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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.
Toby Courtauld: Amazingly, we're a bit early. We could start, Rich? Yes. Okay. Well, in which case, welcome, everybody. Thank you very much for joining us for our interim results presentation. It's great to see you all, and we really appreciate the time that you give us. So thank you for coming along. Now, first of all, I'm going to start by summarizing some of the key messages that we'll be giving you over the next 30 or so minutes. And essentially, we have carried on where we left off at the year-end, successfully executing on our growth strategy. You'll hear about our strong operational performance so far this year, delivering some excellent leasing, well ahead of target and leading us to reiterate our rental value growth guidance. We've made further accretive acquisitions and significant sales ahead of book value, and our developers have created more premium spaces, timed to deliver into a market that is starved of such quality, meaning that we are well set to deliver both strong income and value growth. So to help us tell this story, we have a full agenda as ever for you this morning. I'll start with a reminder of how we're delivering on our very clear strategy before giving you an update on our market opportunity. I'll then run through our successful 6 months of acquisitions, sales and developments before Nick looks at our exciting fully managed growth and our results. And I'll then wrap up with our outlook before opening the floor to you for Q&A. As ever, we have the full executive committee team here to help answer any questions you have. Plus, we also have our newly promoted Rebecca Bradley as Customer Experience Director; and Simon Rowley, as Flex Workspaces Director, and congratulations to them on their appointment. But before we get into all of that, first of all, can I just say as this is probably Nick's last session before past is new. I just wanted to pay tribute to him, to thank him for his exemplary leadership across multiple facets of life at GPE. He's been a great partner to me and I know to many of you and to all of our colleagues at GPE over the past 14 years. And I know you will join me in wishing him well. Nick, thank you. So let's start then with our strategy. And to do so, I want to remind you of our investment case, essentially the 6 fundamental pillars upon which our strategy is built, and you can see them here. And in approaching each, it's always been about doing what we said we would do. First, prime central London. It's the largest city economy in Europe, it's outperforming the U.K. overall, and it has decent forecast jobs growth. And so we have been and will continue to be focused on 100% prime locations only. Second, we create and manage premium luxury offices across our HQ and our Flex products. It's where the richest theme of customer demand exists and our strong leasing and rents rising supports our position with space under offer today materially ahead of ERV. And as I'll show you later, even after substantial growth, they're still affordable, especially given the price inelastic nature of many premium customers. Third, contracyclical capital allocation. You'll recognize the chart at the top raising capital, the green circles and buying when markets are cheap, as was the case in 2009 through '13 and again last year, developing into the inevitable supply crunch before selling completed business plans as markets recover and then returning excess capital to shareholders, shown by the pink circles. We bought well, GBP 390 million, including CapEx since our rights issue last year. We're developing some of the best space in town covering 36% of our book, and we have rotated towards sales, as we said we would, more than GBP 290 million sold so far this year, 1.7% above book value and including 1 Newman Street, the largest single asset sale in the West End year-to-date. Fourth, driving innovation, leading the market in the creation of sustainable spaces and in our customer experience offer. We've delivered a world first in our circular economy activities at 30 Duke Street and our award-winning CX team is helping grow our unique Flex offer towards our 1 million square foot target, and all of this activity always with a strong balance sheet and within an LTV range of 10% to 35%. So far this year, we've delivered a record financing, maintaining high liquidity and have kept LTV low at 28%. And sixth, strong EPS and NTA growth, and we're on target to deliver a 10% plus return on equity over the medium term with more than 3x earnings per share growth. So then, with a strong strategy and supportive fundamentals, we've had another successful period of delivering on our promises. So let's then have a quick look at our half year results and our outperformance despite the challenging U.K. economic and political backdrop. Now, as you can see on the chart on the right, our excellent leasing continues, GBP 37.6 million in 6 months, the same as in the whole of last year, 7% ahead of ERV, leasing faster than underwrite and with strong appeal to AI-led customers now up to 23% of fully managed spaces. And we have a further GBP 10.3 million under offer today, a very strong 31% ahead of ERV. Our rental values were up 2.6%, with prime offices up 3.3%, bringing the total to 6.8% over the last 12 months. Our vacancy rate remains within our target range at 6.9%. Our customer retention rate remains high at 76%, well ahead of target, and we've made an attractive acquisition at a discount and sold at a premium, more on these deals later. Now, all of this activity has helped us deliver healthy financial results for the period, pro forma rent roll up 29% with our average office rents up almost 10% over the last 12 months. Our valuation was up 1.5% over the first half with developments up 6.1%, delivering NTA growth of 2% and earnings growth of almost 85%, still with low LTV at 28%. And as we think about what next, we have created a fantastic platform for further growth. Income growth of some 64% by FY '27 or more than 140% in the medium term, led by Flex. Big development surpluses of circa GBP 300 million to come with potential for upside from there. We'll buy more, we'll sell more and all supported by a London economy that continues to deliver GDP growth ahead of the U.K. overall. So significant growth to come. Now, talking of London, let's have a look at our markets. And in short, we expect supportive leasing conditions to continue with best rents to rise further despite the challenging macro backdrop. Now, why do we think this? In short, because supply and demand conditions in London are both supportive and much stronger than the U.K. picture overall. First, demand for space is strong, driven by jobs growth. As you can see in the blue bars on the right, today, there are 500,000 more jobs in London than there were at the time of the Brexit vote in 2016. Oxford Economics expect the number to continue rising by some 200,000 between now and 2030, equating to roughly 20 million square feet of new demand. Second, take-up remains robust with 5.1 million square feet signed in half 1, ahead of the 10-year average. And third, active demand, that's companies looking for space right now, is still way ahead of the long run average, dominated by banking, finance and digital sectors with the latter responsible for some 40% of U.K. GDP growth with AI-led businesses creating jobs in London today. And history shows us that 2/3 of them will only lease prime space. Plus, contrary to many commentators' perception, way more companies today are looking to expand their space take than contracted, 55% versus 14%. Plus, these companies are going to struggle to find that space. They will run into a supply drop that is extreme and shows no signs of abating anytime soon. Bottom left, we've updated our forecasts, the deliveries shown by the purple bars are very low. And we know that new starts are at lows not seen since 2010. And we think that commentators continue to overestimate deliveries and CBRE's forecast, as shown here by the pink diamonds. Now, either way, if you divide the long-run average take-up of 4.6 million feet per annum into the amount being delivered, we think, we will need to build 84% more every year than is currently planned to meet this demand. That's as higher shortfall as we can remember. And it's not as though customers have much choice from existing space. The current Grade A vacancy rate in the core West End is only 0.3%. And so as a result, we think further rental growth is coming, focused on prime spaces and continuing the theme of the chart bottom right, highlighting the very clear bifurcation between the best and the rest that we have seen since 2023. And remember, overall, rents in London remain affordable. In both the city and the West End, they are still only 5% to 8% of the average London business's salary cost. So conditions then that most definitely play to our strengths with our 100% core prime locations, 94% near in Elizabeth line station. So then, turning to our investment markets, and we think that there is good evidence to back up our view of 6 months ago that they are now recovering, albeit slowly. Capital values are rising, up 6% in nominal terms since our capital raise last year, shown on the right, driven by rental growth and tight investment supply. Prime yields shown bottom left, are now either stable or mildly falling. Investment volumes are also up by 63% in H1 '25 compared to last year, and many more larger lots are now trading, as you can see, bottom right and the green bars with 19 deals of over GBP 100 million already traded so far in '25, up from 11 last year with a further 8 currently under offer. Plus, institutions are buying again, accounting for only 2 of the larger deals done last year, but 10 so far this year, or more than 50%. And with equity demand up since May to GBP 23.5 billion, the multiple of demand to supply at 4.8x remains steady and relatively supportive to pricing. And so we'll continue using these improving conditions to take more selective acquisitions and sales, crystallizing surpluses, and more on this in a minute. So to sum up then with our market outlook, which supports strongly our strategy, the rents, whilst business confidence has weakened since May, healthy demand and a dearth of prime supply has helped us deliver rental value growth in our forecast range that we set out at our finals, as highlighted at the bottom, and so we maintain our expectations for this year overall of growth between 4% and 7%, driven by prime offices, up 6% to 10%. Looking at yields, whilst the political backdrop has probably weakened since May, we think improvements in investor confidence and likely lower interest rates could push prime yields in further, especially where rental growth is a real prospect. So given that, let's turn then and look at our investing and developing activities so far this year. And you'll remember this slide from May, and it shows our successful deployment of the capital that we raised last year. We've added to the 4 deals we told you about back then with the purchase of The Gable, shown on the far right. So that's 5 opportunities acquired since May '24, all in line with our disciplined criteria, all in the West End for a total of GBP 180 million or GBP 390 million, including CapEx and at only GBP 770 per foot and a whopping 57% discount to replacement cost. Three of our fully managed conversions, 2 offer major HQ repositioning and each with attractive stabilized yields and ungeared IRRs. From here, more acquisitions, we have 2 deals in negotiation or under offer, all in the West End and more sales to build on the GBP 290 million completed so far this year with a further GBP 150 million to GBP 200 million in the near term, and GBP 650 million to GBP 700 million identified for the medium term. So plenty of opportunity with more to come. So turning then to look at some of the detail and starting with the acquisition of The Gable, shown in yellow on the map. And it sits in an area of London we know inside out and next to The Courtyard, which we bought last year. We paid GBP 18 million, or only GBP 409 a foot, some 77% beneath replacement cost and with a current running yield of 6.4% until July '26. We have 2 possible business plans here. First, a conversion to Flex. We're in design and talking to the planners, and the economics are attractive with a near 7% yield, but this does rely on vacant possession. And if the government-based customer renews their lease, we'll maintain our low-risk running yield of at least 6.4% and probably hold for a future Flex conversion. Now, since we saw you last, we've also sold our completed and let development 1 Newman Street to a U.K. institution shown at the bottom of the map. We received GBP 250 million, priced off a 4.48% yield, more than GBP 2,000 a foot and 1.8% ahead of book value. So a good sale of this completed business plan and showing both there is liquidity at scale and strong prices for the best assets and reaffirming our long-held commitment to actively recycling capital into the next opportunities for us to drive growth. So talking of growth, let's have a look then at our development program, and taken together, we now have 11 schemes with 3 on-site HQ projects, already 71% pre-let, and 3 further Flex schemes on site. Across our 4 pipeline HQ schemes, we achieved 2 new planning consents in the past few months. And with The Gable purchased, we now have more than 1 million square feet in the program covering 36% of our book by area and delivering into the deep supply shortage that I referenced earlier. So looking then at our On-site HQ schemes, progress has indeed been good. At 2 AS, we're on time to finish in Q1 next year, although the surplus to come has reduced as the valuer has adjusted the cap rate up by 15 basis points. At 30 Duke Street, we signed our pre-let with CD&R, 6.5% ahead of ERV and nearly 12% ahead of the underwrite. As a result, we've captured some significant surplus, but there's more to come as we deliver our expected profit on cost of almost 40%. At Minerva, shown on bottom left, we are on time to finish in Q1 '27, and although costs are up since May, reducing the forecast profit to circa 15%, we are under offer on about 40% of the space at a substantial premium to ERV, which would drive our returns materially higher. Taken together, total area is up 66%. ERV is 174% higher, 99% of the CapEx to come is fixed, and we have GBP 65 million of surplus to come of current rents and current yields. They are all prime with exemplary sustainability credentials and have strong pre-letting potential for the remainder with, therefore, healthy upside to capture. For the next phase of our HQ program, we have 4 fantastic schemes, each timed to deliver into the supply drought with 3 in the West End, next to the Elizabeth line, and 1 next to London Bridge Station. At Soho Square, we're starting imminently, and strip out has begun. At Whittington, we've just received consent for our rooftop pavilion, and we're on site with proprietary works for this major refurbishment. We've also finally achieved planning at St. Thomas Yard on the South Bank for an exceptional 184,000 square foot park refurb, part newbuild project, but will be significantly more profitable than our original tower proposals, and we'll be starting here in Q3 next year. And finally, back in the West End, our Chapel Place project is in design with planning discussions ongoing for a submission next summer. So, big area and ERV gains and targeting a healthy minimum profit level all next to major transport hubs and all with strong upside potential. Now, of course, we also have multiple growth opportunities across the rest of our portfolio, too. You'll remember this portfolio stack. I've talked about our HQ developments at the top, and in the middle, sits our active portfolio management assets, representing 50% of the book, and in many ways, the engine room of the business. They are full of opportunity for us to grow rents and values, for example, on-floor refurbishments and their subsequent leasing to generate some GBP 47 million of income, capturing reversions of almost GBP 14 million, restructuring and regearing our interests and prepping assets for major repositioning. And this presents us with real upside. Their valuation is undemanding at just over GBP 1,000 a foot, but with limited CapEx needed. And all of them are in prime locations. And, of course, they include our Flex assets covering some 29% of our total book and where the growth potential is significant, as you'll hear from Nick in a minute. And shown in yellow is the stabilized proportion of the portfolio, where we will rotate out of completed business plans at high capital values per foot, potentially releasing more than GBP 800 million of capital to employ for much higher returns towards the top of the stack. So lots then to do for us as we execute our plan to deliver the substantial growth available to us, on which topic and probably for the last time over to Nick to dig into our Flex options. Nick Sanderson: Thank you, Toby. Good morning, everyone. I certainly didn't need these when I started 14 years ago, nor was I talking about our unique and well-established fully managed growth strategy, where we are successfully delivering premium hassle-free spaces for our customers. Our leasing volumes continue to grow with more than a deal a week over the last 12 months, representing nearly 90% of all our sub-5,000 square foot office lettings. Rents are growing strongly, too, with these deals securing rents of GBP 37 million, and as shown in purple, regularly achieving more than GBP 250 a foot. As you can see top right, this is driving outsized performance, well ahead of our targets. We're generating strong absolute returns with an average yield on cost of 6.5% and service margin of 35%. And relative to ready to fit, we delivered a 103% rent beat and a 61% 10-year cash flow beat, and we've secured good lease duration, too, at just under 3 years. Our fully managed spaces are today generating GBP 50 million of annualized rent, and we're currently managing GBP 25 million of OpEx and other costs across the categories shown in the green bar. So with a gross to net of 50%, our annualized NOI is GBP 25 million or GBP 107 a foot. Once we factor in CapEx, along with fully managed specific corporate overheads, this results in an annualized net cash return, averaging GBP 80 a foot or 40% higher than the ready-to-fit net rent. So much higher net cash returns than on a traditional basis, and the customer base dominated by corporates, not SMEs. Our retention rate is strong at 75%, well ahead of our 50% underwrite, as our award-winning customer experience team delivers outstanding customer satisfaction. The most common driver for customer nonrenewal is needing more space than we can currently provide, as we experienced with our largest departure to date, a fast-growing unicorn status AI business, who we'd already moved twice within our portfolio. Pleasingly, we were able to relet their space within a month at a higher passing rent to Vanta, another high-growth company, with AI-led businesses now representing 23% of our fully managed customers. And our recently completed schemes are leasing quickly, too. In the heart of Soho, Wardour Street is 100% let within 2 months of launch, including 2 pre-let floors. We've secured average rents per foot of GBP 279 with more than 1/4 of the space let above GBP 300 together, driving a valuation uplift of 10% in the half. Our customers include those we've relocated from adjacent GPE fully managed space, an occupier of a GPE developed HQ building on Broadwick Street as well as a new customer who decided to double their space take within a month of moving in. And over at Piccadilly, which launched last month, 35% of the space is already let or under offer at an average rent of GBP 296 a foot, although we're breaking through GBP 400 on a smaller space. So with an 11% beat to ERV and healthy interest in the balance of the building, the prospects look strong. So, having more than tripled NOI over the last 2 years and our leasing velocity ahead of target, there's plenty more growth to come from today's GBP 25 million. We'll generate GBP 7 million of additional NOI, as we finish leasing up the recent completions. Our 3 on-site schemes, all in the West End, will deliver a further GBP 12 million with our pipeline schemes expected to add another GBP 15 million, taking our fully managed NOI to GBP 59 million, so an organic growth uplift of 2.4x. And as we execute more acquisitions, total NOI would increase to around GBP 90 million if we grow Flex of 1 million square feet. And with more than GBP 19 million of additional service profit, shown in blue, we'll be creating additional value of more than GBP 200 million or more than GBP 200 per foot. So lots more income and value growth to come on top of the strong outperformance we're already delivering with fully managed ERV growth and valuation growth of 11% over the last 12 months. Now a few comments on our overall performance in the half year. We delivered like-for-like value growth of 1.5%, as the best continues to outperform and EPRA NTA rose 2% to 504p per share. As expected and in line with consensus, EPRA EPS increased 70% to 3.9p, and we're paying an interim dividend of 2.9p. Our consistent financial strength saw EPRA LTV falling to 28.2%, and available liquidity rising to more than GBP 450 million, as we transition to a net seller and secured our largest ever bank facility. Overall, we generated positive TAR of 3% and 7.5%, respectively, over the last 6 and 12 months, delivering prime spaces against the backdrop of ERV growth with more to come as we continue to execute our growth strategy. Our opportunity-rich GBP 3.1 billion portfolio is 83% in offices, where we experienced the strongest value growth of 1.8% and ERV growth of 2.7%, with retail ERVs up 1.9% in the half year and fully managed rents up 3.5%. And with an overall valuation uplift of 1.5%, developments delivered the strongest performance, up 6.1%, with GBP 30 million of surpluses captured in the half year valuation. Yields were broadly stable with our portfolio equivalent yield today at 5.5% and our reversionary yield at 6.7%, higher still at 8.7% on a share price implied basis. Finally, the best continues to relatively outperform at both an ERV growth level in purple and by evaluation shown in green. In particular, our West End properties, representing nearly 3/4 of the portfolio, again, outperformed with capital growth of 2.9%. And as we continue to allocate capital to drive value growth, our almost GBP 700 million CapEx program is predominantly in the West End, combining GBP 290 million to complete our 6 on-site schemes shown in black with approximately GBP 400 million for pipeline schemes in gray. You'll find the usual scheme-by-scheme detail in the appendices. With a total GDV of GBP 1.8 billion, we'll deliver further surpluses of more than GBP 300 million based on conservative 10% cumulative rental growth. And you can see by the solid line, more than GBP 125 million should come through within the next 18 months based on profit release at scheme PC although our pre-letting activities typically accelerate these, plus there's serious upside potential with further rental growth and some mild prime yield compression taking the surpluses to more than GBP 500 million or 130p per share. On the right, our investing and leasing activities will clearly change the portfolio composition, with stabilized properties shown in yellow, growing from 19% to 55%, all else equal. However, our recycling activities will evolve the portfolio mix further with prospective sales of around GBP 800 million in the next few years, meaning active portfolio management properties, shown in blue, will, again, dominate with Flex also representing around 40% of the office portfolio. In reality, our sales will likely be higher still, given our disciplined capital management, as they were in the last cycle with more than GBP 3 billion of disposals. Plus, I imagine there'll be some acquisitions, too, to replenish the GPE development hopper. Now, we'll also be driving more income growth. Like-for-like rental income was up 5% over the last 12 months, whilst rent roll was up almost 30%, standing at the GBP 127 million today following the sale of Newman Street. Over the next 18 months, this builds by more than GBP 80 million or 64% and rises to around GBP 30 million in the medium term, an uplift of 142%, including the market rental growth we expect to capture. Of course, some of this uplift will be tempered through sales of stabilized properties, but there's still lots of growth to go for, and we reiterate our guidance for a threefold increase in EPRA EPS over the medium term. Nearer term, we expect EPRA EPS to roughly double to around 10p by FY '27, as we lease up our on-site development and refurb program with more growth to come as we deliver our pipeline and capture market rental growth. Once we factor in finance and other costs to deliver this growth, along with our likely earnings accretive sales, we anticipate annual EPRA EPS of 15 to 20p in around 4 years' time. As a result, we expect a stable dividend for FY '26 with potential DPS growth thereafter. Whilst continuing to invest for growth, we've maintained our financial strength and capacity, including through proactive management of our debt profile. We've recently issued a new 5-year GBP 525 million ESG-linked RCF, allowing us to redeem an early '27 maturing facility and repay a higher-margin term loan. We've also extended the maturity of our smaller RCF, and Moody's reaffirmed our Baa2 credit rating. When combined with our successful sales activity, LTV today is 28%, as we continue to operate within our 10% to 35% through the cycle target range. Interest cover is strong at 15x, with more than GBP 450 million of liquidity, and we have extended our average debt maturity to almost 6 years, whilst our weighted average interest rate remains in the 4s. Looking ahead, as the bar chart shows, we expect LTV to remain above the midpoint of our through-the-cycle range as we invest for growth in a rising market. But remember, a couple of big sales can really move the needle and give us significant incremental acquisition capacity. So wrapping up with a positive financial outlook, we expect to deliver further property value and NTA growth in the second half and beyond, based on current market outlook and our active business plans. H2 EPS will likely be broadly in line with H1, and the capture of our organic rental growth opportunity will drive significant income and EPRA EPS growth moving forward with an expected threefold EPS increase supporting our progressive dividend policy. Our through-the-cycle LTV range and disciplined capital management will be maintained. And through the capture of attractive prime rental growth and the delivery of our development-led growth strategy, we expect FY '26 TAR to at least match FY '25 as GPE moves towards delivering a 10% plus annual return on equity. And of course, shareholder returns would be higher still should the share price discount narrow. So I'll certainly be holding on to my GPE shares. And whilst I'm not leaving just yet, as Toby said, this will likely be my last set of GPE results. It's, of course, been a privilege to have been part of such an awesome GPE team. And I'm also proud of my contribution to both the strategic evolution of the business and its very special culture. But I'm also departing happy in the knowledge that GPE is in great shape with an exciting growth strategy to deliver for shareholders and customers alike, and as I look around the room with slightly blurry glasses and massive thanks to all of you for your support, your challenge, and most importantly, your good humor and camaraderie. And given this is the 29th time that I've run through this presentation, I think it merits a very special thanks to both Stevie and to Rich and their teams for the uniquely special work that they put into putting this presentation together. Not only do I know that footnote 13 on Page 99 will be accurate, I know that it will be accurate to at least 1 decimal place. So a massive thanks to you guys for leaving Toby and I do the easy work of tapping the ball over the line. And as I hand back to you, Toby, I must say it's certainly been fun. You're a good man, a great colleague, and there are many things I will miss at GPE, including your exceptional taste in wine. Over to Toby for the wrap up. Toby Courtauld: But not I should add at this time of day. Thank you, Nick. Very good. Okay. So let's wrap up then with our outlook. And in short, it's all about delivering more growth, as we continue doing what we said we would do. We think that our market opportunity is strengthening. London remains Europe's Business Capital, will outperform the U.K. economically and will generate jobs growth, driving healthy demand for space that will collide with a supply drought, meaning rents are and will continue to rise with the best buildings materially outperforming the rest. As a result, office values are rising, the invest market continues its recovery with prime yield compression a real possibility. Meanwhile, we are focused fully on executing our growth strategy, first, capturing significant income growth of more than 140% in the medium term. Second, delivering development surpluses of between GBP 180 million and GBP 520 million, just from our existing program, some GBP 130 per share. Third, more acquisitions. And fourth, significant further sales of more than GBP 800 million and always operating only in prime Central London, majority West End, 94% near an Elizabeth line station. So all in all then, GPE is well set. Our operational infrastructure is in place and is delivering, and our deeply experienced team, bound together by our collegiate culture, along with our strong balance sheet will help us generate an attractive return on equity, even more so for shareholders should our share price continue its re-rating to properly reflect the group's exciting prospects. So GPE is in great shape with all to play for, and we can look forward to capturing our strong potential over the next few years. Now I know some of you will have questions, maybe even for Nick, last chance. We'll have some microphones running around the room. As I say, we've got the team, home team to help answer any of those questions that you may have. Toby Courtauld: Who would like to raise something? Any hands? Yes, here at the front. Good morning, Tom. Thomas Musson: Yes, I guess I'll ask the question to Nick. You -- it's Tom Musson from Berenberg by the way. You talked about the big growth potential in the business, and I think a tripling of EPS probably stands alone in the sector in terms of the growth outlook. If you can achieve that, there's lots of development surplus to come that will drive NAV growth. Fully managed is a big part of that. Nick, I think you've led the charge on. So given the growth prospects, why is now the right time for you to move on from the business? And then, I had a couple of follow-ups on a couple of the numbers if that's all right afterwards. Nick Sanderson: Sure. Well, I joined GPE 14 years ago. I thought I'd be here for 5 years, and I've been here for 14 years, and I absolutely love -- I love GPE. Equally, hopefully, as we've articulated, not just in this presentation, but in all the presentations that lead up to this, there is a very clear strategy in place. There is very clear and strong team in place. I love the sector. I'm just looking for something a little bit different. I think I was talking to one of our advisers, who works at a similar business to Savills. His comment was, "You love it because it's very similar to what you're doing now, but it's very different". And so I'm moving to a business that like GPE absolutely loves real estate. Unlike GPE, only Central London, I'm moving to a global business, moving from a team of 150,000 to 42,000. And I'm very much -- whilst GPE, I'm confident in the EPS growth that it will deliver, Savills is absolutely an EPS business rather than the balance sheet business. So something to keep you energized. But as I said, I will remain very invested in GPE, both financially, but also emotionally. If you asked any question, I'll be delighted to leave it at that. Thomas Musson: I did have just a couple on the numbers. The fully managed services income, net of fully managed services expenses, has just moved from being slightly profitable last year to slightly loss making this year. Can you just help explain that dynamic there? Is that just a reflection of growth? And then the second one was I think I saw that there was a material, sort of, GBP 3 million reduction in other property expenses in the EPRA P&L from GBP 4.1 million down to GBP 1 million. What was driving that? Toby Courtauld: Nick, do you want to try the first one? Nick Sanderson: Yes. Tom, you were referring to what's actually in the P&L? Yes. I mean, look -- so one of the things that we've done this year within our own targets, so as to you know, we are now incentivized specifically around delivering NOI returns in the P&L. At the moment, they are still lumpy because not -- they're not particularly reflecting a significant amount of the income that, yes, we're generating. But it also -- we tend to take a hit upfront for the agent fees that we're -- broker's fees that we're incurring in putting the customers in place. So I think you'd expect to see the P&L reported NOI will be a little bit volatile as we go through the lease-up of the space. I would hope that over time, those margins improve because the cost of customer acquisition will reduce if we don't have a cost of customer acquisition, i.e., we keep customer retention rate high. And that's why I think you should expect to see over time an even bigger focus, particularly on the fully managed side around customer retention. And as I think I alluded to in the presentation, the single biggest cause for us losing customers out of fully managed is we don't have enough space for them. So that is not the only reason, but it's one of the reasons why we are looking to grow this part of the footprint. On the -- I'm looking Stevie here on the property cost, my guess is probably on empty rates will have been lower over this period. Anything else material to cover? Toby Courtauld: Nothing materially. This is largely due to empty rates, but we can get into the weeds offline. Callum Marley: Yes. Callum Marley from Kolytics. Two questions, one on vacancy and one on artificial intelligence. Is the new vacancy range that you've set of, 6% to 7.5% a new target for this period? And then how do you explain the divergence relative to your close peer who has a vacancy of about half that? Toby Courtauld: Yes. Thanks, Callum. So if you think -- can we just go back to the contracyclical chart right upfront, please, Rich, you do not want your portfolio full when everybody else has put their cranes away, okay? You want to be contracyclical in the delivery of space when everybody else has run for cover, especially when there is an 84% shortage of demand against supplies. So we actively want our vacancy rate up. So right at the beginning, I talked about being countercyclical in our approach, and that's exactly what we're doing here. We're developing into a serious shortage of supply. And we've now got CEOs from large financial institutions around the world saying London does not have enough space. We've got companies looking 6 years ahead to try and forward purchase space. We pre-let most of our H2 developments, as you saw with CD&R during this year. And you will have heard this morning that we're under offer on a good chunk of the space down at Minerva. So you want to have vacancy at this point in the cycle, especially with rents rising. 6% to 7.5%, we're in the range, the single biggest vacancy that we've got at the -- in the portfolio at the minute, we've just finished, which is our Piccadilly Holdings, where we've just completed the repositioning of that building for fully managed. That's leasing up pretty well. Simon, I'll come to you in a second, just for a bit of color on that lease-up. But again, great locations, great buildings, rents rising, it's now that you want vacancy. So I would think we would be failing if our vacancy was 0, okay? I want vacancy. So with that point made, just talk a little bit about the color on how that's going and maybe just what we experienced in the core markets and maybe draw the distinct between the peripheral markets. Simon Rowley: Yes. So Callum, we've -- we completed 170 in September, which was about a month after Wardour Street and some people might have thought, well, why has Wardour Street let faster than 170? One of the principal reasons for that is that Wardour Street was a building that was really easy to understand through construction. So if anyone attended our Capital Markets Day back in February, one of the things I said at the time was that I thought we would pre-let some of Wardour Street. It wasn't in our underwrite. We don't tend to underwrite pre-lets and fully managed. But we did manage to pre-let 2 floors in there because it was easy to understand. Conversely, 170 Piccadilly finished a month later. There are 13 units in that building. It's a heavy intervention as mentioned earlier. It's a Grade 2 listed building. And so it's a much harder building to understand. Nevertheless, once completed, it looks absolutely fantastic. And there are a number of you in the room who have seen it. And that, in turn, has driven some absolutely incredible ERV beats. As you can see, moving through GBP 400 per square foot on some of this building was definitely not in our underwrite. But an average ERV of 296 so far for the deals that we've done, 35% of the building let are under offer, we are really, really confident with the rest of that building. And we are more certain than ever that core locations, prime core locations are where we would like our space to be. There are examples around the market of fully managed space being released in areas where, frankly, the price of a cup of coffee that we make is the same irrespective of where you are in London. We want our fully managed buildings to be in these core locations, these clusters. We are building a much better portfolio of clusters of buildings and that has allowed us to move companies such as, we mentioned, Wunderkind earlier, but others around the portfolio, that is helping that retention rate. Nick mentioned that, that is a big focus for the business. We have, in just this part of this year, done a really good job retaining customers, that's about 70% of the retention rate that we have managed to create. It does not involve broker fees. So as Nick mentioned, the cost of doing that business is far less for us. So it's a really important area. That's why the clusters work. The clusters will also work for reducing some of our operational costs as we are able to transfer some of the cost of our customer experience team across a wider portfolio. So I'm really excited. I mean, we've been doing this for about 5 years now. Looking forward to some of the projects that we have got on site, and the team that we've created really gives us a lot of confidence. Toby Courtauld: Brilliant. Thank you, Simon. AI. Callum Marley: Yes. Second question, stating that entry-level positions in white collar jobs are potentially being displaced by AI. How do you think about that long term, the different scenarios to your job's growth figures that you publish in which AI adoption materially changes, hiring needs, and then, ultimately the impact on office? Toby Courtauld: Yes, a really important question, one that we could spend all week talking about, so we won't do that. But just to give you a couple of thoughts to take away. And Marc, I'll come to you in a second, if you wouldn't mind, just expanding a bit on the sorts of companies you've seen in the market today in that space. I mean, one view, in fact, we asked AI, what AI thought about white collar jobs in London. And it started with an analysis of white collar jobs globally. And one version of AI said to us that it thought 90-odd million white collar jobs would be essentially disintermediated by AI. But 185 million would be created globally. Now, they won't all come to London, unfortunately, but it is an interesting debate as to exactly where they do go. And our experience would suggest that, by and large, they're going to places with talent, with infrastructure, with magnetism, with great buildings, clearly part of the equation, with universities that are world leading in some of these topics, and it's for that reason that places in and around California and some of the Eastern seaboard in the U.S. and the golden triangle around London are performing relatively well. It's why 23% of our customer base in fully managed is AI led. They're not AI businesses, but they have AI in the description as a heavy part of what they're all about. So I actually think there is an opposite side to this coin that you should take, which is that you should consider it as an opportunity. You should consider this as something that great commerce centers, like London, are going to capture more of the opportunity than most other locations. Just in terms of demand, what are we actually seeing right now from businesses in that tangentially related? Marc Wilder: Yes. So as an overview, active demand is about GBP 12.4 million, which is 26% up on this time last year. And of that, TMT is around 15%. And of that, about 12% is AI-focused companies and 88% is non-AI. Now, if you look, Toby has obviously mentioned about the dominance of London in terms of its tech ecosystem, the deepwater talent, world-class universities and that regulatory environment. There are currently 382 companies that are being founded in H2 in London with more than 50 people employed. So it is really quite a mature market. And if you look at AI as a catalyst for demand, there's currently around 0.5 million square feet today of well-established companies and some of the names that are out there that are either under offer, regearing on a short term, either have searches or in negotiation. Names such as OpenAI, obviously, ChatGPT, they are currently under offer on 100,000 square feet. You've got Databricks who are looking for 100,000 square feet and rumored to be in negotiation. Anthropic, who are behind Claude, 50,000 square feet. Palantir, who we know very well, next door to Soho Square, regearing on a short term because they can't find what they need. And we're obviously hopeful that we may have further conversations with them next door. Synthesia which is obviously the AI company that Nick referred to without referring by name, but we took them at 1,500 -- sorry, yes, 1,500 square feet in Dufour's. They grew 3x with us and then have moved to a managed facility of 21,000 square feet. So there's quite a lot of names that are out there. And the other thing I would also say in terms of is it a net promoter or a detractor in terms of jobs, if you look at the case study for San Francisco, currently, in 2025, there are 5.6 million square feet occupied by AI companies. That's moved up from 2.7 million in 2021. And if you look at the prospective job numbers, which is around 50,000 new jobs accretive, then that could lead to about 16 million square feet of new jobs of -- sorry, new requirements up to 2030. So that averages out at about 2.7 million square feet per annum through to 2030. So we believe, if you look at what's going on in London, what is -- what we're seeing in San Francisco, we think that the prospects are positive rather than negative for us. Toby Courtauld: Not complacent, mind you. And we would always make sure that we are realistic when coming to market with spaces, but we've got some good interest in businesses in that line of work. Okay. Where else can we go? Yes, Neil, right at the back. We'll need a microphone, please. Thank you. Neil Green: Neil Green from JPMorgan. Just one question. Given the progress you've already made on disposals and quite sizable pipeline of disposals that you're earmarking, how do you think about leverage and potentially even excess capital down the line should acquisition opportunities become harder to find, please? Toby Courtauld: Yes. Good question. Thank you, Neil. So we have a long track record, as you know, of -- thanks, Rich, of returning when we have not been able to find a more productive use for the capital post-sale. So you can see that from the pink circles in the middle there, and we gave back probably GBP 600 million to shareholders, having raised GBP 300 million at the beginning of the cycle last time around. This time around, we've already raised the GBP 300 million, and let's see what happens. But the same mantra applies. We will give back where it is excess to our needs and we can't make an attractive return for shareholders on it. Last time around, it was interesting, a number of shareholders said, "Well, why don't you hold on to it because you might be able to use it, and we don't really want it back". And we said, well, it's frankly, that's your problem, not ours. Our problem is whether we can use it accretively or not. And if we can't, you are going to get it back. And we did share buybacks. We did a capital restructuring and a capital return. So we've done all variations of it. And we would do them again if we were not able to find enough accretive opportunities to reemploy that capital post-sales. Scale is one reason I hear people arguing for not giving back capital, that is not relevant to us. Return on capital employed is the thing you should look at, and we will not simply hold capital for the sake of feeling a bit bigger if you can't use it productively. So shareholders should know that we will give it back if it's excess. If we don't give it back, it's because we felt we've found a great series of opportunities to employ it for an accretive return. Yes, Max. Maxwell Nimmo: Max Nimmo at Deutsche Numis. Maybe just kind of follow-up question to Neil on that capital recycling point. And talking about kind of liquidity at the larger end of the market, and if you can't sell some of those assets, are there other assets you can kind of pull in and out? And perhaps a theme that we're seeing a little bit at the moment is this sort of disposals below book value, which I think it hasn't really been a problem for you guys so far, but just some of your views on that well. Toby Courtauld: Okay. If you wouldn't mind coming in Dan in a second on how you're seeing the landscape playing out from here, but first up, Max, again, good question, what I think the correlation, I think, you need to be clear about is between sales ability, getting that deal done and quality of asset, right? And quality isn't just the way it looks. It's where it is, who's in it, what the rental position looks like, what its transport interchange, the hub near it looks like, the public realm immediately around it. There I say, even it's feng shui, right? So this whole idea of the way that building sits and feels matters. Now we've just sold the largest single asset trade in the West End. So we have not encountered a problem with scale, and it was ahead of book value. So that tells you that our values are broadly getting right what the market is willing to pay for an asset as they should. As we go from here, one thing that is very clear is that Hanover Square is in that list of stabilized assets, 2 Aldermanbury, both buildings where we've essentially will have delivered our business plan. We've got some rent reviews to do, as you know, in Hanover, before we consider that. And Wells & More is currently in the market. So these are quite big assets, especially to AS and Hanover So we'll be testing the outer envelope, I think, of scale when we get there, but we're not there at the minute. So the evolution of the market will be interesting to see. We will not be overly concerned about hitting book value, okay? We will be principally concerned about the forward IRR from the price on offer. And if we do not think that, that is sufficiently accretive to shareholders, the opportunity cost is much more powerful. We'll take the money. But given the quality, and I said before, I think Hanover Square is one of the best buildings in Europe, therefore, the world, and I mean that. It's an unbelievably good asset. And Wells & More is out there testing the market at the minute, and 2 AS will be a 20-year lease to Clifford Chance. So of a rent, which was struck in 2021, '22, there or thereabouts. So probably reversionary. So these are great quality assets, and I think they will do well. Dan, just in terms of market dynamic. Dan Nicholson: Thank you. And so, I think, at the moment, the market dynamics are such that we've seen lot sizes start to go up. I think, the Newman Street asset we sold a few weeks back, that was the biggest asset in the single asset deal in the West End through this part of the cycle, and so for several years. So it really sets a marker. And I think the -- you're starting to see -- so not only a lot sizes, you're starting to see new investors in the market as well. So against that backdrop, the volumes are up to, I think it was, 63%. On the top left there is the stat that we've quoted. So not only are you selling bigger assets, there's more institutions in the market who are typical buyers of the mature finished product that we've got -- stabilized product that we get at the end of our recycling process. So I think the landscape for sales is very good and definitely improving. So Newman Street set a new benchmark, the likes of Hanover and 2 AS, which again are a step up in scale. And as the market evolves, those larger lot sizes, they will become digestible by the market. And if you look at -- Rich, I think it's Page 4, if you just look at our cyclical part of the chart that we always look. This is where we want to be buying, these pieces here, and that's why we've been conducting such an intensive acquisition strategy over the last 18 months, 5 done, 1 under offer, hopefully done by Christmas, no pressure, Alexa. So that's -- we are buying exactly the right time. And then also, you'll -- so we -- and we're selling those mature, stabilized assets as that part of the market. And we talked about it 6 months ago, different parts of the market get hot at a different time. At the moment, those core assets become attractive because those institutions are coming back in, like the stabilized assets. The value-add part of that curve has been hot for a while. But obviously, we don't want to be selling into that. That's a product we want to be buying. So have we been going into the market and buying value-add assets in competition with a bunch of other people? Not really. Most of the stuff that we've been doing has been off market. So if you look at the map of the acquisitions that we've done, 2 or 3 have come from the city of London, and those have been one-on-one interactions, not in processes. So we're seeing that our acquisitions are playing to the curve there. Our disposals are playing to that part of the market that's warming up, and the general landscape is improving such that over the next 12 months, the larger assets such as 2 AS and Hanover will become liquid at the right times. Toby Courtauld: Rich, can you just jump to Slide 6? Because one of the things you might be thinking is selling at that point on the curve isn't necessarily the right answer. The reason, there's a complicated bifurcation going on between the best and the rest, right? If you are slightly off pitch or there's something wrong with your building, you're going to struggle to sell it, which is a sort of stuff that Dan has described we've been buying. But if you look bottom right, the reason we're now willing to sell some of the buildings we are is because we have seen this bifurcation run riot through rent. And those prime rents have really grown. And it's that differential that is now allowing us to sell prime assets at really strong numbers that I don't think was the case even 12 months ago. And that change is quite dramatic. Dan Nicholson: And it says institutions with a low cost of capital who are buying. And our forward look on those doesn't hit our cost of capital, but it's fine for those buyers. Toby Courtauld: Yes. Thank you, Dan. Thank you, Max. Any more for any more. We are just past the hour. Yes, we've got a couple over here. Yes. Zach? Zachary Gauge: This is Zachary Gauge from UBS. A couple of questions related to returns, and then, hopefully quite straightforward one just on EPRA earnings. But firstly, you seem quite bullish on near-term yield compression. I'm just wondering how you reconcile that with the valuers moving out the yield on Aldermanbury Square by 15 basis points. And I'm sure you have seen the latest MSCI data for the London office market in West End turning negative in October and flat ERVs for the last 2 months in the West End. And sort of following on from that, looking at your 10%-plus ROE medium-term target, can you give any more color on when you expect that to be realized? And I think at the end of FY '25, you guided to more growth to come, and now, it sounds a little bit like this year is in line with last year as opposed to necessarily growing from there. And then the straightforward question was, is the tax credit you received included in the EPRA earnings number? Toby Courtauld: Fabulous question, Zach. I mean, you say I sound a bit more bullish. You sound a bit more bearish, and we will get you to the right place at some point over the next few years. But putting that aside for a second, Nick, if you could deal with the second one, and maybe the third, and then, Stevie, you want to deal with it. So on the yield point, well, funny enough, the further they move the yields out, the more bullish we're going to get on compression, especially in an environment where yields are going to be -- and we know they're driven by interest rates, and in an environment where interest rates are likely to come in. And -- I mean, I think the issue with that is scale. It's just -- it's a big building. It's going to be GBP 400-ish million, there or thereabouts, and that is a rare part of the market. So that's my challenge for the team when we come to selling that one. But more broadly, we are bullish on prime product. I mean, we -- for reasons Dan has just described. We think that really good assets in really good locations are gold. They are irreplaceable, by and large, and we're not talking about the peripheral central London markets. We're talking about core 100% prime, which is where we're focused. And that's why, if anything, we have concentrated even more over the last 5 years than you would have seen us. I'm not sure we'd buy Whitechapel again, put it that way, unless it was unbelievably cheap. It was quite cheap at the time. But I think as those peripheral markets get less relatively attractive to the prospective customer base, we get less interested from an acquisitions perspective on them, but if you are in the core, I've said it before, it's incredibly powerful. We think we'll sell very well because we're leasing very well. So that's the first point. On the second one. Nick Sanderson: Rich, you give 54. Look, we were clear that the aspiration around the 10% plus TAR was one for the medium term. We set out the breakdown of that in the appendices. We said at the beginning of this year that we expected this year's TAR to be in line or ahead of where we were last year. We've maintained that. I think it's fair to say it will be my successor who stands up here talks about a 10% TAR rather than me, but I think that is something the -- looking at our own business plans, we look like we're set to deliver in FY '27-'28. In terms of the tax credit, yes, it is in EPRA earnings in accordance with the guidance. That being said, we are not anticipating it has a material impact on the overall numbers. We still stand by the guidance that we gave on EPRA earnings at the beginning of the year irrespective of that credit. It's a one-off we don't expect to repeat it. But in accordance with EPRA guidance, you include it. Zachary Gauge: Maybe just a follow-up here, if I can. I think everyone largely understands that the prime versus secondary debate, but how much of your portfolio is prime versus secondary? Because presumably, you have a prime guidance and an ERV guidance, so it must be some form of blend of the 2? Toby Courtauld: Well, what -- in an ideal world, at this point in the cycle, thinking contracyclically, in an ideal world, what you want is raw material that is in some way needing attention in prime locations, okay? That is, to me, the holy grail. And so what you can see in GPE is some -- if we can go to the capital stack, please, Rich, some buildings in yellow, which are reaching the end of their GPE life because we've done things -- all of the things we can to them and their prospective numbers are not good enough for us, back to Dan's point about there'll be some institutions out there with a lower cost of capital than us will be happier holders than us. But the majority of your book, in other words, the blue and above, needs to be prime location buildings that you can improve. And then you have a business that's really interesting. If you're simply stuff full of all the yellows, right, and this idea that you just collect, income-producing assets that are yellow, you are a proxy to market moves. You are nothing more than a beta story, right? If you want to be an alpha story that's creating something of value, you go above the yellow and you focus on things that you can do things, too, to generate rent growth, net area again, higher quality buildings in great locations. And that's the underlying, which is why we started this presentation with 100% prime Central London. So if you look at -- I think you could probably argue that Whitechapel is the only building in our book, which would not qualify in the 100% prime Central London. That's the only one. The rest of them are, and the rest of them will be improved over time, and we will transmission, will basically capture growth in the blue section, turn it into a yellow tradable asset and out shall go. That's been our model for as long as I can remember. And it feels -- if you go back to slide -- the cycle one, please, Rich, it feels much more alive today than it did in that really difficult period post Brexit, all the way through COVID, where, frankly, markets we felt should have corrected and didn't because the monetary response was so aggressive. And it took inflation, which was the consequence of -- and QE unwind for capital values to come off sufficient for us to get interested again. And so we're back into a really dynamic cycle, which feels like a good place to be. On that note, I think I'm going to draw proceedings to a close. I think we've given plenty of time for Q&A. Thank you very much. Just to wrap up for me then, this story today is all about our excellent leasing, which is all about our excellent positioning and our financial strength, looking forward with a lot to do over the second half to your point, but a lot to do over the next few years, and I'm very excited about that. As I hope you are. Thank you all for coming.
