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Operator: Good day, and thank you for standing by. Welcome to NTIC's Fourth Quarter 2025 Earnings Conference Call and Webcast. [Operator Instructions] Today's conference is being recorded. As part of the discussion today, the representatives from NTIC will be making certain forward-looking statements regarding NTIC's future financial and operating results as well as their business plans, objectives and expectations. Please be advised that these forward-looking statements are covered under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and that NTIC desires to avail itself of the protections of the safe harbor for these statements. Please also be advised that actual results could differ materially from those stated or implied by the forward-looking statements due to certain risks and uncertainties, including those described in NTIC's most recent annual report on Form 10-K, subsequent quarterly reports on Form 10-Q and recent press releases. Please read these reports and other future filings that NTIC will make with the SEC. NTIC disclaims any duty to update or revise its forward-looking statements. I will now hand the conference call over to Mr. Patrick Lynch, NTIC's CEO. Please go ahead, sir. G. Lynch: Good morning. I'm Patrick Lynch, NTIC's CEO, and I'm here with Matt Wolsfeld, NTIC's CFO. Please note that a press release regarding our fourth quarter and full year fiscal 2025 financial results was issued earlier this morning and is available at ntic.com. During today's call, we will review various key aspects of our fiscal 2025 fourth quarter and full year financial results, provide a brief business update and then conclude with a question-and-answer session. Please note that when we discuss year-over-year performance, we are referring to the fourth quarter and full year of our fiscal 2025 in comparison to the fourth quarter and full year of last fiscal year. Fiscal 2025 was marked by order timing shifts and selective softness in our ZERUST oil and gas and Natur-Tec markets. So NTIC used this period to strengthen its competitive position and to execute strategic initiatives that we believe will enhance our long-term growth potential. We accelerated product innovation within Natur-Tec, advanced new ZERUST solutions across global industrial markets and pursued emerging opportunities in the South American offshore oil and gas sector. These actions have expanded our pipeline, sharpened our focus and positioned NTIC to reaccelerate growth and improve profitability in fiscal 2026 and beyond. In fiscal 2026, we expect to start reaping the benefits gained from the strategic investments NTIC made over the past 3 years to upgrade our global operations and support future growth. We are also focused on flattening our operating expenses while expanding gross margins and driving sales in the higher-margin parts of our business, which we expect will improve our profitability and strengthen our balance sheet in fiscal 2026. While we anticipate macroeconomic headwinds to persist, especially in Europe, we believe NTIC is positioned to deliver growth and improved profitability across many of our key markets in the coming fiscal year. So with this overview, let's examine the drivers of the fourth quarter in more detail. For the fourth quarter ended August 31, 2025, our total consolidated net sales decreased 4.4% to $22.3 million as compared to the fourth quarter ended August 31, 2024. Broken down by business unit, this included a 29.4% decrease in ZERUST oil and gas net sales and a 10% decrease in Natur-Tec net sales, partially offset by a 5.8% increase in ZERUST industrial net sales. Turning to our joint venture sales, which we do not consolidate in our financial statements. Total net sales for the fiscal 2025 fourth quarter by our joint ventures increased year-over-year by 4.7% to $24.4 million. For fiscal 2025, joint venture sales declined 4.9%, reflecting the continued impact of high energy prices and regional political pressures on the European economy as well as significantly increased uncertainty related to U.S. trade and economic policies and the potential impact this will have on global supply chains. We continue to closely monitor trends across our European markets for signs of stabilization following years of subdued demand as governments begin to implement target economic stimulus packages. We expect that any economic recovery from these stimulus packages will lead to a positive impact on our joint venture operating income in future periods, especially in Germany. Improving sales trends at our wholly owned NTIC China subsidiary continue. Fiscal 2025 fourth quarter net sales at NTIC China increased by 12% to $4 million. For fiscal 2025, NTIC China sales increased 14% to $16.2 million, the second strongest year of sales we have experienced in this market. NTIC China sales for fiscal 2025 demonstrate that demand continues to grow in this geography. Furthermore, given that the majority of NTIC China sales are for domestic Chinese consumption, we believe NTIC China's exposure to U.S. tariffs is limited. We expect demand in China will continue to improve in fiscal 2026, helping to support higher incremental sales and profitability in this market. We continue to believe that China will likely become a significant market for our industrial and bioplastics segments, so we'll continue to take steps to enhance our operations in this geography. Now moving on to ZERUST oil and gas. Fourth quarter of fiscal 2025, ZERUST oil and gas sales were $3 million compared to $4.2 million in the same period last year. As a reminder, ZERUST oil and gas sales for the fourth quarter last year benefited from approximately $600,000 in sales that shifted from the third quarter due to timing. On an annual basis, ZERUST oil and gas sales were $7.3 million compared to $9.2 million for the prior full fiscal year. This decline was primarily due to timing of orders. We have continually invested in ZERUST oil and gas to enhance our sales team and add resources to support future growth. This has improved our sales pipeline as the size and the number of opportunities have expanded among both new and existing customers. Our pipeline includes global opportunities to protect above-ground oil storage tanks, pipeline casings and offshore oil rigs from corrosion. The nature of this industry will always cause certain fluctuations in ZERUST oil and gas sales. Nevertheless, we still expect to see ZERUST oil and gas sales and profitability to improve significantly in fiscal 2026 as we leverage these investments and rein in operating expense growth. Earlier this month, we announced that our 85% owned subsidiary, ZERUST Brazil, secured a new 3-year contract for a major offshore project with a leading global EPC company. Under this agreement, ZERUST Brazil will provide advanced corrosion protection solutions for floating production storage and offloading units, or FPSOs, with an estimated total value of approximately BRL 70 million, which is equal to approximately USD 13 million based on current exchange rates. The project started in Q4 and is expected to ramp up during our fiscal 2026 and then continue through calendar 2028. This is a significant validation of our engineering capabilities, scalability of our ZERUST oil and gas business and the reputation we've built as a trusted partner to leading offshore operators. Brazil represents one of the fastest-growing deepwater markets globally, and we believe this win provides a strong foundation for continued growth and expansion across international oil and gas markets. Turning to our Natur-Tec bioplastics business. Fourth quarter Natur-Tec sales were $5.1 million, representing a 10% year-over-year decline in Natur-Tec sales, primarily due to pricing dynamics and the timing of orders. For example, during the past year, a large North American customer of our resin compounds late purchasing for nearly 6 months as they made tooling adjustments to increase the output of their manufacturing line. While this contributed to Natur-Tec's decline in sales for fiscal 2025, we have already received orders for the first and second quarters of the new fiscal year for the equivalent of what this customer purchased from us in all of fiscal 2025. It's also worth mentioning that in Q4 of fiscal 2025, we entered into a preferred supplier agreement with the nation's leading specialized distributor for JanSan, food service and industrial packaging. We expect this new relationship to translate into higher Natur-Tec sales growth in fiscal 2026. We are also working on several larger opportunities for our Natur-Tec solutions that we believe holds significant promise to benefit our sales in the coming quarters, including advancing the compostable food packaging solution we mentioned on our last call. Overall, we believe Natur-Tec is a best-in-class compostable plastic business that is well positioned for significant further growth in the U.S. and abroad. While fiscal 2025 was more challenging than we expected at the beginning of the fiscal year, we remain steadfast on pursuing our strategic growth plan. We are confident in the direction we are headed. Before I turn the call over to Matt, I wanted to acknowledge the hard work and dedication of our global team of both employees and joint venture partners. Our success and our ability to navigate more complex economic periods are a direct result of their efforts. With this overview, let me now turn the call over to Matt Wolsfeld to summarize our financial results for the fourth quarter and full fiscal year 2025. Matthew Wolsfeld: Thanks, Patrick. Compared to the prior fiscal year period, NTIC's consolidated net sales decreased 1.0% in fiscal 2025 and decreased 4.4% in fiscal 2025 fourth quarter because of the trends Patrick reviewed in his prepared remarks. Sales across our global joint ventures increased 4.7% in the fourth quarter. Joint venture operating income in the fourth quarter increased 6.6% compared to the prior fiscal year period, primarily due to the corresponding increase in net sales. For fiscal 2025, sales across our global joint ventures decreased 4.9%, while joint venture operating income decreased 9.8% compared to the prior fiscal period. Total operating expenses for the fiscal 2025 fourth quarter increased 2.2% or $9.7 million for the fiscal 2025, primarily due to strategic investments in ZERUST oil and gas, sales infrastructure and increased personnel expenses, including new hires, benefits and higher travel and professional fees. As a percentage of net sales, operating expenses were 43.5% for the fourth quarter compared to 40.7% for the prior fiscal year period. For fiscal 2025, operating expenses as a percentage of net sales were 44.7% compared to 41.6% for the prior fiscal year. Gross profit as a percentage of net sales was 37.9% during the 3 months ended August 31, 2025, compared to 43.8% during the prior fiscal year period. Gross profit as a percentage of net sales was 37.6% for the fiscal year ended August 31, 2025, compared to 39.7% for the prior fiscal year. Lower gross margin for the fourth quarter and full year periods were primarily due to a less profitable mix of sales. There were a couple of onetime items that impacted profitability during the fiscal year, including a $1.1 million benefit to other income due to the receipt of cash from the employee retention credit that was payable in February of 2025. Secondly, NTIC recognized $387,000 in other expense during the fourth quarter of 2025 as NTIC's Chinese subsidiary was assessed penalties from Ningbo Customs, a customs authority in China as a result of a technical classification matter. We have since updated our export documents and internal review procedures and believe this issue has now been fully resolved. We also experienced an increase in our effective tax rate for fiscal 2025, which was 67.5% for fiscal 2025 compared to 17.3% in the prior fiscal year. The changes primarily reflect increased income tax expense in our foreign subsidiaries and is primarily due to the increase in income tax expense as compared to reduced consolidated pre-book tax income. As a result, our effective tax rate was unusually high and volatile in fiscal 2025. We expect the effective rate to normalize in future periods when additional profits are recognized in our North American operations. NTIC reported net loss of $1.1 million or $0.11 per diluted share for the fiscal 2025 fourth quarter compared to net income of $1.8 million or $0.19 per diluted share for the fiscal 2024 fourth quarter. For the full year, NTIC reported net income of $18,000 or $0.00 per diluted share compared to $5.4 million or $0.55 per diluted share for the fiscal 2024 full year. For the fiscal 2025 fourth quarter, NTIC's non-GAAP adjusted net loss was $607,000 or $0.06 per diluted share compared to non-GAAP adjusted net income of $1.9 million or $0.20 per diluted share for the fiscal 2024 fourth quarter. For the fiscal 2025, non-GAAP adjusted net loss was $12,000 or $0.00 per diluted share compared to net income of $5.8 million or $0.59 per diluted share for fiscal 2024. A reconciliation of GAAP to non-GAAP financial measures is available in our fourth quarter fiscal year 2025 earnings press release that was issued this morning. As of August 31, 2025, working capital was $20.4 million, including $3.7 million in cash and cash equivalents compared to $23.7 million, including $5 million in cash and cash equivalents as of August 31, 2024. As of August 31, 2025, we had outstanding debt of $12.2 million. This included $9.3 million in borrowings under our existing revolving line of credit compared to $4.3 million as of August 31, 2024. Reducing debt through positive operating cash flow and improving working capital efficiencies will be a strategic focus for fiscal 2026. We generated $2.4 million in operating cash flows for the fiscal year ended August 31, 2025. At year-end, the company had $28.6 million of investment in joint ventures, of which 51.7% or $14.8 million was in cash, with the remaining balance primarily invested in other working capital. During fiscal 2025 fourth quarter, NTIC's Board of Directors declared a quarterly cash dividend of $0.01 per common share that was payable on August 13, 2025, to stockholders of record on July 30, 2025. To conclude our prepared remarks, we are optimistic NTIC's momentum is building across many parts of our business. We believe our multiyear strategies are working, our global markets are expanding, and our team is delivering results. With a clear vision and disciplined execution, we're confident that the foundation we have built will drive continued growth, stronger profitability and meaningful creation -- value creation for our shareholders. With this overview, Patrick and I are happy to take your questions. Operator: [Operator Instructions] And we have a question coming from the line of Tim Clarkson with Van Clemens. Timothy Clarkson: Patrick, Matt, obviously, this year was not what everyone wanted. But just a couple of background questions. In general, are the income taxes on our international business, are they higher than the taxes domestically in the United States? Matthew Wolsfeld: It's not that it's higher. It's that essentially what you have is you have a situation where with all of our subsidiaries, let's say, the main 5 subsidiaries, they have a standard statutory tax rate, somewhere between 20% and 33%, 34% depending on the country. And so all of those subsidiaries are profitable, so they generate tax expense. So if you look at it from an effective tax rate when you put it all together, you have essentially the numerator in the effective tax rate calculation is a fixed number. There isn't a significant amount of -- there isn't a significant amount of tax expense from North America. However, we do have tax expense in North America based off of the -- we recognize here based off of the royalties and dividends that we received from JVs. The issue that we have is that the denominator in the calculation, there's very little profit, especially in fourth quarter that went into that number. And so what it created is a very large effective tax rate for fourth quarter. The expectations are that going forward, as there is more profitability, specifically in North America, the denominator in that calculation is going to be increased. For example, if we had more profit in North America, we would have had the same numerator, the same tax expense, but the denominator in the calculation would have been significantly higher, would have led to a more normalized effective tax rate. It's just the nature of how the tax provision calculation works, especially when we had, I would say, a difficult fourth quarter from a North American standpoint. So I do expect it to normalize in fiscal 2026 as we get back to similar profit levels that we had before. Timothy Clarkson: Okay. Sure. So I know you mentioned that you're looking to cut expenses in the company, too. I mean how realistic -- how much money do you think you can cut to improve profitability? Matthew Wolsfeld: The goal at this point isn't to cut expenses. The goal is to, I would say, maintain the same level of operating expenses that we had or close to the same level of operating expenses that we had in fiscal '25. I mean you recall all through the end of 2024 and through 2025, we talked about the increased investments that we've made in the oil and gas group and a couple of other areas inside the company with the ability to kind of use those investments to drive revenues going forward. We didn't see the revenue increases in fiscal 2025. The expectations are the investments that we made in 2024 and 2025, we'll start seeing the results of that in 2026 and beyond as those investments, specifically the people that we hired are able to gain traction and drive revenue growth. So the expectation is that we're going to drive revenue growth in 2026, those gross margin dollars falling down to the operating profit line as we're able to hold operating expenses as stable as possible. Timothy Clarkson: Sure. Okay. On the oil and gas, it sounds like there's some additional business that will kick into the first quarter and further on out with some of these larger orders. Now what is driving this business? Is it just having more sales out in the field in places like the Middle East and Brazil? Or is it as the technology finally getting to be accepted as superior to the legacy technology of the cathodic arc stuff? G. Lynch: Yes. Can you hear me? Timothy Clarkson: Yes, I can hear you. Go ahead. G. Lynch: Right. Okay. It's a combination of having [indiscernible] it's just general acceptance of the technology in the market, where we've proven that it works over and over again. We're getting repeat business from existing customers as we're putting in new customers. And that's really starting to starting to give our oil and gas business the attention that we think it deserves. Timothy Clarkson: Sure, sure. In terms of the packaging, I know that you guys had a breakthrough in terms of being able to kind of replace the traditional Saran wrap packaging that doesn't allow air to go out and you've now developed packaging that's similar to that, that's compostable. I mean how close are we from getting some business from that? G. Lynch: For that, I'd like to turn the question over to Vineet Dalal, who runs our Natur-Tec business. Vineet, go ahead. Vineet Dalal: Yes, this is Vineet. Yes, we have several customers where we're doing trials with compostable packaging, especially for food -- consumer food applications. So this is something that we're working on. We've gotten some good feedback, not just here in North America, but also in India, where there's a big market for these kind of applications. So we expect some of those opportunities to start hitting our sales in 2026. Timothy Clarkson: Okay. Are the costs similar for the compostable product versus the legacy product? Vineet Dalal: No. The cost is definitely higher as a premium solution, but due to legislation and government regulations in countries like India, these companies are forced to use compostable packaging instead of traditional plastic packaging. Operator: Our next question coming from the line of Gus Richard with Northland Capital Markets. Auguste Richard: You mentioned weakness in North America. Could you just describe where that's coming from? Matthew Wolsfeld: The main weakness in North America, we experienced throughout the entire fiscal 2025 was primarily the Natur-Tec group and the oil and gas group. If you look at the oil and gas group in North America was down close to 46% on the year. Natur-Tec North America was down about [ 13% ] on the year. Auguste Richard: Got it. Okay. And then in the floating platforms for the oil and gas, I'm trying to wrap my mind around how your solution work floating on the water and how much does that open up the market opportunity for you? G. Lynch: So it's a new market for us overall. It's not like you're trying to put the entire rig into a package, but you're taking sections of it and finding unique ways to apply our technology in those sections to provide long-term corrosion protection. And based on what we've seen in practice in Brazil so far, we think this is an opportunity, obviously, that can be very -- for us in Brazil, but in other areas around the world where they use offshore platforms. Matthew Wolsfeld: The only thing I'll add, Gus, is that the work that we talked about in Brazil, specifically on these FPSOs, there's a service component to it, where there are actual ZERUST oil and gas employees that are living on the offshore -- essentially the offshore floating platforms and applying the ZERUST solution to the infrastructure and then they're on the rig for a period of time and then they leave and then replacements come in. And so it's been a long process in order to be able to get slots where our specific workers can be on those platforms to do the installation work. And so that's a different -- it's kind of a different sales process than we typically see with onshore, where we're typically selling the solution and it's getting installed and then you don't need to continually apply and continually upkeep it. Auguste Richard: Okay. And just out of curiosity, is that having to have folks on the rigs and continually reapplying, does that have an impact on the margin profile for the floating platforms? Matthew Wolsfeld: Yes. There's -- I mean it's a slightly decreased margin given the service component and things like that compared to just selling any of the other ZERUST oil and gas solutions where you're just selling the actual product and somebody else is doing the installation work. Auguste Richard: Got it. That's super helpful. And then the onetime, I guess, is the Chinese tariff custom, whatever the heck that charge was. Was that a onetime event and nonrecurring? Or is there an impact to the P&L going forward? Matthew Wolsfeld: Well -- Vineet, do you want to address that? Vineet Dalal: Yes. It was a onetime event. I mean essentially, we produce some compounds in China that are filled compounds. So they contain minerals and then that we export out of China. And when you export it, I mean, we've always followed international norms for HTS codes that we use here in the U.S., in India, in Europe. And essentially, when we export it out of China, we get a VAT credit. Now because of the trade war between the U.S. and China and Chinese customs cracking down on any exports that contain minerals or rare earths, there's a customs official who basically said that because your compounds contain these minerals, you're not eligible for the VAT refund. And so that basically accounted for -- we have to repay back all the credit or the rebate that we got. So we expect this to be a onetime event moving forward, that will be part of our cost of goods sold. Matthew Wolsfeld: So essentially, it was a couple of years' worth of VAT that the Chinese government clawed back as well as a penalty on top of that for using what they deem to be the wrong code for the VAT. So the expectations are it's a onetime charge that we took and decided we weren't going to challenge the Chinese government and this we wanted to move forward as quickly as possible with the process so we can continue the import and export of the product. Auguste Richard: Got it. And then on the food packaging application, is this going to be like packaging in, I don't know, like a vegetable produce supplier? Or is this something applied in a supermarket over chicken breast or whatever? Sort of -- go ahead. Vineet Dalal: Yes. So we are looking at multiple applications. One of the applications that we're looking at in India is packaging of milk. So these are milk pouches where we're working with all the largest dairies in India to change over from conventional polyethylene packaging to a fully compostable solution. And we have run trials. We had to engineer the product so that it met the barrier performance, the shelf life performance, the handling. And then even on their form film machines, the throughput was -- with our solution was equivalent to the throughput with additional plastic technology. And so we have proven all that, and we expect that to be a growth business, at least in India. In the U.S., we are working with consumer foods companies where they're looking to -- we're looking at multilayer structures, which would be used for things like sauces and salad dressings and those kind of food items. Auguste Richard: Okay. So replacement for Tetra Pak, am I getting it right? Vineet Dalal: Yes, or pouches, like these little pouches for salad dressings or short shelf life sauces. Auguste Richard: Got it. Like the pouches you would get in a restaurant for -- salad. Vineet Dalal: Yes, in a restaurant or a QSR. So this one, the project that we are working on in the U.S., that's essentially for a QSR segment. Auguste Richard: Got it. And when do you expect that to sort of add to Natur-Tec revenue? Is that revenue second half of fiscal '26? Is it starting today? Can you give a little bit of color as to when you expect that to contribute to revenue? Vineet Dalal: The application in the U.S. that requires some, I would say, fine-tuning. So we are working closely with the customer on trials and prototype validation. So that will probably take several quarters at least before we can introduce that in the market. But the application in India, we've already gotten an initial appeal from one of the dairy companies. And so we expect that business to kind of grow probably by Q2, Q3 of fiscal 2026. Operator: And I'm showing there are no further questions in the queue at this time. I will now turn the call back over to Mr. Patrick Lynch for any closing remarks. One just queue up coming from the line of Zach Liggett, Desmond Liggett Wealth Advisors. Zach Liggett: On your presentations here over the last, I think, couple of years, you've had a strategic objective of hitting greater than 15% top line growth and slower expense growth. I'm just curious, I know the last couple of years have been sort of investment years for you. But how are you thinking about those objectives looking forward? G. Lynch: Matt, I think you're better qualified to handle this one. Matthew Wolsfeld: I guess from a top line growth standpoint, we are still certainly still optimistic. We look at the opportunities that we have in -- specifically in oil and gas, specifically in Natur-Tec, the expectations are that those 2 groups are going to have some significant growth in 2026. The traditional ZERUST business is going to be relatively stable with some slight growth. But certainly, the opportunities that we have in Natur-Tec and oil and gas kind of worldwide are what we expect to kind of fuel that 15% growth this year. Certainly, we didn't get that last year, but we think the investments that we've made should put us back to that kind of growth rate, which would obviously have a significant impact from a gross margin standpoint. And again, with the dollar values flowing down to the EPS level. Zach Liggett: Yes. Okay. And then the operating cash flow came off quite a bit this year. How are you thinking about that for FY '26 and free cash flow for that matter? If you could give us an update on your CapEx expectations? Matthew Wolsfeld: Well, our fiscal 2025 was a large year, really '24 and '25 were a large year from a CapEx standpoint. We had a new ERP -- new SAP ERP system that was implemented, which was -- certainly wasn't cheap. We funded that out of operating cash. We also purchased a building that's directly adjacent to our existing headquarters here for the increased production and warehousing that we need given we're kind of outgrowing the current footprint that we have here. So we were able to add another 60%, 70% to our office -- to our space here. The expectations are for 2026 that there's going to be very little capital improvements that are needed in North America. There are additional facilities we're looking at in Brazil, which they would fund on their own, which wouldn't involve operating cash coming out of North America, and they have a cash surplus in Brazil. And also at Natur-Tec India, they're looking at essentially building their facilities there to accommodate the production and warehousing needs for the Indian business. And again, they would be funding that and taking care of that entirely within their operating cash and any kind of financing in India. So the expectations are specifically in North America in 2026 is that we're going to be able to add a significant amount of cash to pay down our line of credit. The goal is certainly to pay down the line of credit as much as possible, get back to the point that as we're seeing increased earnings, we're able to ramp the dividend back up and have a nice cash cushion to be able to kind of fund future growth and needs that the company has over the next few years. Zach Liggett: All right. Yes, that sounds promising. And then last -- or 2 small ones for me, I guess. Any benefits you're seeing this coming year from One Big Beautiful Bill? Matthew Wolsfeld: Not really. I mean... G. Lynch: No. That's our business. Zach Liggett: Okay. And then any AI use cases that you guys have identified for the coming year? G. Lynch: No. Operator: Thank you. I'll now turn it back to Mr. Patrick Lynch. G. Lynch: All right. Thank you all for joining this morning. I hope you have a nice day. Operator: This concludes today's conference call. Thank you for your participation. You may now disconnect.
Operator: Greetings, and welcome to The Home Depot Third Quarter 2025 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Isabel Janci. Please go ahead. Isabel Janci: Thank you, Christine, and good morning, everyone. Welcome to Home Depot's Third Quarter 2025 Earnings Call. Joining us on our call today are Ted Decker, Chair, President and CEO; Ann-Marie Campbell, Senior Executive Vice President; Billy Bastek, Executive Vice President of Merchandising; and Richard McPhail, Executive Vice President and Chief Financial Officer. Following our prepared remarks, the call will be open for questions. Questions will be limited to analysts and investors. [Operator Instructions] If we are unable to get to your question during the call, please call our Investor Relations department at (770) 384-2387. Before I turn the call over to Ted, let me remind you that today's press release and the presentations made by our executives include forward-looking statements under the federal securities laws, including as defined in the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections. These risks and uncertainties include, but are not limited to the factors identified in the release in our most recent annual report on Form 10-K and in our other filings with the Securities and Exchange Commission. Today's presentation will also include certain non-GAAP measures, including, but not limited to, adjusted operating margin, adjusted diluted earnings per share and return on invested capital. For a reconciliation of these and other non-GAAP measures to the corresponding GAAP measures, please refer to our earnings press release and our website. Now let me turn the call over to Ted. Edward Decker: Thank you, Isabel, and good morning, everyone. Sales for the third quarter were $41.4 billion, up 2.8% from the same period last year. Comp sales increased 0.2% from the same period last year and comps in the U.S. increased 0.1%. Adjusted diluted earnings per share were $3.74 in the third quarter compared to $3.78 in the third quarter last year. In local currency, Canada and Mexico posted positive comps. Our results missed our expectations, primarily due to the lack of storms in the third quarter, which resulted in greater-than-expected pressure in certain categories. Additionally, while underlying demand in the business remained relatively stable sequentially, an expected increase in demand in the third quarter did not materialize. We believe that consumer uncertainty and continued pressure in housing are disproportionately impacting home improvement demand. Today, we've revised our guidance for fiscal 2025, which Richard will take you through in a moment. We remain focused on controlling what we can control. Our teams are executing at a high level, and we believe we are growing market share. We continue to invest across the business, supporting our associates and delivering the value proposition expected by our customers. In September, SRS completed the acquisition of GMS, a leading distributor of specialty building products, including drywall, ceiling and steel framing related to remodeling and construction projects. GMS further enhances SRS' position as a leading multi-category building materials distributor, bringing differentiated capabilities, product categories and customer relationships that are highly complementary to SRS' existing business. We could not be more excited to welcome GMS to the family and look forward to bringing a truly differentiated value proposition to our Pro customers. We're excited to see many of you in person in a few weeks at our investor conference at the New York Stock Exchange on December 9. We will update you on our strategic initiatives, our unique positioning in the marketplace, our investments and the traction we are seeing with our customers as we continue to position ourselves to win market share in both the near and long term. In closing, I would like to thank our store associates, merchants, supply chain teams and vendor partners who continue to take care of our customers and execute at a high level. With that, let me turn the call over to Ann. Ann-Marie Campbell: Thanks, Ted, and good morning, everyone. Our associates did an incredible job focusing on our customers and delivering exceptional customer service in our stores during the quarter. We continue to lean in on initiatives that help our associates do their jobs more effectively while also driving productivity in our operations. I'm going to highlight our progress across a number of initiatives that have helped improve the associate experience and are resulting in a better customer experience and increased customer satisfaction. Last year, we rolled out our freight flow application to all stores, which has improved our freight processes and driven efficiency in all operations. This initiative has significantly improved our cartons per hour metric, resulting in greater efficiency in our onload and pack out process. We also continue to focus on on-shelf availability and through computer vision and Sidekick, we have reached record in-stock and on-shelf availability levels. Lastly, our faster fulfillment efforts leveraging both our stores and distribution centers that you've heard about over the last few quarters have driven an over 400 basis point increase in our customer satisfaction scores. In addition, we continue to focus on our Pro ecosystem, maturing the new capabilities we have built for pros working on complex projects while enhancing the tools we have to serve pros. We are pleased with the progress we are seeing as our customers engage with our capabilities. There are 2 new tools we have deployed over the last several months that help us differentiate our offering. The first is a new project planning tool that we launched in September, which allows our pros to create and manage material lift and track orders and deliveries. The second tool, blueprint takeoffs, will transform the way pros plan and prepare for their projects. This new tool leverages advanced AI and proprietary algorithms to deliver accurate blueprint takeoffs and material estimates in record time. Pros can then quickly and easily purchase all materials they need for their project through The Home Depot, simplifying this complex process by going through a single supplier. This technology replaces a manual intensive process that took weeks to complete, increasing accuracy and reliability. Adding this advanced technology to our ecosystem of capabilities to better serve the pro working on complex projects will further enable us to be the one-stop shop for all project needs from initial planning to material delivery, saving our pros time and money. We look forward to seeing you in a few weeks in New York to provide a holistic view of how our full ecosystem is resonating with our pros and allowing us to gain traction and win in the market. With that, let me turn the call over to Billy. William Bastek: Thank you, Ann, and good morning, everyone. I want to start by also thanking all of our associates and supplier partners for their ongoing commitment to serving our customers and communities. As you heard from Ted, the underlying demand in the quarter was relatively similar to what we saw in the second quarter. However, our results were below our expectations, largely due to a lack of storms relative to historic norms, which most notably impacted areas of the business such as roofing, power generation and plywood to name a few. Turning to our merchandising department comp performance for the third quarter. 9 of our 16 merchandising departments posted positive comps, including kitchen, bath, outdoor garden, storage, electrical, plumbing, millwork, hardware and appliances. During the third quarter, our comp average ticket increased 1.8% and comp transactions decreased 1.6%. The growth in comp average ticket primarily reflects a greater mix of higher ticket items, customers continuing to trade up for new and innovative products as well as modest price increases. Big ticket comp transactions for those over $1,000 were positive 2.3% compared to the third quarter of last year. We were pleased with the performance we saw in categories such as appliances, portable power and gypsum. However, we continue to see softer engagement in larger discretionary projects where customers typically use financing to fund renovation projects. During the third quarter, both Pro and DIY comp sales were positive and relatively in line with one another. We saw strength across Pro heavy categories like gypsum, insulation, siding and plumbing. In DIY, we saw strength across our seasonal product offerings, including live goods, hardscapes and other garden products. Turning to total company online comp sales. Sales leveraging our digital platforms increased approximately 11% compared to the third quarter of last year. We're excited about the continued success we're seeing across our interconnected platforms. Our faster delivery speeds are resonating with customers and driving greater engagement and sales. We know that as we remove friction from the experience, we see incremental customer engagement leading to greater sales across all points of interaction. During the third quarter, we hosted our annual supplier partnership meeting where we focused on how we will continue to work together to bring the best products to market, deliver innovative solutions that simplify the project and offer great value with best-in-class features and benefits. At the event, we recognized a number of vendors across categories who continue to transform the industry with the innovation they bring to our customers on a daily basis. They include Leedarson, Cobra Tork, Feather River, Milwaukee, RYOBI, Frigidaire, Makita, Traeger and many more. We are proud of the innovation and partnership that our suppliers bring to The Home Depot and the value we're able to offer both our Pro and DIY customers. As we turn our attention to the fourth quarter, we're looking forward to the excitement we will bring with our annual holiday, Black Friday and Gift Center events. In our Gift Center event, we continue to lean into brands that matter most for our customers with our assortment of Milwaukee, RYOBI, Makita, DEWALT, RIDGID, Diablo, Husky and more. We'll have something for everyone, whether it's our wide assortment of cordless RYOBI tools or Milwaukee hand tools. And in appliances for Black Friday, we have exciting offers on LG, Samsung, Bosch, Whirlpool, GE and Frigidaire. Our assortment includes multiple exclusive products like LG stainless steel french door refrigerator with Craft Ice and Frigidaire's new Gallery dishwasher with a wash cycle time of only 50 minutes. This quarter, I'm also excited to announce the addition of PGT Windows to our wide assortment of exclusive retail brands, including American Craftsman and Andersen Windows. PGT's impact-resistant windows are engineered to meet some of the highest performance standards in the industry, reducing storm damage risk, providing energy efficiency, UV protection and sound reduction, and they will be exclusive to The Home Depot in the big box channel. Our merchandising organization remains focused on being our customers' advocate for value. This means continuing to provide a broad assortment of best-in-class products that are in stock and available for our customers. It is the power of our vendor relationships, coupled with our best-in-class merchant organization that allows us to offer our customers the best brands with the most innovation to solve pain points, increase functionality and enhance performance at the best value in the market. With that, I'd like to turn the call over to Richard. Richard McPhail: Thank you, Billy, and good morning, everyone. In the third quarter, total sales were $41.4 billion, an increase of $1.1 billion or approximately 3% from last year. Total sales include approximately $900 million from the recent acquisition of GMS, which represents approximately 8 weeks of sales in the quarter. During the third quarter, our total company comps were positive 0.2% with comps of positive 2% in August, positive 0.5% in September and negative 1.5% in October. Comps in the U.S. were positive 0.1% for the quarter with comps of positive 2.2% in August, positive 0.3% in September and negative 1.7% in October. For the quarter and in local currency, Canada and Mexico posted positive comp. In the third quarter, our gross margin was 33.4%, flat compared to the third quarter of 2024, which was in line with our expectations. During the third quarter, operating expense as a percent of sales increased approximately 55 basis points to 20.5% compared to the third quarter of 2024. Our operating expense included transaction fees related to the acquisition of GMS, but otherwise were in line with our expectations. Our operating margin for the third quarter was 12.9% compared to 13.5% in the third quarter of 2024. In the quarter, pretax intangible asset amortization was $158 million. Excluding the intangible asset amortization in the quarter, our adjusted operating margin for the third quarter was 13.3% compared to 13.8% in the third quarter of 2024. Interest and other expense for the third quarter was $596 million, which is in line with our expectations. In the third quarter, our effective tax rate was 24.3% compared to 24.4% in the third quarter of fiscal 2024. Our diluted earnings per share for the third quarter were $3.62 compared to $3.67 in the third quarter of 2024. Excluding intangible asset amortization, our adjusted diluted earnings per share for the third quarter were $3.74 compared to $3.78 in the third quarter of 2024. During the third quarter, we opened 3 new stores, bringing our total store count to 2,356. At the end of the quarter, merchandise inventories were $26.2 billion, up approximately $2.3 billion compared to the third quarter of 2024, and inventory turns were 4.5x, down from 4.8x last year. Turning to capital allocation. During the third quarter, we invested approximately $900 million back into our business in the form of capital expenditures and we paid approximately $2.3 billion in dividends to our shareholders. Computed on the average of beginning and ending long-term debt and equity for the trailing 12 months, return on invested capital was 26.3%, down from 31.5% in the third quarter of fiscal 2024. Now I will comment on our outlook for fiscal 2025. Today, we are updating our fiscal 2025 guidance to include softer-than-expected results in the third quarter, continued pressure in the fourth quarter from the lack of storm activity, ongoing consumer uncertainty and housing pressure as well as the inclusion of the GMS acquisition into our consolidated results. For fiscal 2025, we expect total sales growth of approximately positive 3% with GMS expected to contribute approximately $2 billion in incremental sales and comp sales growth percent to be slightly positive compared to fiscal 2024. Our gross margin is expected to be approximately 33.2%. Further, we expect operating margin of approximately 12.6% and adjusted operating margin of approximately 13%. Our effective tax rate is targeted at approximately 24.5%. We expect net interest expense of approximately $2.3 billion. We expect our diluted earnings per share to decline approximately 6% compared to fiscal 2024 when comparing the 52 weeks in fiscal 2025 to the 53 weeks in fiscal 2024. And we expect our adjusted diluted earnings per share to decline approximately 5% compared to fiscal 2024 when comparing the 52 weeks in fiscal 2025 to the 53 weeks in fiscal 2024. We plan to continue investing in our business with capital expenditures of approximately 2.5% of sales for fiscal 2025. We believe that we will grow market share in any environment by strengthening our competitive position with our customers and delivering the best customer experience in home improvement. Thank you for your participation in today's call. And Christine, we are now ready for questions. Operator: [Operator Instructions] Our first question comes from the line of Simeon Gutman with Morgan Stanley. Simeon Gutman: My first question is more short term on the fourth quarter. So when you guided for the full year after the second quarter, we didn't have GMS in the numbers. And now we do. And then we now know your third quarter came in a little light and that the fourth quarter may be a little lighter on revenue as well. So there's some deleverage. We're having a tough time getting to the full amount of, call it, EBIT dollar shortfall because GMS looks like they made money last year. Are there any expenses that are tied to it? Or how do we think about the deleverage? Richard McPhail: Yes. Simeon, thanks for the question. I think you could look at it 2 ways. Let's talk about fiscal year, and let's talk about Q4. So fiscal year, as you know, we've revised our guidance by 40 basis points from 13.4% adjusted operating margin to 13% operating margin. The walk there, let's talk about the most significant item, which is GMS, the inclusion of GMS in our results. If you take their likely impact to 2025 and you add the transaction expenses to it, you're basically at 20 basis points of year-over-year impact to operating margin. You then take into account the decrease in our comp sales from 1 comp to slightly positive. And then we -- so that assumption would have obviously deleverage that we've spoken of previously. And then with respect to SRS and its impact, first, SRS continues to perform extremely well. There is significant pressure in the roofing market. We know that shipments are down double digits from the absence of storm activity this year. SRS actually comped flat for Q3. And so we think that they are taking significant share. But as our expectations have weakened slightly for them in the full year, rather than seeing them grow at mid-single digits, they're likely to grow low single digits. You do see some deleverage in SRS in the supply chain and in OpEx. And so you add those together and get your revision to the fiscal year guide. And really, you just add to that, if you're talking about Q4, you have all the same dynamics, but let's not forget, you're comparing Q4 last year has 14 weeks of expense. Q4 this year has 13 weeks of expense. And so you've got 50-ish basis points of operating expense deleverage in the quarter. So hopefully, that will help you with the walk. Simeon Gutman: Yes, that helped a lot. And then a follow-up. You mentioned on this call and in the release that there was an expectation of increased or improving demand, I guess, through the remainder of the year at one point. Was that an expectation based on housing or an expectation that there would be storms? And if there was any volatility related to government shutdown, do you have enough time looking backwards since the reopening that there's been an improvement in how the consumer is behaving? Edward Decker: Yes, Simeon, let me step back and just paint a broader picture of what we're seeing with the consumer in our sector. Our comps definitely slowed as the quarter progressed, but great work by the team to register the positive comp for the entire quarter. And as we said, the primary driver of that sales pressure was the lack of storm activity in the quarter. We don't plan for storms per se, but there's always some weather impact in the baseline. And given last year pretty significant storm activity, in this year truly 0. There was no storm activity this year. So we saw that most acutely in October. That was the single heaviest impacted month, and that's where, as Richard called out, the comp progression turned negative in October. And then you talked about the overall economy in housing. We did expect to start seeing some pickup in demand in the second half of the year. And this wasn't just the calendar dynamic of, oh, things will be better in the second half. We're expecting interest rates and mortgage rates to come down, which they did that would have been some assistance to housing. But we really just saw ongoing consumer uncertainty and pressure in housing that are disproportionately impacting home improvement demand. I think the good news is the team, as I said, is executing at a very high level, and we believe we're taking share. And if you adjust for the storm activity, our Q3 comp, the underlying business comp was essentially the exact same as Q2. And adjusting, again, for storm and weather, call that underlying business to be about a 1% comp in each of Q2 and Q3. So now here we are going into Q4, and we're going to see even more quarter-over-quarter pressure from the storm activity. So again, there's nothing that's happened this year. The storm activity and the rebuild and repair continued into Q4 last year. So we'll have even more storm pressure year-over-year in Q4. And then we just don't see the catalyst to increase that underlying storm-adjusted demand in the market. So I mean it's certainly a very interesting consumer dynamic out there. On the one hand, you look at certain economic indicators and you say, geez, things are pretty good. You look at GDP, you look at PCE, those are both strong. But on the other hand, what's impacting us in home improvement is the ongoing pressure in housing and incremental consumer uncertainty. So take housing. I mean, housing has been soft for some time. We all know the higher interest rates and affordability concerns. But what we're seeing now is even less turnover. The housing activity is truly at 40-year lows as a percentage of housing stock. I think we're at 2.9% turnover. And then home prices have started to adjust in even more markets over this past quarter. And then when you look at the consumer, what's going to spark the consumer, we still believe we have one of the healthiest consumer segments in the whole economy. But again, the economic uncertainty continues largely now due to living costs, affordability is a word that's being used a lot, layoffs, increased job concerns, et cetera. So that's why we don't see an uptick in that underlying storm-adjusted demand in the business. So as I said earlier, we're going to keep controlling what we can control, support our associates and deliver just a great value proposition for the customer and believe we took share in Q3 and year-to-date this year and do the same thing in Q4. Operator: Our next question comes from the line of Zach Fadem with Wells Fargo. Zachary Fadem: I wanted to start on the average ticket. I guess any callouts on commodities versus same SKU inflation? And then with last quarter ticking down on promo, curious how Q3 played out and whether you'd expect the industry to be more or less promotional this Q4? William Bastek: Yes. Zach, it's Billy. Thanks for the question. As it relates to ticket, as we've talked about on a few calls, I mean, we continue to see customers trade up for innovation. In fact, we really haven't seen any trade down that we haven't spoken about in previous calls, as it relates to that. So a modest increase in ticket, but most notably, that was from people, innovation and things in the marketplace that we've seen. As it relates to the promotional activity, it's really consistent year-over-year, both in Q3 and Q4. And as Ted mentioned, the fundamental demand in our business, while it didn't increase, certainly was very consistent with what we saw in Q2 outside of, as we mentioned in the storm impact. So from a fundamental standpoint, I feel very good about that and continue to see customers engage. Projects, as I mentioned, they're going to continue to have pressure where they're financed. But from a promotional activity standpoint, it's really a similar environment that it was in -- really for the balance of the year. And certainly, as it relates to Q4 a year ago, it's a similar environment for us as well. Zachary Fadem: Got it. And then, Richard, a couple of follow-ups on GMS. First of all, on operating expenses, could you help us understand what's onetime in terms of impact transactions, et cetera, on Q3 and Q4? And then on the inventory growth, up about 10%, any color you can offer on how much is GMS versus underlying volume versus pricing? Richard McPhail: Sure. You can think about the GMS transaction fees as about 5 basis points of margin to the year or 5 basis points of expense any way you put it, about 15 basis points to the quarter. Obviously, Q3 is one of our larger quarters. And you can think of the impact is about $0.05 of EPS for the year, for GMS transaction fees, and those all occurred in Q3. With respect to the inventory, inventory increases reflect principally the inclusion of GMS now in our balance sheet and the fact that we've leaned into investments, in particular, investments with respect to hitting our speed promise. So we've seen fantastic results from improving our speed and reliability of delivery over the last year. That's something we've leaned into. We have our DFC network, which we think is unmatched in our market. And as we see results from it, and obviously, this quarter, you saw an 11% comp online, we're going to continue to lean into that investment. So for the most part, it's investments in the business. Operator: Our next question comes from the line of Michael Lasser with UBS. Michael Lasser: Given all the comments from this morning, it begs the question, can home improvement demand recover without some assistance from either an increase in underlying housing activity or a reduction in interest rates? And how should this foster the market's expectation towards the recovery or potential recovery in 2026? Edward Decker: Thanks, Michael. We've talked about all the different drivers of demand in our segment. And there are leads and lags in all of them, and we've clearly called out over time that the most statistically relevant would be home price appreciation and household formation and housing turnover. Those 3 right now are pressured for sure. But we also know that we've more than worked our way through the pull forward of the COVID years. And there are many industry reports and calculations of now underspend per household. So on one hand, we're looking at something as much as a $50 billion cumulative underspend in normal repair and remodel activity in U.S. housing. On the other hand, we have less turnover and home price appreciation. So that tension is going to have to balance itself out as we work through the rest of this year and into next year. But fundamentally, our job is to put great value propositions in front of the customer and take share in any environment. So can The Home Depot grow? The answer is yes. Will the industry have some shorter-term pressures with turnover in home price? Yes as well. Michael Lasser: My second question is, as The Home Depot has taken a significant number of big steps over the last few years to gain market share, particularly in the Pro segment, has The Home Depot increased its fixed cost structure such that it's now experiencing deleverage as sales are under pressure, but this can act as a significant tailwind to the earnings outlook as sales improve. Edward Decker: Yes. I mean you're right, Mike. We have had a number of big steps on Pro. It's -- we've talked about the size of the overall home improvement TAM at $1-plus trillion and evenly split between Pro and consumer and how strong we've always been in both sectors out of our stores, the Pro and the consumer, but identified real opportunity to bring increased value proposition to that Pro space by building out wholesale type capabilities to capture more share of wallet with that customer. And that's what we've been doing, and we'll talk a lot about that more in a few weeks in New York. But we're very, very happy with all the initiatives and the organic investments we've made to build out those capabilities. And then we've augmented that with 2 acquisitions of very, very strong wholesale platforms with each of SRS and GMS. Now your question specifically on fixed cost structure, what's interesting, we've mentioned this several times, the organic effort is reasonably asset-light. This -- regardless of whether we lease our DCs or not, the capital deployed in those DCs is first and foremost for general store replenishment. And it's an added benefit that we're able then to deliver to the customer out of those buildings. And as Richard said, the speed equation is a flywheel that works and all our investments in our direct fulfillment centers regardless of what we're doing with the Pro, that's to serve all customers and increase the speed, which we have done very effectively. And then all the other related operating costs, we have variable incentive pay structures for our outside salespeople. We lease trucks and we add trucks and take trucks away from markets as volume ebbs and flows through the season. So really, other than an IT spend, which is modest investment in the scheme of things, there's not been a lot of incremental fixed cost put into the business to support the Pro organic initiatives. Operator: Our next question comes from the line of Christopher Horvers with JPMorgan. Christopher Horvers: So I wanted to follow up on the implied 4Q operating margin question. It looks like you're saying about 10.3%. Did you say that 50 basis points of that was the 53rd week lap? And is there anything like unique that we should think about that this is not -- this is or is not the right level to start to think about building the business as we look to the out years? So for example, 53rd week lap or perhaps the seasonality of the SRS and GMS business structurally changing the normal flow of operating margin over the year? Richard McPhail: Yes. Thanks, Chris. I would use our full year guide as the appropriate jumping off point. I think Q4 has a couple of items of noise. The first was the 53rd week. The second actually is the shape of the business. And if you look, you can actually see, for instance, the public filings of GMS when they were a public company and see the Q4 or rather our Q4 is a significant low point from a volume perspective. That's true for SRS as well. And so SRS and GMS see seasonal swings that are greater than Home Depot. You're going to just see that amplified if you hold Q4 in isolation. And so that's why I would really point you to full year as the right jumping off point for your modeling. Christopher Horvers: That's super helpful. I mean if you step back about the... Richard McPhail: The 53rd week is a year-over-year contract. So it doesn't impact your 2025 numbers, but it does impact the year-over-year. Christopher Horvers: Got it. Makes sense. If you think about this quarter, I mean, if you look at the monthly basis, even with the really tough weather/hurricane-driven compare in October, if you also look at the last -- the first 3 quarters of the year, the 2-year trend seems to be improving on the line, which points to replacement cycle demand and maybe some pricing and just life moves on. I guess -- and then there's some research out there that points to maybe the consumer is waiting for the full effect of the head. We have a couple of meetings coming up, and you had all this noise with a government shutdown that impacted even retailers that sell milk and eggs and take share every day. So why wouldn't we think that the launch point into 2026 is sort of 1 or if not better than this 1% sort of underlying demand just because uncertainty goes away, full effect of the Fed, housing stock ages and life moves on and replacement cycle demand continues to build. Edward Decker: Well, yes. And Chris, another positive add, there'll be more robust tax returns and the tax rates going into effect in '26. So yes, there's a positive story there. But again, the underlying 1%, that is what it was. And this ongoing consumer uncertainty we're talking about and specifically housing turnover and now price, those are near-term and newer phenomenon. Richard McPhail: Let me -- Chris, I mean, I'll just circle back. I was focusing on your question in context of Q4 being a jumping off point and thinking about 53rd week. Let me add something, though. When you pro forma GMS, we do need to take that into account. So on a pro forma basis, recall, we've sort of guided you to within The Home Depot numbers now with SRS included, SRS changes our margin profile by about 80 basis points of gross margin and about 40 basis points of operating margin. GMS, which was about half the size of