Toby Courtauld: Amazingly, we're a bit early. We could start, Rich? Yes. Okay. Well, in which case, welcome, everybody. Thank you very much for joining us for our interim results presentation. It's great to see you all, and we really appreciate the time that you give us. So thank you for coming along. Now, first of all, I'm going to start by summarizing some of the key messages that we'll be giving you over the next 30 or so minutes. And essentially, we have carried on where we left off at the year-end, successfully executing on our growth strategy. You'll hear about our strong operational performance so far this year, delivering some excellent leasing, well ahead of target and leading us to reiterate our rental value growth guidance. We've made further accretive acquisitions and significant sales ahead of book value, and our developers have created more premium spaces, timed to deliver into a market that is starved of such quality, meaning that we are well set to deliver both strong income and value growth. So to help us tell this story, we have a full agenda as ever for you this morning. I'll start with a reminder of how we're delivering on our very clear strategy before giving you an update on our market opportunity. I'll then run through our successful 6 months of acquisitions, sales and developments before Nick looks at our exciting fully managed growth and our results. And I'll then wrap up with our outlook before opening the floor to you for Q&A. As ever, we have the full executive committee team here to help answer any questions you have. Plus, we also have our newly promoted Rebecca Bradley as Customer Experience Director; and Simon Rowley, as Flex Workspaces Director, and congratulations to them on their appointment. But before we get into all of that, first of all, can I just say as this is probably Nick's last session before past is new. I just wanted to pay tribute to him, to thank him for his exemplary leadership across multiple facets of life at GPE. He's been a great partner to me and I know to many of you and to all of our colleagues at GPE over the past 14 years. And I know you will join me in wishing him well. Nick, thank you. So let's start then with our strategy. And to do so, I want to remind you of our investment case, essentially the 6 fundamental pillars upon which our strategy is built, and you can see them here. And in approaching each, it's always been about doing what we said we would do. First, prime central London. It's the largest city economy in Europe, it's outperforming the U.K. overall, and it has decent forecast jobs growth. And so we have been and will continue to be focused on 100% prime locations only. Second, we create and manage premium luxury offices across our HQ and our Flex products. It's where the richest theme of customer demand exists and our strong leasing and rents rising supports our position with space under offer today materially ahead of ERV. And as I'll show you later, even after substantial growth, they're still affordable, especially given the price inelastic nature of many premium customers. Third, contracyclical capital allocation. You'll recognize the chart at the top raising capital, the green circles and buying when markets are cheap, as was the case in 2009 through '13 and again last year, developing into the inevitable supply crunch before selling completed business plans as markets recover and then returning excess capital to shareholders, shown by the pink circles. We bought well, GBP 390 million, including CapEx since our rights issue last year. We're developing some of the best space in town covering 36% of our book, and we have rotated towards sales, as we said we would, more than GBP 290 million sold so far this year, 1.7% above book value and including 1 Newman Street, the largest single asset sale in the West End year-to-date. Fourth, driving innovation, leading the market in the creation of sustainable spaces and in our customer experience offer. We've delivered a world first in our circular economy activities at 30 Duke Street and our award-winning CX team is helping grow our unique Flex offer towards our 1 million square foot target, and all of this activity always with a strong balance sheet and within an LTV range of 10% to 35%. So far this year, we've delivered a record financing, maintaining high liquidity and have kept LTV low at 28%. And sixth, strong EPS and NTA growth, and we're on target to deliver a 10% plus return on equity over the medium term with more than 3x earnings per share growth. So then, with a strong strategy and supportive fundamentals, we've had another successful period of delivering on our promises. So let's then have a quick look at our half year results and our outperformance despite the challenging U.K. economic and political backdrop. Now, as you can see on the chart on the right, our excellent leasing continues, GBP 37.6 million in 6 months, the same as in the whole of last year, 7% ahead of ERV, leasing faster than underwrite and with strong appeal to AI-led customers now up to 23% of fully managed spaces. And we have a further GBP 10.3 million under offer today, a very strong 31% ahead of ERV. Our rental values were up 2.6%, with prime offices up 3.3%, bringing the total to 6.8% over the last 12 months. Our vacancy rate remains within our target range at 6.9%. Our customer retention rate remains high at 76%, well ahead of target, and we've made an attractive acquisition at a discount and sold at a premium, more on these deals later. Now, all of this activity has helped us deliver healthy financial results for the period, pro forma rent roll up 29% with our average office rents up almost 10% over the last 12 months. Our valuation was up 1.5% over the first half with developments up 6.1%, delivering NTA growth of 2% and earnings growth of almost 85%, still with low LTV at 28%. And as we think about what next, we have created a fantastic platform for further growth. Income growth of some 64% by FY '27 or more than 140% in the medium term, led by Flex. Big development surpluses of circa GBP 300 million to come with potential for upside from there. We'll buy more, we'll sell more and all supported by a London economy that continues to deliver GDP growth ahead of the U.K. overall. So significant growth to come. Now, talking of London, let's have a look at our markets. And in short, we expect supportive leasing conditions to continue with best rents to rise further despite the challenging macro backdrop. Now, why do we think this? In short, because supply and demand conditions in London are both supportive and much stronger than the U.K. picture overall. First, demand for space is strong, driven by jobs growth. As you can see in the blue bars on the right, today, there are 500,000 more jobs in London than there were at the time of the Brexit vote in 2016. Oxford Economics expect the number to continue rising by some 200,000 between now and 2030, equating to roughly 20 million square feet of new demand. Second, take-up remains robust with 5.1 million square feet signed in half 1, ahead of the 10-year average. And third, active demand, that's companies looking for space right now, is still way ahead of the long run average, dominated by banking, finance and digital sectors with the latter responsible for some 40% of U.K. GDP growth with AI-led businesses creating jobs in London today. And history shows us that 2/3 of them will only lease prime space. Plus, contrary to many commentators' perception, way more companies today are looking to expand their space take than contracted, 55% versus 14%. Plus, these companies are going to struggle to find that space. They will run into a supply drop that is extreme and shows no signs of abating anytime soon. Bottom left, we've updated our forecasts, the deliveries shown by the purple bars are very low. And we know that new starts are at lows not seen since 2010. And we think that commentators continue to overestimate deliveries and CBRE's forecast, as shown here by the pink diamonds. Now, either way, if you divide the long-run average take-up of 4.6 million feet per annum into the amount being delivered, we think, we will need to build 84% more every year than is currently planned to meet this demand. That's as higher shortfall as we can remember. And it's not as though customers have much choice from existing space. The current Grade A vacancy rate in the core West End is only 0.3%. And so as a result, we think further rental growth is coming, focused on prime spaces and continuing the theme of the chart bottom right, highlighting the very clear bifurcation between the best and the rest that we have seen since 2023. And remember, overall, rents in London remain affordable. In both the city and the West End, they are still only 5% to 8% of the average London business's salary cost. So conditions then that most definitely play to our strengths with our 100% core prime locations, 94% near in Elizabeth line station. So then, turning to our investment markets, and we think that there is good evidence to back up our view of 6 months ago that they are now recovering, albeit slowly. Capital values are rising, up 6% in nominal terms since our capital raise last year, shown on the right, driven by rental growth and tight investment supply. Prime yields shown bottom left, are now either stable or mildly falling. Investment volumes are also up by 63% in H1 '25 compared to last year, and many more larger lots are now trading, as you can see, bottom right and the green bars with 19 deals of over GBP 100 million already traded so far in '25, up from 11 last year with a further 8 currently under offer. Plus, institutions are buying again, accounting for only 2 of the larger deals done last year, but 10 so far this year, or more than 50%. And with equity demand up since May to GBP 23.5 billion, the multiple of demand to supply at 4.8x remains steady and relatively supportive to pricing. And so we'll continue using these improving conditions to take more selective acquisitions and sales, crystallizing surpluses, and more on this in a minute. So to sum up then with our market outlook, which supports strongly our strategy, the rents, whilst business confidence has weakened since May, healthy demand and a dearth of prime supply has helped us deliver rental value growth in our forecast range that we set out at our finals, as highlighted at the bottom, and so we maintain our expectations for this year overall of growth between 4% and 7%, driven by prime offices, up 6% to 10%. Looking at yields, whilst the political backdrop has probably weakened since May, we think improvements in investor confidence and likely lower interest rates could push prime yields in further, especially where rental growth is a real prospect. So given that, let's turn then and look at our investing and developing activities so far this year. And you'll remember this slide from May, and it shows our successful deployment of the capital that we raised last year. We've added to the 4 deals we told you about back then with the purchase of The Gable, shown on the far right. So that's 5 opportunities acquired since May '24, all in line with our disciplined criteria, all in the West End for a total of GBP 180 million or GBP 390 million, including CapEx and at only GBP 770 per foot and a whopping 57% discount to replacement cost. Three of our fully managed conversions, 2 offer major HQ repositioning and each with attractive stabilized yields and ungeared IRRs. From here, more acquisitions, we have 2 deals in negotiation or under offer, all in the West End and more sales to build on the GBP 290 million completed so far this year with a further GBP 150 million to GBP 200 million in the near term, and GBP 650 million to GBP 700 million identified for the medium term. So plenty of opportunity with more to come. So turning then to look at some of the detail and starting with the acquisition of The Gable, shown in yellow on the map. And it sits in an area of London we know inside out and next to The Courtyard, which we bought last year. We paid GBP 18 million, or only GBP 409 a foot, some 77% beneath replacement cost and with a current running yield of 6.4% until July '26. We have 2 possible business plans here. First, a conversion to Flex. We're in design and talking to the planners, and the economics are attractive with a near 7% yield, but this does rely on vacant possession. And if the government-based customer renews their lease, we'll maintain our low-risk running yield of at least 6.4% and probably hold for a future Flex conversion. Now, since we saw you last, we've also sold our completed and let development 1 Newman Street to a U.K. institution shown at the bottom of the map. We received GBP 250 million, priced off a 4.48% yield, more than GBP 2,000 a foot and 1.8% ahead of book value. So a good sale of this completed business plan and showing both there is liquidity at scale and strong prices for the best assets and reaffirming our long-held commitment to actively recycling capital into the next opportunities for us to drive growth. So talking of growth, let's have a look then at our development program, and taken together, we now have 11 schemes with 3 on-site HQ projects, already 71% pre-let, and 3 further Flex schemes on site. Across our 4 pipeline HQ schemes, we achieved 2 new planning consents in the past few months. And with The Gable purchased, we now have more than 1 million square feet in the program covering 36% of our book by area and delivering into the deep supply shortage that I referenced earlier. So looking then at our On-site HQ schemes, progress has indeed been good. At 2 AS, we're on time to finish in Q1 next year, although the surplus to come has reduced as the valuer has adjusted the cap rate up by 15 basis points. At 30 Duke Street, we signed our pre-let with CD&R, 6.5% ahead of ERV and nearly 12% ahead of the underwrite. As a result, we've captured some significant surplus, but there's more to come as we deliver our expected profit on cost of almost 40%. At Minerva, shown on bottom left, we are on time to finish in Q1 '27, and although costs are up since May, reducing the forecast profit to circa 15%, we are under offer on about 40% of the space at a substantial premium to ERV, which would drive our returns materially higher. Taken together, total area is up 66%. ERV is 174% higher, 99% of the CapEx to come is fixed, and we have GBP 65 million of surplus to come of current rents and current yields. They are all prime with exemplary sustainability credentials and have strong pre-letting potential for the remainder with, therefore, healthy upside to capture. For the next phase of our HQ program, we have 4 fantastic schemes, each timed to deliver into the supply drought with 3 in the West End, next to the Elizabeth line, and 1 next to London Bridge Station. At Soho Square, we're starting imminently, and strip out has begun. At Whittington, we've just received consent for our rooftop pavilion, and we're on site with proprietary works for this major refurbishment. We've also finally achieved planning at St. Thomas Yard on the South Bank for an exceptional 184,000 square foot park refurb, part newbuild project, but will be significantly more profitable than our original tower proposals, and we'll be starting here in Q3 next year. And finally, back in the West End, our Chapel Place project is in design with planning discussions ongoing for a submission next summer. So, big area and ERV gains and targeting a healthy minimum profit level all next to major transport hubs and all with strong upside potential. Now, of course, we also have multiple growth opportunities across the rest of our portfolio, too. You'll remember this portfolio stack. I've talked about our HQ developments at the top, and in the middle, sits our active portfolio management assets, representing 50% of the book, and in many ways, the engine room of the business. They are full of opportunity for us to grow rents and values, for example, on-floor refurbishments and their subsequent leasing to generate some GBP 47 million of income, capturing reversions of almost GBP 14 million, restructuring and regearing our interests and prepping assets for major repositioning. And this presents us with real upside. Their valuation is undemanding at just over GBP 1,000 a foot, but with limited CapEx needed. And all of them are in prime locations. And, of course, they include our Flex assets covering some 29% of our total book and where the growth potential is significant, as you'll hear from Nick in a minute. And shown in yellow is the stabilized proportion of the portfolio, where we will rotate out of completed business plans at high capital values per foot, potentially releasing more than GBP 800 million of capital to employ for much higher returns towards the top of the stack. So lots then to do for us as we execute our plan to deliver the substantial growth available to us, on which topic and probably for the last time over to Nick to dig into our Flex options. Nick Sanderson: Thank you, Toby. Good morning, everyone. I certainly didn't need these when I started 14 years ago, nor was I talking about our unique and well-established fully managed growth strategy, where we are successfully delivering premium hassle-free spaces for our customers. Our leasing volumes continue to grow with more than a deal a week over the last 12 months, representing nearly 90% of all our sub-5,000 square foot office lettings. Rents are growing strongly, too, with these deals securing rents of GBP 37 million, and as shown in purple, regularly achieving more than GBP 250 a foot. As you can see top right, this is driving outsized performance, well ahead of our targets. We're generating strong absolute returns with an average yield on cost of 6.5% and service margin of 35%. And relative to ready to fit, we delivered a 103% rent beat and a 61% 10-year cash flow beat, and we've secured good lease duration, too, at just under 3 years. Our fully managed spaces are today generating GBP 50 million of annualized rent, and we're currently managing GBP 25 million of OpEx and other costs across the categories shown in the green bar. So with a gross to net of 50%, our annualized NOI is GBP 25 million or GBP 107 a foot. Once we factor in CapEx, along with fully managed specific corporate overheads, this results in an annualized net cash return, averaging GBP 80 a foot or 40% higher than the ready-to-fit net rent. So much higher net cash returns than on a traditional basis, and the customer base dominated by corporates, not SMEs. Our retention rate is strong at 75%, well ahead of our 50% underwrite, as our award-winning customer experience team delivers outstanding customer satisfaction. The most common driver for customer nonrenewal is needing more space than we can currently provide, as we experienced with our largest departure to date, a fast-growing unicorn status AI business, who we'd already moved twice within our portfolio. Pleasingly, we were able to relet their space within a month at a higher passing rent to Vanta, another high-growth company, with AI-led businesses now representing 23% of our fully managed customers. And our recently completed schemes are leasing quickly, too. In the heart of Soho, Wardour Street is 100% let within 2 months of launch, including 2 pre-let floors. We've secured average rents per foot of GBP 279 with more than 1/4 of the space let above GBP 300 together, driving a valuation uplift of 10% in the half. Our customers include those we've relocated from adjacent GPE fully managed space, an occupier of a GPE developed HQ building on Broadwick Street as well as a new customer who decided to double their space take within a month of moving in. And over at Piccadilly, which launched last month, 35% of the space is already let or under offer at an average rent of GBP 296 a foot, although we're breaking through GBP 400 on a smaller space. So with an 11% beat to ERV and healthy interest in the balance of the building, the prospects look strong. So, having more than tripled NOI over the last 2 years and our leasing velocity ahead of target, there's plenty more growth to come from today's GBP 25 million. We'll generate GBP 7 million of additional NOI, as we finish leasing up the recent completions. Our 3 on-site schemes, all in the West End, will deliver a further GBP 12 million with our pipeline schemes expected to add another GBP 15 million, taking our fully managed NOI to GBP 59 million, so an organic growth uplift of 2.4x. And as we execute more acquisitions, total NOI would increase to around GBP 90 million if we grow Flex of 1 million square feet. And with more than GBP 19 million of additional service profit, shown in blue, we'll be creating additional value of more than GBP 200 million or more than GBP 200 per foot. So lots more income and value growth to come on top of the strong outperformance we're already delivering with fully managed ERV growth and valuation growth of 11% over the last 12 months. Now a few comments on our overall performance in the half year. We delivered like-for-like value growth of 1.5%, as the best continues to outperform and EPRA NTA rose 2% to 504p per share. As expected and in line with consensus, EPRA EPS increased 70% to 3.9p, and we're paying an interim dividend of 2.9p. Our consistent financial strength saw EPRA LTV falling to 28.2%, and available liquidity rising to more than GBP 450 million, as we transition to a net seller and secured our largest ever bank facility. Overall, we generated positive TAR of 3% and 7.5%, respectively, over the last 6 and 12 months, delivering prime spaces against the backdrop of ERV growth with more to come as we continue to execute our growth strategy. Our opportunity-rich GBP 3.1 billion portfolio is 83% in offices, where we experienced the strongest value growth of 1.8% and ERV growth of 2.7%, with retail ERVs up 1.9% in the half year and fully managed rents up 3.5%. And with an overall valuation uplift of 1.5%, developments delivered the strongest performance, up 6.1%, with GBP 30 million of surpluses captured in the half year valuation. Yields were broadly stable with our portfolio equivalent yield today at 5.5% and our reversionary yield at 6.7%, higher still at 8.7% on a share price implied basis. Finally, the best continues to relatively outperform at both an ERV growth level in purple and by evaluation shown in green. In particular, our West End properties, representing nearly 3/4 of the portfolio, again, outperformed with capital growth of 2.9%. And as we continue to allocate capital to drive value growth, our almost GBP 700 million CapEx program is predominantly in the West End, combining GBP 290 million to complete our 6 on-site schemes shown in black with approximately GBP 400 million for pipeline schemes in gray. You'll find the usual scheme-by-scheme detail in the appendices. With a total GDV of GBP 1.8 billion, we'll deliver further surpluses of more than GBP 300 million based on conservative 10% cumulative rental growth. And you can see by the solid line, more than GBP 125 million should come through within the next 18 months based on profit release at scheme PC although our pre-letting activities typically accelerate these, plus there's serious upside potential with further rental growth and some mild prime yield compression taking the surpluses to more than GBP 500 million or 130p per share. On the right, our investing and leasing activities will clearly change the portfolio composition, with stabilized properties shown in yellow, growing from 19% to 55%, all else equal. However, our recycling activities will evolve the portfolio mix further with prospective sales of around GBP 800 million in the next few years, meaning active portfolio management properties, shown in blue, will, again, dominate with Flex also representing around 40% of the office portfolio. In reality, our sales will likely be higher still, given our disciplined capital management, as they were in the last cycle with more than GBP 3 billion of disposals. Plus, I imagine there'll be some acquisitions, too, to replenish the GPE development hopper. Now, we'll also be driving more income growth. Like-for-like rental income was up 5% over the last 12 months, whilst rent roll was up almost 30%, standing at the GBP 127 million today following the sale of Newman Street. Over the next 18 months, this builds by more than GBP 80 million or 64% and rises to around GBP 30 million in the medium term, an uplift of 142%, including the market rental growth we expect to capture. Of course, some of this uplift will be tempered through sales of stabilized properties, but there's still lots of growth to go for, and we reiterate our guidance for a threefold increase in EPRA EPS over the medium term. Nearer term, we expect EPRA EPS to roughly double to around 10p by FY '27, as we lease up our on-site development and refurb program with more growth to come as we deliver our pipeline and capture market rental growth. Once we factor in finance and other costs to deliver this growth, along with our likely earnings accretive sales, we anticipate annual EPRA EPS of 15 to 20p in around 4 years' time. As a result, we expect a stable dividend for FY '26 with potential DPS growth thereafter. Whilst continuing to invest for growth, we've maintained our financial strength and capacity, including through proactive management of our debt profile. We've recently issued a new 5-year GBP 525 million ESG-linked RCF, allowing us to redeem an early '27 maturing facility and repay a higher-margin term loan. We've also extended the maturity of our smaller RCF, and Moody's reaffirmed our Baa2 credit rating. When combined with our successful sales activity, LTV today is 28%, as we continue to operate within our 10% to 35% through the cycle target range. Interest cover is strong at 15x, with more than GBP 450 million of liquidity, and we have extended our average debt maturity to almost 6 years, whilst our weighted average interest rate remains in the 4s. Looking ahead, as the bar chart shows, we expect LTV to remain above the midpoint of our through-the-cycle range as we invest for growth in a rising market. But remember, a couple of big sales can really move the needle and give us significant incremental acquisition capacity. So wrapping up with a positive financial outlook, we expect to deliver further property value and NTA growth in the second half and beyond, based on current market outlook and our active business plans. H2 EPS will likely be broadly in line with H1, and the capture of our organic rental growth opportunity will drive significant income and EPRA EPS growth moving forward with an expected threefold EPS increase supporting our progressive dividend policy. Our through-the-cycle LTV range and disciplined capital management will be maintained. And through the capture of attractive prime rental growth and the delivery of our development-led growth strategy, we expect FY '26 TAR to at least match FY '25 as GPE moves towards delivering a 10% plus annual return on equity. And of course, shareholder returns would be higher still should the share price discount narrow. So I'll certainly be holding on to my GPE shares. And whilst I'm not leaving just yet, as Toby said, this will likely be my last set of GPE results. It's, of course, been a privilege to have been part of such an awesome GPE team. And I'm also proud of my contribution to both the strategic evolution of the business and its very special culture. But I'm also departing happy in the knowledge that GPE is in great shape with an exciting growth strategy to deliver for shareholders and customers alike, and as I look around the room with slightly blurry glasses and massive thanks to all of you for your support, your challenge, and most importantly, your good humor and camaraderie. And given this is the 29th time that I've run through this presentation, I think it merits a very special thanks to both Stevie and to Rich and their teams for the uniquely special work that they put into putting this presentation together. Not only do I know that footnote 13 on Page 99 will be accurate, I know that it will be accurate to at least 1 decimal place. So a massive thanks to you guys for leaving Toby and I do the easy work of tapping the ball over the line. And as I hand back to you, Toby, I must say it's certainly been fun. You're a good man, a great colleague, and there are many things I will miss at GPE, including your exceptional taste in wine. Over to Toby for the wrap up. Toby Courtauld: But not I should add at this time of day. Thank you, Nick. Very good. Okay. So let's wrap up then with our outlook. And in short, it's all about delivering more growth, as we continue doing what we said we would do. We think that our market opportunity is strengthening. London remains Europe's Business Capital, will outperform the U.K. economically and will generate jobs growth, driving healthy demand for space that will collide with a supply drought, meaning rents are and will continue to rise with the best buildings materially outperforming the rest. As a result, office values are rising, the invest market continues its recovery with prime yield compression a real possibility. Meanwhile, we are focused fully on executing our growth strategy, first, capturing significant income growth of more than 140% in the medium term. Second, delivering development surpluses of between GBP 180 million and GBP 520 million, just from our existing program, some GBP 130 per share. Third, more acquisitions. And fourth, significant further sales of more than GBP 800 million and always operating only in prime Central London, majority West End, 94% near an Elizabeth line station. So all in all then, GPE is well set. Our operational infrastructure is in place and is delivering, and our deeply experienced team, bound together by our collegiate culture, along with our strong balance sheet will help us generate an attractive return on equity, even more so for shareholders should our share price continue its re-rating to properly reflect the group's exciting prospects. So GPE is in great shape with all to play for, and we can look forward to capturing our strong potential over the next few years. Now I know some of you will have questions, maybe even for Nick, last chance. We'll have some microphones running around the room. As I say, we've got the team, home team to help answer any of those questions that you may have. Toby Courtauld: Who would like to raise something? Any hands? Yes, here at the front. Good morning, Tom. Thomas Musson: Yes, I guess I'll ask the question to Nick. You -- it's Tom Musson from Berenberg by the way. You talked about the big growth potential in the business, and I think a tripling of EPS probably stands alone in the sector in terms of the growth outlook. If you can achieve that, there's lots of development surplus to come that will drive NAV growth. Fully managed is a big part of that. Nick, I think you've led the charge on. So given the growth prospects, why is now the right time for you to move on from the business? And then, I had a couple of follow-ups on a couple of the numbers if that's all right afterwards. Nick Sanderson: Sure. Well, I joined GPE 14 years ago. I thought I'd be here for 5 years, and I've been here for 14 years, and I absolutely love -- I love GPE. Equally, hopefully, as we've articulated, not just in this presentation, but in all the presentations that lead up to this, there is a very clear strategy in place. There is very clear and strong team in place. I love the sector. I'm just looking for something a little bit different. I think I was talking to one of our advisers, who works at a similar business to Savills. His comment was, "You love it because it's very similar to what you're doing now, but it's very different". And so I'm moving to a business that like GPE absolutely loves real estate. Unlike GPE, only Central London, I'm moving to a global business, moving from a team of 150,000 to 42,000. And I'm very much -- whilst GPE, I'm confident in the EPS growth that it will deliver, Savills is absolutely an EPS business rather than the balance sheet business. So something to keep you energized. But as I said, I will remain very invested in GPE, both financially, but also emotionally. If you asked any question, I'll be delighted to leave it at that. Thomas Musson: I did have just a couple on the numbers. The fully managed services income, net of fully managed services expenses, has just moved from being slightly profitable last year to slightly loss making this year. Can you just help explain that dynamic there? Is that just a reflection of growth? And then the second one was I think I saw that there was a material, sort of, GBP 3 million reduction in other property expenses in the EPRA P&L from GBP 4.1 million down to GBP 1 million. What was driving that? Toby Courtauld: Nick, do you want to try the first one? Nick Sanderson: Yes. Tom, you were referring to what's actually in the P&L? Yes. I mean, look -- so one of the things that we've done this year within our own targets, so as to you know, we are now incentivized specifically around delivering NOI returns in the P&L. At the moment, they are still lumpy because not -- they're not particularly reflecting a significant amount of the income that, yes, we're generating. But it also -- we tend to take a hit upfront for the agent fees that we're -- broker's fees that we're incurring in putting the customers in place. So I think you'd expect to see the P&L reported NOI will be a little bit volatile as we go through the lease-up of the space. I would hope that over time, those margins improve because the cost of customer acquisition will reduce if we don't have a cost of customer acquisition, i.e., we keep customer retention rate high. And that's why I think you should expect to see over time an even bigger focus, particularly on the fully managed side around customer retention. And as I think I alluded to in the presentation, the single biggest cause for us losing customers out of fully managed is we don't have enough space for them. So that is not the only reason, but it's one of the reasons why we are looking to grow this part of the footprint. On the -- I'm looking Stevie here on the property cost, my guess is probably on empty rates will have been lower over this period. Anything else material to cover? Toby Courtauld: Nothing materially. This is largely due to empty rates, but we can get into the weeds offline. Callum Marley: Yes. Callum Marley from Kolytics. Two questions, one on vacancy and one on artificial intelligence. Is the new vacancy range that you've set of, 6% to 7.5% a new target for this period? And then how do you explain the divergence relative to your close peer who has a vacancy of about half that? Toby Courtauld: Yes. Thanks, Callum. So if you think -- can we just go back to the contracyclical chart right upfront, please, Rich, you do not want your portfolio full when everybody else has put their cranes away, okay? You want to be contracyclical in the delivery of space when everybody else has run for cover, especially when there is an 84% shortage of demand against supplies. So we actively want our vacancy rate up. So right at the beginning, I talked about being countercyclical in our approach, and that's exactly what we're doing here. We're developing into a serious shortage of supply. And we've now got CEOs from large financial institutions around the world saying London does not have enough space. We've got companies looking 6 years ahead to try and forward purchase space. We pre-let most of our H2 developments, as you saw with CD&R during this year. And you will have heard this morning that we're under offer on a good chunk of the space down at Minerva. So you want to have vacancy at this point in the cycle, especially with rents rising. 6% to 7.5%, we're in the range, the single biggest vacancy that we've got at the -- in the portfolio at the minute, we've just finished, which is our Piccadilly Holdings, where we've just completed the repositioning of that building for fully managed. That's leasing up pretty well. Simon, I'll come to you in a second, just for a bit of color on that lease-up. But again, great locations, great buildings, rents rising, it's now that you want vacancy. So I would think we would be failing if our vacancy was 0, okay? I want vacancy. So with that point made, just talk a little bit about the color on how that's going and maybe just what we experienced in the core markets and maybe draw the distinct between the peripheral markets. Simon Rowley: Yes. So Callum, we've -- we completed 170 in September, which was about a month after Wardour Street and some people might have thought, well, why has Wardour Street let faster than 170? One of the principal reasons for that is that Wardour Street was a building that was really easy to understand through construction. So if anyone attended our Capital Markets Day back in February, one of the things I said at the time was that I thought we would pre-let some of Wardour Street. It wasn't in our underwrite. We don't tend to underwrite pre-lets and fully managed. But we did manage to pre-let 2 floors in there because it was easy to understand. Conversely, 170 Piccadilly finished a month later. There are 13 units in that building. It's a heavy intervention as mentioned earlier. It's a Grade 2 listed building. And so it's a much harder building to understand. Nevertheless, once completed, it looks absolutely fantastic. And there are a number of you in the room who have seen it. And that, in turn, has driven some absolutely incredible ERV beats. As you can see, moving through GBP 400 per square foot on some of this building was definitely not in our underwrite. But an average ERV of 296 so far for the deals that we've done, 35% of the building let are under offer, we are really, really confident with the rest of that building. And we are more certain than ever that core locations, prime core locations are where we would like our space to be. There are examples around the market of fully managed space being released in areas where, frankly, the price of a cup of coffee that we make is the same irrespective of where you are in London. We want our fully managed buildings to be in these core locations, these clusters. We are building a much better portfolio of clusters of buildings and that has allowed us to move companies such as, we mentioned, Wunderkind earlier, but others around the portfolio, that is helping that retention rate. Nick mentioned that, that is a big focus for the business. We have, in just this part of this year, done a really good job retaining customers, that's about 70% of the retention rate that we have managed to create. It does not involve broker fees. So as Nick mentioned, the cost of doing that business is far less for us. So it's a really important area. That's why the clusters work. The clusters will also work for reducing some of our operational costs as we are able to transfer some of the cost of our customer experience team across a wider portfolio. So I'm really excited. I mean, we've been doing this for about 5 years now. Looking forward to some of the projects that we have got on site, and the team that we've created really gives us a lot of confidence. Toby Courtauld: Brilliant. Thank you, Simon. AI. Callum Marley: Yes. Second question, stating that entry-level positions in white collar jobs are potentially being displaced by AI. How do you think about that long term, the different scenarios to your job's growth figures that you publish in which AI adoption materially changes, hiring needs, and then, ultimately the impact on office? Toby Courtauld: Yes, a really important question, one that we could spend all week talking about, so we won't do that. But just to give you a couple of thoughts to take away. And Marc, I'll come to you in a second, if you wouldn't mind, just expanding a bit on the sorts of companies you've seen in the market today in that space. I mean, one view, in fact, we asked AI, what AI thought about white collar jobs in London. And it started with an analysis of white collar jobs globally. And one version of AI said to us that it thought 90-odd million white collar jobs would be essentially disintermediated by AI. But 185 million would be created globally. Now, they won't all come to London, unfortunately, but it is an interesting debate as to exactly where they do go. And our experience would suggest that, by and large, they're going to places with talent, with infrastructure, with magnetism, with great buildings, clearly part of the equation, with universities that are world leading in some of these topics, and it's for that reason that places in and around California and some of the Eastern seaboard in the U.S. and the golden triangle around London are performing relatively well. It's why 23% of our customer base in fully managed is AI led. They're not AI businesses, but they have AI in the description as a heavy part of what they're all about. So I actually think there is an opposite side to this coin that you should take, which is that you should consider it as an opportunity. You should consider this as something that great commerce centers, like London, are going to capture more of the opportunity than most other locations. Just in terms of demand, what are we actually seeing right now from businesses in that tangentially related? Marc Wilder: Yes. So as an overview, active demand is about GBP 12.4 million, which is 26% up on this time last year. And of that, TMT is around 15%. And of that, about 12% is AI-focused companies and 88% is non-AI. Now, if you look, Toby has obviously mentioned about the dominance of London in terms of its tech ecosystem, the deepwater talent, world-class universities and that regulatory environment. There are currently 382 companies that are being founded in H2 in London with more than 50 people employed. So it is really quite a mature market. And if you look at AI as a catalyst for demand, there's currently around 0.5 million square feet today of well-established companies and some of the names that are out there that are either under offer, regearing on a short term, either have searches or in negotiation. Names such as OpenAI, obviously, ChatGPT, they are currently under offer on 100,000 square feet. You've got Databricks who are looking for 100,000 square feet and rumored to be in negotiation. Anthropic, who are behind Claude, 50,000 square feet. Palantir, who we know very well, next door to Soho Square, regearing on a short term because they can't find what they need. And we're obviously hopeful that we may have further conversations with them next door. Synthesia which is obviously the AI company that Nick referred to without referring by name, but we took them at 1,500 -- sorry, yes, 1,500 square feet in Dufour's. They grew 3x with us and then have moved to a managed facility of 21,000 square feet. So there's quite a lot of names that are out there. And the other thing I would also say in terms of is it a net promoter or a detractor in terms of jobs, if you look at the case study for San Francisco, currently, in 2025, there are 5.6 million square feet occupied by AI companies. That's moved up from 2.7 million in 2021. And if you look at the prospective job numbers, which is around 50,000 new jobs accretive, then that could lead to about 16 million square feet of new jobs of -- sorry, new requirements up to 2030. So that averages out at about 2.7 million square feet per annum through to 2030. So we believe, if you look at what's going on in London, what is -- what we're seeing in San Francisco, we think that the prospects are positive rather than negative for us. Toby Courtauld: Not complacent, mind you. And we would always make sure that we are realistic when coming to market with spaces, but we've got some good interest in businesses in that line of work. Okay. Where else can we go? Yes, Neil, right at the back. We'll need a microphone, please. Thank you. Neil Green: Neil Green from JPMorgan. Just one question. Given the progress you've already made on disposals and quite sizable pipeline of disposals that you're earmarking, how do you think about leverage and potentially even excess capital down the line should acquisition opportunities become harder to find, please? Toby Courtauld: Yes. Good question. Thank you, Neil. So we have a long track record, as you know, of -- thanks, Rich, of returning when we have not been able to find a more productive use for the capital post-sale. So you can see that from the pink circles in the middle there, and we gave back probably GBP 600 million to shareholders, having raised GBP 300 million at the beginning of the cycle last time around. This time around, we've already raised the GBP 300 million, and let's see what happens. But the same mantra applies. We will give back where it is excess to our needs and we can't make an attractive return for shareholders on it. Last time around, it was interesting, a number of shareholders said, "Well, why don't you hold on to it because you might be able to use it, and we don't really want it back". And we said, well, it's frankly, that's your problem, not ours. Our problem is whether we can use it accretively or not. And if we can't, you are going to get it back. And we did share buybacks. We did a capital restructuring and a capital return. So we've done all variations of it. And we would do them again if we were not able to find enough accretive opportunities to reemploy that capital post-sales. Scale is one reason I hear people arguing for not giving back capital, that is not relevant to us. Return on capital employed is the thing you should look at, and we will not simply hold capital for the sake of feeling a bit bigger if you can't use it productively. So shareholders should know that we will give it back if it's excess. If we don't give it back, it's because we felt we've found a great series of opportunities to employ it for an accretive return. Yes, Max. Maxwell Nimmo: Max Nimmo at Deutsche Numis. Maybe just kind of follow-up question to Neil on that capital recycling point. And talking about kind of liquidity at the larger end of the market, and if you can't sell some of those assets, are there other assets you can kind of pull in and out? And perhaps a theme that we're seeing a little bit at the moment is this sort of disposals below book value, which I think it hasn't really been a problem for you guys so far, but just some of your views on that well. Toby Courtauld: Okay. If you wouldn't mind coming in Dan in a second on how you're seeing the landscape playing out from here, but first up, Max, again, good question, what I think the correlation, I think, you need to be clear about is between sales ability, getting that deal done and quality of asset, right? And quality isn't just the way it looks. It's where it is, who's in it, what the rental position looks like, what its transport interchange, the hub near it looks like, the public realm immediately around it. There I say, even it's feng shui, right? So this whole idea of the way that building sits and feels matters. Now we've just sold the largest single asset trade in the West End. So we have not encountered a problem with scale, and it was ahead of book value. So that tells you that our values are broadly getting right what the market is willing to pay for an asset as they should. As we go from here, one thing that is very clear is that Hanover Square is in that list of stabilized assets, 2 Aldermanbury, both buildings where we've essentially will have delivered our business plan. We've got some rent reviews to do, as you know, in Hanover, before we consider that. And Wells & More is currently in the market. So these are quite big assets, especially to AS and Hanover So we'll be testing the outer envelope, I think, of scale when we get there, but we're not there at the minute. So the evolution of the market will be interesting to see. We will not be overly concerned about hitting book value, okay? We will be principally concerned about the forward IRR from the price on offer. And if we do not think that, that is sufficiently accretive to shareholders, the opportunity cost is much more powerful. We'll take the money. But given the quality, and I said before, I think Hanover Square is one of the best buildings in Europe, therefore, the world, and I mean that. It's an unbelievably good asset. And Wells & More is out there testing the market at the minute, and 2 AS will be a 20-year lease to Clifford Chance. So of a rent, which was struck in 2021, '22, there or thereabouts. So probably reversionary. So these are great quality assets, and I think they will do well. Dan, just in terms of market dynamic. Dan Nicholson: Thank you. And so, I think, at the moment, the market dynamics are such that we've seen lot sizes start to go up. I think, the Newman Street asset we sold a few weeks back, that was the biggest asset in the single asset deal in the West End through this part of the cycle, and so for several years. So it really sets a marker. And I think the -- you're starting to see -- so not only a lot sizes, you're starting to see new investors in the market as well. So against that backdrop, the volumes are up to, I think it was, 63%. On the top left there is the stat that we've quoted. So not only are you selling bigger assets, there's more institutions in the market who are typical buyers of the mature finished product that we've got -- stabilized product that we get at the end of our recycling process. So I think the landscape for sales is very good and definitely improving. So Newman Street set a new benchmark, the likes of Hanover and 2 AS, which again are a step up in scale. And as the market evolves, those larger lot sizes, they will become digestible by the market. And if you look at -- Rich, I think it's Page 4, if you just look at our cyclical part of the chart that we always look. This is where we want to be buying, these pieces here, and that's why we've been conducting such an intensive acquisition strategy over the last 18 months, 5 done, 1 under offer, hopefully done by Christmas, no pressure, Alexa. So that's -- we are buying exactly the right time. And then also, you'll -- so we -- and we're selling those mature, stabilized assets as that part of the market. And we talked about it 6 months ago, different parts of the market get hot at a different time. At the moment, those core assets become attractive because those institutions are coming back in, like the stabilized assets. The value-add part of that curve has been hot for a while. But obviously, we don't want to be selling into that. That's a product we want to be buying. So have we been going into the market and buying value-add assets in competition with a bunch of other people? Not really. Most of the stuff that we've been doing has been off market. So if you look at the map of the acquisitions that we've done, 2 or 3 have come from the city of London, and those have been one-on-one interactions, not in processes. So we're seeing that our acquisitions are playing to the curve there. Our disposals are playing to that part of the market that's warming up, and the general landscape is improving such that over the next 12 months, the larger assets such as 2 AS and Hanover will become liquid at the right times. Toby Courtauld: Rich, can you just jump to Slide 6? Because one of the things you might be thinking is selling at that point on the curve isn't necessarily the right answer. The reason, there's a complicated bifurcation going on between the best and the rest, right? If you are slightly off pitch or there's something wrong with your building, you're going to struggle to sell it, which is a sort of stuff that Dan has described we've been buying. But if you look bottom right, the reason we're now willing to sell some of the buildings we are is because we have seen this bifurcation run riot through rent. And those prime rents have really grown. And it's that differential that is now allowing us to sell prime assets at really strong numbers that I don't think was the case even 12 months ago. And that change is quite dramatic. Dan Nicholson: And it says institutions with a low cost of capital who are buying. And our forward look on those doesn't hit our cost of capital, but it's fine for those buyers. Toby Courtauld: Yes. Thank you, Dan. Thank you, Max. Any more for any more. We are just past the hour. Yes, we've got a couple over here. Yes. Zach? Zachary Gauge: This is Zachary Gauge from UBS. A couple of questions related to returns, and then, hopefully quite straightforward one just on EPRA earnings. But firstly, you seem quite bullish on near-term yield compression. I'm just wondering how you reconcile that with the valuers moving out the yield on Aldermanbury Square by 15 basis points. And I'm sure you have seen the latest MSCI data for the London office market in West End turning negative in October and flat ERVs for the last 2 months in the West End. And sort of following on from that, looking at your 10%-plus ROE medium-term target, can you give any more color on when you expect that to be realized? And I think at the end of FY '25, you guided to more growth to come, and now, it sounds a little bit like this year is in line with last year as opposed to necessarily growing from there. And then the straightforward question was, is the tax credit you received included in the EPRA earnings number? Toby Courtauld: Fabulous question, Zach. I mean, you say I sound a bit more bullish. You sound a bit more bearish, and we will get you to the right place at some point over the next few years. But putting that aside for a second, Nick, if you could deal with the second one, and maybe the third, and then, Stevie, you want to deal with it. So on the yield point, well, funny enough, the further they move the yields out, the more bullish we're going to get on compression, especially in an environment where yields are going to be -- and we know they're driven by interest rates, and in an environment where interest rates are likely to come in. And -- I mean, I think the issue with that is scale. It's just -- it's a big building. It's going to be GBP 400-ish million, there or thereabouts, and that is a rare part of the market. So that's my challenge for the team when we come to selling that one. But more broadly, we are bullish on prime product. I mean, we -- for reasons Dan has just described. We think that really good assets in really good locations are gold. They are irreplaceable, by and large, and we're not talking about the peripheral central London markets. We're talking about core 100% prime, which is where we're focused. And that's why, if anything, we have concentrated even more over the last 5 years than you would have seen us. I'm not sure we'd buy Whitechapel again, put it that way, unless it was unbelievably cheap. It was quite cheap at the time. But I think as those peripheral markets get less relatively attractive to the prospective customer base, we get less interested from an acquisitions perspective on them, but if you are in the core, I've said it before, it's incredibly powerful. We think we'll sell very well because we're leasing very well. So that's the first point. On the second one. Nick Sanderson: Rich, you give 54. Look, we were clear that the aspiration around the 10% plus TAR was one for the medium term. We set out the breakdown of that in the appendices. We said at the beginning of this year that we expected this year's TAR to be in line or ahead of where we were last year. We've maintained that. I think it's fair to say it will be my successor who stands up here talks about a 10% TAR rather than me, but I think that is something the -- looking at our own business plans, we look like we're set to deliver in FY '27-'28. In terms of the tax credit, yes, it is in EPRA earnings in accordance with the guidance. That being said, we are not anticipating it has a material impact on the overall numbers. We still stand by the guidance that we gave on EPRA earnings at the beginning of the year irrespective of that credit. It's a one-off we don't expect to repeat it. But in accordance with EPRA guidance, you include it. Zachary Gauge: Maybe just a follow-up here, if I can. I think everyone largely understands that the prime versus secondary debate, but how much of your portfolio is prime versus secondary? Because presumably, you have a prime guidance and an ERV guidance, so it must be some form of blend of the 2? Toby Courtauld: Well, what -- in an ideal world, at this point in the cycle, thinking contracyclically, in an ideal world, what you want is raw material that is in some way needing attention in prime locations, okay? That is, to me, the holy grail. And so what you can see in GPE is some -- if we can go to the capital stack, please, Rich, some buildings in yellow, which are reaching the end of their GPE life because we've done things -- all of the things we can to them and their prospective numbers are not good enough for us, back to Dan's point about there'll be some institutions out there with a lower cost of capital than us will be happier holders than us. But the majority of your book, in other words, the blue and above, needs to be prime location buildings that you can improve. And then you have a business that's really interesting. If you're simply stuff full of all the yellows, right, and this idea that you just collect, income-producing assets that are yellow, you are a proxy to market moves. You are nothing more than a beta story, right? If you want to be an alpha story that's creating something of value, you go above the yellow and you focus on things that you can do things, too, to generate rent growth, net area again, higher quality buildings in great locations. And that's the underlying, which is why we started this presentation with 100% prime Central London. So if you look at -- I think you could probably argue that Whitechapel is the only building in our book, which would not qualify in the 100% prime Central London. That's the only one. The rest of them are, and the rest of them will be improved over time, and we will transmission, will basically capture growth in the blue section, turn it into a yellow tradable asset and out shall go. That's been our model for as long as I can remember. And it feels -- if you go back to slide -- the cycle one, please, Rich, it feels much more alive today than it did in that really difficult period post Brexit, all the way through COVID, where, frankly, markets we felt should have corrected and didn't because the monetary response was so aggressive. And it took inflation, which was the consequence of -- and QE unwind for capital values to come off sufficient for us to get interested again. And so we're back into a really dynamic cycle, which feels like a good place to be. On that note, I think I'm going to draw proceedings to a close. I think we've given plenty of time for Q&A. Thank you very much. Just to wrap up for me then, this story today is all about our excellent leasing, which is all about our excellent positioning and our financial strength, looking forward with a lot to do over the second half to your point, but a lot to do over the next few years, and I'm very excited about that. As I hope you are. Thank you all for coming.
Operator: Good day, and thank you for standing by. Welcome to the T1 Energy Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Jeffrey Spittel, Executive Vice President, Investor Relations and Corporate Development. Please go ahead. Jeffrey Spittel: Good morning, and welcome to T1 Energy's Third Quarter 2025 Earnings Conference Call. With me today on the call are Dan Barcelo, our Chief Executive Officer and Chairman of the Board; Evan Calio, our Chief Financial Officer; Jaime Gualy, our Chief Operating Officer; and Otto Erster Bergesen, our SVP of Project Development. During today's call, management may make forward-looking statements about our business. These forward-looking statements involve significant risks and uncertainties that could cause actual results to differ materially from expectations. Most of these factors are outside T1's control and are difficult to predict. Additional information about risk factors that could materially affect our business is available in our annual report on Form 10-K filed with the Securities and Exchange Commission and our other filings made with the SEC, all of which are available on the Investor Relations section of our website. With that, I'll turn the call over to Dan. Daniel Barcelo: Thanks, Jeff, and welcome, everyone, to our third quarter earnings call. Let's turn to Slide 4, please. Many of you may be new to the T1 story this quarter, so we'll begin today with a brief look at our current position in the U.S. solar market. With 5 gigawatts of annual capacity at G1_Dallas, T1 is the largest American manufacturer of silicon-based solar modules, and we are the second largest American-owned solar module producer in the U.S., but we're just getting started. As we'll discuss on today's call, we are advancing our plan to start construction of the first 2.1 gigawatt phase of our U.S. solar cell fab, G2_Austin, before year-end. G2 is the centerpiece of our strategy to build the first end-to-end domestic polysilicon solar supply chain in the U.S. This strategy is intended to competitively differentiate T1 and to align the company with the growth dynamics in U.S. power markets. Now let's move to Slide 5 for a closer look at the big picture developments, which underpin our strategy. Today's theme is powering America. With U.S. electricity demand growing faster than it has in decades, we are positioning T1 as a homegrown enabler of 3 increasingly evident macro trends: accelerating U.S. AI development, onshoring of advanced American manufacturing and strengthening American energy security. These 3 trends are the thematic pillars of T1's investors' case. Energy is key to unlocking the future of AI. New data centers now routinely require gigawatts of electricity, and they are growing exponentially more compute and energy intensive. Energy has emerged as the leading checkpoint for AI growth. The U.S. has the natural resources and talent to debottleneck the AI equation, and T1 plans to contribute by bringing the capability to produce leading-edge solar technology at scale domestically. T1 intends to power American AI by investing in American advanced manufacturing. The reshoring of manufacturing is another trend that is driving electricity demand growth and presenting T1 with the opportunity to strengthen critical U.S. energy supply chains. We have ramped up domestic PV module production in G1_Dallas. We are advancing towards the expected start of construction at G2_Austin, our U.S. solar cell fab, and we are expanding our U.S. supply chain through our recently announced partnerships with Hemlock/Corning, Nextpower and Talon PV. We have entered an era when control of digital intelligence and AI infrastructure will determine the fate of nations. This underscores the strategic value of domestic energy capacity, and we believe T1's plan to build a domestic PV solar supply chain will contribute to U.S. energy security. In addition, standing up a domestic end-to-end polysilicon supply chain should strengthen our national ability to produce semiconductors, advanced materials and grid and space technologies, all of which involve common inputs and production processes. Turning to Slide 6. Let's drill down into the AI power theme. If the U.S. is to maintain its lead in AI, we need more electrons and we need them now. Leaders from the technology industry have suggested the U.S. must double the 2024 pace of electricity additions to 100 gigawatts per year to close the widening electron chasm between AI-driven demand and power availability. At T1, we are proponents of U.S. energy abundance, and we endorse the strategic merits of adding new natural gas and nuclear power capacity to our grid, but those technologies can only play a limited role in the near term due to swollen order backlogs, permitting red tape and construction cycle times for new generation facilities. Solar, coupled with battery storage, is the obvious choice to bridge this gap as a rapidly deployable resource at scale. The dawn of the AI age is a company-making opportunity for T1. We have available capacity at G1_Dallas, where we recently eclipsed the daily production record equating to an annualized rate of 5.2 gigawatts. As we look to 2026 and beyond, our plans to integrate upstream of G1 will position T1 as the first company that can offer hyperscalers and their partners a high domestic content, polysilicon-based TOPCon solar module. Now let's move to Slide 7 for an update on T1's business. Shortly after we announced our preliminary third quarter results in October, we closed 2 successful equity capital markets transactions. T1 raised $72 million in gross proceeds from a registered direct common equity offering with high-quality new and existing institutional equity investors. And as previously disclosed, T1 entered a $100 million commitment for the issuance of preferred and common stock to certain funds and accounts managed by Encompass Capital Advisors, LLC in connection with T1's acquisition of Trina Solar's U.S. manufacturing assets. Last month, T1 elected to make the second and final draw of $50 million pursuant to this $100 million commitment. This infusion of equity capital positions T1 to begin the first phase of construction at G2_Austin during the fourth quarter of 2025. Although we initially intended to focus on raising debt prior to an equity tranche to partially fund the first phase of construction at G2_Austin, these 2 transactions enable us to raise capital at attractive terms while we engage with prospective debt investors and advance the traditional project financing. The additional trading liquidity from a higher share count and market capitalization also provides opportunities for us to add new shareholders who were previously unable to trade in our stock. At T1, we are focused on shareholder value and as equity owners ourselves, we are highly sensitive to dilution. So we'll continue to use equity judiciously to fund growth CapEx while we optimize our capital stack. Our capital formation progress positions us to add G2 to our expanding domestic polysilicon solar supply chain, which now encompasses a growing network of American partners. In August, we announced an expanded polysilicon supply agreement to include production of American-made solar wafers with Hemlock/Corning. And in October, we signed a framework agreement with Nextpower for the provision of domestic steel frames, and we made a strategic minority equity investment in Talon PV LLC, which is building a U.S. solar cell fab in Texas. These partnerships are foundational to T1's mission to build the first integrated American polysilicon solar supply chain. Our expanding partnership network and the domestication of our supply chain are also key elements of T1's policy playbook. As we highlighted on the second quarter call, our team continues to advance the de-FEOCing process to maintain T1's eligibility for Section 45X tax credits in 2026 and beyond due to requirements in the OBBB. Moreover, our commitment to invest in advanced American manufacturing and critical domestic energy supply chains are consistent with some of the administration's top priorities. Turning to operations. We continue to ramp production and sales during the third quarter at G1_Dallas, our state-of-the-art solar module facility. During the fourth quarter, we expect to generate significantly higher sales and EBITDA as we ship modules under previously booked merchant sales agreements and as we sell down inventory to customers who are clearing out 45X eligible modules before year-end. As a result, our 2025 EBITDA guidance of $25 million to $50 million is unchanged. While we build our business in the U.S., we continue to advance our goal to generate value from our legacy European assets, which are attracting interest for repurposed data center applications. We look forward to providing updates on this initiative as warranted by our progress. As we do on each quarterly earnings call, we have a rotating guest speaker from T1's management team to expand on an important topic. Since this quarter's theme is Powering America, I'd like to introduce our SVP of Project Development, Otto Erster Bergesen, to provide an update on G2_Austin, which will be the centerpiece of T1's domestic supply chain and where we are approaching the start of construction. Otto? Otto Erster Bergesen: Thank you, Dan. Let's turn to Slide 8. After months of work, we have a great design developed and Tier 1 partners contracted to help us move ahead with G2_Austin. We are ready to enter full execution shortly. We're pursuing a 2-phased approach to reach more than 5 gigawatts of capacity of solar cell manufacturing. Phase 1 will be a 2.1 gigawatt fab, which we plan to follow with a 3.2 gigawatt Phase 2. If offtake level permits, we can expand the second phase. The basis of design is Trina Solar's more than 100 gigawatts of solar cell fabs in general and their 5-gigawatt state-of-the-art Huai’'an fab in particular. We have customized this design together with JFE Engineering in China and later with SSOE as our U.S. engineering firm. We have been working very closely with Trina, JFE, SSOE and other companies over the past 10 months to leverage their project and operational experience while securing U.S. compliance and tailoring to U.S. conditions. Yates Construction has been selected as our general contractor. We have worked with Yates since May to provide preconstruction services, focusing on constructability and engagement of global and local subcontractors. Laplace has been selected as our EPC turnkey partner for the production line equipment. In August, we began working with Laplace on detailed design and preparations for equipment manufacturing. Laplace was a first mover on TOPCon and has extensive experience in the TOPCon space. They have been part of solar cell fabs for more than 400 gigawatts of capacity. T1 has great confidence in their ability to deliver top quality and to achieve according to their performance guarantee under the contract. The past few months, we've been working closely with Laplace and Yates to engage critical subcontractors to identify and address long lead items. We are pleased to report that the project has been very well received in the market and that we are currently contracting with subs to support the project schedule. For example, we have secured a very beneficial mill roll contract that enabled us to start erecting steel in March 2026. We have also secured favorable terms on long-lead electrical equipment like switchgears, generators and transformers. Finally, we have built a strong team, combining Tier 1 partners with a solid in-house project management and engineering team. If you take one thing from our portion of today's presentation, I want it to be that we have a world-class team with the experience and technical expertise to execute the G2_Austin project successfully, and we look forward to breaking ground before year-end. With that, I'll turn it back over to Dan. Daniel Barcelo: Thanks, Otto. Let's turn to Slide 9. While we move towards the expected start of construction at G2, production and sales continue to ramp at G1, our state-of-the-art U.S. module facility. We have produced more than 2.2 gigawatts of modules year-to-date, and we are on track to meet our unchanged 2025 production plan of 2.6 to 3 gigawatts. And in October, we achieved a daily production record of 14.4 megawatts, which equates to an annualized run rate of 5.2 gigawatts. In less than 1 year, the T1 operations team has brought G1 from the start of production to a daily run rate that exceeds nameplate capacity, which speaks to the talent and dedication of our people. During the third quarter, T1 generated record net sales of about $210 million, and we expect sales to continue growing meaningfully in the fourth quarter as we start deliveries of previously booked merchant sales and we liquidate finished goods inventory that is eligible for 45X credits before year-end. This near-term sales pipeline and our continued operational progress underpin our unchanged 2025 EBITDA guidance of $25 million to $50 million. As we look forward to 2026, our supply chain team is focused on sourcing non-FEOC cells to G1 during the bridge year to the anticipated start of production at G2 in Q4 2026. We have already identified a meaningful supply of these cells for next year, which will be the primary driver of G1 production and sales before G2 is up and running. And now I'll turn the call over to Evan to walk you through the financials. Evan Calio: Thank you, Dan. Let's move to Slide 10 for a summary of our unchanged guidance. As detailed in this morning's release, our 2025 EBITDA guidance of $25 million to $50 million based on a 2025 production of 2.6 to 3 gigawatts is unchanged. In the fourth quarter, we anticipate a significant ramp in production and sales related to higher production levels, delivery of previously booked merchant sales as well as some liquidation of finished goods inventory before year-end. We expect fourth quarter production and module sales to exceed combined production and sales in the first 3 quarters of 2025 as we've now ramped the facility to average 4.5 gigawatt run rate in the fourth quarter. In our October release of preliminary third quarter results, we also introduced annual run rate EBITDA guidance of $375 million to $450 million for an integrated production of G1_Dallas with the first 2.1 gigawatt phase G2_Austin. The guidance is based upon G2_Austin achieving full run rate production and sales of 2.1 gigawatt and an annualized G1_Dallas run rate production sales of 5 gigawatts, supplied by 2.1 gigawatts of G2 cell and the remainder through a combination of non-FEOC foreign cells. Any U.S. sales procured potentially through Talon represents upside. Now let's turn to Slide 11 for a summary of T1's financial condition. Bringing the first phase of G2_Austin online to deliver a step change in T1's profitability and cash flow generation. The recent capital markets transactions Dan highlighted have advanced that future. Even prior to the equity transactions, our cash position built significantly as we anticipated in the third quarter. We ended 3Q with cash, cash equivalents and restricted cash of $87 million, $34 million of which was unrestricted. We added $118 million of cash in October. In addition, we accrued $93 million of Section 45X production tax credits through 3Q, and we expect to monetize those credits in the fourth quarter. We are currently exchanging term sheets. Aligned with our 4Q production and sales ramp, we expect to generate a similar amount of 45X credits in the fourth quarter that we expect to monetize in 1Q '26. On capital formation, we're building on the momentum of the recent equity transaction with potential G2 offtake contracts and debt investors. We also expect the recent equity raises will yield additional benefits for T1 shareholders. Our improvement in our capital -- our market capitalization and daily trading volume should further expand T1's eligibility for inclusion in passively managed index funds, and we are receiving a noticeable increase in inbound inquiries from active managed institutional funds who were previously unable to invest due to our trading and liquidity constraints. Now I'll turn the call back to Dan for closing remarks. Daniel Barcelo: Thanks, Evan. Turning to Slide 12. Let's conclude with an overview of T1's top priorities. In the near term, our focus is on preserving T1's eligibility for Section 45X credits by completing the de-FEOCing process as well as raising the capital required to complete the first phase of G2_Austin through a combination of debt and cash deposits tied to anticipated customer offtake contracts. While we advance our capital formation and count down to compliance initiatives, we're also executing our plan for 2026, which we view as the bridge year to establish an end-to-end U.S. PV solar supply chain. Our top operational priority for the next year is to source a meaningful supply of non-FEOC solar cells to feed module production at G1 prior to the expected start of operations at G2 in Q4 2026. Concurrently, as we build the G2_Austin offtake portfolio, we intend to initiate and complete the capital formation initiatives required to fund and trigger the start of construction for the planned second phase of G2 sometime in 2026. In 2027 and beyond, we will be focusing on bringing T1's integrated U.S. supply chain online and completing the second phase of G2. We plan to achieve 5 gigawatts of integrated production between G1 and G2. And by virtue of our supply agreements with Hemlock/Corning and Nextpower, we should be producing modules of domestic content that comfortably qualifies our offtake customers for ITC stacking bonuses. Our ultimate objective at T1 is to generate shareholder value by establishing a differentiated competitive position as the first fully integrated U.S. polysilicon-based solar module producer. As we grow our operations and commercial enterprise, we will work to maximize returns on capital, sustainably reduce unit cost of production through software and automation upgrades and optimize T1's balance sheet. This is an exciting time for T1, our investors, employees, customers and partners. We are building something that doesn't exist in the U.S. today, an integrated secure, traceable polysilicon-based supply chain based on advanced solar technology. On behalf of T1's Board of Directors, thank you for your continued support in this journey as we position T1 to power America. And with that, I'll turn it back to Jeff to coordinate Q&A. Jeffrey Spittel: Thanks, Dan. Shannon, I think we're ready to open the line for questions. Operator: [Operator Instructions] Our first question comes from the line of Philip Shen with ROTH Capital Partners. Philip Shen: Congrats on all the progress you're making. Yes, I wanted to check in with you guys on your de-FEOCing process to see if you guys could give us more color on the progress you've made and the main next steps that you guys have to take that we can follow to monitor that progress. Daniel Barcelo: Thanks Philip for that. We actually have Andy Monroe, who is our Chief Legal and Policy Officer on the line. Andy, why don't you take that question? Unknown Executive: Sure. Thanks, Dan and Philip. We're well positioned for compliance with our domestic and non-FEOC supply chain plans. We have a solid compliance plan developed with the assistance of world-class legal and compliance experts and we're making real progress on executing that plan. So we're confident. We're not sharing full details on the compliance for competitive reasons at this point, but we are confident that with those factors in play that we will be compliant. Philip Shen: Okay. And then as it relates to the Q3 contract dispute, could you give us a little bit more context there? Could that dispute extend longer? What kind of impacts could that be? And then how big of a contract was it? It seems like with the impairment of $50-ish-plus million, it was quite meaningful. Daniel Barcelo: Yes. Thanks, Phil. Evan, why don't you take that? And as it relates to the size of the contract, we are limited to certain confidentiality on the contract. And as you can appreciate, if we are in negotiations -- or as we are in negotiations there, we have to be sensitive to the confidentiality required in the contract. Evan, would you like to add other parts? Evan Calio: Yes. I mean I would say that we had already calculated that in our guidance. So there isn't necessarily a guidance change as it relates to this contract, and we are continuing to execute other contracts. So in terms of the financial effect, it's been in our guidance for 2 quarters now. There was goodwill because it relates to a contract that was executed when we made the acquisition. That's why there's recording a goodwill, which we made a conservative interpretation to write off that goodwill. But as Dan mentioned, we remain in discussions with the contract party. We continue to assess all options, and we'll choose a path that optimizes the value to shareholders. I hope that's helpful. Philip Shen: Okay. And then one more here. You guys have made some interesting and useful -- well, interesting investments and partnerships with Nextpower and Talon here. So I was wondering if you might be able to describe more the integration of all these companies and relationships. So specifically Nextpower, what's the volume timing? When could initial modules with U.S. frames come off your line? And then as with Talon, would you expect to source cells from them to support your G1 facility? And then finally, if there's an update with Corning and Hemlock, that would be great as well. Daniel Barcelo: Thanks, Phil. We are very committed to both an integrated -- vertically integrated supply chain and solar industry. So a lot of these projects are related to that. The second part of this is that domestic content. Frames are an increasingly large part. And as we go into the future, there will be a higher requirement for domestic content. A lot of the strategy around Nextpower was meeting that domestic content. As you know, beyond cells, we're basically looking at glass, at frames, at glues, at J-Boxes, et cetera. So this, to us, was a very strategic step to partner with a great company like Nextpower. I think also the Nextpower aspect was about scaling. Nextpower is a very confident partner in their products and how they scale. And we felt that having a partnership with Nextpower for these steel frames allows for the expression of that scaling from Nextpower that we could benefit through having a better customer experience from our modules. So that was another dimension of this beyond just the quality of that. In terms of volumes and timings of that, we'd expect to use that increasingly over into, if not '26 into '27, but we haven't disclosed the volumes there. Those are confidential under the contract. So we prefer to -- we'll make future disclosures on the volumes we're doing for Nextpower. As it relates to Talon , Talon was an opportunity to invest a small quantum, not disclosed in a minority position, where it would allow us to begin to talk to and look at and work with Talon in more detail. Talon is looking to build TOPCon cells. And yes, there is a way for us to procure those cells in the future. And to the degree, we have mixtures of different options in terms of cell supply, we could sell the cells to third parties, also many different options. But we're trying to reinforce and build around us the domestic chain that we really believe in. Last part on Hemlock and Corning -- that, as we've disclosed, we have optionality to convert our polysilicon to wafers. We're excited about those wafers to come from Michigan right into our G2 facility. I would comment too that our G2_Austin facility is discrete from Talon. These are 2 different projects. We're excited about our project, and we're excited about our minority investment in Talon. Philip Shen: Great, Dan. Looking forward to seeing the full results of your integrated supply chain. Daniel Barcelo: Thanks. Philip Shen: One more, if I may. This is from an investor. He's asking how is T1 claiming or planning to claim the 45X credits in terms of stacking when they produce cells in one site and modules at another site when the OBBA says they have to be at the same facility? Daniel Barcelo: Andy, do you want to take that, please? Unknown Executive: Sure. Without getting into all the details, there are provisions in the Act that allow for the election of unrelated party transactions, and those provisions have not been changed. That was in the original Act and were not changed by the OBBA. Operator: Our next question comes from the line of Greg Lewis with BTIG. Gregory Lewis: Guys, I was hoping to get an update on kind of how we should be thinking about the event path for G2. Any kind of hurdle rates we should be thinking about in the next couple of quarters, just as we think about getting that facility up and running by the end of '26 to really set the table for '27 production. Daniel Barcelo: Thanks, Greg. I'll have Otto layer in here, too. We've been working very hard for the last year to design the right paths here. We have over a 30% design done. We have work packages out that are live. As you know, we did raise capital earlier this last month -- this month to unlock some capital in order to begin the first stages of construction. We are still on track to go and start production -- I'm sorry, start construction in the fourth quarter of this year. The paths really go to the site, the equipment, the machines, the early earthworks and concrete and steels packages. Those are the biggest time lines in terms of risks to the time line. As Otto mentioned in his remarks, the steel package was particularly important and some of the switchgear was particularly important. Beyond that, if we look at the equipment, the equipment is not on a critical path, but we wanted to advance those work packages and get those equipment orders as fast as possible also. Otto, do you want to talk about the cadence and how we're tracking toward the fourth quarter '26? Otto Erster Bergesen: Sure, Dan. So yes, so as you mentioned, really, it's all about getting started now, getting started with earthworks, preparing to erect steel in March and also securing the long lead items. So electrical equipment, we've talked about as well, there's air units, there's other utility systems like water and utility plants that needs to come in place. So it's all about getting started and execute those contracts that we have lined up and are negotiating now as soon as possible. So we're tracking towards our time line. Gregory Lewis: Okay. Great. And then just I wanted to go back to Slide 6, where you kind of outlined the -- clearly, what's going on in power -- power is cool again, right? And so as we think about that and kind of the acceleration and the potential for solar, if you go back and look, like no one -- I feel like no one's really -- you don't hear data centers talking about solar. I mean, last year, we installed 50 gigs in the U.S. I think it was a few gigs of natural gas. And just -- so as we look at meeting this increasing demand for power gen in the U.S. are we getting the sense that we hear a lot about behind the meter are hyperscalers pursuing this or other entities? Or do you think really the bulk of this solar growth that we're going to see in the U.S. over the next 5 to 10 years. Is that largely just going to still be with utilities? Daniel Barcelo: Yes. We're seeing tremendous interest from developers and it's a pass-through basically data centers, AI companies. The utility scale levels and the quantum of power that's needed, it's really only the things that solar, which we do and storage together are only thing that's going to deliver that until basically 2029, 2030 when natural gas gen hits or nuclear starts coming back. We fully believe in a combined industry that is supportive of multiple uses of energy and all of the above strategy, but solar is the only thing that's scalable right now. When we -- when the U.S. looks -- when you look at China, China has over a terawatt of manufacturing capacity across ingot wafer cells and modules, a terawatt of manufacturing capacity. First half of the year, China put in 256 gigawatts. So there is tremendous human intelligence and tremendous scope to really deploy it. And we do think that the United States has those elements of capital, has those elements of technology to start building that, and we'd like to see more of that develop in the U.S. But solar is the answer right now. I do think we've reached the tipping point in terms of the costs, in terms of particularly the storage costs and the adjacency to solar. And I think those 2 things are delivering. I do think that building these projects and designing them with either natural gas in mind or other longer-term grid access in mind is an important dimension. And the last part I'd say is I think a lot of these other places are really going to be about distributed energy resources, energy islands. The amount of power that AI needs and the ramp that AI wants, it's just too hard to do that at current grid and current connections. So we're very confident on the future of how solar is going to contribute into that energy. Operator: Our next question comes from the line of Sean Milligan with Needham & Company. Sean Milligan: Just a quick question. It looks like you mentioned that you've ramped up G1 now to over 5 gigawatts. I'm curious about how you see that sustaining into 2026. And then what you're seeing for demand in 2026 there? And then just looking forward, kind of what you're seeing for demand in 2027 as G2 comes online? And kind of the third part of that question is another publicly traded company made some comments about pricing on their call. So is there any kind of like pricing guardrails you can give us for kind of non-FEOC cells in '26, what you're looking at and then also 2027 with G2 online? Daniel Barcelo: Yes. Thanks for that. What we've seen in this year is that we've had a very, let's say, erratic market in solar with -- is the OBBB going to kill the IRA. It did not. You have demand looking at this 232 coming, what is the teeth it's going to be. So the industry has been dealing with inventory, a lot of sales uncertainty. This uncertainty has made for a very choppy 2026. I think that ties to a lot of how we have a back-end loaded volume in 2025. So that really explains the landscape of what we've had today. As we look into 2026, which is a bridge year for us, we will not expect to produce and we will not produce domestic cells. Those are expected to start coming on in the fourth quarter of 2026. So as those come out in the fourth quarter 2026, that will be towards -- that will only be part of it. But for '26, we have to source non-FEOC cells. We feel confident that we have the ability to source quantums, but we are not yet coming out with our guidance there in terms of what we'd like to express. On pricing, it's complicated also because the pricing of those non-FEOC cells is also a question. So we'll be looking to come out with guidance for 2026 and give that pricing update and those volume updates for '26. When I look at '27, which is what we're very, very focused on, which is the domestic cell, that's where we're in active discussions with large utility scale type investors. And we do see demand. We do see strong interest there. There is strong interest in the domestic selling, domestic module, and that's what our focus is. As we get those offtake discussions or contracts done, we will, of course, be disclosing those in full. But the focus really is about how to start delivering in '27. Evan, do you add anything color to the pricing or to the volumes? Evan Calio: Yes. No, no. Look, I think you covered it, Dan. I mean, look, demand is high, right, for '26. It's going to break it up, right? And we're seeing early prices that are higher than current pricing, right? So several cents a watt higher than where we are currently in the fourth quarter. It's going to be cell availability that drives production levels more so than demand. As Dan mentioned, we've begun -- we have attractively priced non-FEOC cells in our inventory today, and we are working aggressively to procure those for 2026, which is our bridge year. But I think that's what's going to drive your value. And we'll provide production range here shortly. For 2027, that's where -- at least for Phase 1, right, Phase 1 of G2, you are in a lot of conversations with parties that have a demand that far exceeds our 2.1 gigawatt production, right? So -- and those discussions are for multiyear offtake contracts that are very attractive, okay? And so we expect to, over time, certainly by the time we're producing a facility to have most, if not all, of that volume contracted the 2.1 gigawatt. And then it becomes a question of how quickly can we convert excess demand for G1 into -- sorry, for G2 Phase 1 into an underpinning for G2 Phase 2, right, which, again, we think it's going to be driven by offtake demand, but we clearly see the potential for that following in some reasonable or short time period from financing on G2 Phase 1, right? The goal would be ultimately to put as many of the high-margin in-demand cells into G1 as possible as quickly as possible. I don't know if that gets... Sean Milligan: That's great. That's great. And then the other question was on the COGS side. So this year, I know you've been doing a lot with your supply chain. And then next year, you bring on non-FEOC cells. I'm just curious how you see COGS moving around this year and if that starts to normalize some next year as you kind of get up to scale more? Evan Calio: Look, that's a good observation. I think you'll see it in the fourth quarter, right? Obviously, when you're at scale at a level that's averaging 4.5 gigawatt run rate in the fourth quarter, your conversion costs come down significantly throughout the course of the year, and we see a forward path to a facility in its second year of operation to continue to make gains on those costs that we control. As it relates to procurement and pricing, again, we are seeing -- your cell is most of your cost, but throughout the [ BAM ] we continue to work to optimize that, and we expect to make improvements. Again, we were ramping a facility into a period that had unusual tariff volatility. So it was like you were less able to kind of optimize timing of costs and you were in a period where rising tariffs, you were hit by some of those tariffs. We think a lot of those risks will be mitigated even in an environment where 232 impacts the market, given we have a differentiated and advantaged supply chain. So we'll provide further quantification of like some of those improvements when we, in near term, put out our 2023 guidance, which we're again making traction on locking things in. Daniel Barcelo: Yes. I would just add to Evan that you touched on the polysilicon side. As you know, the cell is the bulk of the cost, and we work diligently to ensure very competitive cells. Our company, all of our polysilicon is from Hemlock. We take the polysilicon from Hemlock that's turned into wafers in Vietnam. We have control of the polysilicon side. And the reason I mentioned this is with the anticipation of what may come out of 232, we feel that we're very protected on that cost element. Again, we get the benefit of basically having a locked-in pricing on our polysilicon. So to the degree 232 does come out and does add cost to other non-American polysilicon or Chinese polysilicon, we think that we're in a very advantaged state as that feeds through into the cell costs. Sean Milligan: Great. That's great, Dan. And then on Section, the 45X tax credits. I know this year, you've built up a good amount on the balance sheet, and you said you're looking to monetize those currently. It's not like swapping term sheets. As we look forward, should we think about credit monetization being a more regular step in the process for you all? Or is it going to be kind of larger transactions single time like once a year? Or are we thinking multiyear type transactions there to help with liquidity? Daniel Barcelo: I think you're spot on the cadence, I'm going to let Evan cover some of the details. We came -- started fully commissioning full certificate of occupancy in the first half. We did get all of our first half volumes in terms of what was produced, and then we've been out in the market doing that right into the face of OBBB. So there was a lot of uncertainty around the world about those aspects. So I do expect on a go-forward basis, there will be a much more normal cadence on how we monetize 45X. And then on the other side of 45X direct pay versus selling through banks to third parties, that also is an element that we wanted to make sure we optimize in terms of the prices and the costs that we are trying to get there. Evan, do you want to talk about the timing of when we would expect to see 45X now? Evan Calio: Yes. Look, I mean, I think as I said in my comments, we expect to execute third-party sales in this quarter for all or almost all of the 45X that we generated in 2025. I think on a go-forward basis, yes, we're looking to enter into a quarterly cash settle within some number of days after the quarter with one or several parties for our volumes. I think '26 is -- it's a year that has newer requirements that are different from the past. So it might be a slower to develop year. So I think they will be more midpoint of the year and on. But kind of going forward, I think it will be more traditional of, again, quarterly cash settle on a third-party sale, right, versus direct pay. Sean Milligan: All right. Congratulations on the continued move forward. Evan Calio: Thanks, Sean. Operator: This concludes the question-and-answer session. I would now like to turn the call back over to Jeffrey Spittel for closing remarks. Jeffrey Spittel: Thank you, Shannon. Thanks, everybody, for the interest. We will be back on the road at conferences in New York next week. Please feel free to reach out with additional questions, and thanks for the interest and participation today. This will conclude the call. Operator: This concludes today's conference. Thank you for your participation. You may now disconnect.
Operator: Ladies and gentlemen, welcome to the conference call on the third quarter 2025 results. I am Mathilde, the Chorus Call operator. [Operator Instructions] And the conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Jürgen Rebel, Head of Investor Relations. Please go ahead. Jürgen Rebel: Good morning, everyone. This is Jürgen speaking. We welcome you to today's call on third quarter results for fiscal year 2025. Aldo, our CEO, will comment on business and strategy; Rainer, our CFO, will focus on financials. We are referring to the Q3 earnings call presentation that you can find on our website. There, you'll also find further materials such as the full comprehensive IR presentation. Aldo, please let us have your thoughts on Q3. Aldo Kamper: Thank you, Jürgen, and good morning also from my side. Overall, I would say a good quarter. Our strategic focus is paying off. We delivered strong cash flow and significant growth in the core portfolio on a like-for-like basis. Profitability was better than previous quarter, also supported by a one-off. We reestablished the base savings continue to be ahead of plan. And I'm now on Page 3, looking at the financial performance of the group. Revenues came in at EUR 853 million, above the midpoint of the guidance. We saw an almost double-digit percentage improvement in our semiconductor business. In the auto lamps aftermarket business, we had double-digit seasonal upswing. The weaker U.S. dollar cost us EUR 20 million top line compared to the previous quarter. Year-over-year revenues are down a bit with 3%. This is entirely due to the weaker U.S. dollar. Note the 0.07 difference in the average euro-U.S. dollar exchange rate, which equals approximately EUR 35 million top line. If we truly look at the like-for-like comparison based on today's core portfolio at constant currencies, we have grown by about 6% year-over-year. This includes the traditional auto lamps business. The semiconductor core business, that as we measure our growth, grew approximately 9% on a comparable basis, a really good result in the current market conditions. It clearly shows that our portfolio choices are paying off. Profitability. Adjusted EBITDA margin improved quarter-over-quarter and year-over-year by almost 1 percentage point to 19.5%. In euro terms, adjusted EBITDA improved by EUR 21 million. Within that number, we have a profit of a bit more than EUR 10 million from the sale of some manufacturing assets in our Singapore production facility. Now quickly on the segments. Page 4, look at the traditional halogen lamp business, a classic seasonal upswing. We saw a steep 13% quarter-over-quarter increase in revenues driven by the aftermarket season. The darker months in the Northern Hemisphere make drivers replace their broken lights in their cars more frequently. Nothing particular to report on specialty lamps for industrial and entertainment applications. The business remained at a similar level as last quarter with approximately EUR 40 million of revenues. We sold this business segment to Ushio as part of our accelerated deleveraging plan as we communicated last quarter. Closing is expected around end of first quarter '26. Adjusted EBITDA stayed almost flat. Why? If revenues were up by almost EUR 25 million, the gross profit fall-through from higher volume was eaten up by a meaningful reduction of inventories. Now on semis. I'm on Slide 5. First, business unit OS. The sequential increase in Opto Semis with 6% revenue improvement, EUR 365 million compared to EUR 344 million in the previous quarter. The increase was mainly driven by automotive, but also by the seasonal peak of the horticulture business. The upswing could have been higher if it wasn't for the negative impact on the top line of the weaker U.S. dollar. Coming to profitability, adjusted EBITDA improved by EUR 3 million to EUR 82 million. At first glance, you might have expected a higher fall-through from EUR 20 million more top line. However, the increase was balanced also here by inventory reductions and the absence of onetime effects that were supported in Q2, such as IPCEI funding catch-up. In the end, adjusted EBITDA margin stayed almost flat at 22.6%. Now sensors and ASICs on Slide 6, an encouraging seasonal jump in revenues by 13% to EUR 271 million. Consumer products were in high demand. Indoor business was okay. Products we basically discontinued still saw some further orders that, that live longer as often. Little changes in demand for industrial and medical products. Year-over-year, business grew by 2%, mainly driven by the new sensor products, which are more than compensating for the revenue loss from the phased out noncore portfolio and the top line impact from the weaker U.S. dollar. Adjusted EBITDA jumped to EUR 64 million. However, I mentioned earlier that more than EUR 10 million of windfall profit from selling manufacturing equipment was included there. Now looking at the semi end market in summary, and we are on Slide 7 here. Sequentially, 9% up and year-over-year, 2% down. If we exclude the noncore portfolio that we discontinued last year, the semi core business grew by 9% year-on-year at constant currencies, well in line with our semiconductor growth model and higher than last quarter. First, automotive. LED inventory correction has ended, but no significant restocking in sight. We even hear some customers who want to reduce their inventory reach even further. Book-to-bill hovered around 1 throughout the quarter. Nevertheless, we saw a slight sequential increase in revenues of 4%. The uncertainty in the supply chain persists, we see a lot of short-term ordering, which is now often below normal lead times. Fulfillment channel inventories went further down. We are now between 7 and 8 weeks. In the old days, 8 to 10 weeks were considered healthy and normal. Second, industrial and medical. In line with the slow recovery of the overall market, we saw a sequential improvement of 2%. However, we're still below last year's level and ignoring the weaker U.S. dollar, maybe roughly at the same level. As always, we have to look at the verticals individually. Horticulture revenues had a seasonal peak, professional lighting unchanged. Demand for industrial automation is improving only gradually. Same is true for medical. When we look at the channel, same picture as last quarter, Europe and U.S. relatively stronger than China. Third, consumer, a steep seasonal increase of 22% compared to Q2. Our main business is sensors for smartphones and wearables. Year-over-year, we see the impact of the weaker USD. The slight decline is entirely due to FX. Business-wise, our new sensor product more than compensate for the phaseout of our products. Now let's talk about future business. I'm on Slide 8. Design wins are underpinning our midterm growth model in semis. Traction in the market continued unabated in the third quarter. We are well on track reaching again accumulated lifetime value of EUR 5 billion of new business for the full calendar year. We landed about 800 projects in the September quarter across all verticals. This pushes the total to already EUR 4 billion for the first 9 months. A few wins that we are very proud of are sticking out. First, in automotive. With our industry-leading intelligent RGBi interior lighting solutions, we secured another design win at a leading Chinese OEM. And on top of that, also a large design win for a prestigious car platform at a European premium OEM. Second, consumer. Our spectral and proximity sensors are the best you can get. This once again convinced leading customers the design wins are worth a couple of hundred million euros. With that, let us look at some of our recent advances when it comes to differentiating technology platforms. Now on Slide 9. We do spend a lot of R&D money as we continue to believe in exciting growth opportunities. One part of our R&D is dedicated to mastering the cost pressure in more established technologies by creating cost performance optimized platforms. The other part of R&D is focused on differentiating technologies, especially for new applications that might see a growth inflection in the future. We're also making sure that our customers benefit from an appropriate IP safety for those innovations. For this, we signed a comprehensive cross-license agreement with Nichia covering thousands of patent protected innovations in LED and laser technologies. The new agreement also covers sophisticated LED packages and also includes metric headlamps as an example. As such, we are the right partner for our customers, holding a truly unique IP position in the industry. On Slide 9, you get an impression of our leadership in infrared emitter technologies that are used in a multitude of applications. We are speaking of AlGaAs material systems that provides LED and laser light between 808 and 1130 nanometers, just beyond what a human eye can see, the so-called near infrared. Our LEDs boast industry-leading wall-plug efficiency and red glow suppression. Our laser IOs boast industry-leading efficiency and optical output power. Together with high-quality, cost-effective standard packages, these components are ideally suited for a multitude of applications that deliver already today a revenue contribution in the triple-digit million territory. We see the infrared LEDs in the car for in-cabin sensing and consumer applications or in drones, among many others. Our lasers are very established in material treatment and LiDAR, but these properties also make them ideally suited for future defense applications such as drone defense or even for more visionary applications one day like nuclear fusion -- laser-based nuclear fusion, a technology that could harness the energy generation process of our sun. We think there's much more to come here on this technology platform. Now let's switch to the sensor side of things on Slide 10. We recently introduced the industry-leading 2-dimensional direct time-of-flight sensor platform. By direct, the sensor measures the time of photon traps from the object and back and calculates the distance pretty fancy. I'm very proud of our engineers who delivered industry-leading sensors that feature twice the frame rate at the same resolution as competitor devices or twice resolution at the same frame rate, whatever you need in your application. You can use this performance for gesture and object recognition, but also for 3D distance measurement. It also enables Edge AI sensing applications, for example, in smartphones. You will see the principle in the lower left corner when an image is enhanced with the 3D dimensional depth information from the sensor, you can place objects such as furniture in an environment completely virtually. Just to give you an example here. We see applications for the sensor technology, not only in smartphones, but also in building automation, home appliances, robot drones, consumer electronics, you name it. Completing our technology product to this quarter, I'm on Slide 11 now. We have the leading spectral sensing platform in the industry. Here, you see Honor's latest flagship model, the Magic 8, a high-end premium smartphone with 4 cameras on the world-facing site. Our sensors allow for eye-fatigue protection and professional-grade color accuracy for an enhanced user experience. With this, let us move to bottom line products. We reestablished the base continues to be a great success as it has been so instrumental in mastering many of the headwinds to our bottom line, especially when it comes to gold price this year. We're on Slide 12 here. By the end of September, we have pocketed approximately EUR 185 million of the implemented run rate savings, another EUR 25 million during the last quarter alone. Now this time for more details on the financials. And Rainer, please tell us about the latest progress. Rainer Irle: Thank you, Aldo. Hello, everyone, from my side as well. Let us look at the balance sheet first. With the private placement of an additional EUR 500 million of U.S. dollar and euro senior notes, we increased our cash on hand position to EUR 979 million end of September and end of October, we were even above EUR 1 billion. After the tap in July, we have approximately EUR 651 million equivalent of the U.S. dollar bond and EUR 1.30 billion the Eurobond, both are due on March '29. Last quarter, we got some questions about why we tapped at a particular moment. If you look at the leverage finance market in the last couple of weeks, it turns out that our timing was pretty good. Momentarily, conditions are certainly less favorable. No news on the Malaysia sale and leaseback transaction yet. We continue to talk to interested parties, but we are not yet on the final approach. The value stood almost unchanged at EUR 422 million end of September. This brings us to an almost unchanged net debt position of EUR 2 billion compared to end of June. Having just mentioned the sale and leaseback, we certainly continue full steam in negotiating the indicated asset disposals on top of the sale of the entertainment and specialty lamps that we announced in July to venture realize proceeds well above EUR 500 million. We are fully on track. Minority shares with a value of only EUR 11 million were tendered during the summer months. Consequently, the outstanding minority put options stood at EUR 570 million or 12% outstanding at the end of Q3. Taking cash, the revolver and bilateral lines into account, our available liquidity significantly increased to approximately EUR 1.6 billion. We are prepared for all eventualities, any liquidity concerns in the market should be a thing of the past. And switching to Slide 14, cash flows. A strong improvement in the third quarter operating cash flow. We recorded EUR 88 million. And that's despite us paying the coupon on the high-yield bonds, which, as you know, is always due in Q1 and Q3. So we paid that in Q3, but we also managed inventories well and made sure we are collecting money from litigation and subsidies. Last year in Q3, we had the customer prepayment of approximately EUR 220 million that came as a onetime positive at that time. CapEx stayed in check, EUR 48 million in the third quarter. For the full year, we will land between 6% and 7% of revenues, well below our long-term average ratio of 8%. In total, we finished the quarter with EUR 43 million positive free cash flow. This brings us year-to-date to breakeven in free cash flow. If you exclude the customer prepayment last year, Q3 was the best quarter in a long time, though Q4 is expected to be better with lower interest payments and counting on the promised money from the Austrian government under the European CHIPS Act. We switch to Slide 15, net earnings and earnings per share. On the left, you find the adjusted figures. The adjusted net result improved in line with EBITDA to EUR 27 million in the third quarter. Adjusted EPS developed accordingly. The net financing result came in at EUR 59 million. Income tax stood at just EUR 5 million. So following the rule of thumb that there's always EUR 50 million, EUR 60 million adjustments per quarter due to transformation cost, depreciation of PPA and share-based compensation, we ended up with minus EUR 28 million net result according to IFRS. Consequently, IFRS earnings per share also came in negative EUR 0.28. That concludes my remarks. And with that, I would like to hand back to Aldo for the summary and outlook. Aldo Kamper: Thanks, Rainer. And now on Slide 16, let me summarize the third quarter results again. Looking at the business, we delivered revenues above the midpoint and profitability at the midpoint of the guidance. 9% growth in the core semi business year-over-year on a comparable basis, well in line with our midterm target model. Execution of reestablish the base program is ahead of plan now with EUR 185 million run rate savings implemented. And we are securing future semiconductor business with unabated design win streak, now EUR 4 billion already in the first 9 months of this year. Looking at the deleveraging plan, everything well on track without being able to go into further detail right now. R&D investments I've presented to you, an example of our relentless efforts to find future growth opportunities by investing in differentiated technology with great potential. Today, we talked about infrared emitters and 2-dimensional time-of-flight sensors. With that, let us look at the right-hand side of the slide, the outlook for the fourth quarter. We expect revenues to come in between EUR 790 million and EUR 890 million at an exchange rate of 1.16. Compared to the beginning of the year, the weaker U.S. dollar cost us a middle double-digit million figure in top line. Automotive lamps will see its peak in the annual lighting season. For semis altogether, we expect a small seasonal decline. Industrial medical might be kind of stable, but we sense a lot of uncertainty in the automotive market, maybe flattish at best, whereas in consumer, the smartphone season is cooling off a bit logically. We expect adjusted EBITDA margin to come in at 17.5%, plus or minus 1.5 percentage points in absent, stable compared to Q3, if you back out the windfall profit from the selling of manufacturing assets in Singapore. Looking at cash flow. With year-to-date 0 and keeping up our promise for the full year, we expect free cash flow of more than EUR 100 million in the fourth quarter, certainly also driven by the expected inflows from the Austrian CHIPs Act. With that, I conclude my remarks, and we're now ready for your questions. Operator: [Operator Instructions] The first question comes from the line of Sébastien Sztabowicz from Kepler Cheuvreux. Sébastien Sztabowicz: The first one is on the automotive market. So do you see the demand building up? It seems that you are coming to the end of the inventory correction, but I'm just curious about the trajectory of growth moving into the next few quarters. And in the short term, have you seen any specific downside to demand linked to Nexperia turmoil or is not something that is affecting the global car production volume for you or your demand? The second question is on the synergies and the cost saving program. You already reached EUR 185 million at the end of Q3, which is well above the target for '25, and you are coming closer to what you expect for 2026. Do you plan to accelerate a little bit more further the cost-cutting action? Or you will stick to EUR 225 million for next year and then you're going to stop cutting the cost base? Aldo Kamper: Yes. Thanks, Sébastien, for those questions. Yes, on the automotive side, I would say inventory situation is okay. We do see that there is a lot of short-term order behavior. And I do also link that partly to the Nexperia topic, just our carmakers also have to be very agile in their production schedules and what they build and when they build it does vary a bit. So I would expect this quarter and next quarter to be impacted a bit by that. But overall, vehicle build volumes globally are actually holding up quite well. And here, it is also important that we have a good position in China as the Chinese market in this is doing -- is growing quite nicely, I have to say. And Europe and the U.S. are struggling a bit. But given our global exposure, we are able to balance that out. So I would say, overall, the story hasn't really changed. We still see more content per vehicle globally that we benefit from a fairly stable vehicle build volume currently and also for next year. At the same time, yes, also the usual price pressure that eats it up a bit. And then, of course, FX that also goes against us. But yes, underlying demand, I would say, is in principle, okay with some short-term hiccups, as explained. On reestablished the base, yes, we were very happy that we are making very good progress, EUR 185 million already. So I would assume that we can get to the EUR 225 million goal also significantly ahead of plan. And we are thinking about how to extend this program after that. But we at the moment, mainly focused on bringing in the savings as quickly as possible of the measures that we've already defined. Operator: The next question comes from the line of Harry Blaiklock from UBS. Harry Blaiklock: The first is just on the consumer business. I know you've had success at one of your big consumer customers in terms of getting a socket rolled out across the whole kind of smartphone portfolio. And historically, you've spoken about potentially getting further socket wins in that business. I was wondering whether you could just provide an update on that. And then my second question is just on whether there's any update you can give us in terms of progress on the further asset disposals for generating over EUR 500 million. Aldo Kamper: Sure, Harry. Thanks for the question. So yes, at the various cell phone customers, we are making good progress and are winning new sockets. And I must say that it goes across both Android and non-Android space in a very steady and good manner, I must say, without calling out one specific socket, but I must say the engagement across the customer base is very strong, and we continue to see good growth potential in this space with our technology. On the asset disposals, yes, it's hard to comment on that in detail, but I can say we are very active in the process and the plan still stands. We will deliver significantly more than EUR 500 million of disposal proceeds. As we have communicated, the first step, the EUR 200 million, on the lamp business, on the entertainment lamp business is in execution. We are progressing well towards closing probably by the end of Q1 next year. And on a second bigger step, we are making good progress, and we'll share that, of course, as soon as we can with all of you. Operator: [Operator Instructions] We now have a question from the line of Reto Huber from Research Partners. Reto Huber: Now I was wondering the adjusted EBITDA, maybe I missed it, that includes the gain from sales of assets, if I understood this correctly. Have you disclosed that number somewhere? And how much is the one-off gain? And then secondly, what is the reduction in year-over-year sales due to disposals? Rainer Irle: Yes. The adjusted EBITDA had a benefit from that asset sale of roughly EUR 10 million, a bit north of EUR 10 million. That's obviously a onetime effect. And yes, if you look at the year-over-year impact from asset disposals from the portfolio, I would say that, that is probably EUR 30 million. Operator: Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Jürgen Rebel for any closing remarks. Jürgen Rebel: Thanks very much for the interest. We had a lot of people who dialed in. If you have any further questions, don't hesitate to reach out to us. And we're looking forward to receiving your feedback. Thank you. Bye. Rainer Irle: Bye-bye. Operator: Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.
Kenny Green: Ladies and gentlemen, thank you for standing by. My name is Kenny Green. I am part of the Investor Relations team at Ituran Location and Control Ltd. I would like to welcome all of you to Ituran Location and Control Ltd.'s results Zoom webinar. And I would like to thank Ituran Location and Control Ltd.'s management for hosting this call. All participants other than the presenters are currently muted and following the formal presentation, I'll provide some instructions for participating in the live Q&A session. I would like to remind everyone that this conference call is being recorded and the recording will be available from the link in the earnings press release and on Ituran Location and Control Ltd.'s website from tomorrow. With me today on the call are Eyal Sheratzky, CEO, Mr. Udi Mizrahi, Deputy CEO and VP Finance, and Mr. Eli Kamer, CFO of Ituran Location and Control Ltd. Eli will begin with a summary of the quarter's results followed by Eli with a summary of the financials. We will then open the call for the question and answer session. You should have all by now received the company's press release. If not, please view it on the company's website. I'd like to remind everyone that the Safe Harbor statement in today's press release also covers the contents of this conference call and the associated presentation. And now, Eyal, would you like to begin, please? Eyal Sheratzky: Thank you, Kenny. I'd like to welcome all of you to our third quarter 2025 results call and thank you for joining us today. We are very happy with the results of the third quarter, which was strong across all key parameters. In particular, we are very pleased with the revenue growth. And we continue to grow, driven by our long-term efforts and success in bringing existing as well as new customer value-adding telematics and connected car products and services. In addition, we are also constantly bringing additional OEM partners to our growing roster, an example of which was Stellantis last quarter, and we are in active discussions with others. Our results show an ongoing expansion across our target geographies, in our large subscriber base of over 2,500,000 subscribers. In the third quarter, we added 40,000 net subscribers. We are on track to add between 220,000 and 240,000 net new subscribers in 2025, which will represent a very strong year of subscriber growth. We had a good third quarter. And I want to summarize some of our activities, which contribute to our growth and success. We continue to see solid demand for allocation-based products and telematics services in all our regions, as well as traction from our new initiatives and services. In Israel, the high car theft rate continued to provide strong demand for our services in the country, and we are reaching additional new subscribers from parts of the market that were previously untapped by us, such as lower-priced new vehicles or the second-hand car market. Our usage-based insurance business in Israel is also seeing good traction and bringing continued strong subscriber growth. In Latin America, we continue to expand our reach. Our new product targeting the motorcycle market is gaining strong traction across South America, especially on the back of our partnership with BMW Motorrad in Brazil. Motorcycles are a significant market opportunity, being the top mode of transportation in many parts of the world. It significantly increased our total addressable market. With Brazil as our starting point, we plan to scale into other high-growth motorcycle markets through partnerships with local OEMs as well as sales to the aftermarket. Our e2Run mob smart mobility platform is a unique technology and solution enabling remote vehicle access, real-time telematics, and efficient fleet management for shared mobility and rental fleet applications. Ituranmob was launched first in Brazil and has been gaining solid traction here, where it is being adopted by a growing number of fleet operators and rental companies. Based on the strong market interest and success we've seen in Brazil, we are now introducing Ituranmob to the United States market. We recently established operations for Ituranmob in the United States. We have identified a strong need in the US for our solution, particularly among the thousands of small to medium car rental companies, which include hundreds of thousands of cars. These companies could benefit from this type of technological solution, making the rental process more user-friendly and efficient. This creates a new long-term avenue of growth alongside our core telematics and subscriber-based businesses. Ituran Location and Control Ltd. generated a high level of cash in the quarter amounting to $21,300,000 in operating cash flow during the quarter. Due to our continued profitability and strong cash generation, we declared a dividend of $10,000,000 to shareholders for the quarter. I remind you, at the end of last year, we increased our dividend policy by 25%, from issuing $8,000,000 per quarter to $10,000,000 per quarter. This represents $0.50 per share. Our dividend yield on an annualized basis represents a return of around 5%, which is a very solid return from a strong and stable company. During the quarter, we purchased $1,500,000 in shares under our buyback program. As of the end of the quarter, we had around $5,200,000 still available under this program. We see our ongoing dividend and buyback as a reward to our shareholders, their loyalty, and long-term support of our company. In summary, we remain very pleased with Ituran Location and Control Ltd.'s performance in the third quarter and more generally, Ituran Location and Control Ltd.'s long-term and ongoing performance. At the same time, we look for more avenues to bring further growth to our business across all our regions, and the recent launch of Ituranmob is an example of this. We constantly aim to bring new products and services to both existing customers and new customers, as well as partnerships with new OEMs, new financing companies, and other leading companies. 2025 marks twenty years as a public company and thirty years as a company. We look forward to opening the nascent market on Tuesday next week, November 25, and we thank both the Nasdaq as well as our shareholders for the long-term support of our business. And with that, I hand over to Eli. Eli Kamer: Thanks, Eyal. I will provide a short summary of the financial results. You can find the more detailed results that we issued in the press release earlier today. Third quarter revenues were $92,300,000, an 11% increase compared with $83,500,000 in Q3 of last year. Subscription fees were $67,600,000, up 13% year over year, and representing 73% of total revenues. Product revenues were $24,700,000, up 4% year over year. Our subscriber base reached 2,588,000 at quarter end, an increase of 40,000 in the quarter. Year over year, the subscriber base grew by 219,000. The geographic breakdown of revenues in the third quarter was as follows: Israel 55%, Brazil 23%, rest of world 22%. EBITDA was $24,600,000, 26.7% of revenues, up 6% year over year compared with EBITDA of $23,300,000, 27.9% of revenues in the third quarter of last year. Net income for the third quarter was $14,600,000 or diluted earnings per share of 74¢, an increase of 7% compared to $13,700,000 or diluted earnings per share of 69¢ in the third quarter of last year. Cash flow from operations for 2025 was $21,300,000. As of 09/30/2025, the company had net cash including marketable securities of $93,100,000. This is compared with net cash including marketable securities of $77,300,000 as of year-end 2024. The board of directors declared a dividend of $10,000,000 for the quarter. The current dividend takes into account the company's continuing strong profitability, ongoing positive cash flow, and strong balance sheet. During the quarter, we purchased $1,500,000 in shares under our buyback program. As of the end of the quarter, we had around $5,200,000 available under this program. And with that, I'd like to open the call for the question and answer session. Operator? Kenny Green: Thank you. At this time, we will begin the question and answer session. If you have a question, please raise your hand via the Zoom platform. I will introduce you and ask you to unmute after which you may ask your question. Take a few moments to poll for your questions. Our first question will be from Chris Reimer of Barclays. Chris, you may go ahead and ask your question. Chris Reimer: Oh, hi. Thanks for taking my question. And, congratulations on the strong results. I was wondering if you could give a little more color on the launch in the U.S. What's the target market? Do you have any idea of how big it is, and when might you expect it to bear fruit? Eyal Sheratzky: Okay. Absolutely. Thank you. Before we decided to go from Brazil directly to the U.S. market, which is, I think, the most lucrative market for this kind of solution, we did a survey, and we got information that in the United States, there are tens of thousands of rental companies. It's true that about five of them represent more than 60% of the market, and these are the big names. At first, in the beginning, we are not aiming at them as our segment, but the others represent hundreds of thousands of rental cars. We are talking about small and medium rental companies from a one-family that holds 10 or 15 cars that they rent or some mid-sized companies with 100, 200, 300 cars. All of them are local. All of them are, or most of them are not nationwide. And they have a very strong demand for a solution that, first of all, will allow them to save their cost, and I will explain. In order today for a business that has 20, 30 cars to meet the customers, they have to go and meet each customer, give him the key of the car, then bring it back. It requires drivers, it requires service. Or in the worst case, they have to open an office, put a desk, put the people, put software, etcetera. And when you have 20, 30 cars, it's a dramatically high expense, and it's dramatically lowering the chance to make money from your rental company. What we provide is that you don't have to do almost anything except having the cars. Because everything is done on the streets, everything is done that you have a dashboard as a rental company owner, small rental company owner, so you can know every minute what is with the cars, who is driving the car, how much money this car will provide you, and that's done by having a smart key in the car, having the system that we developed through Ituranmob, our small subsidiary for this technology and innovation. And in Brazil, by the way, we have been doing it for almost three years. It's a very successful solution. Add to this that even in Israel, the largest leasing and rental company in Israel, Shlomo, Shlomo lease car, changed a technology that he found in the world because we didn't have it in the past. To our technology, he threw to the garbage about 2,000 hardware that he paid and installed in his rental cars, and now we are the partners in our units and services are also in Israel. I'm not talking about the U.S. because Israel, by definition, is a small market. It's maybe attractive, but it's not having a major influence on our future results. But the U.S. market, and it's important to mention, we are, I think, the first. I mean, we heard we know about companies that tried, they have a very not the same technology. Let me, I don't want to be arrogant. And when they tried, the technology didn't work. They tried to do it in a small city, one small city, but they are not really big technology or communication players that develop or represent it to the U.S. market. So we are in the beginning of this industry, I would say, in the States. There are companies that deal with remote renters, but not the renting the car itself. There are companies that provide services to rental companies, like integrators, software companies. That's good. This is, by the way, it's an advantage for us because we can partner with them. Before we do it, we have a solution which we can go independently by ourselves. We already have pilots in the area of Orlando and New York with some small rental companies that are very satisfied there. The response that we get is very, very good. I'm saying it's not something that will happen tomorrow. We are opening a new, I think, a new niche, a new segment, a new market. It also requires adaptations. But I think that the, let's say, the dream here is huge. Chris Reimer: Got it. Got it. Thanks. That's really great color. Maybe just touching on, OpEx. What was driving the increase in operating expenses this quarter? And how should we be looking at margin expansion into next year? Eli Kamer: Okay. If we are talking about the increase in the OpEx, the big majority of it is coming from the FX effect. As, and that, of course, increased the absolute numbers of the OpEx. And if we are talking about the margins, again, I don't see any reason that as long as we continue to increase our subscriber base, and this is exactly according to the guideline and I'm assuming next year, the same, that the margins will increase as well. Chris Reimer: Got it. Thank you. And maybe if I could just one more. How do you feel the subscriber momentum is performing versus your original guidance for the year? And can you give any color on where you're seeing the most traction? Eyal Sheratzky: As I said in my speech, we provide kind of guidance of 220,000 to 240,000. And according to the nine months, and add the current data that we have is that we will meet this range. It's the highest, I think, ever in the thirty years of Ituran Location and Control Ltd. And drivers are absolutely across all the regions, and it includes also from the OEM, it includes the aftermarket that we do in Brazil, which is including the insurance companies, and it's also including the financial solution that we provide to banks. And also, with a very major influence on the subscribers that we add during 2025 is Israel. And this is thanks to the requirement by insurance companies relatively to the cost of rate is very high, so more and more new cars, but more important is secondhand cars that in the past didn't require for the policy security system, now they required and Ituran Location and Control Ltd. is the first choice in Israel by far of any other security solution, this allows us to grow in 2025 dramatically as well in Israel. And I will add that the UBI also has some volatility at 2023, we did a very high growth in subscribers. 2024, we had to expand the customers that we are approaching. And in 2025, we had another large insurance company that we developed for them a solution and they also during the sale 2025, start using our UBI solution in high numbers. So overall, these are the drivers. Chris Reimer: Great. Great. Thanks. That's it for me, guys. Kenny Green: Thank you. Thanks, Chris. Our next question is gonna be from Allen Klee of Maxim Group. Allen, you may go ahead and ask. Allen Klee: Yes. Hi. Can you hear me? Eyal Sheratzky: Yes. Yes. Allen Klee: Oh, great. You talked about how motorcycles are important in South America and your partnership with BMW. How, where, where are you, could you talk about kind of how you're looking at increasing the uptake in this market? Eyal Sheratzky: Yes. Brazil and especially, but also the rest of Latin America, is a very motorcycles, I'm talking about mid to heavy engine motorcycles, which is quite an expensive vehicle, is very popular. The ratio between four-wheel drive and a two-wheel drive is very different than, for example, in other countries in the Western world, many people use motorcycles. Ituran Location and Control Ltd. always has a solution, but our solution was a little bit, I would say, not reliable enough to provide insurance companies with a low premium to motorcycles. This is first. Second, even the motorcycles themselves, were in a situation that they didn't want to add cost to their motorcycles. But in the last two years, we developed, thanks to our innovative teams, a unit, which is a state-of-the-art for security system and application for the driver on a motorbike. And what we did first, we used our OEM capabilities and teams, we started to negotiate. As you remember, maybe the first one was with Yamaha. Yamaha is our first customer for almost two years, eighteen months. And then now as we publish, we sign an OEM deal with BMW Motorrad in Brazil. The idea is that this is an untapped market for telematic solutions. And we're talking about the potential of millions of motorbikes that fit these needs and can pay it compared to the price of the motorbike. So we started with an OEM, this allows us to create reliability, this allows us to partner with brands. The guys of motorbikes are like sports cars. If somebody is driving a BMW, you will be very loyal. The same Honda, Yamaha, etcetera, specifically in Brazil. So we knew that partnering with a big brand in the OEM will again provide reliability, what we see is traction also from the aftermarket. Because if someone comes to a dealer of BMW, to have some treatment to the motorbike or to buy something, now he's asking or you will see that there is a solution by Ituran Location and Control Ltd. So we really believe that we just started, I am expecting that it will bring us tens of thousands of subscribers of new subscribers starting 2026, and it will grow as we will expand the segment and our customer, whether it will be B2B with other motorbike manufacturers. There are other names that we are starting to talk with. I'm not saying whether it will finish with the deal or not, but we see traction. And a major portion of this market is the second market, the aftermarket, and this is something, again, that I believe that can be very important with influence again on the results, in two to three years from now. Allen Klee: Thank you. I understand that Israel's an attractive market, but not that large. And you have a large opportunity in Latin America, South America. How do you think about, like, first, the size of the opportunity in South America, and then also is it possible over the next couple of years that there could be other geographies that might make sense? Eyal Sheratzky: First of all, we are not passing any opportunity, but by talking about how we focus. So the Latin America market, whether it's Central or South America, it's a huge market, which is, by the way, it's kind of an emerging market. So there is still a growing segment that we couldn't penetrate, whether it's because of price, whether it's because of awareness. So for us, the first online is to expand and continue expanding our business in Latin America because of the synergy that we can create, the relationship, the brand, and we still, I think, in the beginning, of tapping this market. So this is regarding how we focus, but on an opportunistic way, of course, when we're going to some play when we look at the rest of the world, we are more looking to do it by M&A, by acquisition. Because for us, to start a new business from scratch, for example, in the UK or in Europe, it will require high resources, we have zero resources now there. Until the moment that we will turn it to a major revenue and major profits, it will take a long time. At the size of Ituran Location and Control Ltd., the way that we are looking at other geographies is by M&A, but, of course, we are looking should be something that meets our DNA, meets our criteria, and our criteria is not a too small company. On the other end, the company that has assets that we can leverage such as partners, or customers, system of employees, control centers, etcetera. But to make the long story short, we still focus on Latin America, and in the U.S., as I said. Allen Klee: Okay. Thank you very much. Kenny Green: You're welcome. Sergey Glinyanov: Our next question will be from Sergey Glinyanov from Freedom Capital Markets. Sergey, please go ahead. Sergey Glinyanov: Good morning, Eyal, Udi, Eli. Can you hear me? Eyal Sheratzky: Yes. Sergey Glinyanov: Great. Great. So first of all, my applause to Ituran Location and Control Ltd. for another successful quarter. You guys beat market expectations with revenue and EPS. But now I'm interested in revenue dynamics. It seems your ARPU is increasing. Is it basically product and service mix or something more fundamental as a core? Eli Kamer: Hi, Sergey. ARPU is going up due to the fact of the FX. FX has been better in Q3 this year. Therefore, the ARPU went up as well. Sergey Glinyanov: Okay. And some kind of follow-up about your interim open North America. So do you have any expectation about revenue next year? Eyal Sheratzky: We never provide guidance about revenues. But I must tell you that we do all we can to make more revenues than this year. Sergey Glinyanov: Yeah. Sounds great. Sounds great. Thank you. Thank you. That's all for now. Kenny Green: You're welcome. Thank you. Sergey Glinyanov: Thanks, Sergey. Kenny Green: Our next question will be from Evan Tindell of Byrene Capital. Evan, you may ask your question. Evan Tindell: Hi, guys. Thanks for taking my call. My question is I've heard that some theft insurance providers in Israel are not requiring tests to have your system. And I was just wondering, is that true? And then secondarily, like, a follow-up to that is, you know, over ten, you know, over like five to ten, fifteen years, something like that, do you guys worry that more manufacturers will be able to sort of figure out how to do the internal telematics systems and anti-theft systems well enough to disintermediate you guys? Thanks so much. Eyal Sheratzky: Okay. So just to explain how is the process specifically in Israel, because there is a regulation, in Israel insurance companies cannot decide for their insurers or to require in their policy a specific brand, a specific solution. What they are allowed to do is, for example, if they want to have a location unit with a real-time alert, with a twenty-four seven center, that's what they put in the policy. Now as the insurer has to decide what company you choose. So never, never since the inception of Ituran Location and Control Ltd., insurance companies didn't say install Ituran Location and Control Ltd. or install another name. This is what is nice with Ituran Location and Control Ltd. We are not the chosen of the insurance company. We are the chosen of million subscribers in Israel. This is what the story and how we do it with our channels. And the channels in that case are car dealers, car importers. Just to remind you, in Israel, there are no manufacturers. But in Israel, there are car importers which represent manufacturers. So Ituran Location and Control Ltd. has very strong partnerships and relationships along the years. And this is the reason why twenty years ago, Ituran Location and Control Ltd. was declared as a monopoly in the telematics business in Israel, and this is why I can say and publish that Ituran Location and Control Ltd. has something like 85 to 90% market share. So it's saying that 10% of the industry by other companies. But for us, it's good. We have competition, but we lead the competition very, very strongly. So this is regarding this question. Regarding the second question, as we prove in the OEM business in Latin America, and General Motors is a very good example. Historically, we started by selling hardware and services. But Ituran Location and Control Ltd. always was built on a recurring revenue. Always, we were built as a service-oriented company. For us, the hardware in the car is a tool, is a tool to bring customers. But our, I would say, gold medal is to have a customer many years paying every month. For that, we don't need the hardware, but we need yes. We need a car manufacturer or an Israeli car dealer or a shop to say, okay. I'm selling a car a telematics solution. But the company that can provide the services. And for example, when we talk about SVR, this is the market we are very active. Israel, Latin America, very hostile environments. No technology will recover the car. The recovery of the car is done by people sitting in a control center providing information to enforcement people on the field, intelligence. We have drones. Those things are aside the technology. So along as long as we can sell and specifically in emerging markets, our technology is the state-of-the-art. It's very the companies, for example, that sell cars in Israel, even the Chinese companies. They are not providing communication telematics solutions, for example, in Hebrew. They are not providing the data that's relevant, and then don't and they will not integrate it for those small markets. On the other hand, in Brazil, and in Mexico, we are connecting to those manufacturers from the first level. So I think that for us, it's more important to provide the service to have the recurring revenues. Today, 95% of our customers, which are car dealers, car manufacturers, and any other customers, still buy our hardware. But there are a few percentages. We choose their own hardware. We are willing, it's for us, it's okay. For us, it's okay. So it may grow. This percentage will grow. I agree with you. In the next decade. But still, it's not something that we see as an aiming the business of Ituran Location and Control Ltd. Evan Tindell: Great. Thank you. Thank you for that. And one other question. Can you update us on your efforts in India? Eyal Sheratzky: I didn't talk about India today, specifically because there were a few quarters that I mentioned this joint venture that we have in India, and since this growing market is very, very, very slow, I didn't find a reason to repeat things that I said in the past. But for you, I can say we have a joint venture in India. We signed a large contract with Mercedes Benz for commercial cars. But with low margins. The current problem in India is that the market is premature. They keep the financial capabilities of businesses as well as retail is very low. So we have to find very specific deals to make money, but India is for the long term. India has a lot of potential as we see it for the future, and we are the main telematics or one of the main telematics players that are on the ground. Evan Tindell: Okay. Thank you. Kenny Green: You're welcome. Thanks, Evan. So that will end our question and answer session. Eyal, if you would like to go make your concluding statements. Eyal Sheratzky: On behalf of the management of Ituran Location and Control Ltd., I would like to thank you, our shareholders, for your continued interest and long-term support of our business. We look forward to continuing our accomplishments over the next decade. If you are interested in meeting or speaking with us, feel free to reach out to our investor relations team. With that, we end our call. Thank you, and have a good day.
Operator: Good day, and thank you for standing by. Welcome to the Beneficient Second Quarter Fiscal 2026 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Dan Callahan, Director of Communications. Please go ahead. Dan Callahan: Good morning, everyone. And thank you for joining us on Beneficient's Fiscal Second Quarter 2026 Conference Call and Webcast. In addition to the call and webcast, we issued a results press release last Friday that was posted at Shareholders section of our website at shareholders.trustben.com. Today's webcast as the operator indicated, is being recorded, and a replay will be available on the company's website. On today's call, management's prepared remarks may contain forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ from those discussed today. Actual results and future events could materially differ from those discussed in these forward-looking statements because of factors described in our earnings press release and the Risk Factors section of our Form 10-K and in subsequent filings we make with the Securities and Exchange Commission. Forward-looking statements represent management's current estimates and Beneficient assumes no obligation to update any forward-looking statements in the future. Today's call also contains certain non-GAAP financial measures. Please refer to our earnings press release, which is available on our website for important disclosures regarding such measures, including reconciliations to the most comparable GAAP financial measures. At this time, I am pleased to introduce James Silk, the interim CEO for Beneficient. He was appointed to that position by the Board in July of this year. Mr. Silk previously served as Executive Vice President and Chief Legal Officer for Beneficient from January 2020 until May 2024. During that time, he was integral to the development of the company's corporate structure, the completion of the company's business combination transaction and the navigation of the complex legal issues associated with running the company's business. Additionally, Mr. Silk oversaw the company's operations, underwriting risks and legal groups. After James completes his remarks, Greg Ezell, Chief Financial Officer, will provide some financial highlights. I'll now hand the call over to James. James Silk: Well, a lot has happened over the past 6 months, has faced some challenges. The of Beneficient's business and our market opportunity remains strong. When I talked to the Board about returning, this was back in July, it was clear they were united and committed to Ben, which is important to me. And since my return, management, myself and others have been focused on stabilizing the company, getting the company to a place we can execute on our mission to provide liquidity, primary capital customers in the alternative asset market. It's our core business. And I'm committed to that mission and has been energizing to lead the chart during this transition period As it relates to recent developments, as we previously disclosed, in June, we separated from our former Chairman and CEO, Brad Heppner. That occurred just before our annual report was filed. That separation occurred after the company identified credible evidence that Mr. Heppner had committed fraud against the company. Also, as previously disclosed, Mr. Heppner was recently indicted and now faces multiple criminal charges. The company is considering all available options related to Mr. Heppner's conduct, including counterclaims and litigation against Mr. Heppner. The company also intends to vigorously pursue claims regarding the validity of over $100 million of debt poorly owed to an entity related to Mr. Heppner. Overall, while unpleasant, we believe this is an opportunity for the company to move past Mr. Heppner, both reputationally and substantively and ultimately better position the company to execute going forward. Another important recent development concerns the previously disclosed agreement to settle all claims pending in the lawsuits related to GWG against the company, its subsidiaries in each of their current and former directors and officers. That settlement has been approved by the GWG Busy Court. The district court for the northern history of Texas has granted the motion for preliminary approval of that settlement and the hearing on final approval of that settlement has been set for January of 2026. So important progress on that front. Importantly, the settlement is within insurance limits and requires no out-of-pocket payments by the company. I would also note that the claims against Mr. Heppner's entities are not included in that settlement. The company has also worked to regain compliance with NASDAQ listing rules. As previously disclosed, the company was not in compliance with the NASDAQ periodic reporting requirement with our filings being bladed primarily due to the timing of the developments surrounding Mr. Heppner's reputation. Now as of the first quarter 10-Q filing a few weeks ago, we're now back in line with our periodic reporting. And in fact, thanks to our incredibly dedicated accounting team, we filed a 10-K and 2 10-Qs in just over 6 weeks. So much credit to that team. We've also regained compliance with the market value of listed securities requirement with two. Finally, the company continues to take steps to regain compliance with NASDAQ good price requirements. More specifically, we anticipate holding a special meeting on December 1, 2025, to seek shareholder approval of a reverse stock split of its common stock. Bottom line in terms of NASDAQ compliance is that we worked on a plan of compliance. We presented that plan to the NASDAQ panel, and we've been executing on that plan. Importantly, as part of that plan to regain compliance with NASDAQ's continued listing requirements and what I would view is a strong show of confidence in the company's future. Tom Hicks, our Board Chair, converted approximately $53 million of our preferred units in the company's subsidiary into the company's Class A common shares. In connection with that conversion, we agreed not to sell the shares until October 1, 2028, to 3 years. We've also agreed to forego any potential appreciation of the converted shares during that lockup period. And we also agreed during that lockup period to vote those shares with the Board's recommendation for all matters other than the election of directors. We believe this transaction aligns our interest with those of our common shareholders and reinforce leadership's confidence in the company's mission in the future. Final note on developments, we also continue to focus on our relates to Kansas, we are committed to Kansas. We appreciate Kansas, and we'll continue to work to deliver on our obligation to Kansas and its communities. So far, I focused on recent development -- to that end, we've cut costs and operating expenses, which Greg will discuss further. We've also reduced our legitimate third-party debt from $27 million in January to under $4 million as of today. We are also streamlining operations and plan to roll out simpler ways to provide liquidity and capital to customers. We're also exploring adjacent markets where our solutions may work with minimal extra cost, for example, we're reviewing our existing tools and tech and are looking for ways to put them to use. Operator: Ladies and gentlemen, please stand by your conference. We'll resume momentarily. Dan Callahan: We're just having a little bit of technical difficulty with James' line. So you bear with us, we'll be back with James in just a few moments. In the meantime, Greg, why don't we have you run through the financials, and then we'll pick up with James when we're able to get him back on the line. I apologize to everybody for this. Gregory Ezell: That sounds good, Dan. Yes, we'll turn our results now our attention now to the quarterly results and financial position as of September 30, 2025. First, I'll start with a few highlights from the quarter. We reported investments with a fair value of $244 million. These investments serve as collateral for Ben liquidity's net loan portfolio of $223 million. Revenues were a negative $2.8 million and $15.4 million for the second quarter and year-to-date periods in fiscal 2026 as compared to a positive $8.6 million and $18.6 million in the prior year. GAAP revenues principally reflect mark-to-market adjustments on the investments that serve as collateral to Ben's loan portfolio, which for the current fiscal year also includes adjustments to fair value for investments that we have deemed probable of being sold at an amount less than the most recently reported GP value. These arise specific to our asset sales initiatives that we have previously disclosed. Operating expenses were $15.1 million in the second quarter of fiscal 2026, as compared to $22.3 million in the same period for fiscal 2025. On a year-to-date basis, operating expenses for fiscal 2026 were $95.1 million, which included the accrual of a loss contingency of $62.8 million and additional interest expense on the loss contingency accrual of $1.7 million, as compared to negative $12.0 million for the prior quarter, which included the release of a loss contingency accrual of $55.0 million and a noncash goodwill impairment of $3.7 million. Excluding the noncash goodwill impairment and the accrual or release of a loss contingency, including post-judgment interest in each period as applicable, operating expenses were $13.4 million in the second quarter of fiscal 2026 as compared to $22.0 million in the same period for fiscal 2025. With these same exclusions on a year-to-date basis, operating expense for fiscal 2026 was $30.6 million as compared to $39.3 million in the prior year. Reported GAAP net loss attributable to Ben's common shareholders for the current quarter was $3.6 million and $68.7 million for the current year-to-date period. Primarily reflecting negative mark-to-market adjustments on investments as part of the asset sales initiative and the accrual of the loss contingency including post-judgment interest impacting both the current quarter and the year-to-date period for fiscal 2026. During the current fiscal year, we have completed asset sales or equity redemptions of certain investments held by the customer ExAlt Trust, which has resulted in an aggregate of $46.4 million in gross proceeds on a year-to-date basis through the filing date of our Form 10-Q last Friday. These proceeds have been used to pay down certain debt and provide working capital. Next, we'll move on to our primary business segments. In liquidity, which generates interest revenue for supplying liquidity off the balance sheet and Ben custody, which produces fee revenue for the use of the platform and trust services. As typical, I will be focusing my discussion on these business segments, as it's their operations along with corporate and other that accrues to Ben's equity holders. During the second quarter of fiscal 2026, Ben's liquidity recognized $8.5 million of interest income, a decrease of 3.8% from the quarter ended June 30, 2025, primarily due to a higher percentage of loans being placed on nonaccrual status, partially offset by the effects of compounding interest on the remaining loans. Ben liquidity recognized $17.3 million of interest income for the 6 months ended September 30, 2025, down 24.1% compared to the prior year period. Primarily due to lower loans net of the allowance for credit loss resulting from higher levels of nonaccrual loans and loan prepayments, partially offset by new loans originated during the period. Operating loss for the fiscal second quarter was $0.8 million, an improvement from an operating loss of $6 million for the second quarter -- or for the quarter ended June 30, 2025. The increase in operating performance was due to lower intersegment credit losses in the current fiscal period as compared to the quarter ended June 30, 2025, due in part because of the disposition of certain investments during the period, which generated loan repayments at Ben liquidity sooner than had been estimated in prior period calculation of the intersegment credit losses. Operating loss was $6.8 million for the 6 months ended September 30, 2025, declining from operating income of $2.4 million in the prior year period. This decrease is partially a result of lower revenues period-over-period, plus an increase in the intersegment credit losses in the current fiscal year as compared to the same period in the prior year. Moving on to bank custody. NAV alternative assets and other securities held in custody was $271.4 million as of September 30, 2025, compared to $338.2 million as of March 31, 2025. The decrease was driven by disposition of certain alternative assets, distributions and unrealized losses on existing assets, principally related to the disposition of assets as part of our asset sales initiative and adjustments to NAV based on updated information reported from the fund's investment sponsor or manager during the period, offset by $11.8 million of new originations. Revenues applicable to Ben custody were $3.1 million for the fiscal second quarter, compared to $4.2 million for the quarter ended June 30, 2025. The decrease was the result of the lower NAV of alternative assets and other securities held in custody at the beginning of the period when such fees are calculated, along with certain upfront intersegment fees, that are amortized into revenue over time being fully recognized in a prior period. In custody revenues were $7.3 million for the 6 months ended September 30, 2025, down 32.5% compared to the prior year period, primarily due to lower NAV alternative assets and other securities held in custody, along with certain upfront intersegment fees that are amortized into revenues over time being fully recognized in a prior year period. Operating income for the second fiscal quarter decreased to $2.3 million from $3.1 million for the quarter ended June 30, 2025. The decrease was primarily due to the decline in revenues applicable to this operating segment as described earlier, and employee and professional service expenses, offset by slightly lower segment operating expenses. Operating income was $5.4 million for the 6 months ended September 30, 2025, compared to operating income of $5.6 million in the prior year period. While revenues declined in the current year period as compared to the same period in the prior year, operating expenses declined by a similar amount, primarily due to noncash goodwill impairment in the prior year period of $3.4 million. No such impairment was recorded in the current year period. Adjusted operating income for the 6 months ended September 30, 2025, was $5.4 million compared to adjusted operating income of $9.0 million in the prior year period, with the decrease in adjusted operating income primarily due to lower revenue related to lower NAV of alternative assets, offset by slightly higher operating expenses during the current year fiscal period. As of September 30, 2025, the company had cash and cash equivalents of $4.9 million and total debt of $104.0 million. Distributions received from alternative assets and other securities held in custody totaled $7.8 million and proceeds received from asset sales totaled $37.2 million for the 6 months ended September 30, 2025. This concludes my prepared remarks on the financials. Dan Callahan: Well, we're going to throw it to James, who is back and up and running. James, we'll ask, you were talking about the conversion. James Silk: All right. Can you guys -- Dan, can you hear me? Dan Callahan: Yes. James Silk: Okay. Well, this is exciting, obviously. While we're doing it live, this is not recorded unless this is one of the more creative ways to demonstrate live performance. Moving back to the conversion. So as part of our plant to regain compliance with the NASDAQ continued listing requirements, Tom Hicks, our Board Chair and myself, converted $53 million of our preferred units into the company's Class A common shares. In connection with that conversion, we agreed not to sell the shares until October 1, 2028, so 3 years. We've also agreed to forgo any potential appreciation in the value of the converted shares during the lockup period. Finally, also agreed to vote those shares with the Board's recommendation for all matters other than in the election of the directors. We believe this transaction aligns our interest with our common shareholders and reinforces leadership's confidence in the company's mission and future. I also want to point out -- I also want to highlight that we continue to focus in our relationship with Kansas. In short, we're committed to Kansas. We appreciate Kansas, and we'll continue to work to deliver on our obligations to Kansas and its communities. But that's the recent developments, but we realize the next steps are crucial on the success of our business plan and strategy. To that end, we've cut costs and operating expenses, which Greg outlined. We've also reduced our legitimate third-party debt from $27 million in January to under $4 million as of today. We're also streamlining operations and plan to roll out simpler ways to provide liquidity and capital to customers. We're also exploring adjacent markets where our solutions may work with minimal extra cost, for example, we are reviewing our existing tools and tech and are looking for new ways to put them to use. Put simply, we're working towards making beneficial leaner, more flexible and easier for our target market to understand and do business with. By carrying out these steps, we believe we'll be better positioned to seize new opportunities. The market for early liquidity services is large and growing. A Jefferies study in July found that private market secondaries accelerated and reached a 6-month record in the first half of this year. Global transaction volumes reached $103 billion. That's a 51% increase from $68 billion in the first half of 2024. Accordingly, we believe investors and alternative assets need liquidity and other services, and we have the solutions to meet those needs. I'll close by simply saying that I'm very excited about our future, and I'm glad to be back helping management and the employees on our positive path forward. With that, I'll turn it back over to Dan to close out and take any questions. Dan Callahan: Yes. Operator, we're available for questions. Operator: [Operator Instructions] Our first question comes from the line of Michael Kim with Small-Cap Research. Michael Kim: First, James, I understand the core value propositions of the company remain intact. But just curious how your strategic vision might differ a bit and what your priorities are going forward, particularly as it relates to reaccelerating origination volumes? James Silk: Thank you, Michael. That's a very good question. I think management going forward will be focused on implementing the business model in our core space, which is the sort of high net worth or ultra-high net worth market, focusing on transactions in that $5 million to $25 million range that has been sort of a core part of our early model. I think the difference would be that the -- previously, there's been a focus on perhaps larger transactions, more foundational. And I think our approach will be more approaching with more of an incremental approach in terms of the size of the transactions. Michael Kim: Thank you, Michael. Got it. Makes sense. Okay. And then maybe as you have discussions with some of these high net worth investors, have you gotten a sense that maybe prospective customers might be taking a bit of a pause in terms of allocation decisions, just given sort of market volatility and as you work through sort of the management transition? And then related to that, any update on timing as it relates to naming a permanent CEO? James Silk: So a couple of questions there. In terms of dealing with our customer base, I think the need for liquidity and sort of taking timing, think the need is there. Obviously, I think the market wants to see us stabilize before we begin to move forward, which is what we're doing, and quite frankly, what I believe we've done and positions ourselves to move forward. In terms of my role as the interim CEO, we continue to -- we continue to evaluate sort of this transition period. And I'm sure the Board will be communicating in short order in terms of its approach in terms of the permanent CEO position. But the focus right now has been on stabilizing. We're now shifting more to optimizing our model. As I mentioned before, we're simplifying our approach to our products. And I think that will be the point at which we'll have a -- for further developments in that regard. Michael Kim: Got it. And then maybe just one question for Greg. I appreciate some of the incremental color around on the expense side. But as we look forward, just curious to get your perspective on sort of further opportunities to rationalize the cost base, particularly as it relates to sort of corporate and other expenses. Gregory Ezell: Yes, good question, Michael. I mean, we continually evaluate all of our vendors and ways to be more efficient. I think we've -- as you've seen over time, we really ratcheted those kind of base expenses down. There are some additional opportunities there that we evaluate, but I think there'll be more modest and incremental reductions versus some of the more drastic changes that we've seen comparing the last 6 months in terms of cost reductions. Operator: Our next question comes from the line of Brendan McCarthy with Sidoti & Company. Brendan Michael McCarthy: Great. Just wanted to have a -- start off on the balance sheet. I think in the press release, you mentioned there was roughly $104 million in debt on the balance sheet. Can you provide color on, I guess, kind of the breakdown of that debt? Is all of that stemming from the credit agreement with BCH? And how can we kind of think about the debt going forward? Gregory Ezell: Yes, it's a good question. I'll take that. It's Greg. So on our balance sheet as of September 30, $104 million, about -- about $8 million of that was related to our -- we call it the HICS credit facility called HHBDH in the footnotes. The rest of that is primarily related to the HCLP loans and the HCLP loans, as a reminder, are the notes with Brad related Brad Heppner-related entities that we're investigating the validity of those amounts at this time. James Silk: And Greg, it's worth noting -- sorry, just to follow up on that, right, the HIC/TCV loan is now -- the balance of that is below $4 million. And as Greg noted, the HCLP loan is the Brad Heppner-related debt, which we intend to challenge and has obviously been the centerpiece of the criminal indictment against Mr. Heppner. So we will pursue all remedies as it relates to that debt. Brendan Michael McCarthy: Understood. I appreciate that. And I think there was talk about really exploring adjacent markets, perhaps ways to simplify the operating model. How can investors really think about what that ultimately means looking ahead for Beneficient? James Silk: Sure. From the standpoint of simplifying the model, it's both the cost and transparency process. The current product, the way things are designed, results in a fair number of internal entities that increases some costs and complications on our side. So we're simplifying that from an internal standpoint. And then from a transparency standpoint, the -- the goal is to develop products where the revenues and the cash flows from those products and from those services flow more cleanly into the -- basically into the public company in a way that shareholders can understand easier and also designed to basically provide more value to the common shareholders by going through a little bit of a cleaner approach. In terms of the adjacent markets, the company has developed over time, a fair amount of technology for its internal purposes, including AI-generated tools that help in both portfolio management, as well as data extraction. And that has been a -- these have been internal tools, and we're looking now to externalize some of those, either directly through technology or together with some of the trust related services that we can provide. Brendan Michael McCarthy: Got it. That's helpful. That makes sense. Has there been a conversation with end market customers just related to potentially outsourcing that technology? Or is that still more... James Silk: Yes, we're having some conversations, nothing to report. But yes, we are exploring both the market receptiveness, as well as ways to refine what we have internally and make it more outward facing and so those are part of discussions that we're having. Brendan Michael McCarthy: Great. That's good to hear. And last question for me just on the core liquidity business. Is most of the pipeline still more focused in the PCP channel? Or is there other interest in the general kind of broad liquidity transaction area? Right now, it's the channel has -- reflects sort of where we were, I'd say, 3, 4 months ago, just given the focus on stabilizing, getting ourselves current on our filings, resolving the NASDAQ compliance matters and obviously moving forward off of Mr. Heppner. So -- the pipeline is -- or rather the deal flow is probably more leaning towards the PCP, but that's a -- we are sort of moving forward, as you've gotten into this current on our filings, we're sort of reopening the process. So that will evolve, I think, over the sort of the near medium term. Operator: I'm currently showing no further questions at this time. I would now like to turn the call back over to Dan Callahan for closing remarks. Dan Callahan: Thank you, everybody, for joining us and bearing with us through our technical difficulties. If you want to listen to the replay, it will be available on the Shareholders section of trustben.com. Thanks again for joining us this morning, and have a great rest of your day. Operator: This concludes today's conference. Thank you for your participation. You may now disconnect.