SRS is about half the impact. So you've got a pro forma, this is not fiscal year, but a pro forma impact of about 40 basis points of GMS and about 20 basis points -- and about 20 basis points of operating margin for GMS, so 40-20. You add those together, you roughly have a change in our profile with both of them together of 120 basis points of gross margin and 60 basis points of operating margin. Now when you're talking fiscal year 2025, obviously, we have some wonkiness in the comparison periods. We've owned SRS for a full year of 2025, but only owned them a partial year in 2024. We will own GMS for about 5 months in 2025 and own them for no months in 2024. So I'm just going to avoid all the steps in the math and tell you, on a fiscal year perspective, you've got about a 55 basis point impact to gross margin year-over-year, reflecting the ownership of both SRS and GMS and about a 35 basis point impact to operating margin mix, reflecting the year-over-year comparison of those ownership periods of SRS and GMS. We'll clarify this more just one more time when we move forward and in the future, talk about future years. But hopefully, that gives you a little bit more clarity. So I do want to put an asterisk. The jumping off point is our full year guidance, but you also have to include that comparison or rather the full year impacts of GMS next year. Christopher Horvers: Right, offset by a tick of transaction fees. Richard McPhail: That would be correct. Yes. Operator: Our next question comes from the line of Zhihan Ma with Bernstein. Zhihan Ma: I wanted to follow up on the complex Pro and GMS side. So firstly, a short-term question on the $2 billion contribution to sales from GMS this year. I think if we do the math based on the reported numbers last year, kind of implies a high single-digit percentage decline on a year-over-year basis. I don't know if I completely got that math right. If that's true, how much of that is macro weakness versus underlying share dynamics? And is there any additional color you can provide on that underlying market? Richard McPhail: So basically, you're owning it for a quarter plus 8 weeks, and you're heading into the lowest -- the lowest quarter of the year for GMS' fiscal year. There was also weather impact across Home Depot, SRS and GMS. No one was immune to the broader weather impacts in the market. And so $2 billion is an approximation. We know that GMS continues to take share. We continue to take share as an enterprise and particularly in all of GMS' categories, and we feel great about that business going forward. Zhihan Ma: Got it. And then a long-term question, to your point about the current margin dilution impact from the acquisitions. Now is there a long-term argument that as you further consolidate -- I assume as you further consolidate in the complex Pro space, is there a path for you to structurally improve or recover your margins as you start to gain more bargaining power versus suppliers? Edward Decker: Well, there's structural differences in the margins of the wholesale business in retail. I mean, at the highest level, retail would have higher gross and lower operating cost in the inverse with wholesale. Of course, as we drive synergies between the 2 platforms and the most important synergy is the cross-sell and the value proposition to the Pro, we'll be able to leverage incremental sales in both retail and wholesale platforms to leverage the businesses. And of course, just operating efficiencies across a larger scale business will be able to drive efficiencies as well. But the fundamental difference of wholesale margin structure and a retail margin structure would be the case going forward. Those wouldn't dramatically change. Operator: Our next question comes from the line of Seth Sigman with Barclays. Seth Sigman: I had a couple of follow-up questions. Just first on transactions slowed while ticket accelerated this quarter. Just curious, how do you read that? Are there any signs of elasticity? Maybe just elaborate on price changes that you made in the quarter? Or is the slowdown in transactions just really storm related? William Bastek: Yes. Thanks, Seth. It's Billy. I'll answer your last question first. As it relates to the transactions, that was really related strictly to the storm impact that we called out. As I mentioned in our Q2 call after some policy changes were made around tariffs that we would take some moderate price moves with the entire strategy to make sure we protected the project. And so as it relates to elasticity, it's a little early. And then you couple that with a lot of dynamics in the marketplace over the last 60 days, 90 days since our last call, it's a little early to say how much of that is going to -- the elasticity piece will play out. I'm thrilled with the work that the team has done. If you go into our stores right now and look at Gift Center and all the value that we have there and certainly with our holiday program, same thing. So we're watching that. Again, our entire goal was to protect the project, and it bears also to point out that over 50% of our inventory is not part of tariffs and is obviously sourced domestically. So we'll continue to watch that and look forward to the Q4. Seth Sigman: Okay. And then just a follow-up on some of the demand comments today and what seems like a more cautious view on the consumer. I'm just trying to figure out how to reconcile that with big ticket still outperforming. You've had a few quarters of big ticket being positive that continued this quarter. And I guess just based on what you've seen historically, should that be a leading indicator for big projects that have still been pressured? How do you think about that? William Bastek: Well, I mean, you pointed out correctly. And in my prepared comments, I talked about big ticket transactions over $1,000 or positive 2.3%. But I wouldn't read into that from a project standpoint. Think about appliances, think about power tools and some of those pieces. Those are individual items as we've kind of talked about that metric in the past versus more of the project-oriented pieces that customers are still challenged with based on all the things that we've talked about earlier. Edward Decker: I think some of that -- some of the big ticket as well, we've called out the pressure on commodities overall. But some of that big ticket is the success in our Pro initiatives. I mean the managed accounts, the activity that Mike Rowe and team are driving to capture more share of larger Pro complex purchase. That is also driving that. So it's not so much that it's an indicator of demand as it is an indication of our taking share in bigger ticket pro-oriented project. Operator: Our next question comes from the line of Chuck Grom with Gordon Haskett. Charles Grom: There's a lot of talk about a K-shaped economy right now, but we're starting to see more evidence of job losses for white collar employees. So I guess I'm curious when you look at your data, is there anything you see that supports more fatigue in your upper income customer base? And I guess as a follow-up, anything regionally that you'd call out over the past couple of months? Edward Decker: Well, I think that regionally, the most acute difference, again, is the storm and weather patterns. On the larger or the higher income cohort, we don't see anything specific. As Billy said, there has not been a lot of trade down, and we've talked in the past, things like countertops, there's been some trade down, but we have still not seen trade down across the broader assortment in the store. If there's an indication of maybe some fatigue in taking on bigger projects, we have seen Pro backlogs and larger backlogs start to diminish a little bit. So our pros are reporting months that they're booked out. As we know some time ago, you couldn't find a pro. And then they all had full books, and we're seeing a little softening in larger project backlog. I can't say we've tied that directly to an income cohort, but we've definitely seen the dynamic. Charles Grom: Okay. And then just, Richard, can we just double-click on the opportunity to improve the margin structures of both GMS and SRS? It sounds like 30 -- 35 basis points of pressure this year. You probably have some wrap of that into '26. But just like broader picture over the next few years, I mean, how should we think about the improvement line for those 2 businesses? Richard McPhail: Well, we don't like to separate them out. While they do operate independently, as Ted said, the name of the game here is synergies and synergies in the form of cross-selling. And so I think the leverage in the businesses is going to be a function of how we create a differentiated value proposition across the entire enterprise, including SRS and GMS. So look, SRS, the combined entity is an engine for growth for The Home Depot. And so we're just getting started. So I wouldn't put a formula on it, but it's all going to be a function of how fast we can drive cross-sell. Operator: Our next question comes from the line of Steve Forbes with Guggenheim. Steven Forbes: Maybe, Richard, on the idea of cross-selling, would love to sort of hear high-level thoughts on -- I don't know if you can like rank order how you guys see the cross-selling opportunities today now that GMS is integrated. So what are you sort of building the business for from a cross-selling standpoint as we head into next year? Like rank order the opportunities would be great. Michael Rowe: Yes. Amit, it's Mike here. Thanks for the question. We see just from the relationships that have already been established between the outside sales force that we've got here within Home Depot, combined with the sales forces that they have originally with SRS and now with GMS, there is account handoffs that happen. So a great example, recently, with GMS engaged in a large roofing sale on a property, the customer was looking for much more in terms of product, in terms of whether it be framing, flooring and more. And that relationship then that SRS introduced to The Home Depot outside sales force to come in and sell that engagement to the contractor worked quite successfully. And that's just one example of many that have happened, and they happen both ways, whereby The Home Depot sales organization recognizes a large roofing opportunity that they can pass over to SRS or a large drywall opportunity that they can pass over to GMS, and those engagements are happening on a daily and weekly basis. Steven Forbes: And then just a quick follow-up. I was hoping to maybe explore the branch growth opportunity across SRS, GMS and Heritage. So I don't know, Ted, if you can provide a current update on branch counts across the various assets. And then like what's the right way to think about or think through the out-year branch growth opportunity? And I don't know if you can sort of talk about like what's the end state as you see it today versus the 1,200 you have today? How do we sort of think about the footprint evolving over the next 3, 5 or so years? Edward Decker: Yes. We'll certainly go into a lot more detail in a few weeks. But the model that SRS deploy is very similar to GMS that they'll drive organic comp growth through existing branches. They open greenfield branches. And then they'll focus on tuck-in customer list expansion-oriented acquisitions. And they've been doing that quite successfully. On the branches, think of SRS GMS, 40 to 50 branches a year, and they've been sort of running at that pace since we acquired SRS. And then they've done a handful of little tuck-in acquisitions. And again, these can be a 1 branch, $5-ish million acquisition or a smaller regional $30 million, $40 million, $50 million, a couple of few branch operations. So it's going really, really well, and we see that continuing with a key part of the business model. Richard McPhail: And I mean, just to -- it's not just about our plans. It's actually happening right now. If you talk about our non-comp sales, putting new stores and new SRS branches together, you've got about 0.5 point of sales growth driven by those 2 investments. And so we're thrilled with that. Isabel Janci: Christine, we've time for one more question. Operator: Our final question will come from the line of Steven Zaccone with Citi. Steven Zaccone: I wanted to follow up on the storm impact. So it sounds like it was 80 basis points of the third quarter pressure to same-store sales. How large will that be in the fourth quarter? And then we should be mindful of that, that that's also a headwind to think about in the first half of next year? Richard McPhail: Well, thanks. As Ted said, the underlying demand for the business was sort of similar Q2 to Q3. If you talk about storm Q3 to Q4, we absolutely are lapping strong results, in fact, even slightly higher sales last year in Q4 than Q3. Let's call it relatively even. So let's say, you basically, if you've got underlying minus the storm impact, you've got pretty much similar run rates for Q3 and Q4. Steven Zaccone: Okay. Understood. And then your comments on the housing pressure, how does that inform your maybe near- to medium-term outlook for SRS and GMS, right? Like these are new assets for Home Depot. So should we think that original expectation of mid-single-digit growth for SRS stepping down to low single digits? Is that kind of a run rate we should consider for the near to medium term? Edward Decker: I mean I wouldn't say that. We'll talk more about this in a few weeks. But the first thing to remember is SRS is much more in the reroof than new construction. So they're 80-plus percent reroof. So yes, their 15%, 20% of the business that goes into new construction is impacted. But the fundamental business is reroof activity, again, which is why it's disproportionately impacted with storms, particularly in their home and biggest market, which is Texas, which is by far, we think of hurricanes, we think of hail and other wind events. There was none such in 2025. So no, we look at SRS as a long-term mid-single-digit grower. And this is principally a storm impacted dynamic that's taken them down to flattish right now. But as Richard said earlier, we think roofing shipments, you can see this by reported data, roofing square shipments into the market are down mid-teens and SRS was flat. So clearly taking share. Operator: Ms. Janci, I'd like to turn the floor back over to you for closing comments. Isabel Janci: Thanks, Christine, and thank you all for joining us today. We look forward to speaking with you at our investor conference on December 9. Operator: Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.
Operator: Ladies and gentlemen, thank you for standing by, and welcome to the PDD Holdings, Inc. 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 host today. Please go ahead. Unknown Executive: Thank you, operator, and hello, everyone, and thank you for joining us today. PDD Holdings earnings release was distributed earlier and is available on our website at investor.pddholdings.com and through the Globe Newswire services. Before we begin, I'd like to refer you to our safe harbor statement in the earnings press release, which applies to this call as we will make certain forward-looking statements. Also, this call includes discussions of certain non-GAAP financial measures. Please refer to our earnings release, which contains a reconciliation of non-GAAP measures to GAAP measures. Joining us today on the call are Mr. Chen Lei, our Chairman and Co-Chief Executive Officer; Mr. Zhao Jiazhen, our Executive Director and Co-Chief Executive Officer; our VP of Finance, Ms. Liu Jun, is unfortunately on medical leave. Delivering the prepared remarks on Jun's behalf today will be Ms. Xin Yi Lim from our Investor Relations team, who has spoken on our earlier earnings calls. Lei and Jiazhen will make some general remarks and on our performance for the past quarter and our strategic focus, and Jun Liu will then walk us through our financial results for the third quarter ended September 30, 2025. And during the Q&A session, Lei and Jiazhen will answer questions in Chinese and will help translate. Please kindly note that the English translation is for reference only. And in case of any discrepancy, statements in the original language should prevail. Now it's my pleasure to introduce our Chairman and Co-Chief Executive Officer, Mr. Chen Lei. Lei, please go ahead. Lei Chen: Hello, everyone, and thank you for joining our Q3 2025 earnings conference call. This year marks the 10th anniversary of the company's founding. Just before this earnings release, we celebrated our 10th birthday. When we started in 2015, we pioneered the team purchase model, which offered the value proposition of more savings and more fun at scale and created a new e-commerce defined by 3 characters, namely benefit all, people first and more open. Since then, we have gradually grown from a start into a key player in the e-commerce industry and along our journey, created greater value for our users, our merchants as well as the industry and the society. This quarter, we reported RMB 108 billion in revenue, with growth remaining under pressure. As always, we prioritize long-term value over short-term results. Looking back over the past decade, we have upheld our core value of concern, adhered firmly to our own duties and principles and maintained focus on our core business of e-commerce. Through our journey, we strive to create value for our users and to address the needs of the widest range of consumers. We have also made every effort in giving back to the industry ecosystem, driving the industry to become more benefit all, more people first and more open. Since day 1, our mission has been to serve the broadest range of consumers by offering affordable prices and quality services. 10 years ago, we introduced the team purchase model to address the challenges faced by the farmers and growers as well as industrial belt merchants. This e-commerce model has helped a large base of farmers and everyday workers increase their income while offering urban and rural consumers across through quality foods and daily necessities at affordable prices. Today, 10 years later, our focus remains on the day-to-day of people from all walks of life. We continue to provide consumers with quality goods at affordable prices and help merchants, many of which SMEs expand their market reach. And ultimately, we help producers and consumers live a better life. As a new e-commerce platform born in the mobile Internet era, we moved beyond the traditional online shopping model that placed products at the center. And instead, we put people first. We built our model around consumer focus. We try to understand a human touch behind every click, and we honor the consumer trust behind every order. We strive to bring more savings and more fun to every purchasing experience. And with this goal in mind, we will continuously driven product innovation, technology integration, service upgrades and improvements in product selection and the efficiency of supply chain. In doing so, we aim to satisfy the diverse and rapidly growing needs of everyday consumers. Throughout our journey, we have faced fierce and persistent industry competition, and yet we have remained steadfast in our focus on the company's intrinsic value in the long run, and we promote the high-quality growth of the platform ecosystem, and we advocate for a more open industry environment. Since last year, we have further elevated our ecosystem development and roll out substantial merchant support initiatives such as the $10 billion fee reduction program and $100 billion support program. Through these initiatives, we made investments in our merchants and a wider, creating room for innovation and growth for both established brands and SMEs. We hope to play our part in facilitating supply chain upgrade and addressing the long-standing challenge faced by our merchants who had quality but lack brand recognition. As we look ahead, the e-commerce industry is witnessing even more intense competition, and we will continue to uphold the principles that have guided us for the past 10 years, staying true to our mission of creating value for our consumers and focused on investing in the high-quality development of our platform and the wider industry. Today, the scale of our business is far greater than it was 10 years ago and with greater scale comes greater social responsibility. And therefore, as we think about our growth in this new era, we must do so in a way that prioritizes the interest of wider public and the long-term outlook of the entire ecosystem. Going forward, more strategic initiatives similar to $100 billion support program will be rolled out to support both supply side and demand side. We are also strengthening our efforts in giving back to the industry and a broader society. Three years ago, we launched our global business, which has now grown to serve many markets. Today, with the rapid evolvement of trade barriers and other global events, we are seeing significant shift in the platform's regulatory environment, including in trade policies, tax rules, data security and product compliance regulation across different countries and regions. This means we will inevitably face greater challenges and more uncertainties. As a young global company, we are working hard to learn to keep up and to adapt to these trends. However, there remain significant uncertainties exposing the company to risks that are unpredictable and difficult to quantify, which may impact our financial performance, both in the short term and over the long term. And in the midst of fierce industry competition, a complex global environment and our continuous ecosystem investments, our quarterly profitability will fluctuate and is inherently unpredictable. And therefore, simple linear projection might not be a good way to projecting future performance. As we have emphasized in the past, short-term stock price fluctuation has never been our focus. And rather, our focus remains on building long-lasting intrinsic value by doing the right thing and creating value for consumers. It is with our firm commitment to high-quality development, we embark on the next decade towards our vision of Costco plus Disney. And with that, we will turn the call over to Zhao Jiazhen for further remarks. Jiazhen Zhao: [Foreign Language] Unknown Executive: [Interpreted] Good day, everyone. This is Zhao Jiazhen. Thank you again for joining our Q3 2025 earnings release. The third quarter this year marks the company's 10th anniversary. As Lei mentioned, over the past 10 years, we have remained committed to creating value for our users and growing alongside our merchants. We have strived to drive the industry to become more open and have delivered incremental value to the society. At this 10-year juncture, we will continue to step up our efforts to give back to the supply side and the demand side as part of our efforts to drive industry upgrades and deliver more savings and more funds to the general public. In this quarter, our revenue growth continued to be under pressure and operating profit grew in low single digits. Currently, we see intensified competition within the e-commerce sector that is centered around new business models. We will continue to invest back into our platform ecosystem and our investments into the merchant support initiatives similar to the RMB 10 billion fee reduction program and the RMB 100 billion support program will continue in the long run. These investments will affect the sustained performance of revenue and net profit. And accordingly, our financial results of this quarter should not be considered as guidance for future performance. We cannot rule out the possibility that the financial performance in the next few quarters will continue to fluctuate. Over the past decade, we grew from a start-up into a public platform. We benefited from China's rapid economic development. And at the same time, we have not lost sight of the social responsibilities that are inherent to a platform company and proactively gave back to the agriculture and other industries. And this year, we rolled out the first RMB 100 billion support program in the e-commerce industry to support merchants and farmers. Through initiatives such as Duo Duo Premium Produce, new quality supply and logistics support to remote regions, we continue to drive the high-quality development of the platform ecosystem. As a new e-commerce platform with roots in agriculture, the first products bought and sold on Pinduoduo was agricultural produce. Along the way, we have made long-term investments across different parts of the agricultural industry from supply chain and warehousing logistics to supporting new generations of farmers and agricultural research and development. These efforts have significantly increased the scale and efficiency of agricultural product distribution, greatly promoted product standardization and helped farmers increase output and income. And in this process, we have become the largest platform for agricultural products in China. In the third quarter, our Duo Duo Premium project team visited dozens of agriculture specialty regions, including Hubei, Jingzhou, Henan, Shangqiu, Shandong, Liyang, and Yunnan, Pu'er. This year, on the back of CNY 100 billion support program, we launched the Duo Duo Premium Produce initiative to step up our investments into agriculture. Based on the 2025 agricultural product half year report that we just issued, our investments in agriculture have yielded significant results. And in the first half of this year, agriculture sales grew by 47% year-over-year, and we saw a similarly rapid increase in the number of agricultural merchants with a particularly notable increase of over 30% year-over-year in the generation of merchants born in the 2000s. This demonstrates that the online distribution of agricultural products continues to hold immense promise. In the third quarter, our Duo Duo Premium Produce team visited dozens of agricultural specialty regions, including Hubei, Jingzhou, Henan, Shangqiu, Shandong, Liyang, and Yunnan [indiscernible] to develop tailored solutions for the merchants and help them make the transition from a model that prioritizes scale to one that prioritize quality. And during the harvest season starting in September, we allocated RMB 1 billion subsidy and RMB 2 billion traffic support and in collaboration with the 300,000 agricultural merchants on our platform, we rolled out the Duo Duo harvest season program to facilitate the timely distribution of produce from rural areas to urban markets, helping farmers increase income. In the early days of our company, our team purchase model brought about a solution to the legacy challenges within the industrial belts and enabled the industries to quickly scale across regions. The number of e-commerce merchants in many of these regions grew from just 100 or 200 to several thousands. However, this growth has also led to commoditized competition. And today, these industrial belts have reached a critical juncture that calls for transformation. This quarter, we continue to invest in a new quality supply initiative through our CNY 100 billion support program. Our teams visited dozens of industrial belts such as down jackets in Pinghu, snacks in Huizhou, children's wear in Foshan, bags and luggage in Shandong, and Hanfu in Chaoqian. Leveraging our digital capabilities and fee reduction and merchant support programs, we continue to enhance quality and efficiency for our merchants, we aim to address the challenges of commoditized competition faced by many industries by incremental innovation across each part of the supply chain from raw materials to finished products. At the end of September, we released a 1-year development report on new quality supply. The report shows rapid growth in the number of industrial merchants. The number of merchants between the age of 25 and 30 grew by 31% year-over-year and those born in the 2000s grew by 44%. The number of high-quality SKUs increased by over 50% year-over-year, and we've also seen a significant rise in the branded stores on these industrial belts. And these figures demonstrate that the key industrial belts are steadily moving towards high-quality development. And on supply side, investments have allowed us to bring more savings and more fun to a broad base of ordinary consumers. We see urban white-collar workers ordering fresh flowers from Yunnan, while young people in small towns buy trendy designer toys. We see mountain villages enjoying high-quality seafood, while herdsmen in Western regions wear UV protective jackets. And taking the Western regions as an example, the exemption of transshipment fees has led to a significant surge in order volume for pet supplies, outdoor and sun protection gears, designer toys and fresh produce and plants, among other product categories. This greatly stimulated economic activities between the regions. Starting a fresh from this 10-year mark, we will continue to put consumers first and drive organizational evolution. And one by one, we will tackle the practical problems faced by our users, merchants and the industries through persistent focused efforts and continue to build a thriving platform that benefits all, taking on greater social responsibility and creating value for the public. Now I'll hand over to in Xin Yi to provide you with an update on our Q3 financial performance. Xin Yi Lim: Thank you, Jiazhen. Hello, everyone. This is Xin Yi from the Investor Relations team. Jun is on medical leave, and I will deliver the prepared remarks on behalf of her. Let me walk you through our financial performance for the third quarter ended September 30, 2025. In terms of income statements, in the third quarter, our total revenues increased 9% year-over-year to RMB 108.3 billion. This was driven by an increase in revenues from online marketing services and transaction services. Revenues from online marketing services and others were RMB 53.3 billion this quarter, up 8% from the same quarter of 2024. Online marketing services growth moderated further as competition intensified and as we invest in the merchant ecosystem. Revenues from transaction services were RMB 54.9 billion, up 10% from the same quarter last year. Moving on to costs and expenses. Our total cost of revenues increased 18% from RMB 39.7 billion in Q3 2024 to RMB 46.8 billion this quarter, mainly due to increase in fulfillment fees, bandwidth and server costs and payment processing fees. On a GAAP basis, total operating expenses this quarter increased 3% to RMB 36.4 billion from RMB 35.4 billion in the same quarter of 2024. On a non-GAAP basis, total operating expenses increased to RMB 34.4 billion this quarter from RMB 32.9 billion in Q3 2024. Our total non-GAAP operating expenses as a percentage of total revenues this quarter was 32%, roughly in line with the same quarter last year. Looking into specific expense items. Our non-GAAP sales and marketing expenses this quarter were RMB 29.8 billion, flat compared to the same quarter last year. On a non-GAAP basis, our sales and marketing expenses as a percentage of our revenues this quarter was 28% compared to 30% in the same quarter last year. Our non-GAAP general and administrative expenses were RMB 896 million versus RMB 647 million in the same quarter of 2024. Our research and development expenses were RMB 3.7 billion this quarter on a non-GAAP basis and RMB 4.3 billion on a GAAP basis, up 41% year-over-year. Our investment in R&D reached a new high this quarter, reflecting our focus on improving the core technology capabilities of our platform. We are committed to investing in R&D over the long run to capture opportunities in supply chain innovation and consumer experience. On a GAAP basis, operating profit for the quarter was RMB 25 billion versus RMB 24.3 billion in the same quarter last year. Non-GAAP operating profit was RMB 27.1 billion versus RMB [ 28 ] billion in the same quarter last year. Non-GAAP operating profit margin was 25% this quarter, down from 27% for the same quarter last year. As we invest in the platform ecosystem, our profitability may continue to fluctuate. Net income attributable to ordinary shareholders was RMB 29.3 billion for the quarter compared to RMB 25 billion in the same quarter last year. Basic earnings per ADS was RMB 20.96 and diluted earnings per ADS was RMB 19.7 versus basic earnings per ADS of RMB 18.02 and diluted earnings per ADS of RMB 16.91 in the same quarter of 2024. Non-GAAP net income attributable to ordinary shareholders was RMB 31.4 billion versus RMB 27.5 billion in the same quarter last year. Non-GAAP diluted earnings per ADS was RMB 21.08 versus RMB 18.59 in the same quarter of 2024. Now as Lei and Jiazhen mentioned, we are facing an increasingly competitive industry landscape, which calls for more investments in the platform ecosystem. And therefore, as we roll out greater merchant support initiatives and ecosystem investments, financial results may continue to fluctuate from quarter-to-quarter. That completes our income statement. Now let me move on to cash flow. Our net cash generated from operating activities was RMB 45.7 billion compared with RMB 27.5 billion in the same quarter last year. As of September 30, 2025, we had RMB 423.8 billion in cash, cash equivalents and short-term investments. Thank you. This concludes my prepared remarks. Unknown Executive: Thank you, Xin Yi . And next, we will move on to the Q&A session. In today's Q&A session, Lei and Jiazhen will take questions from analysts on the line. [Operator Instructions] Lei and Jiazhen will answer questions in Chinese and will help translate for convenient purposes. Operator, we'll open for questions. Operator: [Operator Instructions] Your first question comes from Joyce Ju with Bank of America. Joyce Ju: [Foreign Language] I will translate myself. My first question is, in the third quarter, we see a recovery in overall online retail sector as the industry's year-over-year growth reached its best level in the past few quarters. Could management share the company's perspective on the recent industry trend? In the meantime, we noticed a slowdown in Duo Duo's online marketing service revenue this quarter, which we estimate also indicated some pressure on the take rate. Could management elaborate on the main factors driving the growth? And do you anticipate this trend will continue in the next couple of quarters? Secondly, in the past few quarters, we've seen several platform companies roll out major business innovations and ramp up investment in the new models, which has really shifted the competitive dynamics. How does management view the competitive outlook in China's e-commerce sector from here and why? Jiazhen Zhao: [Foreign Language] Unknown Executive: [Interpreted] This is Zhao Jiazhen, let me take this question. In the past few quarters, the industry has entered a new investment cycle. The e-commerce sector is evolving rapidly and within an industry landscape that has a large number of strong players, competition is unavoidable. And faced with this competitive and fast-changing environment, our primary focus should be that what unique value our platform can create for the consumers, merchants and other participants. We do not pay too much attention to the short-term industry trends or every move made by the competition. And as we see it from here onwards, we must leverage our inherent strength to pursue high-quality growth and enhance our core capabilities in order to better serve our merchants and consumers and along the way, creating more value. And of course, we are also encouraged to see the overall recovery in online retail. And at the beginning of this year, we further recognized the long-term value of high-quality growth and our management team made a commitment to elevate our platform ecosystem investments to a new stage and launched CNY 100 billion support program to support our merchants. And this involves the platform proactively dedicating substantial resources to invest in merchants and the broader industry. And in doing so, we target to provide ample room for innovation and growth for both established brands and SMEs. In the meantime, we also formed the Merchant Protection Committee to create a long-term communication mechanism with our merchants. We have also undertaken targeted upgrades to the merchant aftersales service system and implemented multiple improvements to address issues like abnormal order disputes. And these efforts are all focused on optimizing the business environment for our merchants and nurturing a platform ecosystem where all participants can thrive together. And looking ahead at this juncture, management unanimously agreed that it is our responsibility to further increase investment in our platform ecosystem and to think about the company's development from a broader perspective of public interest and the long-term health of the entire ecosystem. We will remain focused on the platform's intrinsic value and healthy development in the long run. And therefore, in the period ahead, we plan to roll out more strategic initiatives that benefit both merchants and consumers. Programs such as the CNY 100 billion support program and further enhance our efforts to invest in the industry and give back to the society. And back to the topic of growth rates, we mentioned several quarters ago that as the platform increase in scale and also as competition intensifies, our growth rate is set to slow down. As we continue to invest in programs to support merchants and the industry, our financial performance may experience ups and downs in the coming period. However, we will always maintain a long-term perspective, focusing on creating a unique value for consumers and merchants and building our intrinsic value. And in terms of your second question about competition. And as you have observed, the competition in our industry has intensified. And over the past few months, we've seen many industry peers deploying significant capital and resources to aggressively develop new business models, leading to increasingly fierce competition around emerging business models in the e-commerce sector. And in this environment, we will continue to invest substantial capital to strengthen our platform ecosystem. Major merchant support initiatives such as the CNY 10 billion fee reduction program and CNY 100 billion support program will be sustained over the long run and with more similar program to be launched. The platform is willing to let go some of the profits to create room for the development of the entire ecosystem. We view these as our long-term investments. And for instance, as mentioned earlier, this year, we launched the Duo Duo Premium Produce campaign under our CNY 100 billion support program, which has significantly helped quality agriculture merchants increase their scale and improve the efficiency of product distributions. There are numerous initiatives like this. And these long-term investments will naturally impact our revenue and profit performance. And moving forward, amid the changing external conditions and intensifying competition, our long-term investments are set to increase. And therefore, we do not think this quarter's profitability should serve as guidance for future performance, and there is still the possibility of continuous fluctuation in the results over the coming quarters. Thank you. Unknown Executive: Thank you, Joyce. Operator, we're ready for the analyst -- next analyst on the line. Operator: Your next question comes from Alicia Yap with Citigroup. Alicis a Yap: [Foreign Language] Two questions. The first one is in the global business operation, we have observed that the company and also other peers are facing regulatory and also public scrutiny in many countries, some of which are quite intense. How does management view this situation? And what are our planned response? And then second question is the company has mentioned investment in the merchant ecosystem over the past few quarters. Could you share the current status of this initiative? And how should we assess the financial impacts of this initiative? And what are the company's future plans? Lei Chen: [Foreign Language]. Unknown Executive: [Interpreted] Alicia, this is Lei. Let me answer your first question. After more than 3 years of development, the company's global business now serves local consumers in many markets and has received positive feedback from users worldwide, and we are greatly encouraged by such support and trust, but at the same time, we sense profound responsibility. So from the very beginning, the goal of our global business has been to achieve long-term sustainable development in each market and deliver tangible value to consumers. And therefore, we continuously reflect on how to integrate with the local cultural practices and legal compliance systems in each of the markets so that we become an organic part of the local economies. The growth of our business alongside regulatory trends across different markets now set a higher standard for us. We have always believed that providing consumers with a safe and trustworthy shopping environment is a fundamental duty of an e-commerce platform. And accordingly, management has made trust and safety and also product compliance a key component of the company's high-quality development strategy and has made substantial investments in this area. And on the technical front, we are continuously refining the policies and processes for merchant onboarding and product listing. The company has dedicated significant resources combining automated and manual screening to proactively monitor product listing, sales and after-sales services. And by doing so, we hope to enhance our ability to detect and respond to safety risk. And at the same time, we actively collaborate with external stakeholders and incorporate the feedback to hold ourselves to higher standards. In terms of our teams, we continue to invest in building a professional compliance team that keeps up with regulatory trends in our operating markets and promptly implement adjustments in our business operations. And despite these efforts, regulatory environment in areas such as trade policies, tax, data security and product compliance are undergoing significant changes across various countries and regions, and this presents us with greater challenges and heightened uncertainty. As a young and global organization, we are striving to learn and to adapt to these changes. However, I have to admit that this process introduces significant uncertainties, which bring unpredictable and difficult to quantify risks and could impact the company's financial performance in both the short and long term. And in facing such uncertainties to us, we remain very focused on strengthening our internal capabilities and enhancing platform compliance and fostering a healthier and more sustainable platform ecosystem. Thank you. Jiazhen Zhao: [Foreign Language] Unknown Executive: [Interpreted] This is Zhao Jiazhen. Let me answer your second question. And over the past 10 years, we have undergone an extraordinary growth journey evolving from a start-up to a public platform with certain social influence. And throughout this journey, we have benefited from the rapid development of the digital economy and while at the same time, took on social responsibilities that are expected of a platform company like ours. And over these 10 years, we have explored different ways to leverage digital capabilities to serve the broader communities and give back to the society and particularly around rural revitalization and industry upgrades. And as part of this journey, we launched strategic initiatives such as the CNY 10 billion agriculture research program to inject new energy into agriculture modernization. And this year, we took another critical step to launch the first CNY 100 billion support program in the e-commerce sector. And through the key measures such as Duo Duo Premium Produce, new quality supply and logistics support for remote regions, we are continuously improving the platform ecosystem and brought more high-quality merchants and products to the broader consumer markets, driving the high-quality development of different industries. And regarding your question around merchant support investments, we have always emphasized that as an e-commerce platform, we must collaborate closely with all the ecosystem participants to create value for consumers and merchants are vital partners in our efforts to serve the consumers well. And therefore, a healthy and sustainable merchant ecosystem is a fundamental pillar of the platform's high-quality development. We hope these initiatives will promote high-quality growth for quality merchants. For instance, the fee reduction policies we introduced have lowered merchants costs, enabling them to be more willing and able to reinvest in their products and services. And currently, we are already seeing some positive feedback from these ecosystem investments on our platform. And this year marks our 10-year anniversary and standing at this new starting point, we will continue to diligently address the practical challenges faced by our users, merchants and industries one by one, and we hope to take a greater social responsibility and by building a platform ecosystem that benefits all. Thank you. Unknown Executive: Okay. Operator, I think we have time for one more analyst. Operator: Your next question comes from Kenneth Fong with UBS. Kenneth Fong: [Foreign Language] The company operating margin decline this quarter has narrowed compared to the previous quarter. Meanwhile, management just mentioned plans for increased investment. So how should we view the company's upcoming investment pace as well as the profitability level? And my second question is, could management share what the new consumption trend that we observed during the recent annual shopping festival promotion. Additionally, we have seen other industry participants achieving good results with the new business models such as quick commerce during Double 11. So how does management view the competitive landscape under these emerging models? Jiazhen Zhao: [Foreign Language] Unknown Executive: [Interpreted] This is Zhao Jiazhen. Let me answer your question. In the third quarter, heightened competition, together with our ongoing investments in the CNY 100 billion support program put pressure on our revenue growth and also led to a decline in operating margins both year-on-year and quarter-on-quarter. At the moment, the industry landscape continues to change rapidly. And in this environment, it is crucial for us to maintain our long-term strategic focus. Looking ahead, we will continue to increase investments in our platform ecosystem. This includes measures such as merchant fee reduction and marketing support for high-quality merchants and all targeted at creating more room for the healthy development of the supply chain, and these investments will pose challenges to our revenue and profit. And at the same time, as mentioned in our prepared remarks, our global business is currently facing a complex global environment. The policies and industry regulatory landscapes across different countries and regions have undergone and are expected to continue undergoing significant changes. This will bring unforeseeable risks and challenges to our company, which may also impact the company's financial performance in both the short and long term. Now as we communicated over the past few quarters, we will firmly prioritize high-quality development in the long term over short-term financial results. And accordingly, our financial performance may fluctuate over the coming quarters and linear projections may not be appropriate for financial forecast. And as to your second question, and over the past few months, we have observed an overall positive consumption momentum with gradually recovering market confidence. And during the Q3 promotional period, consumption needs in the e-commerce sector was further stimulated, showing a steadily improving trend. At the same time, we clearly recognize that the e-commerce competition remains very, very intense. New business models continue to emerge and the market landscape is constantly evolving. Major players are increasing investments in new business directions, leading to escalating competition and creating challenges for our businesses on all fronts. And in such an environment, we will further raise our standards, strengthen our core capabilities and continue to deepen our efforts in supply chain improvement and platform ecosystem development to identify new growth opportunities. And from a long-term perspective, we will increase high-quality investments to translate these capabilities into products and services that offer consumers greater quality for money. This process will not be immediate but will demand continuous efforts. For a considerable period of time, we may be at a competitive disadvantage to our competitors, and this will potentially be accompanied by financial pressures such as slower revenue growth. But our attitude remains positive. But first, we choose to view competition through a long-term lens and plan on proactively increasing investments to create more possibilities for the healthy and sustainable development of the ecosystem, even if this means forgoing some short-term profits. And these trade-offs are made with the intention to build a more robust and sustainable long-term value amid industry competition. Thank you. Unknown Executive: Okay. Thank you, Jiazhen. It's about time, and thank you all for joining us today. We look forward to speaking with you again next quarter. Thank you, and have a great day. Operator: Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may now disconnect. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]
Operator: Ladies and gentlemen, thank you for standing by. Welcome to Leumi's Third Quarter 2025 Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded, November 18, 2025. The presentation that we will be using is available on the IR section of the bank's website. I would like to remind everyone that forward-looking statements for respective company's business, financial condition and results of its operations are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated. Such forward-looking statements include, but are not limited to, product demand, pricing, market acceptance, changing economic conditions, risks in product and technology development and the effect of the company's accounting policies as well as certain other risk factors, which are detailed from time to time in the company's filing with the various securities authorities. I would now like to turn the call over to Ms. Hagit Argov, CFO and Head of Finance Division. Please go ahead. Hagit Argov: Good day, everyone. I'm very pleased to be here with you today and to present our strong third quarter 2025 financial results. So let's get started with Slide 3. First, some key takeaways. Bank Leumi continues to present high and stable results over many quarters. This quarter, ROE was 16.3% and net profit was ILS 2.7 billion. It is worth noting that if the excess capital were reduced to the bank's internal CET1 target of 10.6%, the ROE would stand at 19% in the third quarter. In addition, we continue to manage costs effectively while maintaining a strong efficiency ratio. Credit quality metrics further improved and they have been consistently among the best in the sector over a number of years. We continue to present significant excess capital and healthy liquidity ratios. Following the Bank of Israel approval to increase the payout ratio up to 75% of the net profit in the third quarter, Leumi announced a combined dividend and buyback of ILS 2 billion. So all in all, we delivered strong, consistent and high-quality performance. Let's take a quick look at Slide 4. Here, we can see our financial targets for 2025 and 2026 published as a strategic plan in our 2024 annual report. So far, Leumi is well on track to meet our financial targets. Before we dive into the details, let me start with a brief overview of the macroeconomic environment. For this, we move to Slide 5, which highlights the key macro indicators. In Q3, the economic indicators showed an expansion. The Bank of Israel estimates real GDP growth of 2.5% for 2025, mainly impacted by the implications of the military conflict against Iran and 4.7% GDP growth in 2026. The GDP growth is driven by domestic demand and fixed investment. In addition, export of high tech services, which is the key growth engine of the Israel economy has accelerated in recent months. And recently, inflation got back to the target range of Bank of Israel between 1% to 3%. In October 2025, a high-tech agreement with Hamas, including the return of the Israeli hostages was achieved. If fully implemented, this development would have positive implications for the Israeli economy and global sentiment. Moving to Slide 6, which provides a snapshot of our quarterly performance. I will let the numbers speak for themselves. As mentioned, net income for Q3 2025 was ILS 2.7 billion and ROE was 16.3%. The cost-to-income ratio was especially strong at 27%, down from 31.1% in Q3 2024. This was supported by higher income and lower costs, thanks to our advanced technology. Our cost-to-income ratio continues to lead the Israeli banking sector and is among the best globally. Credit loss expenses were 0.03% in Q3, reflecting, among other factors, a positive development in the geopolitical environment. Credit portfolio grew by 1.3% quarter-on-quarter, supported by continued demand, mainly from the corporate and mortgages segment. The book value per share of the bank increased by 2.7% in the quarter and is up 12.7% over the past 12 months to ILS 45. Quarterly earnings per share were up almost 20% year-on-year. Now let's drill down to some key numbers on Slide 7, which shows the breakdown of income and expenses. Net interest income decreased 1.6% year-on-year, mainly driven by a lower CPI compared with Q3 2024. Overall, finance income grew strongly by 10.5% year-on-year, supported by higher noninterest income, mainly from capital markets compared with the parallel quarter last year. Expenses declined, reflecting our tight cost control. As a result of the above, pre-provision net revenues increased year-on-year by 14.3%. In addition, as part of the Bank of Israel program to distribute benefits to customers that was launched in April 2025, Leumi continues to benefit its customers. This totaled ILS 172 million in the third quarter. A brief view of Slide 8 summarizes our 9 months 2025 results. As you can see, 9 months results followed a similar trend to those for the 3 months period in the previous slide. Another brief metric on Slide 9 highlights our fee. Fee income was partly affected by the benefits granted to customers in the Bank of Israel program. Excluding these benefits, fees grew strongly by 11.4% quarter-on-quarter, driven mainly by securities activity and credit growth. 9 months 2025 over 9 months 2024 displayed similar trend. On Slide 10, we clearly see the bank's continued improvement in our multiyear cost income ratio. Our cost income ratio continues to be strong at 27% in the third quarter and 28.6% in the 9 months. Turning to Slide 11. The development of credit loss expenses in Q3, which shows us that specific provisions reflect our high-quality credit portfolio with an income of ILS 74 million coming from net recoveries. That means collections minus provision increases. Collective provisions were lower than in the parallel quarter, reflecting an improvement in the macro environment in light of the positive development in the geopolitical situation. Overall, total credit loss expenses in the quarter were 0.03% of gross loans compared with 0.28% in Q3 2024 and maintain our coverage ratio. Slide 12 presents a significant metric. It is the high quality of our credit portfolio. Credit quality further improved in Q3 with troubled debt declining to 1.34% of gross loans. NPL was also at a low level of 0.41%. The coverage ratio, as I mentioned before, remains stable, while the rate of provisions to NPLs increased 3.3x. These parameters are among the lowest in the banking sector. Now we turn to Slide 13. This shows our strong credit growth. Credit growth over 9 months was in line with our targets and stood at 8.8% with a 1.3% rise in Q3. This was supported by the ongoing resilience of the economy with growth coming from corporates, including real estate, infrastructure, mortgages and middle market. The next slide, Slide 14, shows the bank's diversified deposit base. Total deposits were up 3.7% in 9 months 2025, while deposits from private individuals grew by 1.4%. Liquidity ratios remain robust with the LCR ratio at 128%. Let's now move on. Slide 15 shows our healthy capital and leverage ratios. The core Tier 1 ratio increased by 5 basis points in the quarter to 12.33% with the bank's capital buffer now standing at more than 2% or ILS 11 billion. The total capital ratio was stable at 14.87%, which is also well above the Bank of Israel minimum requirement of 13.5%. Going on to Slide 16, we see the bank's capital return. Because the limitation on the capital return was partly by the Bank of Israel, Leumi declared a total payout of ILS 2 billion, of which ILS 1.5 billion is a cash dividend and the rest is in buybacks. This represents 75% of the quarterly net profit and an annualized return of 8.2% at the current share price. In conclusion, we turn to Slide 17. Let me just summarize our presentation. The bank continues to present consistent and strong financial performance with high ROE even during macroeconomic and geopolitical uncertainty. We remain highly disciplined on costs, resulting in consistent efficiency improvement and the best cost-to-income ratio among Israeli banks and probably one of the best globally. Our technology transformation doesn't stop. Nearly 90% of our private customers carry out their activity through digital platforms. The bank's strong profitability and healthy capital buffer enable us to continue growing in our target segments and also allow us to share higher returns with shareholders through dividends and our buyback program. With that, I will now open the call for questions. Operator? Operator: [Operator Instructions] The first question, funding plans. Do you plan to come to the market in the near term to issue USD senior bonds or AT1s or Tier 2s? Hagit Argov: Okay. Thank you for the question. Regarding the senior, we constantly issue senior bonds depending on our liquidity ratio. And if it will be in U.S. dollar, it depends in the price and in the conditions. So we consider it when we issue. Regarding the Tier 2, let me point out that our total capital ratio is significantly above the requirement. So there is no specific need to refinance it in the near future. As for the bond seniors in the U.S. dollar with the call date in January 2026, the final decision will be during 2026, depends on our capital ratio. Operator: The next question, what are your refinancing plans for the Tier 2s callable in January 2026? Hagit Argov: The same question, I covered it in my answer. Operator: The next question, could you provide some color on the trajectory of net interest income and net interest margins as we approach the end of this year and look ahead to next year? Hagit Argov: Okay. So about this quarter, the NIM was affected mainly by the higher share of institutional in our deposit portfolio. These deposits carry lower margins. They are usually short term. So the current level of the NIM will not necessarily remain the same in the coming quarter. And of course, affected by the competition. About the future, we expected the Bank of Israel to announce an interest rate reduction. And according to our financial statements, a 1% decrease in interest rate would affect our results by around ILS 8 million, which is approximately 0.8% in ROE terms. So we believe that this will be the effect in our financial statement. Operator: The next question, I'd appreciate your perspective on the normalized cost of risk. There was a noticeable decline this quarter with COR at 9 bp for the first 9 months compared to 16 bp last year. Any insights on the drivers behind this change? And any guidance going forward would be very valuable. Hagit Argov: Okay. Thank you for the question. First of all, it is important to note that during the war, we accumulated a large excess provision due to concern about the geopolitical situation. Secondly, in this quarter, there is an improvement in the geopolitical situation. And as I mentioned in my presentation, in our credit quality parameters. And finally, our specific provision, we continue to record income from recovery, net recovery. It means we have more recoveries than write-offs. So consequently, total credit loss provisions were low, amounting to ILS 3 million. I want to mention that our NPL coverage is about 3x and is one of the highest in the system. And also, we maintain our coverage ratio, which means our provisions to our credit. So if I have to appreciate what will be in the future, it's, of course, depend on the geopolitical situation and our credit quality parameters. So if the situation will continue to improve and there will not be any deterioration. So I believe that it will be in the same level of provisions. Operator: The next question. A question on regulatory risk. There have been media headlines about an increased tax rate on the banks and separately by the Finance Minister to subsidize mortgage. Does the bank have any take on that? Hagit Argov: Actually, we heard about this plan at the same time as you did, and we don't have any further information. Such a process would require, of course, legislation. And yet, we don't see any official document. So if the issue develop further, we will be able to respond accordingly. Operator: The next question, how much more operating leverage is there? And how should we be looking at expenses going into next year? Hagit Argov: Okay. So as you know, Leumi has continued year after year to increase its income and decrease its expenses. Our motto has been doing more with less, and this is reflected in our financial parameters, in our cost-income ratio. We have achieved and we'll continue to do this mainly by advanced technology. By the way, to the best of my knowledge, it is the best of all the Israeli banks and probably in the world, and we are very proud of it. We continue our tight control of expenses, and we continue with our technology, and I believe we can maintain it at least in the same level. Operator: [Operator Instructions] There are no further questions at this time. This concludes Leumi's Third Quarter 2025 Results Conference Call. Thank you for your participation. You may go ahead and disconnect.