Will Lopes: Good morning, and welcome to Catapult's investor conference call for our first half FY '26 results. I have with me Bob Cruickshank, Catapult's Chief Financial Officer. This morning, Bob and I will present our results, our strategy and outlook and then take questions from participants on the call. It has been a momentous 6 months for Catapult. Just half a year ago, we reported outstanding FY '25 results, meeting the high bar we had set for ourselves and building on the clear inflection point we had achieved in FY '24. Since then, we've continued to accelerate this trajectory. 5 months ago, we announced the acquisition of Perch, the global leader in velocity-based training, shaping the future of athlete monitoring in the weight room. And just last month, we welcomed Impect, the world's foremost innovator in soccer scouting and tactical analytics, whose end-to-end intelligence platform delivers insights unmatched in the game. It's been an extraordinary stretch, one defined by progress, purpose and performance. And today, with another strong set of financial results, we reaffirm that same commitment to innovation and to the promise of what's still ahead. As you can see on Slide 3, the first half brought another milestone. Our customer base has now grown to more than 5,000 teams worldwide, an increase of 400 teams in just 6 months. While our focus, as many of you know, remains squarely on our professional teams, it's encouraging to see this broader growth. It's a reflection of how Catapult continues to define the global standard for performance technology trusted by athletes and organizations across every level of support. Now turning to our results. And before I begin, I'd like to outline that all figures I reference today are reported in U.S. dollars unless otherwise indicated. And to provide a clearer picture of our underlying performance, year-over-year growth rates are presented in constant currency, to remove the noise of foreign exchange and reflect the true trajectory of the business. The first half of FY '25 was another period of strong performance for Catapult, building on the momentum we have created and progress we made in FY '25. As you can see on Slide 6, we continue to advance against our North Star, The Rule of 40, reaching a new high of 33% at the end of the half, up from 31% a year ago and a full 12 percentage point improvement compared to where we stood just 2 years ago. This metric is powered by two core drivers: the pace at which our subscription base is expanding, reflected in the growth of our annual contract values; and the amount of operating profit we retained measured through management EBITDA. Our top line continues to perform exceptionally well, with ACV now up 19% year-on-year at the end of the half. But what's even more encouraging is the leverage we are generating as we scale. Our ability to keep more of every dollar of revenue is growing faster than revenue itself. Management EBITDA reached $10 million for the half. That is a 50% year-over-year increase, delivering an operating profit margin of 14%. That result would have been even stronger were not for an unexpected payroll tax expense of roughly $2 million, which is tied to the strong performance of our share price, something Bob will speak to shortly. Turning to the next slide. Our 19% ACV growth has lifted contracted subscriptions to a new record of USD 116 million. Our total revenue, which includes some nonrecurring items, grew 16% year-over-year to USD 68 million. For those of you who think more naturally in Australian dollars, this marks an important milestone for us. It is a first half in which Catapult has generated more than AUD 100 million in revenue. To put this into perspective, when Catapult first listed on the ASX, our full year revenue was AUD 5 million. The distance between these two numbers says a great deal about just how far we've come. Catapult's SaaS engine remains in excellent health, as shown on Slide 8. Our ACV retention rate once again exceeded 95%, placing Catapult firmly among the most successful enterprise software companies in the world against this measure. It's a testament to the quality of our product, the stickiness of our platform and the value we are delivering to our customers season after season. ACV per Pro team, our core ARPU metric, grew 8% year-over-year. And as in prior periods, the primary driver of this increase is the continued expansion of customers adopting more than one solution, most often adding a video product from our T&C vertical to wearables product in our performance and health verticals. The number of these multi-vertical customers rose 26% year-over-year, underscoring both the differentiated breadth of our product ecosystem, and the value customers unlock when they integrate wearables with videos, a combination that remains unique to catapult in the market. Turning to Slide 9. You can see the depth of operating leverage in our subscription model and the strength of our unit economics. When excluding the unexpected payroll tax expense in the first half, our incremental profit margin is 56%, meaning we kept $0.56 of every additional dollar of revenue as profit from an operating sense. Bob will discuss further how the payroll tax is primarily a first half expense and our treatment of it going forward. But before I hand it over to Bob, I also want to touch on some of the innovations we have delivered to our customers in the first half as we outlined on Slide 10. The rollout of Vector 8 has been a primary focus in the first half of FY '26. While we are still in the early stages of the process, we are already improving the technology and introducing new features as we go, a pace made possible by the new hardware platform that we introduced. Enhancements that once took months on our previous system are now being delivered in just a matter of weeks. In addition to getting devices and docs into the hands of our North American football customers, we are now extending the rollout into more sports and geographies. And we're also delivering major upgrades to our web experience, including faster editing, more streamlined report creation and time-saving performance analysis. The feedback has been excellent, and the rollout will continue through the second half of FY '26 and well into FY '27. Similar to Vector 8, not only did we launch Hub Pro in the first half, but we have also started to expand its features with a new remote workflow that syncs in real time seamlessly with in-office teams, unifying communication, analysis and a feedback loop across the entire coaching staff, no matter where they are in the world. In the first half, as I mentioned, we acquired Perch, and while we've been very focused on the early stages of integration, integrating their velocity-based training technology into our ecosystem, I am pleased to also say that in a very short period of time, the team has introduced Perch Assist, new performance scores and a new enhanced gym analytics, deepening the sophistication of the technology and strengthening our leadership position in gym technology. We also continue to invest in our game day and sideline solutions to better support teams and leagues in real time. During the half, we expanded Focus Live beyond game day and into practice, giving teams the same real-time analysis capabilities during training that they rely on during competition. And in recent weeks, we acquired key IP assets from IsoLynx, a local positioning system provider whose patents were licensed for the use in NFL game day tracking and whose technology has been white labeled by another wearable company as their own LPS solution. When combined with our existing solutions and IP, we believe that this acquisition not only strengthens the backbone of our live operations but also effectively gives Catapult control of the global patent portfolio required to operate an LPS system for tracking athletes and balls in live competition. And across our product suite, we're beginning to see the real benefits of artificial intelligence. AI-driven tagging, data cleaning and content generation are already saving coach's time and helping teams reach insights faster. And while we're only scratching the surface, our uniquely rich first-party data, spanning performance, tactics and now global recruitment gives us the raw material that makes AI truly effective. This foundation will allow us to usher in entirely new solutions and unlock new value for customers, something I will touch on a bit more later. In summary, we've entered FY '26 in excellent shape. We are delivering strong top line growth, demonstrating meaningful operating leverage and giving our customers the best tools and solutions to help them perform at their very best. With that, I'm going to hand it over to Bob to walk you through the financials in more detail. Bob? Robert Cruickshank: Thank you, Will, and good morning, afternoon and evening to those of you joining today. I'm very pleased to present what are another great set of results today. I'll begin with an overview of our key SaaS metrics before taking you through our financial performance in more detail, and then I'll hand it back to Will to comment on our strategy and outlook. I'd like to reiterate that unless I state otherwise, the numbers I'm about to talk to are actual reported numbers in U.S. dollars and that our growth rates, which compare our performance year-on-year, are in constant currency, removing the impact of fluctuations in foreign exchange rates. Starting with the drivers of some of those great numbers Will presented earlier, I will begin by focusing on our primary metric on Slide 12, our annualized contract value, or ACV. In the first half of FY '26, we delivered 19% constant currency growth, finishing the half at $115.8 million. We're normalizing for the onetime impact of closing our Russian business in the second half of FY '25 and the ACV that we acquired with Perch, this was an 18% growth rate. Our strong growth has again been driven by the performance of both core SaaS verticals, which can be seen on Slide 13. I'll start with our P&H vertical, which includes both our wearables and Perch solutions. This vertical continues to be a reliable and predictable growth engine that yet again delivered an excellent growth rate, growing by 21%, driven particularly by success signing more soccer teams in every region and American football in the United States. P&H was again where we felt the impact of exiting Russia as our business in that region was almost entirely in this vertical. Going forward, that impact will drop out of the FY '25 comparative period when we report our FY '26 results. We remain very pleased with our P&H growth and the continued global expansion we are seeing from our P&H vertical. Our T&C vertical, which includes our video solutions, generated 16% ACV growth. This was underpinned by continued growth from new and existing customers in soccer in Europe and supported by Catapult's expanded product suite of video solutions launched in early FY '26 in American football. Going forward, T&C will also include the ACV from Impect, which we're obviously very excited about, not only because as a stand-alone product, it has the potential for strong growth, but because it will also help us unlock more growth from our own Pro video suite. As you can see on Slide 14, our ACV per Pro team continues to expand, primarily driven by our success in cross-selling. Average ACV per Pro team increased by 8% year-over-year, meaning that our average ACV is now exceeding $28,000 per Pro team. This is very encouraging to see and entirely consistent with our strategy, whereby we have a midterm target of growing this number to $40,000 per Pro team, but you'll learn more about from Will in a moment. The chart on the right of this slide expands on our cross-selling success. In the first half of FY '26, we experienced a 26% year-over-year increase in the number of Pro teams using products from two or more of our verticals, which up until now consisted almost entirely of wearables and video. One of the pillars of our strategy is to maintain ACV retention rates above 95%. As you can see on Slide 15, we delivered an ACV retention rate of 95.1% in the first half, the inverse of which being a churn rate of 4.9%. It is important to note that this includes the onetime impact of our exit from Russia, which represented around 1% -- point impact to this number. This continues to be on par with the best retention rates seen among the world's most successful enterprise software companies. We're incredibly proud of this performance and expect to continue delivering retention rates better than our 95% target. And Slide 16 now provides a good overview of the SaaS metrics we have spoken about today. These are the leading indicators of our future growth, and they present a very positive picture of the health of our business. There are two additional numbers to also call out on this slide. First is lifetime duration, which has increased from 7.6 years to 8.1 years, a 7% increase during a period in which we added approximately 600 new teams year-over-year. It's a great sign that even though we are signing new teams, we're building longer and longer tenure into our customer base. And second is our Pro team count, which increased 12% year-on-year, an acceleration from the 8% growth we experienced in the first half of FY '25. We now have more than 3,800 Pro teams as customers, a significant global footprint. And as a reminder, the Pro team count is different from the 5,000-plus total teams mentioned earlier by Will, which includes non-Pro customers. Let's now move on to our financial results. And you can see on Slide 17, the impact that our strong top line growth has had in our P&L. SaaS revenue derived from our ACV balance grew 16% year-over-year. Recurring revenue, which is comprised of both SaaS revenue and revenue from our media business grew by 19%. As it implies, our media business has had another very strong half of growth with 41% growth year-on-year. And finally, on that slide, recurring revenue as a percentage of revenue has been consistently above 90% for some time, finishing at 94% in the first half of FY '26. Now moving to our cost base. And as you may know, we split our cost buckets into variable costs and fixed costs. Let's start with variable costs on Slide 18. You can see the trend of our variable costs compared to the steady growth of our revenue over the last 2 years, and how these costs are declining as a percentage of revenue. Variable costs are the cost of growth, which are made up of COGS, delivery and sales and marketing expenses. These are the costs that will continue to grow in absolute dollar terms as our revenue grows, while also declining as a percentage of revenue as we gain efficiencies and our business scales. As you can see, we continue to make progress on this metric. While our variable costs increased by $2.6 million year-over-year, they declined as a percentage of revenue from 52% to 49%, corresponding to an improvement in the contribution margin from 48% to 51%. The increase in variable costs was almost entirely COGS related, which increased by 16% and was closely correlated to the growth from our media business. Outside of COGS, our sales and marketing and delivery costs increased by just 4%. This is a tremendous achievement from our team. It means that we are now only 4 percentage points away from reaching our target of 45% of revenue. Now moving on to fixed costs on Slide 19. Fixed costs, which reflect our G&A and R&D teams, both expensed and capitalized, increased by 18% year-over-year and were flat as a percentage of revenue at 37%. Our fixed costs were impacted by the larger-than-anticipated payroll tax expense from the vesting of share-based payments, driven by the Catapult share price, which has risen significantly over the last 2 years. Fixed cost growth was also impacted by the addition of R&D operational costs that came with the acquisition of Perch. Both of these items occurred in the first half of FY '26. Excluding the payroll tax and the Perch impact, fixed costs otherwise rose by 7% year-over-year, which is in line with our expectations. And if we exclude the tax impact only, a nonrecurring cost, our fixed costs would have been 35% of revenue, showing that our core trend of seeing fixed cost leverage with revenue growth is on track. We expect this trend to continue as fixed costs rise modestly in absolute dollar terms, while declining as a percentage of revenue as we continue to make progress towards our 25% target. And these concepts all come together on Slide 20, which highlights how our operating leverage is accelerating the growth in our profit margins. You can see the gap that is now opening up between our revenue and our OpEx as a percentage of revenue and the impact that is having on our profit margin at the bottom of the chart. We have now delivered $28 million (sic) [ $29 million ] of positive operating profit margin, management EBITDA in the last 2 years and we are making great strides towards getting to our targeted 30% profit margin, delivering a 14% margin in the first half of this financial year. As revenue grows and our variable and fixed costs continue to approach their targets, our operating profit margin is expected to increase. And on Slide 21, you can see the ongoing improvement in our free cash flow position that has come about because of these increased efficiencies we're delivering in our cost base and are leading to our expanding operating profit margin. Free cash flow increased $3.4 million year-over-year to $8.2 million in the first half when excluding transaction costs, which consists primarily of the $3 million cash component of the purchase price related to the acquisition of Perch, along with related advisory fees. Including this, our cash flow was still a very healthy $4.3 million and meant that at the end of the first half, Catapult had a net cash position of more than $11 million in the balance sheet and with a fully repaid debt facility. Finally, moving to our profit and loss summary on Slide 22. We have already touched on many of these numbers, so I will make a few observations on those we have not. The increase in share-based payments is primarily due to the year-over-year increase in our share price which has an impact on the expense recognized due to changes in the accounting valuation methodology as outlined in the FY '24 results. This increase is not reflective of an increase in dilution. Incremental depreciation and amortization or D&A includes around $2 million of accelerated expense of S7 devices and Thunder as they approach end of life, along with $1 million of intangible asset amortization related to the Perch acquisition. And finally, the change in interest, taxes and other is primarily due to a tax benefit, lower interest costs due to lower utilization of our line of credit and reduced foreign exchange losses year-over-year. I want to call out that going forward, we will be separating out the payroll tax related to share-based payments from our management EBITDA. This expense relates to our employee share plan and is unrelated to our operating profit. We fully expect to continue delivering for shareholders. And if our share price keeps rising, payroll tax will continue to create timing noise in management EBITDA that has nothing to do with the underlying performance of the business. For that reason, we'll be making this adjustment going forward. In closing, we have started FY '26 in excellent shape. Our key metrics and targets are world-class and our financial performance continues to go from strength to strength. We are consistently delivering strong profitable growth, progressing even further on the Rule of 40. With that, I will hand it back to Will to discuss our strategy and outlook further. Will Lopes: Thanks, Bob. Before we wrap up, I'd like to take a moment to reaffirm the scale of the opportunity in front of us, the strategy guiding us and why we remain so energized about Catapult's role in sport for many years to come. Slide 24 highlights the global market opportunity. The professional sports technology market is expected to exceed USD 71 billion by 2030, effectively doubling over the next 5 years. Live sports remains one of the last true pillars of real-time entertainment. And that enduring demand is driving unprecedented levels of investment across leagues, teams and performance infrastructure. Slide 25 illustrates how our platform strategy is delivering true differentiated value. Our unified SaaS platform is designed to help teams make faster and smarter decisions. It saves time, adds context to the data they rely on and fits naturally into the rhythms and workflows of high-performance environments, turning information into an advantage and an advantage into a competitive edge. On Slide 26, you'll see the breadth of the solutions we now offer, including Perch and Impect. With each addition, we are becoming an even more integrated partner across the full spectrum of performance and coaching workflows. And across this platform, the deeper impact of artificial intelligence is just beginning to come into focus. Our greatest strategic advantage lies in the quality and the scale of the data we create. Catapult generates and manages a uniquely comprehensive body of athlete information, over 5 petabytes from gym and on-field performance metrics to the custom tactical tagging done by our customers and now the most extensive global data set in soccer recruitment. Because this data originates in our hardware, flows through our software and is enriched inside our analysis tool, we hold something rare in professional sport, a vertically integrated foundation of first-party data that AI can uniquely refine and learn from. This foundation is already creating meaningful value. As I've mentioned, AI-driven tagging, data cleaning and content generation are saving coaches time and accelerating insights across our products. In Formula 1, our computer vision technology delivers real-time track limit detection. In the weight room, Perch is redefining velocity-based training with a computer vision system unmatched in the market. And across our broader ecosystem, machine learning has long-powered player and sport-specific algorithms built on top of data, no one else can access. These capabilities help elite teams uncover patterns and insights that previously required hours of manual analysis. And they increasingly make high-quality performance intelligence now accessible to new types of customers who lack the resources to uncover those insights today. AI is also reshaping how we build. A meaningful share of our production level code today is now generated through AI, expanding our engineering capacity and allowing teams to focus on the inventive high-impact work that pushes our platform forward. In short, our unified vertically integrated system, one that creates and owns the data, enriches it through AI and transforms it into actionable insights, continue to strengthen as AI's role in sport only grows from here. The value of AI ultimately depends on the richness of the data beneath it, and that foundation is uniquely Catapult's. This integrated system and our ability to generate differentiated data are also what fuels our excitement around our recent acquisition. Perch strengthens our leadership in athlete monitoring by bringing weight room intelligence into our performance and health portfolio. Shred training is the foundation to athletic development, and Perch bridges a long-standing divide, enabling us to build a unified view of athlete performance. While we are early in the integration, we are already seeing the impact. Perch has already moved beyond its American football roots, helping us win competitive renewals in Europe, break into new verticals like elite volleyball in Asia, along with also helping us sign new customers here in Australia. It's a clear evidence of its broad appeal and immediate commercial traction. Impect, even just weeks post transaction, is also expanding our platform advantage. It adds a scalable, data-rich scouting solution powered by a proprietary Packing metric that meaningfully elevate decision-making for teams. Impect strengthens our cross-sell engine at soccer, deepens our share of wallet and unlocks new growth opportunities for our video products. And like Perch, the acquisition is immediately accretive to our progress in the Rule of 40. Now turning to Slide 27. You can see how the pieces of the strategy come together. Catapult has built a competitive moat that is wide, deep and genuinely defensible. Our one-stop platform, our proprietary data stack, our global scale and our multisport intelligence are unmatched in the industry. And as the first half demonstrates, through the strength of our platform, the sophistication of our technology and the growth of our customer base, the moat is only winding. We are expanding our advantage at the very moment the market itself is accelerating, which is exactly where we want to be. Slide 28 outlines our focused go-to-market approach. We land on Performance & Health, we expand with video and now scouting analysis through Tactics & Coaching. We retain more than 95% of our customers annually, and we drive cost efficiencies as we move towards a target of 30% profit margin. Slide 29 details the economics that supports this journey. We've built an enviable global SaaS business designed for profitable growth at scale. The ability to drive our contribution margin through cross-sell and product innovation allows us to improve unit economics while leveraging a stable fixed cost base, yielding higher profitability as we scale. Slide 30 brings us back to where I started today, and that's with the Rule of 40. It is how we measure our success both internally and for you, our shareholders. At the heart of this framework are five key drivers, each critical input powering our ACV growth and management EBITDA. Together, they shape not just our financial outcomes, but the discipline behind our scale. First, Pro team count. With more than 3,800 Pro teams today, we continue to see greenfield opportunities across leagues, regions and sports. Second, ACV per Pro team. We are increasing ARPU through upsell, cross-sell, pricing and product expansion, especially as we convert single vertical teams into multi-vertical customers. And this is where new solutions like Perch and Impect will play an increasingly important role as we unlock their potential through our global scaled sales organization. Third is ACV retention. We're maintaining retention above 95% by consistently delivering value, service and innovation. And as we add new solutions, we deepen the role we play in helping customers make better decisions, strengthening the stickiness of our platform and the trust they placed in us. Fourth is the variable cost efficiencies. We are scaling smart, supporting growth while driving productivity and lowering marginal delivery costs. Fifth and lastly, it's fixed cost discipline. With our foundation now in place, we are positioned to grow without layering in equivalent fixed overhead. Turning to our outlook on Slide 31. Our objective remains to deliver on our strategic priorities with a continued focus on profitable growth. As we communicated last month, in FY '26, we continue to expect ACV growth to remain strong with low churn, continued improvement in cost margins towards our targets and higher free cash flow, excluding transaction costs as our business continues to scale. In closing, we've had a great start to FY '26. We continue to deliver strong profitable growth with a SaaS engine that is driving us forward, with a team that is hitting on high expectations that we set for ourselves. With our all-in-one SaaS platform built exclusively for sport, now strengthened by Perch and Impect, we stand alone in our ability to help teams, athletes optimize their performance. I remain confident in the path we're in and in the vital role we play in unleashing the potential that lives inside every athlete and team on earth. Thank you all for listening, and I will now turn back to the operator for questions. Operator: [Operator Instructions] Your first question comes from Owen Humphries with Canaccord. Owen Humphries: Well done, team. Another set of strong numbers. A couple of questions from me. First one is just on the Pro team count, added 276 my numbers here in the half, but that would have included Perch, which was around 125, my understanding around the time of the acquisition, but that's largely high schools. Can you just maybe talk through what the, I guess, organic Pro team growth was for the first half? Will Lopes: Yes. Thanks for the question, Owen. Yes, I think the amount of teams that came -- Pro teams that came through Perch were quite minimal. I think the overlap that we had during the acquisition between our Pro team and their Pro teams was very high. I don't have the exact number on the top of my head, but I would have assumed the additions that came with Perch were definitely less than 10% of the additions that we've added in Pro, but probably even less than that on it. So most of that addition is organic. Owen Humphries: Right, So strong teams addition, well done. And then just to understand the multi-vertical team growth of, call it, 95%. Now we didn't get a discussion point around the new video solutions, which was around $13 million of ACV in the last result. Can you maybe just talk through how that tracked up? Is it fair to say that 95 teams was largely taking up the new video solutions? Will Lopes: Yes. The primary growth continues to be in multi-verticals is our Performance & Health or wearables customers taking on video solutions. So yes, the primary version of that came in. I would say that the first half of this year, we were really pleased that we saw, as you asked in your first question, really strong growth in new additions of new teams. So I think the sales team was primarily focused on new logos, but also as we started to integrate Perch, upsell within that logo -- within that vertical also took a lot of attention, which would not show up in the multi-vertical numbers. Owen Humphries: Well, actually, can we dive deeper on that because if it's the strongest first half addition in teams, like what has changed in the sales team to go after new logos because you can't really see it in the variable cost of sales and marketing, so like you're adding 50 more people in that team. Could you just talk through some of the drivers, some of the regions, how you're incentivizing what's -- just the drivers of that strong team growth, logo growth? Will Lopes: Yes. Nothing, I think, in particular unique, I think, from the past. I think it's just where the pipeline fell at the first half of the year. We saw good growth in wearables, particularly around all soccer regions. We saw strength, I think, as Bob mentioned, in American football across all the collegiate areas. And then an upsell as we started to introduce Perch into that vertical customer as well. We should -- they just -- that number doesn't show up in the multi-vertical count. Owen Humphries: And just on the fixed OpEx growth here. So the like-to-like growth was, call it, 8-odd percent. Now that you have a bigger balance sheet, can you just talk through any ideas? I know you talk about modest growth going forward. Is that kind of 5%, 10% growth? You guys are not planning a reinvestment strategy given you guys have a more capitalized balance sheet? Will Lopes: No, I think as Bob mentioned, I think we anticipate modest growth from a fixed cost perspective as we have in the past. I think we have -- we feel like we have a good scale foundation. Like-for-like, I think when you remove the addition of Impect -- sorry, when you remove the addition of Perch R&D in the first half, and the tax, the payroll stuff, our growth was actually just 7%, and our anticipation always has been that, that's around the amount you should estimate on R&D expenditures going forward in terms of growth. Owen Humphries: Well done, guys. Good result. Will Lopes: Thank you. Operator: Your next question comes from Evan Karatzas with UBS. Evan Karatzas: One for me. Just keen to -- well, just keen to parse out how you're thinking about the top line growth over the next 12 to 24 months just with the inclusion of Perch, Impect, which are faster growing businesses and I guess, the existing Catapult and you also got the Vector 8 global rollout, just around, I guess, the potential to accelerate that top line growth from here relative to the last couple of years? Will Lopes: Yes. I appreciate the question. Yes, look, I think as we mentioned in our outlook, we anticipate ACV growth from hereon out to remain strong and for us to continue to see churn. I think the Impect -- sorry, the addition of Impect and Perch will, in their own rights, I think, help each of the verticals accelerate to some degree from where we stand today. It's a bit early to say, particularly on Impect. It's been a couple of weeks since I think we closed the deal. A big part of that acquisition was to ensure that we start to play in the scouting area of the vertical as well as help us have some more innovative bundling strategy with our existing Pro video suite. How it impacts growth rate at this stage, I think it's too hard to kind of give you a guidance on a number. But I think as we've said in the past, I think the addition of all of these products as well as the expansion of our hardware on Vector 8 just continues to add more fuel rods to maintain our growth rate and keep it going strong from here on out. Evan Karatzas: Okay. Good one. And then just sort of a quick follow-up there. Just remind us of the Vector 8 rollout and the progress there for the next 18 to 24 months as well? Will Lopes: Yes. I think we continue to be incredibly excited for it. I think -- so we typically start these rollouts a bit slower than you -- sort of to make sure that we're not impacting our customers in any significant way before we kind of really get our entire customer count converted. Our first focus was really around American football in North America. We passed pretty much the Northern Hemisphere summer time introducing the new technology. We are now in the second phase where we're expanding that technology now into other sports and geography. And I think what was really exciting for us is how fast we could bring new features to market. What used to be really months, what would typically takes between seasons, right, new features that we would design from a software perspective, we can now bring to market in a matter of weeks. And I think to your question, we see that really as sort of the underlying opportunity in the Vector 8 platform, which is not only are we collecting these first-party data sets, but the ability to invent and create new software and add value to it that potentially could lead to expansion of share of wallet means that we can move much faster than we have in the past. So we may not have to wait season to season to see some of that impact growth. But I think the caution I think we've always done to the market here is we're a subscription business. And so while we are excited by the platform and what Vector 8 will allow us to do in the future, we don't see the rollout of the hardware as an ACV moment for us. I think later on, as the software starts to improve, that's really where we start to see the AC benefit long term. Operator: The next question comes from Damen Kloeckner with CLSA. Damen Kloeckner: I just wanted to build on a couple of questions that have already been asked. So if the 408 new Pro teams, should we think of that as basically being exclusively driven by soccer across multiple regions and North American football, like if you could [Audio Gap] of 400? And then also just with the multiple verticals, where has the MV penetration been highest? Which teams are you having the most with now over the last few months as you're integrating these new businesses and rolling that out? Will Lopes: Yes. So I think from a -- if I understood your question on the first part, the primary growth driver on sort of new Pro teams, yes, continues to be in global soccer, primarily in sort of Northern Europe, Eastern Europe and Southern Europe, where are still greenfields for us. We also had incredible success in Latin America. The team -- the sales team continues to do a really great job in that region. And we're now finding particularly in the sort of Middle East, Southeast Asia, some really great results there as well. Similarly, I think the North American market continues to be very strong for us. American football has always been an area where we continue to see consistent growth. And I think we're very pleased to see that continue along the way on the Performance & Health growth logos in particular. I think to your second part of your question on the multi-vertical, yes, the primary area where we're finding, I think, the sort of the, I would say, the lowest hanging fruit in converting a wearable client into a multi-vertical client, continues to be in global soccer. That's really been the primary focus, which is why the addition of Impect was to us so exciting is that not only does it allow us to continue to add on the Pro video suite that we've always -- we've been building and feel we have probably the best one out in the market, but now it allows us to combine that with the most sophisticated scouting analysis tool. And if you understand sort of the Pro global soccer industry, what you quickly realize is that actually outside of maybe the top 30, 50 teams in Europe, 95% of the revenue that teams generate globally is through their scouting system. It's basically through building a great athlete and selling that great athlete to some of the big teams in Europe. So the fact that we now have this platform within our ecosystem, coupled with our Pro video stuff, we're very excited that it's going to give us the opportunity to continue to keep our multi-vertical solution growth stronger than it's been this past half. Damen Kloeckner: Okay. And just one more. Can you give us a little bit more color on what is driving the strength in media business? And should we still be thinking of this as exclusively a North American opportunity, is like contained to the U.S.? Or are you seeing opportunities for media services elsewhere? Will Lopes: Yes. I think it continues to be a positive surprise for us. It's not -- it's never been an area where I think it's been a core driver of our business, but it's an area of the business that has always benefited from the platform, the underlying platform we built primarily for video analysis. So it utilizes a lot of the tools and the technology on it. The drivers have been really, I think, what I mentioned, which is the sort of unprecedented demand around sports, and basically, sport being really the last bastion of live entertainment means that the value of the ecosystem and the amount of investment going in continues to be pretty high. So what that's translated for us on that licensing media part of the business is really two things. I think, one, we're seeing a higher demand for content, particularly collegiate content out of the U.S. for highlights, for advertising purpose, and we're also seeing the streamers, the likes of Netflix, Disney, Amazon want to create content around sports and us sort of playing the rights holder role for our clients in that case is benefiting from that demand. Again, we are cautious. We're very excited, having 40-plus percent growth on anything is always incredibly exciting. I think we're always cautious that it's been a part of the organization that has been historically growing in the single digits, 5%, 7% annually. We treat it typically in our minds as something that we anticipate to stay flat. But if this demand continues, I think we'll probably have to rethink how we think about this part of the business for ourselves. Operator: Our next question comes from Lindsay Bettiol with Goldman Sachs. Lindsay Bettiol: Hopefully, you can hear me okay. Will Lopes: Very good. Lindsay Bettiol: Yes, good. Okay. Question, if I have a look at, say, the full year ACV results versus the first half ACV result, like the mix of Pro teams growth and ACV per team is kind of inverted. With the first half, it was ACV per team driven; second half, more Pro teams driven obviously because of Perch. As we go forward, like you've acquired Perch now, Impect comes in, I would think that would kind of, one, accelerate the conversion of video, but also it's just a higher ACV per team anyway. Like how should we think about the mix of your ACV growth going forward? Would you expect that to be more ACV per team driven versus, say, what we've just seen in the first half? Will Lopes: It's hard to give you a real good answer on that at this stage because I think it's still pretty sort of bringing -- we haven't been historically an M&A machine, where we add solutions into the mix. So Perch has only been with us for 5 months Impect for a couple of weeks. Historically, I think the way we tend to think of our ACV growth or at least not to think about it, but historically, how it's come, it's been around 50% driven by new and about a quarter on upsell and a quarter in cross sell -- sorry, a quarter in price increase. My expectation is that at least for the next 12 months or so, I don't see any reason why that ratio changes. I would anticipate that upsell and cross-selling would still primarily drive about a quarter of our ACV growth and new about half of it. But that ratio could become a bit more close to equal if the integration with Impect and the integration with Perch continues to do as well as we imagine, but it's a little bit too early for me to give you any guidance on that at this stage. Lindsay Bettiol: No, brilliant. That's fine. And then just a couple of clarity questions. If I look at your staff numbers, it looks like they ticked up by 20 half-on-half. Could you just remind us how many heads came across as part of the Perch acquisition, please? Will Lopes: How many heads, how much headcount... Lindsay Bettiol: Yes, how many employees? Will Lopes: Yes. So I think Perch was somewhere in the neighborhood of like a team of 10. And I think in Impect, which is not yet reflected in the number, it was probably -- it's probably about a team of 30 to 40 on their corporate side. It's a bit higher on the operations side that sits behind it in the Philippines. I think the number is around 400. So you'll see a tick on head count growth. But again, those are mainly operational headcount. So think of it as like a support center on it. Excluding those, I think our head count is probably minimal from a growth perspective net, right, so probably around 10 to 15. Lindsay Bettiol: And then just final kind of clarity question. I think Bob did call this out, but just to be sure, the Russia impact, that's done now, right? Will Lopes: Yes. So by the end of the year, if that's what your question is, the Russian impact will be excluded -- or not excluded, it's no longer impacted in the numbers. This will be the last time that, that impact on ACV will be there, particularly in churn. So if you exclude that impact now, I think our retention rate was around 96%. I think we had a churn rate of like 3.9%, which would have been compared to last year this time around 3.8%. So virtually flat and an amazing level at all counts. But yes, you shouldn't anticipate that impact going forward. Operator: [Operator Instructions] We have a follow-up question from Owen Humphries with Canaccord. Owen Humphries: I think you just answered it before. But just around that media business, I think you said that you expect that business or way you model it is kind of flat in terms of the run rate revenue to date going forward? Will Lopes: Yes. I actually think -- I would say that we think it's probably running a little high given where historically we've seen. I think the -- I would say that it's somewhere between $10 million to $12 million in annual revenue. It's kind of where we've seen that business run with, let's call it, CPI level increase. I think this year, it's running -- I don't have the number, but it's probably closer to $14 million right now. So while we're delighted to see it there, I think I'm just a bit cautious on that metric because I don't know how long this demand that we're seeing, particularly from the streamers, right, will stay on. We had -- I'll give you an example, Netflix created a show last year around collegiate sports, particularly around American football. We weren't sure if it was going to get renewed. This year, it did get renewed. And so -- but it's still unclear whether the following season it will get renewed. So it's -- I think those are -- they're harder to predict than the other parts of our business. That's why I think we're fairly cautious about it. Owen Humphries: Got you. And if you're an analyst doing some modeling, and obviously, run rating at 16.6%, you kind of said run rate should be around 10% to 12%, but maybe how would we forecast that into future years and also for the game play, but I think that's where the market is focusing on, what it means for growth trajectory next year? Will Lopes: Yes. I think 10% to 12% with some CPI level growth is probably appropriate. But I don't know what else to add to that.
Hjalmar Ahlberg: Hi, and welcome to Redeye, and today's presentation of Gentoo Media's Q3 result, will be presented by the CEO, Jonas Warrer, and followed by Q&A moderated by me. And if you have any questions, please send them through on the website. With that, I'll leave over to you, Jonas. Please go ahead. Jonas Warrer: Thank you very much, and good morning all. So welcome to the presentation today for our Q3 interim report. We are Gentoo Media. I just wanted to say a little bit about that for those of you out there that are new to the business and to the industry. So what we do is that we work as an affiliate in iGaming. And that means in layman's terms that we connect operators with players. So what we say is when high-value players find the right brand at the right time, attention turns into action. And that's sort of the shape and the business that we shape. Why does iGaming affiliation matter? I think most operators would say that affiliates, they can drive high-intent traffic. We can also build trust to content and to the websites that we have. We can scale visibility fast. I think you can see as an operator that you can both do traditional above-the-line marketing, but you can also work with all of the websites that you have online, which is all of the affiliate websites that actually also creates a lot of visibility and brand awareness. We can also, in that sense, boost conversion and retention for the operators, keeping a presence of the brand online. And then we can reach niche audiences with the different type of websites that we have that target different niches and verticals in iGaming. I think if I dumb it a little bit down to explain more simplified, iGaming affiliation matters because we are the store that you find on the shopping street where players they go and look before they decide which operator to place a bet with. Going into our Q3 2025 executive summary. Q3 is the first quarter showing clear results from the strategic realignment initiated earlier in the year. If I have to highlight a few key words here, I would say, operational control and operational efficiency. This also means that we see EBITDA before special -- EBITDA before special items increasing quarter-over-quarter, reaching EUR 9.3 million in the quarter with margin improving to 41%. Developments, as said, are driven by the rightsizing and organization simplification resulting in a stabilized and efficient cost base. Revenue came in below expectations, partly due to weak September sports margins. We'll also touch on the next slide on a few other factors. Player deposit levels stayed -- developed positively year-over-year. Our organizational capabilities have been strengthened across the organization through improved delivery discipline and clear accountability. And I would say we entered Q4 with a more efficient organization with strengthened execution, ready to maximize the year-end peak season performance and accelerate growth into 2026. Post quarter performance is strong. October delivered 15% revenue growth compared to September and mid-November is trending even further ahead. Gentoo Media maintains our full 2025 guidance, but with better cash conversion. Free cash flow from operations is adjusted up to EUR 31 million to EUR 34 million from previous guidance at EUR 27 million to EUR 30 million. Okay. Going into the financial highlights. As said, revenue of EUR 22.7 million, down from EUR 29.5 million in Q3 last year and lower than previous quarter that came in at EUR 25 million. Revenue below expectations due to usually -- unusually weak September sports margins and also still immature market conditions. And we're still -- and then I will also say, with the partner and the portfolio optimization efforts that we have had in Q3, I think also that had a short-term effect on -- negative effect on revenue where we are more thinking about now the quality of revenue, and about the long-term sustainability of the revenue that we generate. Personnel expenses and other OpEx were EUR 7.4 million in Q3 compared to EUR 8.9 million in the previous year and also down 10% from Q2, from EUR 8.2 million in Q2 2025. And I think actually also if we looked in at Q1 when we started this year because this is sort of the starting point that triggered our strategic realignment. I think it was up at nearly EUR 9.7 million there. So we actually see that our cost base has been reduced and I would say is very much in control right now. And going back to the strategic realignment when we presented that, we presented certain targets, EUR 8 million to EUR 10 million in run rate savings. And I think when we look now at Q3 results, I think it's safe for us to say that we are trending ahead of those targets. I think that's a very important message for me to make. Marketing expenses at EUR 6 million in the quarter, and that's compared to EUR 8.4 million in the previous quarter. And what we did in Q2 was that we took a deliberate choice to increase a lot in marketing, to increase our player base and grow our player base. And we didn't see the full -- we didn't see the revenue effect of that coming, right? And then in Q3, in line also with the strategic realignment, we have taken the choice here to reduce marketing by quite a lot. But I think the highlight here to say is -- and we can touch upon that in some of the next slides that our player acquisition model is improving, meaning that we can generate players at a lower cost. And I think if we look, for instance, specifically paid, we have nearly halved our marketing investments, but we make 2/3 of the players if we do the same comparison, right? So we are getting more efficient at what we do here. And of course, that is a very important metric for us and also gives us comfort for the future. [Technical Difficulty] absence of major summer sports events, of course. But then what surprised us in this quarter was the very unusual low sports margins in September. And of course, we still see secondary effects from what I would call still immature market conditions in Brazil. And also mentioned, there is also a third factor here. This is simply the short-term effects from what we call our partner and website plus portfolio optimization initiatives, where we are thinking about the quality of revenue and about long-term earnings. Player intake and value of deposits. Despite the seasonal impact of no major summer sports events in this quarter compared to last year, player intake and deposit values remained on par with the prior year. So player intake reached 109,000 FTDs in Q3 and deposit value reached EUR 195 million in Q3 2025. And as you can see in the graph here to the right, this is very much on par with the prior year, and actually, for my part, very satisfied with that, considering that this was, as I said, a summer with no major sports events. Very important here to highlight, as I mentioned earlier, our player acquisition model was optimized in the quarter, meaning that we generate players at a lower average cost, and this is both compared to last year than it's compared to the previous quarter. Operational highlights from publishing. I'm not going to go into the details for the revenue. I think we touched upon that. Jumping straight into some of the more specifics here for publishing. WSN.com, our North American-facing asset continue to drive with high revenue growth quarter-on-quarter and year-over-year. Key enhancements were made to the AskGamblers platform to improve site performance, monetization and user engagement. We have done quite a lot to AskGamblers in Q3, but there's still also a lot of things to do looking ahead. Work on Gentoo Media's next-gen proprietary WordPress framework entered the final stages after more than 2 years of development with first websites to go live in Q4 and benefits to materialize in 2026. This as it says, this is actually a project we have been working on for more than 2 years, delayed as it often happens with tech projects. But looking very much forward to seeing the benefits materializing now. And I would say look very happy to see the developments we have done in Q3 and the strengthening that we broadly have done in our product tech and design team here also, which is some of the drivers for seeing the progress that we are seeing for this project. Paid revenue also same factors as we touched upon before. So just going to jump straight into the details here also. Following the expansion in Q2 where we decided to invest quite a lot more in growing our player base. The paid unit focused on controlled growth and operational efficiency in Q3. This is also what I'm talking about in the optimized player acquisition model. So compared to Q2, paid retained roughly 2/3 of our acquisition volume with half the marketing costs. Of course, very happy to see that. Growth initiatives launched in Q3 shows positive sign in Q4. And of course, also very happy to see that, that we have sort of managed to add another layer of new initiatives that are growing. And with an improved and more diverse acquisition model, paid is poised to grow in Q4 and beyond. Post quarter, October delivered plus 15% revenue growth compared to September and with November trending even further ahead. Q4 expected as a strong quarter, supported by a reduced cost base and restored EBITDA margins. Also, we've had the negotiation of the new terms on our RCF facility has been completed, which has created the room to explore the right financial structure for the business going forward. In summary, Q3 was a difficult revenue quarter with a combination of factors affecting performance and causing results to land below expectations. However, the quarter also marked the first clear effects of the strategic realignment initiated in the first half of the year. Decisive rightsizing actions have created a leaner, more agile organization with a healthier cost base and stronger ability to execute on growth opportunities. EBITDA margins have been restored with further upside as revenue develops. Post quarter performance is strong. October delivered plus 15% revenue growth compared to September and with November trending even further ahead. And as I said, Q4 is expected as a strong quarter, supported by reduced cost base and restored EBITDA margins. Gentoo Media overall maintains its full year 2025 guidance, but with better cash conversion, free cash flow from operations is adjusted up to EUR 31 million to EUR 34 million from previous guidance at EUR 27 million to EUR 30 million. Thank you very much. Hjalmar Ahlberg: And now we move over to the Q&A session. We're also joined by CFO, Mads Albrechtsen to answer questions. Maybe I can start with a question for you. I mean regarding your restated financials. I guess you worked a lot with that. Could you elaborate, I mean I guess a lot of different changes? Or if you can give some details on what has changed in 2024 and '25 as well? Mads Albrechtsen: I think first of all, it has been very, very important for us to be very transparent about it is what has been presented. Today, we issued a press release with all changes in separately for the sole purpose of actually addressing this theme. As you're also seeing in that press release, there is a lot of different movements in each of the FSLIs. I think the overall theme here is that we want to present our numbers 100% correct. When we did the audit last year, there was some unadjusted misstatements which we found immaterial. I think that's normal for a business like ours. Then we also find other areas in '25 -- went through all the accounts. And then the Board, together with me, of course, took the decision to clean everything up to present everything as transparent and open as possible. That's why we did -- as we did. Hjalmar Ahlberg: Got it. And I mean, looking at your process now on, how do you make sure that you don't have any big restatements again going forward? Mads Albrechtsen: Yes, I think that's an evident question. We have changed a lot, especially around finance and governance in general in the business. Of course, I joined back in March, and we came out of a year of so much growth and transformation and also the years before that. I think it's natural for a business like ours to feel growing pains at some point in time that you need to take this important decision to invest a lot in the infrastructure and the controls and governance. And I feel very much supported by Jonas, but also our Board to invest what's necessary for us to make sure that this has never happened again. Hjalmar Ahlberg: Sounds good. And moving over to the Q3 result there. You mentioned three things that impacted negatively that you did not expect maybe when Q2 was released, sports margin, Brazil and partnerships ending. Can you say anything the biggest effect? Or was it all three of them? Or if you can give us some information about that. Jonas Warrer: Now, of course, the sports margin in September was quite big, right. Also I think if you look at some of our peers, they also talked about this. And then, of course, the sports margins or whether -- if we look at Brazil specifically, the sports margins were low in September, and we also still see this sort of still immature market conditions where revenue and -- revenue share margins can be very up and down in the different months. So it's still a little bit of a market that's difficult to predict. So to what degree, what is what they are, but Brazil was, of course, also hit here in September, right, for both factors. And then -- and I think this is one that's maybe the most hard to quantify. Of course, when we go into this process about looking out about our portfolio, what to invest in and also what partners to work with thinking about the quality of revenue. Of course, you end in some debates and you end up taking some actions that have a short-term effect and difficult for me to put a value on it. But of course, there is an effect here. We are also in a process where we are discussing margins with our partners. And we have a sustainable business together, a very good discussions with a lot of our partners. And of course, at that time, it can also maybe be difficult to have that kind of discussion and then you're also selling, for instance, fixed fees because there is a timing for everything, right. And I think short term, there was an effect in Q3 from this portfolio and partner optimization initiatives that we are doing very dedicated now. Hjalmar Ahlberg: And you mentioned that Brazil continues to be challenging. Is it the market stable for you? Is it continue to decline? Or what do you think we should expect from here from that market? Jonas Warrer: I think it's still a very attractive market, but it's also, I would call it, a chaotic market for us. It's hard to predict what will happen next month, which, of course, there's always various discussions down there to what should happen to the market. So I would say we are optimistic about the market, but we, of course, also -- we are not letting the horses run free there. So we take, I would say, a controlled investment case down there right now. And of course, continuously assessing should we increase, decrease, just do what we do now and whatnot. But we hope, of course, that the Brazilian market will turn out to be great, and it's a market we are optimistic about with some caution, as I said. Hjalmar Ahlberg: And just following up, on looking at your regional development, I mean you comment that Americas is, of course, soft due to Brazil, but then you actually saw some growth in Nordics. Was that something that you -- is it a trend or something that for this quarter that was there? Or if you can elaborate a bit on that. Jonas Warrer: We have pretty good rankings in the Nordics right now for some of our sites and some of our markets. So very happy. It's what we started out doing right many, many years ago. That's where we started. I think I'm very happy to see that we can actually still grow that market despite some people would call it a legacy market, a market that's declining. That's not what we are seeing, and we can still gain market share by taking even more rankings there. And I think we have done that in the last period. And very happy to see that. If we can manage to grow in what you would call probably one of the most like mature markets, we should also be able to grow in some of the new emerging markets. Hjalmar Ahlberg: Good. And also a few questions coming in from the audience here around the guidance. I mean if you look at what have you done this far, Q4 is implied to be a pretty strong quarter. And seasonally, I guess, it usually is, but can you give some -- I mean, you did say that October was 15% better than September. But what do you expect in terms of the monthly development? Are you hoping a lot for a strong December to be able to reach that guidance? If you can give some input on that? Jonas Warrer: Yes, of course, we are hoping very much for a strong December and have also expected that in the numbers we are seeing and in the guidance we have given. December is always the best month in the year. We also expect it to be this year. But November is trending really good compared to October, and October is up, as I said, very strongly compared to September, right? So optimistic here right now about numbers. And of course, December is normally a month where you have both strong earnings in casino and in sport. So this is why it works very well for us, hopefully. Hjalmar Ahlberg: And can you comment anything about -- I mean, October 50% up versus September. I guess some of that is the reversal of the low sports win margin in September. Is that a large part of the growth? Or is it different things in there? Jonas Warrer: No, I would more call it different things. Actually, we've been discussing a little bit whether we would see this effect from players having won so much money that they would just go even wilder. I don't think really that's the effect we have seen here, I would call it more broadly growth across the line. Hjalmar Ahlberg: And a question for you, Mads, regarding free cash flow. I mean, you increased your free cash flow guidance here, strong operating cash flow, partly driven by some working capital changes. Is that something you see you can sustain from here? Or is it something that can fluctuate going forward as well? Mads Albrechtsen: No, I think it's a fair level we are now. We are always focused on our cash flow, but I think that we have improved that side of the business a lot over the last couple of quarters. We are always ambitious in terms of that. But I would say the levels we have now are suitable for our size. So what we should keep in mind, obviously, of course, as Jonas is also saying the quality in our revenue. So the revenue actually turned out to be cash as well. And we can actually utilize all the digital tools and automating processes we have implemented around a much better environment for issuing invoices and collecting cash. That's the sole purpose of why we see such a strong cash conversion in the business. Jonas Warrer: Yes. Yes, if I can say -- I think now with Q2 and Q3 completed with what we have seen now with the solid operational control and efficiency. Of course, naturally, now we move focus towards growing the top line, towards growing revenue but added with this like quality of revenue. Because I think if you look at Q3 last year and look at how much more we generate in the revenue and then you compare the free cash flow from the operations, that's not that big of a difference, right? So I think going forward, revenue growth but with this extra quality in it and then, of course, translating into growth in the free cash flow from operations. Hjalmar Ahlberg: And following up on that on the balance sheet, maybe for both of you. I mean, you said that you're evaluating the optimal structure of the balance sheet, I think maybe starting you, what does that mean? I mean, do you look to refinance the bond or anything else that you could look forward to? Jonas Warrer: That's a very specific question. No, we are, of course, looking into what would be the best sort of financial structure for us going forward. I don't think I'm in a position right now to say anything more detail about that. And of course, a debate that we are having with the Board and really looking forward to having now also after there has been created this sort of stability around our RCF situation, right? Mads Albrechtsen: If I can comment a little bit about that. I would say like there is two sides of it. One thing is our liability side, of course. The short-term liability side is very much impacted of a quite big tax liability, which is not in reality, a liability, but in terms of how we had structured our setup, it's turned out that in our accounts. We will clean that up to show more accurate picture around that. We have also added a narrative around that in our report, how you should actually look at that net liability. The other element is, of course, it's evident that our bond is maturing by the end of the year. So of course, it's natural for us to look what we should do. It's also -- we should also keep in mind that we inherit the financial structure for the old Gaming Innovation Group post -- and post the split, of course, we need to evaluate what is suitable for specifically our business and our strategic goals going forward. Hjalmar Ahlberg: And then just maybe a final one on the cash flow generation. I mean, you had a lot of acquisitions, deferred payments coming in. Can you remind us, I mean, how much is left on that? And do you think more of the cash flow we will go to you, not from acquisitions. Mads Albrechtsen: We have a little bit above EUR 6.5 million left. Hjalmar Ahlberg: All right. Sounds good. Jonas Warrer: So that has been reduced by quite a lot this year also, yes. Mads Albrechtsen: Going out of this year, I think we have spent roughly EUR 40 million related to prior year acquisition, investments, et cetera. So of course, that put a certain burden cash flow wise on us. Hjalmar Ahlberg: And looking at the OpEx levels, I mean, you did a really good job by coming down after your cost optimization program. What do you see from here? Do you think this is the new level where you stabilize from, and will we see more optimizations from here? Jonas Warrer: I would call it around this level right now. There's probably still a few things to do in the organization in terms of executing faster in a more predictable manner. But cost-wise, I think we are where we are, should be right now. I think more I would put the focus towards revenue growth and growing top line. Of course, I think what we have learned here in the last few quarters is that there is actually a lot of potential in the organization when you start to think about doing things better in a more structured and controlled manner. And of course, that is then a learning that we, of course, always need to also do that in the future. And I think if we look back at '24 there was far more focus on revenue growth there, right? And we probably took some missteps there in that process in terms of letting the organization grow and the processes maybe not being the most efficient and so on. So I think clear learnings from this year and something we should take into the future of Gentoo Media, of course. Hjalmar Ahlberg: Yes. And looking at what can drive growth. I mean your products, recent Google update, you mentioned, I mean, some ups, some downs. It sounds like usual, but could you say some more about that? AskGamblers has been kind of sideways declining? Do you see that stabilizing from here or... Jonas Warrer: Yes, I would say growth in broad sense, we can either optimize how we acquire traffic, how we convert traffic or how we monetize traffic. I think we are very good at acquiring traffic. I think we can optimize how we convert the traffic and also I think we can optimize how we monetize the traffic also with this sort of quality revenue perspective on it. So things like conversion rate optimization, getting that more installed into the organization, having a stronger product portfolio that converts better with more user features that creates retention towards users. We can definitely also, of course, we work with so many different partners. And that has been a metric for us in the past with diversification. I think what we are saying now is that we, of course, looking at all of the different partners we work with and want to see that we work with partners that also invest in us, where we have a healthy sort of margin together. So that, of course, also means that there's work to be done here, and there's things to optimize here. So I would say, traffic part, of course, we can always rank for more. And we are, of course, working very hard on that. But I think if I look at our skill levels, what we can do better is probably more the conversion part than monetization part. Hjalmar Ahlberg: All right. And also a few questions here on the audience. From AI search, you mentioned as well in your report that you are doing some to mitigate the impact from that. Can you both talk about, I mean, what impact you've seen from this far and also more about what you're doing to -- I mean, I guess, benefit from this in some sense? Jonas Warrer: Yes. I think impact is still discussing with and what they see. There is some sort of impact, but I think it's hard for us to quantify still also notably within iGaming. We still have a lot of people that prefer coming to our sites to actually see what a human has sort of reviewed and chosen and recommended for them. I think also that then talks into what are we doing about it. I think, of course, our website made by humans for humans, but also with strong product features, adding loyalty programs, being more sharper with offers, what we promote to the user, so it matches what the user is searching for. I think there's still a lot of things to be done here. And I think if you look at iGaming and affiliation overall, you have been able to get away with having very simple sites that essentially are just top lists, and maybe the bar has been raised there. And maybe that's also fair enough. It's also for the better of the user and then for the better of our customers, the operators. So maybe it is a good thing right now that we are raising the bar, and we can definitely also raise the bar and we are doing that. Hjalmar Ahlberg: Another hot topic, I mean, if you look at the mostly -- maybe the U.S. market, the prediction markets. Is that something that you are generating traffic to or revenue from? Or is it only a small... Jonas Warrer: Very small still. But, of course, the market we are interested in. I think a market that's evolving quite fast right now. It feels like it's a bus that's driving, and we are trying to jump on it notably in publishing, of course. If you decide to do something, it just takes a few months before we start to see an effect from it, right? Otherwise, it comes with too high risk. So I wouldn't say that we see notably results there, but of course, something that we would like to see growing also. Hjalmar Ahlberg: And another on U.S., I mean sweepstakes has seen some regulatory changes, I guess you can say. Is that something that you see in your business as well? I don't know how big sweepstake is for you, but... Jonas Warrer: It's a growing market for us, vertical. And of course, one of the drivers behind what we see in the U.S. with WSN.com. That being said, of course, there is some risk here from a regulatory point of view, right, with the discussions that have been going on there. So I would say use the opportunity that's there now, but we shouldn't go all in on sweepstakes. And I'm happy that it's still not a big part of our business in that sense because, of course, it would be nice to get clarity on what will happen in the U.S. over the next years when it comes to sweepstakes, which is a bit of undecided right now. . Hjalmar Ahlberg: Got it. And a few more from the audience here on the cash generation. I mean you're seeing higher cash generation, upgraded guidance. When do you think you can do share buybacks? Or is that something you're looking at? Mads Albrechtsen: It's a valid question we're getting every time. And I think that the answer is still the same. That, of course, that's Board decision ultimately. But right now, we need to fix the balance sheet we have. We need to clean that up and make sure we are presented as smooth and operate as smooth as possible. If that require a little bit of more investments for us, we need to do that for secure -- for the good for the business in the long run. Then of course, we need to fix the bond. We need to fix the elements before we are going out and doing that. That will be natural. But of course, it's an element we are discussing all the time. Hjalmar Ahlberg: Got it. And also maybe you kind of answered this, but I'm just testing anyway. I mean, looking at your guidance, I mean, you came in a bit soft in Q3. Wouldn't it be prudent to kind of lower your guidance a bit if you can give some flavor on why you not did that? Jonas Warrer: No, we see Q4 developing very positively. I think that's the short reply. Hjalmar Ahlberg: Got it. And also, I mean, a few general question here, if you can give some kind of trends. I mean you've mentioned AI search and so on impacting prediction market [indiscernible]. But can you see some broad trends maybe globally in North America, Europe? What's happening with affiliate marketing in the next few years? . Jonas Warrer: I think broad trends, we have seen -- I think I also talked about earlier, we have seen some smaller decline in margins here, right, when we work on revenue share earnings. And that's something we are very focused now on discussing with our partners. I think we work with more than 300 partners where we are in more than EUR 10,000. So we have a lot of partners to work with. And diversification has been a big theme for us. But I think going forward, we also, of course, want to work with the partners, where we continue to see that we have the margins that we have been used to and where we have a fair partnership. And I think I would assume that's also a trend for the other affiliates out there. We see -- at least we see broadly across our different partners and are now discussing with some of them, what does this mean, what does it mean for the future. There are a lot of partners to work with. Some of them are doing amazing in some markets, and some of them are doing less amazing in some markets. And I think going forward, this sort of the partner optimization aspect becomes more and more important. Hjalmar Ahlberg: Okay. Perfect. Thank you very much for joining. Jonas Warrer: Thank you very much.