Graham Sutherland: Good morning, and welcome to FirstGroup's 2026 Half Year Results Presentation. In a moment, I will hand over to Ryan to take you through the financial performance for the first half of the year. I will then provide an update on business performance in bus and rail before we take your questions at the end. Moving on to Slide 3. I'm pleased to report another strong half for the group despite several economic and policy headwinds. Strong execution has ensured that we've been able to fully counter the negative impacts of lower bus funding in England, above inflation wage pressures and higher levels of employer national insurance contributions. Group adjusted revenue, which does not include the national rail contract revenues, where we take substantially no revenue risk has increased by 30% to GBP 834 million. This was largely driven by growth in First Bus due to the acquisition of First Bus London, which completed in February. Adjusted earnings per share for the half year has increased by 16% to 9.9p, with earnings growth supported by the repurchase of circa 22 million shares during the period. As a result of our strong performance in the first half, the Board has proposed an interim dividend of 2.2p per share, up 29% against the prior year. As a result of our continued strategic delivery and the restructuring of the business completed earlier this year, we are on track to deliver modest growth in our adjusted earnings per share for the full year. We expect to then at least maintain adjusted earnings per share in full year 2027 as both Avanti West Coast and GWR are nationalized. This leaves us well positioned for the remainder of the year. Our focus will continue on operational delivery and the successful execution of our U.K. growth and diversification strategy. Turning now to Slide 4, which sets out some of the key highlights against our strategic framework. Delivering day in and day out remains a key priority for the group. We continue to drive operational efficiencies in First Bus with a 24% reduction in lost mileage to 1.3%. We have also increased our Net Promoter Score to plus 15 as service delivery remains core to our strategy. We have also completed our business restructure to deliver annualized overhead savings of around GBP 15 million, which will help offset the impact of -- on the group of increased national insurance contributions. We will see the full benefit of the restructuring in the second half. Looking at modal shift, generating additional demand for our service is a commercial driver of our business and also crucial for reducing congestion, improving air quality and supporting government decarbonization goals. In open access rail, our seat miles capacity utilization of 67% remains significantly above the industry average. And we've also secured Rolling stock for our new Stirling to London Houston service, which we expect to be fully operational in mid-calendar year 2026. Turning to our sustainability pillar. We are at the forefront of bus fleet and infrastructure electrification and are working to capitalize on opportunities to unlock adjacent electrification revenue streams. In the first half, this has included the launch of First Charge and a small investment in Palmer Energy technology to bring battery storage capability to our sites. We continue to diversify our portfolio with the First Bus London performing ahead of our expectations, and we continue to grow our business and coach asset footprint with high-quality value-accretive acquisitions. At open access rail, we were pleased to have been awarded Extra pass on our existing services and the extension of some of Lumo services to Glasgow. We've also submitted applications for new routes, where we can commit further material investment and utilize our proven expertise to drive economic growth through connecting underserved communities. I will now hand over to Ryan, who will take us through the financial results for the half year. Ryan Mangold: Thank you, Graham, and good morning, everybody. This has no doubt been a more challenging half year given the headwinds of inflation and national -- employers national insurance increases. However, the early actions that we have taken have helped mitigate some of these pressures and the group has continued to make progress across the business. In my presentation, I'll be covering the following 3 areas: strong growth in adjusted revenue, the improvement in adjusted EPS with further progress on a much better balance of earnings distribution; and finally, reinforcing our capital allocation policy and our financial guidance for full year 2026 as well as full year 2027. So turning to the financial summary on Slide 6, where we have made progress across all financial KPIs despite the headwinds. The group's adjusted revenue is up over 30%, driven by both organic and inorganic growth and decent performances across the business. The revenue improvements in bus and open access rail have largely been offset by inflationary cost pressures as well as the national insurance impact as well as business development costs in open access with the mobilization of our Stirling route, which is now underway. As a result, group adjusted operating profit of GBP 103.6 million is up 2.8%. Our positive operating profit performance has benefited somewhat by the IFRS 16 adjustment in rail being lower given SWR ending, partially offset by higher net finance costs, resulting in the group delivering GBP 55.5 million in adjusted earnings, up 7.1%. The ongoing share buyback program has reduced the average share count. And as a result, the group's adjusted EPS has increased by 16.5% to 9.9p. This robust underlying business performance and strength of the balance sheet has resulted in the Board proposing an interim dividend of 2.2p per share, an increase of 29.4%. The dividend is in line with the group's current progressive dividend policy of around 3x adjusted earnings per share with around 1/3 in the interim and 2/3 at the final. The free cash flow generation before acquisitions and returns to shareholders has been impacted by the timing of a more material investment in bus electrification in the half year, and this is us taking advantage of the available government funding, resulting in an above-normal spend in the half year. The group's adjusted net debt position was GBP 207.6 million with a strong free cash generation offset by the accelerated CapEx as well as about GBP 10 million in acquisitions and GBP 76 million returned to shareholders through the buyback program and the final dividend for the year. At the bus business, despite the material organic and inorganic growth investments in the year, the post-tax return on capital employed was 9.4%, which was impacted by the acquisition of the London business in February. And as expected, the profitability is initially lower from this business. Turning to the 30% growth in adjusted revenue on Slide 7. The material increase in adjusted revenue has been mostly driven by the capital deployment in the second half of full year '25, with London in particular, performing well and is operating ahead of the investment expectations. The regional bus business passenger demand has ever been marginally weaker with a number of factors contributing to this, which Graham will cover later. However, despite the marginally lower volumes, the bus business has been able to deliver some yield growth that has been partially offset by lower government funding. First Rail's open access operations delivered some revenue growth with this progress marginally impacted by the strike action that we saw in whole trains. The Rail Services business also delivered a strong performance in the half year. And what is pleasing to note now is that more than 30% of the current contracted revenues are now with external parties, demonstrating the continued strong value creation from these businesses. Looking at the 16.5% adjusted EPS growth on Slide 8. This chart shows our adjusted EPS progression on a post-tax basis for all the variances. Open access and rail services contributed 0.5p in growth, with this now at 3.6p of our EPS, representing a materially higher proportion of earnings in rail now from more sustainable business streams. H1 has, however, had a marginal benefit from once-off rail center provision releases. First Bus increased operating profits contributed 0.2p to the improvement and central costs are 0.3p lower year-on-year, driven by the cost efficiencies and the group restructure executed earlier. Despite SWR ending in May 2025, the earnings from the DfT talks are 0.1p higher than the prior year, with the first half benefiting from once-off enhanced variable management fees as well as lower disallowable costs. Interest costs were 0.5p higher due mainly to lower interest received on cash balances and the group now being in an adjusted net debt position. The buyback programs that have now run for several years has resulted in a lower number of average shares, and this contributed 0.8p per share. As can be seen, the work that we have been doing over the past few years, together with our disciplined capital allocation approach has grown our adjusted EPS to 9.9p per share. But equally as important, we are continuing to drive a far better distribution and the quality of our earnings as we look ahead. Turning to the adjusted cash flow movements for the past 12 months on Slide 9. As a reminder, our adjusted measures excludes the ring-fenced cash as well as the impact of IFRS 16 from the DfT train operating companies. The group generated EBITDA of GBP 181.4 million before the DfT TOC cash inflows where we have received GBP 37.9 million in distributions. Just as a reminder, these DfT TOC management fees are paid by way of dividends generally in the second half of the following year after completion of the top statutory audited accounts. Working capital was a net inflow of GBP 4.4 million in the 12 months, resulting in a total of GBP 223.7 million of capital generated from operations versus the full year of 2025 of GBP 207.4 million. The capital generated was deployed in investing GBP 126.5 million in CapEx, net of grant funding and battery sales into the Hitachi strategic joint venture. GBP 6.5 million was paid in cash interest and tax, mainly relating to interest on the new finance leases and arrangements for the electric fleet in First Bus, offset by interest earned on the cash balances. There was a nominal amount of cash tax paid with the low level of cash tax being driven by the historical losses as well as the accelerated capital allowances that should apply for several years given our decarbonization investment program. Other movements include payments to acquire shares for the Employee Benefit Trust that continues to hold around 20 million shares for share award settlements and small cash payments into the pension schemes, mainly to cover costs. This has meant that the business has generated a total of GBP 78.3 million in cash despite the accelerated investment in electrification of bus. Just short of GBP 150 million was deployed in growth capital with the acquisition of RATP London for GBP 90 million being the major contributor to that as well as several bolt-on acquisitions in First Bus, mainly in the business and coach market, but also includes investment into several innovative energy businesses as well as combined with the 2 open access rail businesses with Stirling in mobilization phase. GBP 37.1 million has been paid by way of dividends in the 12 months and GBP 99.1 million was spent on the share buyback programs. What is clear from the chart is that the group continues to deploy a very balanced approach to capital allocation, focusing on both organic and inorganic growth opportunities as well as meaningful returns to shareholders in line with our strategy. This results in the group ending the half year with GBP 207.6 million in adjusted net debt and a debt cover ratio of 0.95x, which is well below our leverage policy parameters despite being a fairly busy 12 months, combined with a seasonally high level of adjusted net debt at the half year. Turning to our capital allocation framework on Slide 10. As we look ahead, we have a leverage policy of less than 2x adjusted net debt to EBITDA. With our forecast year-end position being well below 1x, there's plenty of capacity for the U.K. growth for the right opportunities, where the post-tax IRR from these investments exceeds our WACC. On an underlying basis, pre-deployment of capital for acquisitions, we expect to maintain our leverage below 1x for the time being. We have a strong focus on decarbonization in First Bus with the additional cost and efficiency benefit this brings, and we will continue to deploy capital in this area, particularly where this is supported by government funding to help deliver the U.K.'s wider decarbonization strategy. At First Bus London, we continue to expect this business to be operating cash positive from full year '27 onwards, and we are very pleased with the business performance to date. For the DfT TOCs we now estimate that GBP 125 million will be received in cash from October 2025 onwards to the end of the contracts. And this includes the anticipated continued support as required under contract from the rail services businesses. This is effectively higher than the GBP 120 million that we guided in June, due mainly to the longer-dated contracts agreed in rail services business, slightly better DfT TOC end dates and partially offset by the cash that we received in the first half of the year. Our current dividend policy remains around 3x adjusted earnings per share with this ratio and quantum being progressive over time. And finally, in line with our disciplined capital allocation approach, the group is committed to any surplus cash that cannot be effectively deployed in growth will be returned to shareholders. Given the current adjusted net debt and the pipeline of U.K. opportunities that are currently being evaluated, we are not announcing an extension to the buyback program at this stage, and this will be reviewed again with the full year results. To end with on Slide 11, looking ahead for the financial outlook for full year 2026 as well as adding in guidance now for full year 2027, given the transition of the remaining DfT TOCs at some stage within the next 12 to 18 months. The group expects to deliver modest growth in adjusted EPS for full year 2026 and then to at least maintain this level into full year '27 off a higher base. The bus business anticipates making sequential operating profit progress year-on-year with growth being driven by the material change in the business following the acquisitions, including London, with bus now consisting of 3 strong business segments, delivering a combined annual revenue that's anticipated to be above GBP 1.4 billion for full year '26. In First Rail, the open access businesses are anticipated to deliver results ahead of full year 2025, reflecting strong demand and yield management being offset by inflationary cost pressures as well as the costs for mobilizing the Stirling business. The rail services businesses are expected to make progress year-on-year given the continued support provided to previous and existing DfT TOCs as well as growth in new customers. For the DfT TOCs, the fees are anticipated to be at more normal levels going forward and combined with SWR ending means that the underlying management fees will be lower. The IFRS 16 positive impact to EBIT for the year is expected to be circa GBP 36 million in full year 2026. At the center, we anticipate costs to be circa GBP 8 million lower, benefiting from the central restructuring that was completed in the first half. Below operating profit, we anticipate incurring GBP 60 million worth of interest, of which GBP 34 million relates to IFRS 16 charges mainly due to the DFT rail leases. We anticipate deploying a net circa GBP 180 million of CapEx in the First Bus after taking into account grant funding and the benefit of GBP 10 million cash from the Hitachi Strategic Battery partnership. This CapEx of GBP 180 million now includes GBP 30 million of CapEx in London for electric vehicles, where the group is trialing an outright ownership model rather than an operating lease model on a specific large route that commenced late in 2025 due to the operating margin benefit that the ownership model delivers. The current level of CapEx in bus is above the expected normal levels given the success the business has had in accessing grant funding and annual CapEx is anticipated to be around GBP 100 million per annum as we look ahead, depending on the model that may be applied in London. First Rail remains capital light, but with some investment expected on the inorganic growth in open access as we mobilize these routes. For the pensions escrow, we have now finalized the Bus Section 2024 triennial valuation. This resulted in GBP 20 million of cash being returned to the group in November with GBP 20 million paid into the scheme and the balance of GBP 43 million retained in escrow. The escrow will be reviewed with the 2030 valuation, where a number of medium-term actuarial and asset judgments will be clarified in the scheme's performance. And when this is combined with the group section, it means that GBP 65 million is now in escrow that we will continue to explore derisking options that will be tested on the 2030 valuations. We anticipate ending the year with circa GBP 125 million to GBP 135 million worth of adjusted net debt. And this guidance is before any further inorganic growth opportunities, where there's a decent pipeline in the U.K. that we continue to evaluate. As you can see, the group retains a very strong balance sheet position with a much improved quality of earnings trajectory where we expect modest growth in EPS for full year 2026 and then to at least maintain this higher level for full year 2027. I'll now hand over to Graham for the business review. Graham Sutherland: Thank you, Ryan, for the update. Much appreciated. Moving on to Slide 13. It's been a solid half year for First Bus with operating profit growth of 4%, driven by yield management, cost efficiencies and the benefits of recent acquisitions. This has come in a challenging environment, where the transition to a GBP 3 fare cap in England resulted in lower funding levels, down GBP 17 million on last year. This, combined with related pricing activity and generally a softer economy has negatively impacted regional bus volumes. Concessionary volumes are up 4%, but this has been more than offset by a 7% decline in commercial volumes, leaving overall volumes down by 4%. As well as the move to the GBP 3 fare cap, economic factors are impacting demand. It's worth noting that just over 40% of all bus trips are for shopping and leisure purposes and around 20% are for commuting, and we're seeing these journeys impacted by lower levels of consumer confidence. To offset the drop in funding and softer demand, we introduced a new simple distance-based fare structure, resulting in a circa 10% yield improvement in the first half. Inflationary pressures remain with cost increases due to inflation of circa 3%, mainly in wages, where there was a 4% average increase in driver pay awards. We have now settled the majority of our largest bargaining units with 2-year awards achieved in most cases. We have also delivered GBP 7 million of efficiencies through the electrification progress and overhead savings, including a GBP 2 million saving in fuel costs. We've also benefited from our new businesses in London and a business in Coach, where we also continue to extend and win value-accretive contracts. Adjusted operating profit margin of 6.1% after absorbing 1.4% impact from higher national insurance contributions. Regional bus operating profit margin was 8.2%, slightly lower than the prior year. Moving now to Slide 14. The First Bus portfolio is evolving as we grow our business in Coach segment and develop our franchising capability centered on First Bus London and our operations in Rochdale. In Business and Coach, we are actively growing our operational footprint and asset base. In the first half, this included the acquisition of Tetley’'s Coaches, an established profitable operator with a large own depot in Central Leeds. This segment's revenue grew by 30% in the first half due to contract wins and extensions, the launch of Flixbus services and the contribution of our new businesses, which are trading in line with expectations. This is an attractive market worth an estimated GBP 3 billion, and we have a strong pipeline of opportunities to further grow our market share. The significant increase in our franchising segment's revenue reflects the addition of First Bus London, which contributed GBP 150 million in the first half. Thanks to our focus on service delivery to drive customer satisfaction and performance incentives, both our London and Rochdale franchise businesses consistently hold top positions in the operator league tables. Looking ahead, a number of Merrill authorities outside London are progressing with bus franchising schemes. These include Liverpool City Region, West Yorkshire, South Yorkshire, Wales and the West Midlands, representing an opportunity for us to enter new markets. There is still some uncertainty over which franchising models will be deployed, in particular around fleet and depot ownership. This could lead to potential CapEx savings and property disposals should authorities opt for an ownership model. Our track records of delivering quality bus operations under contract in London and Greater Manchester leaves us well positioned to actively take part in franchising growth. And moving on to Slide 15. The electrification of our fleet and infrastructure is a key part of our strategy to transform our bus business and to unlock potential adjacent revenue streams. We continue to make good progress with circa 23% of our fleet zero emission with 3 fully and 17 partially electrified depots across the U.K. As I flagged on a previous slide, we're benefiting from electrification efficiencies, including through fuel costs. This has led to a net fuel cost per mile reduction of 20% over the last 3 years. We're also making good progress identifying and capitalizing on opportunities to further monetize our electrification assets -- we recently launched the First Charge brand, giving access to chargers at 15 of our depots. We also made a small investment in Palmer Energy Technology to bring battery storage capability to some of our depots. This included the launch of a battery energy storage facility in Holford, and we expect to launch a second facility in Aberdeen next year. Over time, this will drive further cost efficiencies and provide a potential platform for commercial second life use of bus batteries. And now moving on to open access rail on Slide 16. Our 2 open access rail operations, Hull Trains and Lumo delivered adjusted operating profit of GBP 16.3 million in the first half. This is lower than the prior year with some impact from industrial action at Hull Trains and GBP 1.3 million of mobilization costs for our new Stirling to London Houston service. Lumo saw strong demand during the summer months and Hull Trains had a good ramp-up in business traveler demand in September. Seat miles operate were 3% lower than the prior year, reflecting higher levels of engineering works on the East Coast mainline and industrial action. Seat miles utilization remains high for both operators and still well above the rail industry benchmarks. Looking ahead, the mobilization of our new Stirling to London Houston service is progressing well, and we expect the service to be fully operational in mid-calendar year 2026. As you can see on the slide, we've set out our current rail open access seat miles capacity and how we see this developing over the coming years. We were pleased to announce in July that the ORR had approved our applications for Extra Pass on our existing services from December 2025 as well as the extension of some of Lumo's services to Glasgow. These extensions will add an additional 118 million seat miles, a 13% increase to our existing capacity. This, together with our new Sterling and Carmarthen services will see us more than double our existing seat miles capacity over the next 2 to 3 years. We've also launched a number of applications with the ORR. This includes services from Payton to London Paddington, Hereford to London Paddington, the extension of the Sterling track access agreement to December 2038 with the addition of new battery electric trains a revised Rochdale to London Houston application and an application for a new route between Cardiff and New York. We've committed significant investment to facilitate the growth of our open access services, including our circa GBP 500 million agreement for 14 new Hitachi trains that are being manufactured in County Durham, securing the skills base and jobs in the local area. If our ongoing applications are successful, we will make use of our option to commit further investment in new Hitachi trains, representing a further U.K. manufacturing investment of around GBP 300 million. And moving on to Slide 17. Our teams managing the national rail contracts at Avanti West Coast and DWR continue to focus on enhanced service delivery and effective cost management. Both teams are performing well and attributable net income from the national rail contracts has been in line with our expectations at GBP 15.3 million in the first half. In line with government policy, the DfT train operating companies are moving into public ownership. Our SWR team worked tirelessly with the DfT operator to ensure a smooth transition with the business exiting the group on schedule in May. The dates for the transfer of Avanti West Coast and GWR have not yet been announced by the government, but are anticipated to be in full year 2027. Our rail services businesses, FCC, Mistral and Consultancy continue to progress and perform well with revenue showing encouraging growth. Almost 1/3 of the current contracted revenues are now from external customers. We continue to look at opportunities to scale these businesses as we believe private sector expertise will continue to be vital to the success of the rail industry. Moving on to conclude on Slide 19. Our robust performance in the first half and a challenging economic and policy environment is testament to the work we have done to transform, grow and diversify our business. We're on track to deliver modest growth in adjusted earnings per share for the full year, and we expect to then at least maintain adjusted earnings per share in full year '27 as we transition our train operating companies to the government. In First Bus, we're an experienced operator with a large, well-capitalized fleet and a network of own depots that will allow us to continue to improve performance and to grow in attractive markets. The electrification of our fleet and infrastructure continues at pace as we look to unlock cost efficiencies and potential adjacent revenue streams. We will also be able to leverage these capabilities when bidding for new contracts. In First Rail, we will continue to work to grow our open access capacity and revenues, look to optimize our rail services businesses and to bid for contracts where we can bring forward our experience and capability. In our remaining 2 DfT train operating companies, we continue to prioritize contractual and operational delivery together with the work required to ensure a professional handover to the DfT operator. Our strong balance sheet allows us to evaluate a good pipeline of value-accretive U.K. growth opportunities. We remain committed to our discipline on capital allocation, and we'll continue to return any surplus cash to our shareholders. As a leading U.K. public transport operator, we have a critical role to play in the delivery of the U.K.'s wider economic, social and environmental goals. We will continue to be proactive, demonstrate our strengths as an experienced partner, underpinned by our significant investment in growth and decarbonization. To close, the work we have done over the last few years has allowed us to maintain our positive earnings trajectory as the U.K. bus and rail markets partially transition to new models. We aim to continuously improve performance to drive more demand for bus and rail services and to capitalize on strategic U.K. growth opportunities. Thank you for your time this morning, and we will now open for questions. We will take questions from the room first and then from the webcast. Gerald Khoo: Good morning, everyone. Gerald Khoo from Panmure Liberum. 3, if I can. Firstly, on bus franchising. You set out the regions that are moving towards franchising. I was wondering whether you could sort of quantify the sort of revenue opportunity and also what's potentially at risk in, I think, just West Yorkshire is the area that you're in amongst those. Secondly, there's been quite a big increase in the CapEx guidance for the year, but not a very big increase in the adjusted net debt guidance. I was just wondering what the sort of reconciling item there is. And finally, you talked about having a look at owning electric buses in London. I mean what are the challenges around that versus owning diesel buses in London? Is it -- is it significantly more challenging to cascade electric buses into the regions to on to other London bus contracts? Graham Sutherland: Thank you, Gerald. And it was good to see the question starting before I even sat down. So I'm very impressed. I'll maybe take the first one on bus franchising. Look, I mean, obviously, we are in West and South Yorkshire. So that's clearly a risk for us, particularly given how some of these bids are formed with the ability only to win certain depots. But when we look at the opportunities outside, we kind of feel that we can balance the kind of risk/reward scenario here. And the fact that we've worked very hard to strongly capitalize our assets over the last few years with improved fleet, improved depot, I think it leaves us in a strong position in discussions with the local authorities in terms of how those assets are positioned and the future use within franchising. So I'm not going to quote individual subsector numbers, but I think the general feeling in the team is that we will come out of this process. We're likely to release some capital from the business in the areas where we have strong asset base. And we feel we've got the qualities and the experience now within our business, particularly bringing in the London business and what we've learned from that to be competitive in the bidding process. And obviously, that has started, the results of the first phase of Liverpool around the end of this calendar year. So we'll begin to get some insight as to where we stand in pretty short order. Ryan, do you want to take the second question on CapEx and net debt? Ryan Mangold: Yes. So CapEx is higher by GBP 30 million. It's primarily driven by us trialing the GBP 30 million, it's 59 EVs that we're trialing on a specific route in London, which is all electric that the business effectively retained and won that starts later this year. So the guidance is better than what we previously gave effectively with that sort of GBP 30 million going out and a couple of reasons for that. 1 is the GBP 20 million of escrow cash that's come into the business in the second half of the year as well as some underlying sort of cash -- stronger cash generation, particularly coming out of the rail business than what we originally anticipated. So a combination of those 2 factors offset against the CapEx in London is where the net debt guidance has ended being -- being slightly higher, but better off. And just also a reminder, we deployed GBP 10 million in growth M&A in the first half of the year as well. So we've got GBP 40-odd million and GBP 20 million back on the pensions escrow, but our net debt is slightly better than that, obviously, mathematically. Graham Sutherland: And then on the bus ownership in London. Ryan Mangold: Yes. So the EVs in London, I mean the TFL is committed to electrification in London. I think that the sort of risk of transition of technology in terms of how these EVs work and the warranties that the OEMs are now providing has kind of gone beyond the kind of risk factor that you previously, I think, would have taken and hence, kind of moving those to operating leases. I think the world is also moving to more post-IFRS 16 basis in terms of financial judgments. And I think there's quite a few bankers in the room. I think the banks eventually also start moving up to covenants to be sort of on a post-IFRS 16 basis. So your net debt to [ EBITDAR ] and your total cost of borrowing is going to be all kind of caught into one thing rather than just being simply off balance sheet. And combination of sort of commitment by TFL to go to electric. So we always have a use for those buses one way or the other is a positive. Technology improvements on the OEMs in terms of length of warranty is a positive. And if we can use our strong balance sheet to effectively kind of fund our business model in London at our WACC of 9% versus the WACC of the ROSCOs, then which is much, much higher, then we can sort of, in theory, kind of capture that benefit and that capture of that benefit really kind of translates into slightly higher margins. But we're just trialing this on a specific route. So we don't want people to think that we are just buying buses now in London. We're not going to uplease them. We're just trialing them on a specific route just to see that the kind of financial benefits are as we expect them to be over time. Graham Sutherland: Alex? Alexander Paterson: 3 from me as well, please. Firstly, just in the remote possibility that the budget doesn't like the blue touch paper of the U.K. economy and the consumer still doesn't feel great on the 27th of September. If commercial bus volumes remain somewhat subdued and the trend you saw in the first half continues, what sort of levers have you got? Should we expect more mileage reduction there? Secondly, if I can just elaborate on the bus franchising question. Manchester has obviously bought depots and fleet from previous operators. Birmingham has acquired a depot, look like they're going to buy more and fleet as well. What do you expect in the regions, where you think they may franchise? You talked about capital release. I don't know if you can quantify that at all. And then finally, just on the rail services, it sounds like you've had a very positive outcome on those continuing for longer. What do you think the end game is? Should we expect government provision of these services or private? If it's private, is there actually an opportunity for you to increase your market share? Graham Sutherland: Okay. Thanks, Alex. Very comprehensive questions. I mean the budget, obviously, when you look back a year, we obviously had to deal with national insurance contributions. I think the team worked very hard to manage that. The reality is when you're running a large business, you don't always deal with these issues in a 3-month period. So the reality is it's probably taken us right through to the end of the half year to do all the work that we wanted to offset those increased costs, and we will now see that in the second half. When we look at this budget, again, we will just deal with what comes our way. I mean, on volumes, we began to see volumes begin to -- this time last year, we were talking about volumes being up 4%. So clearly, there's been a number of impacts that have affected them. But we did see them begin to drop off in the January to March period and have largely been around the 4% level since then. We begin to cycle that effect out in January this year. And we're obviously working with various initiatives to stimulate more demand as well, including having put more frequency on in some of our larger urban areas to try and stimulate more demand. So we -- it's difficult to gauge, where volumes will be next year. But we still have population growth. We still have some macro tailwinds. So we do think it will settle down a bit, but we're prepared to deal with it, if we see softer volumes next year. So it's hard to call, but I do -- we do expect some improvement from the current level. In terms of bus franchising, yes, I mean, we have seen the signal from a number of areas that they want to own depot fleet in total. But we have also seen discussions around potentially a split fleet in certain areas given the lack of available funding to do the whole thing. So I don't think it's clear how that will completely play out. A lot of it will be down to choices at a Merrill authority level as to where they invest their money. I think the fact that we have a well-capitalized business is helpful. And also, we have available capital if the opportunity arises. So I think we'll lean into each individual situation as it kind of prevails. And as I said, if in Western South Yorkshire, they're looking at an ownership model, certainly the depots and maybe partially for the buses, then we're in a strong position to work with them to make that happen. So yes, so I think relatively positive in our ability to work there, but it's very hard to call out numbers because these are active negotiations, and they're not concluded at this point. I think then on rail services, the team have done a good job. There's no doubt about that. And we provide some high-quality expertise into the train operating companies, and we've been able to broaden some of these services beyond our -- obviously, into the external market, which is a positive. It's difficult to fully assess where GBR will go. But it's -- the reality is they may bring some in-house. They may combine and consolidate and look for 1 or 2 private sector partners. And at the end of the day, our job at the moment is to provide quality services, put good contracts in place, and then we'll respond to how the market evolves. But I think we have optionality here. And within the number, the GBP 125 million of cash receipts, that includes an assumption of how much rail services cash will be there. And we're more than comfortable with giving that guidance at this point. So evolving area. But since we last spoke, we have a better contract position now than we would have had 6 months ago, and that's encouraging. Ruairi Cullinane: Good morning. It's Ruairi Cullinane from RBC. The first question, I think the M&A was described as a U.K.-focused growth strategy. Should we infer from that, that you're likely to continue primarily buying businesses in the U.K.? And is there still a reasonable pipeline of opportunities there? Secondly, I was quite struck that bus CapEx could normalize towards GBP 100 million in the medium term. Is that -- does that come back to the shift to franchising and then more regions opting to own assets? And then finally, what have you assumed in terms of the timing of the exit of the remaining talks in terms of the upgrade of the cash inflow from DfT TOCs from GBP 120 million to GBP 125 million? Graham Sutherland: Okay. Thanks very much. On M&A, we are solely focused at this point in time on our U.K. pipeline of opportunity. We've been able to do over the last 18 to 24 months, 7 or 8 acquisitions. And we have a pipeline that at the moment that's made up of live opportunities under discussion and some more medium-term opportunities that we feel could come to the market. So our job right now is to run down those opportunities. They're a good fit with the strategy of the business in terms of more growth in bus and the potential to obviously completely optimize what's there on open access. So we feel there is enough there to have a strong growth story around bus and open access rail for the next 2 to 3 years. We -- as I've said before, we -- given the type of organization we are, stuff comes our way to assess and look at. So we will continue to look at opportunities outside the U.K., but we have absolutely -- at the moment, that's really just from a kind of good corporate citizen perspective. We are solely focused on driving and delivering the U.K. pipeline we have. And until that pipeline weakens, we have no real intention of looking elsewhere. Bus CapEx, Ryan, do you want to maybe take that one? Ryan Mangold: On the CapEx, there's a number of sort of variables on that. One of them being, obviously, as we transition towards franchising some of the markets, our own fleet in terms of our regional bus operations will be slightly smaller as a result of that. Now I kind of spoke a little bit earlier in one of the questions in terms of is it going to be depots and buses owned by the combined authorities or whether we can have a partner ownership. Now clearly, we're going to have to own the buses under that scenario, then clearly, the CapEx number will be higher, but that should then be reflected in the margins that those bids will go for in terms of cost of capital pricing. So that GBP 100 million kind of doesn't include the fact that we might have to buy buses under the franchising model, and we'll obviously update the market as and when that happens in terms of how the structure is going to end up. The other factor is that we've got a lot more confidence now on the electrification of our existing diesel fleet in terms of transitioning it from being a diesel fleet to an electric bus by just doing the -- putting in an electric drivetrain and battery. Normally, with the diesel bus about midlife, they'd have a massive engine replacement and a big refurbishment. And that happens instead of putting a diesel engine back into the bus, we're now putting in an electric drivetrain as well as the batteries. And that then gives us a sort of more limited amount of CapEx that we need to then spend to be able to electrify those fleets. And so that's -- I think we've got sort of 40, I think, in operation now, [ Janet ], I think from 30 in operation already, and we've got a sort of an investment in a business called KleanDrive, which is another one of these sort of adjacencies where we're trying to use our sort of scale and expertise to be able to help monetize the benefit of being a leader in this electrification journey for large fleets. And it's those sort of factors combined means that our overall CapEx, therefore, should be a lower number on a go-forward basis. But clearly, in the shortest term, whilst we've been successful in accessing government funding, which is very important to us in order to be able to continue this accelerated journey, then that CapEx level is generally higher. And you can see it from our average fleet age being down sort of just over 8.8 years currently versus starting out 11 years as early as 4 years ago. Graham Sutherland: And then on the TOC access, I mean, as we said during the presentation, we expect both of them to be transferred by the end of full year '27. Nothing has been announced by the government, but that's a kind of working assumption at this point. And as Ryan said, on the kind of cash upgrade number that we put out there is really a function of better operating performance and a little bit more longevity on some of our contracts, which is a positive. And I think it is worth saying as well that the operational performance, particularly Avanti in terms of what they can control outside of infrastructure failures has been very, very good. It's a significant step forward over the last 12 months and all credit to the team performing well above the industry averages on those metrics. So in terms of cancellations. So that obviously has a benefit as well in the short term. So I think general, just improved performance and contract longevity is really what's driving that upgrade. Any further questions in the room? Okay. Any questions on the web? Ryan Mangold: Currently no questions on the webcast. So I'll hand back for closing remarks. Graham Sutherland: Okay. Well, look, thanks, everyone, for coming along today, and thanks for all the questions. It's been fantastic to deal with them. And then look, the company continues to push forward and grow its key financial metrics, and we intend to continue doing that. So thank you very much for your time today.