Operator: Good morning, ladies and gentlemen, to a conference devoted to talking about the results of the KGHM Group for the third quarter of first 9 months of 2025. We have President, Anna Sobieraj-Kozakiewicz with us; Mr. Zbigniew Bryja, Deputy Manager for Development; Piotr Krzyzewski, Deputy Board President for Industrial; and Mr. Laskowski, Deputy Board President for Investment and Investor Relations Director. The meeting is broadcasted online, and you will be able to send your questions to -- during the conference and afterwards, and all the answers are going to be published either during the conference or afterwards. And now Mr. President, over to you. Andrzej Szydlo: Welcome, ladies and gentlemen, and apologies to the investors who are watching us from the Western Hemisphere. Apologies for atypical time of the meeting. But due to the tight schedule, we needed to move the time of the conference a little bit back. Due to also the tight schedule I mentioned, I will try to make it very brief today not to get into the competence of further speakers today. So to give you the bird's eye view of our situation, I'll start with an anecdote. But yes, this slide and the trends that we have been seeing for many months about KGHM and influences its results. I think I can jokingly say that maybe LME -- copper prices on LME should be in Polish zloty because what does this slide show us? 5% copper price in terms of USD year-on-year. So 9 months -- first 9 months of 2024. The exchange rate for -- between USD and PLN is minus 4% year-on-year, which gives us the stable results, unchanged results. So the status quo is unchanged. So if the stock market would be in Polish zloty, this chart would be much more predictable. And then average copper price for 9 months were at the level of $9,556 in dollars and PLN 36,257. We see a marked increase in terms of silver price, which is a very important product of KGHM. Let me remind you, we are the second top producer of silver in the world. And here, we have 23% of increase in terms of zloty and 29% of increase in terms of dollars. Of course, that influences our results. However, this increase of copper prices in dollars happened by the end of the reporting period. And strengthening of zloty has been observed throughout 2024. Let me just remind you that at the end of last year, the dollar versus zloty was PLN 4, PLN 4.08, PLN 4.10. Next slide, please. In reference to the previous slide, we see a minus 1% in terms of adjusted EBITDA in KGHM Group. And in KGHM Polska Miedz S.A., we have minus 1%. So almost the same year-on-year, of course. And judging by the fact that the copper prices remained unchanged and in the first half of the year, we had a major renovation in Glogow smelter, so a decreased production year-on-year compared to 2024 by 20,000 tonnes of electrolytic copper. The drop of revenues by 1% can be treated as only 1%. Then adjusted EBITDA of KGHM Polska Miedz plus 5% compared to 2024, and plus 16% in terms of adjusted EBITDA in KGHM Group. And then net profit, a bit of deja vu because the first 6 months -- throughout the first 6 months we had the same results. So it's worse than first 9 months of 2024, both in terms of KGHM Polska Miedz and consolidated. Key production indicators, as I said, 20,000 tonnes of electrolytic copper less. And it is due to planned maintenance on smelter infrastructure in Glogow smelter. So in KGHM Polska Miedz S.A., that was 421,000 compared to 441,000; better results in terms of Sierra Gorda, as you can see, plus 14%, which is almost 8,000 tonnes of copper more in Sierra Gorda. And in KGHM International, a little less than 5,000 tonnes less, which is minus 11%. I think Ms. President will talk about the reasons of decreases in Robinsons mine -- in Robinson mine. So again, I'm not going to precede her part of the presentation. We see a constant trend, about 66%, 67% of payable copper in national, domestic assets comes from own concentrate, KGHM, 1/3 that would be purchased metal, either imported or scrap. This is no surprise. It's a stable level. And we do hope that this stability won't move towards lower production from own concentrate towards purchased metals. And here, we have the production results in terms of other assets. So Sierra Gorda and KGHM International. Silver production slightly higher, plus 1%. TPM production, minus 6%. And molybdenum production markedly higher, plus 95% better efficiency and better molybdenum concentration in Sierra Gorda. And to finish up, what I would like to emphasize, the results are really good, especially the EBITDA. The exchange rate differences affect the net result. And we are very happy that -- with what we've been commenting on for many years -- for many quarters, the cost discipline, because the increase of costs that we had in the previous years, systematic increase due to the cost of work or cost of energy, we have managed to stabilize it. I'm pretty sure that President Krzyzewski will talk about it. There is no increase, even decrease of C1 cost in foreign assets, international assets, domestic assets, the increase of C1 cost is minimal. And if we look at C1 without the tax, we even are dealing with a decrease. Okay. Now Professor Laskowski. Miroslaw Laskowski: Yes, let me give you a bit of details in production. In terms of production results in all the segments, ore extraction, production of copper and concentrate, production of electrolytic copper and metallic silver production, we are within or even above the budget. And the Q3 of 2025, is one of the best production quarters compared to other -- previous year's period and compared to the other -- the previous 5 quarters. So metallic silver, as you can see, plus 1.5% year-on-year. And Q3, as I said, of 2025, 330 tonnes, and this is one of the best results across these 5 quarters that we compare it with here. Electrolytic copper, in Q3, we returned to the production level of 149 tonnes. These are the amounts that we got in Q3, Q4 last year. The President Szydlo talked about the maintenance in electro refinery department in Glogow II smelter, this would contribute to the lower production results of the first 2 quarters of 2025. And in terms of production -- in terms of ore extraction, it's similar to 2024, over 23 million tonnes. And Q3, that would be a level of extraction of 6 -- 7.8 million tonnes, the highest in comparable periods. And production of copper in concentrate, it is slightly, but still higher than the compared 2024 year-on-year. So again, 304,000 tonnes, the highest level of production in compared -- with compared periods. These are really good results. And I need to emphasize that we had unfavorable production calendar. 2024 was an off year, and February had 29 days, 1 production day more for KGHM S.A. is 100 tonnes -- 100 more tonnes of extraction, more concentrate, 1,000 copper in concentrate, 1,700 electrolytic copper or 1,000 tonnes of wire copper. So this is one more day only in our production results. So -- and then one more thing about Zelazny Most reservoir. We have safe level of filling it, 6 million cubic meters of water. This is what we mean by safe. To compare in summer last year, when we got to KGHM, the filling of the reservoir of the main and southern part reached dozens of cubic meters. And one more important thing in terms of Zelazny Most, we have obtained all the agreements and permits to the level of 205. So that gives us a couple of -- or more than a dozen years of safe work in KGHM. Anna Sobieraj-Kozakiewicz: And in terms of production results of international assets, another very good year for that sector in terms of payable copper production. In Sierra Gorda for 55 assets, the level of payable copper production was 64,900 tonnes by -- it's an increase by 14% year-on-year, an increase of the production results. This result is due to the higher grade copper ore as well as higher recovery despite the lower volume of ore produced. Very good results in line with our budget assumptions. It's worth emphasizing that, thanks to the optimization activities, we have stabilized production in Sierra Gorda, and we see more predictability of production, both in terms of copper and molybdenum. In terms of molybdenum production, here, we can boast almost 100% increase of molybdenum production year-on-year. In Q3, that was over 2 million pounds. And so by the end of September, we have 4 million pounds in total. And then molybdenum production starting from May -- end of May, actually, we see a marked increase of that. And this is due to higher concentration of molybdenum in the ore as well as higher recovery despite the lower volume of ore processed. And what we need to emphasize here, molybdenum production in Q3 was one of the highest in the history of Sierra Gorda. In terms of silver and gold production, we see slight decreases, but this is due to lower volume of ore processed. In terms of gold, compared to the budget of this year, we see that we are still higher than our budget expectations, which, thanks to high prices of this metal and good TCRC premiums, contributes to a very good level of C1 below $1 per pound. Next slide, please. When it comes to the production results of KGHM International, the production of payable copper after 9 months is 40,600 of tonnes of payable copper, so a decrease of 11% compared to the reference period, and this is the result of the lower content of copper, lower volume and yield of metal. But here, we need to highlight that we are referencing to the previous year where the results were record high. And this year, the production of ore goes into liberty which has lower parameters of ore. However, we can see that we are within the budget when it comes to the production of copper of 75% of the production. When it comes to the production of the gold in Robinson, we are above the assumptions for the given year. And I was referencing to Robinson mine. Ladies and gentlemen, we can see that the production results of international assets are very good, which transfers to the good financial condition of international units. So at the end of September, we had $240 million, from which $210 million was paid by Sierra Gorda and $30 million KGHM International, and those are payments from guarantees, loans and provision of other services. So I can say that this is a very good year for international assets. Thank you very much. Zbigniew Bryja: So Professor, right now, when it comes to the advancement of development initiatives, we have similar parameters compared to the previous year for the given period. So when it comes to the development plan, it was 62%. Right now, we have 63%. So we can compare those values at the end of the year. In accordance with the conversations that we had with the departments, we can say that we've completed our tasks when it comes to investments and the execution would be at a similar level. So 96%, which is a very good result. Let me remind you, the investment plan, so PLN 3.800 billion, also the reserve that we will not be touching, will not be moving the assets. When it comes to the distribution divisions, as mentioned during the previous conferences, mining industry when it comes to the development spending is PLN 2.492 billion from which PLN 2.406 billion is for financing; leasing, PLN 86 million. So let me tell you 3/4 of 80% is the spendings for mining. When it comes to division for tasks of recreation development, it's 35%. In total, it's not what we would like to see, but this is something that we can do because the recreation and maintenance are very important components that provide us with the chance to survive, and we cannot -- those cannot suffer because of our investment plans. So we need to divide those assets so that every party is happy with the values they receive. So let's go to the next slide right now. Okay. This slide, the circular slide that we can -- this pie chart. So we can go to the segments. So PLN 2 billion -- of the execution, PLN 2.492 billion, 2.019 billion is mining. So of course, outfitting of the mines because we are mentioning that this is a type of activity that every day we are extracting every part of the deposit, let's say, so a part, we should also prepare for the excavation for every other day. So that's why maintenance of the mining region, so the construction of conveyor belts and stuff like that is important. Also, for the construction of the transformer station, those are all basic tasks. There are plenty of basic tasks that make our work in the industry mining -- in the mining industry profitable. So we need to have active mining department. Another very important item in here is replacement of machine park. And we undertaken plenty of actions in here in accordance with the regulations that are in force to rationalize the purchase of machines. And this year, right now in -- for 3 quarters, we have 201 machines, and the goal is 256 machines. And this is the approximate number because every year, depending on the needs, it's always the approximate. So 5 -- plus/minus 5 to 10 machines. And so that's why we shouldn't be mentioning any delays because this is a result of the previous year. So 256 machines. This is something that we want to purchase until the end of the year. The next item, mine dewatering. So we know the problem. So the water in Polkowice-Sieroszowice. So for example, the anti-filtration barrier needs to be prepared under the shaft SW4, so PLN 187 million. The development of the Zelazny Most tailings storage facility, and we are referencing to that because it was all related to Q3 to get all the acceptances, permits for the exploitations, for the construction, the environmental authorizations and licenses as well, so we can proceed with the construction of the storage. So we need to be consistent and go step by step, but this is also complemented by the investment in the construction of the so-called barriers surrounding the reservoir. So in order to decrease the pressure, and this is the so-called -- so those also -- some wells, special wells, relief wells in order to relieve the area. Also, the next part, so the replacement of mines and tailings divisions. So different types of modernizations of conveyors, shafts, ACs, ventilations in the hydro facility, hydrotechnical facility. So for example, pipes, the network of pipes because as you can probably recall, one of the reasons of gathering a substantial amount of water when we arrived to KGHM was exactly that. So the infrastructure of pipelines was not good. So we are removing this downside. And right now, we can maintain the safe level of water of Zelazny Most, and we can proceed. So exploration, this is not significant, so PLN 86 million. And the next year due to the entrance of Bytom Odrzanski, we will be drilling new holes in order to get some more exploration within that region, and this is in perspective. Maintenance of shafts, those are mostly -- so PLN 56 million, and this is mostly for the SW4 shaft complex. So step by step, we need to remove the salt and move the infrastructure. And the biggest part, so deposit access program, so 34% for all investment -- mining investments. And on the first slide, we have 35%. We have development. So this is, in fact, this position, this item plus exploration, of course. So it's still mining and mostly prepared for north, for shafts because a shaft without the possibility of connecting to the mining system becomes a well, and we are not constructing wells. So that's why we are very much interested in the intensification of work for Retkow, [ GG-2 Odra ] and Gaworzyce. And for the plant areas, the gallery areas that we have, for Q1, we have 32.4. So within the plan and the execution is not endangered in here, and we are right now going back to the situation from a year ago. So the excavations were underwater. And right now, they are well prepared and accessible. So we are sort of like trying to get the time back. But the excavations are not everything. And for example, we need conveyor belts for those. We need to prepare roads. Those need to be limited because, of course, we need to prepare the proper conveyor belt systems for that. And it's all when it comes to the basic inflows, and this is also a slide that shows the scope of our works for the upcoming years. And in green, we have the upcoming shafts that we will be constructing in the future. And please pay attention that in June 2023, we have the deconstruction of the shaft. We have been noticing the increase, and it all transfers into the ton of excavation of yield. So right now we have a stabilization of Glogow. So those amounts are not so relevant anymore. But when it comes to the construction of the following shafts, so GG-1 and on the surface and the equipment of the facility, we have the reinforcement prepared for the shaft and anti-weight in -- for one of the machines, so machine 1. And we are also preparing for the construction of the target cage. We are also increasing from 33 to 34 when it comes to AC of megawatts, but it will be given for the exploitation in September '29. And -- so PeBeKa 2 units from our group, so the general contractor for the surface works, so the liquidation of the temporary facilities and Bipromet, so a company that plays a role of the so-called engineer of the contract will be overseeing the progress of work. When it comes to GG-2, apart from the planning work for the municipality because we need to get the permits because as you know, in some other words, the GG-2 will be in different place as compared to what was planned before. And the works are going in accordance with the schedule when it comes to the transformator station. So the first hall is done already. So there will be no dislocation and the shaft will be there. When it comes to Gaworzyce shaft, we have everything prepared. We are preparing for the geological drills right now. So it's all when it comes to the shaft. Let's proceed to the next slide when it comes to the execution in metallurgy. So it's PLN 358 million, and the main investments and the point of interest of ours at the end of the year. There will be a renovation, Cedynia mine conducted. But in general, we are preparing for Glogow 2 that will be taking place next year. So the first contracts, purchases as well, and those are the main points of interest when it comes to metallurgy. When it comes to ZWRs, it's modernization of mills, crushers, ball mills and press fillers -- filters, sorry. And we are counting on ending the Legnica smelter as well. So the new technology without no caps, no cap -- and until the end of the next year, this installation will be accessible and available. So that's all when it comes to the investments, the basic info. Thank you very much. Andrzej Szydlo: I will digress for a moment here. Such detailed presentation by President Bryja results from 2 things. First, his passion; and secondly, the importance KGHM puts on investment and development and providing long-term efficiency of our facilities. Thank you very much, President. You can see -- we can see your enthusiasm and heart, but time is running out. So let's move on. Piotr Krzyzewski: Thank you. So let's move on to financial results. Piotr Krzyzewski. Yes, it's good to be last because I can start from a summary. So I will borrow some of the words that my predecessors used. So to summarize, the Q3, but also all 3 quarters of this year, we've observed and have been observing good production levels with good cost discipline. At the same time, we're using our opportunities. In consequence, we have good financial results and creation of additional value for shareholders and stockholders. This is what we focused on, and you can see that after these 9 months. Before we move on to the presentation, 3 key aspects I would like to emphasize. If I started from finances, I would say the first important element here, President Szydlo mentioned that is the exchange rate. We discussed a lot about tariffs. They are important. However, through the prism of our results, we are able to manage our trade activities so that tariffs do not affect us so much. But the exchange rate affects us just like all the other European economy and all the other industries in Europe. And this is a great challenge in terms of competitiveness for the industrial -- from the European industry. In Poland, it's particularly important because zloty is also very strong right now. So as the President said, on one hand, the copper prices raised by 5%, and our currency also raised by 5%. So at the end of the day, all the national assets, the price of copper in dollars then calculated -- recalculated into zloty has the same value, even though it increased in general. In terms of trade, again, the last quarter was very dynamic. On one hand, spread between LME and CME grew by PLN 3,000 almost. And then we had the 2nd of August when we finished the claim based on Paragraph 232 in the States, and the decision was made of not imposing tariffs on semi-finished products, but raw materials were tariffed -- were taxed. So again, it did not affect us so much. We were able to rechannel our goods and the flow of our goods. So thank you very much for the commercial team and our clients, our logistics department. So we -- there was a lot of time pressure there. But as you can see, the results are impressive. And energy aspects. Again, very volatile, first transactions, first PPAs in the history of the company. We purchased 110-megawatt hours, 2 big wind farms that will provide energy for us next year. To give you the bigger picture, this is 5% of the purchased energy a year. And if we look at it from the perspective of the infrastructure, it's like Legnica will be covered by 72% by wind energy. And from the perspective of ESG, it's like in Scope 2, we reduced Scope 2 by 5% next year. So energy transition is important, but I also have to emphasize the fact that this is a very efficient financial instrument, and it will contribute very well to lower cost of purchasing energy in the next year and years to come. Moving on to the presentation now. In terms of group revenues, it's 1% lower. But as President Laskowski mentioned, it has its reasons. President Szydlo, the maintenance on electro-refinition at Glogow was responsible for that. I will show you what it means. We produced less, but we managed to earn more. And this is something we focus a lot. It's not about production volume, but we want to produce as efficiently as possible in terms of finance. Operating costs, also lower by 1%. What was mentioned during our first quarter conference, we focus on cost discipline. Cost optimization program is working very well. And then if we take into -- exclude depreciation, then it's minus 2%. So this is something we will be doing in the coming periods, as you will see. So the adjusted EBITDA, as you can see, is plus 16% year-on-year. But again, keep in mind the fact that in 2024 for 9 months compared to 9 months 2023, EBITDA -- adjusted EBITDA was plus 43%. So very, very high dynamics of growth. So we're raising the bar. In terms of the contributions, as you can see, over PLN 1 billion higher EBITDA, out of which Sierra Gorda, PLN 7 million, then KGHM Polska Miedz, and KGHM International, also strong contributors as well. President also mentioned Sierra Gorda here. What we do in our domestic assets, we also do in international assets. So we focus on one hand, fulfill our cost discipline. And in Sierra Gorda, it's a low-grade mine. This is the most important aspect. So the financial lever is very important here. And we've made a lot of changes here, both personnel and managerial, minus 1 level, relations with our partners, so far T2 is also doing very well. So the team of the President also contributes in many areas to Sierra Gorda. And the cooperation between the assets is also very good, and we see very positive results of that here. Here, looking at group sales revenue, the first is, yes, the renovation in electro-refinition. You can see the sales -- changes in sales volumes is copper and this is due to the maintenance in electro-refinition. So by 16% own contribution, own concentrate and 4% only in foreign inputs. So it shows how well we are able to adjust. A great thank you for the smelter departments. So we're looking at production through the perspective of finances. And the results are really, really well. The other positions should be connected. So position 2, 3 and 4. If we combine them, we have PLN 800 million plus. So this is how efficiency and management looks like, risk management looks like. This is plus PLN 800 million. To remind you, last year, we have generated PLN 670 million plus. In this year it's over PLN 100 million. And again, our strategies work in a way that they can allow us to participate in exchange rate increase. So this contributed positively to the result. Here, we have the expenses by nature. Again, we're getting very close to the inflation levels, 4%, both in terms of capital group and similarly on domestic assets, again, again, plus 4%. The biggest value positions here are well, tax, unfortunately, plus 10%. In terms of value, I would say, cost of -- labor costs, PLN 300 million, in the capital group in Poland, PLN 200 million. Also here, we have the reserve for the pension expenses. And let's take a look at the use of materials here. It's also going -- it's still going down. And a great work -- a great achievement of the capital group here. Energy and energy factors here, the quantity decided here, the price is lower, but we used more energy, less gas. This was also a result of some of the maintenance activities on steam and gas blocks. So I would say the budget of gas plus energy keeps being optimized, and that contributes to very good results. And that -- that gives us the image we see. So C1 unit cost. In the capital group, we have minus 6%, but if we exclude the tax, the decrease is minus 13%, which is a very good result. And that here is a result of both production efficiency and cost regime. Taking a look at some particular clusters of assets in Poland, plus 2%. But again, if we exclude the tax from that, that would be minus 4%. So from that perspective, again, great cost discipline and all the factors that we could influence determine the fact that C1 go down. And then C1 is recalculated and dependent on the USD rate. So if we exclude that as well, then that would place us on the level of minus 9% almost. So this is the real value if we eliminate both the tax and the exchange rate from our analysis. Then taking a look at KGHM International, as the President mentioned already, good levels of production, both on Robinson mine and TCRC is supporting us here. Logistics costs got down mostly. All that contributed to the fact that C1 in KGHM International got down by almost 40%. And Sierra Gorda marked decrease of almost 50%. And here, TPMs are very, very important. And the facts that were already mentioned, TCRC, molybdenum, all the opportunities on the market we have used. And that is showed in C1. And then the financial results. The first column, let me just mention that it's without -- Sierra Gorda excluded. So KGHM International and domestic assets, positive contribution. And what was mentioned by President Laskowski, I would like to thank the mining departments that contributes very, very well in both assets. And as the President said, the last quarter in Poland in terms of ore extraction is very good in Poland. And we see that this tendency is being continued also now. So these perspectives are really good. Second parameter that contributed positively would be our loans and loans also sent to Sierra Gorda. And the biggest negative element, exchange rate differences. To give you the picture. These are the exchange rate differences resulting from our loans granted to Sierra Gorda. And because of that, the change of exchange rate, the result is around PLN 1 billion. And part of our debt, part of all the bank liabilities we have is also denominated in dollars that contributed positively, gave us PLN 200 million plus, but then we are still minus PLN 800 million -- minus. That influenced detrimentally the financial result of the group. Last thing, cash flow, also very important, if not the most important because cash is what matters in the end. Looking at operational cash flow, comparing it with investing activities, we are very close to financing our investing activities with operating activities. And here, I would like to point one thing to your attention. EBITDA positive -- contributes very positively. But then stock, something that will be connected with the maintenance in Glogow smelter. We have some last corrections on our budget for the next year. We don't want it to influence our cathode production. So we are calculating right now how many anodes we need to create to make it in time without this smelter to provide stability of the company. So by the end of September, in semi-finished products, you probably observed that it's over PLN 1.4 billion semi-finished product, mainly anodes that we are producing right now for stock. We have it very well calculated and it pays off, I have to assure you. It will cost us some of the current assets. But still by the end of the day, it will positively contribute to our results. So I think on the annual conference, we will show you that and this element is going to be growing. It's going to be increasing. One more thing that I would like to mention in the last days, to conclude, the cash flow. We will be emitting our bonds in December. This is a planned transaction that contributes to the strategy, that writes in the strategy of stable financing. One of the important elements apart from bank financing would be bond financing. We have the whole program written down. We already emitted bonds once. Right now, we will refinance that emission and that issuance, we want to prolong the refinancing terms, and we want to use the positive situation, market situation. So this is something that you will be shown by the end of the year for sure. Thank you very much. Operator: I would like to thank the Management Board for the presentation of results. Now feel free to ask the questions. And due to time limitations, please focus on the questions for this presentation today. Do we have any questions from the room? No questions from the room. Janusz Krystosiak: I think I have a question from the Internet, from the web. Jakub Szkopek, Erste. It's pretty long. When it comes to 2 years ago when the Management Board was taking job at KGHM, they were basing their actions on the assumed copper prices. Right now the copper prices are 11,000 increase the prices of gold and silver, increase tax on excavation. When the Management Board will test again and reverse the -- and write-offs, and to reverse the write-offs. Piotr Krzyzewski: Yes. So to answer those questions, when I remember from PLN 8,000, PLN 8,250, right now, we are close to PLN 11,000. We need to add one more parameter. Back then, the exchange rate was PLN 4.10. Right now, it's PLN 3.60. It's a very important element when it comes to the increase because it's not high when it comes to Polish zloty, but some other aspects as well because as I understand, the matter of the change when it comes to the taxation, the tax for the balance date, we'll be talking to the auditor, to the supervisor, and this is an aspect that was -- is being analyzed by us, whether there is a reason for that. So we need to have a broader look, not only through the prism of the copper price itself. Thank you very much. Janusz Krystosiak: And to continue with the questions via e-mails, I think it's for Ms. President and for Mr. President, Piotr Krzyzewski. So 2 questions from Morgan Stanley. Number one, when can we expect an update on the Sierra Gorda development? What areas are the feasibility studies conducted for? Anna Sobieraj-Kozakiewicz: So ladies and gentlemen, we are trying to have a very detailed approach when it comes to investments for Sierra Gorda. At the current stage, we are in the preparation of the feasibility study. For which, the end date is at the end of this year or the beginning of the next year. And only then we'll have the full package of information that will be the basis for our decision. And we can -- we will be able to talk about the further investment decisions. Right now, the gathering information stage is in progress. Janusz Krystosiak: Question number 2 from [ Janusz ]. What part of the turnover capital -- working capital can be reversed in Q4? Piotr Krzyzewski: So as mentioned, the key element will be the matter of the construction of the optimal state of semi-finished products. So -- and what will be the burden of the turnover capital? And we are working on some other elements as well to free up the capital as well, and this is something that you can observe too. So it's very difficult for me to provide the details when it comes to the numbers. But just to add on what Ms. President was saying, our strategy from the very beginning was for our assets to be developed, and we are focusing on what you can see right now, and we have agreed with our partners that, first, the assets need to be produced effectively, the goals, the results need to be reached, and then we can talk about the investments. The first one is executed, reached and needs to be continuously reached. But right now we can talk about the investments. And I think that this aspect is very complex because from the perspective of the fourth line, for green line, this aspect is much more complex. So we are making the drills in the concession area. So the mineralization is in the neighborhood. And the layout, the exact layout of Sierra Gorda, this is something that we are having discussions over. And we are considering all the assets that are developing in terms of operations, and we are looking at the investments from the financial efficiency. Andrzej Szydlo: So I'll just add on this. From the very beginning, so for a longer period of time right now, we have been saying that, first and foremost, the international assets should be organized and optimized, and this is something that is being done. And secondly, not so long ago we had a problem of the due date of loans, [ so Doosan ]. And this problem was resolved too. The third thing, this year, Ms. President was referring to the payment of loans. And it's good that it's happening. So this will also be contributing to -- for us to protect us from the proper levels of the pay of the loans when it comes to the exchange rates. And the last thing, the most important one, the CapEx that are pretty relevant when it comes to the off-sites and the fourth line. And to be truth with you, the burden of the investments, when it comes to the group, we all know it, and we have been signalizing it as a Management Board. The biggest challenge when it comes to the investment is at KGHM S.A. And of course, the project that can be attractive, so increase of the -- increasing the Sierra Gorda production capacity when it comes to the fourth line, provided that it's going to be effective, efficient, can go hand-in-hand with what we are planning when it comes to the finances for KGHM. So for example, if we consider this to be very efficient with relatively short return rate, we need to remember that fourth line is working negative -- in a negative manner for the so-called loans. And we are turning this capital well, it's working well. So when it comes to the answer, we need to search for the proper balance for the investments. First, we need to proceed with the ones that are the most important. So for example, the ones that we need to execute, then we need to proceed with the ones that are the most profitable ones. Anna Sobieraj-Kozakiewicz: So just to add on that answer. The last sentence from me, we would like to focus on the production to be at a foreseeable level, and this is something that we are putting a lot of effort into right now. We're talking about the Millennia CapEx, $700 million for the fourth line of Millennia. So this is something that we need to keep in mind. And what was stated before, the international assets are contributing positively to EBITDA. So right now, 46% of corrected EBITDA. But at this CapEx, we need to be sure that the return rate will be proper. Andrzej Szydlo: So just at the very end, to remember, for Sierra Gorda, the decisions are made with our partners. So we are -- we have 50% of shares, but this is not a monopoly for the decision. So we need to agree upon those and we are co-referencing and searching for proper solutions. Piotr Krzyzewski: I would like to add one more sentence when it comes to financing because ladies and gentlemen, this is something that we have been communicating and saying to you. We are trying to separate the international assets from the banking perspective. So for example, $500 million for Sierra Gorda, there's a bigger option in here to get more financing. KI is getting more financing for different assets as well with our support from the substantial part. So I would like to say that we are not defining the risk of cannibalization of CapEx because I think there is no risk as such. But when it comes to the loans and changing the philosophy not to generate additional loans, yes, this is something that we have been focusing on from the very beginning, and we have been -- so we will be providing the financing from the operational standpoint, but for respective assets. Unknown Analyst: If I can just ask President, Krzyzewski, you said that we produced less but earned more. So at KGHM, Q4 usually was the biggest sales. So what is the prediction for the future that in Q4 we produced more and we sold more and earned more. Is that possible for the future for Q4? Piotr Krzyzewski: A very good question. But I have to answer when it comes from the sort of like the back office perspective. And I think that this is actually publicly available when it comes to the European market. So the benchmark, so [indiscernible] for cathodes is 40% higher compared to this year. So I will not comment on that. But for sure, we will be optimizing that in the long perspective. The company earns as much as possible on its products, of course, depending on the availability of the items on the market. And this is something -- we also need to remember about the geopolitical world. So we are responsible for the 50% of the copper in Europe. So this technological tract is dependent on us in Europe, depending on the partners, depending on the availability of the product and raw materials, too. Janusz Krystosiak: Thank you very much. One more question from mBank from (sic) [ for ] Mr. President, Bryja. When it comes to -- what will be the profile of the expenses for new 3 shafts in time? So the CapEx will be divided in even amounts. Are there any more intensive -- intense periods? Zbigniew Bryja: When it comes to the construction of the shaft, the most expensive part is the deepening part and then equipment of the shaft when it comes to GG-1 and Retkow is of different purposes. And this is transferring to the -- providing proper equipment for the shafts because we need to remember that any additional equipment is sort of like limiting the amount of air within the shaft. When it comes to the first hole drilled in Retkow, we are just waiting for 2 more, the construction of the freezing units, so 44 holes need to be drilled the whole installation. When it comes to the deepening of the hole, we are assuming at 2028, 2029. When it comes to the shaft, it will be deepened and evened out in accordance with our schedule around 2036. And this is the most important part for Retkow, but all the remaining shafts within the period of 2 or 3 years will be going after that shaft. So that will be the concentration of the period from 2034 to 2040. So those will be the expenses in different parts of time for 3 shafts. So Retkow will be finished in 2040, the next one in 2042, and the next one in 2044. So if we are talking about the deepening as being the most expensive part, and then providing the proper infrastructure for the shaft is the 30s, but it's very difficult to indicate a specific year because we haven't started the deepening period yet. So it's a matter of a year or 2 years. So thank you very much. Janusz Krystosiak: Thank you very much. So do we have any questions from the room? If not, then it's... The last question, a bit technical, analytical from me. I will try to answer that and maybe Mr. President will -- so Adam Milewicz from PKO BP. Why in Q3 of this year, why is it the income tax CIT, corporate income tax, is so high? Piotr Krzyzewski: So last year, we've been observing the return of CIT from the previous years, and this is sort of like distorting the analytics part of this tax. And this one that we have right now is a standard level. So please consider that for -- in terms of the previous periods as well. Operator: Right. Thank you very much for attending this conference and feel invited to the next one that will be happening next year. Thank you very much. [Statements in English on this transcript were spoken by an interpreter present on the live call.]
Darren Seed: Good afternoon, ladies and gentlemen. Welcome to the Greenlane Renewables Third Quarter 2025 Video Conference. My name is Darren Seed, President of Insight Capital Markets, responsible for Investor Relations at Greenlane. I'm joined today by Brad Douville, Greenlane's Chief Executive Officer; and Stephanie Mason, Greenlane's Chief Financial Officer. We'll begin with prepared remarks followed by Q&A, which I will moderate. Before beginning our formal remarks, we'd like to remind listeners that today's discussion may contain forward-looking statements that reflect current views with respect to future events. Any such statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected in these forward-looking statements. Greenlane Renewables does not undertake to update any forward-looking statements, except as may be required by applicable laws. Listeners are urged to review the full discussion of risk factors in the company's annual information form, which has been filed with the Canadian securities regulators. Please feel free to submit any questions you may have through our investor e-mail address at ir@greenlanerenewables.com. Now over to Brad. Brad Douville: Good afternoon, and thank you, everyone, for joining us today on the update of the quarter. It's been a very busy quarter to say the least as we have accomplished many of the deliverables we set out for ourselves at the beginning of the year in our strategic plan. Our third quarter was highlighted by positive adjusted EBITDA and earnings, an increase in our sales order backlog and the market launch of our next-generation landfill gas upgrading technology. Let me get into each of these. At the start of the year, I said that we would have a relentless focus on profitability and maintaining healthy cash reserves. We've done that by delivering another strong quarter with positive adjusted EBITDA and our net -- and positive net income, marking back-to-back quarters of profitability. Our persistence has strengthened our balance sheet with more than $19 million in cash on hand after averaging just over $16 million at quarter end over the past 3 quarters. Importantly, we've achieved these results while continuing to invest in our future, advancing our next-generation Cascade LF upgrading technology. 2025 represents a reset year for our core upgrading business, which historically has generated the bulk of our revenue, considering the contract values are in order of magnitude larger than our other current revenue streams. Looking ahead, we've developed the Cascade LF upgrading system as our growth platform, building on the strong foundation of our biogas desulfurization, parts and service and royalty revenue streams. Quoting customers and working through the sales cycle to secure Cascade LF orders is underway following the product reveal events we held in September in Brazil and the U.S. Revenue from new orders is likely to begin in 2026. We believe that the launch of this product line will help make RNG projects more accessible and scalable by enabling project owners to enhance revenue-generating RNG output from their landfill gas assets while minimizing upfront investment. Greenlane's consistent financial and operational progress this year underscores the momentum we're building across the organization. We are creating a more resilient, focused company that is well positioned to drive long-term value for our shareholders and customers as we continue progressing towards achieving the 2025 strategic and financial goals outlined earlier this year. With that, I will now turn the call over to Stephanie to take you through the numbers. Stephanie Mason: Thanks, Brad, and good afternoon, everyone. As a reminder, all figures are in Canadian dollars unless otherwise stated, and all comparisons are for the third quarter of 2025 against the third quarter of 2024. Greenlane continues to demonstrate discipline and improvement across key financial metrics. Our revenue increased 10% to $11.6 million from $10.5 million in Q3 last year. We generated $0.5 million of adjusted EBITDA and $0.1 million of net income and comprehensive income. This marks a significant turnaround from last year's net loss and comprehensive loss of $2 million and adjusted EBITDA loss of $0.2 million and continues our achievements in Q2 of this year. Our gross margin before amortization increased to 39% from 34% last year, driven by stronger sales, product mix and enhanced operational efficiency. At the same time, general and administrative expenses declined by 5% over the same quarter last year, enhancing our ability to convert top line growth into bottom line profitability. Our sales order backlog has grown to $33.5 million, up sharply from $14.3 million a year ago. Sequentially, it grew by 27% from Q2 and 58% from Q1 of this year. Our $19.3 million in cash increased from $16.2 million in December 31, 2024, of which $1.2 million was from the release of restricted cash. This strong cash balance and no debt provides us additional flexibility to invest strategically in growth initiatives such as the new Cascade LF product line. The combination of higher margins, a growing backlog and a strong balance sheet positions Greenlane to drive long-term value creation. We remain focused on operational efficiency, financial discipline and the commercialization of our next-generation Cascade LF product line, as we continue to execute on our strategic plan. We look forward to keeping you appraised of our progress. And with that, let's go over to Darren for the Q&A. Darren Seed: Thank you, Stephanie. Some great results today and a healthy increase in our cash balance. So how should investors think about the company's cash balance moving forward? Stephanie Mason: Thanks, Darren. That's a good question. I want to start by reminding everyone that we do not provide guidance. But what I will say is that we did see $1.2 million increase in our cash balance from the release of restricted cash. But even above and beyond that, we've been able to maintain a strong cash position. So we've already said we've been focusing on the profitable areas of our business, having financial discipline. So that is a main contributing factor. And with that strong cash balance, we're going to invest in our business. We're investing in the Cascade LF product line. We're working on setting up manufacturing in the business, but we also want to keep optionality open and really be able to focus on strategic growth for our business. Darren Seed: Thank you, Stephanie. Now looking at the new Cascade LF system. We've revealed it. We're marketing it to new and existing customers. So how should investors think about its success or any purchase order reactions from customers? Brad Douville: Yes. Let me take that one. So firstly, we set our sights on solving the most difficult problems in the industry, and we're doing that with Cascade LF, specifically the persistent challenge of nitrogen removal, oxygen removal from methane in landfill gas applications. So that's really what this new technology associated with our new Cascade LF product line is around. So our ambition was to come down the cost curve, go up the performance curve, and that's something that we've been listening to our customers, obviously, for quite some time. We knew it's something that they need to be able to do more projects, smaller projects, but also the kind of projects that they need considering the amounts of nitrogen and oxygen in their various landfill assets. So, so far, so good. We've had some really positive feedback. We've had the reaction that we were hoping to get in terms of this product being compelling. And we're just in the early throes of that with early days on the sales pipeline. We just launched it from a marketing perspective in September. And so far, so good, really great feedback from customers so far. Darren Seed: Thanks, Brad. You've noted that in the Cascade LF product reveal events were held in Brazil and in the U.S. Are there other geographies of focus? And can you say more about the Cascade LF being the growth platform going forward after a reset year in 2025 for Greenlane's core upgrading business? Brad Douville: Yes. So the -- if you think about the sources of RNG, the feedstock sources, in particular, so landfill gas in the Americas, it represents about 70% of -- 70% of RNG is derived from landfill gas. Europe is a bit of a different case. Europe is more mainly dominated with anaerobic digestion. So that means our core focus area is the Americas. So we've launched -- did the marketing launch in Brazil, in the U.S., but key focus is other parts of Latin America and also Canada. When we talk about Cascade LF being the growth platform, it's really important to note that relative to the other revenue streams in the business today. So if you look at our biogas desulfurization product line, for example, contract values associated with the upgrading system, Cascade LF, it's an order of magnitude greater. So achieving the same kind of growth levels that we've had in the base business with a much higher revenue. That's what we mean when we say Cascade LF is really our growth engine going forward. Darren Seed: Thanks, Brad. Now I see that the Canadian government has tabled -- has recently tabled their budget for a vote in the House of Congress. Have you seen anything in that budget that might benefit Greenlight? Brad Douville: Yes, there's a couple of things. So the feedback from industry groups to the Canadian government has been, firstly, on the CFR, the clean fuel regulation. And the feedback was pretty simple, keep it and enhance it, make it work a little bit more efficiently and effectively. So that seems to be preserved in the budget that was tabled. The next most important thing that would help the industry in Canada move forward is ITCs, investment tax credits. So the industry had put forward to say, well, look, as of -- before this budget was tabled, the ITCs had not considered RNG or biogas more generally. And it appears that perhaps they've been listening. We'll see when the full regulations come out, but there is note in the budget that now renewables derived from biomass that go to heat or electricity, which, of course, RNG goes towards both of those things, would be qualifying for the investment tax credits for building out new projects in Canada. So that's really exciting. We'll see. We'll see how they actually turn that into the official language. Now the other piece that's also in there is around hydrogen. There's an existing ITC for hydrogen projects in Canada, built out in Canada. And that's now been expanded to include hydrogen, in this case, particularly the green hydrogen generated from methane. So the only way you can get green hydrogen from methane is through biomethane or renewable natural gas. So again, both of those have to be turned into the regulatory language. We'll see what happens. But by, at least, my read of it over the weekend, it appears that there could be some positive signals going to our industry in Canada coming up. Darren Seed: Well, thanks, Brad, and thank you for watching today's financial report. We look forward to seeing you in the next quarter.
Operator: Good day, and welcome to Palladyne AI's Strategic Update Conference Call and Webcast. [Operator Instructions]. Please note, this conference is being recorded. I will now turn the call over to Brian Siegel, Senior Managing Director of Hayden Investor Relations. Brian Siegel: Thank you, operator. Today, I'm joined by Ben Wolff, Palladyne's AI's President and Chief Executive Officer; and Trevor Thatcher, Palladyne's Chief Financial Officer. On this call, Ben will discuss the details of the strategic transformation announced in this morning's press release, followed by a Q&A. Any forward-looking statements made during today's prepared remarks or in the question-and-answer session, whether general or specific in nature, are subject to risks and uncertainties that may cause actual results in the future to differ materially from those discussed on today's call. These risks and uncertainties include, but are not limited to, specific risks and uncertainties disclosed in Palladyne AI's periodic SEC filings. The company assumes no obligation to update any forward-looking statements or to update the factors that may cause actual results to differ materially from those that are discussed on today's call. Please note that today's press release and this presentation will be available on the Investor Relations page of Palladyne AI's website. They have also been filed on Form 8-K with the SEC. Now I'd like to turn the call over to Ben to discuss this morning's exciting news in more detail. Benjamin Wolff: Thank you, Brian. Good afternoon, and thanks for joining us. Today is a defining moment for Palladyne AI, an American company where artificial intelligence meets the physical world. We build embodied AI, systems that don't just analyze data, but sense, decide and act at the edge in real time. Our mission is to be America's first multiplier, whether for the Department of War or industrial customers. Today, I'll cover how the GuideTech and the Crucis companies acquisitions, which for the latter, I'll refer to as Crucis in today's presentation and the launch of Palladyne Defense transform us into a fully integrated AI and defense technology company. Before we begin, a brief reminder. Today's presentation includes forward-looking statements that are subject to risks and uncertainties described in our SEC filings. With that said, let's begin the strategic review. Most people think of AI as something that happens in a data center, algorithms that analyze information and deliver insights. Embodied AI is different. It's intelligence that lives in the real world. Again, we enable physical systems that can sense, decide and act at the edge in real time. That difference between intelligence that analyzes and intelligence that acts is where the next generation of capability will come from. The Department of War has made it clear, the future advantage lies not in analytics alone, but in autonomous systems capable of executing missions in complex contested environments. That is the world Palladyne is building for. Before this transformation, Palladyne AI was a pure-play embodied AI company, developing software that brings autonomy to the physical world. Our 2 core products, Palladyne IQ and Palladyne Pilot form the foundation of that capability. Palladyne IQ powers robotics automation, enabling intelligent, adaptive operation for commercial and industrial robots. Pilot provides advanced autonomous cooperation for unmanned systems, currently aerial and in the future, unmanned ground, space and maritime systems and will continue as one of our core commercial offerings. For defense and public safety, though, we've rebranded the pilot variant as SwarmOS, a specialized version designed for collaborative multi-agent missions and swarming behaviors. Together, IQ and Pilot extend our commercial reach, while SwarmOS positions Palladyne to lead in national security, one connected embodied AI ecosystem serving both domains. Palladyne's evolution has been defined by 4 major inflection points, each one building on the lessons of the past. We began with robotics, designing and building sophisticated machines. Then we moved into robotics plus software, embedding decision-making directly into those systems. In the third phase, we paused building hardware to focus exclusively on software, building the intelligence layer that could power any platform. Today, we enter our fourth inflection, one that unites artificial intelligence, aerospace design and American manufacturing into a single vertically integrated defense business. This is where Palladyne becomes more than just an AI company. We're redefining what it means to be a mid-tier defense technology company. With the closing of these acquisitions, we have formally launched Palladyne Defense, a new business focused on embodied AI for national security, including both defense and public safety missions. Palladyne Defense combines ethical autonomy, cost-effective mission capability and precision-driven design, all produced in the United States. Every system we build follows one rule, human oversight by design while reducing human cognitive load and letting humans and machines each do what they do best. This is intelligence that protects autonomy that serves national interest with control, precision and accountability. With the acquisitions of GuideTech and Crucis, we've evolved from a pure software innovator into a purpose-built vertically integrated defense technology business that is fully aligned with the priorities set by the White House and the Department of War over the past 6 months. We now bring AI intelligence, aerospace design and U.S. manufacturing together under one umbrella. For the Department of War, it means a partner that can design, prototype and produce not just code. GuideTech contributes deep engineering talent and rapid iteration of an optimal aerospace platform design. Crucis adds certified expandable manufacturing, capacity -- manufacturing capacity supporting flagship programs like the F-35 and the Tomahawk. Together with SwarmOS, they formed Palladyne Defense, a new American force built on speed, intelligence and sovereignty. We're not just making moves in a vacuum. The world has fundamentally changed, and the Department of War is reshaping its priorities around 3 forces that directly align with what we build and that are driving demand for what we build. First, the Department of War's focus on cost per effect. It's no longer about the largest platform or the most complex platform. It's about maximum operational impact per dollar. Second, reshoring and sovereignty. The National Defense Industrial strategy calls for rebuilding American production and supply chain resilience. Crucis is part of that national resurgence, a certified U.S. manufacturer already supporting legacy and next-generation programs. Third, AI and mission systems. AI is moving out of data centers and into real mission hardware into systems that think, coordinate and act at the edge. Autonomy is no longer theoretical. It is becoming a core operational requirement. These forces define the new rules of readiness, and they create the exact demand environment Palladyne Defense is built for. So why does Palladyne Defense exist? Because the market has a structural gap that neither start-ups nor large primes are designed to fill. Start-ups innovate quickly, but they're too small often to scale production, certify systems or deliver sustained readiness. Large primes, on the other hand, can scale but they sometimes move too slowly to keep pace with emerging threats and rapid iteration requirements. The Department of War is asking for something new with its replicator initiative, an agile, vertically integrated American defense company that can design, build and deliver advanced autonomous capabilities at speed and at scale. That's the gap Palladyne Defense is built to fill. We're the bridge between fast and small and big and bureaucratic. In short, we are the new mid-tier prime engineered for this era of embodied AI, rapid capability delivery and American production. Palladyne Defense is built around 3 core capabilities. First is SwarmOS, our embodied AI and autonomy core for defense and public safety missions. It brings the decision-making intelligence that autonomously coordinates unmanned systems in the field. Second is GuideTech, our aerospace design, avionics and precision low-cost attritable systems group. These are former prime contractor engineers who can take a new concept from digital model to working flight prototype in less than 6 months, a fraction of traditional time lines. Third is Crucis, a certified U.S. manufacturer with the ability to scale rapidly that is already supplying major defense programs like the F-16, the F-35, the Tomahawk, Harpoon and the Bradley Tank. Individually, each is already assisting large primes and defense tech start-ups in meeting the evolving demands of the Department of War. Together, we believe 1 plus 1 plus 1 has the potential to equal 10 as they will get Palladyne Defense one integrated stack, AI, engineering, components and American production, which is exactly the structure the Department of War has been asking for. GuideTech is the aerospace engineering nucleus of Palladyne Defense. As I just mentioned, the company is composed of former prime contractor engineers, veterans of missile, space and unmanned programs who know how to design and iterate at speed. GuideTech is already supplying avionics and design support to multiple defense contractors, proving its value in the field today. GuideTech is already supplying avionics and design support to multiple defense contractors proving its value in the field today. For the Department of War, that speed and responsiveness align perfectly with modernization directives calling for faster prototyping and deployment across unmanned and autonomous systems. GuideTech isn't just fast. It's built around a continuous design process from concept to field. Designs move from simulation to prototype to flight test and into initial production, all within the same integrated team. That's how you close the gap between an idea on a whiteboard and a system on station. This process is critical to the Department of War's modernization initiatives, including the push for accelerated capability delivery under the replicator program and related autonomy efforts. Palladyne Defense now has the structure to answer that call with the AI BRAIN, the engineering muscle and the manufacturing backbone to move faster than most others. Let's start with BRAIN, our mission-grade avionics architecture. It delivers the performance of legacy flight computers at roughly 1/10 of the cost, which is ideal for attritable and autonomous systems. BRAIN isn't just a concept. It's already being built into a tradable systems. The system is modular, programmable and capable of full integration with SwarmOS so that the same AI decision-making driving our autonomy can also run natively inside the airframe. In short, BRAIN gives us the intelligence hardware that connects our AI to the real world. Next is Banshee, a low-cost reusable precision loitering munition that demonstrates how embodied AI can transform mission economics. Banshee isn't a hobby drone or a repurposed quadcopter. It's a purpose-built system engineered for tactical and strategic operations with the ability to deliver multiple effects similar to much larger platforms, but a fraction -- at a fraction of their cost. Our plan is to integrate SwarmOS and BRAIN into Banshee, enabling coordinated swarming, target sharing and precision execution. The Department of War's modernization priorities, including cost per effect and scalable autonomous systems are directly addressed by this design. Banshee represents the shift from one-to-one weapon systems to one-to-many intelligent effects. Here is a quick video of a Banshee test where it is dropping ordinance within a designated target area. I think that's the wrong video. [Audio Gap] All right. So that gives you a good idea of what the Banshee platform is about. Now next, we will talk about the SwarmStrike platform. SwarmStrike takes that same philosophy to a higher tier of mission capability. It's a long-range intelligent loitering munition that delivers cruise missile reach at dramatically lower cost. SwarmStrike is designed to work individually or in teams with onboard autonomy that enables self-coordination and adaptive targeting. It's an example of how our embodied AI and avionics technology scales upward from tactical systems to strategic assets while keeping cost and complexity down. This is the future the Department of War is calling for, intelligent, adaptive systems that deliver operational effects affordably and at speed. Here is a quick video of SwarmStrike's first flight test. So you can see this is something tangible, not just a concept or something in a PowerPoint. [Audio Gap] And SwarmStrike isn't the only cruise scale loitering munition we're working on. GuideTech is already down the path of developing a near hypersonic long-range affordable mass strike vehicle for the U.S. Navy. GuideTech is far more than an acquisition. It's the core engineering and avionics BRAIN trust behind our defense components. It also provides the foundation for IntelliSwarm, the next-generation embodiment of our autonomy architecture. Here's how it evolves. SwarmOS, the defense and public safety variant of pilot that integrates unique capabilities specifically required for national security applications. And when you combine SwarmOS with BRAIN, you get IntelliSwarm, a unified intelligent autonomy system that merges AI, sensors and avionics into one cohesive operating layer. IntelliSwarm will be the connective tissue across our entire defense product line, the same AI that thinks, flies and fights. Pilot, our commercial autonomy product, continues to serve applications and use cases that don't need the full capabilities of SwarmOS. The second pillar of Palladyne Defense is Crucis, our new manufacturing and fabrication business. Crucis is a certified U.S.-based manufacturer supplying major defense programs, including the F-16, F-35, Tomahawk, Harpoon and Bradley. Among its customers are Lockheed, the Boeing Kratos teaming effort and more. It has a growing 18-month backlog exceeding $10 million and is expanding capacity to support both Palladyne Defense programs and external defense primes. Crucis is AS91000 -- 9100 certified and built for precision. For the Department of War, this acquisition aligns perfectly with the broader national strategy, reshoring production, securing supply chains and ensuring that critical components are built in America. What makes Crucis so compelling isn't just what it builds today, it's what it can build tomorrow. The companies have the physical space, the workforce and the tooling to expand rapidly from precision machining to full system integration. Together with the R&D and production space we have at Palladyne, we now have more than 100,000 square feet of production capacity. That means Palladyne will be able to take a concept from design to prototype to flight test to production and do it all in-house. It also means we can serve as a surge capacity provider for the Department of War, supporting modernization, readiness and reshoring initiatives that demand flexible American-made manufacturing. In every sense, Crucis gives Palladyne the backbone to scale. Crucis is the piece that completes our loop, AI, engineering and U.S. manufacturing under one umbrella. With Crucis, we have certified American production tied to programs like the F-35, F-16, Tomahawk and Bradley, work that's already flowing through its facilities today. We'll also look at how we implement Palladyne IQ on the shop floor to drive higher throughput and quality so the factory becomes smarter as we scale. Strategically, this aligns directly with the Department of War's industrial base modernization efforts, reshoring capacity, building resilience and reducing lead times with American suppliers. We're not waiting for others to build the future. We're building it here. This is the all-up picture. All the pieces you've just seen, SwarmOS, GuideTech and Crucis will now operate as one Palladyne Defense business. In practice, that means we are a partner and supplier to large primes, not a challenger to their core franchises. We provide software, avionics, components, complete systems and design capacity, which gives us multiple shots on goal across the value chain, and we only build proprietary systems when there is a clear capability gap. That model lines up directly with the Department of War's priorities, cost-effective autonomous capability that can be fielded quickly backed by an American industrial base. Financially, these transactions are disciplined, high leverage accretive transactions. For 2026, the combined acquisitions are expected to push consolidated Palladyne AI revenue to more than triple our 2024 revenue of about $8 million, with positive adjusted EBITDA contributions from the 2 acquisitions. Importantly, we are entering the next phase with a growing 18-month backlog of more than $10 million, including ongoing development contracts with U.S. Air Force and the U.S. Navy. Total consideration paid in these 2 transactions is approximately $31 million, consisting of stock, cash and assumed equipment and real estate debt, plus an earn-out over the next 5 years of up to an additional $25 million once revenues relating to GuideTech's products exceed $71 million. Assuming this hurdle is achieved, the payout will be more than worth it for Palladyne and our shareholders. In addition, we plan to invest $5 million over the next 12 to 18 months to take Banshee and SwarmStrike from TRL-6 to TRL-9. That investment is aimed at unlocking a much larger revenue opportunity while keeping our capital structure highly efficient. We've talked about the assets. Now let's talk about how the business will run. Coming out of these acquisitions, Palladyne AI now operates through 2 focused businesses that share one autonomy core. Palladyne Defense integrates SwarmOS, GuideTech and the Crucis companies, giving us mission autonomy, aerospace design, new products and U.S. manufacturing in a single stack. That lets us move from concept to prototype to production on time lines the Department of War is demanding. Palladyne Commercial continues to scale IQ and Pilot across manufacturing, logistics and aerospace. It remains a core business opportunity for us. The headline is simple. Defense is an expansion of our platform, not a substitution for our commercial business. 2 focused businesses, both strategically important, both powered by the same autonomy engine. Here's how the structure looks formally. Palladyne AI manages strategy, capital and our shared autonomy platform. Palladyne Defense combines SwarmOS, GuideTech and Crucis to serve government, defense and public safety customers. Palladyne Commercial scales IQ and Pilot across industrial automation and logistics. One platform, 2 focused businesses, each with distinct customers and strengths. Before we wrap up, I want to come back to where I believe a lot of our long-term upside sits, which is in Palladyne IQ. IQ is our original AI platform and the foundation of our embodied AI ecosystem. It was built to orchestrate complex multi-robot environments. And from that work, we drive pilot for unmanned systems. IQ delivers the intelligence layer for industrial and operational efficiency. Its focus is simple, enable robots and automated systems already working in manufacturing, logistics and infrastructure to perceive, reason and adapt instead of just repeating fixed preprogrammed motions. IQ is hardware-agnostic and enterprise-wide, so customers can standardize on one intelligence layer across many facilities and robot types. The business model is attractive, software licensing and services that can scale as customers add robots and lines. Before we talk about the road ahead, I want to anchor us in the fundamentals. We are executing from a strong financial foundation. For the quarter ended September 30, we closed with $57.1 million cash -- $57.1 million in cash and equivalents and used about $6.3 million in operating cash. That discipline gives us the runway to integrate GuideTech and Crucis and advance our autonomy products. We also announced a new U.S. patent covering key elements of our embodied AI and autonomous coordination capabilities. This IP directly supports SwarmOS and reinforces our role in edge autonomy. In parallel, we are advancing existing programs and pursuing new development work. For example, we think we are well positioned for an upcoming Department of War contract award. In addition to our relationship with Red Cat, we also launched a collaboration with Draganfly that reflects the type of ecosystem engagement we expect to grow. Finally, we further strengthened our leadership bench, specifically for defense and national security priorities with the additions of retired Lieutenant General Twitty who during his career, led roughly half of the U.S. Army to our Board; and Doug Dynes as President of Palladyne Defense, a former Presidential appointee and National Security Adviser to Senator Hatch and retired Major General Lee Levy, former Commander of the Air Force Sustainment Center, who will serve as Vice Chairman of Palladyne Defense. All 3 of these men complement existing Board member, retired Admiral Olson, the first Navy Seal to attain a 3-star Admiral rank and among his other distinguished roles was Head of SOCOM. Overall, we remain on track for 2026 that we expect will see a significant uptick in customer engagement across our portfolio. Stepping back, our investment thesis rests on 5 pillars: technology leadership, a proven autonomy architecture built for embodied AI at operational scale. Vertical integration, AI software, avionics, systems engineering and U.S. manufacturing in one stack. 2 growth engines, IQ in the commercial and industrial sectors and our vertically integrated defense-focused businesses. Financial strength with roughly $50 million in cash post acquisitions, we have the runway to execute. And finally, strategic timing. Our structure and technology align directly with Department of Water priorities for rapidly fielded cost-effective autonomous capability as evidenced by our ongoing contracts with the Air Force and the Navy. This slide pulls the structure together visually. On the left, Palladyne Defense, SwarmOS, BRAIN Avionics, Banshee, SwarmStrike and the IntelliSwarm architecture powering AI-enabled mission systems. On the right, Palladyne Commercial, IQ and Pilot, delivering industrial autonomy for manufacturing, logistics and infrastructure. Both businesses share the same AI core. So innovation on one side accelerates the other. That's the advantage of a single autonomy platform supporting 2 complementary markets. So before I close, I'm going to show you a short video that helps realize -- helps you visualize our vision. [Presentation] Benjamin Wolff: In summary, I hope you come away from today's call with the understanding that Palladyne AI is now a fully integrated autonomy company serving national security customers through Palladyne Defense and industrial customers through Palladyne Commercial, all powered by embodied AI. Our technology is advanced. Our structure is aligned with the national security priorities, and our financial position gives us the runway to execute on near-term deployments. We're building an American company designed for this moment, 1 platform, 2 businesses and a significant opportunity ahead of us. Palladyne AI, America's cross-domain force multiplier. Thank you. Operator, we can open the floor for questions. Operator: [Operator Instructions] Our first question comes from Brian Kinstlinger from Alliance Global Partners. Brian Kinstlinger: Congrats on your transactions. In terms of BRAIN hardware from GuideTech, how much of that revenue is commercial versus government? Do they go-to-market as a prime generally or a subcontractor? And then maybe can you quantify the sales cycle, including the design win phase? Benjamin Wolff: Thank you for your question, Brian. So their customers are all in the defense sector. At least today, they are defense sector. They have also done some things in the space arena, and I think there's a lot of opportunity in space, not necessarily tied directly to Department of War. But the BRAIN sales today are focused on them being a supplier to other primes who are building the BRAIN into their aviation platforms or aerospace platforms. It is part -- to be able to win that business, it has to be part of a design win that ultimately the entire system gets sold to a defense customer, Department of War, one of the services, et cetera. So that is what they've been working on for the last couple of years, and they have got some great traction in that regard. Brian Kinstlinger: Great. And then prior to the GuideTech acquisition, did your drone partners have another third party they use for edge compute system. And so now the value is the drone manufacturer can come to you with one solution as opposed to using a variety of suppliers? Benjamin Wolff: So it is very common in the smaller drone space to have either NVIDIA or Qualcomm boards that are being used on those platforms. And today, our SwarmOS software is being implemented on both NVIDIA and Qualcomm boards. Depending on the size of the platform of the aviation or, I should say, aerospace platform, depending on what the mission capabilities are that are required, you might see the BRAIN being a supplement to an NVIDIA or Qualcomm board or in lieu of an NVIDIA or Qualcomm board. It just depends on what the mission requirements are. But yes, you can think of us as being a vendor now for that avionics or guidance a navigation system that gets put onto a new type of weapon system. Brian Kinstlinger: Great. And then is there anything you can share in terms of either installed base, the number of partners GuideTech has? Just any kind of information to help understand average deal size, how to think about their customer base? Benjamin Wolff: I hope to be able to give you more details after the first quarter. We're not at a point today that we're prepared to start talking about all of those details, Brian. But I think after the first quarter, we'll have some more information for you. Brian Kinstlinger: Two more. In terms of Crucis, first, address how this -- well, maybe how this addresses manufacturing concerns that prospective customers might have had about your ability to scale large programs. And then talk about the type of components they're manufacturing today and who their primary customers have been? I think you said [ F-15 ] and some vehicles, sorry. Benjamin Wolff: Yes, no problem. So whenever you talk about producing systems at scale, one of the concerns that potential customers have is, okay, great, you've got a good concept. Now can you actually execute on it? Can you produce it at scale because we're going to be a big customer. We want to buy a lot of these. We don't want to just buy a few. And that has always been a challenge for start-ups is to figure out how do you go from not just prototype and into first commercial article, but how do you scale it to volume, which is the kind of volume that the Department of War is going to look for. We decided to not try and reinvent the wheel, not try and go through all the aches and pains of scaling up manufacturing on our own, but to acquire 2 companies that were trusted and well proven, have been around for a long time, had adopted new innovative technologies to be able to have higher margins than the industry average and that could produce some of the most complex challenging parts and components that were needed by the aerospace industry. That is one of the things that I think startups and younger companies get criticized for is how are you really going to produce at scale. And so we decided to nip that in the bud in one fell swoop and be able to provide this consolidated vertically integrated package to our customers. Brian Kinstlinger: My last question is, can you talk about how opportunities with your 2 drone partners, Red Cat and Draganfly are tracking? I'm sure the government shutdown isn't helping, but maybe from a high level, talk about the procurement and the opportunities. Benjamin Wolff: I think both companies are doing some great things with opportunities with Department of War and the various services. We are engaged with -- we've been obviously engaged with Red Cat longer than Draganfly. Draganfly is a relatively recent announcement. They have airframes that have different mission sets than what Red Cat has. We get very excited about the idea of having our software that allows collaboration among different manufacturers platforms to be able to communicate and provide the war fighter with more information in the field. That's capability that the Department of War continues to talk about. So we're just getting going on our engagement with Draganfly. We just announced it a few weeks ago. So that's relatively early. But we expect to do the same thing with them that they've done -- that we've done with Red Cat, where we go out and jointly meet with customers, talk about what the basic air platform is capable of, why it's the best-in-class for a particular mission set and then educate the Department of War customer on what is the art of the possible when you start adding in collaborative autonomy that our SwarmOS platform provides. So it is more than just having to get a design win. You get a design win with a customer like Red Cat or Draganfly, but then you have to go convince the Department of War that it's worth spending the extra money for the additional capability set. Fortunately, for us, almost every time Pete Hegseth wants to talk about drones, he's talking about swarming and collaborative autonomy capabilities. So it is -- I think we're in front of the duck. We're in a good spot with this right now. Operator: Our next question comes from Michael Latimore with Northland Capital Markets. Mike Latimore: Congrats on the transactions here. Did you say that the -- a couple of the main customers for your acquisitions were the Air Force and Navy or those the 2 main sort of end customers? I know you sell the primes, but do they end up in those 2 categories? Benjamin Wolff: So we actually have direct contracts with the Air Force and with the Navy, where they are funding the development of capabilities that they want to deploy. So those are direct contracts. That's not where we're acting as a sub to somebody else. Mike Latimore: Interesting. And then as you think about the kind of revenue composition here, are we going to see sort of one revenue line? Or are you going to have hardware, software services? Just trying to think about how that will look. Benjamin Wolff: Yes, I expect we will -- we're still sorting through that, Michael, but I expect that we will be able to clearly articulate what's component sales, what services, what software sales. Mike Latimore: And how quickly can you get SwarmOS kind of embedded into the GuideTech development cycle and product lines there? Benjamin Wolff: Well, it can't happen fast enough. But since we just closed the deal today, I can tell you it's not today, but I expect -- if you look at what we did in terms of getting it on to the NVIDIA board and on to Qualcomm, it was a matter in those cases of a couple of weeks. So one of the things that our engineering team started talking about today was exactly what the path is to make that happen. I have not gotten an update on that conversation, but it's something that I do not think is going to be terribly cumbersome or time consuming. Mike Latimore: And then I think at the end there, you mentioned you're potentially expecting a Department of War contract award. I guess just what product category is that in? Or any more detail there? Benjamin Wolff: That will still relate to the SwarmOS capabilities. I don't want to say more about it than that because it's premature. But bottom line is we've got some good momentum with the Department of War following on the backside of some of the existing contracts that we have. Mike Latimore: And just last one. It seems like GuideTech is able to produce key systems in much more cost effectively. Can you just provide a little more detail on how they do that? Why are they so much more cost effective? Benjamin Wolff: Yes. One of the things that they did when they first started the company, which I think was 10 or 12 years ago now, and the founders came out of Raytheon Missile Systems, they put a fair bit of capital into developing their own internal software systems that they use as tools to what I think that is revolutionizing the way aerospace design and engineering occurs. They can go from concept to working prototype in less than 6 months. In the case of SwarmStrike, I believe that they had their first flight within 4.5 months after the original concept was conceived of. And that is in large part credited to their internal software tools that they have created. And I think that is one of the -- when I look at the crown jewels of GuideTech, it is the people first and it is the internal software systems that they've created as tools that allow them to conceive and validate designs far more quickly than I think occurs anywhere else in the industry. And that is why they have been very successful at having customers across the defense prime space. Operator: Our next question comes from James Kisner with Water Tower. James Kisner: This is James. Can you hear me? Benjamin Wolff: Yes, I can hear you. Thank you, James. James Kisner: Congrats on the transaction. I just wanted to double-click a little bit on the vertical integration and sort of the benefits of that and sort of the why behind the transaction. I think you said that it helps your scaling, but are there other benefits here like time-to-market or integration technology or maybe even some margin stacking that's eliminated that also are rationales for these ready transactions? Benjamin Wolff: Here's the way I think about it. The ability to control your destiny on both the hardware and software side to evolve them in tandem so that you can optimize both is something that you don't get the benefit of if you're just providing hardware or just providing software. You can think of a couple of great examples that I use as an analogy here. If you thought about Steve Jobs trying to come up with the iPhone and all, he was going to produce the hardware, not the software, it wouldn't be the hit product that it became. Vice versa, if he was only focused on software, not hardware, it may not have become the hit product it was. Take it into something that's a little more current. Think of the Tesla cars. If Elon had said, I'm going to build the frame and the physical instantiation of the vehicle, but I'm going to farm out the AI and the software to somebody else, it would not have been an optimized car that attracted the millions of customers that they have today. What we see in our opportunity set going forward is in those cases where there are gaps of capability that we think the Department of War wants, we now are bringing together our software and the hardware and the avionics and the components altogether vertically integrated, so that we can go faster in a way that demonstrates enhanced capabilities so that we can beat our near peer competitors worldwide to the punch. James Kisner: Very helpful. Just one other follow-up. I mean the shutdown, obviously just ended and you're kind of early commercialization, but have you seen any change in the tender conversations in the last couple of days, anything to report there? That's all I have. Benjamin Wolff: I will tell you this, I've been pleasantly surprised that there isn't any slowness in getting people reengaged now that they're back at work. We've been -- frankly, I've been a little surprised at it's like the spigot turned on and they are -- at least the people that we're dealing with and the narrow areas that we're focused on, I can't speak for the whole Department of War or the whole government, but I've been very pleasantly surprised at seeing almost instantaneous reengagement picking up right where we had left off. Operator: Our next question comes from Brian Kinstlinger once again with Alliance Global Partners. Brian Kinstlinger: Just a quick modeling question. Is there any seasonality that you see in the 2 acquiring -- businesses you're acquiring? I know often there's some seasonality in defense, at least with awards, but I'm not sure if there is on the revenue generation from your business. Benjamin Wolff: We have not seen seasonality that I'm aware of. I think that as you get towards the new budget cycle, that can always impact things when you're talking about the U.S. government as a customer. But I do not believe that either of these businesses have seen significant issues as a result of that. The slowdown resulting from the shutdown of the government definitely impacted the ability, for example, when you're asking a government customer to approve a first design or a first product and they're no longer in the seat to approve it. That created a delay, and you saw that across the sector. But just in terms of normal seasonality, I don't see anything there, Brian. Operator: [Operator Instructions] I will now turn the floor back over to Brian Siegel for any questions from our webcast audience. Brian Siegel: Thanks, Juan. I got a couple here. The first one is earlier this year, you described a roughly 12- to 18-month sales cycle and suggested you'd have more visibility in the back half of the year. I'm wondering whether the acquisitions along with the creation of Palladyne Defense have improved that visibility. Are you seeing any signs that these moves could shorten the sales cycle? Benjamin Wolff: So the 12- to 18-month sales cycle was primarily focused on the commercial side of our IQ sales. And I don't see any change there. And certainly, these 2 acquisitions don't really impact that. I do think what these acquisitions do is they give us more avenues to monetize our SwarmOS swarming software, a lot more customers that we can now tap into relationships that we can build and expand on. And so it's too early for me to say whether I think the sales cycle for that product on the defense side will be shorter, but I do know it increases significantly our shots on goal. Brian Siegel: One other question is, will you need to expand sales staff as you grow, let's say, over the next 6 to 12 months? Benjamin Wolff: We expect to do that. That's something that we budgeted for already, and that was true notwithstanding whether we did these acquisitions or not. One of the great things about these acquisitions, though, is that they have their own business development efforts. We will supplement that and fortify that. As I mentioned before in my prepared comments, Doug Dynes, comes over to us. He will be leading our defense business with a primary focus on generating revenues for the defense side of the house. And he has incredible relationships, and we've got -- we'll be building a team to support him. So bottom line is, as with -- when I've been asked that question in the past, as we understand more about what gets a customer to say yes, then we will put more resources into getting more customers to say yes. But we're not going to just start throwing a bunch of money at marketing and sales until we know what works until we've cracked that code. Brian Siegel: One last question. It's about the commercial business. When will the next version of IQ become available? And is it being tested currently at customer or potential customer facilities? Benjamin Wolff: We are testing the V2 of IQ in our own facilities now. As soon as we believe we've got it debugged and completely ready to go, then we will start placing it with customers. So we're not quite there yet. A lot of that, as I mentioned in my prior comments in past quarters or in our press releases, was focused on improving the user interface. User interface is never as easy as just putting a wrapper on the piece of candy. It actually requires integration with the way the software works, but we've never had an issue with the functionality of V1. What we had was an issue with the ease of use and making it so that we truly can have folks that are not software engineers able to interact with it and train robots the way very expensive computer programmers and software engineers typically do. So remember, our whole focus with IQ is to democratize the ability to program and manage industrial robots and to allow people that may only have a high school education to be able to do the kind of job that historically has taken people that are $225,000 or $250,000 a year graduate students that are able to do. So I think that we're close, and we're going through all the testing internally right now internally to make sure that it will be satisfactory for our customers when we release it out into the wild. Brian Siegel: Great. That's all the questions from the webcast. Juan, you can close out the call. Operator: Ladies and gentlemen, this now concludes our question-and-answer session and does conclude today's teleconference as well. We thank you for your participation. Please disconnect your lines, and have a wonderful day.