Operator: Thank you for standing by, and welcome to the Nufarm Limited FY '25 Results Conference Call. [Operator Instructions] I would now like to hand the conference over to Mr. Greg Hunt, CEO. Please go ahead. Gregory Hunt: Thank you, and good morning, everyone. Welcome to Nufarm's Financial Year '25 Results Presentation. Joining me today are Brendan Ryan, Nufarm's CFO; Brent Zacharias, Group Executive of Seed Technologies; as well as Rico Christensen, who is the Group Executive Portfolio Solutions. And as you'll see from this morning's announcement, CEO [Technical Difficulty], I will talk to the transition in more detail later in the presentation. But in terms of the call today, I will speak to the financial year '25 results. Brendan will speak to the financials and Rico will cover priorities for financial year '26 and the outlook. Before we move to the presentation, I draw your attention to the disclaimer on Slide 2 and in particular, the wording related to forward-looking statements. To the result, since the half year, we have delivered on key profitability and leverage unwind targets that we communicated to the market in August. We are very pleased with the performance of Crop Protection, delivering an earnings increase of 18%, with importantly, growth across all regions. We have concluded the review of Seed Technologies and the Board has determined that a reprioritized strategy is expected to deliver the best value for shareholders. We have taken steps during the year to reduce cost and capital requirements across the Seeds business, and we are in very good shape to deliver upside from the business in the future. We reported a statutory loss of $165 million, which includes $142 million of mainly non-cash material items relating to the outcomes of the Seed Technology review and the broader performance improvement program across the business. We are confident that the action that we have taken sets the business up well for the future. We reduced net debt by $538 million from the half and ended the period with a leverage of 2.7x. This reflects both the seasonal unwind that's inherent in our business, as well in our ability to delever through internal discipline and efficiency. We are in good shape to deliver earnings growth and further leverage reduction this financial year through growth in Crop Protection and improved performance in Seed Technologies. Meaningful positive cash flow generation and a lower CapEx profile is expected to support further deleverage at the end of the 2026 financial year. I'll now cover some of the highlights across financial year '25. In Crop Protection, as I said, we delivered a strong result, with growth in profitability in all regions and EBITDA margin improvement of 140 basis points. In North America, we recorded a record year for profitability in the turf and ornamental segment and in APAC, a record profit in Asia. In Europe, a 22% uplift in profitability, and this reflects the focus that we've had on improving returns in that business. Across Seed Technologies, we have made good progress on the repositioning, which includes a reduction in cash costs. Our focus is on growing our profitable hybrid seeds business, and we are really pleased with the increased revenue and profitability in South America. In bioenergy, as the market fundamentals have continued to strengthen, we increased the planted area in carinata. The market has evolved as expected, with a shortage of feedstocks to supply the demand creation by the implementation of the Renewable Energy Directive in Europe and the subsequent mandates. We have a long track record in developing solutions for farmers through innovation, with a capital-light technology partnership model. We have a very strong near- and medium-term pipeline and have delivered multiple product launches in multiple markets across our Seed and Crop Protection platforms. New product launches in Crop Protection contributed around 15% of financial year '25 revenues. And on operating performance, we are pleased with the gross margin improvement of 100 basis points. Good internal discipline around working capital and cost has supported the net debt unwind in the second half. As you know, we announced a review of our Seed Technologies business in May of this year. The review considered a thorough assessment of our strategy as well as the potential for a sale and bringing in a capital partner. After a considerable amount of work, the Board has determined the highest value outcome for shareholders is expected to be continued ownership under a reprioritized strategy, where we are focused on growing our hybrids seeds business, a reduction in the cash requirements for omega-3 and expanding our bioenergy business with BP. We have already taken action to reduce cash costs and capital requirements across the business. We are focusing on the continued growth of hybrid seeds in markets where we have established positions and strong growth prospects, particularly in South America and Australia. We plan to grow bioenergy, supported by our agreement with BP, and expected demand growth coming from biofuels mandates. In omega-3, our near-term focus is on supporting customers with the existing inventory and managing to a cash flow-neutral outcome. We have the opportunity to reposition production over the medium term to South America, with the aim of lowering our cost of production and improving our competitive position. We have a clear path to generate benefits for shareholders as we partner with downstream customers and optimize to a lower cost position. We are really pleased with performance across Crop Protection, with underlying EBITDA up 18%. We focused on profitable growth in a flat volume environment. Revenue and profit grew with the benefit of both mix and margin. And the team did a really good job on inventory management, and we are seeing the benefits coming from the performance improvement plan predominantly in Europe. Turning now to the regional Crop Protection businesses. Underlying earnings increased 10% in APAC, a good result considering the impact of dry weather in Australia. We delivered record revenue and profitability in Asia, and the margin uplift was driven by improved COGS of goods and product mix. In North America, we grew underlying earnings by 19% across the year, with momentum building in the second half, which was up 30% on the second half of 2025. This was an excellent result given the team we're navigating some dynamic market conditions in relation to tariffs and antidumping duties. The turf and ornamental segment had a very good year delivering a record result, primarily driven by improved demand in the golf and lawn care sectors. Margin uplift was driven by improved COGS and product mix. As I mentioned earlier, we also had a very good year in Europe with underlying EBITDA increasing by 21%. Margins expanded from improved mix and the benefit improvement program. Performance also benefited from better seasonal conditions and market conditions driving volume growth. The business has good momentum with more upside to come from the continued execution of our performance improvement plans in the current year. Turning now to Seed Technologies. We thought it would be helpful to give you more visibility on the segments. So we have split out our earnings from hybrid seeds and the emerging technologies, which includes bioenergy and omega-3. Hybrid seeds performed well with EBITDA of $67 million, with the lower earnings on the prior period mainly a result of dry weather in Australia, which impacted canola seed sales. South America sorghum and sunflower were ahead of the prior year. We have streamlined our European and North American operations as we focus on the markets which are most attractive and where we have the strongest positions and growth potential. In bioenergy, we had the benefit of growth in hectares planted and resulting seed margin. However, this was offset by lower licensing fees from our agreement with BP. We have seen strong recovery in GHG market values in Europe, which is driving increased oil demand and value outlook for carinata. Omega-3 earnings were impacted by the fall in fish oil prices. Inventory has been carried into this financial year and will provide us with the ability to serve customers while we look to ship production to South America, where we are targeting our lower cost of goods. We are advancing towards customer offtake agreements to improve both volume and price predictability. And as I said before, we have significantly reduced the cost and capital profile for our omega-3 business. As a final point, I'd like to emphasize that as a result of our view -- our review, we have shifted the cash requirements of the Seed Technologies business to become more self-funding. I will now hand over to Brendan to cover the financials. Brendan Ryan: Thanks, Greg. I'll begin with a summary of the financial year '25 performance. The results presented today is consistent with the market update provided in August. For financial year '25, we delivered a solid top line growth with revenue up 3% year-on-year. Gross profit increased by 7% and the gross profit margin expanded by 1 percentage point to 26.1%, driven by strong Crop Protection margins and a favorable mix. EBITDA after material items was a loss of $74 million. Net financing costs were $101 million, down 6% year-on-year. The reported statutory loss of $165 million, impacted by 2 significant factors. The material items of $142 million, primarily from the Seed Technologies' review. I'll provide more detail on this shortly -- and $53 million of early-stage losses from emerging platforms, principally omega-3 relates to the fall in fish oil prices. Underlying EBITDA was $302 million compared to $311 million in the prior year. Importantly, excluding emerging platform losses, underlying EBITDA was up 10% year-on-year, reflecting a strong improvement in crop protection profitability and resilient hybrid seeds performance. Now to more detail on the material items. The after-tax impact on material items was $142 million, which is predominantly non-cash with a financial year '25 cash impact of approximately $30 million. The key component of material items were $118.7 million from Seed Technologies' asset rationalization and restructuring. In hybrid seeds, we have scaled back our European sunflower operations as the prolonged, more severe Russia-Ukraine conflict has significantly reduced the attractiveness of that market. This resulted in the impairment of sunflower IP and a write-down on associated seeds inventory, representing the majority of this material item. Also included in this material item is to scale back on omega-3 plantings in North America, with plans to move production to South America to achieve more competitive cost of goods sold. This has resulted in the write-down of the excess omega-3 seed inventory. There are also associated redundancy costs with the cost out program and workforce reductions. Separately disclosed but primarily connected to seeds review is $5.4 million of legal and advisory costs. We also incurred $13.4 million restructuring costs in Crop Protection. These costs include redundancy costs with the cost-out program and some asset rationalization. In financial year '26, we expect to see clear benefits from the action taken in financial year '25, with reduced capital expenditure, more focused capital allocation and lower staff and operating costs. Turning now to margin and costs. Underlying gross margin increased by 80 basis points, with Crop Protection delivered a strong 140 basis points improvement, driven by cost of goods efficiencies and favorable mix. Operating costs remain an important focus. Underlying SG&A increased by 10% year-on-year and when expressed relative to revenue was up 140 basis points. This growth reflects inflationary pressures, increased investment in R&D, marketing and business development to support growth to the top line. Looking ahead, operating cost discipline is a priority. Full period benefit of the $50 million cost savings program is expected to broadly offset natural cost inflation in financial year '26. Now to the balance sheet. Average net working capital sales improved to 38.2%, improving by 440 basis points and firmly within our 35% to 40% target range under our capital management framework. The improvement was primarily driven by inventory efficiency, supported by a focused program and inventory reductions across all crop-protected regions. Average inventory days improved by 16 while receivables days were down 4, reflecting strong cash collections during the second half seasonal unwind. Payable days remained flat, reinforcing that the net working capital progress was largely an inventory story. Working capital management remains a key focus with further improvements targeted in financial year '26. In respect to capital expenditure, it was broadly consistent with the prior year. Same as property, plant and equipment focused on health, safety and environmental priorities and plant reliability. Proper tax intangible CapEx continues to deliver value into the product pipeline. Investment in Seed Technologies growth platforms was also similar to prior year. For financial year '26, we are targeting CapEx below $200 million, reflecting disciplined capital allocation. The reduction will come from lower manufacturing spend following significant investment in recent years. Crop Protection R&D focus more on the near-term priorities and reduce capital for Seed Technologies aligned to the reposition strategy. It's worth noting that CapEx in the first half of 2026 is expected to be a significant reduction compared to the prior period, given the spend last year was first half weighted. In terms of free cash flow, it was negative $131 million, reflecting several key factors. While net working capital movements excluding omega-3 were positive, these gains were offset by the omega-3 position. The outflows on interest, tax, CapEx, lease and step-up security distributions contributed to the overall cash flow result. Looking ahead, we are strongly positioned to deliver meaningful positive free cash flow in financial year '26, supported by anticipated continued improvement in working capital efficiency, planned CapEx below $200 million, reflecting disciplined investment, significantly lower cash requirements from omega-3 and expected EBITDA growth year-on-year. In terms of net debt, net debt reduced by $538 million in the second half '25, reflecting the normal seasonal unwind, demonstrating strong second half cash conversion. Year-end net debt was $824 million, with unfavorable FX movements and omega-3 inventory contributing to the year-on-year increase. Leverage closed at 2.7x, below the guidance provided in August. Reducing average remains a priority, supported by the actions outlined earlier to deliver positive free cash flow in financial year '26. In terms of funding, gross debt, excluding leases was $1.154 billion at year-end. Liquidity remained strong with $345 million of undrawn facilities, consistent with the prior period and $475 million in cash. Our diversified and flexible debt facilities are underpinned by a covenant-light financing structure and a staggered maturity profile. The short-term omega-3 credit facility has been successfully refinanced into a 2-year amortizing loan facility with a maturity of September 2027. Looking ahead, we are well positioned to support seasonal working capital build. We anticipate that this year's build will be lower. CapEx will be $50 million lower in the first half. Omega-3 cash requirements will be significantly lower, and there is further benefit from the improvement in earnings. Importantly, Nufarm's capital structure is designed to accommodate seasonal funding demands. There are no expected short-term refinancing needs for the group's primary debt facilities other than the standby liquidity facility, which the extension to November 2027 is well advanced, and the ABL facility matures in November 2027. Importantly, Nufarm's capital structure is designed to deal with seasonal fluctuations. In concluding, Nufarm enters financial year '26 with a solid base of profitability and a strong liquidity position. Crop Protection profitability improved across all regions, and our hybrid seeds business is generating strong profits. Our funding structure remains flexible, supported by $345 million of undrawn facilities and $475 million in cash at the balance date. Second half 2025, net debt had the usual seasonal unwind of $538 million. We are continuing actions to reduce costs and deleverage. We're expected to deliver further benefits in financial year '26. We are expecting positive cash flow, with anticipated further reduction in net working capital, disciplined capital management with capital expenditure below $200 million and EBITDA growth. To help with your models, we are giving the following guidance on some key items for financial year '26. Depreciation and amortization, circa $225 million; net interest expense, circa $105 million; and the effective tax rate, circa 30%. I will now hand you back to Greg. Gregory Hunt: Thanks, Brendan. Rico is now going to cover the outlook and priorities for the year ahead. But before he does, I would just like to make some introductory remarks. As you would have seen on our ASX announcement, Rico has been appointed CEO and Managing Director of Nufarm, commencing in the role in the new year. Rico joined Nufarm to run portfolio solutions 4.5 years ago, having spent over 2 decades in the industry. He's done an excellent job in that role and brings considerable global experience running businesses in the Americas, Europe and Asia before his time at Nufarm. I am looking forward to working with Rico over the coming weeks and months to support the transition. I would also like to take the opportunity to thank our shareholders for their support over the last 10 years. It's been a fantastic opportunity to lead this business, and I'm very confident in the future of Nufarm under Rico's leadership. Over to you, Rico. Rico Christensen: Thanks, Greg. First, let me start by thanking the Board for the trust they have shown in appointing me CEO designate of Nufarm and also to Greg for his support over the last 4.5 years in the business. I am honored that I will be leading Nufarm, a great Australian company that I deeply respect. In agriculture, Nufarm is known far beyond the borders of Australia. When I talk to farmers and channel partners in Brazil, in Canada and Spain and other countries, we have instant brand recognition and respect. We are known for our solutions and our dedication to be easy to do business with. We are a leader in key geographies and core crops, and in key product segments. We are known for our innovative mindset, thinking of new ways to support agriculture as it continues to evolve. I have more than 2 decades of experience from the agricultural industry, running businesses in Europe, South America, North America and Australia. I've spent most of my career competing against Nufarm. Taking that outsider's view, I cannot emphasize enough how valuable our brand is, how valuable our leading positions are and how valuable our relationships are, the relationships we have built with farmers, channel partners and technology partners for more than 100 years of doing business. I have regular conversations with partners about our innovations across Crop Protection and Seed. We are known and respected for our innovation and our partnership model. That means our R&D cost is many times lower than our competitors. This is the Nufarm way. Above everything else, we have a team of dedicated, hard-working people who show up every single day with fire in their eyes wanting to do better for Nufarm, for our customers, and for our shareholders. When we have all of those things I just mentioned, it's very valuable, and our competitors envy us for it. My job, with the help of all of our people around the globe, is to translate that half-fought position into strong financial performance and returns to our shareholders and position Nufarm for improved performance through the cycle. This leads me to my priorities for FY '26. First, we are already taking action to instill a strong cost and capital deployment discipline. We are doing that through a range of changes in our processes, accountability and ways of working, which combined will result in a positive free cash flow to support reduction in debt and leverage. We will extend that by embedding that cost and capital discipline into our corporate culture by refining structure, delegations and incentives. The aim is to ensure not just a onetime improvement in performance, but that this remains a focus through the years and is reflected in our performance through the cycle. Second, FY '25 showed positive signs in the performance and profitability of our Crop Protection business. We plan to build on our leading positions across geographies and crops. A great example is our phenoxy portfolio, which has growth potential that can be unlocked through partnerships and market presence. To that point, our pipeline looks healthy in the short, medium and long term. Combined with a stronger focus on launch excellence, we expect to accelerate the impact of the near-term pipeline. We have also made good progress improving our net working capital in Crop Protection and we have plans underway to deliver further improvement. Third, the seed review has provided us with valuable learnings. Most importantly, we need to be more focused in our efforts. We are repositioning our strategy and capital allocation to deliver improved performance and returns over time. We've already taken action in FY '25 to reduce cash expenditure and capital requirements, in particular in omega-3. We expect to benefit from these actions in financial year '26. Our hybrid seeds is a high-quality cash-generative business. It has unique and valuable IP that we are looking to scale in Southern Hemisphere markets. With the appropriate focus and attention, we see a clear runway for future growth and that will be a priority in FY '26. We are committed to building on our strategic partnerships and emerging platforms to improve the annual earnings profile. Turning now to outlook and how these initiatives provide confidence into FY '26. We are expecting strong EBITDA growth, assuming normal seasonal and market conditions. In Crop Protection, we expect continued growth in EBITDA, moderating on the 18% growth we saw in financial year '25. In hybrid seeds, we also expect growth in EBITDA and we are targeting approximately $30 million improvement in EBITDA in our emerging platforms. We are targeting a leverage of 2.0x at the end of FY '26 compared to 2.7x at the end of FY '25. We also expect meaningful positive free cash flow coming from improved earnings, the improvements in net working capital and from a step down in capital expenditure to less than $200 million. For the first half, we expect net debt similar to the prior period, but with a leverage below prior period coming from improved earnings. I would like to close by saying that I'm looking forward to leading Nufarm. While my immediate priority is on delivering on FY '26, I'm looking forward to speaking with you more in the future about longer-term growth plans across the business. Greg, Brendan and I will be joined now on Q&A by Brent Zacharias. We'll now hand back to the operator. Operator: [Operator Instructions] Your first question comes from John Purtell with Macquarie. John Purtell: I just had a couple of questions, please. Firstly, just in terms of the seeds review process, can you provide some further color there, particularly regarding the decision to hold on to the business and also the degree of third-party interest in the business? Gregory Hunt: Yes. Thanks for the question, John. Look, there was broad market engagement with multiple parties, and the review -- as I said in our presentation, the review allowed us to challenge ourselves around the cost structure, around capital allocation, and around strategic focus. So the review was quite broad, widespread, encompassed the whole strategy. It wasn't just about a sale of the business or bringing in a capital partner. And as we said, we've concluded that we believe the best value for shareholders will be realized by implementing from that reprioritized or repositioned strategy. John Purtell: And just a second question, and Greg, just beforehand, I just wanted to wish you all the best going forward. And thanks for all your help over the years. Just the second question around what you're seeing in terms of the broader ag chem industry. It's obviously been a tough few years. Cost of goods sold looks to have reset, which is good, but pricing still looks subdued, and markets remain competitive. So I just want to get your thoughts on that. Gregory Hunt: Yes. And John, thanks for the comments. So look, I would say the overall outlook is positive. Seasonal conditions generally around all of our markets are positive. Grain pricing supports demand for both crop protection and our oil seeds sales. I think the important point is that active ingredient prices have stabilized. So we've replenished inventory at competitive COGS. And as a general statement, I'd say that channel inventories, particularly in North America, where it's been a little stubborn, have normalized. So I would say in terms of 2026, we would continue to see some volume improvement in Europe. I would expect sort of APAC to probably be broadly flat with last year. And in North America, we've had strong growth in the turf and ornamental business, and that's to some extent as a result of the lower spend, particularly in golf and in lawn care coming out of COVID. I think a more sort of normalized tariff situation, that seems to have settled down now. The tariff benefits on phenoxies and stable active ingredient pricing, I think key drivers for our business in North America. So generally, I would say, going into '26 in what is a pretty positive environment. Operator: Your next question comes from William Park with Citi. William Park: Can I just ask about the $30 million of earnings recovery you're expecting across emerging platform. Just looking at your slide now, you've alluded to $29 million of non-cash inventory revaluation hit that you've taken above the line this year. Is it basically the $30 million, is that basically the online to that $29 million? Or are there any other sort of changes you've made across the emerging platform you've alluded to sort of moving production from North America to South America, but just wondering whether that $30 million recovery would be -- whether if you would need to see some recovery in fish oil price or lower costs going forward that would help you -- that will effectively contribute to delivering that, please? Brendan Ryan: Yes, thanks for your question. There's 2 elements -- sorry. Apologies. Sorry, there's 2 elements to the question. Yes, as part of the repositioned strategy, we have reduced the cost and the capital profile of the business. And as you mentioned, the second aspect is related to the carrying value of the inventory that we're taking into the current year and financial year '26, which is effectively assuming that $29 million will come through largely reflectable where fish oil pricing is today. Gregory Hunt: Maybe we can -- Brent, if you wouldn't mind probably providing a little more color around fish oil pricing? Brent Zacharias: Yes, certainly. I think as everyone's understood, fish oil pricing had come down from historic highs and persisted at levels of about $2,500, $2,600 through calendar year 2025. And that was really due to very large back-to-back quotas that we haven't seen in more than 10 years. So the comments about our position going into 2026 and the $30 million improvement in emerging businesses is based on the understanding of our inventory position based on fish oil prices as of September, which were around the $2,600 level. So obviously, then if fish oil prices improve throughout the year, that does provide likely support for upward pricing. The other thing I would add is that in recent weeks, we've seen the recommended North Atlantic quota come out at 35% down from last year. And we've also seen the Peruvian quota announced at about 35% down from last year as well. So hopefully, that provides a little more color for you, William. William Park: And just staying with omega-3, you committed to sort of selling off your inventories there, but you were alluding to sort of cash flow neutral outcome. Just curious to know what you mean by that? Brendan Ryan: Yes. In terms of the cash flow neutral outcome, it's supported by the reduced cost of the capital profile of the business. The exact timing of cash flow is obviously dependent on when we sell through on the inventory. And obviously, that's a consideration in terms of how optimally we do that over the next 1 to 3 years. William Park: And then just one last question I had is, obviously, now with seed treatment business sitting in Crop Protection, how are you sort of internally thinking about the growth profile for the seed treatment business? Does it sort of trend in line with hybrid seeds business, the earnings growth that you're expecting through hybrid seeds business? Just any color around seed treatment would be appreciated. Brendan Ryan: Yes, the reclassification in terms of the change of the segment in terms of taking seed treatment, which is approximately $20 million in financial year '25 EBITDA from -- included in Seed Technologies segment and Crop Protection. So following the review of Seed Technologies, we felt that was appropriate. It has no impact from an overall group perspective on the P&L nor the balance sheet. And in terms of sort of future profile, there's no significant change seen with predominantly, I guess, sourced on North America and Europe. Gregory Hunt: And I think, Will, just if I can add, there's no direct link between our seed treatment business and our hybrid seeds business. Seed treatment provides chemical applications for the broader seed market, not just our hybrid seeds business. Operator: Your next question comes from Ramoun Lazar with Jefferies. Ramoun Lazar: Welcome, Rico, and Greg, best of luck in your future endeavors. Just a couple of questions. One on the Crop Protection, just a point of clarification there on the growth drivers. So it sounds like a bit of volume growth, but are you assuming a continuing improvement in that gross margin profile through '26? Rico Christensen: Yes. That is correct. What we've talked about in the past is that when we look at the profile coming in through our product launches, the NPIs, they are generally at a higher margin than the existing business. That's something we've spoken to the past, and it continues to be the case looking forward. And I would also say that over the coming years, what we know about the pipeline today that is pretty consistent that they come in with a higher margin than the existing business, which you then will see reflected in the margin for the business overall. Ramoun Lazar: That's pretty clear. And then I just had a question on the emerging platform, particularly omega-3. I mean it sounds like you're going to manage the cash requirements of that business more tightly. I mean can you maybe just talk about I guess, how that potentially impacts the potential growth profile of that omega-3 platform? Is there anything else also you can do to potentially improve the cost profile of that business, just given the volatility that we've seen over the last year or so? Brendan Ryan: Yes. So we have -- as part of the review, we have reduced the cost and the capital profile of the omega-3 business with the focus on selling through on the current inventory in terms of really the customer supply requirements over the next couple of years. The focus also is looking at how do we improve our cost of goods competitive positioning, and that's planned with a change in the production zone to the Southern Hemisphere. That's underway in terms of that activity today. We'll continue to look at the capital profile and the cost profile knowing that there has been significant steps already taken, and that will continue to be a focus throughout the financial year '26. Gregory Hunt: And just one other point there in relation to the carinata bioenergy business, the capital contributions from BP support the growth in that platform as well. Ramoun Lazar: Okay. Okay. But to get -- I guess to get it back to a breakeven position, so you need to see either a further improvement in fish oil pricing or some of these shifting of growing to some of these lower cost regions before that -- before the earnings get to a breakeven? I guess do you have some sort of time frame on when you could get back to breakeven? It doesn't sound like '26, obviously, but maybe '27? Gregory Hunt: Well, we've said we're not going to grow a crop in calendar year 2026. We have said that we will start -- so we're talking specifically about omega-3 now. What we have said is we will start to plant in South America small volumes in 2026 and then grow through '27, '28. I think the other point I'd just remind everybody of is that a big catalyst -- value catalyst in this platform is global deregulation. And we still believe we're on track to achieve that in '27, '28. In relation to the hybrid seeds business, that is cash-generative, so in effect, it funds itself. And as I said, just to be clear, the relationship with BP, they are continuing to support us with the ramp-up, both through SG&A and R&D support to accelerate the growth of that platform. So you're right, it's fundamentally an omega-3 issue. Operator: The next question comes from Jonathan Snape with Bell Potter. Jonathan Snape: Look, I'm going to ask 3 questions for the time because there are 3 different people. First sort of touch on the seeds, and I know you've gone through it a little bit of detail, but that $30 million improvement in the emerging platform looks like it's like really 3 buckets going on there, if I can talk about it, obviously, one is carinata. I think you said the plantings are up. I didn't catch if you said how much they were up this year, but I imagine that has some kind of earnings benefit to Nufarm. It sounds like the second bucket in there is omega-3, you're planting less of it. So imagine losses just from simply planting less again be lower in '26 when you sell '25 crop in terms of metric you mentioned it's the fish oil component. And I think you've referenced pricing [ together for '26 ]. Gregory Hunt: Sorry, Jonathan. Well, I got the first part of the question, which was increased carinata, the impact on seed sales or seed revenue, seed margin and oil, yes, we didn't get the second and third questions. Jonathan Snape: With the omega-3 oil pressure, reduce planting, how much that kind of contribute into the omega-3 loss reduction year-on-year. And then I'm trying to figure out fish oil because the prices in Peruvian and Chilean ports last week took quite a big jump. And I'm trying to think if you -- it doesn't sound like you put any of that in your thought process at the moment. And I think that's the first reference price since the [ AMAPE ] numbers came out. So if that was to hold or continue, that would be a benefit to the sell-through, I imagine, of the inventory. Is that kind of how I should think about it but with the latter bit probably not in your thinking at this point? Gregory Hunt: Thanks for the question, Jonathan. Brent, do you want to have a crack at that? Brent Zacharias: Sure. Jonathan, just some comments on fish oil pricing first. Yes, we have seen some indications of that jump that you referenced in the Peruvian market, but it's just important to recognize that very little volume has actually traded yet until the quotas are actually caught. So yes, we're alive to it. But you're right, our $30 million improvement target for emerging platforms is based on where fish oil prices were trading as of September, which was about $2,600 on the North Atlantic, which is the one we tend to track and follow because they sell into certified fisheries. So absolutely, you're right. If we do see some upward movement that creates upside to that $30 million improvement target. It was really based around the $2,600 that we saw as of September. And just to add... Jonathan Snape: No, I was just interested in the carinata side and how much that contributes. Brent Zacharias: Yes. Carinata, as Greg covered in the script, we're starting to see some really strong fundamentals with the increase in GHG values. Just to comment on that. A year ago, the German GHG ticket price was $75 for a ton of carbon. Today, it's trading at over $250 as referenced by Argus. So that's encouraging us. And as you noted, we did increase our plantings last year, and we'll continue to scale further going into 2026, which creates seed margin as well as with rising fundamentals on GHG, it should expand oil premiums that we share with BP as well. Jonathan Snape: And look, can I ask -- this is -- the next question is around active ingredients prices. I noticed you said that kind of stabilized. And I think some of your competitors have said that as well in the recent week. If I look at ex-China factory gate price and some of the actives, it's actually started to be kind of an upward movement like high single-digit year-on-year gains in some of those commodities. So when you're looking into 2026 in your baseline thoughts, are you kind of assuming a fairly benign environment for actives and therefore, sell through prices? Or do you factor in that there has been kind of this upward movement in the last 2 or 3 months in actives and if you find anything, it's a carry on active? Rico Christensen: So we definitely use the current pricing for budgeting and forecasting for the coming years. But obviously, we're also very attuned to change in the prices coming out of China. And it does feel like not just when we look at our own momentum in the second half, but also looking across the industry. It does feel like we're beginning to see the industry as such beginning to climb out of that pricing depression we've had in the last couple of years. So we hope that we will see that continue in FY '26. Jonathan Snape: And look, my last question is balance sheet as always. The off-balance sheet facility utilization was down quite materially year-on-year. It looks like you shifted $100 million from off to on, which obviously says your operating cash flow is probably a little bit better. But if I'm looking at it right, I think that's the lowest utilization of the off-balance sheet facilities by Nufarm that I can find. Is there any particular reason why you're utilizing those facilities materially less than you have in the past? Is it aged stock? Is it something else? It just looks like an exceptionally low number. Brendan Ryan: No, it's not -- so Jonathan, just on the supplier financing, just the one facility. The balance at -- $26 million at the balance date. Why is lower primarily related to the arbitrage, I guess just on interest rates, particularly between the Chinese rates? And I guess, just to reinforce, if you look at our payables days, they remain flat. So there's no trade-off between, I guess, terms of trade versus debt. Jonathan Snape: Yes. Okay. But if you were to use those like closer to the historical average, obviously, it would move debt off your own balance sheet. So it's just an interest rate arbitrage thing. It's nothing else? Brendan Ryan: Yes, that's correct. Operator: The next question comes from Owen Birrell with RBC. Owen Birrell: Look, first question for me, just again on the omega-3. I just wanted to get a better indication from you as to your current omega-3 oil inventory position. Just wanted to get a sense as to how much oil was actually produced through '25 and therefore, what's your carryover inventory into '26? And just acknowledging the comment that you said about no crop being grown in '26, does that mean there's going to be zero oil generated in '26? Brendan Ryan: Yes. Thanks for the question, Owen. Just clarifying on omega-3 inventory position, I won't call it metric tons, that's quite commercially sensitive. But what we have is a carryover of the inventory into '26 from the crop last year, and that's been valued at the current North Atlantic fish oil pricing, which one person referred to a $29 million non-cash revaluation. So that's the -- effectively a benefit that carries through to the sales profile in financial year '26. In terms of new crop, there is a legacy crop coming from the FY '25 plantings. That will -- we're factoring in that there will be some revaluation on that crop relative to where fish oil pricing may go in the future. So it's a factor of that. And then, I guess, overall, the focus is on managing that inventory in terms of optimally gaining cash position from it. And that's in parallel then with managing the demand requirements from our customers. Owen Birrell: I know the -- effectively the $29 million write-down of that inventory position, but are you able to give us a sense as to what the -- how much -- what the value of that inventory sits on your books right now post that write-down? Brendan Ryan: Look, the value of that book is probably closer on the majority of the omega-3 facility, which is disclosed in the accounts. So it's in the order of -- I give an approximate of about $100 million, which is pretty close to that. Owen Birrell: Okay. And just second question, just on the bioenergy platform. You mentioned quite extensively the sort of new capital-light model. But I'm just wondering if you can give us a sense, I guess, functionally or operationally, how has the model changed from what you were previously doing? Brendan Ryan: The model hasn't previously changed. So the model hasn't changed in terms of 3 years into the agreement. It's a capital-light model in terms of -- from our perspective, as we take no balance sheet. So no inventory comes on to our balance sheet and also through the partnership, some of the supporting costs and capital requirements are co-funded. Owen Birrell: So previously, you were taking that inventory on your balance sheet? Is that what I'm reading into there? Brendan Ryan: No. we're taking no inventory to the balance sheet previously. Just other than the underlying carinata seeds, no oil, no carinata oil or biofuel oil on our balance sheet. Owen Birrell: Okay. But it sounds like the capital-light is very much that the capital contributions are coming from BP rather than yourself? Is that the difference? Brendan Ryan: It's co-funded between us and BP. Owen Birrell: Okay. I'm just trying to understand what's actually different. What's changed? You're talking about a capital-light model, but it doesn't sound like anything has actually changed. Brendan Ryan: Nothing has changed. Just stating that it's a capital-light model. Operator: The next question comes from Scott Ryall with Rimor Equity Research. Scott Ryall: My first question relates to Slide 13 and the talk about R&D expenditure. I just want to make sure I heard Brendan correctly that the R&D expenditure, broadly speaking, is expected to continue to grow. Did I catch that right? And if so, I guess I'm looking at the material items -- the slide before. We've impaired some intellectual property on sunflower and canola. And I'm just wondering, and the question stands, regardless of what the outlook for R&D is. But how do you make sure that you get your real bang for buck? And how are you ensuring that you learn from whatever has gone wrong with that intellectual property? And how does that fit within your reprioritization, please? Brendan Ryan: Well, thanks for the question. Just on R&D, just to clarify. So the expenditure going forward into financial year '26 has a lower level of expenditure than financial year '25, and that's primarily driven by the near-term focus on the research and development pipeline. Sorry, what was your second part of the question? Scott Ryall: Just R&D and making sure that you're not -- your material items in the future are not writing off intellectual property, which presumably is where the R&D has gone to. How does that fit within the reprioritization, please? Brendan Ryan: Yes. So thanks for that. In terms of material items, the material item relating to the sunflower is a result of the position or the conflict going on in Ukraine and Russia. It's been much more prolonged and severe than we initially anticipated. And given it's a significant sunflower market, that was the driver in terms of the impairment around the sunflower IP. In terms of more broadly managing the benefit that comes from our investments in R&D, there's a rigorous process around identifying the research and development product line that provides, I guess, a balance, both in the short term and the medium term, followed with a disciplined approach around stage gating and review in terms of monitoring the progress in terms of the delivery of the benefits. I might pass to Rico, he might add a few more comments just around that. Rico Christensen: Yes, sure. I think we expect the R&D cost to be lower in FY '26 compared to FY '25. It's due to some of those reasons Brendan mentioned around more efficiency around stage gate processes and so on and also because we did have some one-offs in our R&D cost in '25 that we've announced in different press releases we've done in agreements with different partners. Again, those are capital-light models compared to different -- what different companies are doing on R&D. So generally speaking, we do spend a lot less on R&D than our competitors because of those partnerships that we have. Scott Ryall: Okay. All right. And then, Rico, my last question is just for you. I -- sorry for the football results overnight, by the way. So you've been onboarded in Nufarm for more than 3 years. I guess I'm just wondering, how do you think the position of Nufarm will change over the next 3 to 5 years relative to what you've observed the position has been over the year has changed over the last 3? What do you really think is going to be where the change in direction for the company, please? Rico Christensen: I think it's a good question, and I also spoke to it a little bit about in the priorities and the outlook. And I think... Scott Ryall: That was just for 1 year, right? Rico Christensen: Yes. Well, exactly. So as I said in the -- in my comments, the short-term focus is really on -- around capital discipline and cash discipline. We have -- we want to get our leverage down as we've stated. But at the same time, obviously, we also have to solve for the growth for tomorrow in Nufarm, and we continue to do that through our investments in R&D in both seeds and cost protection where we have a strong near, medium and long-term pipeline. And I think as we talked about earlier, when you see the impact of our new product introductions across the business in Crop Protection. We've said overly it's around 15% on revenue. But in fact, it is a little bit more when we talk about gross margin. And what you will see over time is that as those new products coming into the portfolio, they will keep improving our gross margin profile and therefore, also the earnings for the company. Operator: There are no further questions at this time. I'll now hand the call back to Rico Christensen for closing remarks. Please go ahead. Rico Christensen: Yes. Thank you. I just wanted to end up by saying, thanks for dialing in. I look forward to catching up with many of you over the coming days. And this then concludes our call. Thank you. Operator: That does conclude our conference for today. Thank you for participating. You may now disconnect.
Operator: Thank you for standing by, and welcome to the Argosy Property Limited FY '26 Interim Results Conference Call and webcast. [Operator Instructions] I would now like to hand the conference over to Mr. Peter Mence, CEO. Please go ahead. Peter Mence: Thank you, and welcome. Thanks for joining us for this presentation for the F '26 half year results. The results, with due respect to Sean Fitzpatrick, very much looked like a game of 2 halves. The first few months were very much characterized by a lack of activity and very little lease inquiry. This gave way quite abruptly in the end to a significant increase in inquiry levels and more recently, to significantly improved activity. Moving through to the results summary on Slide 5. The revaluation at $31.3 million was principally driven by the extended lease of 9 years to MBIE at the Stout Street development. Now you'd be aware that I've been talking about that for some time. It actually took just over 5 years to negotiate, but it includes a reasonably exciting decarbonization project, which is jointly conceived between Argosy and MBIE, and we'll be starting work on that fairly shortly. The NTA lifts slightly on the strength of that revaluation to $1.56 and the gearing sitting just above the midpoint in the target range. We're pretty comfortable at this point in the market to be at the upper end of that range with some sales still to come. We've reached agreement to sell 143 Lambton Quay, usually known as TPK at book value and that will remove the vacancy from that building. The sale is to a private buyer. It is expected to be unconditional prior to the Christmas break, not much time left for that. And it's expected to settle before the end of the financial year. Vacancy is obviously a little higher than we would have liked, but with the significant increase in inquiry levels that we're now fielding, there is cause for optimism in the year ahead. We have still been realizing some rental growth on the way through and the 9-year extension to MBIE has obviously had a good positive impact on the weighted average lease term being the largest lease in the portfolio. The tenant retention rate remains solid, but we often see that in a quieter market where tenants are more likely to stay put than to look at a change. On Slide 7, the weightings are showing actually little change since I last spoke to you. They remain target -- close to the target levels with current activity in terms of sales and development moving us closer to those targets. The revaluations were characterized by a lack of evidence with respect to both sales and leasing. But post balance date activity is suggesting a market in line with the valuations with some evidence of the expected firming in the cap rates driven by the lower interest rates, albeit that that's relatively modest at this point. The economy in general remains relatively weak in both Auckland and Wellington, and there remains a risk that there will be tenant failures, although thus far, these have been significantly fewer than we had expected. Of note, there is that the cap rate comparable for the last year excludes the Marketplace building as this was only valued on a discounted cash flow basis at that time being largely vacant. This building has seen some significant change. You will have been aware of the change in the earthquake-prone building announcement that the government is working through. That has resulted more quickly than we had expected in a change to the tenant interest in NBS ratings. Obviously, that is a big positive for this building. And as a result, we've seen a significant increase in lease inquiry and recently signed 2 additional tenants into the building. The value-add and green developments, Mt Richmond is progressing as planned with no orange lights so far. Both the building platforms have been completed and leased to existing tenants elsewhere in the portfolio. But of the rest of the list in that value-add schedule, there is nothing that is pending out of those properties over the next 12 months. Forward inquiry for the Mt Richmond site has improved in line with the market, but there's nothing to announce at this point. Looking at 224 Neilson Street, both buildings have been completed on budget, on program, and we're very pleased with the quality of the construction, thanks to Haydn & Rollett on those sites. The first building, obviously, was leased when we last announced. The second building, we've just moved to agreement to lease stage with a very good quality logistics operator on a new 10-year lease, and we have a backup negotiation still current. So pretty positive news on that one. It is fair to say that prior to October, leasing inquiries were sparse, and that was concerning at that time. It has been much welcomed to see the increase in inquiry levels coming through. With 8-14 Mt Richmond, the project is literally smack on target. It's progressing well. There is now no further leasing activity required for this development on site with both the platforms and the building that's under construction all committed. We did well with value increase on the land prior to the development, and we expect to make solid profits on the remainder of the development, thanks principally to a very strong location. I'll hand over to Dave to take us through the financials. David Fraser: Thanks, Peter, and hello, everyone. So the first slide from me, as usual, is the gross property income waterfall. So gross property income was $69.4 million compared to $66.6 million last year, up by 4.1%. There were some strong rent reviews in the period, and there's more detail on that in the appendix as usual. Most reviews were fixed with an annualized increase of 2.6%. 29% by rent were market reviews with an annualized increase of 7.7%. Income from developments offset the effect of the disposal of Forge Way in March of this year. So on to the next slide, net profit for the half year. Net property income was up by 4.9% on the prior period at $61.2 million. The property expenses were slightly lower as rates increases were offset by lower insurance charges. Our insurance captive has been a very successful initiative and allowing us to market to reinsurers directly. In particular, we've seen some reasonable reductions in premiums for the Wellington market, which you'll know as gross. Expenses were flat in the period. Management expense to NPI improved to 9.2% from 9.8% in March and the management expense ratio improved to 51 basis points from 56 basis points at March. Net interest expense was down on the prior period. Lower rates and higher capitalized interest more than offset a negative volume variance in the period. Peter's covered the revaluation gain, and we sold a small sliver of land at Ti Rakau Drive for $230,000 in the period. We'll cover off tax in the next slide, but net profit after tax was $61.1 million compared to $33 million in the prior period. The next slide covers net distributable income. After the usual fair value adjustments, gross distributable income was $36.8 million compared to $31.6 million last year. That's up by 16.4%. Current tax expense was $6.1 million compared to $4.1 million last year. This is mainly due to higher taxable profit. There's been a lot of information published about the government's investment boost program. There was little impact from this at the half year, but we'll receive a $5.7 million deduction in the second half of this financial year as a result of the practical completion of Warehouse A at 224 Neilson Street. So last year, we were complaining about the removal of depreciation deductions on buildings, but we're obviously a lot happier this time around. So on a per share basis, net distributable income was $0.0358 per share compared to $0.0325 per share last year, up by 10%. And this slide covers adjusted funds from operations or AFFO. The AFFO adjustments were reasonably consistent with the prior year. Maintenance CapEx is up by $1.1 million, mainly due to a number of smaller office fitouts across the portfolio. So AFFO was $29.6 million compared to $26.8 million last year, an increase of 10.4%. On a per share basis, AFFO was $0.0345 per share compared to $0.0317 per share last year. The next slide covers the movement in investment properties. Investment properties increased by $70 million compared to March '25. As Peter already talked about the reval gain of $31 million. The balance was mainly spending on developments, principally Neilson Street and Mt Richmond. The portfolio after deducting the right-of-use asset in respect of the ground lease at 39 Marketplace was valued at $2.2 billion at 30 September. The next slide covers debt to total assets. The balance sheet remains in good shape, and we have capacity to complete developments and acquire assets as evidenced by the recent acquisition of 291 East Tamaki Road, which is a very exciting future development opportunity, and this property settled in October. The debt to total asset ratio was 35.9% at 30 September compared to 35.7% at March and 37.2% at 30 September last year. As at 30 September, 7 properties were regarded as noncore with a book value of $148 million, and we'll sell these properties as conditions allow. And Pete's already mentioned one sale that we hope to complete this year. The next slide covers interest rate management. It's been great to see rates continue to decline during the period. Our weighted average cost of debt reduced to 4.8% compared to 5.1% at March. The interest cover ratio improved slightly to 2.6x, well above the bank covenant of 2x. The level of fixed rate cover was 57%, down from 63% in March. And we continue to add cover as appropriate, and we've added 3 swaps in October to a value of $80 million at around the 2.5% mark. So we'll provide a lot more color on our hedging profile in the appendix. The next slide looks at our debt profile. We refinanced our bank debt during the period, pushing out tenor, including a new 7-year tranche of $100 million. The nearest bank expiry is now October 2028. Bank margins remain extremely competitive, as you'll see from the appendix. The nearest green bond matures next March, and we'll refinance that later this financial year. And the final slide for me is on dividends. We announced this morning a second quarter dividend of $0.016625 per share with imputation credits of $0.002633 per share attached. The record date is 3 December and the payment date will be 17 December. There's no change at this stage to the full year guidance of $0.0665 per share. The DRP remains open for shareholders to participate in. I'll now pass you back to Pete for a leasing update. Peter Mence: Thanks, Dave. I guess most importantly is the leasing environment has been challenging, but has recently improved, is looking a lot more promising for the year ahead. A couple of the ones that really stand out that we did achieve. Obviously, the MBIE lease extension dominates this half year result. And there was also a 6-year extension of the New Zealand Post lease at 7WQ. So we've got quite a bit of activity still coming through in that space. And what is really notable if we look at the forward demand is the deficit of certified green space that is going to be evident in the market over the next 3 to 4 years. This is particularly so in the industrial space, but also with commercial offices in both Auckland and in Wellington. It's really only large-format retail where we're seeing virtually no demand for sustainably rated space. Looking at the lease expiry profile. Clearly, this has changed a lot with the MBIE lease dominating this chart for the last 6 years. So pushing that out by the 9 years has made a big difference to that. And obviously, it leaves the March '27 year with modest expiries. The year through to March '28, the largest expiry there is General Distributors or Woolworths at the 80 Favona Road property in Mangere. Now -- we've obviously been working with general distributors on the way through that. And the reality is that we are not expecting them to be able to leave during that time. So they will still ultimately depart the site. It will still ultimately be a redevelopment, but the expectation is that, that expiry will be pushed out into later years. So it's certainly not on the current site. Once that is taken into account, then we're sort of looking at that 10% or less for the next 5 years. So not a big leasing demand coming forward. Looking at the 3 principal sectors, as I mentioned, overall, the expectation is a deficit of supply of certified green space for both industrial and office. Large-format retail is actually performing relatively well at this stage. For us, that is principally the Albany Mega Centre, where we're going through some remerchandising. We've recently opened the new JD Sports facility over there. That is trading extremely well and has provided some additional gravity to the site. In addition, we are in the process of -- in fact, we have conditional lease agreement for food operators over there, and we have managed to re-lease pending vacancies with a trade up on the site. So that site is going pretty well. Turning back to the industrial space. We are looking at a period where demand is returning. That activity is now evident, and it is interesting that it is dominated by international tenants. And as a result of that, we're seeing that increased demand for green-rated space coming through. So we do expect to see '26 being a busier space in industrial leasing. In the office space, the trends that we've been looking at over the last few announcements continue in terms of organizations looking to adjust the workplace to encourage office workers back in. I don't know any CEOs in the portfolio who don't want all their staff back in the office 5 days a week. We are conscious that we'll be moving into an election year when we come back from Christmas. That characteristically in Wellington gives us a quieter period, particularly with Crown tenants, but we've had very little activity from Crown tenants in Wellington over the last year in any event. Wellington potentially is overdiscounted at the moment. We do have excellent inquiry levels for our building at 147 Lambton Quay with around 5,000 meters of space available in that building. There's only one 500-meter floor that we don't have negotiations on currently. So qualified inquiry is very strong for that building. Obviously, that is from nongovernmental tenants. So turning to what we're looking at for the period ahead. The domestic economy is expected to gradually improve. And the reality is that it is still relatively challenged in both Auckland and in Wellington at the present, but inquiry levels and activity levels are improving. The interest rate situation is obviously positive, and the expectation is that we will ultimately see cap rate compression as a net result of that. Certainly, we're starting to see just in the last 2 months, increased levels of inquiry, particularly from offshore. Dave's mentioned insurance levels. But as premiums fall, that is also a positive for the market, and we're seeing that start to come through in the interest levels. So we're still dealing with relatively strong bottom-up fundamentals with the industrial sector. And with both industrial and commercial in Auckland and in Wellington, we've been dealing with a period of relatively modest supply levels, and that should be positive for us over the year ahead. So looking forward, the calendar year for 2026 should see a gentle return to business for the sector. And it's fair to say that Dave and I and the Board are reasonably comfortable with the way this business has weathered the last recession. Happy to take questions. Operator: [Operator Instructions] your first question comes from Vishal Bhula from Jarden. Vishal Bhula: A couple of quick ones for me. Just with your NPI coming in at $61.2 million, I mean, it's up 5% on the PCP as well as second half '25. There was no acquisition activity in the half, and you did lose the rental from Forge Way as well as maybe some rental on the Mt Richmond development. So the growth here just seems really strong. Is there anything specific to call out? Like was there any one-off income from 4 Henderson Place or anything like that? David Fraser: Yes. There's 2 things to call out. One is a significant rental uplift from one of our tenants in terms of a rent review, which flowed through into this year. And also, we did receive a surrender payment in respect of an industrial tenant. So in terms of the NPI line impact was $1.1 million. But the good news for that particular property was that we were able to re-lease the property within a month. So it's something of a bonus, I guess. Vishal Bhula: No, perfect. And then just on your office occupancy, you've put it in the presentation at 91.6% by income when at FY '25, that was 88%. But on a vacant space on a square meter basis, you've got 25,000 vacant space versus 15,000 at '25. So on an occupancy basis, you're down to 83% from 88%. So I just don't quite get how those percentages can be up on an income basis. Peter Mence: I think, Vishal, that will be principally down to the 143 Lambton Quay building, where it was effectively over-rented. Vishal Bhula: No, thanks. That clears that up. And then maybe could we just get a bit more color over 143 Lambton and that sale process that you know that is currently conditional? Peter Mence: Yes. I'm not -- I'm pretty tight. So I can't tell you a hell of a lot more, but we do have an agreement for sale sitting there around book value. It is a very short due diligence period. And the domestic private buyer knows the building very well. Vishal Bhula: I won't push more on that then. And then just a couple of short ones for me. Just East Tamaki, are those capital works now finished? And is it still 58% occupied? Peter Mence: Yes. The works are now finished. It did take a lot longer, and you'd be aware that we struggle with a delayed settlement from the vendor unable to meet their obligations. But -- so we've got that through now. Leasing activity is pretty good on that site. Inquiry levels are good and strong. So we're not expecting that to cause any particular issues for us. Obviously, they tend to be shorter-term leases because it's a development site for us and because it's secondary quality buildings that are sitting on the site, obviously. So we tend to get shorter-term leases from that, and that is having a negative impact on the weighted average lease term as it currently sits. Vishal Bhula: And then just a last one on me. Your guidance, there's no mention of the payout range this time around, whereas previously, you were expecting to be towards the top end of your policy range. Are you still kind of targeting that or the investment, those benefits coming through kind of see you push down to the middle of that range? David Fraser: Well, I think it will be in the top end of the range, but below 100%. Operator: Your next question comes from Nick Mar from Macquarie. Nick Mar: Just on Stout Street, can you just talk through what the potential rental step-up is at the market review that's coming up next year? Peter Mence: So we've got a rental review pending. I can't go into too much detail, obviously, on that at the moment, but the expectation is for a good solid lift out of that. But we've treated that completely separately to the renewal documentation. Nick Mar: No, that makes sense. And then in terms of the CapEx that you're spending, how did you look to, I guess, rentalize that as part of the process? Peter Mence: That's been a 5-year project working with MBIE in terms of what they wanted to achieve with the building and how we were able to add value. It really is the total being greater than sum of the parts. So it's been full disclosure with them on the way through with the work that we wanted to do, the results they wanted to see and how we rentalize that on the way through. So very much part of the negotiation over the 5-year period to make sure that it's stacked up. Nick Mar: Can you give us an indication of what rentalization rate you effectively achieved on the $13 million? Peter Mence: I'm looking at Dave, and he's not looking at me. David Fraser: Well, I mean, the reversion that Pete is talking about is about $1 million is what we're expecting in July next year, and the capital spend is about $13 million. So you're looking at it... Nick Mar: But did Pete just say that that's a separate impact versus the renewal in itself because [indiscernible] market view? Peter Mence: Yes. So it's both, Nick. Obviously, the market rental has to be landed out of the reversion rental for the upgrade to the building. Nick Mar: So you're saying that, that $1 million is on top of the market rental? Peter Mence: Yes, that's right. Obviously, you're looking at -- just so we're clear, we're obviously looking at a situation in Wellington where market rentals have actually declined marginally over the last 12 months. Nick Mar: Yes, but it comes down to the time between the last reviews... Peter Mence: You're all over it, Mate. Well done. Nick Mar: Yes. Okay. And then on divestments, you've taken a few other assets to market, particularly some of those new market assets. Can you just talk us through what's happened there, whether they're still in train or whether you've pulled them given lack of demand or anything else? Peter Mence: Yes. It's fair to say that we didn't get a great response. The numbers that we got were less than book value, looked at it and said, hey, there's no urgency to move these assets at the moment. They're still yielding quite well and the risk wasn't there. So we -- they remain on the sales list. We've pulled them from active marketing. If the market looks the way I expect it to look when we come back, we'll probably relaunch those to the market in February. So the intent is still to move them on, but not at any cost. Nick Mar: Did your updated book values reflect the feedback from the market on them? Peter Mence: Yes, yes. As I think I mentioned earlier -- I hope I mentioned earlier, the valuers have really been dealing with a paucity of evidence as at September. It's only really since September that we've seen any improvement in the activity levels. Nick Mar: Okay. And then just on valuations, have you got any initial indication of the amount of seismic allowances that are sitting in the portfolio, which may be removed as the sort of new earthquake legislation moves through? Peter Mence: Yes, that's a slightly tricky one to address. Obviously, as far as this building is concerned, then you're dealing with a straight removal because there's no requirement to do that. But with the change in the seismic rules, it's important that we all remember that, that doesn't actually change the NBS rating at all. It changes the obligation to do anything about it. So what has been surprising, I think, is the degree to which the leasing market has stopped focusing on that in the Auckland market. So the requirement to actually do it commercially is probably less. But where you have a situation where you've got a building that is less than 50% NBS, that doesn't actually change its NBS rating. And in circumstances, tenants may still require that upgrade to go through. So it's very much a case-by-case analysis. It is this building principally where you're simply drawing a line through it because it's a ground leased asset. And therefore, it is only the building with a lease expiring in 2039, it is cash flow management. So there is no requirement to spend any money on the building at all. Nick Mar: And as context, what kind of delta is sitting in that building? Peter Mence: This building -- the pure seismic upgrade was expected to be around $18 million. Operator: Your next question comes from Bianca Murphy from UBS. Bianca Fledderus: So first question is just around your comments around inquiry levels picking up significantly so far over the last couple of months. And I know it's still early days, but could you just talk about how much of that interest is actually turning into signed leases? Peter Mence: Yes. Good question, Bianca. At the moment, we've had some really good results, but I don't know whether that's generally reflective of the market. We've had Intrepid Travel moving downstairs in this building. We've recently signed an architectural practice for the other end of the building. So there was a lot of improvement in inquiry levels, but it's only relatively recently that we've actually seen that lock away. It's only relatively recently that we actually signed the first lease up at 147 Lambton Quay. So it's -- inquiry levels obviously have to come first. We had the improved inquiry levels for, say, 8 weeks before we actually started to get results, but the conversion rate looks like it's improving over the current period. Bianca Fledderus: Okay. That's helpful. And then just on your interest expenses. So yes, pleasing to see that drop, of course, as a result of lower rates and higher capitalized interest. Can you give us a sense of where you expect interest expenses to land for the full year? David Fraser: Well, it's going to come down further because -- if you look at our most recent rollover of our -- of the 90-day rate we rolled over in September, the base rate was sort of 3.1%. When you look at the base rate now, it's under 2.5%. So -- and we've got over $300 million of floating debt at the moment. So rate is going to keep coming down, actually, which is obviously a huge positive for the business. Operator: [Operator Instructions] Your next question comes from Rohan Koreman-Smit Forsyth Barr. Rohan Koreman-Smit: Just going back to that AFFO, you said you'd be at the top end of the policy range. Are you not taking the investment boost deductions through AFFO? Is that how we should read that? David Fraser: No, no, we are. We are. Rohan Koreman-Smit: [indiscernible] down further, what's the other moving part there to offset $6 million of deductions? David Fraser: Well, there's -- the offset is things that are going to really going to move into next year. So we've got lower repairs and maintenance deductions than normal because the lease to Neilson Street, the incentives to that lease may move into next year. There's a number of other things that impact the tax line, which effectively will flow through into next year as opposed to this year. Rohan Koreman-Smit: And you mentioned Mt Richmond, I guess, the first building plus Stage 2. You said it was committed. I think what's the comment there, but there's 2 pad sites, right? You haven't committed to building sheds on those pads yet, have you? Peter Mence: No, no. So what is committed is the first building Viatris that is obviously leased. Then we created the building platforms for 2 further buildings, and we said at the full year result that we wanted to get those completed and leased. So those have been leased as hardstands, not as buildings. Rohan Koreman-Smit: Okay. Okay. So they're leased as hardstand. So that suggests that development leasing is a bit slower contrary to other comments around pickup in leasing inquiries if you're prepared to lease those as hardstands because unless you've got some development break clause, I was just wondering about inquiry and when the, I guess, CapEx -- the balance of the CapEx at Mt Richmond because there's a reasonable chunk there may kick off. Peter Mence: Yes, there is -- look, Mt Richmond is going exactly as per the plan. Obviously, it's a progressive development that we've been looking at pulling those buildings in. And it's probably fair to say that current inquiry is stronger than we would have expected, but we still don't see that we'll be moving ahead faster than we planned on that site. So the reality is that things like the DRP are going to pay for that development pipeline as it comes through. Rohan Koreman-Smit: Okay. And on that, you're talking to cap rates improving, leasing seems to be going well. There's good tenant demand. You expect to be able to sell noncore assets. Do you think the DRP is being overly conservative at this point in time? It's just a very expensive way to raise money where your share price is? David Fraser: Well, it's not expensive actually. I mean the current share price, very, very limited discount. You're applying that to brand developments, it's accretive. So I would argue that it's not an expensive way of raising capital at all. Rohan Koreman-Smit: Okay. We'll have to agree to disagree on that one. And then just last one, Marketplace. The previous strategy was to sell it to a -- or potentially turn it into a hotel, I believe. But now you're leasing it up. Has the earthquake rules materially changed, I guess, how you view the exit on that building? Peter Mence: The earthquake rules have materially changed the way we view the exit on the building, yes. So obviously, it's going to be a lot more feasible to manage the cash flow into a positive situation through until 2039. But we looked for a hotel conversion on this. We had really good demand for it, and then it went completely flat. And the same happened in 143 Lambton Quay, where that building we felt was going to make a very good hotel. All the designs came through looking really positive. And then the hotel market, especially in Wellington, went completely flat. I think government travel -- government-related travel in Wellington was down 54%, I heard yesterday. So that market simply got removed from us. The -- obviously, the -- we did put quite a bit of work into the seismic review situation to try and get a more rational risk-based approach, and that's been extremely positive as far as this building is concerned. Rohan Koreman-Smit: And then last one, just on 147 Lambton Quay, I believe that's in that noncore pipeline, but has a decent amount of vacancy. You talked to some potential inquiry. Kind of how do you see that one progressing given it is kind of probably a net drag on the earnings at the moment? Peter Mence: Yes, I expect it will turn into being a positive very shortly with the solid lease inquiry that we're fielding at the present. So expect that will be fine, but it remains on the sale list. It's just not in the immediate future. Operator: There are no further questions at this time. I'll now hand back to Mr. Mence for any closing remarks. Peter Mence: Very good. Well, just to say thank you very much for joining us. We've put these results together, as I said, very much a game of 2 halves, and we're expecting that the period ahead will be quite remunerative. Obviously, with the interest rates coming down, the expectation is that cap rates will firm and recent research suggests that, that is already happening. So it will be a case of seeing what sort of evidence we've got by the time we start doing the 31 March valuations, but the indications are positive at this point. Thanks very much. David Fraser: Thank you. Operator: Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.
Operator: Good afternoon, and welcome to the Nanoco Group plc Investor Presentation. [Operator Instructions] Before we begin, I'd like to submit the following poll. I'd now like to hand you over to the management team from Nanoco Group plc. Dmitry, good afternoon, sir. Dmitry Shashkov: Good afternoon, good morning. Dmitry Shashkov, CEO of the company. Liam? Liam Gray: I'm Liam Gray, CFO. Dmitry Shashkov: Okay. Welcome to our annual results presentation. I will take you through the operational highlights, and I pass it off to Liam to cover the financials, after which we will take any questions which you may have. My main topics will be around the revised Nanoco strategy, which we've been developing throughout the year, the progress along the strategy, especially in the area of image sensor, which was the main focus. And in the end, I will also give you an update on our strategic options review known as the CDX process. With that, let me proceed. 2025 was a big year for Nanoco. We accomplished a lot in a short period of time. As we reported earlier to the shareholders, we started the year by significantly adjusting our cost base. In the end, we were able to reduce our cash burn by approximately 30%, extending our cash runway and giving us opportunity to reinvest in the business development. Along the way, we also changed our organization following the changes in the Board composition earlier in the previous year, we proceeded to build a global commercial organization, which is now operational on 3 continents. And the early part of the year was strongly focused around redesigning our strategy. We really started with a blank sheet of paper, and we rebuild the strategy from the ground up by analyzing all available market opportunities with a strong focus on those which could deliver revenue and profitable growth to the company in the short to medium term and prioritizing other opportunities lower on the list to stay focused on what will deliver the value in the coming years. Along the way, we reconfirmed that image sensors remains the main market and should remain the top focus area for the company for the reasons which I will get into later. But in brief, it's a combination of very favorable external factors in the market trends which favor the development and adoption of this technology and a strong competitive position inside Nanoco, which we've built through the years through the combination of our technology, IP, production capabilities and new product development. Throughout the year, we signed a second joint development agreement that happened in the spring of 2025. And just about a month ago, we extended our first joint development agreement by additional 3 years. Those are both very important milestones in the company development, and I'll comment on that later as we go through the presentation. And finally, earlier in 2025 in the calendar 2025, we started the strategic options review with CDX. The process after a few months resulted in significant progress, and I will give you an update in the end of this presentation. Let me start by categorizing our markets. As a result of the strategic strategy review, we put our markets into 3 categories. And in the first category, top priority, one market image sensor is strongly revalidated as the top area of focus for Nanoco. There are a couple of reasons for that, but most important ones, as I mentioned, on the outside -- in the outside world, we have rapidly developing applications, which are enabled by this new quantum dot sensor technology. They range from facial recognition for consumer electronics to automotive safety, helping monitor the driver's condition as well as various collision avoidance systems to industrial quality control where in a variety of industries, quantum dot sensors can deliver capabilities not achievable with other methods, all the way to medical monitoring and various applications in defense and surveillance. All of these applications are developing in parallel. And against these trends, we formulated the strategy to focus in image sensors around 3 main themes. One is around new product development. We pursue aggressive new product development, which is focused on high-volume markets. For us, that means predominantly consumer electronics and automotive markets with others to follow. Secondly, we work on our product portfolio. In addition to our first-generation material, we now have second and third-generation materials under development, which fit the needs of those high-volume markets, consumer and electronics. We also -- in addition to new materials, we're also offering longer wavelengths available for this type of sensing, which also opens up additional applications for us. And finally, we said from the beginning to have a broad commercial outreach to really cover any significant programs globally, whether they are in North America, in Europe or in Asia, if any of the end users of the sensor technology is considering introduction of QD sensors into their product lineup, we would like to be their partner of choice and work with them on developing this technology and bringing it to commercial adoption. The second category are the markets where we see growth potential in the medium term, and they could nicely balance our presence in image sensors with additional applications, which are less cyclical and growing on independent, based on different trends than the image sensor market. Those are the markets such as flat panel display, photovoltaic, agriculture and paints and pigments. In each of those, we see some opportunity for the future. But right now, they do not warrant the same amount of attention and focus as image sensor market. And flat panel display is a more mature market, but would give us additional opportunities to grow if and when we see favorable regulatory trends manifesting towards substitution of cadmium, which is one of our main strengths in the flat panel display market. The other 3 markets photovoltaic, agriculture and paints and pigments are much younger. And rather than pursuing these new markets by ourselves, we are looking to find a development partner, typically one partner per segment to pursue that development jointly. And if and when those market segments develop to larger commercial opportunities, we would be able to scale up our resources and participate in them with a more significant effort. So for now, those are growth options, which we continue to pursue with modest amount of resources, so we can focus all our efforts on image sensor. And finally, for the 4 market segments, which were previously considered for growth, that's lighting, biomedical applications, authentication markets and quantum technologies. We do believe that quantum dots offer nice opportunities in the longer term. But for now, those markets do not warrant additional attention. As a relatively small company for the sake of focus, we will continue monitoring these applications, but we're not going to put any additional effort into them as of today. With that, I would like to take a deeper dive into the image sensor market, the one which is the main focus of our product development and our strategy investment. We are witnessing a major and a positive shift happening in this market. Just in the 12 months that I've been with Nanoco, we see quite a dramatic change where today, it's predominantly low-volume markets, mostly centered around industrial and defense applications. They enable some important possibilities such as machine vision, whether it's for agricultural applications for produce inspection or for semiconductor fabs as well as a variety of defense applications. Those are good applications with good value proposition, but the volume of sensors and associated systems tends to be in the hundreds and thousands of units, not in the millions. Those pave the way for high-volume application to come through. And what we witnessed is that consumer and automotive markets are rapidly moving towards commercial adoption. Consumer market has already been our focus. That is the focus of both of our joint development agreements. The first one signed a little bit over 2 years ago and now extended and the second one, which we only signed in the spring of 2025. But in addition to consumer, we witnessed rapid changes in the automotive market. Conventional wisdom, what you would read in the market reports would say that automotive market typically is delayed by a few years after consumer because of high reliability requirements and conservative nature of the end users. But that's not what we witnessed. We observe that some of the companies, especially Asia-based companies are pursuing this technology quite aggressively, and we believe that adoption in high volume in the automotive segment will rapidly follow the adoption in consumer. For us, those are the 2 main high-volume markets. In addition to consumer and automotive, we see some favorable developments in the medical field where those quantum dot sensors can be used for diagnostic as well as for biomonitoring. And this also could be a pretty high-volume application. If it's taken to wearable devices, opportunities would be in the millions, whereas for automotive, it's already in the tens of millions because you expect to have multiple sensors per car performing different functions once they are introduced. And on the consumer side, if you just count the cell phones, approximately 1.4 billion cell phones are manufactured every year. So even a modest penetration into the cell phone segment would indicate hundreds of millions of units. So that is the reason why we strongly focus on the right-hand side of that panel where really high-volume opportunities lie. And we, as a company, are really well positioned to succeed in this market. In the existing products, during 2025, we developed a detailed capacity model. And we now can confidently say that our existing production facility in Runcorn can produce 2D materials enough for approximately 150 million sensors on a 1-shift operation, 5 days a week, 1 shift. If we change that operation to 3 days -- sorry, 3 shifts, 7 days a week, we are capable of producing up to 700 million sensors worth of quantum dot material. This, again, enables us to participate fully in this growing high-volume market, whether it's consumer or automotive, this amount of capacity is sufficient to service this market globally. Along the way, we also analyzed our cost position and Nanoco is in a unique situation compared to other companies in this field because of our extensive production experience in high volume of those quantum dot materials as well as our unique IP. And as a result, we concluded that once we are on scale, we're able to provide this quantum dot material at a very modest cost to the end user. It remains a high-margin profitable product for us, but the contribution to the cost of the sensor would be somewhere in the ballpark of $0.12 to $0.25 per sensor. Again, contrary to popular belief, quantum dots are not necessarily expensive. They deliver their unique functionality in such a small quantity that to enable a sensor, we only need to contribute a very modest amount of the cost. And that's an encouraging calculation, which tells us that we can really aim at very high-volume cost-sensitive markets with our production capabilities. We also recently received a small grant from Innovate UK and that grant is to further optimize our first-generation material, lead sulfide to develop what is known as a single-layer ink. That will be an improvement to an existing manufacturing process, which will make us even more productive with this first-generation material. On the new product side, most important developments during the year were really the signing of the second joint development agreement with an Asian manufacturer, which we announced in April. And that joint development is focused on consumer applications just like the first. And the first joint development agreement was successfully renewed just about a month ago for additional 3 years. That is perhaps the most important milestone we achieved during the year because in 3 years, we expect to finalize the material selection, go through all the steps of process development, manufacturing process development and most importantly, to go through the scale-up phases where our material is extensively tested in high volume, validated by the end user and gets ready to be adopted in high volume. And that means that within this 3-year period, we will rapidly increase our production volumes for the sake of the customer, and we are looking to get a lot closer to breakeven sometime in 2027 as a company. On the technical side, we also made some significant advances. We can now state that Nanoco achieved the best-in-class performance with the leading material, which we are developing for this market, which is indium arsenide. The 4 numbers highlighted here in the light green, I will explain them on the next page, but those are the best result which any company or organization has been able to achieve, and that's very encouraging result for our customers. And in addition, we launched some new internal projects to extend our capabilities further. One of them has to do with new materials. In addition to indium arsenide, which is our main material, we also now have a project on indium antimonide. That is the third-generation material, if you'd like to call it that, which can deliver additional capabilities, which indium arsenide material cannot. So we are now pursuing device development with Indium antimonide. And in addition, we started to look at extending our wavelength capabilities as well. Current capabilities in the short-wave infrared, SWIR region, as it's known, tend to extend all the way to 2,000 nanometers. But between 2,000 and 3,000 nanometers is the extended SWIR and above that region between 3,000 and 5,000 nanometers, we have the mid-wave infrared region. And in both of these regions, there is no low-cost applications, so no low-cost technology, which can sense objects at this wavelength. This wavelengths opens significant additional opportunities and high-volume applications, and we started the projects in this area to be first extending our capabilities into these wavelengths. So this page is a bit technical, but I will explain. This page demonstrates all the results known to us, which were achieved with this quantum dot sensor technology in a very important spectral range of 1,400 to 1,500 nanometers. This is a popular wavelength, which a number of organizations, commercial and technical are pursuing. Companies like IMEC, companies like Sony and some of the others have done a lot of work at this wavelength with this material. And technically, the expectations of this material are twofold. There are 2 most important performance parameters. On the horizontal axis is what is known as quantum efficiency. This is the measure of how strong is the signal coming from the sensor when the object is illuminated. And on the Y-axis is what is known as dark current. This is the measure of noise or useless signal, which comes from the sensor when object is not illuminated. So as you can imagine, on the horizontal axis, the higher quantum efficiency, the better. And on the dark current, the lower dark current, the better. So ideally, you would like to be positioned as low on the Y-axis and as far to the right on the X-axis. And the 2 champion devices are circled at the bottom of the chart in red boxes. Those are the 2 champion devices which we developed with indium arsenide technology. And as you can see, they far exceed any other results which were published so far. I also point out that the scale on the Y-axis is logarithmic. So additional reductions in dark current are quite significant, and they're very difficult to achieve. For comparison, you can see the blue oval, which roughly outlines the region -- the range of performance, which now puts us into a position to be adopted into commercial applications. And as you can see, we're already meeting requirements for dark current, and we are very close to meeting requirements for quantum efficiency. We're quite confident that we can get there with a few additional developments, which are already underway. So again, very encouraging results for our customers who see this performance and clearly putting us in a leader category in this new market. So with sensors capable of this, we can do a lot of things. I think we already demonstrated some of the pictures. Those are pictures taken with the camera and inside the camera are Nanoco quantum dots. This is the first-generation material. And on the first panel, you can see clearly improved visibility through smoke. Left-hand side is the conventional visible camera. Right-hand side is the infrared camera, which shows very clear visibility through the smoke and a very good level of contrast, which you otherwise cannot achieve. The second panel demonstrates visibility through a silicon wafer. In the visible light on the left, it looks opaque and slightly purple. But in the infrared illumination, you can clearly see the Nanoco logo, which is printed on a piece of paper underneath the silicon wafer. Clearly, light goes through silicon without any obstacle, and that opens up a variety of applications in the semiconductor industry, including wafer inspection and quality control. Likewise, the picture on the bottom shows visibility through plastic packaging. Again, in the visible light, the package appears opaque. But with infrared illumination, you can clearly see through the package, which allows you to accomplish material sorting or simple quality control without breaking the packaging open. And many other applications can be enabled with this kind of capabilities, which we're just beginning to implement in real world. With that, I would like to shift gears and give you an update on our strategic options review with CDX. You will probably remember when we started this process roughly in January, there was a significant amount of activity, which we reported on. Our outreach was quite broad. We ended up in conversations with more than 200 companies globally. The idea was to leave no stones unturned and really assess all types of potential investors with their potential to make an investment in Nanoco and to deliver higher value to our shareholders than we could through organic development. And after months of activity, we identified a number of interested parties and discussions with these parties are continuing. I am cognizant that the process has taken quite a long time. But again, as I stated in our spring presentation, the objective is to find the highest value option for the shareholders, and that doesn't always happen as fast as we'd like. We continue this process, and we will update the shareholders as soon as we're able to. But overall, we are confident that between the organic strategy, which has been underway and under implementation throughout the year and the inorganic options, which we are now lining up, we are in the best position to deliver shareholder value. With that, I'd like to pass the baton to Liam, and he will cover the financials. Liam? Liam Gray: If we start with some of the financial highlights for the year. Firstly, revenue of GBP 7.6 million is down GBP 0.3 million on the prior year, and this is due to the prior year having the full year benefit of the JDA with the European customer, which they canceled in October '24. And this was partially mitigated in FY '25 by the new JDA we signed with the second Asian customer. Our adjusted EBITDA in spite of the fall of revenue has increased to GBP 1.5 million from GBP 1.2 million in the prior year, and that reflects the reduction in the cash cost base as a result of the restructuring program we completed during the year. During the year, we also completed the previously promised GBP 33 million return of capital to shareholders with the final GBP 1 million of buyback being completed in October '24. Our year-end cash position was GBP 14 million, and our ongoing cash cost base is now stable at GBP 0.5 million per month. And just to clarify, that is our gross cash cost base before any revenue. So our net cash depletion is around GBP 350,000 to GBP 400,000 per month. As a business, we obviously continue to maintain a strong focus on our cost management. And finally, we currently have an order book of GBP 7.6 million, which can be broken down into GBP 6 million relating to the Samsung license, which has obviously been prepaid, GBP 1.5 million relating to services revenue and GBP 0.1 million of grant revenue from Innovate UK grant, which Dmitry referenced. This order book of GBP 7.6 million is equal to the revenue achieved in FY '25 and gives us a solid foundation to outperform the FY '25 financial results. Moving on to the next slide, we have our summary income statement. So starting from the top. As mentioned previously, revenue in the year was GBP 7.6 million compared to GBP 7.9 million in the prior period. Our cost of sales has fallen compared to the prior year due to a combination of lower revenue and also a reallocation of staff to internal R&D investments. And you can see that increase in cost further down the table on the fifth row. This has resulted in a gross profit in FY '25 of GBP 7 million compared to GBP 6.7 million in the prior year. Other administrative expenses have fallen by GBP 0.5 million, and that reflects the benefit of the restructuring we completed during the year. This gets us down to an adjusted EBITDA of GBP 1.5 million. Further down within other adjusted items, there are a number of small one-off charges, which included GBP 0.3 million relating to the ongoing strategic review, GBP 0.3 million related to the LG litigation and GBP 0.2 million related to the requisition general meeting last year. And we also incurred GBP 0.1 million related to the restructuring. We then have our noncash share-based payment charge of GBP 0.7 million. And in the comparative period, that was GBP 1 million, which -- and that was offset by a positive FX gain of GBP 2.7 million on the Samsung receivable. Depreciation and amortization has increased due to the full year impact of device lab, our investment in CapEx over the past couple of years. And then we have finance income, which is largely interest on cash deposits and the tax charge is the unwinding of the withholding tax assets and a change in the calculation of the deferred tax asset. And just for reference, that movement is all noncash, and we actually received a GBP 0.3 million payment from HMRC for R&D tax credits claimed during the year. And that gets us down to bottom line loss after tax of GBP 2.2 million. So this next slide reconciles our movement in cash from GBP 20.3 million at the start of the financial year to GBP 14 million as of 31st July 2025. We have the completion of the buyback, which cost GBP 1 million in the current financial year. And then we had our cash outflow from operations during the year, which is GBP 5.2 million, which is essentially the cash we used to run the business. We had some one-off exceptional cash costs, as mentioned previously, for the general meeting, the CDX process and the LG litigation, which comes to GBP 0.8 million. We had some small investments in capital equipment and costs related to the new IP, and that came to GBP 0.4 million in the year. Interest income, as mentioned before, on our cash deposits amounted to GBP 0.6 million. And then we had the R&D tax credit of GBP 0.3 million and then some other small movements, which amounted to an inflow of GBP 0.2 million. And this meant we finished the financial year with GBP 14 million. So in summary, the company has an order book of GBP 7.6 million of revenue. As I mentioned earlier, this is in line with the FY '25 revenue and gives us a strong foundation from which to grow and potentially financially outperform FY '25. Our gross cash cost base before revenue is stable at GBP 0.5 million per month, which is a significant reduction on where we were 12 months ago. As a business, we remain focused on identifying and implementing further savings where possible without compromising on our capabilities. No further investment is required. The device lab is settled and delivering great results, and we have full operational autonomy over the lab for use with any of our customers. We have the facilities to continue to fulfill our joint development agreements, and we have the installed capacity to rapidly scale our sensing materials if the market adoption takes place and the demand increases. And also as previously mentioned, we have completed the GBP 3 million return of capital to shareholders. And finally, on our cash resources, our runway is secure, and there is significant potential for upside without incurring further costs or investments. And as mentioned in the Chairman's report, we have a plan to scale up our materials and be achieving a level of revenues in the calendar year 2027, which means we, as a business, will be self-sustaining. And with that, I'll pass you back to Dmitry. Dmitry Shashkov: Thank you, Liam. In summary, I'd like to say that this was a significant year for Nanoco. We really streamlined the company, and we positioned the company well for organic growth. On the outside, we continue to face very favorable market developments, and those are especially favorable in the image sensor market. We have an excellent competitive position in this market, and we are well positioned to succeed. As we began to implement this strategy during the year, we made significant progress on the commercial front. We have a broad commercial reach. We have 2 joint development agreements, and we are working to sign additional ones when we are ready. We expanded our product portfolio in the image sensor, and we made quite a rapid technical progress. And as a result, there is a growing recognition of the leading role which Nanoco plays in the image sensor market. In addition, we are pursuing some of the additional markets with minimum investment, so we can maintain strong focus on image sensor. So all of this together positions us very well to pursue organic pathway for the company. But as we said in the beginning of the year to explore additional strategic options, which may include the sale of the operating business, now after a few months of the CDX process, we are really well positioned to compare what the inorganic options can deliver. And I'm confident that in due course, we will be able to put the highest value option on the table, whether it is organic or inorganic development as we conclude our CDX process. With that, I'd like to close the formal part of the presentation and open it up for questions. We received quite a few. Operator: [Operator Instructions] I would like to remind you that recording of this present along with a copy of the slides and the published Q&A can be accessed by investor dashboard. We have received a number of questions about today's presentation. Liam, could I please ask you to read out the questions and give responses where appropriate to do so, and I'll pick up from you at the end. Liam Gray: Of course. So the first question we have received is, can you give an update on the LG case, at least in terms of potential dates for development along with the outlook for IP protection generally, please? Dmitry Shashkov: Thanks, Liam. So all I can say about LG case is that it's progressing as expected, but I cannot give you further comments or any potential dates on that. For the second part of the question, outlook for IP protection, yes, of course, that remains part of our focus to look for additional opportunities to assert our IP and enter licensing arrangements, which will help the company financially. We will continue to evaluate those opportunities as we are progressing with LG, then after that, we would look at additional opportunities if and where it makes sense. Just to remind everybody, IP protection doesn't have to take a form of a lawsuit. Lawsuits are costly and risky. First and foremost, we would be looking for opportunities to take in a license, but legal options remain on the table if they are financially justified. Again, we need to recognize that the process could take a while and can cost a substantial amount of money. Therefore, it's always a trade-off between what's achievable and what's practical given the financial limitations and risks involved. I think second question is very much related to that. So we can skip it. Next question is maybe, Liam, I'll pass it to you. What is the current cash burn per month for Nanoco? Is an equity raise likely in 2026? Liam Gray: Thank you. So as I mentioned, the gross cash cost per month is GBP 0.5 million, we do have revenue of sort of GBP 100,000 to GBP 150,000 per month offsetting that. So the gross cost per month are GBP 350,000 to GBP 400,000. Will the cash balance at the year-end be GBP 14 million? No. It's very unlikely an equity raise is likely in 2026, unless something significant happens in that we have to scale quickly or deploy cash for investment. But in regards to run the business, no an equity raise isn't likely in 2026. Okay. Next question. How is the transition in the technology team progressing post the departure of Dr. Nigel Pickett, Founder and CTO of the Nanoco Group? Could you provide a further color on his departure? Dmitry Shashkov: Thanks, Liam. Yes, good question. So we announced that Nigel will eventually retire from the company. And that is after building up this company from the garage stage literally in a closet in the University of Manchester to the company that it is today 24, almost 25 years later. So Nigel is simply ready to move to the next stage. And that was his intention to eventually retire. Along the way, we invested significantly into our technology resources. As we announced, we replaced his role with a non-Board role, but it's a senior technologist, Ombretta Masala, who was already in a leading role in the technology organization, supported by a number of your quite seasoned R&D colleagues. And I must say that this transition has been very smooth. Operationally, the new team is already fully running independently of Nigel. Nigel continues to be with the company for a few additional months to provide some of the transition as well as to focus on some of the special tasks, which he is uniquely capable of doing. We're certainly wishing him well, but the organization at this point is well positioned to continue. I also will mention that in the fall of 2025, we also brought 3 additional resources into the R&D team. And that still keeps us with the reduced cash burn, which Liam outlined, but we brought two senior chemists and one device physicist onto our team, and they're already well engaged and they bring additional capabilities to our technology organization. So transition is going well, and we are confident that we're well positioned to capture the opportunities. Liam Gray: Okay. Next question. Sorry if I have missed it in the first few minutes, but there has always been a focus on the TV screen market and a huge growth market that Nanoco is well positioned to capitalize on. That now seems less of a focus. Are you now telling us that you don't see this as a major opportunity any longer? Dmitry Shashkov: Excellent question, and it's always good to reflect and say, how did our views change from a couple of years back? Yes. So flat panel display is the first market for quantum dots, which developed into relatively high volume. Along the way, market also commoditized significantly. So when we look at the opportunities to introduce our materials into the existing flat panel applications such as LCD technology, really the legacy technology, the one which started, the penetration of QDs. This market is rather commoditized. And there are pockets in this market, which remain attractive. For example, especially in China and in Taiwan, significant amount of LCD product is still produced using cadmium-based material. We at Nanoco pioneered the cadmium-free technology, and we think it may be an attractive opportunity to replace cadmium-based materials with the cadmium-free. However, right now, in China specifically, there is no regulatory trend or regulatory drive to substitute cadmium away. Therefore, we see this as an opportunity which we will monitor, but not necessarily put a lot of resources into given that absent regulatory drive, this is not going to be a high-margin opportunity for us to pursue. On the new technologies, new technologies, especially microLED is expected to be introduced in the coming years. And quantum dots will likely play a role. They would be used in relatively high volume comparable to LCD. And this may become a good market for us to pursue. But as of today, this technology has been delayed by years and years because of very significant technical hurdles as well as the economics. This new and improved TV technologies have to compete with existing ones, which are continuing to improve their own performance and to reduce their cost. So on balance, we still think it's an opportune market for us to pursue, but it does not warrant the same focus as a few years ago. Liam Gray: Thank you. Next question. Why is the strategic review taking longer than initially guided? Is Nanoco still of the view that an outright sale of its key division is likely? Or is it also considering strategic equity investors? Dmitry Shashkov: Good question. So I can answer it in very simple terms. Nanoco is not an easy company to assess and value because the technology is quite new and a number of applications are relatively technically complex. So when we started the CDX process, we had to recognize that complexity. And the fact that at the early revenue stage where we are, it may take a while for potential investors to assess the viability of our business plan and to proceed with potential acquisition. So again, our objective is not to get to any deal no matter what it is, but to try and find a deal which would value the company higher than it is currently valued in the public market. And therefore, this may take some time to build that conviction from the potential investors in this inorganic option. That is the main reason, right? We are not trying to rush into a deal, but we are trying to develop an option which could offer high value to the shareholders than organic development. To answer the second part of the question, are we considering straight sale only or an equity -- partial equity investment? In principle, we can consider both. But practically speaking, outright sale of the operating business is the main scenario we are focusing on. So there is a clean transition from the current ownership into the new ownership. That is the main scenario we are continuing to pursue. Liam Gray: Thank you, Dmitry. The next question is, when does Nanoco expect to announce further deals with its technology? Any such discussions at a closing stage? Dmitry Shashkov: Yes. So we have 2 joint development agreements, which we announced. We have quite a few other commercial and technical relationships, which may result in similar joint development agreements. But if and when they will happen, I cannot fully tell you. Yes, we would very much like to expand that portfolio. Three is better than 2, 4 is better than 3, but they come when our partner on the other side is ready to put additional resources and make it into a real project. So we are aiming to have more than 2, but when they will happen, I cannot tell you. What I did witness in my 12 months at Nanoco is that the level of interest in the image sensor market continues to steadily grow that we see a larger number of companies getting involved. I already gave you an example of automotive applications, which 1 year ago, everybody was convinced are pretty far away. But as of today, even coming off the industry conferences 2 weeks ago in Korea, I have pretty clear visibility on a number of large companies pursuing those automotive applications, which 1 year ago was not the case. So I think new agreements will come into place. I just cannot tell you exactly when. Liam Gray: Thank you. Next question. You are not talking about image sensing in the same way as you used to talk about screen market and Nanoco's unique position, which has never transpired. How do you expect shareholders to continue on this journey of assurance that Nanoco can eventually find a commercial product that turns the company's fortunes around? Dmitry Shashkov: Yes. Good question. And obviously, I wasn't there when Nanoco was focused almost exclusively on the flat panel market. But indeed, that market did not materialize for us in the form of sustainable product revenue. It did materialize for us in the largest licensing deal, I think, in the history of advanced materials when we achieved settlement with Samsung. And as you're well aware, we are pursuing a similar type of process with other potential users of our IP. But the market did not develop into sustainable product supply, which ideally we, as a materials -- advanced materials company would like to pursue. I believe image sensor market is different for a couple of reasons. One, we are clearly in the lead when it comes to developing this new technology. Nobody, neither the material manufacturers nor device companies have neither IP, nor production experience, nor the product portfolio, which we have in image sensors. Secondly, we have at least 2 actively engaged customers who vote with their wallet and with their resources. They commit substantial amount of resources from their side to proceed with those joint development agreements. And as we progress with those JDAs, we will continue to update you on our performance. But in and of itself, it's an evidence of customers committed to this market, developing this technology jointly with us where we would become the supplier of choice. We are not worried about not becoming a supplier because the production of these materials is difficult. The production processes are protected by our IP, and we do not expect that anything similar to the Samsung situation will materialize here. So I believe this is a very different market, and these are very different times. And our business model is pretty well protected in the image sensor. Liam Gray: Thanks, Dmitry. Next question, Nanoco Director, Jalal Bagherli and yourself undertook material share buys in November 2024. Are you still of the view that Nanoco is still undervalued? Are directors considering further share buys? And if I may make as subjective inference, you seem a lot less ebullient compared to IMC webinar earlier in the year/April 2025? Dmitry Shashkov: Yes. So to answer the factual questions, yes, I continue to be an investor and a shareholder in Nanoco, mainly because I do believe that we're undervalued. And I believe our Non-Executive Chairman, Jalal, is in the same situation. So I'm confident that the company is worth more, but my job is now to prove it with either organic development, which lead to that recognition in the market or inorganic deal, which will prove it through a transaction value. So that's all I have, I can say about that. In terms of being less ebullient, is ebullient, does it mean bullish? Liam Gray: Cheerful, full of energy. Dmitry Shashkov: Well, I'm certainly full of energy with regards to Nanoco's future. But yes, perhaps on day 1, I was a bit less informed about the complexities of the company. But 1 year later, I'm just as enthusiastic about what the company can do, whether we stay on the organic path or whether we'll find the new owners. I continue to believe that there is significant value locked in the company right now, and we are well positioned to unlock it. Liam Gray: Next question. If you succeed in getting your materials into driver monitoring, do you think that need will be there for a long time? Or do you think autonomous vehicles will mean the opportunity is only there for a short time? Dmitry Shashkov: Yes, good question. I'm not a specialist in autonomous driving. But I think under most realistic scenarios, transition away from human drivers to completely autonomous driving is the transition measured in decades, not years. And under completely driverless cars, even if and when it happens that all the cars on the road are robotically controlled, well, then the cars need to monitor each other. They just don't need to monitor the drivers. So applications in automotive technology, yes, they -- some of them are tailored towards self-driving cars. Others are tailored towards cars with drivers. But either way, the expectation is that quantum dot sensors, infrared sensors will be adopted in multiple units per car, just like today's even proximity sensors, which help you park, you probably have at least a dozen sensors in different points of the car. Likewise, with the 2D sensors, expectation is going to be more than one per vehicle. And therefore, we're not just dependent on driver monitoring alone. Liam Gray: Okay. Next question. The RNS suggests that it is more likely than not that the CDX process won't conclude in the sale. What's the point of continuing if no acceptable offer has been received to date. After everything that has been promised, it would be a huge failure of the Board to execute a sale. Will the Board consider their decisions if that is the outcome. And when you say the process is nearing conclusion, what time frame does that actually mean? Operator: Yes. So I don't know how you read the RNS to say that we are less confident. We are closer to the goal than we were in the beginning, but we are not yet -- we have not yet identified a high-value option, which would come through an inorganic process. The reason we are continuing with the process is because we believe that goal is well within reach. We just haven't been able to deliver it by today, but that remains firmly in our sight. And as I said, we are looking forward to updating all of you as soon as we can. Liam Gray: Next question. The cost of running the business seems too far out. The turnover generated from any production rate sales, how can this continue and when will it change? With spend of GBP 6 million per annum, the GBP 14 million will soon be gone. So just on this, as I mentioned before, the gross monthly spend is between GBP 350,000 GBP 400,000. So is GBP 4 million to GBP 4.5 million. And that's the current revenue levels. We are looking at further JDAs, as Dmitry mentioned, which would reduce that cash burn. And then as we ramp up our scale to production of the materials, we do anticipate the level of revenue from material sales to increase significantly, which is why we believe that come calendar year 2027, we will be in a self-sustain or breakeven position. Next question. You say how significant this year has been for Nanoco. The market sees things differently. Up until now, the market has always been right. Why would this time be any different? Dmitry Shashkov: Yes. I don't know if I can answer this question convincingly, right? I haven't been there at the previous junctions, but I do see that the way we are pursuing commercial engagement with our customers in image sensors and otherwise puts us in a position to succeed. I mean, just to state the obvious, up until December of last year, there was no commercial organization. The company was entirely internally focused on the technical development. Nobody was out there listening to the customers, asking questions, explaining our capabilities and engaging with various customers commercially, whether it's through joint development agreements or any other form of technical or commercial collaboration. We put this organization in place for the first time. We now have a broader pipeline than we ever had of potential customers evaluating our technology. And for all these reasons, yes, I do believe that this time is different. And markets clearly do not see it the same way, but markets do not have access to the inside knowledge, which we are privy to in our discussions with potential customers and development partners. So again, I -- my goal is to disclose as much of it as I'm able to through favorable market trends and specific agreements and commercial developments when we are ready to announce them. But apart from that, we can simply do our jobs, proceed with the commercial development and the results will speak for themselves. I do believe that the markets will eventually align with our vision once we demonstrate tangible progress towards those goals. Liam Gray: Please, can you talk a little bit more about the change of pace of development in automotive? What sort of opportunities do you foresee? Dmitry Shashkov: Yes. Again, infrared sensors can deliver particular functionality better than existing sensors. Existing sensors, if they operate in a visible or near infrared region have limited ability to see through adverse conditions. So for the collision avoidance and similar type of safety tasks, infrared sensors are able to penetrate through rain, snow, fog, smog, smoke or any other types of adverse conditions. So both for driver awareness of an obstacle or automatic collision avoidance systems. Once those sensors are introduced, they can help steer the car away from an object on the road. They're even able to distinguish between a live object and a dead object, lacking better term. If you have a cat on the left and the rock on the right, you would rather steer towards the rock than the cat, et cetera, et cetera. On the driver monitoring side, infrared sensors in some of the wavelengths, which we're working on, are particularly good, for example, to see through the tinted glass, which is good for other types of automotive safety, even for law enforcement. But they're also able to see, for example, through sunglasses. So in some of the countries, legislation is now coming where driver monitoring, especially preventing driver from falling asleep is becoming a mandated feature in some of the new vehicles. Well, infrared sensors are able to easily see, for example, through the sunglasses to track ice movement and to make sure that the driver is awake and attentive with attention on the road. So these are just some of the applications where we see this being adopted. And as I stated, especially in Asia, automotive companies are very keen to differentiate themselves with some of the additional safety features. And this technology gives them an opportunity to get ahead with introduction of this technology. Liam Gray: And just a few more left. Could any of the very large tech companies get involved with Nanoco to pursue quantum dots for quantum computing? Dmitry Shashkov: Quantum dots for quantum computing. Yes, that remains a possibility. We've done some academic work with the University of Manchester to demonstrate that quantum dots could be usable for quantum computing and quantum communication. Those -- this application is in our third category. We believe in the long-term value, but we are not willing at this point to put significant resources into this just simply because of the time it takes to develop. If there is a willing development partner who would like to co-invest in this technology with us, for sure, we would consider. Right now, we just would not like to make it a self-funded activity because I think these markets will take some time to develop. Liam Gray: Is Nanoco eligible for U.K. government R&D grants? Have any such avenues been explored? Dmitry Shashkov: Yes, of course. So we're already a receiver of Innovate UK grant, which is, I guess, one of the main funding agencies in the U.K. We will continue to look at other opportunities. One of our senior staff members is IT and grant manager, Nathalie Gresty, who is monitoring the space quite carefully, both in the U.K. and on the continent. Some of the EU opportunities are still applicable to the U.K. companies, and we will continue to pursue those funding opportunities. They've been quite limited, but with increasing amount of attention from the government to high-tech sector and semiconductor industry in general in the U.K., yes, we believe there are going to be some additional funds available to us, and we will pursue that. Liam Gray: And the final question, you've clearly worked hard at the last year, seem quite optimistic. What are the top 3 things that excite you about Nanoco? Dmitry Shashkov: Yes. Just kind of thinking on my feet right off the bat. The first one is I do think it's a diamond in the rough. I think that Nanoco is one of the very few companies, perhaps it's the oldest quantum dot company, which is still alive, and it's one of the few companies which survived through the years. We only see perhaps 2 or 3 companies around the world pursuing these technologies because it's hard. And most others have been acquired or have gone bankrupt at this time. I do feel that we are now finally in a position to capitalize on all the technology investment, all the complicated developments and all the IP, which was put in place and really become the leader in a fast-growing, very profitable market, which for us will start as image sensor and over time, other markets can be added to this. So that's the main reason. I see that it's a tremendous technology, which is currently undervalued, and we can unlock that value. A couple of other reasons. The team is great. It's a very dedicated team. We have seen relatively low turnover. Just like many of you, our investors stuck with Nanoco, our team has been sticking around and really contributing to the company development through some really hard times, right? So there's a level of resilience and optimism within the company because if we made it that far, we can definitely make it further where others have failed. And there's an element of technology here, which also makes me excited. We are simply contributing to positive developments in the world, not to get too high horsey about it, but we are developing applications, which will help really improve our lives through automotive safety or some of the other applications, which this technology is able to offer. We have solutions which are more energy efficient, ecologically preferable to some of the legacy solutions and those which do deliver real value in a variety of markets. For me, that's pretty exciting. Operator: Dmitry, Liam, thank you for answering all those questions you can from investors. And of course, the company can review all questions submitted today, and we'll publish those responses on the Investor Meet Company platform. Just before redirecting investors to provide you with their feedback, which is particularly important to the company, Dmitry, could I please just ask you for a few closing comments? Dmitry Shashkov: Yes. I'll just simply recap that it's my first full year, which I'm completing at Nanoco. I feel quite satisfied with what we've done. It was a difficult task to pursue organic strategy development and implementation in parallel with the strategic options review, the CDX process. I feel that we made very good progress on both fronts, and we're looking forward to updating the shareholders once that process -- CDX process is complete. And we will be in a position to offer the highest option value -- highest value option to the shareholders. I'm looking forward to updating you on this as soon as we're ready. Operator: Dmitry, Liam, thank you for updating investors today. Can I please ask investors not to close this session as you'll now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations. This will only take a few moments to complete, and I'm sure will be greatly valued by the company. On behalf of the management team of Nanoco Group plc, we'd like to thank you for attending today's presentation, and good afternoon to you all.