Operator: Ladies and gentlemen, welcome to the conference call on third quarter 2025 Results. I am Mathilde, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Juergen Rebel, Head of Investor Relations. Please go ahead. Juergen Rebel: Good morning, everyone. This is Juergen speaking. We welcome you to today's call on third quarter results of fiscal year 2025. Aldo, our CEO, will comment on business and strategy; Rainer, our CFO, will focus on financials. We are referring to the Q3 earnings call presentation that you can find on our website. There, you'll also find further materials such as the full comprehensive IR presentation. Aldo, please let us have your thoughts on Q3. Aldo Kamper: Thank you, Juergen, and good morning also from my side. Overall, I would say a good quarter. Our strategic focus is paying off. We delivered strong cash flow and significant growth in the core portfolio on a like-for-like basis. Profitability was better than previous quarter, also supported by a one-off. We established base savings continue to be ahead of plan, and I'm now on Page 3, looking at the financial performance of the group. Revenues came in at EUR 853 million, above the midpoint of the guidance. We saw an almost double-digit percentage improvement in our semiconductor business. In the Auto Lamps aftermarket business, we have double-digit seasonal upswing. The weaker U.S. dollar cost us EUR 20 million top line compared to the previous quarter. Year-over-year revenues are down a bit with 3%. This is entirely due to the weaker U.S. dollar. Note the $0.07 difference in average euro-U.S. dollar exchange rate, which equals approximately EUR 35 million top line. If we truly look at the like-for-like comparison based on today's core portfolio at constant currencies, we have grown by about 6% year-over-year. This includes the traditional Auto Lamps business. The semiconductor core business, against we measure our growth grew approximately 9% on a comparable basis, a really good result in the current market conditions. It clearly shows that our portfolio choices are paying off. Profitability. Adjusted EBITDA margin improved quarter-over-quarter and year-over-year by almost 1 percentage point to 19.5%. In euro terms, adjusted EBITDA improved by EUR 21 million. Within that number, we have a profit of a bit more than EUR 10 million from the sale of some manufacturing assets in our Singapore production facility. Now quickly on the segments. Page 4, look at the traditional Halogen Lamp business, a classic seasonal upswing. We saw a steep 13% quarter-over-quarter increase in revenues driven by the aftermarket season. The darker months in the Northern Hemisphere make drivers replaced their broken lights in the car more frequently. Nothing particular to report on Specialty Lamps for industrial and entertainment applications. The business remained at a similar level as last quarter with approximately EUR 40 million of revenues. We sold this business segment to show as part of our accelerated deleveraging plan as we communicated last quarter. Closing is expected around end of first quarter '26. Adjusted EBITDA stayed almost flat. Why? If revenues were up almost EUR 25 million, the gross profit fall-through from higher volume was even up by a meaningful reduction of inventories. Now on semis, I'm on Slide 5. First, business unit OS. The sequential increase in Opto semis with 6% revenue improvement, EUR 365 million compared to EUR 344 million in the previous quarter. The increase was mainly driven by automotive, but also by the seasonal peak of the Horticulture business. The upswing could have been higher if it wasn't for the negative impact on the top line of the weaker U.S. dollar. Coming to profitability. Adjusted EBITDA improved by EUR 3 million to EUR 82 million. At first glance, you might have expected a higher fall-through from EUR 20 million more top line. However, the increase was balanced also here by inventory reductions and the absence of onetime effects that were supported in Q2, such as [ ease of ] funding catch-up. In the end, adjusted EBITDA margin stayed almost flat at 22.6%. Now Sensors and ASICS on Slide 6. An encouraging seasonal jump in revenues by 13% to EUR 271 million. Consumer products were in high demand and our business was okay. Products, we basically discontinued, still saw some further orders that live longer as often. Little changes in demand for industrial and medical products. Year-over-year, business grew by 2%, mainly driven by the new sensor products, which are more than compensating for the revenue loss from the phased-out non-core portfolio and the top line impact from the weaker U.S. dollar. Adjusted EBITDA jumped to EUR 64 million. However, I mentioned earlier that more EUR 10 million win for profits from selling manufacturing equipment was included there. Now looking at the semi end market in summary, and we are on Slide 7 here. Sequentially, 9% up and year-over-year, 2% down. If we exclude the noncore portfolio that we discontinued last year, the semi core business grew by 9% and year-on-year at constant currencies, well in line with the semiconductor growth model and higher than last quarter. First, automotive. LED inventory correction has ended, but no significant restocking in sight. We even hear from customers who want to reduce their inventory even further. Book-to-bill hovered around 1 throughout the quarter. Nevertheless, we saw a slight sequential increase in revenue of 4%. If the uncertainty in the supply chain persists, we see a lot of short-term ordering, which is now often below normal lead times. Fulfillment channel inventories went further down. We are now between 7 and 8 weeks in the old days, 8 to 10 weeks were considered healthy and normal. Second, Industrial and Medical, in line with the slow recovery of the overall market, we saw a sequential improvement of 2%. However, we're still below last year's level. And ignoring the weaker U.S. dollar, maybe roughly at the same level. As always, we have to look at the verticals individually. Horticulture revenues had a seasonal peak. Professional lighting, unchanged. Demand for initial automation is improving only gradually. Same is true for medical. If we look at the channel, same picture as last quarter, Europe and U.S., relatively stronger than China. Third, Consumer, a steep seasonal increase of 22% compared to Q2. Our main business is sensors for smartphones and wearables. Year-over-year, we see the impact of the weaker USD, a slight decline is entirely due to FX. Business-wise, our new sensor product more than compensate for the phase out noncore products. Now let's talk about future business. I'm on Slide 8. Design wins are underpinning our midterm growth model incentives. Tracks the market continued unabated in the third quarter. We are well on track to reaching again accumulated lifetime value of EUR 5 billion of new business for the full calendar year. We landed about 800 products in the September quarter across all verticals. This pushes the total to already EUR 4 billion for the first 9 months. A few wins that we are very proud of are sticking out. First, in automotive. With our industry-leading intelligent RGB interior lighting solutions, we secured another design win at a leading Chinese OEM. And on top of that, also a large design win for a prestigious car platform at the European premium OEM. Second consumer. Our spectral and proximity sensors are the best you can get. This once again convinced leading customers the design wins are worth a couple of hundred million euros. With that, let us look at some of our recent advances when it comes to differentiating technology platforms. Now on Slide 9. We do spend a lot of R&D money as we continue to believe in exciting growth opportunities. One part of our R&D is dedicated to mastering the cost pressure in more established technologies by creating cost performance optimized platforms. The other part of R&D is focused on differentiating technology, especially for new applications that might see a growth inflection in the future. We're also making sure that our customers benefit from an appropriate IP safety for those innovations. For this, we signed a comprehensive cross-license agreement with Nichia, covering thousands of patents, protected innovations in LED and laser technologies. The new agreement also covers sophisticated LED packages and also includes metric headlamps as an example. As such, we are the right partner for our customers, holding a truly unique IP position in the industry. On Slide 9, you get an impression of our leadership in further emitter technologies that are used in a multitude of applications. We're speaking of AlGaAs material systems that provides LED and laser light between 808 and 1,130 nanometers, just beyond what a human eye can see, the so-called near-infrared. Our LEDs boasts industry-leading wall-plug efficiency and red glow suppression. Our [ laser design ] is post industry-leading efficiency and optical output power, together with high-quality, cost-effective standard packages, these components are ideally suited for a multitude of applications to deliver already today a revenue contribution in the triple-digit million territory, see the infrared LEDs in the car for incumbent sensing and consumer applications or in drones among many others. The lasers are fairly established in material treatment and LiDAR with these properties also making my dealer suited for future defense applications such as drone defense or even for more visionary applications 1 day like nuclear fusion, laser-based nuclear fusion, a technology that could harness the energy generation process of our sun. We think there's much more to come here on this technology platform. Now let's switch to the center side of things on Slide 10. We recently introduced the industry leading to dimensional direct Time-of-Flight sensor platform. Why direct? This sensor measures the time of [ photon transfer ] from the optic come back and calculate the distance. Pretty fancy. I'm very proud of our engineers who delivered industry-leading sensors that featured twice the frame rate at the same resolution as competitor devices or twice the resolution at the same frame rate whatever you need in your application. You can use this performance for gesture and object recognition, but also for 3D distant measurement. It also enables edge AI sensing applications, for example, smartphones. You will see the principle in lower left when it images enhanced with the 3D dimensional information from the sensor, we can place objects such as furniture in an environment completely virtually. Just to give you an example here. We see applications for the sensor technology, not only in smartphones, but also in building automation, home appliances, robot drones, consumer electronics, you name it. Completing our technology product toward this quarter. I'm on Slide 11 now. We have the leading spectral sensing platform in the industry. Here you see on our latest spec model to Magic 8, a high-end premium smartphone with 4 cameras in the world facing side. Our sensors allow for [ eye flicker ] protection and professional grade color accuracy for an enhanced user experience. With this, let us move to bottom line profits. We established the base continues to be a great success as it has been so instrumental in mastering many of the headwinds to our bottom line, especially when it comes to gold price this year. We're on Slide 12 here. By the end of September, we have pocketed approximately EUR 185 million of implemented run rate savings. Another EUR 25 million during last quarter alone. Now this time for more details on the financials. And Rainer, please tell us about the latest progress. Rainer Irle: Thank you, Aldo. Hello, everyone, from my side as well. Let us look at the balance sheet first. With the private placement of an additional EUR 500 million of U.S. dollar in euro senior notes, we increased our cash on hand position to EUR 979 million end of September and end of October were even above EUR 1 billion. After the tap in July, we have approximately EUR 651 million equivalent of the U.S. dollar bond and EUR 1.030 billion with Eurobond, both as during March 29. Last quarter, we got some questions about why we tapped that at a particular moment. If you look at the leveraged finance market in the last couple of weeks in terms that our timing was pretty good, momentarily conditions are certainly less favorable. No news on the Malaysia sale and leaseback transaction yet. We continue to talk to interested parties, but we are not yet on the final approach. The value stood almost unchanged at EUR 422 million end of September. This brings us to an almost unchanged net debt position of EUR 2 billion compared to end of June. Having just mentioned Basel leaseback, we certainly continue full steam in negotiating the indicated asset disposals on top of the sale of the Entertainment and Specialty Lamps that we announced in July. To venture realize proceeds well above EUR 500 million. We are fully on track. Minority shares with the value of only EUR 11 million were tender during the summer months. Consequently, the outstanding minority put options stood at EUR 570 million, 12% outstanding at the end of Q3. Taking cash, the revolver and bilateral lines into account, our available liquidity significantly increased to approximately EUR 1.6 billion. We are prepared for all eventualities any liquidity concerns in the market within of the past. And switching to Slide 14, cash flows. Strong improvement in the third quarter operating cash flow. We recorded EUR 88 million. And that's despite us paying the coupon on the high-yield bonds, which, as you know, is always due in Q1 and Q3. So we paid that in Q3, but we also managed inventories well and make sure we are collecting money from litigation and subsidies. Last year in Q3, we had the customer prepayment of approximately EUR 220 million became as a onetime positive at that time. CapEx base in check, EUR 48 million in the third quarter for the full year, we will land between 6% and 7% of revenues, well below our long-term average ratio of 8%. In total, we finished the quarter with EUR 43 million positive free cash flow. This brings us year-to-date to breakeven in free cash flow. We exclude the customer prepayment last year, Q3 was the best quarter in a long time, though Q4 is expected to be better with lower interest payments and counting on the promise money from the Austrian government under the European Chips Act. We switch to Slide 15, net earnings and earnings per share. On the left, you find adjusted figures. The adjusted net result improved in line with EBITDA to EUR 27 million in the third quarter. Adjusted EPS developed accordingly. The net financing result came in with EUR 59 million. Income tax stood at just EUR 5 million. Following the rule of thumb that there's always EUR 50 million, EUR 60 million adjustments per quarter due to transformation cost depreciation of PPA and share-based compensation, we ended up with minus EUR 28 million net results according to IFRS. Consequently, IFRS earnings per share also came in negative EUR 0.28. That conclude my remarks. And with that, I would like to hand back to Aldo for the summary and outlook. Aldo Kamper: Thanks, Rainer. And now I'm on Slide 16, let me summarize the third quarter results again. Looking at the business, we delivered for revenues above the midpoint and profitability at the midpoint of the guidance. 9% growth in the core semi business year-over-year on a comparable basis, well in line with our midterm target model. Execution of resemblance based program is ahead of plan now with another EUR 85 million run rate savings implemented. And we are securing future semiconductor business with an abated design win streak, now EUR 4 billion already in the first 9 months of this year. Looking at the leveraging plan, everything well on track without being able to go to further detail right now. R&D investments, I've presented to you an example of our relentless efforts to find future growth opportunities by investing in differentiated technology with great potential. Today, we talked about infrared emitter and to 2 dimensional Time-of-Flight sensors. With that, let us look at the right-hand side of the slide, the outlook for the fourth quarter. We expect revenues to come in between EUR 790 million and EUR 890 million at an exchange rate of 1.16. Compared to the beginning of the year, the weaker U.S. dollar cost us a middle double-digit million figure in top line. Automotive lamps will see its beacon annual lighting season. For semis altogether, we expect a small seasonal decline. Industrial medical might be kind of stable, but it sends a lot of uncertainty in the automotive market, maybe flattish at best, where I think consumer, the smartphone season is cooling a bit logically. We expect adjusted EBITDA margin to come in at 17.5%, plus or minus 1.5 percentage points, in absent stable compared to Q3. If you back out the win for profit from the selling of manufacturing assets in Singapore. Looking at cash flow. With easily 0 and keeping our promise for the full year, we expect free cash flow of more than EUR 100 million in the fourth quarter, certainly also driven by the expected inflows from the Chips Act. With this, I conclude my remarks, and we're now ready for your questions. Operator: [Operator Instructions] The first question comes from the line of Sébastien Sztabowicz from Kepler Cheuvreux. Sébastien Sztabowicz: The first 1 is on the automotive market. So do you see the demand building up, it seems that you are coming to the end of the inventory correction. But I'm just curious about the trajectory of growth moving into the next few quarters? And in the short term, have you seen any specific downside to demand linked to next turmoil or is not something that is affecting the global car production volume for your demand? And the second question is on the synergies and the cost saving program. You already reached EUR 185 million at the end of Q3, which is well above the target for '25 and you are coming closer to what you expect for 2026. Do you plan to accelerate a little bit more further the cost-cutting action or you will stick to EUR 225 million for next year and then are you going to stop cutting the cost base? Aldo Kamper: Yes. Thanks, Sébastien for those questions. Yes, on the automotive side, I would say inventory situation is okay. We do see that there is a lot of short-term order behavior. And I do also link that partly to the Nexperia topic, just our carmakers also have to be very agile in their production schedules and what they build and when they build it does vary a bit. So I would expect this quarter and next quarter to be impacted a bit by that. But overall, vehicle build volumes globally are actually holding up quite well. And here, this is also important that we have a good position in China. The Chinese market is doing -- is growing quite nicely, I have to say. And Europe and the U.S. are struggling a bit. But given our global exposure, we are able to benefit out. So I would say, overall, the story hasn't really changed. We still see more content per vehicle globally that we benefit from a fairly stable vehicle build volume currently and not for next year. At the same time, also the usual price pressure that eat up a bit. And then, of course, FX that also goes against us. But yes, underlying demand, I would say, is a principal okay with some short-term hiccups as explained. On reestablished base, yes, we're very happy that we are making very good progress, EUR 185 million already. So I would assume that we can get to the EUR 225 million goal also significantly ahead of plan, and we are thinking about how to extend this program after that. But we, at the moment, mainly focused on bringing in the savings as quickly as possible of the measure that we've already defined. Operator: The next question comes from the line of Harry Blaiklock from UBS. Harry Blaiklock: First is just on the consumer business. I know you've had success at 1 of your big consumer customers in terms of getting a socket rolled out across the whole kind of smartphone portfolio. And historically, you've spoken about potentially getting further socket wins in that business. I was wondering whether you could just provide an update on that? And then my second question is just on whether there's any update you can give us in terms of progress on the further asset disposals for generating over EUR 500 million? Aldo Kamper: Sure, Harry. Thanks for the question. So yes, at the various cellphone customers, we are making good progress and are winning new sockets. And I must say that it goes across both Android and non-Android space in a very steady and good manner, I must say, without calling out 1 specific socket, but I must say the engagement across the customer base is very strong and we continue to see good growth potential in this space with our technology. On the asset disposals, yes, it's hard to comment on that in detail, but I can say we are very active in the process. And the plan still stands. We will deliver significantly more than EUR 500 million of disposals proceeds. As we have communicated, the first step, EUR 100 million on the lamp business, on the entertainment lamp business is in execution. We are progressing well towards closing, probably by the end of Q1 next year. And on a second bigger step, we are making a good progress, and we'll share that, of course, as soon as we can with all of you. Operator: [Operator Instructions] We now have a question from the line of Reto Huber from Research Partners. Reto Huber: Yes. Thank you very much for your very detailed reporting. Now I was wondering, the adjusted EBITDA maybe I missed it, that includes the gain from sales of assets, if I understood this correctly. Have you disclosed that number somewhere? And how much is the one-off gain? And then secondly, what is the reduction in year-over-year sales due to disposals? Rainer Irle: Yes the adjusted EBITDA had a benefit from that asset sale of roughly EUR 10 million, a bit north of EUR 10 million. That's obviously a onetime impact. And yes, if you look at the year-over-year impact from asset disposals from portfolio, I would say that that's probably EUR 30 million. Operator: Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Juergen Rebel for any closing remarks. Juergen Rebel: Thanks very much for the interest. We had a lot of people who dialed in. If you have any further questions, don't hesitate to reach out to us. And we're looking forward to receiving your feedback. Thank you. Bye. Aldo Kamper: Bye-bye. Operator: Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.
Ryan Weispenning: Hello, everyone. And thanks for joining us today for our fiscal 2026 second quarter video earnings webcast. I'm Ryan Weispenning, vice president and head of Medtronic investor relations. Joining me here today are Geoffrey Martha, chairman and chief executive officer, and Thierry Pieton, Chief Financial Officer. Geoff and Thierry will provide comments on the results of our second quarter, which ended on October 24, 2025, and our outlook for the remainder of fiscal year 2026. After our prepared remarks, we'll take questions from the sell-side analysts that cover the company. Today's program should last about an hour. Earlier this morning, we issued a press release discussing our results and containing several financial schedules. We also posted an earnings presentation that provides additional details on our performance. The presentation can be accessed in our earnings press release or on our website at investorrelations.medtronic.com. During today's program, many of the statements we make may be considered forward-looking statements, and actual results may differ materially from those projected in any forward-looking statement. Additional information concerning factors that could cause our actual results to differ is contained in our periodic reports and other filings that we make with the SEC. And we do not undertake to update any forward-looking statement. Unless we say otherwise, all comparisons are on a year-over-year basis, and revenue comparisons are made on an organic basis, which excludes the impact of foreign exchange, second-quarter revenue in the current and prior year from our this quarter of the Dutch Obesity Clinic, also known as NOK, and second-quarter revenue in the current prior year reported as other. References to sequential revenue changes compared to the '20 and are made on an as-reported basis. All share references are on a revenue and year-over-year basis and compare our second fiscal quarter to our competitors' third calendar quarter. Reconciliations of all non-GAAP financial measures can be found in our earnings press release or on our website at investorrelations.medtronic.com. And finally, our EPS guidance does not include any charges or gains that would be reported as non-GAAP adjustments to earnings during the fiscal year. With that, over to you, Geoff. Geoffrey Martha: Okay. Thanks, Ryan, and hello, everyone. Last quarter, I told you that Medtronic is on the cusp of an acceleration in our financial results and our strategy. Well, today I'm pleased to share that because of our organization's relentless focus, that acceleration is indeed underway. We delivered a strong second quarter. Both our revenue and EPS beat expectations. Looking across our business, procedure volumes and end markets are robust, and we're bringing Medtronic's full capabilities to bear as we launch innovative technologies and execute ahead of plan in some of the most attractive and fast-growing end markets in med tech. We're glad to be able to raise our revenue growth and EPS guidance for the full year on the back of this building progress. This quarter, we accelerated our growth with significant contributions from our cardiac ablations business as promised. Looking ahead, there's even more that Medtronic is capable of. We're positioning ourselves for even greater acceleration in revenue growth in the back half of the year and beyond. And our momentum is fueled by our enterprise growth drivers, including our PFA franchise for AFib, simplicity for hypertension, HUGO and soft tissue robotics, and AltaViva for incontinence. Look, these are game changers, and they'll power our trajectory. And at this pivotal inflection point in our growth journey, we recognize the need to capitalize on the incredible market opportunities before us. So we've scaled manufacturing to support our acceleration. In this quarter, we took the opportunity to increase OpEx investments to support our revenue growth momentum. We did all this while still delivering outsized EPS growth relative to our guidance. Overall, we shifted to a growth mindset. Besides our organic programs, we're focused on pursuing tuck-in M&A and executing strategic portfolio. Now let's get into the details on our enterprise growth drivers. One of them powered our growth acceleration this quarter. And together, all of them will fuel our total company revenue growth in the quarters ahead. In cardiac ablation, our PFA franchise is generating just a ton of momentum. We grew 71%, which is a strong acceleration from last quarter's nearly 50% CAS growth. This is the highest growth rate of any company in this large and fast-growing space. We're winning share as our PFA franchise grew over 300% in The US, as well as in international markets. This was based on the strength of our Ferra mapping system and our Sphere nine dual energy and high-density mapping catheter. Look. Physicians tell us that they appreciate not only the shorter procedure times that they're seeing with Afera, but increasingly, they're calling out its outstanding durability as well. And demand continues to be extremely high as we hear repeatedly from customers that they want to purchase additional affair systems to expand into even more of their labs. And in the vast majority of instances, when a new affair system goes into a lab, we take the majority of the AF procedure share in that lab. You know, our plants have scaled, as I mentioned earlier, to meet the challenge. And our mapping hiring is going really well. And as a result, we've doubled our installed base of Affair mapping systems during the quarter. And given the economics of this business with capital and consumables, our mapping system sales are a strong leading indicator of future revenue growth and margin expansion. So we're in the early, we're still in the early parts of this rollout. And we expect revenue acceleration to continue with an even higher CAS growth in Q3. We remain on track to double the revenue of this business soon, adding an incremental $1 billion off the $1 billion FY '25 base. Look, and we're not stopping there. With our pipeline, we're bringing a fair technology to the single-shot segment with Sphere 360. EPs tell us that 360 is the most anticipated PFA catheter out there, given the strength of its early clinical data. We've submitted the IDE to the FDA to get approval for our US pivotal trial. So the EP ablation space we're expecting to start in Q3 is now over $12 billion. It's growing mid-twenties, and with our low double-digit share, and the high demand I just talked about, for the current portfolio and our pipeline, we see a long runway to gain significant share and add meaningful growth to Medtronic. Now on top of that growth, we're launching as the clear market leader in two very large end markets. Our simplicity procedure for hypertension, and AltaViva for incontinence. And we're excited to have received the final Medicare NCD for simplicity three weeks ago. So now in addition to a broad label from the FDA, we have an excellent coverage outcome from CMS. The final NCD enables broad access and removes certain patient pathway barriers that were in the original proposal, including reducing in-person visits, removing a kidney function exclusion, and cutting in half the time requirement for adherence to meds. It also highlights patient quality of life as an important consideration. So the NCD gives physicians many avenues to bring simplicity to patients. Additionally, we are currently the only company to meet the full NCD criteria with an approved continued evidence development plan. And on the commercial payer front, we picked up significant momentum with wins during the quarter, including HCSC, Regions, and several Blue Cross Blue Shield plans, that collectively cover 30 million lives. Shifting to efficacy, Medtronic is the runaway leader with Ardian clinical data. And we continue to add to it. Only Simplicity RF Ardian has consistently shown sustained and improving blood pressure reductions in the long term. This is definitively unique to us. As we've not seen this with the ultrasound devices. This sets the standard that all other devices must now meet. And last month at TCT, we shared three-year data from our OnMed trial, that continue to show the procedure is effective over the long term. Patients who underwent the simplicity procedure experienced an 18.5-point average drop in systolic blood pressure. We also completed enrollment in our SPIRAL AFFIRM trial, which aims to expand simplicity into high-risk subgroups, including people with isolated systolic hypertension. The first data from a subset of this trial was also shown at TCT with very strong results. We're using these results in ongoing discussions with the FDA. So simplicity represents a massive multi-billion dollar opportunity for Medtronic. With an addressable market of 18 million people in The US, with uncontrolled hypertension. And now with a broad NCD in place, and commercial payers coming online faster than anticipated, this isn't a question of if or even how big. A question of how fast. Now we have not incorporated much Simplicity revenue into our back half guidance. But we are sprinting after this opportunity. We have supply. We've ramped up physician training and market development activities. With many hospitals initiating simplicity programs across the country. And now we're increasing our consumer awareness programs. And as a result, we expect our revenue to pick up in the back half of the fiscal year and ramp over the next few quarters and meaningfully contribute to Medtronic for years to come. Now shifting to Altaviva. We're seeing very positive signs in the first several weeks of The US launch. Physician training programs are oversubscribed. And we're expanding training capacity to meet this demand. Physicians are stacking cases and early media coverage has driven a surge in consumer search activity. Altaviva is a simple option to treat urinary urges and involuntary leaks, which affect 16 million people in The US. This small device is inserted just below the skin but above the fascia near the ankle. The procedure is minimally invasive, doesn't require sedation, and the patient goes home with a therapy activated. So they're not waiting for follow-up appointments to feel the results. The device is only recharged once or twice a year, eliminating the need for daily at-home charging equipment. And it has a 15-year battery. So we believe Ultaviva will add meaningful growth to our pelvic health business. And be a Medtronic growth driver again, for years to come. And more importantly, it is meaningful for patients. This is our first patient in South Carolina who's dancing to Jingle Bell Rock. I was getting that to be that time of the year. And it's a wonderful video. In addition to these enterprise growth drivers, we're seeing improvements in many of our other businesses as we execute on new product introductions. Getting products to market ahead of schedule, and ensuring strong commercial follow-through. So with that, I'm gonna turn it over to Thierry to cover the details of our business performance, financials, and our guidance. Thierry Pieton: Hey. Thanks, Geoff. Hi, everyone. Appreciate everyone joining us today. So I'll start with our cardiovascular portfolio, where we grew 9%. This was our strongest growth over a decade, excluding the easy comparisons we had after the pandemic. The growth acceleration was driven by our building momentum in CAS, which Geoff walked you through. And it's worth noting that PFA is now 75% of our cardiac ablation revenue. Our PFA growth significantly offset the 40% declines we had in cryo, and 90% of our remaining cryo revenue is in markets outside of The U.S. And look, it wasn't just casts. The rest of our cardiovascular portfolio grew a combined mid-single digits. Cardiac Rhythm Management grew 5%, with 18% growth in Micra leadless pacemakers and nearly 80% growth in Aurora EVICDs. In Structural Heart, we grew 7% on the strength of the Evolut TAVR platform. In peripheral vascular, we grew low single digits, and we expect growth to improve as we continue to launch the NeuroGard IEP carotid stent and begin the launch of our Liberant mechanical thrombectomy system. Next, in our neuroscience portfolio, our growth returned to mid-single digits as expected, with growth of 4%. In Cranial and Spinal Technologies, we grew 5%. That included 8% growth in Core Spine, both globally and in The U.S, and 5% in neurosurgery capital equipment. Our SpineABLE ecosystem, which includes AI-enabled preoperative planning software, and enabling capital equipment, including robotics, navigation, imaging, and powered surgical instruments, continues to attract strong spine surgeon adoption and drive meaningful share gains. And this is enabling strong pull-through of our Core Spine hardware. Our Specialty Therapies businesses had flat results in Q2, an expected improvement from last quarter driven by ENT and neurovascular. We have clear line of sight to continued improvement in specialty therapies next quarter, as we accelerate growth in both Neurovascular and Pelvic Health. In neurovascular, growth will improve as we anniversary the vast majority of China VBP in January, also expect an increasing growth contribution from the NeuroGard carotid stent launch, which is being sold by both our peripheral vascular and neurovascular businesses. In Pelvic Health, we expect growth to accelerate on the Arteviva launch that Geoff outlined. In 7% both pain stim and brain modulation grew high single digits as we continue the rollout of our Insemptiv SCS and BrainSense ADBS systems. The market continues to appreciate our differentiated fully closed-loop technology with responsive real-time therapy adjustments that's available in both of these products. Next, our MedSurg portfolio grew 1% as expected. Our Surgical business also grew 1%, impacted as we anticipated by the timing of certain tenders in emerging markets and the ongoing but stable market pressures from bariatric surgery and the shift to robotics. We expect a slight rebound in Surgical in the back half. And over time, we expect growth to continue to improve as we enter new markets with Hugo. In the back half of this fiscal year, we expect the FDA to approve Hugo with a urology indication and will start our entrance in The U.S. We also continue to make progress on expanding indications. During the quarter, we presented our Enable hernia repair study, which met its safety and effectiveness endpoints. We kicked off our Embrace Gynecology U.S. Pivotal study last month. This builds on the momentum from the positive results of our international GUIN study, which we shared at SRS in July. Given our experience in international markets, we have developed a clear understanding of the differentiated features that will make our robotics program successful. This includes Hugo's modularity and open console. It also includes continuously adding advanced technologies such as our ICG imaging and instrumentation like LigaSure RAS. Our touch surgery digital ecosystem is a force multiplier for robotics and for laparoscopic surgery. Adoption is building momentum and bringing AI into operating rooms in over 30 countries. Beyond the features, we're also leveraging our deep partnerships with through our training, support, and through our service. We look forward to robotics becoming a more meaningful growth driver over time. Next, our endoscopy business grew 8%. This was driven by double-digit growth in our esophageal products, as well as in G.I. Genius, our AI-powered solution used to detect polyps during colonoscopies. Wrapping up our business performance, our diabetes business or MiniMed, as it will be called post-separation, grew high single digits. We had particular strength in international markets, which grew 11%. As expected, The U.S. was lower this quarter in large part due to a decline in new orders as customers anticipated the launch of our new sensors. As we've started accepting orders, we're seeing this pent-up demand materialize. There's a lot of excitement behind both the Simplera Sync and Instinct sensors. Look, with the SimpleraSync, we continue to ramp manufacturing volume to support its European launch. As that ramp continues, we plan to roll it out more broadly to U.S. consumers later this fiscal year. And ahead of that, we started accepting orders during the quarter. With the Instinct sensor, we started taking preorders in The U.S. during the last month of the quarter. And we expect to begin shipping in late November. We accumulated more than 35,000 U.S. customer orders for Simplaris Inc, and preorders for Instinct. Around 25% of these orders are from new pump users or our Medtronic pump users who were not using our CGM. The rest of these orders are current customers in our install base, upgrading to the new sensors. We also saw over 9,000 HCPs in The U.S. who are new Medtronic prescribers. Look, for those of you who follow this space, you know how big a deal these numbers are. And the impact they're expected to have on increasing our installed base. We expect the demands our new sensors to accelerate our U.S. growth in the back half of the fiscal year. Our diabetes business is in a strong innovation cycle. We've had a lot of great news in the last few months as our teams execute on the pipeline. In July, the 780 gs system received CE Mark for three expanded indications, including for type two, for children as young as age two, and during pregnancy. In September, the US FDA also approved 780 gs for people with type two diabetes. And they cured our smart guard algorithm enabled integration with the Instinct sensor. Earlier this month, we received FDA approval to start The U.S. Pivotal for Vivera, our third-generation algorithm. We also continue to make progress with our new AID systems, MiniMed Flex, and MiniMed Fit. Remain on track to submit Flex, our next-generation durable pump, to the U.S. FDA. And with FIT, our AID patch system, we intend to submit to the U.S. FDA by the fall of next year. Look, finally, our planned separation of MiniMed is on track. Our preferred path continues to be a two-step IPO and split. We continue to expect the separation to be complete by the end of calendar year '26. So we have a lot of momentum with diabetes given the order inflection, and progress on the pipeline and separation. And you're hearing today that this momentum acceleration extends across the enterprise. As we advance our pipeline and deliver growth. Now turning to the financials. The second quarter revenue of $9 billion grew 6.6% reported and 5.5% organic. That's an acceleration from last quarter and 75 basis points ahead of the midpoint of our guidance. Our revenue from geographic from a geographic perspective was balanced, with double-digit growth in Japan, and mid-single-digit growth in The U.S., in Western Europe, and China. In China, we're driving growth even as we go through ongoing but very manageable volume-based procurement in a few businesses. Our adjusted gross margin was 65.9%, up 70 basis points year over year. Similar to last quarter, I'll walk you through the main components. So we got 30 basis points again from pricing. As well as 40 basis points from our COGS efficiency programs net of inflation. Importantly, margin headwinds from ramping up our manufacturing capacity on Afera are now behind us. So together, we drove a 70 basis point operational improvement in gross margin in the quarter, was offset by business mix, which represented a headwind of 80 basis points. Split roughly equally between cardiac ablation and diabetes. I noted last quarter, CAS is impacted by the mix of lower margin capital to higher margin catheters, and diabetes is early in its manufacturing ramp-up of Simplera. Over time, we expect both of these to improve as we scale our Cast business and separate the diabetes business. Next, tariffs were a 20 basis points headwind, and finally, FX was about a 100 basis points tailwind. Adjusted R&D was 8.4% of revenue and increased 8.9%, which is 230 basis points ahead of reported revenue growth. Have increased R&D investments in our core right-to-win franchises, where we've identified opportunities to accelerate top-line growth and improve our share in the near mid and long term. SG&A was 32.7% of revenue, up 20 basis points versus last year. As Geoff mentioned, we proactively took the opportunity to increase spending to accelerate our PFA and RDN launches in light of the considerable market demand and compelling near and medium-term outlooks. At the same time, we delivered disciplined leverage on G&A, with growth at under half the rate of our revenue growth. Our adjusted ARP profit was $2.2 billion, an increase of 6%. This resulted in an adjusted operating margin of 24.1%, down 20 basis points year over year but an increase of 50 basis points sequentially. Our adjusted tax rate was 16.4%, Q2 tax expense was lower than expected, which is largely due to timing and which we expect to offset in the fourth quarter. All in all, adjusted EPS was $1.36, an increase of 8 percent and $0.05 above the midpoint of our guidance. Let's cover our guidance. Given our outperformance in the first half of the year, as well as the confidence we have in our revenue growth acceleration, we're raising our full-year revenue guidance today. Year to date, we've delivered 5.2% organic growth, and we expect this to further accelerate in the back half of the year. As a result, now expect fiscal 2026 revenue growth of approximately 5.5%. A 50 basis point increase from the prior guidance. The third quarter, we're also expecting approximately 5.5% growth and Q4 will be even stronger. Based on recent rates, we now see an FX tailwind to fiscal 2026 revenue, of $625 to $725 million, including a $150 to $200 million tailwind in the third quarter. Moving down the P&L, we expect our fiscal 2026 gross margin to be slightly up ex tariffs, with pricing, FX, and COGS efficiency programs more than offsetting the negative impacts of business mix, primarily from cardiac ablation and diabetes. We anticipate a tariff impact to COGS of approximately $185 million, including $90 to $95 million in the third quarter. Including tariffs, we expect a fiscal 2026 gross margin decrease of roughly 40 basis points. We'll continue to fund R&D to grow greater than sales with SG&A in light of the outsized demand and building momentum for our enterprise growth drivers, we're capitalizing on every opportunity to accelerate our top line by strategically increasing sales and marketing investment in key programs. But will still deliver SG&A leverage on the full year by rigorously managing our G&A line. Taking all of this together, we expect fiscal 2026 adjusted operating profit to grow approximately 5% or 7% excluding tariffs. Our fiscal 2026 operating margin is expected to be roughly flat ex tariffs and down about 50 basis points including the tariffs impact. Now coming to EPS. Second quarter EPS came in $0.05 above the midpoint of our guidance. $0.03 5 of this beat was from reduced tax expense, I mentioned earlier, that we now expect to occur in Q4. We're flowing through the remainder of the Q2 beat and increasing our fiscal 2026 EPS guidance to a new range of $5.62 to $5.66 versus the prior range of $5.60 to $5.66. For Q3, we expect EPS in the range of $1.32 to $1.34. We're expecting margins to be down a couple of 100 basis points in Q3 as the quarter includes half the annual impact of tariffs. In addition, the expected growth acceleration in CAS and diabetes will continue to impact business mix. And Q3 is typically our lowest quarter for generating COGS efficiency savings given the holidays. However, we do expect Q4 margins to increase year over year and show strong sequential improvement. Looking ahead to next year, we continue to expect high single-digit EPS growth in fiscal year 2027 driven by accelerating revenue growth, a lesser impact of business mix from cats and diabetes on the gross margin line, and leverage on SG&A while we continue to drive higher investments in R&Ds and sales and marketing. Look, we remain committed to driving both revenue and earnings growth and believe strongly that our financial algorithm will flow from our current focus on building sustained top-line momentum. Geoff, back to you. Geoffrey Martha: Okay. Thank you, Thierry. Before we go to Q&A, let me share a few quick thoughts. So when you look at our top line, you can really see the focus we've had on allocating capital and executing on our pipeline is all now coming together to drive meaningful acceleration in our growth. We're on an incredible trajectory with PFA and we're just getting started. With some big new opportunities with Simplicity and Altaviva. At the same time, our newly formed board committees are helping as we act decisively and with increased speed. We're executing on margin enhancement programs to fuel our enterprise growth drivers, the future pipeline, and earnings leverage. We continue to evaluate the overall portfolio at every level as well as tuck-in M&A, and we are committed to growing above our WAMGR while also raising the WAMGR of the company over time. And I'm looking forward to diving deeper into all of this with you at our Investor Day next year. So bottom line, we're executing on our commitments. You can see it in our numbers. And with every quarter, we're picking up more momentum. We're pleased with the progress, but eager to continue proving Medtronic has turned the page and entered a new period of greater revenue and earnings growth. Finally, I want to thank our employees who are watching today around the world. Thank you. Thank you for your steadfast commitment to the Medtronic mission. And to the patients that you and our customers serve every day. I also appreciate your continued execution, which allows us to collectively deliver on our total company performance. So thank you. Okay. Now it's time to move on to Q&A where we're going to try to get to as many analysts as possible. We ask that you limit yourself to just one question and only if needed, a related follow-up. If you have additional questions, you can reach out to Ryan and the investor relations team after the call. So Ryan, can you please give the Q&A instructions and queue up the analysts? Ryan Weispenning: Sure, Geoff. For the sell-side analysts that would like to ask a question, please select the participants button and click raise hand. If you're using the mobile app, press the more button and select raise hand. Your lines are currently on mute, and when called upon, you will receive a request to unmute your line which you must respond to before asking your question. Finally, please be advised that this Q&A session is being recorded. We'll pause for a few seconds now to assemble the queue. Okay. Let's take the first question from Patrick Wood at Morgan Stanley. Please go ahead, Patrick. Patrick, can you hear us? Patrick Wood: There we go. Nailed it. Thank you so much for taking the question. Thanks, guys. I'll keep it to one, of course. I'd love to start with simplicity. You mentioned the commercial discussions happening faster than kind of expected. Obviously, diving into any individual payer, how are those reflective relative to the NCD? Like, are there restrictions being put on? You know, what is the sort of tone of the conversation and, you know, how the payers looking to introduce this within their patient pool? Thanks. Geoffrey Martha: Yeah. Thanks. Thanks for the question, Patrick. Yeah. The commercial payers, you mentioned in the commentary, they are coming online faster than I believe we anticipated. They're getting a lot of push from patients as well. In terms of restriction, I would say first of all, I'd say, look, the NCD is, you know, the Medicare NCD is broad. And it's better than we anticipated. It's better than the proposal. So we're comparing it to that. The one area that I've heard in addition on the NCD, they've incorporated, you know, physician, you know, for lack of a better word, physician discretion, patient discretion on hey. As a patient, can I tolerate these meds? Does the physician feel like the patient cannot tolerate the meds? That gives them that avenue to move to, to move to Ardian. To simplicity. In the commercial payers, we're seeing where there is one difference that I know of is around the medications. More of an emphasis on, you know, being on a few medications for a while. So that's the one area that I'm aware of, Patrick. And, you know, we'll keep you keep everyone posted as we get more commercial payers online. Patrick Wood: Okay. Thanks for the color. Ryan Weispenning: Thanks, Patrick. We'll take the next question from Travis Steed at BofA Global Securities. Go ahead, Travis. Travis Steed: Hey. Congrats on a good quarter. I guess, first of all, the implied second half guide around 6%. And I kind of think about it two buckets, the pipeline and then kind of the base business. And maybe talk about kind of what you're assuming on RDN in the second half. And then also the base business, you know, why confident in the slight rebound in med surge and kind of the confidence that to keep the base business humming. And then on the margins in the second half, you know, this quarter, we didn't see quite as much margin flow through. Just assuming that changes in the second half. Revenue upside leads to more margin upside in the second half. Thierry Pieton: Do you want to take that one? So maybe I start with the margin. Hey. Hi, Travis. Thanks for the question. Hey. Hey. Look. You know, the momentum that we had from a commercial perspective in the second quarter. And, you know, pretty early on in the quarter, we saw the order intake being pretty strong. We also saw that we were gonna have a little bit of upside from a tax perspective even though that's timely, but we did see it coming early on in the quarter. And so we just made a decision to go invest in the places that are gonna drive the growth going forward. So, you know, we made some significant investments in the mappers structure, for example, in cardiac ablation. We started to build up the capability from a direct marketing on the simplicity side. So we took the opportunity that we were gonna see upside on revenue and a little bit on the tax line. Just to lean into the investment to make sure we fully capture the opportunities that are ahead of us. And so you saw that in R&D. You know, it's the second quarter where we have R&D growth that's pretty significantly higher than the revenue growth. And this quarter, specifically, you saw it on the SG&A line. Where we put, as I said, quite a bit of investment especially in sales and marketing, while keeping the G&A line pretty constrained. So going forward into the rest of the year, we'll keep investing in these growth areas. You'll see R&D continue to ramp up. As you know, we're targeting to get over time to roughly about 10% of our revenue on the R&D line. On SG&A, though, you should expect to see leverage in the second half. So SG&A together, so we'll start seeing a lift there. And so ex tariffs, we'll have gross margin and operating margin leverage in the second half. And we will have to contend with the tariff impact. So all in all, on the full-year basis, you'll see gross margin slightly up before tariffs. Down about 50 basis points post tariffs. And at the operating margin level, you'll see operating margin roughly flat year over year ex tariffs and slightly down with the impact of tariffs. So, look, it's all about capitalizing on the opportunities that we've got ahead of us. Second half, leverage. And that's what we'll keep doing. But, again, on both those lines. Geoffrey Martha: So on the revenue, as you see from the guidance, we're seeing we're looking at a back half ramp here that will extend into '27. And the way I'd break it down, I mean, a big piece that is these growth drivers that are kicking in, these multibillion-dollar opportunities. In terms of the back half, though, most of that is really coming from PFA. So, in terms of the new big ones. Right? When you think about PFA, simplicity, Altaviva, and we have Hugo coming, those are we would say our big, you know, multibillion-dollar, you know, up market opportunities. In the back half, the contribution will be more from PFA in that category. PFA is, I mean, you know, is cranking right now. We've got a lot of momentum there. When it comes to Simplicity, and obviously Simplicity and Ultaviva are approved in The U.S., you know, on simplicity, I'd say we're gonna see it start to, you know, tick up in the back half of the year. And then ramp, you know, in the quarters following that. You know, like I said, between the NCD, and the commercial payers coming online, you know, this market is, you know, really a best-case scenario. It's as big as what we said it is, it's not about, you know, if or even how big. Like, it's as big as we said as it's really how fast. And we're measuring that speed of adoption in quarters, not years. Altaviva, you know, again, just approved a lot of great leading indicators, physician trainings over, you know, booked, and we can talk more about that if I get questions on why we're so excited. Again, it'll start to contribute in the back half a little bit. And then Hugo, we don't have too much on, you know, we but we do still expect the approval in the back half of our year. Then there's another getting to the base business, you know, diabetes pops, you know, pops back up, as our new sensors are available. Neuromodulation continues to be strong. CST will be continue to be strong. CRM, had two really good, you know, a really good Q2, you know, I don't know if we're gonna have that same level of growth there, but still, you know, strong growth there. And then you've got two other businesses that'll I'll call it, tick up, you know, incrementally increase their growth. Peripheral vascular with the carotid stent. Mechanical thrombectomy coming. And then neurovascular, again, it's also selling like carotid stent. Some hemorrhagic products coming, and they're just lapping some issues. A recall and then, lapping VBP here. So the base business is a big contributor. PFA is a big contributor. Then you're gonna start to see Simplicity, Altaviva, and a little bit of Hugo. Great. Thanks a lot. Ryan Weispenning: Thank you, Travis. We'll go to the line of Vijay Kumar at Evercore ISI. Please go ahead, Vijay. Vijay Kumar: Hey, guys. Congrats on a nice sprint here. And Geoff. Thanks for taking my question. I had maybe a new product question, a two-parter, if you will. One on Effera, Geoff, do you feel like we have enough mappers now? And if is supply in a place enough where you can hit the $2 billion, you know, how are you thinking about supply and mapping? Then on TBL, we've got some good feedback on cannibalization of, you know, whether TBL could cannibalize Botox procedures. Could TBL be, you know, a billion-dollar product for you guys down the road? Thank you. Geoffrey Martha: So, you know, I'll start with the PFA questions. You know, on the supply that, you know, we are that that's not holding us back. So, supply is in a good spot. And then on the mappers, the mapper hiring is going well. Right? We're staying ahead. You know, but I wish the buffer a little bit more because the growth is tremendous. But we are staying ahead on the mappers and the supply is not an issue. And like I said, our PFA business is really humming, you know. I was just with a big customer yesterday. They got two systems. They will hit laid out three more that they're gonna buy and just talking about, you know, once they put, you know, especially Afera, once they put that in one of their hospitals, how it kind of, you know, takes all the market share or the majority of the market share there. For all types of cases. There's just all these benefits there. So feeling really really good about that. And, again, this mapper hiring has been a Medtronic, not just our cardiac ablation business, but a Medtronic effort. And our HR team's doing a hell of a job there. And then on tibial, you know, look, tibial is something I think everyone needs to invest a little bit of time in here. It's a huge market, 46 million people in The U.S. with overactive bladder and of that 16 million with urinary urge incontinence, where this really shines. And it takes the therapy versus sacral which works really well. It's been a great market for us. You know, there's been some channel disruption in the market lately, but it's still a great market. You know, and, like, works really well for patients. But it does take, you know, weeks or months to get that therapy to a patient from when they start. Versus tibials left less than a day. So what you're seeing here is with tibial, right, you have to do, I mean, with both with the sacral nerve, you have to do a trial, then you have to go in for the implant. Then the patient leaves without the therapy turned on, has to come back to get it activated. Versus tibial. This all happens in a day and the procedure is easier. And when patients, to get to your core, your question, when they're presented with options, all of their options, sacral nerve, tibial, Botox, they choose they tend to choose the tibial. So we do think it will take share from Botox. And I would emphasize that this we believe, look, there's a very strong place for sacral nerve. There definitely been this is an incremental opportunity on top of our sacral business. And so this that sacral combined with tibial given that it's gonna be incremental, this is gonna make that business, that pelvic health business, a growth driver for the company. That's what I'll say about that. It's gonna meaningfully improve the growth rate of that business. Ryan Weispenning: Okay. Thank you, Vijay. Next, let's go to the line of Robbie Marcus at JPMorgan. Please go ahead, Robbie. Robbie Marcus: Great. Good morning and nice quarter. Thanks for taking the questions. I wanted to ask you talked about strategically reinvesting into SG&A and over time, materially increasing R&D, I think up to 200 basis points. How are you thinking about where those dollars are going? How soon should we be thinking about that? And, you know, just help us think about the cadence and the ability to still grow operating margin in the face of higher investment. Thierry Pieton: Yes. Hi, Robbie. Thanks for the question. So, you know, first, where the dollars are going. So there are really two different categories, I would say. One is to, as I said, to capitalize to the maximum extent possible on the growth drivers that are ahead of us. So there is a significant amount of investment that's going to cast to Ardient to Altaviva and to, and, obviously, to Hugo with a profile that a little bit more long term. There are other growth drivers that we're funding. At the same time, such as structural heart and neuromodulation, for example. The second category of where we're putting investment is to make sure that we keep the leading edge from a technology perspective in the key franchises that are our bread and butter. So, you know, there's overinvestment compared to the average of the business in CRM. For example, in the next generation of micro, there's significant investment going in CST to continue to develop the ecosystem that that business has created around Able that has enabled us to, you know, make the CST business more sticky with our customers from a device perspective and gradually improve the margins. So it's really those two areas capitalize on the growth drivers on one hand, and keep the edge on innovation in the key franchises on the other side. From a sequence perspective, look, you know, I would say third quarter, we made a pretty deliberate strong investment because we saw the coming. You know, you'll see a bit less of that already in the second half. So as I said, you know, you should see leverage on the SG&A line in the 40 basis points of pricing and about 30 basis points or 40 basis points of cost out. That's been sort of a recurring performance over the last quarters. And we expect that to continue. Over time. Right? So we're generating between those two lines 70 to 80 basis points of gross margin improvement. Right? And this quarter, you had about 80 basis points of negative mix. And 20 basis point of tariffs. And that was offset with FX. Going forward, we expect that negative mix to start getting better towards the '27. So for the rest of the year, it's still gonna be, pretty significant headwind as CAS and diabetes continue to accelerate. And in the second half of, of twenty-seven, diabetes will be deconsolidated, and then on the CAS side, we'll start seeing the shift between the capital equipment and the catheters, which will make that an accretive business as opposed to being dilutive. So what's what you're gonna see there is the 70 to 80 basis points of gross margin improvement operationally start to show up more as the mix becomes a gradually smaller and a positive effect over time. And then outside of that, we've got some external factors, so we have to contend with the tariffs. So for the second half, we've got, you know, about 90% of that $185 million of tariffs that's gonna show up. In the income statement. The bigger portion is in Q3. Then we'll have a carryover of tariffs going into '27. And we expect foreign exchange, which is the last item there, to be a slight tailwind going into '27. So if you go it's a long it's a long answer. Apologies. But I think it's important that you understand the algorithm. Going into '27, we'll keep investing in R&D. To get to the 10% over time. But you should expect to see leverage on the SG&A line in '27. So, look, we're confident that with the growth with what we're doing from our gross margin performance in a sustainable fashion and COGS and pricing, and the leverage on the overhead, we'll have a leveraged P&L on the operating profit line in 2027. And that's why we hold on our commitment to have high single-digit EPS growth going into next year. Geoffrey Martha: Yeah. You know, just to just to add to that, you know, there's more oxygen here. To create for the investment. You know, it's good to see the improved pricing. And as we go forward, we're not, you know, assuming much incremental, but pricing, but at least holding the improved position that we have. But there's more oxygen in our cost down. You know, as we there's opportunities in scrap, obsolescence, and over time, you know, continue to optimize our network. So these are areas I think these are the incremental opportunity and cost down. And, Rob, you have read some of your stuff in the past that you don't think there's much to do for us on SG&A. There but there's more. There's more to go on SG&A for the company, and that's where the scale of the company should benefit us here. And, you know, it's not gonna be, you know, easy on the company, but there's opportunities there. And we're committed to doing what it takes to fund these growth drivers because, you know, what we're seeing out there with patients on these different growth drivers and what we're hearing clinicians, the impact on them and their staff. It's, you know, this is a big opportunity for the company we haven't seen in decades. We're gonna make it happen. Right? And so there's still, you know, room to go on SG&A as well. And like I said, COGS, to make this happen. Robbie Marcus: Great. That was a fantastic answer. Maybe just one, quick follow-up. Geoff and Thierry, I know even since the beginning of this year, you've talked more and more about tuck-in M&A. Are you thinking about the environment today? Do you see a lot of opportunities and any areas you see more interesting than others to help flush out the portfolio? Thanks a lot. Geoffrey Martha: No. Look, we're very focused on the tuck-in M&A. Don't wanna tip our hat in terms of, you know, exact segments, but we definitely are prioritizing some of the, it's again, it's tuck-in. We're prioritizing these higher growth segments. A lot of that is in cardiology, some in neuroscience as well. We like that affair profile, right, where you're close to market or just you're on the market early stage or close to market would be ideal. Not afraid to, you know, to make the investment that it takes. To get those type of companies. But as Thierry said on your earlier question on, like, where's the R&D going, you know, doesn't the tuck-in M&A, I wouldn't rule out some of our other, you know, key franchises that may need, to augment their R&D with a little M&A. But we are more focused on these higher growth segments. And then the, you know, the board committees we've set up help with the speed enable us to move faster. So, we'll see where it goes. But it's definitely a big focus. Thierry Pieton: Hey. One thing, that, you know, we don't communicate a lot about but we've got a pretty active ventures. That's good. And that arm's been pretty active. So it's got, you know, over 50 companies in which we have a stake right now. We like to use that arm to make investments in sort of early-stage companies. And, you know, it helps with some of the dilution, etcetera. Typically, you know, we always make these venture investments with a view of going higher into the capital over time. So it's never a venture for venture. And, again, it's been it's the pipeline there is pretty strong. We'll keep working that angle too because it's helpful to feed the pipeline for future M&A. Robbie Marcus: A lot. Appreciate it. Ryan Weispenning: Yeah. Thank you, Robbie. Looking at the clock here, I think we've got time for about three more questions. So next, we'll go to the line of Larry Biegelsen at Wells Fargo Securities. Larry, please go ahead. Larry Biegelsen: Good morning. Thanks for taking the question, and congrats on a nice print here. So, Geoff, I wanted to ask about the ramp of Ardian because as you said, it's a question of how fast. So I'm hoping you can add some precision to your earlier comments. You know, I think at our conference in September, you know, I asked US already in sales could replicate The US watchman ramp, which is about $400 million in year five. And, you know, I believe you said you'd be disappointed if your US audience sales didn't achieve $400 million by, I believe, year three. So how does the exclusion of isolated system hypertension in the NCD, you know, impact how you think about the ramp? And do you still believe you can achieve $400 million, you know, US sales by around fiscal 2028, which I think would be year three. And just confirm, Geoff, that the current run rate The US is about $50 million. Thank you. Geoffrey Martha: Well, look. Let me start by saying, yes. I would be disappointed if we're at year five, wherever you said at $400 million. We think it would go faster than that. And this the final NCD won't hold us back. And like I said, we believe it's an improvement on the proposed NCD. Maybe this is a good time because I know there was, you know, on that NCD, like I said, it's an improvement to the proposed NCD. If you go back a year, it's better than what we thought a year ago. If you go back five years, and you asked us if we thought we would get this type of NCD, we'd say that's the best-case scenario. You know, so this market, like I said, is as big as we've said it's gonna be. And, we believe that this final NCD as you dig into and really understand how hypertension, today is treated, it actually reduces the requirements for patients to get this therapy and it reduces the. And maybe this is a good time that we have, our chief scientific and medical officer on the line. Knowing that there'd be, Doctor Laura Mori, who's also an interventional cardiologist, knowing that there'd be maybe some questions on this, on the treatment pathways. Maybe I'll ask Laura to comment, you know, since you mentioned that one systolic, you know, question. Or diastolic question. Laura, can you maybe provide some context here? Laura Mori: Sure. Hey, Larry. As specific to your question about isolated systolic hypertension, those are patients who, you know, don't have an elevation of their diastolic or the lower number of their blood pressure. It's only the top one. And Jeff said we're continuing to study those patients, but I think the important thing to note is this population is actually pretty small for us overall. If you look at recent studies, people with hypertension over age 60, it's less than 15% of patients who have ISH or this condition. And for patients who are younger than 60, who are half of our patients in trials and then also in practice, it's really very unusual. So as Jeff said out the gate with the NCD, you know, if you just look at that topic, we would estimate that, you know, be less than 10% that would be affected by isolated systolic hypertension, not meet those criteria. And then overall, you know, just to reiterate what Jeff said is that the overall the final NCD makes access more practical for patients with less time delays to treatment. Less restrictions and the, you know, the couple of things that they've talked about screening for are really things that are done in standard practice, you know, by general practitioners or internists. And you yeah. I think the other port just to mention is that in their response, CMS really reiterated that quality of life a really important consideration for patients. Because lifestyle changes and being on many medications can be really difficult. And so they specifically said the good faith attempts are reasonable before referral rather than specifying some, like, mandatory minimum doses or number of medications. So overall, you know, whether it's ISH or overall, the workflow for patients to get into, referral for simplicity is not is really not restricted. Geoffrey Martha: Alright. Thank you, Mark. Larry Biegelsen: Yep. Thanks, Larry. Ryan Weispenning: Next, we'll go to the line of Shagun Singh at RBC Capital Markets. Go ahead, Shagun. Shagun Singh: Great. Thank you so much. You know, I wanted to touch on the algorithm here. A key message was growth acceleration. You know, how should we think about the base business? Is it mid-single digits? The $1 billion incremental PDFA sales is about 300 basis points. And then RDN, I don't know if you could put a final point there in terms of the growth contribution. But as you think about growth should we think about Medtronic moving towards that high single digit on the top line? And then on portfolio management, I was just wondering how you're thinking about or should we expect portfolio pruning beyond diabetes? Thank you for taking the questions. Geoffrey Martha: Well, maybe I'll, you know, Shagun, thanks for the question. I'll start with the last part of it on the portfolio management. And look, this is an ongoing focus, you know, for the company, and it's really making sure that beyond diabetes, right, first of all, that deal is tracking and on track. And going well. Beyond diabetes, we just wanna make sure that the whole portfolio fits together. We're getting the right amount of synergies. And we can provide the right amount of focus on these generational enterprise growth drivers like PFA, like Ardian, like Altaviva. And Hugo when it comes to The U.S. and others. And so it remains a focus and it remains a focus of, like, one of the board committees that we set up, and we're meeting frequently on this and at it. And that's what I'll say there. And I'll have Thierry answer. Thierry Pieton: Overall, you know, if you think about the guidance that we just gave, five and a half on the full year, we were at 5.2 at the end of the first half. We're guiding at 5.5 in the third quarter. You can do the math for what fourth quarter looks like. And, you know, we don't wanna slow down from there. And look, what I would say is, you know, it's pretty clear that CAS represents a sizable opportunity. We reiterate the incremental $1 billion coming shortly probably in the beginning of in the '27. Fiscal year '27 for us. And Ardian, you know, we have all these discussions about the speed. It's I think it's important to keep in mind that, you know, 11% of market share that population is, you know, sort of almost $3 billion of revenue for us. So it's a pretty significant opportunity. And we talked about the size of the Altaviva opportunity as well. It's 20 million patients overall. So those come in increment to the rest of the business, and the rest of the business is not standing still. So specialty therapies is getting better. You saw a first sign in this quarter, and it's gonna keep going with the product activity that we've got in neurovascular with Altaviva and pelvic. And the key franchises, look, CRM had a great quarter. It's gonna continue to perform for the rest of the year and beyond. We're investing in that business to keep the technology lead. So we don't intend to go backwards. CST has been improving on the back of, you know, the able ecosystem that the team has created. So look. You know, we're positive about the opportunities of the company going forward. And we'll keep you posted when we give next year's guidance in at the '4. Ryan Weispenning: Okay. Thank you, Shagun. We've got time for one more question, and I apologize to the analysts that we weren't able to get to. You've got additional questions, feel free to reach out to me during the day. So we'll go to our last question, Pito Chickering from Deutsche Bank. Pito, please go ahead. Pito Chickering: Hey. Good morning, guys. Thanks for taking my questions. I'll I have sort of two product, so I'll ask them upfront. First one is, as AF ablation is moving to the ASC setting, can you talk about how you are positioned in the ASC in terms of mappers, and the fair placements? And on TAVR, can you talk about what you saw The U.S., you know, Europe and Japan? And how market share is looking in those markets. Thanks so much. Geoffrey Martha: Well, thanks, Pito. Look, for, you know, PFA and ASCs, over time, we do see that as an incremental opportunity for market expansion there. It'll be a bit of a shift outside of the tertiary centers to the ASCs over time, but it also, you know, be a market expansion opportunity for us. It is a focus for us. We have been hiring across the company, quite frankly, particularly in neuroscience, and in cardiovascular. Folks that are specifically focused on market development in the ASCs for us and what our strategy is and how our product portfolio fits there. And the resources we need, including mappers. So this is definitely in the calculus for Medtronic, not just, you know, not just our cardiac ablation business. Like I said, this I think will represent, you know, an incremental growth opportunity for us there. And then on TAVR, you know, what I'll say is, you know, we had a decent Q2 here growing high single digits on a global basis. We're executing particularly well and getting more than our fair share of that of that Boston exit. You know, as we move forward in PFA, you know, I think, you know, Q3, we may see a deceleration there. Thierry Pieton: Tougher. Geoffrey Martha: In TAVR. In TAVR. What did I say? PFA. PFA. I'm sorry. No. No. No. PFA, he's gonna keep going. I'm sorry. But in TAVR, a little bit of a deceleration in Q3, but then it'll pop back up in Q4. We've seen due to a phasing we've seen this in prior quarters as well. I don't know if you wanna add anything to that. Thierry Pieton: No. That's right. We saw the Q4, Q1 effect and, you know, Q2, Q3 looks kinda similar, a little bit slower in Q3, but with a pickup in the fourth quarter. Yeah. And just for, you know, clarity, PFA will continue to go off the 71%. It'll accelerate into Q3 and beyond. Ryan Weispenning: Thank you, Pito. Geoff, if you wanna go ahead with your closing remarks. Geoffrey Martha: Sure. Well, so for thank you for joining and all your thoughtful questions this morning. And like Ryan said, apologize to the analysts. We didn't get to, certainly appreciate your support and your interest in Medtronic. Please join us again for our Q3 earnings broadcast for more updates, and there'll be more, and our continued progress. And on the long-term strategies. And we expect to hold this on Tuesday, February 17. And for those of you in The U.S., I wish you and your families a very happy Thanksgiving next week. I can't believe Thanksgiving's next week. With that, enjoy the rest of your day. Thank you.