Operator: You are in the right place for the KULR Technology Group's third quarter 2025 earnings call set for today, Tuesday, November 18. The call will begin at 4:30 PM Eastern. Please hold on the line. Thank you everyone for joining us here today for the KULR Technology Group's third quarter 2025 earnings call. I will be your host and moderator, Stuart Smith. In just a moment, I will be joined by the Chief Executive Officer of the company, Michael Mo, as well as the Chief Financial Officer for the company, Shawn Canter. After we are given their opening statements, we will have a question and answer section on the call today. But before we get started, please listen to the following safe harbor statement which will cover the statements made on the call today. This call may contain certain forward-looking statements based on the company's current expectations, forecasts, and assumptions that involve risks and uncertainties. Forward-looking statements made on this call are based on information available to the company as of the date hereof. KULR Technology Group's actual results may differ materially from those stated or implied in such forward-looking statements due to risks and uncertainties associated with their business, which include risk factors disclosed in their Form 10-K filed with the Securities and Exchange Commission on 03/31/2025, as may be amended or supplemented by other reports KULR files with the Securities Exchange Commission from time to time. Forward-looking statements include statements regarding the company's expectations, beliefs, intentions, or strategies regarding the future and can be identified by forward-looking words such as anticipate, believe, could, estimate, expect, intend, may, should, and would, or similar words. All forecasts provided by management on this call are based on information available at this time, and management expects that internal projections and expectations may change over time. In addition, the forecasts are based entirely on management's best estimate of their future financial performance given their current contracts, current backlog of opportunities, and conversations with new and existing customers about their products and services. KULR Technology Group assumes no obligation to update the information included in this call whether as a result of new information, future events, or otherwise. Now with that, let me welcome onto the call Chief Executive Officer of KULR Technology Group, Michael Mo. Michael? The call is yours. Michael Mo: Thank you everyone for joining us today. I'm proud to share that KULR delivered our strongest quarter to date. In Q3 2025, we generated approximately $6.9 million in revenue, growing 116% year over year and 75% sequentially from last quarter. Our product revenue more than doubled, showing that our transition from services to a product-driven company is firmly underway. We also strengthened our financial foundation. We have approximately $140 million in cash and digital assets and no debt, following the full repayment of the $8 million Coinbase loan. This strong financial foundation allows us to invest in research and development, growing product production capabilities, expand facilities, and accelerate growth across the KULR One platform. We believe we are at the beginning of a super growth cycle in our energy storage and management business, and this optimism is backed by real results. This summer, we launched KULR One Air, built on the same technology foundations as our KULR One Space and Guardian platforms. This July, we created more than 150 KULR One Air battery SKUs, giving us one of the largest made-in-USA battery portfolios in the market. The demand is growing strong. We have over a dozen late-stage opportunities or signed contracts across unmanned autonomous vessels, drones, direct energy systems, and underwater vehicles, and we're seeing an acceleration in customer engagements. At the same time, we're expanding the KULR One platform into AI data centers and telecom infrastructure with new battery backup units (BBUs) and battery energy storage systems (BESS) products, both of which fit in some of the fastest-growing energy markets in the world. With these growth engines coming online, we expect our energy storage and management business to grow tenfold over the next three years. What sets KULR apart is simple. We deliver faster, deliver with higher quality, and we deliver better performance all at a competitive price point. Customers feel that difference immediately. A big part of the advantage comes from our team and our facility in Texas. We design, prototype, build, and test our batteries in-house, all under one roof, which allows us to move with speed and precision. And to meet the rising demand, we're preparing for our next phase of expansion. In 2026, we plan to grow our Texas headquarters to over 100,000 square feet and scale production from a few thousand packs per month right now to more than 50,000 packs per month, supported by new automated battery production lines. This is an exciting moment for KULR. We have the technology, the team, the balance sheet, and the momentum to be America's trusted energy source for these growing applications. I'm very excited that we are entering a super growth cycle as demand surges for advanced energy storage and management products across our core markets. UAVs, drones, and autonomous robots are scaling rapidly, and the KULR One Air and Guardian platforms meet this demand with safe, high-performance, production-ready propulsion batteries at competitive commercial prices. Space exploration is accelerating in both private and public sectors, and KULR One Space positions us as a trusted partner for mission-critical energy systems built to operate in extreme environments. AI data centers need dramatically more energy, and they need it fast. Our KULR One Max platform aligns directly with the industry's shift towards high-density, high-power, and high-reliability backup battery systems. Telecom networks and critical infrastructures are investing heavily in resilience, driving greater demand for certified high-reliability energy storage solutions. And the US is moving decisively towards a domestic, secure battery supply chain, and our Texas-based design and production operation give us a strong strategic advantage. Let me summarize why KULR is winning. Why we're winning right now. First, speed. Our entire value proposition is built on getting high-performance energy systems to customers faster than anyone else. Because we design, engineer, test, certify, and prepare for production under one roof, we can move from concept to manufacturable products in a fraction of traditional industry timelines. That speed has become a decisive advantage as customers demand semi-custom and high-performance solutions delivered quickly and reliably. Second, quality. KULR's heritage in thermal management and battery safety is a core differentiator. We're 40 AS 9100 and ISO 2001 certified. Customers increasingly view quality and safety not as checkboxes but as strategic factors in selecting long-term partners. Third, performance. We use next-generation battery cells, advanced categorization, and validation processes to ensure every KULR One system delivers consistent high-confidence performance, even in the harshest mission profiles. Our focus on thermal stability and optimization is separating us from legacy pack manufacturers. Fourth, safety. Our engineering platform is built on NASA's space-grade safety architecture, applied across the full KULR One ecosystem. As energy levels rise across all applications, safety is becoming one of the most important buying criteria, and this is an area where KULR has a structural advantage. Fifth, secure supply chain. Every KULR One battery we ship is designed, built, and tested in Texas. Customers want a domestic, transparent, and highly controlled supply chain. KULR provides that, supported by strategically secured components and partnerships worldwide. And finally, customer experience and value. We believe that we have the best team in the industry. Because everything is done under one roof, we deliver fast turnaround, better quality, higher performance, and more competitive pricing than our competition. That combination is building customers' trust, winning their business, and is a major reason why KULR is capturing momentum across the markets we serve. Let me highlight one of the most exciting developments at KULR. The launch of KULR One Air. We introduced this platform in July and immediately positioned us in one of the fastest-growing segments of the electrification economy: the UAV, drone, electric aviation, and autonomous robotics. KULR One Air is a purpose-built, high-performance propulsion battery architecture designed specifically for those next-generation systems. The momentum has been extraordinary. In just a few months, the platform has expanded to over 150 commercial-ready SKUs across multiple cell manufacturers and form factors. That makes KULR One Air one of the largest made-in-USA battery portfolios in the market. And we're entering the market at exactly the right time. The UAV and drone battery market is expected to grow from roughly $1.5 billion in 2025 to more than $2.4 billion by 2030, driven by rapid adoption in commercial operations, public sector modernization, and the rise of autonomous robotic platforms across industries. KULR One Air is built on space-grade engineering heritage, delivering safer busbar and connector architectures, lower thermal rise, and high power performance that the series demands that legacy packs simply cannot handle. This performance profile is resonating strongly with customers who operate in demanding mission environments. Demand is accelerating on every front. Today, we have actively engaged with a broad range of commercial and government customers using drones for inspection, logistics, imaging, environmental monitoring, public safety, and advanced robotics. In every case, operators need high-power batteries that deliver safety, power, and reliability at scale. On the production side, we're scaling aggressively. We're currently producing a few thousand packs per month, and with our Texas expansion, we're targeting 50,000 packs per month by mid-2026. And if demand signals accelerate, which we anticipate, we're ready to scale to 100,000 packs per month and beyond. We have the capital, the talent, the supply chain partnerships, and the facility space to execute. KULR One Air isn't just a product line. It's a platform that leverages our decades-long engineering heritage and opens up a multibillion-dollar market for us. AI is creating one of the largest energy transformations we've ever seen, and KULR is stepping directly into the center of this. We're expanding our KULR One Max platform into two massive markets: data center battery backup units (BBUs) and telecom infrastructure energy storage systems. Across NVIDIA GPU generations, power consumption per server is increasing by about 100x. Rack power is climbing from today's 30 to 80 kilowatts to more than 250 kilowatts in some deployments, and NVIDIA's roadmap is pushing towards one megawatt racks by 2028. At these levels, rack-level battery backup units (BBUs) become essential. NVIDIA's latest GB 300 NBL 72 architecture now bakes BBUs directly into the reference design to manage power spikes, ride through micro outages, and reduce reliance on massive UPS systems. As data centers transition to 800-volt high-voltage DC systems, the whole industry is moving this way, including Meta's open compute project. But with high power comes higher risk, and battery safety is now mission-critical. Operators must meet stringent standards like the UR 9540A as they push for greater energy and higher discharge rates. This is where KULR has a unique advantage. Our space-grade safety architecture makes the KULR One Max platform ideally suited for these AI rack applications. We're designing 21700 bays and 5 amp-hour class BBU systems specifically for next-generation NVIDIA systems, while much of the market is still relying on older 18650 cells under 3 amp-hours. We expect our BBU system to be UR 9540 certified and production-ready in 2026, positioning KULR to compete in this multibillion-dollar fast-growing market. AI is rewriting the energy transition, and KULR intends to be at the forefront of that transition. AI isn't just changing data centers. It's transforming the entire power and thermal landscape. Power and thermal have moved from backroom issues to network-wide operating constraints. We're seeing pressure everywhere: on towers, radio, fiber hubs, central offices, and, of course, inside high-density AI data centers. So it's across the entire telecom infrastructure. Recent incidents are reminding everyone why safety matters. One of the clearest examples came from South Korea, where a battery-origin fire disrupted hundreds of government systems and took nearly a full day to extinguish. Events like this are forcing operators to reevaluate their backup power and thermal protection. KULR's role is to help operators safely increase runtime and energy density as they push infrastructure to its new limits. Near term, we're partnering with established backup power providers to deliver safer and higher energy lithium-ion battery packs and thermal runaway mitigation to existing UPS platforms, especially in space-constrained towers, fiber hubs, and central offices. Looking ahead, we'll need to align with platform players and co-development partners to leverage our safety hardware to integrate with recurring business software-as-a-service business models. More to come in the near future. Let me take a moment to update you on our Bitcoin treasury strategy because it continues to be an important part of how we build long-term shareholder value. As a Bitcoin-plus treasury company, we stay close to the digital asset treasury market, and we remain disciplined. We have not taken on any convertible debt to acquire Bitcoin. Instead, our approach is intentional. We're making incremental and economically sound BTC acquisitions through our mining operations while directing our primary capital towards high-value and high-growth energy businesses. Our mining strategy itself creates additional strategic upside. We focus on projects with renewable, low-cost power, and that puts us in direct partnership with mining hosts who are increasingly expanding to high-power computing and AI infrastructure. These relationships give us a front-row seat in new opportunities where KULR can deliver battery energy solutions, BBUs, and UPS systems to support AI workloads and grid resilience. Through Q3, our mining operations produced Bitcoin at an all-in cost of approximately $102,000 per coin. We continue to evaluate projects where we can lower our average cost of acquisition even further. In short, our Bitcoin treasury and mining strategy is disciplined, aligned with shareholder value, and increasingly synergistic with our move into the AI data center energy markets. Let me give you an update on KULR Vibe, which is becoming another exciting part of our portfolio. This year, we'll be working closely with helicopter OEMs and operators across both civilian and government sectors in the US. Vibration mitigation remains one of the most challenging maintenance issues in aviation. It is often described as more of an art than a science. KULR Vibe is changing that. Our system enables maintenance teams to track and balance aircraft quickly, accurately, and without needing decades of experience. The software learns over time, becoming more precise with each balance on each specific aircraft through its built-in learning algorithm. Now that the government shutdown has ended, we expect our US Army program to resume and advance to the next level. On the commercial side, demand is growing rapidly. To support the civilian helicopter market, we're preparing to launch the KULR Vibe app on iOS in 2026 in partnership with a global aviation leader, making this technology more accessible than ever. Let me give you a quick update on Exia. In just a few months of marketing Exia in North America, we've already deployed more than 30 units across multiple verticals. In retail, Exia is supporting workers in distribution centers of a major North American retailer. In logistics, it's operating inside a national 3PL specializing in oversized and bulky items. For industrial distributors, Exia is deployed across three warehouse locations serving the restaurant sector, and in healthcare, we've been running a successful pilot in a nursing home in Montreal, with highly positive feedback from caretakers. We're preparing to launch a second pilot with a major hospital in the Northeast. The momentum is strong because Exia's seventh-generation architecture delivers the right balance of cost reduction, performance, and safety—a combination that's resonating with industrial customers who need productivity gains without compromising worker well-being. As industries look to empower workers, reduce injuries, and bridge labor gaps, Exia allows us to play a strategic role in the future of the modern, augmented workforce. Next, Shawn Canter will provide financial updates. Shawn? Shawn Canter: Thanks, Mike. Overall, the third quarter was another strong quarter for KULR. Our operating activity continues to position KULR for continued growth and future success. With that in mind, I'll touch on some highlights. Revenue grew 116% from the same quarter last year to approximately $6.9 million. Q3 was the highest revenue quarter KULR has ever posted. This grows the streak to the fifth straight quarter KULR has grown revenue over the comparable prior year period. The third quarter also sets another growth record, this one a new trailing twelve months revenue record at $16.7 million. The third quarter grew this streak to the fifth consecutive quarter KULR has set a trailing twelve-month record. For the third quarter 2025 versus the third quarter 2024, product revenue grew 112%, but services revenue was down 74%. Let me make a brief comment on our services revenue. Our services work plays an important role in complementing our products business. But over time, you'll continue to see us focus our resources on products. This reflects our belief that our products business can go after a much larger global market, benefit from economies of scale, leverage our already strong and growing brand awareness, and offers KULR a long sustainable growth trajectory in which to invest. Now let's touch on our operating expenses. In addition to what is in the 10-Q, I'd like to share the trend from the first, second, and now third quarter this year. Both R&D and SG&A have gone down each quarter since the beginning of the year. R&D is down 5.2%, and SG&A is down 13%. Our operating costs reflect the everyday costs to run the business as a public company, find and retain high-quality talented teammates, and make the necessary investments to drive growth in the short and long term. In fact, many of the investments that we've made are bearing fruit and serve as a foundation for the vision that Mike just outlined. We are seeing increases in the number, quality, and size of customer engagements. I'll point out that the payoffs for some of the investments will take longer to realize. It's to be expected that every investment doesn't always play out over a straight line. But we remain confident of their future payoff. One last point on operating expenses. We won't be able to reduce costs every quarter. Our goal is to get to positive operating earnings through strong revenue growth with appropriate investments to maintain the durability of that growth. Now a few points on our balance sheet. At the end of the third quarter, our cash balance was just over $20 million. Our current accounts receivable was approximately $3 million. We held Bitcoin worth approximately $120 million, and our total assets were approximately $156 million. Before I hand things back to Stuart, I'll just add a point to another topic Mike spoke about. We continue to be enthusiastic about the exoskeleton market and technology. Based on our early commercial customer experiences and what we can see in the marketplace, the appetite for exoskeletons appears to be strong. Nike's recent announcement of their own exoskeleton is an example. Notwithstanding that outlook, I do want to state that based on information from German Bionic, we made the appropriate decision to take one-time impairments. We do not anticipate this will materially affect our US commercial sales activity going forward. Overall, we are enthusiastic about another strong positive growth momentum quarter for KULR. Back to you, Stuart. Stuart Smith: Alright. Thank you very much, Shawn. So that again brings us to the question and answer portion of our call today. And, Michael, the first question is for you. And here it is. What are KULR's strategic priorities today as a Bitcoin treasury company with operations? Michael Mo: Yeah. Thank you, Stuart. And this is a question that we are often asked, and I'm glad to answer it. Our priorities are focused and deliberate. Bitcoin treasury is an important role for our treasury strategy. But, operationally, we're very focused and anchored in our core energy management and storage business as well as our vibration reduction technologies. So, because we're seeing both areas present strong revenue growth for 2026. And that's where we're gonna focus all of our attention and our commercial efforts on. Stuart Smith: Very good. Well, Shawn, the next question is for you. What is the long-term strategy for the Bitcoin treasury and mining operations? Shawn Canter: Thanks, Stuart. That's a good follow-up after the prior question about our future. We believe Bitcoin's supply and demand structure supports a favorable long-term pricing outlook. After initially purchasing Bitcoin on the spot market, we shifted in mid-July to growing our position through mining. In addition to accumulating more Bitcoin, mining brings us closer to the data center ecosystem as we explore new opportunities in energy storage solutions. While we're on the topic of Bitcoin, perhaps it makes sense to have a word about Bitcoin's price volatility and even the equity market volatility, which we've all recently seen. We like to maintain a strong cash position and no debt as a buffer to Bitcoin's price and stock market volatility. We don't have any interest payments or debt maturities to worry about. We're focused on growing revenue. We worked very hard to position ourselves to be able to take advantage of volatility rather than to be a victim of it. Stuart Smith: Okay. Thank you for that, Shawn. Michael, next question for you. Given the previous reverse split and the ongoing share price pressure, what outcomes have been achieved in terms of institutional participation and market perception, and is another reverse split being considered? Michael Mo: Well, since the reverse split that went into effect in June 2025, third-party data has indicated that the company has more than doubled its institutional ownership. And today, we can say definitively that there is no basis for considering another reverse split. Stuart Smith: Alright, Michael. The next question is also for you. Several partnerships, government, military, aerospace, and corporate have been announced with limited follow-up. Can management provide detailed updates, expected and how these programs contribute to revenue and long-term enterprise value? Michael Mo: Well, across government, aerospace, defense, and corporate accounts, we continue to make steady progress on the partnerships that we have previously announced. Many of these partners involve multistage qualification, certification, design, testing, and integration processes. And as you know, those cycles often span several quarters, and also, they are governed by confidentiality agreements that limit the level of program-specific details that we can publicly talk about. As we transition to a product-focused company, these engagements are important because they establish long-term technical and operational pathways for products to get inside of these critical platforms where reliability, safety, and performance matter the most. At the same time, as I talked about in my prepared remarks, it's important to highlight that the future growth engine of the company is now being driven by our KULR One Air product and also the entire KULR One platform, which is seeing significant broader and faster commercial adoption. As we enter 2026, we'll keep everybody up to date on the commercial efforts around our KULR One Max and AI BBU, and also telecom applications as well. These new platforms are expanding our addressable market into multibillion-dollar markets. Stuart Smith: Alright. Shawn, previously KULR has issued investor letters. Mike has said he would try to communicate more with shareholders. Is this still a priority? And if so, how will you be doing it? Shawn Canter: Sure. Well, as Mike just mentioned, due to the nature of many of our government, defense, and even commercial customers and the programs we work on, we're often limited in our ability to disclose contracts and progress until later milestones occur. With that said, as we've indicated before, we hear our shareholders and their desire for more communications. Early 2026, we will write an investor letter in addition to everything else that we do to communicate. Going forward, at least once a year in an investor letter, we'll share a more intimate account of what we're seeing and doing. We'll use it as a reflection on where we are and a window into what may lie ahead. In 2026, we're looking forward to our next open house at our headquarters in Texas. We're looking forward to attending more events where we can speak about our progress. We're looking forward to increased coverage from research analysts. I guess it's worth noting that, as everybody knows, the analysts independently make those decisions. We don't. And, of course, where we can publicly announce new contracts, customers, and programs, we certainly will. Stuart Smith: Shawn, the next question's also for you. What concrete steps is management taking to stabilize the stock price? Shawn Canter: Well, Stuart, our primary focus is squarely on accelerating revenue growth in our core energy storage and vibration markets. The investments we've made are showing real traction. As we've mentioned earlier, we are securing meaningful business in autonomous systems and expect additional wins ahead. As Mike mentioned, we're pushing into infrastructure with our market-leading energy storage and management solutions. We also are advancing KULR Vibe towards a scalable, globally marketable platform. It's probably worth noting, also that our Bitcoin treasury strategy has sort of touched on this question too. Both Mike and I have mentioned at the end of the third quarter, we held about $120 million worth of Bitcoin. We have intentionally taken a conservative approach to our Bitcoin holdings. We have no debt or other complex structures on our balance sheet, unlike others who have levered up their balance sheets to acquire Bitcoin and have experienced or perhaps still own the risk of leverage in volatile markets. As Mike mentioned, we believe in the long-term value of Bitcoin and its unique fixed supply and increasing demand characteristics. Individuals, institutions, and governments are buyers of Bitcoin. The regulatory environment has moved from a headwind to a tailwind. Increased domestic and international economic and political macro risk and resulting volatility on global currencies appear to further contribute to Bitcoin demand. Let me put some numbers associated with this just to understand the scale of the demand trend. And I asked AI for some help here. In 2011, there were an estimated 100,000 active Bitcoin addresses. In 2015, an estimated 6 million. In 2020, the estimated number of active addresses increased fivefold to 30 million, and an estimate for November 2025 indicates the number of active addresses to be approximately 60 million. That's a 58% compounded annual growth rate. It's not easy, and one doesn't find every day, or one can find something that grows 58% a year for fourteen years. So simply, fixed supply, strong growth demand trend, all else equal, we think this suggests over time the price of Bitcoin should rise and along with it, the value of our holdings. Historically, we acquired Bitcoin via the spot market, more recently via mining operations, and as Mike mentioned, one of the reasons for this is the strategic position for KULR to both acquire Bitcoin and get insight into the infrastructure energy solutions market. Overall, Stuart, over time, we believe our stock price should reflect the results of our strong operational execution. Stuart Smith: Thank you for that, Shawn. And this really dove into that. Here is the next question, and I will direct it back towards you again, Shawn. Given so much that has happened at KULR in the last year or two, how is management viewing these changes in relationship to revenue growth and, ultimately, stock price appreciation? Shawn Canter: Sure. Well, that's a great question. A lot certainly has changed over the last couple of years. I guess, again, it's worth stating again, our focus is on growing 2026. We believe that the market demand number and nature of customer engagements and the engagement sizes will show up in scaling durable revenue. From programs that took our batteries into outer space and to the bottom of the ocean, we're now applying those same technologies, insights, and learnings to higher volume programs related to autonomous vehicles covering air, land, and sea. Another example of change that took place over time is our decision to implement and then consolidate our facilities into just one location in Texas. As Mike mentioned earlier, we're already seeing demand signals indicating that we need more space to accommodate the customer engagements and growing programs that we see heading our way. Additionally, as we've already touched on, we're exploring how our products can be applied to even larger global infrastructure markets. Again, all of this to say, we see revenue materially growing in 2026. And as we talked about in the prior question, while we don't predict ours or anyone else's stock price, it would seem that it would stand to reason. KULR's stock price should follow as revenue grows and we gain further scale. Since we're talking about change, I guess I'll add one more observation even though we have touched on it already. Looking at our balance sheet and how it has evolved over the last two years. Today, we have no debt. We have over $100 million in liquid assets. We are seeing real traction across products and markets. We can and are investing in our real durable growth. Thanks, Stuart. Stuart Smith: Thank you, Shawn. And Michael, we're gonna close out the Q&A portion with this final question directed towards you, and it is a long one. It's in regards to the KULR Intelligent Data System, which currently generates high-fidelity vibration and thermal telemetry at scale from active battery deployments. And it says it's a multipart question, actually. Will KULR in the future, one, tokenize the aggregated dataset on a public blockchain with verifiable provenance, and two, license access to leading AI labs for training foundation models specialized in battery physics, electrochemistry, and predictive safety? If so, what is the minimum data moat size in terabytes of raw sensor streams that KULR believes would be required to position the platform as the de facto Bloomberg terminal of battery physics? That's in quotes, that last part. And then he has this comment. Thank you again for your vision in building the data backbone of safe electrification. So, Michael, will you handle that one, please? Michael Mo: Yeah. No. Thanks, Stuart. This is actually a really interesting question. Actually, it kind of relates to AGI, artificial general intelligence. It's something like that type of question. You can think about this question or answering this in three buckets. First is how much data you can get from individual models of battery cells and packs. Second is how many of these cells and packs do you have in operation to get the data moat size, terabyte data that this investor is referring to. And third is what you do with that data both as a primary and secondary application for these batteries. We can probably spend hours talking about this in general, but the first point is that some of these proprietary testing and categorization techniques that we have, such as FTRC, IgM, IFC trigger cells, and etcetera, we can get some of the most detailed and quantitative data on thermal runaway and safety behavior on both the battery cells and packs that we're interested in building for KULR battery packs. This will probably not include all the battery cells in the world, but just focus on the cells relevant to our applications and our customers. Then it's to get to scale by deploying as many packs as possible into the field and continuously monitor them. That's where I say the EV vendors will have a tremendous advantage because they have the largest scale deployments, and the EV BMS monitor all the cells. We can do similar with our KULR One battery platform. And that is actually becoming a business model question on, you know, do you sell the battery packs, or do you lease them out and charge for the use of the energy consumption through the batteries as a subscription service? So, I think the shareholder's question is actually leaning towards the second case. So if your business model is energy as a service, then you could have data on primary application usage and potentially second-life applications for these battery packs as well to maximize the lifetime value of these batteries. I actually really believe that energy as a service will be the business model for telecom, for AI data centers, and advanced electric mobility applications. They all have different requirements for the cell performance and lifespan of the batteries. So you can price something for each one of them as a primary application. And then you can eventually take possession of the battery and then apply second-life applications for another industry. And in that case, you can maximize the economic value of the battery packs and also minimize waste. In those applications, the Bloomberg terminal analogy for battery information and an AGI-like monitoring system, I believe, will be the killer app. Stuart Smith: Well, Michael, thank you for that. I want to thank both Michael Mo, CEO of KULR Technology Group, as well as Shawn Canter, the CFO of KULR Technology Group. That concludes our call today. And with that, I'll hand the call back over to our operator. Thomas. Thomas, the call is yours. Operator: Thank you. This does conclude today's webcast and conference call. You may disconnect at this time. Have a wonderful day. Thank you once again for your participation.
Operator: Thank you for standing by, and welcome to the Argosy Property Limited FY '26 Interim Results Conference Call and webcast. [Operator Instructions] I would now like to hand the conference over to Mr. Peter Mence, CEO. Please go ahead. Peter Mence: Thank you, and welcome. Thanks for joining us for this presentation for the F '26 half year results. The results, with due respect to Sean Fitzpatrick, very much looked like a game of 2 halves. The first few months were very much characterized by a lack of activity and very little lease inquiry. This gave way quite abruptly in the end to a significant increase in inquiry levels and more recently, to significantly improved activity. Moving through to the results summary on Slide 5. The revaluation at $31.3 million was principally driven by the extended lease of 9 years to MBIE at the Stout Street development. Now you'd be aware that I've been talking about that for some time. It actually took just over 5 years to negotiate, but it includes a reasonably exciting decarbonization project, which is jointly conceived between Argosy and MBIE, and we'll be starting work on that fairly shortly. The NTA lifts slightly on the strength of that revaluation to $1.56 and the gearing sitting just above the midpoint in the target range. We're pretty comfortable at this point in the market to be at the upper end of that range with some sales still to come. We've reached agreement to sell 143 Lambton Quay, usually known as TPK at book value and that will remove the vacancy from that building. The sale is to a private buyer. It is expected to be unconditional prior to the Christmas break, not much time left for that. And it's expected to settle before the end of the financial year. Vacancy is obviously a little higher than we would have liked, but with the significant increase in inquiry levels that we're now fielding, there is cause for optimism in the year ahead. We have still been realizing some rental growth on the way through and the 9-year extension to MBIE has obviously had a good positive impact on the weighted average lease term being the largest lease in the portfolio. The tenant retention rate remains solid, but we often see that in a quieter market where tenants are more likely to stay put than to look at a change. On Slide 7, the weightings are showing actually little change since I last spoke to you. They remain target -- close to the target levels with current activity in terms of sales and development moving us closer to those targets. The revaluations were characterized by a lack of evidence with respect to both sales and leasing. But post balance date activity is suggesting a market in line with the valuations with some evidence of the expected firming in the cap rates driven by the lower interest rates, albeit that that's relatively modest at this point. The economy in general remains relatively weak in both Auckland and Wellington, and there remains a risk that there will be tenant failures, although thus far, these have been significantly fewer than we had expected. Of note, there is that the cap rate comparable for the last year excludes the Marketplace building as this was only valued on a discounted cash flow basis at that time being largely vacant. This building has seen some significant change. You will have been aware of the change in the earthquake-prone building announcement that the government is working through. That has resulted more quickly than we had expected in a change to the tenant interest in NBS ratings. Obviously, that is a big positive for this building. And as a result, we've seen a significant increase in lease inquiry and recently signed 2 additional tenants into the building. The value-add and green developments, Mt Richmond is progressing as planned with no orange lights so far. Both the building platforms have been completed and leased to existing tenants elsewhere in the portfolio. But of the rest of the list in that value-add schedule, there is nothing that is pending out of those properties over the next 12 months. Forward inquiry for the Mt Richmond site has improved in line with the market, but there's nothing to announce at this point. Looking at 224 Neilson Street, both buildings have been completed on budget, on program, and we're very pleased with the quality of the construction, thanks to Haydn & Rollett on those sites. The first building, obviously, was leased when we last announced. The second building, we've just moved to agreement to lease stage with a very good quality logistics operator on a new 10-year lease, and we have a backup negotiation still current. So pretty positive news on that one. It is fair to say that prior to October, leasing inquiries were sparse, and that was concerning at that time. It has been much welcomed to see the increase in inquiry levels coming through. With 8-14 Mt Richmond, the project is literally smack on target. It's progressing well. There is now no further leasing activity required for this development on site with both the platforms and the building that's under construction all committed. We did well with value increase on the land prior to the development, and we expect to make solid profits on the remainder of the development, thanks principally to a very strong location. I'll hand over to Dave to take us through the financials. David Fraser: Thanks, Peter, and hello, everyone. So the first slide from me, as usual, is the gross property income waterfall. So gross property income was $69.4 million compared to $66.6 million last year, up by 4.1%. There were some strong rent reviews in the period, and there's more detail on that in the appendix as usual. Most reviews were fixed with an annualized increase of 2.6%. 29% by rent were market reviews with an annualized increase of 7.7%. Income from developments offset the effect of the disposal of Forge Way in March of this year. So on to the next slide, net profit for the half year. Net property income was up by 4.9% on the prior period at $61.2 million. The property expenses were slightly lower as rates increases were offset by lower insurance charges. Our insurance captive has been a very successful initiative and allowing us to market to reinsurers directly. In particular, we've seen some reasonable reductions in premiums for the Wellington market, which you'll know as gross. Expenses were flat in the period. Management expense to NPI improved to 9.2% from 9.8% in March and the management expense ratio improved to 51 basis points from 56 basis points at March. Net interest expense was down on the prior period. Lower rates and higher capitalized interest more than offset a negative volume variance in the period. Peter's covered the revaluation gain, and we sold a small sliver of land at Ti Rakau Drive for $230,000 in the period. We'll cover off tax in the next slide, but net profit after tax was $61.1 million compared to $33 million in the prior period. The next slide covers net distributable income. After the usual fair value adjustments, gross distributable income was $36.8 million compared to $31.6 million last year. That's up by 16.4%. Current tax expense was $6.1 million compared to $4.1 million last year. This is mainly due to higher taxable profit. There's been a lot of information published about the government's investment boost program. There was little impact from this at the half year, but we'll receive a $5.7 million deduction in the second half of this financial year as a result of the practical completion of Warehouse A at 224 Neilson Street. So last year, we were complaining about the removal of depreciation deductions on buildings, but we're obviously a lot happier this time around. So on a per share basis, net distributable income was $0.0358 per share compared to $0.0325 per share last year, up by 10%. And this slide covers adjusted funds from operations or AFFO. The AFFO adjustments were reasonably consistent with the prior year. Maintenance CapEx is up by $1.1 million, mainly due to a number of smaller office fitouts across the portfolio. So AFFO was $29.6 million compared to $26.8 million last year, an increase of 10.4%. On a per share basis, AFFO was $0.0345 per share compared to $0.0317 per share last year. The next slide covers the movement in investment properties. Investment properties increased by $70 million compared to March '25. As Peter already talked about the reval gain of $31 million. The balance was mainly spending on developments, principally Neilson Street and Mt Richmond. The portfolio after deducting the right-of-use asset in respect of the ground lease at 39 Marketplace was valued at $2.2 billion at 30 September. The next slide covers debt to total assets. The balance sheet remains in good shape, and we have capacity to complete developments and acquire assets as evidenced by the recent acquisition of 291 East Tamaki Road, which is a very exciting future development opportunity, and this property settled in October. The debt to total asset ratio was 35.9% at 30 September compared to 35.7% at March and 37.2% at 30 September last year. As at 30 September, 7 properties were regarded as noncore with a book value of $148 million, and we'll sell these properties as conditions allow. And Pete's already mentioned one sale that we hope to complete this year. The next slide covers interest rate management. It's been great to see rates continue to decline during the period. Our weighted average cost of debt reduced to 4.8% compared to 5.1% at March. The interest cover ratio improved slightly to 2.6x, well above the bank covenant of 2x. The level of fixed rate cover was 57%, down from 63% in March. And we continue to add cover as appropriate, and we've added 3 swaps in October to a value of $80 million at around the 2.5% mark. So we'll provide a lot more color on our hedging profile in the appendix. The next slide looks at our debt profile. We refinanced our bank debt during the period, pushing out tenor, including a new 7-year tranche of $100 million. The nearest bank expiry is now October 2028. Bank margins remain extremely competitive, as you'll see from the appendix. The nearest green bond matures next March, and we'll refinance that later this financial year. And the final slide for me is on dividends. We announced this morning a second quarter dividend of $0.016625 per share with imputation credits of $0.002633 per share attached. The record date is 3 December and the payment date will be 17 December. There's no change at this stage to the full year guidance of $0.0665 per share. The DRP remains open for shareholders to participate in. I'll now pass you back to Pete for a leasing update. Peter Mence: Thanks, Dave. I guess most importantly is the leasing environment has been challenging, but has recently improved, is looking a lot more promising for the year ahead. A couple of the ones that really stand out that we did achieve. Obviously, the MBIE lease extension dominates this half year result. And there was also a 6-year extension of the New Zealand Post lease at 7WQ. So we've got quite a bit of activity still coming through in that space. And what is really notable if we look at the forward demand is the deficit of certified green space that is going to be evident in the market over the next 3 to 4 years. This is particularly so in the industrial space, but also with commercial offices in both Auckland and in Wellington. It's really only large-format retail where we're seeing virtually no demand for sustainably rated space. Looking at the lease expiry profile. Clearly, this has changed a lot with the MBIE lease dominating this chart for the last 6 years. So pushing that out by the 9 years has made a big difference to that. And obviously, it leaves the March '27 year with modest expiries. The year through to March '28, the largest expiry there is General Distributors or Woolworths at the 80 Favona Road property in Mangere. Now -- we've obviously been working with general distributors on the way through that. And the reality is that we are not expecting them to be able to leave during that time. So they will still ultimately depart the site. It will still ultimately be a redevelopment, but the expectation is that, that expiry will be pushed out into later years. So it's certainly not on the current site. Once that is taken into account, then we're sort of looking at that 10% or less for the next 5 years. So not a big leasing demand coming forward. Looking at the 3 principal sectors, as I mentioned, overall, the expectation is a deficit of supply of certified green space for both industrial and office. Large-format retail is actually performing relatively well at this stage. For us, that is principally the Albany Mega Centre, where we're going through some remerchandising. We've recently opened the new JD Sports facility over there. That is trading extremely well and has provided some additional gravity to the site. In addition, we are in the process of -- in fact, we have conditional lease agreement for food operators over there, and we have managed to re-lease pending vacancies with a trade up on the site. So that site is going pretty well. Turning back to the industrial space. We are looking at a period where demand is returning. That activity is now evident, and it is interesting that it is dominated by international tenants. And as a result of that, we're seeing that increased demand for green-rated space coming through. So we do expect to see '26 being a busier space in industrial leasing. In the office space, the trends that we've been looking at over the last few announcements continue in terms of organizations looking to adjust the workplace to encourage office workers back in. I don't know any CEOs in the portfolio who don't want all their staff back in the office 5 days a week. We are conscious that we'll be moving into an election year when we come back from Christmas. That characteristically in Wellington gives us a quieter period, particularly with Crown tenants, but we've had very little activity from Crown tenants in Wellington over the last year in any event. Wellington potentially is overdiscounted at the moment. We do have excellent inquiry levels for our building at 147 Lambton Quay with around 5,000 meters of space available in that building. There's only one 500-meter floor that we don't have negotiations on currently. So qualified inquiry is very strong for that building. Obviously, that is from nongovernmental tenants. So turning to what we're looking at for the period ahead. The domestic economy is expected to gradually improve. And the reality is that it is still relatively challenged in both Auckland and in Wellington at the present, but inquiry levels and activity levels are improving. The interest rate situation is obviously positive, and the expectation is that we will ultimately see cap rate compression as a net result of that. Certainly, we're starting to see just in the last 2 months, increased levels of inquiry, particularly from offshore. Dave's mentioned insurance levels. But as premiums fall, that is also a positive for the market, and we're seeing that start to come through in the interest levels. So we're still dealing with relatively strong bottom-up fundamentals with the industrial sector. And with both industrial and commercial in Auckland and in Wellington, we've been dealing with a period of relatively modest supply levels, and that should be positive for us over the year ahead. So looking forward, the calendar year for 2026 should see a gentle return to business for the sector. And it's fair to say that Dave and I and the Board are reasonably comfortable with the way this business has weathered the last recession. Happy to take questions. Operator: [Operator Instructions] your first question comes from Vishal Bhula from Jarden. Vishal Bhula: A couple of quick ones for me. Just with your NPI coming in at $61.2 million, I mean, it's up 5% on the PCP as well as second half '25. There was no acquisition activity in the half, and you did lose the rental from Forge Way as well as maybe some rental on the Mt Richmond development. So the growth here just seems really strong. Is there anything specific to call out? Like was there any one-off income from 4 Henderson Place or anything like that? David Fraser: Yes. There's 2 things to call out. One is a significant rental uplift from one of our tenants in terms of a rent review, which flowed through into this year. And also, we did receive a surrender payment in respect of an industrial tenant. So in terms of the NPI line impact was $1.1 million. But the good news for that particular property was that we were able to re-lease the property within a month. So it's something of a bonus, I guess. Vishal Bhula: No, perfect. And then just on your office occupancy, you've put it in the presentation at 91.6% by income when at FY '25, that was 88%. But on a vacant space on a square meter basis, you've got 25,000 vacant space versus 15,000 at '25. So on an occupancy basis, you're down to 83% from 88%. So I just don't quite get how those percentages can be up on an income basis. Peter Mence: I think, Vishal, that will be principally down to the 143 Lambton Quay building, where it was effectively over-rented. Vishal Bhula: No, thanks. That clears that up. And then maybe could we just get a bit more color over 143 Lambton and that sale process that you know that is currently conditional? Peter Mence: Yes. I'm not -- I'm pretty tight. So I can't tell you a hell of a lot more, but we do have an agreement for sale sitting there around book value. It is a very short due diligence period. And the domestic private buyer knows the building very well. Vishal Bhula: I won't push more on that then. And then just a couple of short ones for me. Just East Tamaki, are those capital works now finished? And is it still 58% occupied? Peter Mence: Yes. The works are now finished. It did take a lot longer, and you'd be aware that we struggle with a delayed settlement from the vendor unable to meet their obligations. But -- so we've got that through now. Leasing activity is pretty good on that site. Inquiry levels are good and strong. So we're not expecting that to cause any particular issues for us. Obviously, they tend to be shorter-term leases because it's a development site for us and because it's secondary quality buildings that are sitting on the site, obviously. So we tend to get shorter-term leases from that, and that is having a negative impact on the weighted average lease term as it currently sits. Vishal Bhula: And then just a last one on me. Your guidance, there's no mention of the payout range this time around, whereas previously, you were expecting to be towards the top end of your policy range. Are you still kind of targeting that or the investment, those benefits coming through kind of see you push down to the middle of that range? David Fraser: Well, I think it will be in the top end of the range, but below 100%. Operator: Your next question comes from Nick Mar from Macquarie. Nick Mar: Just on Stout Street, can you just talk through what the potential rental step-up is at the market review that's coming up next year? Peter Mence: So we've got a rental review pending. I can't go into too much detail, obviously, on that at the moment, but the expectation is for a good solid lift out of that. But we've treated that completely separately to the renewal documentation. Nick Mar: No, that makes sense. And then in terms of the CapEx that you're spending, how did you look to, I guess, rentalize that as part of the process? Peter Mence: That's been a 5-year project working with MBIE in terms of what they wanted to achieve with the building and how we were able to add value. It really is the total being greater than sum of the parts. So it's been full disclosure with them on the way through with the work that we wanted to do, the results they wanted to see and how we rentalize that on the way through. So very much part of the negotiation over the 5-year period to make sure that it's stacked up. Nick Mar: Can you give us an indication of what rentalization rate you effectively achieved on the $13 million? Peter Mence: I'm looking at Dave, and he's not looking at me. David Fraser: Well, I mean, the reversion that Pete is talking about is about $1 million is what we're expecting in July next year, and the capital spend is about $13 million. So you're looking at it... Nick Mar: But did Pete just say that that's a separate impact versus the renewal in itself because [indiscernible] market view? Peter Mence: Yes. So it's both, Nick. Obviously, the market rental has to be landed out of the reversion rental for the upgrade to the building. Nick Mar: So you're saying that, that $1 million is on top of the market rental? Peter Mence: Yes, that's right. Obviously, you're looking at -- just so we're clear, we're obviously looking at a situation in Wellington where market rentals have actually declined marginally over the last 12 months. Nick Mar: Yes, but it comes down to the time between the last reviews... Peter Mence: You're all over it, Mate. Well done. Nick Mar: Yes. Okay. And then on divestments, you've taken a few other assets to market, particularly some of those new market assets. Can you just talk us through what's happened there, whether they're still in train or whether you've pulled them given lack of demand or anything else? Peter Mence: Yes. It's fair to say that we didn't get a great response. The numbers that we got were less than book value, looked at it and said, hey, there's no urgency to move these assets at the moment. They're still yielding quite well and the risk wasn't there. So we -- they remain on the sales list. We've pulled them from active marketing. If the market looks the way I expect it to look when we come back, we'll probably relaunch those to the market in February. So the intent is still to move them on, but not at any cost. Nick Mar: Did your updated book values reflect the feedback from the market on them? Peter Mence: Yes, yes. As I think I mentioned earlier -- I hope I mentioned earlier, the valuers have really been dealing with a paucity of evidence as at September. It's only really since September that we've seen any improvement in the activity levels. Nick Mar: Okay. And then just on valuations, have you got any initial indication of the amount of seismic allowances that are sitting in the portfolio, which may be removed as the sort of new earthquake legislation moves through? Peter Mence: Yes, that's a slightly tricky one to address. Obviously, as far as this building is concerned, then you're dealing with a straight removal because there's no requirement to do that. But with the change in the seismic rules, it's important that we all remember that, that doesn't actually change the NBS rating at all. It changes the obligation to do anything about it. So what has been surprising, I think, is the degree to which the leasing market has stopped focusing on that in the Auckland market. So the requirement to actually do it commercially is probably less. But where you have a situation where you've got a building that is less than 50% NBS, that doesn't actually change its NBS rating. And in circumstances, tenants may still require that upgrade to go through. So it's very much a case-by-case analysis. It is this building principally where you're simply drawing a line through it because it's a ground leased asset. And therefore, it is only the building with a lease expiring in 2039, it is cash flow management. So there is no requirement to spend any money on the building at all. Nick Mar: And as context, what kind of delta is sitting in that building? Peter Mence: This building -- the pure seismic upgrade was expected to be around $18 million. Operator: Your next question comes from Bianca Murphy from UBS. Bianca Fledderus: So first question is just around your comments around inquiry levels picking up significantly so far over the last couple of months. And I know it's still early days, but could you just talk about how much of that interest is actually turning into signed leases? Peter Mence: Yes. Good question, Bianca. At the moment, we've had some really good results, but I don't know whether that's generally reflective of the market. We've had Intrepid Travel moving downstairs in this building. We've recently signed an architectural practice for the other end of the building. So there was a lot of improvement in inquiry levels, but it's only relatively recently that we've actually seen that lock away. It's only relatively recently that we actually signed the first lease up at 147 Lambton Quay. So it's -- inquiry levels obviously have to come first. We had the improved inquiry levels for, say, 8 weeks before we actually started to get results, but the conversion rate looks like it's improving over the current period. Bianca Fledderus: Okay. That's helpful. And then just on your interest expenses. So yes, pleasing to see that drop, of course, as a result of lower rates and higher capitalized interest. Can you give us a sense of where you expect interest expenses to land for the full year? David Fraser: Well, it's going to come down further because -- if you look at our most recent rollover of our -- of the 90-day rate we rolled over in September, the base rate was sort of 3.1%. When you look at the base rate now, it's under 2.5%. So -- and we've got over $300 million of floating debt at the moment. So rate is going to keep coming down, actually, which is obviously a huge positive for the business. Operator: [Operator Instructions] Your next question comes from Rohan Koreman-Smit Forsyth Barr. Rohan Koreman-Smit: Just going back to that AFFO, you said you'd be at the top end of the policy range. Are you not taking the investment boost deductions through AFFO? Is that how we should read that? David Fraser: No, no, we are. We are. Rohan Koreman-Smit: [indiscernible] down further, what's the other moving part there to offset $6 million of deductions? David Fraser: Well, there's -- the offset is things that are going to really going to move into next year. So we've got lower repairs and maintenance deductions than normal because the lease to Neilson Street, the incentives to that lease may move into next year. There's a number of other things that impact the tax line, which effectively will flow through into next year as opposed to this year. Rohan Koreman-Smit: And you mentioned Mt Richmond, I guess, the first building plus Stage 2. You said it was committed. I think what's the comment there, but there's 2 pad sites, right? You haven't committed to building sheds on those pads yet, have you? Peter Mence: No, no. So what is committed is the first building Viatris that is obviously leased. Then we created the building platforms for 2 further buildings, and we said at the full year result that we wanted to get those completed and leased. So those have been leased as hardstands, not as buildings. Rohan Koreman-Smit: Okay. Okay. So they're leased as hardstand. So that suggests that development leasing is a bit slower contrary to other comments around pickup in leasing inquiries if you're prepared to lease those as hardstands because unless you've got some development break clause, I was just wondering about inquiry and when the, I guess, CapEx -- the balance of the CapEx at Mt Richmond because there's a reasonable chunk there may kick off. Peter Mence: Yes, there is -- look, Mt Richmond is going exactly as per the plan. Obviously, it's a progressive development that we've been looking at pulling those buildings in. And it's probably fair to say that current inquiry is stronger than we would have expected, but we still don't see that we'll be moving ahead faster than we planned on that site. So the reality is that things like the DRP are going to pay for that development pipeline as it comes through. Rohan Koreman-Smit: Okay. And on that, you're talking to cap rates improving, leasing seems to be going well. There's good tenant demand. You expect to be able to sell noncore assets. Do you think the DRP is being overly conservative at this point in time? It's just a very expensive way to raise money where your share price is? David Fraser: Well, it's not expensive actually. I mean the current share price, very, very limited discount. You're applying that to brand developments, it's accretive. So I would argue that it's not an expensive way of raising capital at all. Rohan Koreman-Smit: Okay. We'll have to agree to disagree on that one. And then just last one, Marketplace. The previous strategy was to sell it to a -- or potentially turn it into a hotel, I believe. But now you're leasing it up. Has the earthquake rules materially changed, I guess, how you view the exit on that building? Peter Mence: The earthquake rules have materially changed the way we view the exit on the building, yes. So obviously, it's going to be a lot more feasible to manage the cash flow into a positive situation through until 2039. But we looked for a hotel conversion on this. We had really good demand for it, and then it went completely flat. And the same happened in 143 Lambton Quay, where that building we felt was going to make a very good hotel. All the designs came through looking really positive. And then the hotel market, especially in Wellington, went completely flat. I think government travel -- government-related travel in Wellington was down 54%, I heard yesterday. So that market simply got removed from us. The -- obviously, the -- we did put quite a bit of work into the seismic review situation to try and get a more rational risk-based approach, and that's been extremely positive as far as this building is concerned. Rohan Koreman-Smit: And then last one, just on 147 Lambton Quay, I believe that's in that noncore pipeline, but has a decent amount of vacancy. You talked to some potential inquiry. Kind of how do you see that one progressing given it is kind of probably a net drag on the earnings at the moment? Peter Mence: Yes, I expect it will turn into being a positive very shortly with the solid lease inquiry that we're fielding at the present. So expect that will be fine, but it remains on the sale list. It's just not in the immediate future. Operator: There are no further questions at this time. I'll now hand back to Mr. Mence for any closing remarks. Peter Mence: Very good. Well, just to say thank you very much for joining us. We've put these results together, as I said, very much a game of 2 halves, and we're expecting that the period ahead will be quite remunerative. Obviously, with the interest rates coming down, the expectation is that cap rates will firm and recent research suggests that, that is already happening. So it will be a case of seeing what sort of evidence we've got by the time we start doing the 31 March valuations, but the indications are positive at this point. Thanks very much. David Fraser: Thank you. Operator: Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.