Operator: Ladies and gentlemen, thank you for standing by. Welcome to Canaan Inc. Third Quarter 2025 Earnings Conference Call. At this time, all participants are in listen-only mode. After management's prepared remarks, we will have a question and answer session. Please note that this event is being recorded. Now I'd like to hand the conference over to your speaker today, Gwyn Lauber, Investor Relations for the company. Please go ahead, Gwyn. Gwyn Lauber: Thank you, operator. Hello, everyone, and welcome to our earnings conference call. Joining us today are Chairman and CEO, Nangeng Zhang, and our CFO, James Jin Cheng. Leo Wang, Vice President of Capital Markets and Corporate Development, and Kevin Darryl Dede, Senior IR Manager, will also be available during the question and answer session. Our CEO will start the call by providing an overview of the company and performance highlights for the quarter. Our CFO will then provide details on the company's operating and financial results for the period before we open up the call for your questions. Before we begin, I would like to refer you to our safe harbor statement in our earnings press release. Today's call will include forward-looking statements. These statements include, but are not limited to, our outlook for the company and statements that estimate or project future operating results and the performance of the company. These statements speak only as of today, and the company assumes no obligation to revise any forward-looking statements that may be made in today's press release, call, or webcast except as required by law. These statements do not guarantee future performance and are subject to risks, uncertainties, and assumptions. Please refer to the press release and the risk factors and documents we file with the Securities and Exchange Commission, including our most recent annual report on Form 20-F, for information on risks, uncertainties, and assumptions that may cause actual results to differ materially from those set forth in such statements. In addition, during today's call, we will discuss both GAAP financial measures and certain non-GAAP financial measures, which we believe are useful as supplemental measures of the company's performance. These non-GAAP measures should be considered in addition to, and not as a substitute for, or in isolation from, GAAP results. You can find additional disclosures regarding these non-GAAP measures, including reconciliations with comparable GAAP results, in our earnings press release, which is posted on the company's website. With that, I will now turn the call over to our Chairman and CEO, Nangeng Zhang. Please go ahead. Nangeng Zhang: Thank you, Gwyn. Hello, everyone. This is Nangeng Zhang, CEO of Canaan Inc. Welcome to our earnings call. Together with our CFO, James Jin Cheng, we are calling from our Singapore headquarters to discuss our Q3 2025 business results. Let me start with an overview. During the third quarter, the global macro environment remained highly uncertain. In particular, the US Reserve's reciprocal tariff policy increased mining costs in North America. However, we also saw the resilience of the North American market. Once there was a bit more clarity, demand started to recover clearly during this quarter. Bitcoin prices increased from approximately $107,000 at the end of June to about $114,000 at the end of September. This shows a rapid increase in total global hash rate, which rose from 846 exahash per second at the end of Q2 to 1,041 exahash per second at the end of Q3. Accompanied by a significant rise in mining difficulty, with growing energy competition globally, the mining industry is facing higher operational challenges. Despite the complex external environment, we delivered results that exceeded expectations. Total revenue for the quarter exceeded $150 million, up 50.2% quarter over quarter and 104.4% year over year, and beat our guidance range of $125 million to $145 million. Gross profit reached $16.6 million, much higher than the $9.3 million reported in Q2. This improvement in revenue and gross profit reflects our rapid response to market demand and ongoing optimization of global mining operations. Supported by strong sales and revenue momentum, our cash balance at the end of the quarter increased to $119 million, representing an 80.9% sequential increase. Nangeng Zhang: In mining machine sales, we delivered a record high of 10 exahash per second of computing power in Q3, up 55.6% sequentially and 37.7% year over year. Our average selling price increased 33.8% year over year, to $11.8 per terahash. Despite a slight rise in cost per terahash due to changes in international trade policies during this quarter, we achieved a product gross margin of approximately 17%. We continue to serve strong hash rate demand in Asia and also captured the recurring demand in North America. Notably, during this quarter, we secured large orders from well-known customers in the region, including Bitfury, Cipher, CleanSpark, and Luxor. In early October, we signed a purchase agreement for over 50,000 A15 Pro models with a US-based miner client. This highlights the growing recognition of our product performance, quality, and service by North American institutional customers. In the consumer-grade mining machine market, our Avalon Home series continues to lead in this emerging space. In addition to regular marketing and promotional activities, we have also included the home series in our open-source code program. We are actively growing our user and developer community and expanding our brand influence. At the same time, we are exploring new applications of the home series in smart home scenarios. Currently, we are developing software to make our products compatible with Matter, the mainstream protocol standard for smart home devices. In terms of consumer-grade product sales, we delivered 14,000 units of the Avalon Home series in Q3, generating over $12 million in revenue, a sequential increase of 115.3%. The AvalonQ model was the top performer this quarter. By supporting scale sales through channel partners, the home series achieved nearly $4 million in gross profit, with a solid gross margin of around 33%. Overall, our total product revenue reached $118.6 million, with gross profit close to $20 million in Q3. The Avalon Home series contributed 10.3% of total product revenue and about 20% of product gross profit. Based on what we are seeing, competition in the consumer mining market remains relatively healthy. We plan to maintain solid gross margins with the launch of new products and expanding channel coverage to drive scale. Turning to mining operations, despite a notable increase in mining difficulty during this quarter, our disciplined execution allowed us to steadily enhance hash rate development, utilization, and overall mining efficiency. As a result, we generated another quarterly record of $30.55 million in mining revenue while maintaining competitive power costs. In the third quarter, we added approximately 1 exahash per second of new deployed capacity in North America, bringing our total deployed hash rate to 9.3 exahash per second by the end of the quarter, with approximately 7.8 exahash per second energized. We mined 267 BTC during this quarter, which further contributed to our crypto asset balance. Our Bitcoin holding reached an all-time high of 1,582 BTC by the end of the quarter, providing solid support for our balance sheet. We are also actively exploring innovative mining projects. This quarter, we partnered with Solana to deploy machines at a 20-megawatt wind power mining facility in Texas. In Canada, we worked with a local energy infrastructure partner on a pilot project that converts stranded natural gas into computing power. We also supplied mining equipment for projects designed to support local grid stability. These projects mark our first step into the energy infrastructure space, bringing with them the utilization of stranded energy. Our long-term vision is to integrate high-density, interoperable Bitcoin mining loads with energy-intensive AI and HPC workloads, building a future where computing and energy infrastructure grow together. We are entering an era in which AI software and data centers will profoundly shape daily life. At the same time, we believe that public awareness and demand for sustainable energy will continue to grow. Throughout Canaan's history, we have held a consistent belief that technology should make society more efficient. Today, we are seeing that vision become materialized. We have unique advantages in this transformation, with more than a decade of developing technologies that make chips and systems more energy-efficient. We are now extending these capabilities to both home use and the traditional energy sector. Energy operators can use our computing systems to balance the grid, improve transmission efficiency, and generate new revenue. On the consumer side, utilizing excess heat from home mining is only the beginning. Over time, we envision this concept expanding into broader home computing applications. For R&D, we continue to innovate and upgrade our products. In October, we officially launched our next-generation Avalon A16 series. The Avalon A16 XP model delivers 300 terahash per second of hash rate per unit with an industry-leading power efficiency of $12.8 per terahash. This marks the first time our Avalon miner has reached the 300 terahash level, clearly showcasing our strong leadership in Bitcoin ASIC design. We see improvements to production and supply chain. Our global delivery system is now more flexible and resilient. Today, we have manufacturing capabilities laid out in Mainland China, Malaysia, and the US, working seamlessly together to support delivery and after-sales service for consumers worldwide. While enhancing our product and supply chain capabilities, we have also sharpened our focus on core operations. Starting this quarter, we realigned our R&D team around projects that offer clear revenue visibility and strategic value. We have also streamlined headcount to support this focus. In addition to organizational and cost optimizations, we are also allocating additional resources to expand our business footprint. We have established a dedicated consumer product team to optimize product quality and accelerate product iteration. Additionally, we are also allocating more resources to our hash rate finance and energy infrastructure initiatives. We see new power-related opportunities in many regions, from home users and small businesses to power utilities. In Europe and Asia, customers are exploring ASIC-based grid balancing applications. In North America, stranded energy opportunities continue to grow, with similar projects emerging globally, including in the Middle East. In our digital assets treasury management, we continue to execute our flexible strategy. At the end of the third quarter, we held 1,582 Bitcoins and 2,830 Ethereum. In early November, during a market pullback, we strategically acquired an additional 100 Bitcoins as part of our crypto asset management strategy, further enhancing our asset allocation and potential liquidity. To sum up, Q3 was a highly strategic quarter in Canaan's development journey. We achieved strong revenue growth and improved gross profit while also optimizing our business structure and organization. At the same time, we made encouraging progress in several new areas. Looking ahead, we are fully focused on driving Q4 sales, fulfilling large customer orders, and converting preorders for our new A16 series. At the same time, we are accelerating the deployment of newly signed mining projects to further expand our mining hash rate. We are closely monitoring the impact of US tariff policy, macro liquidity conditions, and potential changes in global mining and energy regulations. Taking all of these factors together, we remain cautiously optimistic for the fourth quarter and expect total revenue to be in the range of $175 million to $205 million. This outlook is based on current market and operating conditions, and actual results may vary with policy uncertainties and market volatility. This concludes my prepared remarks. Thank you, everyone. Now I will hand it over to our CFO, James Jin Cheng. Please, James. James Jin Cheng: Thank you, Nangeng. Good day, everyone. This is James Jin Cheng, CFO of Canaan Inc. I'm very glad to share our Q3 financial results with you. Even today, we are witnessing Bitcoin price under big pressure. As Nangeng stated at the start of the call, the macroeconomic environment in Q3 was highly uncertain. Reciprocal tariff policies from the United States added mining costs in North America. Global network hash rate growth continuously outpaced Bitcoin's price appreciation. This all led to increased mining difficulty and intensified operational challenges across the industry. Despite market volatility, we delivered strong results this quarter. Our revenue exceeded our own expectations. Our gross profit showed consistent growth, with the average selling price climbing again, and our reserves of cash and digital assets increased significantly in our ending balance sheet of September. Let me give a quick summary of our financial performance. First, we delivered a total revenue reaching $150.5 million, exceeding our guidance and representing a 104% year-over-year increase. This was primarily driven by growth in our product sales of $118.6 million, surpassing the $100 million milestone for the first time in the past three years. This growth was achieved while we set a new record of 10 exahash of quarterly computing power sold, and the average selling price continued rising to $11.8 per terahash per second, a new high for the past two years. After a very quiet Q2, our clients from the United States started actively placing sizable and repeating orders for the A15 series. Sales of North American customers contributed 31% of our total revenue in Q3. We are happy to witness the strong demand recovery of the North American market. Also, our sales of Avalon Home series generated $12.2 million in revenue during the quarter, representing a 115% quarter-over-quarter increase. This is the first time Avalon Home products have contributed over 10% of total product revenue since the launch just over a year ago. As Nangeng said, we are cultivating the consumer market and establishing our leadership position in the newly defined house mining category. Second, our mining business also delivered another record result this quarter. Mining revenue reached $30.6 million, an all-time high and a 241% year-over-year increase. We mined 267 Bitcoins during the quarter, representing 82% year-over-year growth. During the quarter, we deployed over 8,000 mining machines across our projects in the United States and other countries, expanding our total deployed hash rate by 14% from 8.15 exahash per second at the end of Q2 to 9.3 exahash per second at the end of Q3. Our installed computing power in the United States also grew by 20%, from 3.66 exahash per second at the end of Q2 to 4.4 exahash per second at the end of Q3. We also strategically closed our mining operations in Kazakhstan and initiated a small-scale project in Malaysia. James Jin Cheng: Next, our profitability continued to improve this quarter. Gross profit reached $16.6 million, up 78.6% quarter over quarter, marking a significant turnaround from a gross loss of $21.5 million in the same period last year. Product gross margin reached 17% this quarter. Both gross profit and margin continued their growth in Q3, extending the upward trajectory and reinforcing the positive trend. Our Avalon Home series generated nearly $4 million in gross profit with a gross margin of approximately 33%. The Avalon Home series accounted for around 10.3% of product revenue, and it contributed 20% of the product's gross profit. The home series has already become a stable revenue pillar and a recognized gross profit contributor. Last but not least, our total cryptocurrency treasury reached approximately 1,582 Bitcoins and 2,830 Ethereum, with an estimated market value of approximately $189 million at the end of Q3. Our unrealized total gain was approximately $87 million, reflecting the appreciation in value of the digital assets accumulated from mining and other operations. As of October 31, our total Bitcoin treasury increased to 1,610 as previously disclosed in our monthly report. In early November, we further strengthened our digital asset portfolio by purchasing another 100 Bitcoin. Turning to expenses, our operating expenses totaled approximately $40.5 million. We recorded $1.5 million in one-time expenses relating to the operational efficiency initiative, including organizational optimization, travel control measures, and other related items. In addition, we recorded $1.2 million in impairment related to mining machines deployed in Kazakhstan. By the end of Q3, the price of Bitcoin increased to around $113,000 versus around $107,000 at the end of Q2. The price of Ethereum increased to around $4,100 at the end of Q3 versus around $2,500 at the end of Q2. This price appreciation resulted in an aggregate unrealized fair value gain of $5.7 million on our digital asset holdings. A non-cash change in fair value of preferred shares impacted our Q3 bottom line by $9.5 million. This included a $5.4 million impact from the Series A-1 preferred shares, which were fully converted during the quarter, and another $4 million from Series A preferred shares, which were fully converted in early October. To provide a clearer view of our underlying operational performance, we have excluded the impact of this accounting treatment from our non-GAAP measures. With all preferred shares now fully converted, we expect Q4 to include a final impact related to the change in fair value of these instruments. Benefiting from strong top-line growth, improved margins, and firm cost discipline, we delivered a positive adjusted EBITDA of $2.8 million in Q3. Our net loss per ADS narrowed to just 5¢ versus 27¢ in the same period last year, demonstrating continued momentum toward profitability. Turning to our balance sheet and cash flow, we generated a net cash inflow of $53 million in Q3. This was driven by $189 million in sales collections, the highest quarterly level in the past two years, and supplemented by approximately $10 million in export VAT refunds. These inflows fully covered the quarter's major cash outflows, including $56 million in wafer prepayments and $90 million for production and operations. As a result, our cash balance increased to $119 million at quarter-end. Now moving to our contract liability, the balance of contract advances reached nearly $87 million as of this quarter-end, with over 85% contributed by North American clients. As of the end of Q3, we recorded account receivables of $7 million, all from customers using Bitcoins as collateral for installment payments. We will continuously evaluate market demand and adopt corresponding credit policies with caution. Now turning to our recent fundraising, in early November, we closed a strategic investment totaling $72 million with three top-tier institutional investors: Brevan Howard, Galaxy Digital, and Wace Asset Management. The proceeds are intended to fund the acquisition and deployment of North American data center sites, as well as the expansion of our Bitcoin mining machine production capacity. In late October, we renewed the ATM program to broaden banking relationships and enhance our financial flexibility for future growth initiatives. Following the renewal, we sold approximately 4.8 million ADSs, raising gross proceeds of about $7.8 million. As previously reported in the monthly report, we have decided to pause further sales under the ATM for the remainder of 2025. As of the date of the earnings, we have cumulatively repurchased approximately 5.1 million ADSs for approximately $3.4 million under our share repurchase program. In the future, we plan to execute on our repurchase plan as market conditions allow us. Moving forward, as our CEO just mentioned, strategically, we will continue our technology-driven efforts with the goal of improving the efficiency of society. These efforts include the development of energy-efficient chips, similar to what we did in the past decade. This includes an extension of our energy operations, which leverages computing technologies. Also, on the consumer side, these efforts include Bitcoin computing and heat reuse. To better utilize our resources, we set up additional internal controls to oversee the operation of our business. These priorities are of strategic importance and will help to provide us with additional revenue visibility. We will increase the expansion of our consumer products and energy operations, but at the same time, streamline existing R&D and administration cost structures. In cash flow management, we will continue to invest in R&D on new products and wafers in the supply chain, and we will also seek opportunities that will increase our energy operations around the world, as well as help our digital assets treasury to accumulate more digital assets on our balance sheet. All this will happen in a very dynamic environment. We remain cautiously optimistic as we execute on our strategy while focusing on protecting and increasing our shareholder value. We expect revenue for the fourth quarter to be in the range of $175 million to $205 million. This forecast reflects current market conditions, and actual results may vary given policy uncertainties and market volatility. This concludes our prepared remarks. We are now open for questions. Operator: Thank you. We will now begin the question and answer session. As a courtesy to other investors and analysts who may wish to ask a question, please limit yourself to one question and one follow-up. If you have any additional questions after the Q&A session, the Investor Relations team will be available after the call. For the benefit of all participants on today's call, if you wish to ask your question to management in Chinese, please immediately repeat your questions in English. To ask a question, please press 11 and wait for your name to be announced. One moment for the first question. Your first question comes from the line of Mike Grondahl from Northland. Please go ahead. Mike Grondahl: Hey, guys. On the 50,000 machine order for the A15 Pros, can you talk a little bit about delivery timing there and gross margin on those sales? Nangeng Zhang: Hi. Good morning. Yeah. You know, this order for more than 50,000 A15 Pro units is one of our most important deals this year. So under the contract, we expect to complete all deliveries by the end of 2025. So far, we have shipped a part of the orders and are progressing in the remaining production and logistics after that. Yeah. You know, given the size and the tight timeline of this order, and the fact that Q4 is generally a peak period for supply chain logistics, cost chains, our production and operations team are working at full strength to ensure on-time delivery while maintaining product quality. And, also, you know, at the same time, we are expecting deliveries for other customers in parallel to avoid any impact on our long-term other long-term partners. This is a key test of our delivery management capabilities. It's a really hard job. Yeah. So for the gross margin, yes, we have a positive gross margin. Yeah. But maybe I cannot have the exact numbers. Yes. We have close one. Mike Grondahl: Yep. Got it. And then just maybe a follow-up. Your home mining sales have done really well lately. What are the margins on that business line versus the industrial mining equipment? Nangeng Zhang: I think, you know, for our home series, in Q3, we get 33% of gross margin. And by the end of this year, I think we should maintain above 30% gross margin. It is significantly higher than industrial miners. Yeah. Yeah. Definitely. I think the competition. Yeah. Yeah. Right. So yeah, so for I think for the home miners' roadmap, we are planning to launch several new products over the next twelve months. And, you know, further compete about 2C, you know, the 2C product portfolio always consumer products need a refresh every year. So we need to refresh almost all existing models in the coming year. So but but still for 2026, our most important KPI for the home series is still to go mainstream and break out of the crypto niche. So please give us some more time. Yeah. Thank you. Mike Grondahl: Got it. Okay. Thank you. Nangeng Zhang: Thank you, Mike. Operator: Thank you for the questions. One moment for the next question. Next question comes from the line of Nick Giles from B. Riley. Please go ahead. Henry Hurl: Thank you, operator, and good morning or good evening, everyone. This is Henry Hurl on for Nick Giles. So for my first question, when is the earliest you guys could ship your new A16 models and at what scale? And what are your expectations on price and margin respectively? Thanks. Nangeng Zhang: Yeah. The A16 series was officially launched in October. And now we are at the first batch of sample production, and yeah, and we finished the testing stage. According to our plan, we will start shipping samples to selected customers by the end of this month for their testing and evaluation. Yeah. This is consistent with our launch strategy. And we expect to begin our volume shipments in 2026. And yeah, and then we will adjust the production and the delivery pace dynamically based on the presale and the customer feedback. For pricing, you know, we will adhere to market-driven principles, taking into account supply demand, competitive dynamics, and customer mix. So at first, I think our new flagship product A16 delivers major performance. The Avalon A16 XP can offer over 300 terahash at $12.8 per hash, which is really industry-leading. So I think it will provide higher returns per unit. And, also, we can share these benefits with our customers. Yeah. So about I think our margins based on the current wafer material and manufacturing cost? The per terahash cost for A16 is under control. And we've seen our expectations and also the yield is acceptable. So I think the product's pricing power will help us to offset some cost pressures. Sure. You know, the A16 cost per test is higher than A15. So yeah. So let's see. Thank you. Henry Hurl: Yeah. And then for my follow-up, I wanted to get your guys' thoughts on the fact that several public Bitcoin miners have been very vocal about winding down their mining operations in the medium term and then at the same time supply of ASIC appears to be increasing. So what do you guys think the market impact will be? And then how is Canaan responding to this trend? Nangeng Zhang: Yeah. For I think for this question, yes, we observed that some listed miners maybe they are facing balance sheet pressure, share price performance issues, and a desire to pivot toward AI HPC have publicly stated their intention to reduce Bitcoin mining over the medium term. Yeah. But from my perspective, yeah, firstly, I think the slowdown, you know, I don't think the global hash rate will slow down this year in the near term. And, also, the HPC AI HPC deployments still need some time. By our investigation, into the energy market in the US, the AI HPC applications need high-quality energy electricity. And high quality always means higher cost. So I think fundamentally, in the next one to two years, the mining power is suitable for mining. It's not in competition with the energy used for AI HPC. It's not the same electricity. So I know our customers, including ourselves, are thinking about how to build mining AI-ready mining facilities for the future. But at this stage, deploying more ASIC Bitcoin miners is still the best way to allocate energy today and generate revenues from this date, not waiting for another one or two or three years. So I think still the things are hard to foresee for the long term. So we focus on yeah. So because there's no answer for three or five years later, so now we are focused on cooperating with our partners to fulfill their requirements. Also, we are trying to find more energy resources in the US and building our own mining sites today. And maybe we should have potential possibilities to transfer to the AI infrastructure in the future. This is what I personally observed in the past maybe six months. Thank you. Henry Hurl: Great. Thank you, and continued best of luck. Nangeng Zhang: Thank you for your questions. Operator: Thank you. Our next question comes from the line of Kevin Cassidy from Rosenblatt Securities. Please go ahead. Kevin Cassidy: Thank you, and congratulations on the strong results. And your guidance for $190 million for the fourth quarter is impressive. Do you have orders also scheduled out into the first quarter? I guess, what kind of visibility are your customers giving you? James Jin Cheng: Thank you, Kevin. I think Q4 is a peak quarter in terms of seasonality. And we provided the guidance in a very optimistic way. And, also, we have already collected some of the orders. We try our best to deliver in Q4. Looks to me, Q1 traditionally is the low season because there is a New Year and the Chinese New Year together. In the Western part of the world and the Eastern part of the world, both having all kinds of holidays and the global logistics supply chain is not in the normal shape. So I don't personally see another peak time for Q1. I think the revenue could go down a little bit. But we will try our best to deliver Q4 first and then we predict Q1 later when we have a clear understanding of the demand. Also, recently, the Bitcoin price is not in a good shape. So it's under turbulence. And some of the customers, they tend to be more cautious and hesitate to make their decisions immediately. That will also have a kind of impact on Q1 orders. So we will try to make a flexible supply. Anyway, currently, I think the demand is still higher than supply. We're just focusing on Q4 delivery first. And then let's see how it goes in Q1. Maybe we can balance between the demands of the sales and also the self-mining side. If we do have some inventory, we can allocate to self-mining in the United States. That will also be a long-term strategic goal for us. Yeah. I think that's my 2¢, Kevin. Kevin Cassidy: Thank you, James. Very good detail. Thanks. And maybe you did note that there's a rebound in demand in the US. Is the US market, which is less sensitive to the price of Bitcoin? James Jin Cheng: Sorry. Come again. You mean Oh, okay. Yeah. Just you had mentioned that with the price of Bitcoin being down in the just very recent times last few days, and you'd mentioned that would be sensitive to the demand for mining machines. And I was just wondering if you know, the rebound we've seen in the US that you I think you said it was 31% of revenue in the third quarter. Whether that continues, even with, you know, I guess, is it less sensitive in North America to prices of Bitcoin versus the rest of the world? James Jin Cheng: Yeah. Kevin, looks to me, in my observation, North America is now the leading area for the global mining industry. The whole total hash rate in North America is some percentage between 35 to 40% globally. And there are, you know, around 20 listed companies in North America doing mining. They are kind of institutional players. They are more professional in building up the sites, the electricity facilities, and eventually becoming mining sites. So they have their schedule. It's not easy for them to stop their own schedule even when Bitcoin price has some short-term turbulence. For them, they look at, you know, long-term goals. That's why they are not very price sensitive in a very short-term time. But we observed the tariff did have a kind of impact on their cost structure. That increased their mining cost. That means some of the miners, especially the smaller ones, even if they are sitting in the United States, with the, you know, consistent policy advantage, they could still withdraw from Bitcoin mining to other, you know, activities. They may, you know, want to change their miner's purchase plan in Q4. So I should say US customers are the most important customers for us, and we observed their worries in the short term. But we also respect their long-term strategic goals, and we try our best to support strategic goals to get realized. So that's something we do together with them. Nangeng Zhang: Yeah. Yeah. And, also, I think for looking at this year, especially fully, the market initially expected the demand would flow rapidly into North America. However, changes in tariff policy led to a significant contraction in North American demand from late Q1 to Q2. And at that time, I think everyone was very, very nervous. But hash rate demand ramped up quickly and partly offset the weakness in North America. And in Q3 and Q4, North American customers showed very strong resilience. Together, we adapted to the new trade environment, and the demand there has recovered quickly since late Q3. In effect, for the potential already delivered in Q4, North America has again accounted for more than 50%. So, you know, Bitcoin price volatility is constant. Sharp moves over a few days or weeks do cause some customer shifts, especially small customers, to pause and reassess. But over multi-year time frames, I think the impact on underlying demand trends is limited. And I highly disagree with, like, running a business by country numbers day by day. So this is my personal opinion. Thank you. Kevin Cassidy: Okay. Thank you very much. Thank you for the Thank you. Operator: Thank you. Our next question comes from the line of Michael Donovan from Compass Point. Please go ahead. Michael Donovan: Thank you, operator. Hi, Nangeng and James. So how much inventory do you have left for the A15 series? And then for Q4 guidance, what mix do you expect between A15 orders and preorders for A16s? James Jin Cheng: Thank you for the question, Michael. I think our inventory in Q3 is like $200 million, including some of the raw materials, like wafers, like, you know, other components. And it mainly reflects the strong demand in Q4, and you have already known when we got the big order around 50,000 units to the United States. So we have to prepare the inventory. Other than that, if we digest the inventory in Q4, I don't think our inventory level will be that high. In Q1, we will see a lower inventory level for A15. And that's because we are expecting the uncertainties of the market demand in Q1. And for A16, I think it's mainly like Q3 to be the mass delivery. I think the early delivery could be late Q2. But in the transition, we will continue to produce A15 and make it better and better. I think that's the plan. Did I answer your question, Michael? Michael Donovan: No. You did, James. I appreciate that. And then I guess for my next question, can you expand a bit more on the pilot projects that you have, the 2.5 megawatts in Alberta, Canada, and 4.5 megawatts in Japan? What are the growth opportunities in those two countries? James Jin Cheng: Yeah. Nangeng Zhang: I think we are running several similar pilot projects globally. Actually, this includes Japan, Canada, the US, and as well as some small projects ongoing in Europe and other Asian countries. Since these are pilots, our primary goal is to validate the technology and the business model rather than maximize early-stage financial returns. Yes. Thanks to the use of stranded gas and energy, the power cost for these pilot projects is relatively low, and the project-level gross margins are decent. But, you know, like most mining operations, meaningful economic benefits ultimately require scale. But based on the current results, we believe that these pilots all have the potential for scale-up. It is very important to remember that power and gas infrastructure are very traditional, long-cycle industries. Building trust and proving out a new model takes time and patience. Our strategy is to run the pilots in a stable way, cement the partnerships, and then we'll pass on to larger megawatt levels at the right time. For example, the Canada stranded gas project has a very high possibility to scale up to 20 megawatts in the middle of next year. And, also, we can do more, like I just mentioned, the AI-ready site mining farms in the US with our partner, Luxor. So yeah. So I think still there's a please give us some time. Yeah. Michael Donovan: Thank you. James Jin Cheng: Thank you. Operator: Thank you for your questions. One moment for the last question. Our last question comes from the line of Kevin Dede of HCW. Please go ahead. Kevin Dede: Gentlemen, thanks very much for having me on the call. Appreciate it. Nangeng, I'm wondering about your self-mining objectives. Can you refresh us on where you plan to take self-mining in particular? Ethiopia, which remains the largest contributor of your exahash. We're hearing that power tariff rates have increased there, and we're wondering how you might rethink hash deployment. Nangeng Zhang: Thank you. And I think for our strategy, you know, now in the short term, there's some pullback in Bitcoin price. And many people are asking the question about our strategy of mining. Yeah. I think in the near term, over maybe a few months, our attention will be on delivering large miner orders, which does slow the pace at which we add our self-mining hash rate. Please remember there are still other customers. We cannot lose our long-term partners at this time. So because of the lack of machines, at the same time, we are actively developing more power sources, including potential greenfield sites. These projects have longer construction cycles but relatively controllable cash outlays, and they offer better long-term value and operational flexibility. The gas-to-compute pilots in Canada and the 20-megawatt data center projects in Texas with Solana are only examples. For what we see in the market, I think there are indeed more attractively priced mining assets now. The pullback for Bitcoin price gives us benefits to get more energy resources, especially in the US. Yeah. So I think our security projects with solid resources, but short-term funding pressure. So this offers us better entry points. We are continuously screening special entities and their strict return and risk control. And we aim to expand our self-mining footprint in a more prudent, value-attractive way. So in short, I think we are still keeping the expansion in the US, and we are moving to more fundamental sites like the energy infrastructure. And long term. Yeah. And the big order and Bitcoin pullback give us time to redirect our direction to find a better way to expand in the US. Kevin Dede: James, I was wondering if you could offer a little more color on the $56 million wafer purchase and the $90 million in processing. Would that include pretty much everything that you need for the A15 and A16 XP, at least as you see orders initially? And how much of it do you think translates to the Avalon Home series? James Jin Cheng: Well, Kevin, I don't think $56 million is all the wafer supply we can get for Q1. It's actually some payments that happen to be in the phase of payments just in Q3. So the $56 million is some prepayments, also some, you know, some closed payments for the previous contract. And I think in Q4, we'll pay more. It's just a kind of pacing difference. And for the home series, I think currently, it's wintertime. We observed that the demand from North America is actually getting stronger compared to Q3 and Q2. It seems like we will allocate more chips to the home series. But, of course, we don't want to, you know, generate a lot of inventory. We will still produce according to the orders. But to be very honest, currently, we have already noticed the home series will occupy a higher percentage in Q4. And while the total revenue is so big, so we are expecting the sales for Q4 of the home series. And actually, a lot of buyers, a lot of consumers, they posted on their social media talking about Avalon Q. They like it because it's quiet, and it can generate Bitcoins. And, you know, using the same kind of energy, they in the past, they buy a heater can do. So, actually, we can feel the passion from the consumers asking more for the supply side. That's why when we do allocate the chips, I think internally, we have some discussions and sometimes even very fierce competition between the consumer sector and the sector. But, of course, Nangeng will try his best to balance different product lines and different categories to try to satisfy most of the customers and consumers. Nangeng Zhang: Yeah. And, also, you know, currently, the macro environment is indeed very complex and changing very fast. And especially for the semiconductor sector. You know, like, the DRAMs price has maybe doubled in the past few months. It's only, you know, it indicates the tightness of the global capacity for the semiconductor industry. So, currently, I think we had, you know, the demand because the demand for the vast chip growth, especially for the AI-related applications and many other stuff. The foundry capacity today is very tightened, and also the price is trending up significantly. I think this could impact both our manufacturing cost and the mining CapEx. And this but this is it was the whole industry, not only us. That said, well, we cannot share the exact figures. But we have already secured meaningful wafer allocation for next year at favorable pricing and payment terms. Thanks to our strong relationships with our key suppliers, the volume is built on very cautious numbers, but this will I think this will definitely give us a good cost position heading into 2026. Yeah. This is my 2¢. Thank you. Kevin Dede: James, if you didn't touch on the $90 million processing. Can you just give us a feel for that and what the implications are for future cash use? James Jin Cheng: $90 million. I think it says too much. Yeah. I think you mean the $72 million we raised from the strategic investors and also $7.8 million from the ATM program. I think putting this together is, like, $80 million. Yeah. Yeah. Kevin Dede: Okay. No. I thought that when you were discussing cash use in the third quarter, you mentioned $90 million. I apologize. I probably have the number wrong, but James Jin Cheng: Oh, yeah. You mean the operational and the supply chain together? The expenses. Right. Okay. I think that outflow is for some payments of the, you know, supply chain, like components. Like all kinds of production and logistics to shift the components from here and there. You know, a lot of things including some of the expenses related to that. I think that's a major part of the supply chain expenses. And, also, I think there is the, you know, R&D, G&A, and also sales and marketing fees inside this. I think the run rate is still, like, $28 to $29 million. Even the P&L shows it's like $40 million, but then that includes a lot of non-cash items like share-related salaries. But the rest goes to, like, $28 to $29 million for the normal operation. And, also, we have, you know, expenses related to the operation like travel, like marketing, especially for the consumer product. We start to have some marketing try in Q3. But not much expenses. But that is something we try to do in the transition from a pure machine company to a kind of operational company with energy and also with the consumer product. We will also increase our marketing expenses in the future. I don't know if I answered your question. Kevin Dede: Yeah. Yeah. Just one more little nuance. I'm just wondering if those payments include prepayments for supply chains, you know, securing supply chain components through, you know, through December and then into March? James Jin Cheng: That's wonderful, Kevin. Usually, we only do prepayment for wafers. Most of the components, we usually get the components first. And then we pay them a little bit later in different kinds of terms. For example, like, fifteen days, thirty days, something like that. It's usually not the month payment. Kevin Dede: Well, congratulations on that 50,000 unit order. Congratulations on the sharp pop in revenue and gross margin. Thank you very much for taking my questions. James Jin Cheng: Thank you, Kevin. Nangeng Zhang: Thank you. Operator: As there are no further questions now, I would like to turn the call back over to the company for any closing remarks. Nangeng Zhang: Thank you once again for joining us today. If you have further questions, please feel free to reach out to us, and we look forward to speaking with you throughout the quarter. Thanks. Operator: Thank you. That does conclude today's conference call. Thank you, everyone, for attending. You may now disconnect.
Operator: Excuse me, ladies and gentlemen. This is the operator speaking. Please continue to stand by, and your conference will begin momentarily. Thank you. Excuse me, ladies and gentlemen. This is the operator. Please continue to stand by. Your conference will begin momentarily. Thank you. Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Zynex, Inc. Third Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. As a reminder, this conference is being recorded. I would now like to turn the conference over to Vikram Bajaj, Chief Financial Officer of Zynex, Inc. Please go ahead. Vikram Bajaj: Thank you, operator. And good afternoon, everyone. Yesterday, we released financial results for the third quarter ended September 30, 2025. A copy of the press release is available on the company's website. Before we begin, I would like to remind you that during this conference call, the company will make projections and forward-looking statements regarding future events. We encourage you to review the company's past and future filings with the SEC, including, without limitation, the company's 2024 Form 10-K and subsequent Form 10-Qs, along with any amendments which identify the specific factors that may cause actual results or events to differ materially from those described in these forward-looking statements. These factors may include, without limitation, statements regarding product development, product potential, the regulatory and legal environment, sales and marketing strategy, restructuring activities, or operating performance. With that, I'll now turn the call over to Steven Dyson, our CEO. Steven Dyson: Thank you, Vikram. And good morning to everyone attending today's earnings call. It's been three months since Vikram and I joined the company. And since joining, we have been tirelessly focused on addressing the business and compliance challenges at Zynex, Inc. while creating a new future for the company. As you will already know from our public disclosures, we have an entirely new management team with the addition of new leaders in sales, legal, compliance, regulatory, HR, and billing, as well as a recent addition to our leadership team in the critical role of strategic marketing. We have also complemented our governance and oversight with the addition of two new directors on our board, Brett Wise and Paul Aronson. Brett is our new audit committee chair, and he brings a wealth of experience in healthcare and med tech, as well as financial expertise with a strong background in compliance oversight. Paul Aronson is the chair of our special committee, which is tasked with overseeing the company's efforts to evaluate strategic alternatives for the company, including potential capital raising opportunities and recapitalization and restructuring strategies. As you can see from these additions, we have recruited a highly experienced and capable team to help turn the company around. Now, this is my first earnings call with investors. I thought it would be good to share a few points on the value I see in the Zynex, Inc. franchise, as well as our near-term strategy and priorities. The first thing to appreciate is the quality of our flagship product, the NexWave electrotherapy device. The NexWave device is cleared by the FDA for chronic and acute pain indications. The NexWave is a product that is very much loved by our patients and clinicians. People suffering with pain are looking for non-pharmaceutical ways to get back on their feet, and this company has a great product with the reach and the channel to provide life-changing relief to individuals while providing significant value to the healthcare system. We have thousands of patient testimonials supporting the effectiveness of the NexWave device, and it represents an amazing business opportunity. This is the main reason I came to Zynex, Inc., and it is the main reason we have been able to attract great talent to the management team and directors. Moving on to our strategy and priorities. Over the last ninety days, we've been implementing a three-part strategy to turn the company around. First, addressing the concerns of government agencies and ongoing investigations. Second, addressing the near-term maturity of our $60 million in convertible senior notes, and liquidity concerns, and seeking to raise new capital to fund operations. And third, improving revenue and cash flow performance of the core business. First, as it relates to government investigations, we are proactively engaging with government agencies and investigators in a collaborative way to deliver a new future for Zynex, Inc. that is focused on compliance and integrity. These discussions have been positive, and we are making progress on our commitments. While we do not have certainty on any potential TRICARE reinstatement or resolution of ongoing investigations, or the timing thereof, it will be critical as we move forward to reach resolution based on the company's commitment to the future. In support of our renewed commitment to compliance and integrity, starting October 1, we implemented a new resupply order fulfillment policy. Under this new policy, we do not process resupply orders unless a patient first confirms their needs. We systematically reach out to each patient to ask about their resupply needs, and patients can contact us at any time. We are already seeing good results. Not only is the policy leading to far more regular patient contact, but our patients are responding positively. We expect these efforts to result in a significant improvement in how patients, public and private payers, and their providers experience doing business with Zynex, Inc. Second, we need to manage the company's near-term debt obligations as we seek to raise additional capital. As you know, we have $60 million in convertible senior notes that mature in May 2026. Also in Q3, we had negative cash flow of $6.3 million. And as of September 30, the company had cash and cash equivalents of $13.3 million on the balance sheet. It is important that we address the convertible notes maturity and our cash burn relative to the amount of our cash and cash equivalents in order to continue as a going concern and give certainty to our customers and suppliers that we could honor our commitments going forward. As you have seen in our announcements, we have recently hired Providence LLC to advise the company on various strategic and financing alternatives and evaluate a range of strategic alternatives, including potential capital raising and restructuring strategies. We've also formed a highly experienced special committee of the board of directors to oversee this process. We have initiated collaborative discussions with our debt holders, and while we cannot predict the outcome, we believe that our business plans for the future are compelling and will be critical to this process. Third, we need to address the company's revenue and cash flow performance. Since I started, we have initiated several quick-win projects in multiple functions within the company, focused on near-term performance improvements in Salesforce productivity, order conversion efficiency, and collections. These efforts are showing early signs of success and are bearing fruit. After customer order volume had been down for many months sequentially, we have recently seen orders stabilize, even with a substantially reduced sales force. To increase sales productivity and improve order volumes, we have improved and simplified our commission plans, provided improved communication and technology to our sales reps, and increased their focus on targeted accounts. We have also engaged with a new partner for our VA business, and early signs there point to a good opportunity for increased penetration to VA accounts. So these are the three key elements of our strategies to turn around the company's performance and create a new future for Zynex, Inc. While our Q3 performance released yesterday is more of a continuation of the challenges from the first two quarters, I'm encouraged to see progress in all three elements of our strategy. Now I'll turn the call back over to Vikram, our CFO, to give you an overview of our Q3 financial results. Vikram Bajaj: Thank you, Steven. Please refer to our press release issued yesterday for our summary of financial results for the third quarter ended September 30, 2025. Net revenue was $13.4 million compared to $50 million in 2024. Device revenue was $7.1 million, and supplies revenue was $6.3 million. The decline in net revenue for the three months ended September 30, 2025, compared to the prior year period, is primarily related to the company's TRICARE payment suspension, along with a $2.8 million reduction in revenue related to payments received from TRICARE during the suspension period. Through 2025, changes to certain payers' claim submission review practices have resulted in denials and payment delays, which have negatively impacted our revenue. Additionally, Q1 and Q2 workforce reductions in many functions, including sales, have negatively impacted device orders and corresponding supplies, new patient onboarding, and order completion, contributing to the overall decline in net revenue during the three months ended September 30, 2025. Gross profit in the third quarter was $8.1 million or 60% of revenue, as compared to $39.8 million or 80% of revenue in Q3 2024. Sales and marketing expenses decreased 54% to $9.5 million in the third quarter of 2025. The primary contributor to the decrease in sales and marketing expenses was a headcount reduction. G&A expenses were $11.8 million in 2025 compared to $15.3 million in Q3 last year. Net loss was also negatively impacted by a non-cash asset impairment charge of $50.7 million during the quarter ended September 30, 2025, primarily related to goodwill, definite-lived intangible assets, and certain fixed assets associated with Zynex, Inc. monitoring solutions. Net loss was $42.9 million and $1.42 per share in 2025 compared to net income of $2.4 million in 2024. Adjusted EBITDA loss for the three months ended September 30, 2025, was $12.3 million, as compared to adjusted EBITDA of positive $5.1 million in the quarter ended September 30, 2024. On the balance sheet, we have $13.3 million of cash in hand at September 30, 2025, and we're able to reduce our cash burn during the quarter. As part of our cash management program, Zynex, Inc. has elected to enter the contractual thirty-day grace period under the terms of the company's $60 million of convertible notes and did not make a $1.5 million interest payment due November 17, 2025. The company is in discussions with holders of the convertible notes regarding potential restructuring opportunities. Our convertible debt of $60 million is due May 2026, so you'll notice it's now a current liability. We are currently working with our advisers to address this liability. I'll now turn the call back to Steven. Steven Dyson: Thank you, Vikram. And thank you for joining us today. We appreciate your time and interest in Zynex, Inc. Have a great day. Operator: Thank you. And ladies and gentlemen, this now concludes today's conference call. Thank you all for joining. You may now disconnect.