Operator: Ladies and gentlemen, thank you for standing by, and welcome to the Qfin Holdings Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please also note today's event is being recorded. At this time, I'd like to turn the conference over to Ms. Karen Ji, Senior Director of Capital Markets. Please go ahead, Karen. Karen Ji: Thank you, Ken. Hello, everyone, and welcome to Qfin Holdings Third Quarter 2025 Earnings Conference Call. Our earnings release was distributed earlier today and is available on our IR website. Joining me today are Mr. Wu Haisheng, our CEO; Mr. Alex Xu, our CFO; and Mr. Zheng Yan, our CRO. Before we start, I would like to refer you to our safe harbor statement in the earnings press release, which applies to this call as we will make certain forward-looking statements. Also, this call includes discussions of certain non-GAAP financial measures. Please refer to our earnings release, which contains a reconciliation of non-GAAP financial measures to GAAP financial measures. Also, please note that unless otherwise stated, all figures mentioned in this call are in RMB terms. In addition, today's prepared remarks from our CEO will be delivered in English using an AI-generated voice. Now I will turn the call over to Mr. Wu Haisheng. Please go ahead. Haisheng Wu: [Interpreted] Hello, everyone. Thank you for joining us today. In the first 9 months of this year, China's economy and the consumer finance sector have both faced persistent headwinds. The outstanding balance of short-term consumer loans has declined for 3 consecutive quarters on both a year-over-year and quarter-over-quarter basis. Going into Q3, the industry is undergoing a series of regulatory-driven adjustments to improve consumer financial inclusion. We believe these changes will strengthen the sector's long-term prospects and sustainability, paving the way for healthier and more structured competitive landscape. As such, we view these adjustments not only a challenge but also an opportunity for Qfin. As a leading credit tech platform in China, we continued to prioritize risk management, advance our AI capabilities and deepen collaboration with financial institutions. We believe these efforts will enable us to better serve inclusive finance needs and strengthen our leadership in the industry. Now I'll walk you through the progress we made in Q3. By the end of the quarter, our AI-powered credit decision engine and asset distribution platform served 167 financial institutions, delivering efficient, intelligent digital credit services to over 62 million credit line users on a cumulative basis. To navigate the evolving regulatory environment, we dynamically fine-tuned our risk strategies to maintain a healthy balance between risk and growth. As a result, total loan facilitation and origination volume on our platform reached RMB 83.3 billion in the quarter, broadly in line with Q2. Despite the macro headwinds, we delivered steady financial results. Non-GAAP net income reached RMB 1.51 billion, while non-GAAP EPADS on a fully diluted basis, came in at RMB 11.36, reflecting our solid profitability and operating resilience. On the risk front, funding liquidity in the high-price segment continued to tighten in Q3, leading to an uptick in overall delinquency risk across the industry. To stay closely aligned with evolving market conditions, we further tightened our credit standards and optimized our customer mix by increasing the proportion of high-quality borrowers. In addition, we proactively refined our risk models and completed 611 iterations, implementing differentiated risk management and distribution strategies. On the collection front, we improved efficiency through smarter resource allocation and deeper technology integration. For example, we allocated more resources to high-performing collection partners to ensure sufficient capacity and better productivity. For customers willing to repay but facing temporary financial difficulties, we offered measured concessions and flexible repayment options. In addition, we were able to assess repayment intent and capacity in real time through large language model algorithms, enabling more precise segmentation and more agile resource deployment. These efforts helped us maintain steady progress even as the broader industry faced rising collection pressure. Our FPD 7, a leading risk indicator for new loans declined in September versus August. Since October, given the new regulations and heightened industry self-discipline initiatives, we expect risk indicators to remain volatile in the near term with current levels above historical averages. That said, having navigated multiple industry adjustment cycles in the past with prompt and effective responses, we remain confident that we can once again bring risk levels back within a reasonable range in a timely manner. On the funding front, we have been white-listed by all of our active financial institution partners, ensuring a smooth and stable cooperation going forward. Despite a relatively tight funding environment driven by liquidity conditions and policy factors, we maintained the industry-leading pricing power and secured ample funding supply at stable costs. Our average funding cost for Q3 held steady from last quarter, remaining at historical lows. In the ABS market, we issued RMB 4.5 billion during the quarter, up 29% year-over-year with issuance costs down by another 10 basis points. For the first 9 months of 2025, total ABS issuance grew 41% year-over-year to RMB 18.9 billion, further optimizing our funding structure. Looking ahead, we expect our funding costs to remain largely stable in the coming quarters. For user acquisition, we continue to diversify our channels, enhance targeted operation and improve efficiency compared with last quarter. The number of new credit line users grew by 9% to $1.95 million while average cost per credit line user declined by 8%. The number of new borrowers also grew 10% sequentially to $1.35 million. We have seamlessly integrated convenient and efficient credit services into diversified channels and scenarios, including short-form videos, e-commerce, mobility, food delivery, and financial services. In Q3, we further expanded our embedded finance network, adding 7 new strategic partners and extending our presence across Internet and financial institution platforms. As a result, the number of new credit line users from the embedded finance channels increased by 13% sequentially, while loan volume up by 11%. For placement strategy, we remain focused on onboarding high-quality users and optimizing our overall user mix. As such, our long-term strategic priority will focus more on our high-quality customers. Supported by AI-driven data models, we expect to gain deeper insights into user needs and behaviors and further refine products and services. This approach will allow us to deliver a superior user experience and improve both our unit economics and user lifetime value. We believe this focus is critical to strengthening our long-term competitive edge and cementing our leadership position in the industry. In our Technology Solutions business, we continue to advance our AI plus banking strategy, empowering financial institutions in their digital and intelligent transformation. During the quarter, loan volume supported by this business achieved exponential growth, up by roughly 218% on a sequential basis. Our collaboration with banks continue to deepen, expanding from their proprietary channels to a broader range of Internet scenarios where we provide end-to-end technology support in customer acquisition and risk management. Powered by our FocusPRO credit tech platform, our proprietary solution for SME lending, which is built on a 3-tiered credit assessment system, was adopted by several new banking partners and received positive feedback for its industry-leading performance. As part of our AI plus banking initiative, our 2 proprietary AI agents, the AI Credit Officer and AI Loan Officer, entered pilot testing with our first bank client. The engagement rate among the activated user base has reached around 50%, providing initial validation for the AI agent practical effectiveness in core credit scenarios. Looking ahead, we will focus on strengthening our capabilities in multimodal recognition, voice data collection, lead management and feedback loops while expanding pilot programs and further improving user engagement. At the same time, we are seeing growing interest from financial institutions, laying a strong foundation for broader commercial rollout and scaled adoption in the next phase. On October 1, the new rules officially came into effect. As a leading player in the industry, we have always held ourselves to the highest compliance standards with no exception this time. Working closely with our financial institution partners, we quickly optimized our business structure and product experience. While these measures may temporarily impact our loan volume and profitability, we believe that prioritizing value for users will eventually strengthen their trust and help us maintain more sustainable and resilient growth over the long term. Meanwhile, certain new industry-wide regulatory measures may have some impact on the industry dynamics. That said, we believe our diversified business model and ample funding capacity will help position us to navigate these changes with limited disruption. Given the current phase of industry-wide adjustment, we will prioritize risk management over near-term growth, focusing on improving user quality and collection efficiency. Since mid-October, we have already seen encouraging early signs of stabilization in asset quality. Over the years, we have a proven track record of emerging stronger from past challenges, including multiple industry-wide adjustments, and we are confident that this time will be no different. Looking ahead, we will continue to advance our One Body, Two Wings strategy, further strengthen our AI capabilities and empower financial institutions in their digital transformation, driving efficient, healthy and sustainable development of our core business. On the international front, we are actively exploring opportunities across multiple overseas markets. After extensive research, we are even more convinced that our fintech capabilities are among the best in the world. We view the international expansion as a challenging yet strategically sound path. Quality always comes from deliberate execution, and we are confident we will deliver. In closing, short-term industry headwinds will not alter our long-term trajectory or our fundamental commitment to giving back to our shareholders. Going forward, we will continue to pursue efficient capital allocation and deliver value to our shareholders through compelling shareholder returns. With that, I will now turn the call over to Alex. Zuoli Xu: Thank you, Haisheng. Good morning, and good evening, everyone. Welcome to our third quarter earnings call. Unexpected China events in the last few months put significant pressure to our operations, and such headwinds may persist through the next couple of quarters as the consumer finance industry faces new round of regulatory scrutiny and the participants try to settle in the vastly different environment. Total net revenue for Q3 was CNY 5.21 billion versus CNY 5.22 billion in Q2 and CNY 4.37 billion a year ago. Revenue from credit-driven service capital heavy was CNY 3.87 billion in Q3 compared to CNY 3.57 billion in Q2 and CNY 2.9 billion a year ago. The sequential and year-on-year increase was mainly driven by higher capital heavy loan balance. Overall funding costs remained stable Q-on-Q despite some liquidity shortage later in the quarter. In the first 3 quarters, we issued a record-breaking CNY 18.9 billion ABS, an increase of over 40% year-on-year. Revenue from platform service capital light was CNY 1.34 billion in Q3 compared to CNY 1.65 billion in Q2 and CNY 1.47 billion a year ago. The year-on-year and sequential decline was mainly driven by lower capital light facilitation and ICE volume. Platform service account for roughly 48% of our quarter-ending loan balance. We will continue to make timely adjustments to the business mix through the rest of the year to reflect the changing market dynamics and regulatory guidelines. During the quarter, average IRR of the loans we originated and/or facilitated was 20.9% compared to 21.4% in Q2. Looking forward, we may see further pricing decline as the new regulatory environment requirement being fully implemented across the industry, although the pace of the decline should be modest. Sales and marketing expenses remained stable Q-on-Q, but unit cost declined by about 8% sequentially. We added approximately 1.95 million new credit line users in Q3 versus 1.79 million in Q2. We will likely to adjust the pace of the new user acquisition in the coming months given the volatile macro condition and further optimize our user acquisition channels and improve user engagement and retention. 90-day delinquency rate was 2.09% in Q3 compared to 1.97% in Q2. Day 1 delinquency rate was 5.5% in Q3 versus 5.1% in Q2. 30-day collection rate was 85.7% in Q3 versus 87.3% in Q2. C-M2, which represents the outstanding delinquency rate after 30 days collection increased Q-on-Q to 0.79% from 0.64%. As overall portfolio risk continued to increase in the last few months, we took additional measures to tighten the risk standard in September and October. While still a bit too early to reverse the trend, we start to see marginal improvement in new loans quality. It may take a few more months to see overall portfolio risk improves as the mix of the loans become more favorable. In such a challenging backdrop, we took even more conservative approach to book provisions against potential credit loss. Total new provisions for risk-bearing loans in Q3 were approximately CNY 2.58 billion versus CNY 2.5 billion in Q2 despite lower risk-bearing loan volume Q-on-Q. Provision booking ratio hit another historical high. Write-backs of previous provisions were approximately CNY 785 million in Q3 versus CNY 1.18 billion in Q2. Provision coverage ratio, which is defined as total outstanding provisions divided by total outstanding delinquent risk-bearing loan balance between 90 and 180 days, remain near historical high at 613% in Q3. Non-GAAP net profit was CNY 1.51 billion in Q3 compared to CNY 1.85 billion. Non-GAAP net income per fully diluted ADS was RMB 11.36 in Q3 compared to RMB 13.63 in Q2 and RMB 12.35 a year ago. At the end of Q3, total outstanding ADS share count was approximately 130.2 million compared to 132.4 million at the end of Q2 and 144.2 million a year ago. Effective tax rate for Q3 was 20.9% compared to our typical ETR of approximately 15%. The higher-than-normal ETR was mainly due to withholding tax provision related to the cash distribution from onshore to offshore. With higher contribution from capital heavy model, our leverage ratio, which is defined as a risk-bearing loan balance divided by shareholders' equity was 3.0x in Q3, still near the low end of historical range. We expect to see leverage ratio fluctuated around this level in the near term. We generate approximately CNY 2.5 billion cash from operations in Q3 compared to CNY 2.62 billion in Q2. Total cash and cash equivalents and short-term investment was CNY 14.35 billion in Q3 compared to CNY 13.34 billion in Q2. Our strong cash flow and financial position should give us sufficient resources to navigate through the challenging environment and allow us to satisfy the commitment and obligations to the market. We started to execute the $450 million share repurchase program in January 1. As of November 18, 2025, we had in aggregate purchased approximately 7.3 million ADS in the open market for the total amount of approximately CNY 281 million, inclusive of commissions at the average price of USD 38.7 per ADS. We intend to resume the repurchase program after the window opened after this earnings call. Finally, regarding our business outlook. Given the persistent economic uncertainty and fast-changing market dynamic, we will continue to take a cautious approach in business planning for the next couple of quarters, focusing on risk control of our operation. For the fourth quarter of 2025, the company expects to generate non-GAAP net income between CNY 1 billion and CNY 1.2 billion. This outlook reflects the company's current and preliminary view, which is subject to material changes. With that, I would like to conclude our prepared remarks. Operator, we can now take some questions. Operator: [Operator Instructions] For those who can speak Chinese, please start your question in Chinese, followed by English translation. [Operator Instructions] Your first question today comes from Chiyao Huang from Morgan Stanley. Chiyao Huang: [Foreign Language] So basically 2 questions from me. One is after the new loan facilitation come into effect in October, how should the management think about the change to the business model or profit model of the loans? And what's the expectation for the take rate in 2026? And maybe over the long run, how should we think about the loan economics when they normalize? And number two is how do management think about the competitive landscape after the loan facilitation rule taking effect? Zuoli Xu: Thank you, Zheong. And in terms of regulation and take rate, with the new rules in place, both on loan facilitation space and the broader consumer finance industry will need some time to adjust. In near term, the rules will have some impact on market size, risk levels and profitability. This is for sure. But in the long run, we believe the competitive environment will become more sustainable and healthier, which is good to our industry. As for the near-term impact, let me talk about what we are seeing right now. First, as the entire industry is lifting the risk bar, funding capacity for our ICE and referral businesses will come down. This means some users will no longer be served, and this will have some impact on our loan volume. For the rest of ICE business, as we adjust pricing, the take rates will decline. Also on the positive side, we expect to see better conversion, higher loan amounts and less early repayment. This will help you reduce some of the pressure on the net take rate. Second, the liquidity pressure in the market is pushing overall risk higher for the broader consumer finance space. Our C2M2 was up to 0.79% in Q3 from 0.64% in Q2, and the net provisions were up about 36% compared to Q2. We expect this trend to continue at least in the next 1 or 2 quarters. Based on our Q4 guidance, we are roughly talking about take rate of 3% to 4% because of pricing and the risk impact. Over the next 2 quarters, we expect the industry to remain volatile, and we are trying to get a better understanding on our take rate for in the new loan. For 2026 and beyond, the take rates will depend on how things evolve from the Q4 baseline. Specifically, our focus will be a few things. First, we will continue to optimize our risk strategies and improve collection efficiency to enhance our risk performance. Second, we will further optimize costs in user acquisition and operations to improve overall efficiency. Third, we will also explore some new service offerings to further improve user conversion and retention. We hope these efforts could help improve our take rate over time. And for your second question, for the competitive landscape, since the new rules came out in April, we have seen a major shakeup in the high pricing segment. New loan volumes in that market decreased a lot. Some smaller platform may not survive in the future. The rest of the platform are also shrinking their loan book. So entering Q4, we are actually seeing less competition for traffic. Looking ahead, some of the platform currently operating in high pricing segment may also try to move into the 18% to 24% range, but it is very difficult for them to be profitable in that band, given their disadvantage in funding risk management and operational efficiency. So in longer term, we think some of these players will eventually leave the market. We think that the market consolidation will benefit us in a few ways. With fewer smaller platforms competing for traffic, our marketing efforts will be more effective. We can acquire higher-value users more accurately with lower acquisition costs. In the new market environment, the user's multi-borrowing situation improves. We should be able to expect lower credit risk and better conversion rates. As such, users' lifetime value will improve in the longer term. So overall, we think the longer-term competitive environment will become more in our favor, and we see room to take more market shares over time. Thank you. Operator: Your next question comes from Lincoln Yu at JPMorgan. Lihan Yu: [Foreign Language] I will translate my question. So my question is on shareholder return. So given the recent share price volatility and the regulatory uncertainties, would there be any change in the company's execution of the existing buyback plans? As I see, we still have about like 170 million remaining from the plan announced like in last November. And also in longer term, what is the company's consideration on shareholder return? Zuoli Xu: Okay. Lincoln, I will take this question then. So just like you said, as of now, we still have about 170 million left under our 450 million program designed for this year. And we took a temporary pause during the third quarter, just given the incoming regulatory update and all the risk associated with that. Now after today's earnings call, the new window will open in terms of repurchase. We will resume the execution of this program to fulfill our commitment for the rest of the year. And then regarding the dividend, we have been stated that our goal is to gradually increase dividend per ADS through the -- through each semiannual kind of a dividend payout. And right now, the Board-approved dividend payout ratio is 20% to 30%, which still gives us enough room to maintain that kind of a progressive dividend trend, even with the volatile kind of earnings movement for the next few quarters there. Eventually, we still aim to achieve that progressive dividend target for the foreseeable future. In the long run, we still put the shareholder return as one of the top priorities for this company, although the mix between the buyback and dividend payout may change from time to time depending on the situation that we are facing at any given time. Thank you. Operator: Your next question comes from Alex Ye at UBS. Xiaoxiong Ye: [Foreign Language] So my question is regarding the asset quality trend. So just wondering how has been the trend -- monthly trends for October and September and November? Have we seen any rate deterioration versus Q3? And assuming there's no further trends in regulatory framework, so how -- when does management expect the equity to stabilize and pick? What are the upside that we should be aware of? Haisheng Wu: [Foreign Language] Karen Ji: [Interpreted] So let me do the translation. Since the new rules started to take effect on October 1, high-cost fundings have tightened further. At the same time, industry risk levels have been going up in Q3. So pretty much all platforms, no matter the price level, have made risk management first and tightened their risk policies. This has made liquidity even tighter and pushed over risk levels further up. But we are also seeing some positive signs in November. The early risk indicators of new loans are showing signs of stabilization and slight improvement. The FPD7 delinquency rate for new loans in September decreased by 8% compared to that of July. In terms of the risk performance of overall loan portfolio, the 7-day delinquency rate observed in November has remained broadly flat compared to October with no further upward trend. Haisheng Wu: [Foreign Language] Karen Ji: [Interpreted] So right now, we mainly focus on 2 areas to lower rates. For pre and in loan processes, we are modestly increasing the share of high-quality users to optimize overall rate structure. We are also increasing operational resources for low-risk users and use large language model algorithms to improve pricing. With more tailored pricing, exclusive benefits and a simpler user journey, we intend to improve user conversion and retention. For collection, we are adding more in-house capacity and increasing support for our partner agencies. We are also improving how we profile users and match cases. So each case can go to direct team. Powered by large language algorithms, we can now get a better read on borrowers' ability and willingness to repay, addressing their grouping and tailor our approach to drive better [indiscernible]. Haisheng Wu: [Foreign Language] Karen Ji: [Interpreted] So looking ahead, although we have seen some early signs of stabilization, it's only been about 2 weeks into November. So we will need some more time to tell if the trend will hold. Our loan tenure is usually 9 to 10 months. So when we tighten risk strategies for new loans, it usually takes 2 to 3 quarters for the improvement to show up in the overall portfolio. But the market dynamic is still evolving, and the leading risk indicators for new loans haven't been down to our desired levels yet, so this adjustment cycle will likely take a bit longer than we expected. On the financial side, our provisions and profit buffer of our business are both very solid. This gives us plenty of room to manage through the short-term industry headwinds. We have been through many challenges before. At each time, we were able to respond quickly and effectively. So we are confident we can bring risk levels back to a reasonable range once again. Operator: Your next question comes from Emma Xu of BofA Securities. Emma Xu: [Foreign Language] So according to recent media reports, regulators are starting new regulations for consumer finance companies that will lower the APR of newly issued loans to 20%. So although these regulations will not apply to loan facilitation firms, has the management evaluated the potential implications if the average APR will fall to below 20%? Could this lead to a slowdown in loan growth and an increase in credit cost? In such a scenario, does the company has any measures in place to hedge against the impact on profitability? Zuoli Xu: Emma, let me take this one. Yes, on the pricing guidance for consumer finance companies, there's no formal document [ tariff ] at this point, just informal communication. As we understand, consumer finance companies are required to keep their average pricing below 20%. We think the logic behind this is quite close to the new rules on loan facilitation sector as the regulators' intention is also to reduce the borrowing costs for consumers and make credit more accessible. In the near term, yes, it will have some impact on market size, risk levels and profitability. But over time, we think it will help create healthier competition and improve asset quality. In terms of funding, our direct exposure to consumer finance companies is small. So the direct impact on us is limited. First, the consumer finance companies source their business from diverse channels. Industry-wide, about 40% of their loans is self-operated and about 60% from API channels, mostly platform under other Internet companies. Our cooperation with them just accounts for a very small part. In terms of funding, they only account for about 15% of our loan mix. Most of our funding comes from banks. So we are flexible to shift our funding structure if needed. As such, we think the direct impact on us is quite limited, but there is indirect impact. As consumer finance companies adjust their pricing, we may expect further pressure on liquidity in the short term, leading to risk volatility. In that case, we may continue to lift our bar to mitigate the risk. Our average APR in Q3 was 20.9%. Going forward, we need to strengthen our ability to serve higher-quality users. With a broader user base and a better mix, we should be able to optimize pricing and keep our risk well balanced. In the meantime, we will maintain our operation to improve overall profitability. The point is we care about -- we care more about our users' long-term value than certain profitability. Thank you. Operator: Your next question comes from Cindy Wang at China Renaissance. Yun-Yin Wang: [Foreign Language] I have 2 questions here. First, during the opening remarks, CEO mentioned Technology Solutions loan volume up more than 200% quarter-over-quarter in Q3. What's the main drivers behind it? And what is the outlook of this business? Second, in Q3, capital light accounted for 42% of the new loan volume, largely the same as Q2, but down 3 percentage points quarter-over-quarter to 48% of loan balance. So how do you expect the ratio of capital-heavy and capital-light business to new loan volume and loan balance in Q4 and 2026? Haisheng Wu: Thank you, Cindy. I can take a first one, and Alex, you can take the second one. So far -- yes, so far, our Technology Solutions business has partnered with over 20 financial institutions. In Q3, we facilitated around RMB 5.4 billion in loan volume through this model, up 218% quarter-on-quarter. And the outstanding balance has exceeded RMB 10 billion lately. Two main factors are driving this growth. First, loan volume with our same partners is steadily ramping up. Second, we are expanding the way we collaborate with financial institutions. Not only can we facilitate credit business within their ecosystem, but also across a broader set of online scenarios. This really highlights the value we bring in customer acquisition and risk management across diverse channels. We are also seeing strong demand from financial institutions for AI agents. Because of that, our solution is more than technology infrastructure. We are currently upgrading our FocusPRO product into our super credit AI agent. Take our AI Credit Officer as an example. Traditional off-line credit products in banks have long complicated processes. Powered by large language model capabilities, AI Credit Officer can use the one single model to handle all kinds of documents processing tasks during due diligence and credit approval states. This will streamline the process by removing overlapping models running in parallel. As a result, users do not need to resubmit their materials. The whole process can be accelerated and the approvals can be completed within the same day. On the risk assessment side, by leveraging our trillion-level risk decision data sets and multi-model large language model technology, the agent can identify risk in seconds, generate more precise user profiles within minutes and keep iterating based on feedback. In the pilot run with our bank partners, our AI agents are already making an impact in key areas like customer acquisition and approvals. The market feedback has also been very positive. We are also seeing interest from several other financial institutions in their products. We believe the future upside of our super credit AI agent is very huge. Thank you. Zuoli Xu: Cindy, to your second question regarding the mix between capital heavy and capital light. In the short term, as we are facing very volatile kind of market condition that we discussed earlier, we may need to make some flexible adjustments to the mix. On one hand, for example, in this kind of generally higher risk environment, we intend to do more capital light versus capital heavy. But on the other hand, the price cap on the '24 also limited our capability to do the ICE side of the business. So those 2 forces probably will work together in the fourth quarter in particular. But directionally, I would say you probably will see a little bit more on the capital light side in the fourth quarter and -- as we intend to reduce the risk exposure. And then the longer term, I think we still need to make from quarter-to-quarter or time to time, we still need to make timely adjustments based on the conditions we were facing based on the risk level the market presents and also based on the funding sources we're getting to decide what's the best solution or best mix for us in terms of mix. So I don't think there will be -- at least for the 2026, I don't think there will be a directional movement toward the light or towards the heavy, and most likely, we'll be sort of bouncing around the sort of the 50-50 line throughout the next year. Thank you. Operator: Thank you. That concludes our question-and-answer session for today. I'd like to hand back for closing remarks. Thank you. Zuoli Xu: Okay. Thank you again for everyone to join us for the call. If you have additional questions, please feel free to contact us offline. Thank you. Have a good day. Operator: Thank you. That does conclude our call for today. You may now disconnect your lines. Thank you. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]
Operator: Good afternoon, and welcome to the Nanoco Group plc Investor Presentation. [Operator Instructions] Before we begin, I'd like to submit the following poll. I'd now like to hand you over to the management team from Nanoco Group plc. Dmitry, good afternoon, sir. Dmitry Shashkov: Good afternoon, good morning. Dmitry Shashkov, CEO of the company. Liam? Liam Gray: I'm Liam Gray, CFO. Dmitry Shashkov: Okay. Welcome to our annual results presentation. I will take you through the operational highlights, and I pass it off to Liam to cover the financials, after which we will take any questions which you may have. My main topics will be around the revised Nanoco strategy, which we've been developing throughout the year, the progress along the strategy, especially in the area of image sensor, which was the main focus. And in the end, I will also give you an update on our strategic options review known as the CDX process. With that, let me proceed. 2025 was a big year for Nanoco. We accomplished a lot in a short period of time. As we reported earlier to the shareholders, we started the year by significantly adjusting our cost base. In the end, we were able to reduce our cash burn by approximately 30%, extending our cash runway and giving us opportunity to reinvest in the business development. Along the way, we also changed our organization following the changes in the Board composition earlier in the previous year, we proceeded to build a global commercial organization, which is now operational on 3 continents. And the early part of the year was strongly focused around redesigning our strategy. We really started with a blank sheet of paper, and we rebuild the strategy from the ground up by analyzing all available market opportunities with a strong focus on those which could deliver revenue and profitable growth to the company in the short to medium term and prioritizing other opportunities lower on the list to stay focused on what will deliver the value in the coming years. Along the way, we reconfirmed that image sensors remains the main market and should remain the top focus area for the company for the reasons which I will get into later. But in brief, it's a combination of very favorable external factors in the market trends which favor the development and adoption of this technology and a strong competitive position inside Nanoco, which we've built through the years through the combination of our technology, IP, production capabilities and new product development. Throughout the year, we signed a second joint development agreement that happened in the spring of 2025. And just about a month ago, we extended our first joint development agreement by additional 3 years. Those are both very important milestones in the company development, and I'll comment on that later as we go through the presentation. And finally, earlier in 2025 in the calendar 2025, we started the strategic options review with CDX. The process after a few months resulted in significant progress, and I will give you an update in the end of this presentation. Let me start by categorizing our markets. As a result of the strategic strategy review, we put our markets into 3 categories. And in the first category, top priority, one market image sensor is strongly revalidated as the top area of focus for Nanoco. There are a couple of reasons for that, but most important ones, as I mentioned, on the outside -- in the outside world, we have rapidly developing applications, which are enabled by this new quantum dot sensor technology. They range from facial recognition for consumer electronics to automotive safety, helping monitor the driver's condition as well as various collision avoidance systems to industrial quality control where in a variety of industries, quantum dot sensors can deliver capabilities not achievable with other methods, all the way to medical monitoring and various applications in defense and surveillance. All of these applications are developing in parallel. And against these trends, we formulated the strategy to focus in image sensors around 3 main themes. One is around new product development. We pursue aggressive new product development, which is focused on high-volume markets. For us, that means predominantly consumer electronics and automotive markets with others to follow. Secondly, we work on our product portfolio. In addition to our first-generation material, we now have second and third-generation materials under development, which fit the needs of those high-volume markets, consumer and electronics. We also -- in addition to new materials, we're also offering longer wavelengths available for this type of sensing, which also opens up additional applications for us. And finally, we said from the beginning to have a broad commercial outreach to really cover any significant programs globally, whether they are in North America, in Europe or in Asia, if any of the end users of the sensor technology is considering introduction of QD sensors into their product lineup, we would like to be their partner of choice and work with them on developing this technology and bringing it to commercial adoption. The second category are the markets where we see growth potential in the medium term, and they could nicely balance our presence in image sensors with additional applications, which are less cyclical and growing on independent, based on different trends than the image sensor market. Those are the markets such as flat panel display, photovoltaic, agriculture and paints and pigments. In each of those, we see some opportunity for the future. But right now, they do not warrant the same amount of attention and focus as image sensor market. And flat panel display is a more mature market, but would give us additional opportunities to grow if and when we see favorable regulatory trends manifesting towards substitution of cadmium, which is one of our main strengths in the flat panel display market. The other 3 markets photovoltaic, agriculture and paints and pigments are much younger. And rather than pursuing these new markets by ourselves, we are looking to find a development partner, typically one partner per segment to pursue that development jointly. And if and when those market segments develop to larger commercial opportunities, we would be able to scale up our resources and participate in them with a more significant effort. So for now, those are growth options, which we continue to pursue with modest amount of resources, so we can focus all our efforts on image sensor. And finally, for the 4 market segments, which were previously considered for growth, that's lighting, biomedical applications, authentication markets and quantum technologies. We do believe that quantum dots offer nice opportunities in the longer term. But for now, those markets do not warrant additional attention. As a relatively small company for the sake of focus, we will continue monitoring these applications, but we're not going to put any additional effort into them as of today. With that, I would like to take a deeper dive into the image sensor market, the one which is the main focus of our product development and our strategy investment. We are witnessing a major and a positive shift happening in this market. Just in the 12 months that I've been with Nanoco, we see quite a dramatic change where today, it's predominantly low-volume markets, mostly centered around industrial and defense applications. They enable some important possibilities such as machine vision, whether it's for agricultural applications for produce inspection or for semiconductor fabs as well as a variety of defense applications. Those are good applications with good value proposition, but the volume of sensors and associated systems tends to be in the hundreds and thousands of units, not in the millions. Those pave the way for high-volume application to come through. And what we witnessed is that consumer and automotive markets are rapidly moving towards commercial adoption. Consumer market has already been our focus. That is the focus of both of our joint development agreements. The first one signed a little bit over 2 years ago and now extended and the second one, which we only signed in the spring of 2025. But in addition to consumer, we witnessed rapid changes in the automotive market. Conventional wisdom, what you would read in the market reports would say that automotive market typically is delayed by a few years after consumer because of high reliability requirements and conservative nature of the end users. But that's not what we witnessed. We observe that some of the companies, especially Asia-based companies are pursuing this technology quite aggressively, and we believe that adoption in high volume in the automotive segment will rapidly follow the adoption in consumer. For us, those are the 2 main high-volume markets. In addition to consumer and automotive, we see some favorable developments in the medical field where those quantum dot sensors can be used for diagnostic as well as for biomonitoring. And this also could be a pretty high-volume application. If it's taken to wearable devices, opportunities would be in the millions, whereas for automotive, it's already in the tens of millions because you expect to have multiple sensors per car performing different functions once they are introduced. And on the consumer side, if you just count the cell phones, approximately 1.4 billion cell phones are manufactured every year. So even a modest penetration into the cell phone segment would indicate hundreds of millions of units. So that is the reason why we strongly focus on the right-hand side of that panel where really high-volume opportunities lie. And we, as a company, are really well positioned to succeed in this market. In the existing products, during 2025, we developed a detailed capacity model. And we now can confidently say that our existing production facility in Runcorn can produce 2D materials enough for approximately 150 million sensors on a 1-shift operation, 5 days a week, 1 shift. If we change that operation to 3 days -- sorry, 3 shifts, 7 days a week, we are capable of producing up to 700 million sensors worth of quantum dot material. This, again, enables us to participate fully in this growing high-volume market, whether it's consumer or automotive, this amount of capacity is sufficient to service this market globally. Along the way, we also analyzed our cost position and Nanoco is in a unique situation compared to other companies in this field because of our extensive production experience in high volume of those quantum dot materials as well as our unique IP. And as a result, we concluded that once we are on scale, we're able to provide this quantum dot material at a very modest cost to the end user. It remains a high-margin profitable product for us, but the contribution to the cost of the sensor would be somewhere in the ballpark of $0.12 to $0.25 per sensor. Again, contrary to popular belief, quantum dots are not necessarily expensive. They deliver their unique functionality in such a small quantity that to enable a sensor, we only need to contribute a very modest amount of the cost. And that's an encouraging calculation, which tells us that we can really aim at very high-volume cost-sensitive markets with our production capabilities. We also recently received a small grant from Innovate UK and that grant is to further optimize our first-generation material, lead sulfide to develop what is known as a single-layer ink. That will be an improvement to an existing manufacturing process, which will make us even more productive with this first-generation material. On the new product side, most important developments during the year were really the signing of the second joint development agreement with an Asian manufacturer, which we announced in April. And that joint development is focused on consumer applications just like the first. And the first joint development agreement was successfully renewed just about a month ago for additional 3 years. That is perhaps the most important milestone we achieved during the year because in 3 years, we expect to finalize the material selection, go through all the steps of process development, manufacturing process development and most importantly, to go through the scale-up phases where our material is extensively tested in high volume, validated by the end user and gets ready to be adopted in high volume. And that means that within this 3-year period, we will rapidly increase our production volumes for the sake of the customer, and we are looking to get a lot closer to breakeven sometime in 2027 as a company. On the technical side, we also made some significant advances. We can now state that Nanoco achieved the best-in-class performance with the leading material, which we are developing for this market, which is indium arsenide. The 4 numbers highlighted here in the light green, I will explain them on the next page, but those are the best result which any company or organization has been able to achieve, and that's very encouraging result for our customers. And in addition, we launched some new internal projects to extend our capabilities further. One of them has to do with new materials. In addition to indium arsenide, which is our main material, we also now have a project on indium antimonide. That is the third-generation material, if you'd like to call it that, which can deliver additional capabilities, which indium arsenide material cannot. So we are now pursuing device development with Indium antimonide. And in addition, we started to look at extending our wavelength capabilities as well. Current capabilities in the short-wave infrared, SWIR region, as it's known, tend to extend all the way to 2,000 nanometers. But between 2,000 and 3,000 nanometers is the extended SWIR and above that region between 3,000 and 5,000 nanometers, we have the mid-wave infrared region. And in both of these regions, there is no low-cost applications, so no low-cost technology, which can sense objects at this wavelength. This wavelengths opens significant additional opportunities and high-volume applications, and we started the projects in this area to be first extending our capabilities into these wavelengths. So this page is a bit technical, but I will explain. This page demonstrates all the results known to us, which were achieved with this quantum dot sensor technology in a very important spectral range of 1,400 to 1,500 nanometers. This is a popular wavelength, which a number of organizations, commercial and technical are pursuing. Companies like IMEC, companies like Sony and some of the others have done a lot of work at this wavelength with this material. And technically, the expectations of this material are twofold. There are 2 most important performance parameters. On the horizontal axis is what is known as quantum efficiency. This is the measure of how strong is the signal coming from the sensor when the object is illuminated. And on the Y-axis is what is known as dark current. This is the measure of noise or useless signal, which comes from the sensor when object is not illuminated. So as you can imagine, on the horizontal axis, the higher quantum efficiency, the better. And on the dark current, the lower dark current, the better. So ideally, you would like to be positioned as low on the Y-axis and as far to the right on the X-axis. And the 2 champion devices are circled at the bottom of the chart in red boxes. Those are the 2 champion devices which we developed with indium arsenide technology. And as you can see, they far exceed any other results which were published so far. I also point out that the scale on the Y-axis is logarithmic. So additional reductions in dark current are quite significant, and they're very difficult to achieve. For comparison, you can see the blue oval, which roughly outlines the region -- the range of performance, which now puts us into a position to be adopted into commercial applications. And as you can see, we're already meeting requirements for dark current, and we are very close to meeting requirements for quantum efficiency. We're quite confident that we can get there with a few additional developments, which are already underway. So again, very encouraging results for our customers who see this performance and clearly putting us in a leader category in this new market. So with sensors capable of this, we can do a lot of things. I think we already demonstrated some of the pictures. Those are pictures taken with the camera and inside the camera are Nanoco quantum dots. This is the first-generation material. And on the first panel, you can see clearly improved visibility through smoke. Left-hand side is the conventional visible camera. Right-hand side is the infrared camera, which shows very clear visibility through the smoke and a very good level of contrast, which you otherwise cannot achieve. The second panel demonstrates visibility through a silicon wafer. In the visible light on the left, it looks opaque and slightly purple. But in the infrared illumination, you can clearly see the Nanoco logo, which is printed on a piece of paper underneath the silicon wafer. Clearly, light goes through silicon without any obstacle, and that opens up a variety of applications in the semiconductor industry, including wafer inspection and quality control. Likewise, the picture on the bottom shows visibility through plastic packaging. Again, in the visible light, the package appears opaque. But with infrared illumination, you can clearly see through the package, which allows you to accomplish material sorting or simple quality control without breaking the packaging open. And many other applications can be enabled with this kind of capabilities, which we're just beginning to implement in real world. With that, I would like to shift gears and give you an update on our strategic options review with CDX. You will probably remember when we started this process roughly in January, there was a significant amount of activity, which we reported on. Our outreach was quite broad. We ended up in conversations with more than 200 companies globally. The idea was to leave no stones unturned and really assess all types of potential investors with their potential to make an investment in Nanoco and to deliver higher value to our shareholders than we could through organic development. And after months of activity, we identified a number of interested parties and discussions with these parties are continuing. I am cognizant that the process has taken quite a long time. But again, as I stated in our spring presentation, the objective is to find the highest value option for the shareholders, and that doesn't always happen as fast as we'd like. We continue this process, and we will update the shareholders as soon as we're able to. But overall, we are confident that between the organic strategy, which has been underway and under implementation throughout the year and the inorganic options, which we are now lining up, we are in the best position to deliver shareholder value. With that, I'd like to pass the baton to Liam, and he will cover the financials. Liam? Liam Gray: If we start with some of the financial highlights for the year. Firstly, revenue of GBP 7.6 million is down GBP 0.3 million on the prior year, and this is due to the prior year having the full year benefit of the JDA with the European customer, which they canceled in October '24. And this was partially mitigated in FY '25 by the new JDA we signed with the second Asian customer. Our adjusted EBITDA in spite of the fall of revenue has increased to GBP 1.5 million from GBP 1.2 million in the prior year, and that reflects the reduction in the cash cost base as a result of the restructuring program we completed during the year. During the year, we also completed the previously promised GBP 33 million return of capital to shareholders with the final GBP 1 million of buyback being completed in October '24. Our year-end cash position was GBP 14 million, and our ongoing cash cost base is now stable at GBP 0.5 million per month. And just to clarify, that is our gross cash cost base before any revenue. So our net cash depletion is around GBP 350,000 to GBP 400,000 per month. As a business, we obviously continue to maintain a strong focus on our cost management. And finally, we currently have an order book of GBP 7.6 million, which can be broken down into GBP 6 million relating to the Samsung license, which has obviously been prepaid, GBP 1.5 million relating to services revenue and GBP 0.1 million of grant revenue from Innovate UK grant, which Dmitry referenced. This order book of GBP 7.6 million is equal to the revenue achieved in FY '25 and gives us a solid foundation to outperform the FY '25 financial results. Moving on to the next slide, we have our summary income statement. So starting from the top. As mentioned previously, revenue in the year was GBP 7.6 million compared to GBP 7.9 million in the prior period. Our cost of sales has fallen compared to the prior year due to a combination of lower revenue and also a reallocation of staff to internal R&D investments. And you can see that increase in cost further down the table on the fifth row. This has resulted in a gross profit in FY '25 of GBP 7 million compared to GBP 6.7 million in the prior year. Other administrative expenses have fallen by GBP 0.5 million, and that reflects the benefit of the restructuring we completed during the year. This gets us down to an adjusted EBITDA of GBP 1.5 million. Further down within other adjusted items, there are a number of small one-off charges, which included GBP 0.3 million relating to the ongoing strategic review, GBP 0.3 million related to the LG litigation and GBP 0.2 million related to the requisition general meeting last year. And we also incurred GBP 0.1 million related to the restructuring. We then have our noncash share-based payment charge of GBP 0.7 million. And in the comparative period, that was GBP 1 million, which -- and that was offset by a positive FX gain of GBP 2.7 million on the Samsung receivable. Depreciation and amortization has increased due to the full year impact of device lab, our investment in CapEx over the past couple of years. And then we have finance income, which is largely interest on cash deposits and the tax charge is the unwinding of the withholding tax assets and a change in the calculation of the deferred tax asset. And just for reference, that movement is all noncash, and we actually received a GBP 0.3 million payment from HMRC for R&D tax credits claimed during the year. And that gets us down to bottom line loss after tax of GBP 2.2 million. So this next slide reconciles our movement in cash from GBP 20.3 million at the start of the financial year to GBP 14 million as of 31st July 2025. We have the completion of the buyback, which cost GBP 1 million in the current financial year. And then we had our cash outflow from operations during the year, which is GBP 5.2 million, which is essentially the cash we used to run the business. We had some one-off exceptional cash costs, as mentioned previously, for the general meeting, the CDX process and the LG litigation, which comes to GBP 0.8 million. We had some small investments in capital equipment and costs related to the new IP, and that came to GBP 0.4 million in the year. Interest income, as mentioned before, on our cash deposits amounted to GBP 0.6 million. And then we had the R&D tax credit of GBP 0.3 million and then some other small movements, which amounted to an inflow of GBP 0.2 million. And this meant we finished the financial year with GBP 14 million. So in summary, the company has an order book of GBP 7.6 million of revenue. As I mentioned earlier, this is in line with the FY '25 revenue and gives us a strong foundation from which to grow and potentially financially outperform FY '25. Our gross cash cost base before revenue is stable at GBP 0.5 million per month, which is a significant reduction on where we were 12 months ago. As a business, we remain focused on identifying and implementing further savings where possible without compromising on our capabilities. No further investment is required. The device lab is settled and delivering great results, and we have full operational autonomy over the lab for use with any of our customers. We have the facilities to continue to fulfill our joint development agreements, and we have the installed capacity to rapidly scale our sensing materials if the market adoption takes place and the demand increases. And also as previously mentioned, we have completed the GBP 3 million return of capital to shareholders. And finally, on our cash resources, our runway is secure, and there is significant potential for upside without incurring further costs or investments. And as mentioned in the Chairman's report, we have a plan to scale up our materials and be achieving a level of revenues in the calendar year 2027, which means we, as a business, will be self-sustaining. And with that, I'll pass you back to Dmitry. Dmitry Shashkov: Thank you, Liam. In summary, I'd like to say that this was a significant year for Nanoco. We really streamlined the company, and we positioned the company well for organic growth. On the outside, we continue to face very favorable market developments, and those are especially favorable in the image sensor market. We have an excellent competitive position in this market, and we are well positioned to succeed. As we began to implement this strategy during the year, we made significant progress on the commercial front. We have a broad commercial reach. We have 2 joint development agreements, and we are working to sign additional ones when we are ready. We expanded our product portfolio in the image sensor, and we made quite a rapid technical progress. And as a result, there is a growing recognition of the leading role which Nanoco plays in the image sensor market. In addition, we are pursuing some of the additional markets with minimum investment, so we can maintain strong focus on image sensor. So all of this together positions us very well to pursue organic pathway for the company. But as we said in the beginning of the year to explore additional strategic options, which may include the sale of the operating business, now after a few months of the CDX process, we are really well positioned to compare what the inorganic options can deliver. And I'm confident that in due course, we will be able to put the highest value option on the table, whether it is organic or inorganic development as we conclude our CDX process. With that, I'd like to close the formal part of the presentation and open it up for questions. We received quite a few. Operator: [Operator Instructions] I would like to remind you that recording of this present along with a copy of the slides and the published Q&A can be accessed by investor dashboard. We have received a number of questions about today's presentation. Liam, could I please ask you to read out the questions and give responses where appropriate to do so, and I'll pick up from you at the end. Liam Gray: Of course. So the first question we have received is, can you give an update on the LG case, at least in terms of potential dates for development along with the outlook for IP protection generally, please? Dmitry Shashkov: Thanks, Liam. So all I can say about LG case is that it's progressing as expected, but I cannot give you further comments or any potential dates on that. For the second part of the question, outlook for IP protection, yes, of course, that remains part of our focus to look for additional opportunities to assert our IP and enter licensing arrangements, which will help the company financially. We will continue to evaluate those opportunities as we are progressing with LG, then after that, we would look at additional opportunities if and where it makes sense. Just to remind everybody, IP protection doesn't have to take a form of a lawsuit. Lawsuits are costly and risky. First and foremost, we would be looking for opportunities to take in a license, but legal options remain on the table if they are financially justified. Again, we need to recognize that the process could take a while and can cost a substantial amount of money. Therefore, it's always a trade-off between what's achievable and what's practical given the financial limitations and risks involved. I think second question is very much related to that. So we can skip it. Next question is maybe, Liam, I'll pass it to you. What is the current cash burn per month for Nanoco? Is an equity raise likely in 2026? Liam Gray: Thank you. So as I mentioned, the gross cash cost per month is GBP 0.5 million, we do have revenue of sort of GBP 100,000 to GBP 150,000 per month offsetting that. So the gross cost per month are GBP 350,000 to GBP 400,000. Will the cash balance at the year-end be GBP 14 million? No. It's very unlikely an equity raise is likely in 2026, unless something significant happens in that we have to scale quickly or deploy cash for investment. But in regards to run the business, no an equity raise isn't likely in 2026. Okay. Next