Operator: Thank you for standing by, ladies and gentlemen, and welcome to Euroseas Conference Call on the Third Quarter 2025 Financial Results. We have with us today Mr. Aristides Pittas, Chairman and Chief Executive Officer, sir; and Mr. Anastasios Aslidis, Chief Financial Officer of the company. [Operator Instructions] I must advise you that this conference is being recorded today. Please be reminded that the company announced their results, the press release that has been publicly distributed. Before passing the floor over to Mr. Pittas, I would like to remind everyone that in today's presentation and conference call, Euroseas will be making forward-looking statements. These statements are within the meaning of the federal securities laws. Matters discussed may be forward-looking statements, which are based on current management expectations involve risks and uncertainties and may result in such expectations not being realized. I kindly draw your attention to Slide #2 of the webcast presentation, which has the full forward-looking statement. The same statement was also included in the press release. Please take a moment to go through the whole statement and read it. And now I would like to pass the floor over to Mr. Pittas. Please go ahead, sir. Aristides Pittas: Good morning, ladies and gentlemen, and thank you for joining us today for our scheduled conference call. Together with me is Anastasios Aslidis, our Chief Financial Officer. The purpose of today's call is to discuss our financial results for the 3 and 9 months period ended September 30, 2025. Please turn to Slide 3 of the presentation for our quarterly financial results. For the first quarter of 2025, we reported total net revenues of $56.9 million and the net income of $29.7 million, or $4.25 per diluted share. Adjusted net income for the quarter was $29.6 million, or $4.23 per diluted share. Adjusted EBITDA for the period was $38.8 million. Please refer to the press release for a reconciliation of adjusted net income and adjusted EBITDA. Anastasios Aslidis will go over our financial highlights in more detail later on in the presentation. We are pleased to announce that our Board of Directors has declared another quarterly dividend of $0.70 per share for the first quarter of 2025, payable on or about December 16 to shareholders of record as of December 9. Based on current price levels, the distribution reflects an annualized yield of approximately [indiscernible]. In addition, since launching our $20 million share reverse plan in May 2022, we have repurchased 466,000 shares of our common stock in the open market for a total of approximately $10.5 million. This plan was renewed in May 2025. We remain committed to utilizing this program thoughtfully and strategically deploying it well appropriately to support and enhance long-term shareholder value. Recent Developments & Fleet Status Aristides Pittas: Now please turn to Slide 4 where we review our recent developments, including updates on our sales and per activity, chartering progress and operational highlights. During the third quarter, we completed the sale of motor vessel Marcos V for $50 million. The vessel has delivered her new and affiliated donors on October 20, and we recorded an estimated gain of $9.3 million on the transaction. On the employment front, we extended the charter for motor vessel Jonathan P for a minimum of 11 months and up to 12 months at a daily rate of $25,000 per day. The earliest delivery under this contract in October 2026. Motor vessel Synergy Oakland was extended just yesterday for a further 36 months following the end of current charter at $33,500 per day. Finally, also yesterday, our 4 new buildings, Motor vessels, Elena, Thrylos, Nikitas G, Socrates Ch were chartered upon the expected deliveries in second half '27 and first half '28 for the time period of 4 years at a daily rate of $35,500 per day or a 5-year period at first $2,500 per day at charterer's option, which is declarable by November 2026. Turning on to operations, the motor vessel Emmanuel P successfully completed its scheduled dry docking, resulting in an off-high period of approximately 39 days. As part of this repair, we installed energy saving devices that are expected to deliver fuel savings in excess of 20%. We experienced low rise or commercial of higher time during the Q3. Aristides Pittas: Now please turn to Slide 5. Our current fleet on the water consists of 21 vessels of total carrying capacity of 61,000 TEU and an average age of about 12 years. This includes fixed intermediate vessels with a combined carrying capacity of 25,500 TEU and an average age of around 17 years as well as 15 feeder vessels with a combined carrying capacity of 35,600 TEUs and the other at the age of 8.4 years. In addition, we have 4 intermediate vessels under construction each with a capacity of 4,484 TEU. Two of these are expected to be delivered in the second half of 2027, while the remaining 2 in the first half of 2028, adding a further 17,000 TEU of capacity 12 fleets. On a fully delivered basis, our fleet will now grow to 25 vessels carrying capacity of approximately 78,300 TEU. Aristides Pittas: Please turn to Slide 6 for a further update on our fleet employment. We continue to benefit from strong forward coverage, as you can see. For the first quarter of 2025, the 100% of our available days have already been secured and at an average rate of approximately 30,345 per day. Looking ahead in 2026, we have already covered 75% of our volume to date at an average rate of around $1,300 per day. In 2027, Discovery stands at an even higher average rate of around $33,500 per day. And even in 2028, it standard at 30% at an average rate of around $35,000 per day. Our disciplined strategy provides us with high visibility of future cash flows, and will support the profitability within the next couple of years, if we -- even if the market was to correct certainly. Market & Industry Overview Aristides Pittas: Moving on to Slide 8, let's review the market highlights for the third quarter of 2025. Around the third quarter, 1-year time charters remained firm at elevated levels supported by tight vessel supply and limited availability. This environment encourages charters to secure for [indiscernible] cover early in the season. However, towards the end of the quarter, the freight market softened as concerns over able supply and increased competition among carriers began to weigh on sentiment. By late September, the Sungai container freight index has declined to its lowest level in nearly 2 years. However, during October and early November, we witnessed the stabilization and even a strong uptick by 20%. The average secondhand price index rose by about 4.4% in the third quarter versus the second quarter supported by limited vessel availability, geopolitical tensions and strong buyer interest. Meanwhile, newbuilding prices remained stable quarter-over-quarter. With [indiscernible] gradual increase in prices relative to Chinese yards. Idle capacity continued to be practically nonexistent. Also recycling activity remains subdued with only 11 vessels totaling 6,000 TEUs scrapped year-to-date. [indiscernible] prices have dropped slightly to around $425 per lightweight ton. Overall, the global fleet has expanded by a significant 6% year-to-date. Aristides Pittas: Please turn to Slide 9 for our broader market overview, focusing on the development of 6- to 12-month time charter rates over the past 10 years. The slide illustrates the charter rates across all major containership segments remain significantly elevated compared to the 10-year medium levels. This [indiscernible] and more subcute elsewhere. U.S. growth is projected at 2% in 2025 and 2.1% in 2026, and modest the revision from model forecast reflecting smaller-than-expected effects from tariffs and more favorable financial conditions. In late October, the Federal Reserve reduced the market range for the [indiscernible] funds rate by 25 basis points, bringing it to 3.75% up to 4%. [indiscernible] has not loved out an additional rate cut [indiscernible] remain on hold as inflation remains too high, while the market schooling. It continues to show mixed signals. The broader outlook remains fragile with downside risks stemming from persistent uncertainty, potential protectionist measures and the ongoing labor market constraints. Among emerging markets, India is forecast to expand by 6.6% in 2025 and 6.2% in 2026, supported by strong domestic investment, resilient apiculture allow and the vibrant services sector. The ASEAN economy were also expected to post solid growth of around 4.2% in 2025 and 4.1% in 2026, underpinned by healthy regional demand and continued industrial activity. [indiscernible] economic outlook is expected to remain positive but at a decelerating pace. [indiscernible] include a widening gap between industrial supply and weak domestic demand as well as ongoing trade tensions with the United States, including new tariffs and groups, export confirms and restrictions on high-tech goods. As a result, China's growth is projected to moderate to 4.8% in 2025 and 4.4% in 2026, reflecting a gradual slowdown following the front-loaded exports and remaining fiscal support. Despite these domestic headwinds, the Chinese economy is still being supported by strong excellent performance to regions such as Southeast Asia and India, along with a still resilient manufacturing sector. We analyze global growth data carefully as it affects directly trade volumes as a whole. Specific factors affecting trade, create slight fluctuations around GDP growth. On containerized trade, estimates demand growth for 2025 to expand by 3.2%, signaling a strong correlation with expected GDP growth. Parent forecasts though point to a dip to 0.7% growth in 2026, and a further decline of 6% in container trade growth in 2027. These expected decline largely reflects the writing of extraordinary routing patterns and temporary distances that boosted volumes in prior year. The influx of capacity recently order will probably, at some point, outpaced demand growth especially in geopolitical disruptions were to suddenly resolved that allows its turn to short-term more efficient groups. Aristides Pittas: Turning on Slide 11, where you consider total fleet age container support book. The top left chart, the picture containership fleet is relatively young with most vessels under 15 years old and only 12% of the fleet over 20 years old. The top right chart shows the new deliveries as a percentage of the existing fleet, which are projected at 6.9% for 2025, 5.1% for 2026 and 8.3% for 207, with actual fleet growth expected to be slightly lower due to slippage and future demolition activity. The bottom chart further, the order book continues to increase rapidly, reaching approximately 32% of the fleet as of November 2025. Aristides Pittas: Turning on to Slide 12, we go over the fleet age profile and order book only for 6 in the 1,000 to 3,000 TEU range, which is quite different from the overall picture. As of November 2025, the order book for vessels below 3,000 TEU stands at a modest 8.1% of the fleet. According to Clarksons, deliveries in this size range remain limited with newbuilding additions projected returning 2.1% of the fleet in 2025, followed by 2% in 2026, 3.4% in 2027 and 2.7% in 2028 beyond. About half of the fleet is over 15 years old making them likely candidates for scrapping when the market corrects. Aristides Pittas: Let's move to Slide 13 now to see the supply outlook for the 3,000 to 8,000 TEU segment, the other sector in which we currently operate. As of November 2025, the order book stands at 12% of the fleet, a modest level compared to the larger main classes. Meanwhile, the age profile of this segment is notably advanced with 27% of vessels over 20 years old and another 38% between 15 and 19 years. With a limited new building pipeline, net fleet growth in this segment is expected to remain contained if not become negative over the next few years. Aristides Pittas: Moving on to Slide 14. This chart places those dynamics and perspectives across the entire containership sector. What stands out is the concentration of new building activity in the larger vessel classes. New Panamax and Post-Panamax vessels saw order books representing 40% to nearly 80% of their existing fleet, reflecting the significant capacity being [indiscernible] for the main lane play. By contrast, the feeder and intermediate segments have significantly smaller orders ranging from just 4% to 12%, depending on size even though a substantial portion of these fleets between 20% and 40% or already more than 20 years old. This widening gap between newbuilding activity in the large vessel segment and the limited replacement in smaller segment highlights why our core fleet remains structurally well positioned with minimal risk of oversupply. Aristides Pittas: Now please turn to Slide 15. Turning to the container sector outlook. Conditions across the container shipping sector remain mix. [indiscernible] continue to hold firm supported in part by Red Sea rerouting, even if the [indiscernible] container ship rate index has steadily declined. Overall, charter rates remain[indiscernible] due to limited near-term supply and steady demand across most societies. In 2026, U.S. trade policy and broader geopolitical developments will be key drivers of trade volumes and route patterns. Recent tariff agreements raising from 10% to 50% have provided some short-term stability with uncertainty around U.S.-China relations persists. Through 2025 was an epitome of this uncertainty. The U.S. post reason Chinese own control of big ships only for China to reciprocate and then within days, both these fees were put on ice following discussions between Mr. Trump and Mr. [indiscernible] at the end of October. Additionally, the recent ceasefire between Israel and [indiscernible] Hamas suggest potential easing of disruptions with the Red Sea. The shipping companies are adopting a cautious wait-and-see stance with no immediate [indiscernible] yet. In 2027, and on the back of the increased container ship ordering even for smaller vessels, if demand in terms of a mile doesn't surprise on the upside, the market may enter into a more challenging phase. Regarding energy transition, while it continues to be an important factor in the balance of container trade, the recent nonapproval of the IMO's net 0 framework has inevitably slowed the process substantially. Arguably, the compulsion was overambitious as technical targets and economic curves were [indiscernible] anyway and surmounted. Nevertheless, the process of transitioning to new more environmentally friendly fuels will continue, but hopefully in a more disciplined and realistic manner. Aristides Pittas: Let's turn to the last slide of this section, Slide 16. The left-hand graph shows the cycle of the 1-year time charter rate for 2,500 TEU container ships over the past 10 years. As of November 14, 2025, the 1-year time charter rate stands at $25,750 per day well above both historical leverages and medium. This robust rate environment is made in asset values as well. New building vessels are now valued at $45 million compared with a 10-year $35 million and an average of roughly $36 million. Likewise, 10 year round second hand versus the currently valued at [indiscernible] million significantly higher than the 10-year median or $14 million at the average of about $20 million. In this environment, owners like us are generally reluctant to buy vessels at today prices, unless this can be combined with charters, which would bring the residual values down to more normalized prices. It is proving though that quite a few charters fearing the potential loss of market share and consequently, market relevance are providing such charters to smaller newbuilding vessels even with 2028 deliveries. Unfortunately, until this stops, we will continue to see the order book swelling, which obviously will eventually result in a lot of capacitating the market. And with that, I will pass the floor to our CFO, Anastasios Aslidis, to go over our financial highlights in further detail. Financial Review (Anastasios Aslidis) Anastasios Aslidis: Thank you very much, Aristides retires. Good morning from me as well, ladies and gentlemen. Over the next 5 slides, I will give you my usual overview of our financial highlights for the quarter and the 9-month period of 2025 and compare them to the same periods of last year. Anastasios Aslidis: For that, let's turn to Slide 18. For the third quarter of 2025, the company reported total net revenues of $56.9 million, representing a 5.1% increase over total net revenues of $54.1 million during the third quarter of last year. On a per vessel per day basis, our vessels earned a 10.7% higher average charter rate in the third quarter of this year compared to last year. We reported a net income for the period of $29.7 million as compared to a net income of $27.6 million for the third quarter of 2024. Total interest and other financing costs for the third quarter of 2025 amounted to $3.7 million compared to $4.2 million for the previous year, a figure of the previous year that does not include imputed interest income of about $0.9 million, which is related to the self-financing of our predelivery payments for our new billing program. The decrease is due to the lower interest rate we paid in the third quarter of this year compared to last for our debt. Adjusted EBITDA for the third quarter of 2025 increased to $38.8 million compared to $36.1 million achieved during the third quarter of 2024, again, primarily due to the increase in revenue. Basic and diluted earnings per share for the third quarter of 2025 were $4.27 and $4.25, respectively, calculated on about $7 million basic diluted weighted average number of shares outstanding compared to $3.97 and $3.95 basically diluted, respectively, for the same period of last year. The adjusted earnings per share for the quarter -- for the 3-month period ended September 30, 2025, which has been $4.26 and $4.23 basically diluted, respectively, adjusted for unrealized gains on derivatives compared to adjusted earnings of $3.94 basic and $3.92 diluted for the same period of last year. Anastasios Aslidis: Let's now look at the numbers for the corresponding 9-month period ended September 30 and convert them. For the first 9 months of 2025, we reported total net revenues of $170.5 million representing a 6.8% increase over total net revenues of $159.6 million that we earned during the first 9 months of last year mainly as a result of the higher number of vessels we owned and operated and higher average earnings that we had. We reported a net income for the period of $96.5 million as compared to a net income of $88.4 million for the first 9 months of last year. Total interest and other financing costs for the first 9 months of 2025 amounted to $11.7 million, not including $0.1 million of imputed interest income compared to $10.7 million for last year, again, not including in that case, $3.6 million of reputed interest income. This increase is due to the increased amount of debt that we held on average during the respective 9-month period of this year compared to last, partly offset by the lower interest rates we paid. Adjusted EBITDA for the first 9 months of 2025 was $115.2 million, compared to $102.9 million for the first 9 months of last year, a 12% increase. Basic diluted tenants per share for the first 9 months of this year were $13.90 and $13.84, respectively, calculated again on approximately $7 million, basically diluted weighted average number of shares outstanding compared to basic diluted earnings per share of $12.75 and $12.66 for the first 9 months of 2024, calculated again on approximately the same number of shares, about $7 million. The adjusted earnings per share for the 9-month period ending September 30 of this year would be $12.25 basic and $12.19 diluted compared to $11.57 basic and $11.49 diluted for the same period of 2024. Anastasios Aslidis: Let's now turn to Slide 19 to review our fleet performance. I will not go through the utilization rate figures as I did in the previous calls, and they are near 100%, but I will move [indiscernible] discuss the rest of the table. On others, in the third quarter of this year, 22 vessels were owned and operated, earning another time charter equivalent rate of $29,284 per day compared to 23 vessels that we operated in the third quarter of 2024, earning an average of $26,446 per day. Our total daily operating expenses including management fees, G&A expenses, but excluding dry docking costs, were **$ 7,246 per vessel per day** during the third quarter of this year compared to $7,247 per vessel per day for the same period of 2024. If we move further down on this table, we can see the cash flow breakeven levels which take into account in addition to the above expenses, the drydocking expenses, interest expenses and loaner payments. Thus, for the third quarter of 2025, our daily cash flow breakeven level was $13,073 per vessel per day compared to $13,629 per vessel per day for the same period of last year. Below the breakeven line, you can see our dividend distribution expressed in dollars per vessel per day basis. And for the third quarter of this year, it amounted to $2,410 compared to $2,013 for the same period of 2024. Let's move now to discuss similar figures for the 9-month period, keeping again the discussion on the utilization rates. We can report that we own and operated an average of 22.6 vessels, during the first 9 months of 2025, earning an average time charter equivalent rate of $28,735 per day, compared to 21.3 vessels that we own and operated in the same period of 2024 earning an average, $28,624 per vessel per day. Our operating expenses, again, including management fees and G&A expenses, averaged $7,386 during the first 9 months of 2025, compared to $7,452 per vessel per day for the same period of last year. Again, at the bottom of this table, you can see the breakeven level, the cash flow breakeven level, which includes, as we said, interest expenses, dry docking expenses and loan repayments, excluding Baluch, and that was $13,833 per vessel per day compared to $14,743 for the same period of last year. Anastasios Aslidis: And finally, I will not go through the dividend that we paid in the 9 months expressed in dollar per day basis. Let's now turn to Slide 20. We reduced this slide this time around to provide a better perspective of the depth of our contract coverage especially in light of the recent forward charters concluded that Aristides mentioned in the beginning of the presentation. The table zone present the development of our fleet ownership days over the period -- over the next 2 years to 2026 to 2028 at an estimated breakdown of how many days are available for hire and how many days are already contracted. It incorporates assumptions about delivering dates for vessels under construction, scrapping days for older ships, estimate dry docking timing and duration, utilization rate, assumption going forward, we used a quite conservative one of 98% and estimates for contracted dates and average contractor grade. Please note that the data in this table is only estimates that we use for our modeling purposes for future time charter equivalent revenues and the actual figures will be different. But still, I hope this can provide some appreciation of our revenue and earnings visibility. As Aristides mentioned earlier, our contract coverage currently stands for 75% for 2026, 52% for 2027 and 29% for 2028. Average contracted rates are, respectively, 31,300, 33,500, and 35,500 for each of the 3 years. Here, if one makes an assumption about the average rate that are uncontracted days will learn, one can easily come up with an estimate of our overall revenues for the respective year. I hope this helps our investors and analysts that cover us in their own analysis of our future profitability. Anastasios Aslidis: Let's now move to Slide 21 to review our debt profile. As of September 30, 2025, our total outstanding bank debt stood at about $224 million with an average interest rate margin of about 2% which based on a 3-month off rate of 3.87% results in the cost of our debt of about 5.9% which is well within the prevailing gains for our segment and peers. For the fourth quarter of 2025, we expect loan repayments of approximately $5.4 million with no balloon payments during the remainder of the year, which accordingly, we reduce our year-end balance. In 2026, scheduled loan repayments amount to approximately $19.5 million, again with no volume payments during the year. In 2027, we expect [indiscernible] of about $16.8 million, together with a $20 million balloon payment making total scheduled repayments for 2027 to approximately $36.8 million. Similarly, we can see in the chart, the scheduled payments for the period 2028 to 2030. At the end of 2030, the remaining outstanding debt, assuming no [indiscernible] financing of our current debt would be about $76 million. This calculation here does not include debt we expect to draw to finance the construction of our 4 new buildings, debt which we estimate to be in the range of $140 million to $150 million. At the bottom of this slide, as always, we show our cash flow breakeven estimate for the next 12 months, broken down by its key components. On this basis, our total cash flow breakeven level for the next 12 months stands at approximately $12,000 per vessel per day, a level well below the ends of our fleet. In making the comparison, we are the ends of our fleet, one can really appreciate the cash flow generation potential that our vessels provide. Anastasios Aslidis: To sum up my presentation here, let's move to Slide 22 to review some highlights from our balance sheet. As of September 30, 2025, cash and other cash -- other current assets in our balance sheet totaled approximately $126.4 million. We have already made $35.9 million of advances for our newbuilding program. And we had also on our asset side, the book value of our vessels including Marcos B, which as [indiscernible] was held for sale, which stood at about $512.5 million, for a total book value of our assets of about $675 million. On the liability side, as I mentioned in the previous slide, we had debt amounting to $224 million. Other liabilities for about $24 million, resulting in book shareholders' equity of roughly $427 million. However, the market value of our fleet, it's charter -- adjusted market value for our vessels, is significantly higher than their book value. According to our latest estimates, our fleet is valued approximately $680 million, which translates into a net asset value for our company of about $595 million or roughly almost $85 per share. With our last closing price and the recent trading rates of around $60 per share, our stock trades is at almost a 30% discount to its charter adjusted net asset value. Aristides Pittas: And with that, let me pass the floor back to Aristides to continue our call. Aristides Pittas: Thank you, Anastasios. Let me open up the floor for any questions we may have. . Operator: [Operator Instructions] Our first question is from Mark Reichman with NOBLE Capital Partners. Mark La Reichman: There's just really 2 areas I wanted to focus on. The first is -- what are your expectations for the scheduled off-hire days for the fourth quarter and the remainder of 2026. I mean if I look at your slide deck, it seems like that you're anticipating very light dry-docking schedule, at least over the next 12 months. So just a little clarity there would be appreciated. Anastasios Aslidis: I think this is correct. We have not many dry dockings over the next 12 months. And the -- our -- likely of high for Q4 as in the previous quarter, almost 0. And for modeling purposes, what I saw on this new slide 20, we use a 2% [indiscernible] in of hire just to model it. But typically, we run our fleet north of 99% utilization rate. . Mark La Reichman: Okay. So if they were 39 days in the third quarter, do you think that the fourth quarter would be lower than that? If you've got 0 in terms of order. Anastasios Aslidis: In terms of scheduled dry docks, I think we don't have any scheduled dry docks in the fourth quarter to the best of my top of my head. We have all signing water surveys. . Mark La Reichman: Okay. And so surveys. I mean, I think in the third quarter, the number of days came maybe in a little higher than what we were expecting. But we might have just had a special survey built in. But I mean, do you think it would be greater than 5 or 10 days for the fourth quarter? Anastasios Aslidis: It's hard to, I would say -- yes. Not even. But in the third quarter, we had a mine that underwent dry docking. We have no scheduled dry docks in the fourth and the next scheduled dry dock will be in the third quarter of next year to the best of my understanding. . Mark La Reichman: Okay. Tasos. And the second area is so if containership ordering has accelerated even in the smaller sector, which could increase supply, you've mentioned that you think that could pressure rates from 2027 on you're pretty well covered in 2027 with 52% locked in. But I mean if we look at your Slide 9 where you're showing kind of the rates and you can kind of see that the rates are above the average. And then if you take into consideration that the rerouting, if that kind of settles back that you're kind of expecting maybe a the potential for rates to decline into 2027, 2028. But I was just kind of curious, I wanted to focus on that Slide 9, if I could, because I see the averages and the medians, it seems to me median is pretty severe. I mean I would probably look at it by taking the standard deviation of the rates and maybe putting a plus 1, minus 1 standard deviation around the average. But I mean, you're also looking at a couple kind of a time series here. And so if we're looking at different regime ships. If you were to plant a flag and say 2020, what differences do you see in the market, pre-2020 and maybe the last 10 years versus the next 10 years. I mean, I think you're looking at an aging fleet. You're looking at increasing environmental standards. So obviously, the fleet is going to get replenished. Rates could probably go up based on the newer vessels, efficiencies could go down -- or could go up as you've got more fuel-efficient vessels. So you're -- your costs could come down. But I was just kind of just kind of flesh that out a little bit in terms of your expectations? And are there differences in the overall market? I mean, is it too simplistic to kind of look at this slide from 2015 to 2025 and draw conclusion? Or are there some other factors that may have a bearing on rates going forward. Aristides Pittas: The main reason why years 2015 to 2020, the markets were very low, as you can see, if we're looking at this decade is that there was a huge order book nearly 100% back in 2007 and 2008 that got delivered. So we had a fee oversupply of vessels which was the reason why charter rates for between 2015 and 2020 were extremely low. And then of course, we had the pandemic with the consequent significant increase in tonne miles for vessels, which resulted in this huge boom that we witnessed during the pandemic. And then the market started to correct after the pandemic and rates dropped again to a much more reasonable level. And then we had the war between Palestine and Israel, which closed the Suez Canal and resulted in the increase in the market that we have seen. These are the 3 main factors. Of course, there's so many other things that play around that. But these are the 3 main factors where we are -- where we are I don't think that we can see rates again as low as what we see -- we saw between '15 and '20, but we are shipping. But I don't think you can see that also for one additional reason that there has been quite significant inflation resulting in prices of newbuilding ships increasing substantially over the last 5 to 6 years. So if new building ships cannot become much cheaper because the shipyards will be losing money. They place kind of a floor for secondhand values as well. So it's a very difficult equation and it's extremely difficult to predict. That's why .... Mark La Reichman: But it's not unreasonable to expect that the rates would -- could be higher than, say, your average this average going forward, never told day in the shipping market. So there's probably going to be some volatility. But looking ahead and your breakeven rate is actually pretty -- you have a pretty good cost structure. So I don't know. I just -- just extending this back to 2015 and anyway, that's very helpful. It gives -- it provides a little perspective on the forward numbers. Aristides Pittas: It gives us a bit of color on what has happened, but to predict what will happen is so much more difficult. Yes. Anastasios Aslidis: Another indication Mark of what the market thinks is the charters we just concluded. Obviously, in these were levels we've seen in the market the market believes that the $35,000 per day roughly that we booked our ships for the 4,400 TEU plus is a level that would be okay to lock yourself in for 4 years, 2 years out from now. So that might be an indication that the 54 might be -- I mean, this is a market opinion. I guess, the counterpart opinion willing buyer, willing seller type of thing that might provide some other insights, I guess. . Operator: Our next question is from Tate Sullivan with Maxim Group. Tate Sullivan: I mean you gave a lot of good descriptions on why you're willing to book your newbuilds well forward. I mean at a longer time line to delivery than most -- almost all your other newbuilds, I think. But can you talk the charters willingness to book the ships that far forward. Have you -- I mean is it to avoid sudden spikes in the market like they had post-COVID? I would love to hear your thoughts on that, please? . Aristides Pittas: As we said, the fleet of the below 6,000 TEU is a very old fleet, right? 25% is older than 20 years is older than 15 years. We are seeing this aging fleet in the smaller sizes. And the charterers are competing amongst them to have those ships because they know that these ships are needed to trade is increasing continuously. The big ships get full. But then field. But then you need the smaller ships to do the regional trade. So I think we are seeing this potential lack of sales and racing to secure tonnage. Tate Sullivan: Or do you get any market indications if they're willing to book such long-term contracts that they have dormant vessels that are sitting in ports waiting for voyages at all in the current market? Aristides Pittas: No, because the current market is a market of full employment, okay? There might be some delays and some waiting times, small waiting times, occasionally due to the various reroutings that are happening. But no, the market is full. Tate Sullivan: Okay. I mean your news and commentary echoes some recent news in the sector to Tassos remaining newbuild commitments for the new ships, 4 new ships. I think you of your -- what you have already funded. So is your remaining commitment about $200 million -- is that fair? Anastasios Aslidis: Yes, correct. I think the contracted prices in total are approximately $240 million. And as I mentioned, we have made payments amounting to about $36 million or so. So roughly $200 million are remaining to be paid. Tate Sullivan: And then maybe one installment payments every -- one installment payment every year or 2 every year . Anastasios Aslidis: I think the next payment is when there is the steel cutting which should be about 12 months roughly before the delivery of the ship. So in middle of next year, we'll start making additional 10% payments. So there would be, I think, there will be 3 more 10% payments before the final payment. . Operator: Our next question is from Clement Molins with Value Investor's Edge. Climent Molins: Most has already been covered, but I wanted to delve a bit into your fleet positioning. You have a clearly dated fleet between legacy and modern tonnage. -- considering you recently fixed for new Wilson order at solid rates. Is there any appetite towards the additional tonnage alongside long-term contracts? Or are you comfortable with your current positioning? Aristides Pittas: So there is always a possibility to order something. We are looking at various possibilities. I don't know if something will develop or not. But obviously, having secured these last 4 vessels gives us significant safety and comfort to look at potentially doing something more. . Climent Molins: Makes sense. And final question from me. Pro forma for the sale of the Marcus 5 and even when including the CapEx on the new builds, you're sitting in a solid financial position. Is there a medium-term leverage target you plan to meet going forward? Or is it, let's say, a moving target? Aristides Pittas: [indiscernible]. But generally, our strategy is to have leverage around 50%. And we moved 10%, 15% above or 10% 15% below depending on certain stances and timing in the market. We believe that a decent leverage in a business that is making more than 6%, which is our cost of capital of that, so. it makes sense to have some leverage, if you can earn more than 6%, which is what we believe that historically we do. . On the other hand, we never want to be too exposed because we know what happens in a bad market, and we've lived through bad markets through our careers. So we don't want to overleverage. So I think that gives you guidance about our general leverage strategy. Operator: Our final question is from Poe Fratt with Alliance Global Partners. Unknown Analyst: Just do math on the delivery payments I'm calculating in the second half of 2027, you're going to owe about $65 million on the first 2 newbuilds. And then in the first half of '28, you're going to owe about or have to pay about $65 million in -- for the last 2 newbuilds. Is that correct? Anastasios Aslidis: That's probably right. I think you should you should think of something like 55% of the contract price to be paid in the year of the delivery in the half year of the delivery. So something like $65 million for the first pair and $ 65 million for the second pair sounds right. . Unknown Analyst: Yes. That's what I was guessing. And then just a nitpicky one. How did you decide to offer the charter the 1-year option after the fourth year, if you look at the way that the time charters are structured on the 4 new builds, 4 years at 35.5% and then years at 32.5%. It seems like you're giving up a lot on that last year of extra coverage. Can you just talk about that? Anastasios Aslidis: I think they were -- we were discussing with charter various options of triclinical ships from 3 years to 5 years, and there were different combinations of rates and durations. And we ended up [indiscernible] that will focus on the 4-year duration of $35, 500, but they ask to have the option to extend or the other -- the 5-year deal. So they have a year to decide about that. That implies a rate of around -- of low 20s for the fifth year if you compare 4 years 35, and 5 years, 22.5%, the implied rate for the fifth year, if you keep the first 4 years and 35.5%, it's around in the low 20s. So we felt that was an appropriate trade-off to make. . Unknown Analyst: Yes. I had calculated $20,500. And then on your Slide 20, it seems like you're implying that the fleet will -- even with the new builds coming into the fleet will decline in '26 and '27 and '28. Can you just talk about your strategy on selling some of the older assets, mainly the feeders that don't have as much contract cover? Anastasios Aslidis: So let me take that. We are taking a very conservative approach that the market may decline significantly. And. We will need to -- instead of passing the special survey of our 2 older vessels, we will decide to scrap them This, of course, is the lowest possible value, but we are being very conservative in our projections. . Unknown Analyst: And just to get granular, it looks like the and the Jonathan P would be the 2 scrapping candidates if the market does do what you think it is going to do? Anastasios Aslidis: One vessels [indiscernible] in our fleet. . Operator: With no further questions, I would like to turn the conference back over to management for closing remarks. Aristides Pittas: Thank you very much, everybody, for listening in. We will be back to you at the beginning of the year with the full year results. Thank you. Anastasios Aslidis: Thank you. This will conclude today's conference. You may disconnect at this time, and thank you for your participation.
Clay M. Whitson: The cadence driven by the cadence of revenue recognition on certain projects in our utilities and transportation markets. This will be particularly true in Q1. Despite the lower outlook for those markets in fiscal 2026, they are well positioned to rebound in fiscal 2027 and beyond. Our long-term expectation for organic revenue growth remains high single digit. While we are now a single operating segment, we would like to provide some detail regarding the size and relative contributions to revenues by our core markets. 25% of revenues utilities, transportation, education, and public administration are all roughly equally weighted. From a seasonality standpoint, software license sales and professional services represent the most variable line items to forecast and can distort seasonality in a given quarter. We currently expect our revenue distribution to approximate the following: Q1, 23%; Q2, 25.5%; Q3, 24.5%; Q4, 27%. I'll now turn the call over to Rick Stanford for updates on the M&A. Thank you, Geoff. Good morning, everyone. I'll briefly address M&A and then I'll hand the call off to Paul Christians. Rick Stanford: This past quarter has presented various opportunities to assess potential acquisition targets. Our interest in some of these companies remains strong and discussions are ongoing. Acquisition philosophy remains steady. We will pursue opportunities that align with our strategic goals while maintaining a disciplined approach to pricing. Additionally, each potential acquisition must fit well within our operational framework ensuring compatibility. We remain optimistic as our acquisition pipeline is constantly churning and continually filled with promising opportunities. Our primary focus remains on strengthening our public sector vertical where we see significant potential for growth and innovation. I'll now turn the call over to Paul Christians for final comments. Paul Christians: Thank you, Rick. i3 Verticals, Inc. is structured into five primary markets: Justice tech, transportation, public administration, education, and utilities. Because we intentionally structured our organization in a market-centric model to remain as close to the customer as possible, intra-market cross-selling naturally progressed into solution bundling. As solutions have evolved, some are applicable cross-market. Given that, leadership is actively identifying synergistic opportunities across markets further accelerating revenue and deepening customer engagements. Governments are prioritizing the modernization of legacy systems, enhanced user experience, and improved transparency for constituents. The combination of modernization needs and scope expansion creates a unique market opportunity for i3 Verticals, Inc. to address the gap by providing solutions that include ancillary modules such as payments and other revenue cycle activities, that may reduce costs of systems modernizations. Additionally, i3 Verticals, Inc. is positioned to address the needs of all sides of the state and local government agencies. Our solutions architecture and service delivery model allows us to scale from a single agency to an entire state system broadening our addressable market. Recently, i3 Verticals, Inc. announced the expansion of our partnership with the West Virginia Supreme Court to deliver the i3 Court One case management solution to the state's circuit, family, and magistrate courts. With the new contract, i3 Verticals, Inc. provides ancillary value-added services designed to maximize efficiency and offset project costs for West Virginia's unified judicial system. An expanded platform will empower citizens to gain greater access to aggregated public court data, while the revenue cycle management module will streamline financial processes and improve court's case disposition rates. We are experiencing a heightened awareness and demand for technology-forward platform solutions across the public sector. Platform offerings support decision-makers' ability to manage results versus managing assembly of multiple systems, vendors, and ongoing maintenance. Recent evidence of market platform orientation includes a higher number of RFPs, an increase in the scope of the solutions covered, unified data structure for analytics, and ongoing systems evolution and maintenance requirements. The shift from traditional licensing and capital expenditure models to SaaS introduces a new budgeting paradigm for government clients. One of our differentiators is that i3 Verticals, Inc. is organized both in solution bundling and delivery structure to scale implementation from a single agency to statewide deployment. To address evolving platform market trends, we bundle ancillary services to reduce upfront costs and deliver integrated, modular solutions that deliver modernization with extended scope and enable rapid rollout of additional modules. As referenced earlier, we're observing increased RFP activity alongside continued pipeline growth. This momentum in part reflects increased recognition of i3 Verticals, Inc. as a trusted platform provider and the enhanced market visibility achieved through our brand unification over the past year. This concludes my comments, Drew. At this time, we will open the call for Q&A please. Rick Stanford: We will now begin the question and answer session. The first question comes from John Kimbrough Davis with Raymond James. Please go ahead. Good morning, guys. Geoff, just wanted to dive into the '26 organic growth outlook. Our math is about 5%. I heard 8% to 10% recurring and professional services down. Is that a function of you're no longer selling those professional services or maybe you're not putting things like Manitoba in the guide because they're lumpy and you don't know if they can if they're going to hit or when they're going to hit. Just trying to get a sense for the level of conservatism and almost have and also how much you expect professional services to be down on a year-over-year basis? Clay M. Whitson: Yes. Thanks for the question, J.D. So it's absolutely true that we are leaning into recurring revenue any chance we get. When it comes to negotiations, the West Virginia deal we just did, or any opportunity where we can push and lean on the SaaS and defer over, you know, opt for the recurring sources instead of the professional services implementation sources and contract negotiations, we're absolutely doing that. At each turn. That being said, the professional services, we don't expect that to go away. We don't think that what we have clear line of sight on in 2026 is reflective of any kind of long-term trend necessarily. There's a number of things. The West Virginia deal, utilities pipeline, they look really strong on the professional services and implementation front. Further out. Just true that for 2026, we think that the cadence and timing of some of those things is going to be a little bit lighter. And so we expect to see that line drop off a little bit here. And it was strong in Q4, some of that was a little bit of pull forward, but most of it is kind of things that we just think that the actual performance obligation fulfillment, the cadence of when we get to rev rec on these is further back end of 2026 or slipping into 2027. John Kimbrough Davis: Okay. Thanks. And then I just wanted to drill down a little bit on that dollar I think you called out 104 for the year. How much of that was priced? And how should we think about kind of the pricing tailwind going forward? So we addressed this a little bit with the market but just to kinda recap some of these things. The company has been extremely conservative on price increases historically. And I'm going to say that we are isn't like a pendulum swing to the ops end of the spectrum at all. But we're much more bought in and have been, you know, working through the contracts and the expectations to make sure we kind of get to more of a 3% to 5% price increase range. On a consistent basis with our customers. We've kind of guided that you might expect if price increases were historically contributing one, all things that we think we're gonna get a great return on. You know, West Virginia is just one of kind of, you know, the sources where that's gonna kinda come from. We're really excited about that deal. The cost is I'd say it's relatively in line with where we thought it was going to be for Q4, but these are people who are going to be with us for the foreseeable future here. And that's going to that elevated cost is going to continue into the next fiscal year here. Okay. And then Greg, $85 million cash balance on the balance sheet. Here. How do we think about buyback versus M&A just remind us how much you have them on the buyback? It looks like this year can be a little bit of a transition year at least on the revenue front. Just how are you thinking about that? M&A versus buyback here? And remind us how much you guys have authorized left? Rick Stanford: We just regarding buybacks, and I'll let Greg hit M&A. But Hey. Buybacks, we just refreshed the approval to $50 million. Not a lot of activity in this current period. See obviously the detail in our 10-Ks. That's something that the emphasis is on being opportunistic. We'll do it when we think we get a good return. And we'll we're not going to chase it when we don't think that we're given. On the M&A, we've worked in our pipeline for thirteen years. And I think you'll see some activity sooner than later. We've done a couple of small ones that we'd really don't talk a lot about. And I think we'll still do those, but I think there'll be a couple of meaningful ones we get done in 'twenty six. John Kimbrough Davis: And Greg, when you say meaningful, more tuck in but announced deals that are big enough that you're going to announce them versus maybe some that are just immaterial and not even worth kind of press releasing or talking about? Rick Stanford: Exactly. But nothing transformative. Clay M. Whitson: Yeah. Nothing transforming. They're larger. We say our sweet spot is $2 million to $5 million of EBITDA and we pay 10 times. We could get a little bit above that, but nothing dramatically. John Kimbrough Davis: Okay. Appreciate it. Thanks, guys. This concludes our question and answer session. I would like to turn the conference back over to Greg Daily for any closing remarks. Rick Stanford: Thank you. We do appreciate your interest. We're here if you need to talk discuss. The Duke We do appreciate your support. Thank you. Have a good day. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the C3is Third Quarter 2025 Financial and Operating Results Conference Call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Diamantis Andriotis. Please go ahead, sir. Diamantis Andriotis: Good morning, everyone, and welcome to our C3is Third Quarter of 2025 Earnings Conference Call and Webcast. This is Dr. Diamantis Andriotis, CEO of the company. Joining me on the call today is our CFO, Nina Pyndiah. Before we commence our presentation, I would like to remind you that we will be discussing forward-looking statements, which reflect current views with respect to future events and financial performance and are based on current expectations and assumptions which by nature are inherently uncertain and outside of company's control. At this stage, if you could all take a moment to read our disclaimer on Slide 2 of this presentation. I would also like to point out that all amounts quoted, unless otherwise clarified, are implicitly stated in U.S. dollars. We have today released our earnings results for third quarter of 2025, so let's proceed to discuss these results and update you on the company's strategy and the market in general. Please turn to Slide 3, where we summarize and highlight the company's performances, starting with our financial highlights. For the first 9 months of 2025, we achieved a net income of $5.26 million compared to a net loss of $3 million for the same period in 2024, an increase of 281%. Our voyage revenues decreased by 24% compared to the same period in 2024 due to the drydocking of our Aframax tanker, resulting in a loss of revenue from our highest earning vessel over a period of 74 days. Our TCE rate was also impacted with a drop of 40%. In April 2025, we settled the final outstanding balance of $14.6 million due on our latest addition, the Eco Spitfire. We reported an EBITDA of $10 million compared to $3 million for 2024, an increase of 245%. Slide 4 shows the dry bulk trade for the first 9 months of 2025, the recent U.S.-China trade truce, while Fragile should support Q4 rates via more U.S. exports. The iron ore and markets remained resilient and 2026 could see faster expansion than 2025, driven by South and omni iron box volumes. The market was also supported by strong iron ore volumes to China. Dwindling Chinese iron ore and bauxite mine output will create scope for imports, departures from Guinea to China showed the usual Q3 rainy season weakness. Much of the relatively strong demand has been driven by inventory building and dwindling Chinese mining output rather than rapid growth in demand. Chinese demand is not growing rapidly, but its inventory is hard. Q3 was a much stronger period for seaborne coal trades than the first half of 2025, overall levels remained slightly down against '24 levels. Come 2026, a moderate rebound in coal trade is expected as trade tensions in La Nina remain key risks. The grain train boomed in Q3. This was primarily driven by bumper grain volumes in the. China, but enormous volumes to Brazilian soybeans far later in the year than usual, as it avoided by U.S. soybeans as part of the wider trade dispute between the 2 nations resulting in U.S. exports falling 35% by the end of Q3. There was also strong grain and soy meal volumes from Argentina, thanks to government cuts in export levies and strong harvests. Camp26, firmer EU production, moderate black seat growth and strong ECS volumes support a modest rebound in grain flows, a much more vigorous rebound will be from Chinese return to the market in Q4 with demand expanding well. Minor demand remains resilient as steady manufacturing and construction underpin minor bulk imports. Slide 5 shows the Handysize market fundamentals and the fleet ages and growth. the market outlook shows that in January, September 2025, global exports of all dry bulk commodities loaded on handy super tonnage reached 1.3 to 8 million tons into excess marine vessel tracking data, exports loaded were coal. This was largely due to a slowdown in coal mine output in China. Indian appetite for coal imports was down significantly in Q3, in line with typical seasonal trends. India, demand was also hampered by strong domestic mining. Moving on to the handy fleeted in growth. The global Handysize fleet now stands at 3,202 vessels. Of these 569 vessels are over 20 years of age, accounting for 17.8% of the total number of vessels. With the starting tally of 3,117 vessels, the current fleet represented change of 2.73% invested numbers over the year so far. The global Handysize order book now stands at 226 vessels. Of these 37 vessels are scheduled for delivery within 2025. Currently, the order book to fleet ratio stands at 7.2%, while in comparison, 10.5% of the fleet is over 25 years of age an average 7.3% is between 20 and 24 years of age. The average age of the C3Is and fleet was 15.2 years by the end of 2025. Slide 6 shows the Aframax LR2 fleet size and. As at the end of Q3 2025, the Aframax in service comprised 1,191 vessels with a total deadweight capacity of 131.35 million deadweight, reflecting a year-to-date growth of 3.3%. Deliveries in 2025 reached 47 vessels, demolitions totaled 9 vessels with 2 vessels removed during Q3. The current order book stands at 197 vessels fleet as 20 years totals 252 vessels, representing 21% of the total fleet. The highest number of vessels is in the 15, 20 years category. The age of our Aframax tanker was 15.2 years by the end of Q3 2025. Slide 7 summarizes the current tanker market fundamentals. Global oil consumption rose only modestly in Q3 and speculations are now growing over a oil supply surplus next year. Chinese crude oil imports were down 0.4% on Q2, but up 5% year-on-year. Chinese oil demand sludges, increasing purchases are cost opportunistic and testing to build up inventories as domestic demand is flatlined. There is only another 2% of total growth in oil demand expected until 2030. War and global uncertainty will keep causing market disruptions typically boosting earnings, refinery attacks in Russia are just the latest example. Parson Trade Global growth has proven stronger than anticipated in the face of trade tariffs patch. However, part of this resilience was masked by front-loaded exports. China remains on track to meet this 5% growth target and outcome you expected earlier this year. The real test will come next year even if Chinese exports remain strong, next exports are unlikely to grow as much as in 2025. China-U.S. relations have with a 1-year agreed, but some tariffs remain without a comprehensive long-term deal, uncertainty will persist. The recent U.S. tariff reduction on Chinese goods is marginal now 47%, down from 57% and China U.S. trade is expected to keep declining. Geopolitical uncertainty continues to dominate, especially the U.S.-China trade and gravelly. Late October and 1-year truce agreed with U.S. tariffs on China reduced to 47% and other measures delayed. Early Q4 showed the Israel Hamas which is holding for now. Ships still avoid the red sea despite the gas and is fire. This continues to mask oversupply. It will take time for the route to be being safe. There was little land inside to crane work, but the U.S. is now talking tougher on sanctions with implications for oil and tanker markets. Q3 was all about waiting for the IMO vote on net 0 measures in October. The vote was eventually delayed until next year after U.S. lobbying against the rules. Bar stock change of U.S. policy, any global carbon measures are unlikely to pass next year or a 10-point in Trump's term. The rules if passed, would have effectively introduced a carbon tax on burning fuel oil. Slide 8 shows the current fleet of CIS. CIS owns and operates a fleet of 300 drybulk carriers and 1 on Aframax oil tanker. In May 2024, the company took delivery of the 33,000 deadweight dry bulk carrier Veeco Speed fire bringing the total fleet capacity to 213,000 deadweight, with an average age of 14.8 years at the end of Q3. All vessels have had their ballast wall systems already installed. The successfully completed heat dry dock in August 2025. And the next one, you will be in August 28. All the vessels are unencumbered and currently employed on short- to medium-term period charters and spot voyages. None of the vessels were built in Chinese not affected by the newly postponed tariffs. Slide 9 shows the example of the international charters with whom management company has developed strategic relationships and has experienced repeat business. Repeat business highlights the confidence our customers have for our operations and the satisfaction of the services we provide. The key to maintaining all relationships with these companies are high standards of safety and reliability of service. I will now turn over the call to Nina Pyndiah for our financial performance. Nina Pyndiah: Thank you, Diamantis, and good morning to everyone. Please turn to Slide 10, and I will go through our financial performance for the first 9 months of 2025. We reported voyage revenues of $24.2 million for the first 9 months of '25 compared to $32.9 million in '24, a reduction of 26% and primarily due to the dry docking of our Aframax tanker, which resulted in 74 nonrevenue days. The time charter equivalent rates of our vessels were also impacted with a decrease of 40% compared to the same period of 24%. Voyage costs for the first 9 months of '25 were $9.4 million compared to $10.4 million in '24, this decrease was attributed to the decrease in voyage days due to the dry docking of the Aframax tanker. Voyage costs for the 9 months ended September 30, 2025, mainly included bunker costs of $4.7 million, corresponding to 49% of total voyage expenses and port expenses of $3.8 million, corresponding to 40% of total voyage expenses. Operating expenses for the 9 months ended September 30, '25 was $7 million and mainly included crew expenses of $3.5 million, corresponding to 50% of total operating expenses, spares and consumables costs of $1.6 million and maintenance expenses of $1 million representing works and repairs on the vessels. The dry docking cost were $1.7 million. General and administrative costs for the 9 months ended September 30, '25 and '24 were $2 million and $2.5 million, respectively. The $0.5 million decrease mainly related to expenses incurred in the 9 months ended September '24 relating to the 2 public offerings, September 30, '25 was $4.9 million, a $300,000 increase from $4.6 million for the same period of last year due to the increase in the average number of our vessels. Interest and finance cost for the 9 months ended September 30, '25 and '24 were $400,000 and $2.1 million, respectively. The $1.7 million decrease is related to the accrued interest expense related party in connection with $53.3 million, part of the acquisition prices of our tanker a 2, which was completely repaid in July '24 and our bulk carrier, which was completely paid in April '25. Gain of warrants for the 9 months ended September 30, '25 was $6.7 million as compared with a loss on warrants of $10.4 million for the 9 months ended September 30, 25 and mainly related to the net fair value changes on our Class B1 and Class B2 warrants and C1 and C2 as. And as these were classified as liabilities. For the first 9 months of '25, the company reported a net income of $5.3 million and related EPS of 3.34%. Turning to Slide 11 for the balance sheet. We had a cash balance of $6.6 million compared to $12.6 million at the end of '24, a decrease of 48% due to the full settlement of the 90% of the purchase price of the Echo Spitfire in Q2 '25. Other current assets mainly include charges receivable of $3.5 million compared to $2.8 million in December '24, as well as inventories of $600,000 compared to $900,000 at December '24. The vessels net value of $79 million were for the 4 vessels less depreciation. Trade accounts payable of $1.8 million are balances due to suppliers and brokers. Payable to related party of $4.3 million represents the balance due to the management company race maritime. Warrant liability of $3.9 million was recorded, a drop of 63% from the year-end balance of '24 when it was $10.4 million. Concluding the presentation on Slide 12, we outline the key variables that will assist us progress with our company's growth. Earning a high-quality fleet reduces operating cost. -- improve safety and provides a competitive advantage in securing favorable charters. We maintain the quality of the vessels by carrying out regular inspections, both while import and at sea, and adopting a comprehensive maintenance program for each vessel. None of our vessels were built from Chinese shipyards, Hence, the ongoing tariff spreads by the U.S. to China will be of no consequence to our fleet. The company's strategy is to follow a disciplined growth within depth technical and conditional assessment review. Equity issuances will continue as management is continuously seeking a timely and selective acquisition of quality non-Chinese built vessels with current focus on short- to medium-term charters and spot voyages. We always charter to high-quality charters, such as commodity traders, industrial companies and oil producers and refineries. Despite having increased our fleet by 234% since inception, the company has no bank debt. New interests were charged by the affiliated sellers on the purchase prices and the EcoSpidfire. From July 23 to date, we have repaid all of our CapEx obligations totaling $59.2 million without resorting to bank loans. At this stage, our CEO, Dr. Diamantis Andriotis, will summarize the concluding remarks for the period examined. Diamantis Andriotis: For the first 9 months of 2025, we reported voyage revenues of $24.2 million and EBITDA of $10.3 million, an increase of 245% and net income of $5.3 million, an increase of 281% and EPS of 3.5%. In April '25, we paid off the remaining balance of $14.6 million due on our bulk carrier, the Eco Speed fire. In August 2025, we successfully completed the dry docking of our Aframax tanker, we are fully delevered, thus significantly enhancing our financial flexibility. As the world goes through an uncertain volatile later, turbulences in the shipping market are unavailable. The market remains as uncertain as they have ever been due to this geopolitical environment. But despite all this uncertainty, major economies are still growing and trade volumes are still rising across sectors. In the midst of the dynamics, CTIs performance remained solid, and we have proved that we have built a resilient and organic foundations adaptable to this changing environment. We will, therefore, continue with our strategy with our debt-free balance sheet of enhancing our fundamental ability to both further develop existing core businesses as well as explore potential new growth businesses. We would like to thank you for joining us today and look forward to having you with us again at our next call for the results of the fourth quarter of 2025. Operator: This concludes today's call. Thank you for participating. You may now all disconnect. Have a nice day.
Operator: Welcome, and thank you for joining Oaktree Specialty Lending Corporation's Fourth Fiscal Quarter and Full Year 2025 Conference Call. Today's conference call is being recorded. I'll now turn the call to Clark Koury, OCSL's Head of Investor Relations. Clark Koury: Thank you, operator. Our fourth quarter and full year 2025 earnings release, which we issued this morning, along with the accompanying slide presentation, can be accessed on the Investors section of our oaktreespecialtylending.com. Before we begin, I want to remind you that the comments on today's call are forward-looking statements reflecting current views with respect to, among other things, future operating results and financial performance. Actual results could differ materially from those implied or expressed in the forward-looking statements. Please refer to the relevant SEC filings for a discussion of these factors in further detail. Oaktree undertakes no duty to update or revise any forward-looking statements. I'd also like to remind you that nothing on this call constitutes an offer to sell or solicitation of an offer to purchase any interest in any fund. Investors and others should note that OCSL uses the investor section of its corporate website to announce material information. The company encourages investors, the media, and others to review information that it shares on its website. Now I will turn the call over to Matt Pendo, president of OCSL. Matt Pendo: Thank you, Clark, and thank you all for joining our call today. I'll begin the call with an overview of our results for the fiscal year and fourth quarter. Armen Panossian, our CEO and co-CIO, will then share commentary on the current market environment. And Raghav Khanna, our co-CIO, will provide details on our portfolio and investment activity. Christopher McKown, our CFO and treasurer, will then review our financial results before we open the call for questions. The 2025 reflected steady improvement for OCSL, even as the macro environment remained choppy. As we will discuss in more detail, our team worked hard to turn around non-income producing positions, find interesting investment opportunities, and reduce our cost of capital. In the fourth quarter, we achieved adjusted net investment income of $0.40 per share, up from $0.37 the prior quarter. This sequential improvement reflects the return to more normalized prepayment fees, higher dividend income, and lower interest expense from our refinancings earlier this year, and lower base rates. Additionally, we continue to make progress reducing our nonaccruals, a key strategic focus. At year-end, nonaccruals were 2.8% of the portfolio measured at fair value, down 20 basis points from the third quarter and down 100 basis points from last year. Last week, the board approved a dividend of $0.40 per share for the quarter, consistent with our dividend policy, and fourth quarter earnings. While the Federal Reserve September rate cut did not affect fourth quarter earnings, lower base rates will impact net investment income in December. As we've said before, we have several levers at both the corporate and JV levels to help offset lower base rates and support net investment income. First, we can prudently increase balance sheet leverage to enhance earnings power and deploy capital into interesting investment opportunities. Our balance sheet is conservatively levered at 0.97 times and provides us with ample financial flexibility. Second, we can continue to optimize our JV. Finally, reducing nonaccruals and equity positions will improve our earnings power. We have line of sight into, one, putting a portion of our previously nonaccruing loans onto accrual status, two, monetizing a portion of our nonaccruals, and three, monetizing equity positions. Any proceeds we receive from realizations of nonaccruals and equity will be reinvested into income-generating assets. On an ongoing basis, we will continue to evaluate these levers and their potential contributions to earnings and our dividend. Now I will pass the call over to Armen for an update on the market environment. Armen Panossian: Thanks, Matt. Turning to the current market environment, we see many conflicting themes. Private credit deal flow showed modest improvement during the quarter, although the overall quality of deals was mixed. We continue to see a steady supply of high-quality opportunities, alongside an increasing number of lower-quality deals coming to market. Sponsors are pursuing dividend recapitalizations more often as exit activity remains subdued compared to historical levels. Momentum in Europe slowed relative to what we observed in our third quarter given ongoing political and economic uncertainty. But we still see some interesting deal flow from that region. Ample liquidity in the broadly syndicated loan and private debt markets has driven sponsors to dual track financings. We have seen an increasing share of $1 billion plus LBOs opting for the broadly syndicated market and the tightening of the illiquidity premium. However, since the Fed rate cut in September, we have witnessed slightly more price discipline and are cautiously optimistic that private credit spreads have bottomed out at SOFR plus $4.50. PIK and looser covenants remain popular tools for private debt managers to win mandates and allocations, but we remain extremely disciplined in our credit documentation and acceptance of PIK. As a percentage of total investment income, PIK was 6.4% at quarter end. We prefer to use PIK judiciously and in situations such as financing a high ROE project or carve-out acquisition that requires the PIK option only for a defined period, after which a project or acquisition generates the necessary cash flow to cover the debt's full cash interest payment. Despite a mixed environment, our long-term outlook on private credit remains bullish. Issuers continue to value the speed and assurance of deal execution with a sophisticated partner. For investors, we think private debt will continue to deliver a premium spread relative to other floating rate asset classes and with lower volatility. To talk more about our portfolio and new investments, I will turn it over to Raghav. Raghav Khanna: Thanks, Armen. I'll start with a review of our investment activity in the fourth quarter. Our pipeline improved during the quarter, yet given heightened competition and tighter spreads, as Armen mentioned, we are taking a highly selective approach to new investments. We continue to prioritize senior secured loans to market-leading businesses with durable fundamentals, reliable cash flow, and strong downside protection. At the same time, we are focused on diversifying the portfolio, avoiding industry concentration risk, and limiting exposure to more cyclical sectors. Turning to origination and repayment activity for the quarter, new funded investment commitments, including drawdowns from existing commitments, amounted to $120 million, up 54% from the prior quarter. Prepayments from exits, other paydowns, and sales were $177 million. And the weighted average spread on deployments during the quarter was approximately SOFR plus 570. First lien loans represented 88% of our new originations. One notable investment during the quarter was Walgreens Boots Alliance, an integrated healthcare pharmacy, and retailer with a 170-year heritage. The company was taken private by Sycamore Partners for over $20 billion, and the sponsor subsequently split the conglomerate into four operating businesses. Each segment required its own bespoke lending solution, and the sponsor got lenders who could move quickly to underwrite the distinct challenges and transformation opportunities of the retail and pharmaceutical businesses. Oaktree strategies worked collaboratively to consider various capital structures. Ultimately, Oaktree funds acted as joint lead arranger for the $2.5 billion first in, last out, first lien term loan to support the US retail business. The FILO was priced at SOFR Plus 700 with 2.5 points of OID, which is attractive for the industry risk and complexity of the deal. Oaktree's deep expertise in inventory appraisal and long track record of investing in FILOs made us comfortable with the collateral coverage of the loan. This transaction is a great example of how Oaktree is positioned to capitalize on complicated yet compelling investment opportunities. Turning to our portfolio, over 40% of our portfolio companies were marked up during the quarter, by about 70 basis points on a weighted average basis, reflecting improving fundamentals in several portfolio companies. As of September 30, 83% of our portfolio was comprised of first lien senior secured debt, and the weighted average yield on debt investments was 9.8%. The median EBITDA of our portfolio companies was approximately $150 million, an $11 million decrease from the prior quarter. Portfolio company weighted average leverage increased slightly to 5.2 times from 5.1 times, and weighted average interest coverage remained unchanged at 2.2 times. As Matt mentioned, we have made tangible progress reducing nonaccruals and resolving challenged investments, which contributed to a decline in nonaccruals this quarter. I'll cover those now starting with an update on Mosaic companies. We have been working closely with Mosaic to realize value for the separation of its three business segments. Two of these segments were sold, and the third is in a liquidation process. As you may recall, these efforts resulted in a significant cash paydown during June, and we received additional cash paydowns in September and after quarter end. Inception to date, the paydowns we received amount to a little over 70% of our original invested cost, and when combined with coupon payments, have resulted in generating positive IRR over the life of this loan. We believe the proactive actions we took following Mosaic's tariff-related headwinds earlier this year helped maximize our recovery in a challenging situation. We also made progress in monetizing our Inopen Therapeutics, whose loan is secured by certain royalty rights and public shares of ADC Therapeutics. Following an increase in ADC's share price, we sold a portion of our ADC shares and used the proceeds to reduce the outstanding loan amount. Our remaining position in Inopen Therapeutics continues to be marked at 99.5, reflecting our view that we will continue monetizing the collateral supporting this loan and recover substantially all of the remaining loan balance. While the issuer is not new to our nonaccrual list, we added Baymark's first lien loan to nonaccrual status. The company's second lien loan was put on nonaccrual in the third quarter. We are working closely with other lenders and the company to maximize value. I'll now turn the call over to Chris to review our financial results. Christopher McKown: Thank you, Raghav. In our fourth fiscal quarter ending September 30, 2025, we delivered adjusted net investment income of $35.4 million or $0.40 per share as compared to $32.5 million or $0.37 per share in the prior quarter. The increase for the quarter reflects the return to normalized levels of fee income and interest expense following the one-time items that impacted the results in the third quarter. NAV per share was $16.64, down from $16.76 in the third quarter due to unrealized depreciation on certain debt and equity investments. Adjusted total investment income increased to $76.9 million compared to $74.3 million in the third quarter, primarily driven by higher prepayment fees and dividend income. Net expenses declined modestly compared to the third quarter. Interest expense decreased due to the refinancing of our syndicated credit facility completed earlier this year and lower reference rates. Additionally, as you may recall, our June results were impacted by noncash and nonrecurring interest expense related to the acceleration of deferred financing costs primarily in connection with the termination of the Citibank SPV facility. The weighted average cost of borrowings was 6.5% at September 30, down from 6.6% in the third quarter. Further, we waived approximately $1.9 million in incentive fees as a result of our total return hurdle. Our leverage ratio at quarter end was 0.97 times, up slightly from 0.93 times last quarter, and total debt outstanding was $1.5 billion. Our target leverage range of 0.9 times to 1.25 remains unchanged. Driven by our disciplined pace of capital deployment, we remain at the low end of the range. Unsecured debt represented 64% of total debt at quarter end, down slightly from the prior quarter. We have ample dry powder to fund commitments with liquidity of approximately $695 million, including $80 million of cash and $615 million of undrawn capacity on our credit facility. Unfunded commitments, excluding those related to the joint ventures, were $258.9 million, approximately $246.9 million of which can be drawn immediately as the remaining amount is subject to portfolio companies meeting certain milestones before the funds can be drawn. Turning to our two joint ventures, together, the JVs currently hold $513 million of investment primarily in broadly syndicated loans spread across 73 portfolio companies. During the fourth fiscal quarter, the JVs generated ROEs of 12.4% in aggregate. Leverage at the JVs was 1.7 times, compared to 1.3 times last quarter. In addition, we received a $525,000 dividend from the Kemper JV. With that, I'll turn the call back to the operator to open the call for questions. Operator: Thank you. We will now begin the question and answer session. At this time, I would like to remind everyone in order to ask a question, press 1 on your telephone keypad. And your first question comes from the line of Melissa Wedel with JPMorgan. Melissa Wedel: Good morning. Thanks for taking my questions today. Definitely noted the turnaround in the level of new net funding activity this quarter. I know that typically December is a seasonally busy quarter, but I'm just curious if you have any early insight into sort of expectations around investment activity in the December quarter this year? And any outsized repayments that should be thinking about? Armen Panossian: Thanks, Melissa. It's Armen. In terms of outsized repayments, we don't expect any at this time for the quarter, December. As far as deployment, nothing really stands out either direction, either on the heavy side or the light side relative to past December quarters. You know, we certainly have seen some tightening in the spreads, and so we're judicious about how we're deploying. But I don't see us materially deviating from past quarters in terms of deployment or leverage levels for the quarter. Melissa Wedel: Okay. I appreciate that. One of the other things related to your comment about spreads tightening, I did notice that the yield on new investments this quarter was a step higher, about 60 bps higher, compared to last quarter. I'm assuming that relates to sort of the complexity of the Walgreens deal, the complexity and size of the Walgreens deal. I guess, one, is that right? And then two, what's your view on sort of a pipeline for transactions like that where there might be more complexity and pricing involved? Thanks very much. Christopher McKown: Hey, Melissa. It's Chris. Thanks for the question. I'll start and maybe Armen can add a little bit in terms of pipeline. In terms of the quarter-on-quarter change, I mean, you're right in noting Walgreens. I think the other thing I would just note about June is that on balance, we had a little bit higher originations into your LIBOR indexed loans. So when you're looking at the absolute coupons, you know, June was a little bit lower as a result of that. You know, we do hedge all of that back to US dollars. There is a little bit of a pickup when you take into account that hedging impact, but that does create a little bit of noise, you know, kind of quarter to quarter. Armen, do you have anything? Armen Panossian: Yeah. You know, we do have a very active origination function in non-sponsored direct lending. I think Walgreens stands out as a pretty high spread loan. I don't see anything that we would be originating in the December quarter that's quite that high in spread. But we do have a few things that we're working on that might be sort of higher than the 450 to 500 spread that's typical sponsor lending, but I think it's too early at this point to provide forward guidance. I just don't think that the Walgreens deal is not repeatable, I don't think, in the fourth quarter. Oh, sorry. The fourth calendar quarter. Melissa Wedel: Yep. Understood. Thanks. Our next question comes from the line of Sean Paul Adams with B. Riley Securities. Sean Paul Adams: Hey, guys. Good morning. On the nonaccruals still on the books, it seems like there's still a heavy skew towards healthcare and pharma. Can you just share a little bit more color about what's going on in those particular segments? Armen Panossian: Sure. This is Armen. You know, we have or we had a couple of sort of chunky positions in the life sciences space. It's not many in number, but there were unfortunately some larger positions that continue to be the subject of workouts. FIO2 being the, I would say, the most material of them, which is a name that we've talked about on past calls. But that's really what it is. We continue to sort of work out situations that at this point have been in the portfolio for several years. They're all sort of stable to maybe slightly improving, but still not at the position where we're either going to exit or move them into accrual status, unfortunately. We're not adding. We haven't added other kind of life sciences or healthcare names that have created problems in the recent quarters. But again, these handfuls, a small handful of positions that were put on a few years ago continue to sort of weigh on the nonaccrual bucket. Sean Paul Adams: Got it. And as a quick follow-up, is there any workout strategies going on with those long-standing nonaccruals? Armen Panossian: They were operational workouts. They have already been, from a capital structure perspective, restructured. But operational improvements are being made. We're working closely with management teams to drive that performance. And when possible, we are working with the management to sell assets and either fund cash burn or repay, or make distributions to our position. But there's nothing significant or monumental that would be happening in the near term with respect to those positions. It's just kind of blocking and tackling with an operational turnaround. Sean Paul Adams: Appreciate the color. Thank you. Operator: Again, if you would like to ask a question, press 1 on your telephone keypad. Thank you. I'm not showing any further questions in the queue. I would now like to turn it back to Clark Koury for closing remarks. Clark Koury: Great. Thank you, operator, and thanks to everybody for joining. Please reach out with any questions. We're happy to jump on the phone. Have a great day. Operator: And that concludes our today's conference call. Thank you all for joining. You may now disconnect.