question. How is the transition in the technology team progressing post the departure of Dr. Nigel Pickett, Founder and CTO of the Nanoco Group? Could you provide a further color on his departure? Dmitry Shashkov: Thanks, Liam. Yes, good question. So we announced that Nigel will eventually retire from the company. And that is after building up this company from the garage stage literally in a closet in the University of Manchester to the company that it is today 24, almost 25 years later. So Nigel is simply ready to move to the next stage. And that was his intention to eventually retire. Along the way, we invested significantly into our technology resources. As we announced, we replaced his role with a non-Board role, but it's a senior technologist, Ombretta Masala, who was already in a leading role in the technology organization, supported by a number of your quite seasoned R&D colleagues. And I must say that this transition has been very smooth. Operationally, the new team is already fully running independently of Nigel. Nigel continues to be with the company for a few additional months to provide some of the transition as well as to focus on some of the special tasks, which he is uniquely capable of doing. We're certainly wishing him well, but the organization at this point is well positioned to continue. I also will mention that in the fall of 2025, we also brought 3 additional resources into the R&D team. And that still keeps us with the reduced cash burn, which Liam outlined, but we brought two senior chemists and one device physicist onto our team, and they're already well engaged and they bring additional capabilities to our technology organization. So transition is going well, and we are confident that we're well positioned to capture the opportunities. Liam Gray: Okay. Next question. Sorry if I have missed it in the first few minutes, but there has always been a focus on the TV screen market and a huge growth market that Nanoco is well positioned to capitalize on. That now seems less of a focus. Are you now telling us that you don't see this as a major opportunity any longer? Dmitry Shashkov: Excellent question, and it's always good to reflect and say, how did our views change from a couple of years back? Yes. So flat panel display is the first market for quantum dots, which developed into relatively high volume. Along the way, market also commoditized significantly. So when we look at the opportunities to introduce our materials into the existing flat panel applications such as LCD technology, really the legacy technology, the one which started, the penetration of QDs. This market is rather commoditized. And there are pockets in this market, which remain attractive. For example, especially in China and in Taiwan, significant amount of LCD product is still produced using cadmium-based material. We at Nanoco pioneered the cadmium-free technology, and we think it may be an attractive opportunity to replace cadmium-based materials with the cadmium-free. However, right now, in China specifically, there is no regulatory trend or regulatory drive to substitute cadmium away. Therefore, we see this as an opportunity which we will monitor, but not necessarily put a lot of resources into given that absent regulatory drive, this is not going to be a high-margin opportunity for us to pursue. On the new technologies, new technologies, especially microLED is expected to be introduced in the coming years. And quantum dots will likely play a role. They would be used in relatively high volume comparable to LCD. And this may become a good market for us to pursue. But as of today, this technology has been delayed by years and years because of very significant technical hurdles as well as the economics. This new and improved TV technologies have to compete with existing ones, which are continuing to improve their own performance and to reduce their cost. So on balance, we still think it's an opportune market for us to pursue, but it does not warrant the same focus as a few years ago. Liam Gray: Thank you. Next question. Why is the strategic review taking longer than initially guided? Is Nanoco still of the view that an outright sale of its key division is likely? Or is it also considering strategic equity investors? Dmitry Shashkov: Good question. So I can answer it in very simple terms. Nanoco is not an easy company to assess and value because the technology is quite new and a number of applications are relatively technically complex. So when we started the CDX process, we had to recognize that complexity. And the fact that at the early revenue stage where we are, it may take a while for potential investors to assess the viability of our business plan and to proceed with potential acquisition. So again, our objective is not to get to any deal no matter what it is, but to try and find a deal which would value the company higher than it is currently valued in the public market. And therefore, this may take some time to build that conviction from the potential investors in this inorganic option. That is the main reason, right? We are not trying to rush into a deal, but we are trying to develop an option which could offer high value to the shareholders than organic development. To answer the second part of the question, are we considering straight sale only or an equity -- partial equity investment? In principle, we can consider both. But practically speaking, outright sale of the operating business is the main scenario we are focusing on. So there is a clean transition from the current ownership into the new ownership. That is the main scenario we are continuing to pursue. Liam Gray: Thank you, Dmitry. The next question is, when does Nanoco expect to announce further deals with its technology? Any such discussions at a closing stage? Dmitry Shashkov: Yes. So we have 2 joint development agreements, which we announced. We have quite a few other commercial and technical relationships, which may result in similar joint development agreements. But if and when they will happen, I cannot fully tell you. Yes, we would very much like to expand that portfolio. Three is better than 2, 4 is better than 3, but they come when our partner on the other side is ready to put additional resources and make it into a real project. So we are aiming to have more than 2, but when they will happen, I cannot tell you. What I did witness in my 12 months at Nanoco is that the level of interest in the image sensor market continues to steadily grow that we see a larger number of companies getting involved. I already gave you an example of automotive applications, which 1 year ago, everybody was convinced are pretty far away. But as of today, even coming off the industry conferences 2 weeks ago in Korea, I have pretty clear visibility on a number of large companies pursuing those automotive applications, which 1 year ago was not the case. So I think new agreements will come into place. I just cannot tell you exactly when. Liam Gray: Thank you. Next question. You are not talking about image sensing in the same way as you used to talk about screen market and Nanoco's unique position, which has never transpired. How do you expect shareholders to continue on this journey of assurance that Nanoco can eventually find a commercial product that turns the company's fortunes around? Dmitry Shashkov: Yes. Good question. And obviously, I wasn't there when Nanoco was focused almost exclusively on the flat panel market. But indeed, that market did not materialize for us in the form of sustainable product revenue. It did materialize for us in the largest licensing deal, I think, in the history of advanced materials when we achieved settlement with Samsung. And as you're well aware, we are pursuing a similar type of process with other potential users of our IP. But the market did not develop into sustainable product supply, which ideally we, as a materials -- advanced materials company would like to pursue. I believe image sensor market is different for a couple of reasons. One, we are clearly in the lead when it comes to developing this new technology. Nobody, neither the material manufacturers nor device companies have neither IP, nor production experience, nor the product portfolio, which we have in image sensors. Secondly, we have at least 2 actively engaged customers who vote with their wallet and with their resources. They commit substantial amount of resources from their side to proceed with those joint development agreements. And as we progress with those JDAs, we will continue to update you on our performance. But in and of itself, it's an evidence of customers committed to this market, developing this technology jointly with us where we would become the supplier of choice. We are not worried about not becoming a supplier because the production of these materials is difficult. The production processes are protected by our IP, and we do not expect that anything similar to the Samsung situation will materialize here. So I believe this is a very different market, and these are very different times. And our business model is pretty well protected in the image sensor. Liam Gray: Thanks, Dmitry. Next question, Nanoco Director, Jalal Bagherli and yourself undertook material share buys in November 2024. Are you still of the view that Nanoco is still undervalued? Are directors considering further share buys? And if I may make as subjective inference, you seem a lot less ebullient compared to IMC webinar earlier in the year/April 2025? Dmitry Shashkov: Yes. So to answer the factual questions, yes, I continue to be an investor and a shareholder in Nanoco, mainly because I do believe that we're undervalued. And I believe our Non-Executive Chairman, Jalal, is in the same situation. So I'm confident that the company is worth more, but my job is now to prove it with either organic development, which lead to that recognition in the market or inorganic deal, which will prove it through a transaction value. So that's all I have, I can say about that. In terms of being less ebullient, is ebullient, does it mean bullish? Liam Gray: Cheerful, full of energy. Dmitry Shashkov: Well, I'm certainly full of energy with regards to Nanoco's future. But yes, perhaps on day 1, I was a bit less informed about the complexities of the company. But 1 year later, I'm just as enthusiastic about what the company can do, whether we stay on the organic path or whether we'll find the new owners. I continue to believe that there is significant value locked in the company right now, and we are well positioned to unlock it. Liam Gray: Next question. If you succeed in getting your materials into driver monitoring, do you think that need will be there for a long time? Or do you think autonomous vehicles will mean the opportunity is only there for a short time? Dmitry Shashkov: Yes, good question. I'm not a specialist in autonomous driving. But I think under most realistic scenarios, transition away from human drivers to completely autonomous driving is the transition measured in decades, not years. And under completely driverless cars, even if and when it happens that all the cars on the road are robotically controlled, well, then the cars need to monitor each other. They just don't need to monitor the drivers. So applications in automotive technology, yes, they -- some of them are tailored towards self-driving cars. Others are tailored towards cars with drivers. But either way, the expectation is that quantum dot sensors, infrared sensors will be adopted in multiple units per car, just like today's even proximity sensors, which help you park, you probably have at least a dozen sensors in different points of the car. Likewise, with the 2D sensors, expectation is going to be more than one per vehicle. And therefore, we're not just dependent on driver monitoring alone. Liam Gray: Okay. Next question. The RNS suggests that it is more likely than not that the CDX process won't conclude in the sale. What's the point of continuing if no acceptable offer has been received to date. After everything that has been promised, it would be a huge failure of the Board to execute a sale. Will the Board consider their decisions if that is the outcome. And when you say the process is nearing conclusion, what time frame does that actually mean? Operator: Yes. So I don't know how you read the RNS to say that we are less confident. We are closer to the goal than we were in the beginning, but we are not yet -- we have not yet identified a high-value option, which would come through an inorganic process. The reason we are continuing with the process is because we believe that goal is well within reach. We just haven't been able to deliver it by today, but that remains firmly in our sight. And as I said, we are looking forward to updating all of you as soon as we can. Liam Gray: Next question. The cost of running the business seems too far out. The turnover generated from any production rate sales, how can this continue and when will it change? With spend of GBP 6 million per annum, the GBP 14 million will soon be gone. So just on this, as I mentioned before, the gross monthly spend is between GBP 350,000 GBP 400,000. So is GBP 4 million to GBP 4.5 million. And that's the current revenue levels. We are looking at further JDAs, as Dmitry mentioned, which would reduce that cash burn. And then as we ramp up our scale to production of the materials, we do anticipate the level of revenue from material sales to increase significantly, which is why we believe that come calendar year 2027, we will be in a self-sustain or breakeven position. Next question. You say how significant this year has been for Nanoco. The market sees things differently. Up until now, the market has always been right. Why would this time be any different? Dmitry Shashkov: Yes. I don't know if I can answer this question convincingly, right? I haven't been there at the previous junctions, but I do see that the way we are pursuing commercial engagement with our customers in image sensors and otherwise puts us in a position to succeed. I mean, just to state the obvious, up until December of last year, there was no commercial organization. The company was entirely internally focused on the technical development. Nobody was out there listening to the customers, asking questions, explaining our capabilities and engaging with various customers commercially, whether it's through joint development agreements or any other form of technical or commercial collaboration. We put this organization in place for the first time. We now have a broader pipeline than we ever had of potential customers evaluating our technology. And for all these reasons, yes, I do believe that this time is different. And markets clearly do not see it the same way, but markets do not have access to the inside knowledge, which we are privy to in our discussions with potential customers and development partners. So again, I -- my goal is to disclose as much of it as I'm able to through favorable market trends and specific agreements and commercial developments when we are ready to announce them. But apart from that, we can simply do our jobs, proceed with the commercial development and the results will speak for themselves. I do believe that the markets will eventually align with our vision once we demonstrate tangible progress towards those goals. Liam Gray: Please, can you talk a little bit more about the change of pace of development in automotive? What sort of opportunities do you foresee? Dmitry Shashkov: Yes. Again, infrared sensors can deliver particular functionality better than existing sensors. Existing sensors, if they operate in a visible or near infrared region have limited ability to see through adverse conditions. So for the collision avoidance and similar type of safety tasks, infrared sensors are able to penetrate through rain, snow, fog, smog, smoke or any other types of adverse conditions. So both for driver awareness of an obstacle or automatic collision avoidance systems. Once those sensors are introduced, they can help steer the car away from an object on the road. They're even able to distinguish between a live object and a dead object, lacking better term. If you have a cat on the left and the rock on the right, you would rather steer towards the rock than the cat, et cetera, et cetera. On the driver monitoring side, infrared sensors in some of the wavelengths, which we're working on, are particularly good, for example, to see through the tinted glass, which is good for other types of automotive safety, even for law enforcement. But they're also able to see, for example, through sunglasses. So in some of the countries, legislation is now coming where driver monitoring, especially preventing driver from falling asleep is becoming a mandated feature in some of the new vehicles. Well, infrared sensors are able to easily see, for example, through the sunglasses to track ice movement and to make sure that the driver is awake and attentive with attention on the road. So these are just some of the applications where we see this being adopted. And as I stated, especially in Asia, automotive companies are very keen to differentiate themselves with some of the additional safety features. And this technology gives them an opportunity to get ahead with introduction of this technology. Liam Gray: And just a few more left. Could any of the very large tech companies get involved with Nanoco to pursue quantum dots for quantum computing? Dmitry Shashkov: Quantum dots for quantum computing. Yes, that remains a possibility. We've done some academic work with the University of Manchester to demonstrate that quantum dots could be usable for quantum computing and quantum communication. Those -- this application is in our third category. We believe in the long-term value, but we are not willing at this point to put significant resources into this just simply because of the time it takes to develop. If there is a willing development partner who would like to co-invest in this technology with us, for sure, we would consider. Right now, we just would not like to make it a self-funded activity because I think these markets will take some time to develop. Liam Gray: Is Nanoco eligible for U.K. government R&D grants? Have any such avenues been explored? Dmitry Shashkov: Yes, of course. So we're already a receiver of Innovate UK grant, which is, I guess, one of the main funding agencies in the U.K. We will continue to look at other opportunities. One of our senior staff members is IT and grant manager, Nathalie Gresty, who is monitoring the space quite carefully, both in the U.K. and on the continent. Some of the EU opportunities are still applicable to the U.K. companies, and we will continue to pursue those funding opportunities. They've been quite limited, but with increasing amount of attention from the government to high-tech sector and semiconductor industry in general in the U.K., yes, we believe there are going to be some additional funds available to us, and we will pursue that. Liam Gray: And the final question, you've clearly worked hard at the last year, seem quite optimistic. What are the top 3 things that excite you about Nanoco? Dmitry Shashkov: Yes. Just kind of thinking on my feet right off the bat. The first one is I do think it's a diamond in the rough. I think that Nanoco is one of the very few companies, perhaps it's the oldest quantum dot company, which is still alive, and it's one of the few companies which survived through the years. We only see perhaps 2 or 3 companies around the world pursuing these technologies because it's hard. And most others have been acquired or have gone bankrupt at this time. I do feel that we are now finally in a position to capitalize on all the technology investment, all the complicated developments and all the IP, which was put in place and really become the leader in a fast-growing, very profitable market, which for us will start as image sensor and over time, other markets can be added to this. So that's the main reason. I see that it's a tremendous technology, which is currently undervalued, and we can unlock that value. A couple of other reasons. The team is great. It's a very dedicated team. We have seen relatively low turnover. Just like many of you, our investors stuck with Nanoco, our team has been sticking around and really contributing to the company development through some really hard times, right? So there's a level of resilience and optimism within the company because if we made it that far, we can definitely make it further where others have failed. And there's an element of technology here, which also makes me excited. We are simply contributing to positive developments in the world, not to get too high horsey about it, but we are developing applications, which will help really improve our lives through automotive safety or some of the other applications, which this technology is able to offer. We have solutions which are more energy efficient, ecologically preferable to some of the legacy solutions and those which do deliver real value in a variety of markets. For me, that's pretty exciting. Operator: Dmitry, Liam, thank you for answering all those questions you can from investors. And of course, the company can review all questions submitted today, and we'll publish those responses on the Investor Meet Company platform. Just before redirecting investors to provide you with their feedback, which is particularly important to the company, Dmitry, could I please just ask you for a few closing comments? Dmitry Shashkov: Yes. I'll just simply recap that it's my first full year, which I'm completing at Nanoco. I feel quite satisfied with what we've done. It was a difficult task to pursue organic strategy development and implementation in parallel with the strategic options review, the CDX process. I feel that we made very good progress on both fronts, and we're looking forward to updating the shareholders once that process -- CDX process is complete. And we will be in a position to offer the highest option value -- highest value option to the shareholders. I'm looking forward to updating you on this as soon as we're ready. Operator: Dmitry, Liam, thank you for updating investors today. Can I please ask investors not to close this session as you'll now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations. This will only take a few moments to complete, and I'm sure will be greatly valued by the company. On behalf of the management team of Nanoco Group plc, we'd like to thank you for attending today's presentation, and good afternoon to you all.
Operator: Thank you for standing by, and welcome to the Nufarm Limited FY '25 Results Conference Call. [Operator Instructions] I would now like to hand the conference over to Mr. Greg Hunt, CEO. Please go ahead. Gregory Hunt: Thank you, and good morning, everyone. Welcome to Nufarm's Financial Year '25 Results Presentation. Joining me today are Brendan Ryan, Nufarm's CFO; Brent Zacharias, Group Executive of Seed Technologies; as well as Rico Christensen, who is the Group Executive Portfolio Solutions. And as you'll see from this morning's announcement, CEO [Technical Difficulty], I will talk to the transition in more detail later in the presentation. But in terms of the call today, I will speak to the financial year '25 results. Brendan will speak to the financials and Rico will cover priorities for financial year '26 and the outlook. Before we move to the presentation, I draw your attention to the disclaimer on Slide 2 and in particular, the wording related to forward-looking statements. To the result, since the half year, we have delivered on key profitability and leverage unwind targets that we communicated to the market in August. We are very pleased with the performance of Crop Protection, delivering an earnings increase of 18%, with importantly, growth across all regions. We have concluded the review of Seed Technologies and the Board has determined that a reprioritized strategy is expected to deliver the best value for shareholders. We have taken steps during the year to reduce cost and capital requirements across the Seeds business, and we are in very good shape to deliver upside from the business in the future. We reported a statutory loss of $165 million, which includes $142 million of mainly non-cash material items relating to the outcomes of the Seed Technology review and the broader performance improvement program across the business. We are confident that the action that we have taken sets the business up well for the future. We reduced net debt by $538 million from the half and ended the period with a leverage of 2.7x. This reflects both the seasonal unwind that's inherent in our business, as well in our ability to delever through internal discipline and efficiency. We are in good shape to deliver earnings growth and further leverage reduction this financial year through growth in Crop Protection and improved performance in Seed Technologies. Meaningful positive cash flow generation and a lower CapEx profile is expected to support further deleverage at the end of the 2026 financial year. I'll now cover some of the highlights across financial year '25. In Crop Protection, as I said, we delivered a strong result, with growth in profitability in all regions and EBITDA margin improvement of 140 basis points. In North America, we recorded a record year for profitability in the turf and ornamental segment and in APAC, a record profit in Asia. In Europe, a 22% uplift in profitability, and this reflects the focus that we've had on improving returns in that business. Across Seed Technologies, we have made good progress on the repositioning, which includes a reduction in cash costs. Our focus is on growing our profitable hybrid seeds business, and we are really pleased with the increased revenue and profitability in South America. In bioenergy, as the market fundamentals have continued to strengthen, we increased the planted area in carinata. The market has evolved as expected, with a shortage of feedstocks to supply the demand creation by the implementation of the Renewable Energy Directive in Europe and the subsequent mandates. We have a long track record in developing solutions for farmers through innovation, with a capital-light technology partnership model. We have a very strong near- and medium-term pipeline and have delivered multiple product launches in multiple markets across our Seed and Crop Protection platforms. New product launches in Crop Protection contributed around 15% of financial year '25 revenues. And on operating performance, we are pleased with the gross margin improvement of 100 basis points. Good internal discipline around working capital and cost has supported the net debt unwind in the second half. As you know, we announced a review of our Seed Technologies business in May of this year. The review considered a thorough assessment of our strategy as well as the potential for a sale and bringing in a capital partner. After a considerable amount of work, the Board has determined the highest value outcome for shareholders is expected to be continued ownership under a reprioritized strategy, where we are focused on growing our hybrids seeds business, a reduction in the cash requirements for omega-3 and expanding our bioenergy business with BP. We have already taken action to reduce cash costs and capital requirements across the business. We are focusing on the continued growth of hybrid seeds in markets where we have established positions and strong growth prospects, particularly in South America and Australia. We plan to grow bioenergy, supported by our agreement with BP, and expected demand growth coming from biofuels mandates. In omega-3, our near-term focus is on supporting customers with the existing inventory and managing to a cash flow-neutral outcome. We have the opportunity to reposition production over the medium term to South America, with the aim of lowering our cost of production and improving our competitive position. We have a clear path to generate benefits for shareholders as we partner with downstream customers and optimize to a lower cost position. We are really pleased with performance across Crop Protection, with underlying EBITDA up 18%. We focused on profitable growth in a flat volume environment. Revenue and profit grew with the benefit of both mix and margin. And the team did a really good job on inventory management, and we are seeing the benefits coming from the performance improvement plan predominantly in Europe. Turning now to the regional Crop Protection businesses. Underlying earnings increased 10% in APAC, a good result considering the impact of dry weather in Australia. We delivered record revenue and profitability in Asia, and the margin uplift was driven by improved COGS of goods and product mix. In North America, we grew underlying earnings by 19% across the year, with momentum building in the second half, which was up 30% on the second half of 2025. This was an excellent result given the team we're navigating some dynamic market conditions in relation to tariffs and antidumping duties. The turf and ornamental segment had a very good year delivering a record result, primarily driven by improved demand in the golf and lawn care sectors. Margin uplift was driven by improved COGS and product mix. As I mentioned earlier, we also had a very good year in Europe with underlying EBITDA increasing by 21%. Margins expanded from improved mix and the benefit improvement program. Performance also benefited from better seasonal conditions and market conditions driving volume growth. The business has good momentum with more upside to come from the continued execution of our performance improvement plans in the current year. Turning now to Seed Technologies. We thought it would be helpful to give you more visibility on the segments. So we have split out our earnings from hybrid seeds and the emerging technologies, which includes bioenergy and omega-3. Hybrid seeds performed well with EBITDA of $67 million, with the lower earnings on the prior period mainly a result of dry weather in Australia, which impacted canola seed sales. South America sorghum and sunflower were ahead of the prior year. We have streamlined our European and North American operations as we focus on the markets which are most attractive and where we have the strongest positions and growth potential. In bioenergy, we had the benefit of growth in hectares planted and resulting seed margin. However, this was offset by lower licensing fees from our agreement with BP. We have seen strong recovery in GHG market values in Europe, which is driving increased oil demand and value outlook for carinata. Omega-3 earnings were impacted by the fall in fish oil prices. Inventory has been carried into this financial year and will provide us with the ability to serve customers while we look to ship production to South America, where we are targeting our lower cost of goods. We are advancing towards customer offtake agreements to improve both volume and price predictability. And as I said before, we have significantly reduced the cost and capital profile for our omega-3 business. As a final point, I'd like to emphasize that as a result of our view -- our review, we have shifted the cash requirements of the Seed Technologies business to become more self-funding. I will now hand over to Brendan to cover the financials. Brendan Ryan: Thanks, Greg. I'll begin with a summary of the financial year '25 performance. The results presented today is consistent with the market update provided in August. For financial year '25, we delivered a solid top line growth with revenue up 3% year-on-year. Gross profit increased by 7% and the gross profit margin expanded by 1 percentage point to 26.1%, driven by strong Crop Protection margins and a favorable mix. EBITDA after material items was a loss of $74 million. Net financing costs were $101 million, down 6% year-on-year. The reported statutory loss of $165 million, impacted by 2 significant factors. The material items of $142 million, primarily from the Seed Technologies' review. I'll provide more detail on this shortly -- and $53 million of early-stage losses from emerging platforms, principally omega-3 relates to the fall in fish oil prices. Underlying EBITDA was $302 million compared to $311 million in the prior year. Importantly, excluding emerging platform losses, underlying EBITDA was up 10% year-on-year, reflecting a strong improvement in crop protection profitability and resilient hybrid seeds performance. Now to more detail on the material items. The after-tax impact on material items was $142 million, which is predominantly non-cash with a financial year '25 cash impact of approximately $30 million. The key component of material items were $118.7 million from Seed Technologies' asset rationalization and restructuring. In hybrid seeds, we have scaled back our European sunflower operations as the prolonged, more severe Russia-Ukraine conflict has significantly reduced the attractiveness of that market. This resulted in the impairment of sunflower IP and a write-down on associated seeds inventory, representing the majority of this material item. Also included in this material item is to scale back on omega-3 plantings in North America, with plans to move production to South America to achieve more competitive cost of goods sold. This has resulted in the write-down of the excess omega-3 seed inventory. There are also associated redundancy costs with the cost out program and workforce reductions. Separately disclosed but primarily connected to seeds review is $5.4 million of legal and advisory costs. We also incurred $13.4 million restructuring costs in Crop Protection. These costs include redundancy costs with the cost-out program and some asset rationalization. In financial year '26, we expect to see clear benefits from the action taken in financial year '25, with reduced capital expenditure, more focused capital allocation and lower staff and operating costs. Turning now to margin and costs. Underlying gross margin increased by 80 basis points, with Crop Protection delivered a strong 140 basis points improvement, driven by cost of goods efficiencies and favorable mix. Operating costs remain an important focus. Underlying SG&A increased by 10% year-on-year and when expressed relative to revenue was up 140 basis points. This growth reflects inflationary pressures, increased investment in R&D, marketing and business development to support growth to the top line. Looking ahead, operating cost discipline is a priority. Full period benefit of the $50 million cost savings program is expected to broadly offset natural cost inflation in financial year '26. Now to the balance sheet. Average net working capital sales improved to 38.2%, improving by 440 basis points and firmly within our 35% to 40% target range under our capital management framework. The improvement was primarily driven by inventory efficiency, supported by a focused program and inventory reductions across all crop-protected regions. Average inventory days improved by 16 while receivables days were down 4, reflecting strong cash collections during the second half seasonal unwind. Payable days remained flat, reinforcing that the net working capital progress was largely an inventory story. Working capital management remains a key focus with further improvements targeted in financial year '26. In respect to capital expenditure, it was broadly consistent with the prior year. Same as property, plant and equipment focused on health, safety and environmental priorities and plant reliability. Proper tax intangible CapEx continues to deliver value into the product pipeline. Investment in Seed Technologies growth platforms was also similar to prior year. For financial year '26, we are targeting CapEx below $200 million, reflecting disciplined capital allocation. The reduction will come from lower manufacturing spend following significant investment in recent years. Crop Protection R&D focus more on the near-term priorities and reduce capital for Seed Technologies aligned to the reposition strategy. It's worth noting that CapEx in the first half of 2026 is expected to be a significant reduction compared to the prior period, given the spend last year was first half weighted. In terms of free cash flow, it was negative $131 million, reflecting several key factors. While net working capital movements excluding omega-3 were positive, these gains were offset by the omega-3 position. The outflows on interest, tax, CapEx, lease and step-up security distributions contributed to the overall cash flow result. Looking ahead, we are strongly positioned to deliver meaningful positive free cash flow in financial year '26, supported by anticipated continued improvement in working capital efficiency, planned CapEx below $200 million, reflecting disciplined investment, significantly lower cash requirements from omega-3 and expected EBITDA growth year-on-year. In terms of net debt, net debt reduced by $538 million in the second half '25, reflecting the normal seasonal unwind, demonstrating strong second half cash conversion. Year-end net debt was $824 million, with unfavorable FX movements and omega-3 inventory contributing to the year-on-year increase. Leverage closed at 2.7x, below the guidance provided in August. Reducing average remains a priority, supported by the actions outlined earlier to deliver positive free cash flow in financial year '26. In terms of funding, gross debt, excluding leases was $1.154 billion at year-end. Liquidity remained strong with $345 million of undrawn facilities, consistent with the prior period and $475 million in cash. Our diversified and flexible debt facilities are underpinned by a covenant-light financing structure and a staggered maturity profile. The short-term omega-3 credit facility has been successfully refinanced into a 2-year amortizing loan facility with a maturity of September 2027. Looking ahead, we are well positioned to support seasonal working capital build. We anticipate that this year's build will be lower. CapEx will be $50 million lower in the first half. Omega-3 cash requirements will be significantly lower, and there is further benefit from the improvement in earnings. Importantly, Nufarm's capital structure is designed to accommodate seasonal funding demands. There are no expected short-term refinancing needs for the group's primary debt facilities other than the standby liquidity facility, which the extension to November 2027 is well advanced, and the ABL facility matures in November 2027. Importantly, Nufarm's capital structure is designed to deal with seasonal fluctuations. In concluding, Nufarm enters financial year '26 with a solid base of profitability and a strong liquidity position. Crop Protection profitability improved across all regions, and our hybrid seeds business is generating strong profits. Our funding structure remains flexible, supported by $345 million of undrawn facilities and $475 million in cash at the balance date. Second half 2025, net debt had the usual seasonal unwind of $538 million. We are continuing actions to reduce costs and deleverage. We're expected to deliver further benefits in financial year '26. We are expecting positive cash flow, with anticipated further reduction in net working capital, disciplined capital management with capital expenditure below $200 million and EBITDA growth. To help with your models, we are giving the following guidance on some key items for financial year '26. Depreciation and amortization, circa $225 million; net interest expense, circa $105 million; and the effective tax rate, circa 30%. I will now hand you back to Greg. Gregory Hunt: Thanks, Brendan. Rico is now going to cover the outlook and priorities for the year ahead. But before he does, I would just like to make some introductory remarks. As you would have seen on our ASX announcement, Rico has been appointed CEO and Managing Director of Nufarm, commencing in the role in the new year. Rico joined Nufarm to run portfolio solutions 4.5 years ago, having spent over 2 decades in the industry. He's done an excellent job in that role and brings considerable global experience running businesses in the Americas, Europe and Asia before his time at Nufarm. I am looking forward to working with Rico over the coming weeks and months to support the transition. I would also like to take the opportunity to thank our shareholders for their support over the last 10 years. It's been a fantastic opportunity to lead this business, and I'm very confident in the future of Nufarm under Rico's leadership. Over to you, Rico. Rico Christensen: Thanks, Greg. First, let me start by thanking the Board for the trust they have shown in appointing me CEO designate of Nufarm and also to Greg for his support over the last 4.5 years in the business. I am honored that I will be leading Nufarm, a great Australian company that I deeply respect. In agriculture, Nufarm is known far beyond the borders of Australia. When I talk to farmers and channel partners in Brazil, in Canada and Spain and other countries, we have instant brand recognition and respect. We are known for our solutions and our dedication to be easy to do business with. We are a leader in key geographies and core crops, and in key product segments. We are known for our innovative mindset, thinking of new ways to support agriculture as it continues to evolve. I have more than 2 decades of experience from the agricultural industry, running businesses in Europe, South America, North America and Australia. I've spent most of my career competing against Nufarm. Taking that outsider's view, I cannot emphasize enough how valuable our brand is, how valuable our leading positions are and how valuable our relationships are, the relationships we have built with farmers, channel partners and technology partners for more than 100 years of doing business. I have regular conversations with partners about our innovations across Crop Protection and Seed. We are known and respected for our innovation and our partnership model. That means our R&D cost is many times lower than our competitors. This is the Nufarm way. Above everything else, we have a team of dedicated, hard-working people who show up every single day with fire in their eyes wanting to do better for Nufarm, for our customers, and for our shareholders. When we have all of those things I just mentioned, it's very valuable, and our competitors envy us for it. My job, with the help of all of our people around the globe, is to translate that half-fought position into strong financial performance and returns to our shareholders and position Nufarm for improved performance through the cycle. This leads me to my priorities for FY '26. First, we are already taking action to instill a strong cost and capital deployment discipline. We are doing that through a range of changes in our processes, accountability and ways of working, which combined will result in a positive free cash flow to support reduction in debt and leverage. We will extend that by embedding that cost and capital discipline into our corporate culture by refining structure, delegations and incentives. The aim is to ensure not just a onetime improvement in performance, but that this remains a focus through the years and is reflected in our performance through the cycle. Second, FY '25 showed positive signs in the performance and profitability of our Crop Protection business. We plan to build on our leading positions across geographies and crops. A great example is our phenoxy portfolio, which has growth potential that can be unlocked through partnerships and market presence. To that point, our pipeline looks healthy in the short, medium and long term. Combined with a stronger focus on launch excellence, we expect to accelerate the impact of the near-term pipeline. We have also made good progress improving our net working capital in Crop Protection and we have plans underway to deliver further improvement. Third, the seed review has provided us with valuable learnings. Most importantly, we need to be more focused in our efforts. We are repositioning our strategy and capital allocation to deliver improved performance and returns over time. We've already taken action in FY '25 to reduce cash expenditure and capital requirements, in particular in omega-3. We expect to benefit from these actions in financial year '26. Our hybrid seeds is a high-quality cash-generative business. It has unique and valuable IP that we are looking to scale in Southern Hemisphere markets. With the appropriate focus and attention, we see a clear runway for future growth and that will be a priority in FY '26. We are committed to building on our strategic partnerships and emerging platforms to improve the annual earnings profile. Turning now to outlook and how these initiatives provide confidence into FY '26. We are expecting strong EBITDA growth, assuming normal seasonal and market conditions. In Crop Protection, we expect continued growth in EBITDA, moderating on the 18% growth we saw in financial year '25. In hybrid seeds, we also expect growth in EBITDA and we are targeting approximately $30 million improvement in EBITDA in our emerging platforms. We are targeting a leverage of 2.0x at the end of FY '26 compared to 2.7x at the end of FY '25. We also expect meaningful positive free cash flow coming from improved earnings, the improvements in net working capital and from a step down in capital expenditure to less than $200 million. For the first half, we expect net debt similar to the prior period, but with a leverage below prior period coming from improved earnings. I would like to close by saying that I'm looking forward to leading Nufarm. While my immediate priority is on delivering on FY '26, I'm looking forward to speaking with you more in the future about longer-term growth plans across the business. Greg, Brendan and I will be joined now on Q&A by Brent Zacharias. We'll now hand back to the operator. Operator: [Operator Instructions] Your first question comes from John Purtell with Macquarie. John Purtell: I just had a couple of questions, please. Firstly, just in terms of the seeds review process, can you provide some further color there, particularly regarding the decision to hold on to the business and also the degree of third-party interest in the business? Gregory Hunt: Yes. Thanks for the question, John. Look, there was broad market engagement with multiple parties, and the review -- as I said in our presentation, the review allowed us to challenge ourselves around the cost structure, around capital allocation, and around strategic focus. So the review was quite broad, widespread, encompassed the whole strategy. It wasn't just about a sale of the business or bringing in a capital partner. And as we said, we've concluded that we believe the best value for shareholders will be realized by implementing from that reprioritized or repositioned strategy. John Purtell: And just a second question, and Greg, just beforehand, I just wanted to wish you all the best going forward. And thanks for all your help over the years. Just the second question around what you're seeing in terms of the broader ag chem industry. It's obviously been a tough few years. Cost of goods sold looks to have reset, which is good, but pricing still looks subdued, and markets remain competitive. So I just want to get your thoughts on that. Gregory Hunt: Yes. And John, thanks for the comments. So look, I would say the overall outlook is positive. Seasonal conditions generally around all of our markets are positive. Grain pricing supports demand for both crop protection and our oil seeds sales. I think the important point is that active ingredient prices have stabilized. So we've replenished inventory at competitive COGS. And as a general statement, I'd say that channel inventories, particularly in North America, where it's been a little stubborn, have normalized. So I would say in terms of 2026, we would continue to see some volume improvement in Europe. I would expect sort of APAC to probably be broadly flat with last year. And in North America, we've had strong growth in the turf and ornamental business, and that's to some extent as a result of the lower spend, particularly in golf and in lawn care coming out of COVID. I think a more sort of normalized tariff situation, that seems to have settled down now. The tariff benefits on phenoxies and stable active ingredient pricing, I think key drivers for our business in North America. So generally, I would say, going into '26 in what is a pretty positive environment. Operator: Your next question comes from William Park with Citi. William Park: Can I just ask about the $30 million of earnings recovery you're expecting across emerging platform. Just looking at your slide now, you've alluded to $29 million of non-cash inventory revaluation hit that you've taken above the line this year. Is it basically the $30 million, is that basically the online to that $29 million? Or are there any other sort of changes you've made across the emerging platform you've alluded to sort of moving production from North America to South America, but just wondering whether that $30 million recovery would be -- whether if you would need to see some recovery in fish oil price or lower costs going forward that would help you -- that will effectively contribute to delivering that, please? Brendan Ryan: Yes, thanks for your question. There's 2 elements -- sorry. Apologies. Sorry, there's 2 elements to the question. Yes, as part of the repositioned strategy, we have reduced the cost and the capital profile of the business. And as you mentioned, the second aspect is related to the carrying value of the inventory that we're taking into the current year and financial year '26, which is effectively assuming that $29 million will come through largely reflectable where fish oil pricing is today. Gregory Hunt: Maybe we can -- Brent, if you wouldn't mind probably providing a little more color around fish oil pricing? Brent Zacharias: Yes, certainly. I think as everyone's understood, fish oil pricing had come down from historic highs and persisted at levels of about $2,500, $2,600 through calendar year 2025. And that was really due to very large back-to-back quotas that we haven't seen in more than 10 years. So the comments about our position going into 2026 and the $30 million improvement in emerging businesses is based on the understanding of our inventory position based on fish oil prices as of September, which were around the $2,600 level. So obviously, then if fish oil prices improve throughout the year, that does provide likely support for upward pricing. The other thing I would add is that in recent weeks, we've seen the recommended North Atlantic quota come out at 35% down from last year. And we've also seen the Peruvian quota announced at about 35% down from last year as well. So hopefully, that provides a little more color for you, William. William Park: And just staying with omega-3, you committed to sort of selling off your inventories there, but you were alluding to sort of cash flow neutral outcome. Just curious to know what you mean by that? Brendan Ryan: Yes. In terms of the cash flow neutral outcome, it's supported by the reduced cost of the capital profile of the business. The exact timing of cash flow is obviously dependent on when we sell through on the inventory. And obviously, that's a consideration in terms of how optimally we do that over the next 1 to 3 years. William Park: And then just one last question I had is, obviously, now with seed treatment business sitting in Crop Protection, how are you sort of internally thinking about the growth profile for the seed treatment business? Does it sort of trend in line with hybrid seeds business, the earnings growth that you're expecting through hybrid seeds business? Just any color around seed treatment would be appreciated. Brendan Ryan: Yes, the reclassification in terms of the change of the segment in terms of taking seed treatment, which is approximately $20 million in financial year '25 EBITDA from -- included in Seed Technologies segment and Crop Protection. So following the review of Seed Technologies, we felt that was appropriate. It has no impact from an overall group perspective on the P&L nor the balance sheet. And in terms of sort of future profile, there's no significant change seen with predominantly, I guess, sourced on North America and Europe. Gregory Hunt: And I think, Will, just if I can add, there's no direct link between our seed treatment business and our hybrid seeds business. Seed treatment provides chemical applications for the broader seed market, not just our hybrid seeds business. Operator: Your next question comes from Ramoun Lazar with Jefferies. Ramoun Lazar: Welcome, Rico, and Greg, best of luck in your future endeavors. Just a couple of questions. One on the Crop Protection, just a point of clarification there on the growth drivers. So it sounds like a bit of volume growth, but are you assuming a continuing improvement in that gross margin profile through '26? Rico Christensen: Yes. That is correct. What we've talked about in the past is that when we look at the profile coming in through our product launches, the NPIs, they are generally at a higher margin than the existing business. That's something we've spoken to the past, and it continues to be the case looking forward. And I would also say that over the coming years, what we know about the pipeline today that is pretty consistent that they come in with a higher margin than the existing business, which you then will see reflected in the margin for the business overall. Ramoun Lazar: That's pretty clear. And then I just had a question on the emerging platform, particularly omega-3. I mean it sounds like you're going to manage the cash requirements of that business more tightly. I mean can you maybe just talk about I guess, how that potentially impacts the potential growth profile of that omega-3 platform? Is there anything else also you can do to potentially improve the cost profile of that business, just given the volatility that we've seen over the last year or so? Brendan Ryan: Yes. So we have -- as part of the review, we have reduced the cost and the capital profile of the omega-3 business with the focus on selling through on the current inventory in terms of really the customer supply requirements over the next couple of years. The focus also is looking at how do we improve our cost of goods competitive positioning, and that's planned with a change in the production zone to the Southern Hemisphere. That's underway in terms of that activity today. We'll continue to look at the capital profile and the cost profile knowing that there has been significant steps already taken, and that will continue to be a focus throughout the financial year '26. Gregory Hunt: And just one other point there in relation to the carinata bioenergy business, the capital contributions from BP support the growth in that platform as well. Ramoun Lazar: Okay. Okay. But to get -- I guess to get it back to a breakeven position, so you need to see either a further improvement in fish oil pricing or some of these shifting of growing to some of these lower cost regions before that -- before the earnings get to a breakeven? I guess do you have some sort of time frame on when you could get back to breakeven? It doesn't sound like '26, obviously, but maybe '27? Gregory Hunt: Well, we've said we're not going to grow a crop in calendar year 2026. We have said that we will start -- so we're talking specifically about omega-3 now. What we have said is we will start to plant in South America small volumes in 2026 and then grow through '27, '28. I think the other point I'd just remind everybody of is that a big catalyst -- value catalyst in this platform is global deregulation. And we still believe we're on track to achieve that in '27, '28. In relation to the hybrid seeds business, that is cash-generative, so in effect, it funds itself. And as I said, just to be clear, the relationship with BP, they are continuing to support us with the ramp-up, both through SG&A and R&D support to accelerate the growth of that platform. So you're right, it's fundamentally an omega-3 issue. Operator: The next question comes from Jonathan Snape with Bell Potter. Jonathan Snape: Look, I'm going to ask 3 questions for the time because there are 3 different people. First sort of touch on the seeds, and I know you've gone through it a little bit of detail, but that $30 million improvement in the emerging platform looks like it's like really 3 buckets going on there, if I can talk about it, obviously, one is carinata. I think you said the plantings are up. I didn't catch if you said how much they were up this year, but I imagine that has some kind of earnings benefit to Nufarm. It sounds like the second bucket in there is omega-3, you're planting less of it. So imagine losses just from simply planting less again be lower in '26 when you sell '25 crop in terms of metric you mentioned it's the fish oil component. And I think you've referenced pricing [ together for '26 ]. Gregory Hunt: Sorry, Jonathan. Well, I got the first part of the question, which was increased carinata, the impact on seed sales or seed revenue, seed margin and oil, yes, we didn't get the second and third questions. Jonathan Snape: With the omega-3 oil pressure, reduce planting, how much that kind of contribute into the omega-3 loss reduction year-on-year. And then I'm trying to figure out fish oil because the prices in Peruvian and Chilean ports last week took quite a big jump. And I'm trying to think if you -- it doesn't sound like you put any of that in your thought process at the moment. And I think that's the first reference price since the [ AMAPE ] numbers came out. So if that was to hold or continue, that would be a benefit to the sell-through, I imagine, of the inventory. Is that kind of how I should think about it but with the latter bit probably not in your thinking at this point? Gregory Hunt: Thanks for the question, Jonathan. Brent, do you want to have a crack at that? Brent Zacharias: Sure. Jonathan, just some comments on fish oil pricing first. Yes, we have seen some indications of that jump that you referenced in the Peruvian market, but it's just important to recognize that very little volume has actually traded yet until the quotas are actually caught. So yes, we're alive to it. But you're right, our $30 million improvement target for emerging platforms is based on where fish oil prices were trading as of September, which was about $2,600 on the North Atlantic, which is the one we tend to track and follow because they sell into certified fisheries. So absolutely, you're right. If we do see some upward movement that creates upside to that $30 million improvement target. It was really based around the $2,600 that we saw as of September. And just to add... Jonathan Snape: No, I was just interested in the carinata side and how much that contributes. Brent Zacharias: Yes. Carinata, as Greg covered in the script, we're starting to see some really strong fundamentals with the increase in GHG values. Just to comment on that. A year ago, the German GHG ticket price was $75 for a ton of carbon. Today, it's trading at over $250 as referenced by Argus. So that's encouraging us. And as you noted, we did increase our plantings last year, and we'll continue to scale further going into 2026, which creates seed margin as well as with rising fundamentals on GHG, it should expand oil premiums that we share with BP as well. Jonathan Snape: And look, can I ask -- this is -- the next question is around active ingredients prices. I noticed you said that kind of stabilized. And I think some of your competitors have said that as well in the recent week. If I look at ex-China factory gate price and some of the actives, it's actually started to be kind of an upward movement like high single-digit year-on-year gains in some of those commodities. So when you're looking into 2026 in your baseline thoughts, are you kind of assuming a fairly benign environment for actives and therefore, sell through prices? Or do you factor in that there has been kind of this upward movement in the last 2 or 3 months in actives and if you find anything, it's a carry on active? Rico Christensen: So we definitely use the current pricing for budgeting and forecasting for the coming years. But obviously, we're also very attuned to change in the prices coming out of China. And it does feel like not just when we look at our own momentum in the second half, but also looking across the industry. It does feel like we're beginning to see the industry as such beginning to climb out of that pricing depression we've had in the last couple of years. So we hope that we will see that continue in FY '26. Jonathan Snape: And look, my last question is balance sheet as always. The off-balance sheet facility utilization was down quite materially year-on-year. It looks like you shifted $100 million from off to on, which obviously says your operating cash flow is probably a little bit better. But if I'm looking at it right, I think that's the lowest utilization of the off-balance sheet facilities by Nufarm that I can find. Is there any particular reason why you're utilizing those facilities materially less than you have in the past? Is it aged stock? Is it something else? It just looks like an exceptionally low number. Brendan Ryan: No, it's not -- so Jonathan, just on the supplier financing, just the one facility. The balance at -- $26 million at the balance date. Why is lower primarily related to the arbitrage, I guess just on interest rates, particularly between the Chinese rates? And I guess, just to reinforce, if you look at our payables days, they remain flat. So there's no trade-off between, I guess, terms of trade versus debt. Jonathan Snape: Yes. Okay. But if you were to use those like closer to the historical average, obviously, it would move debt off your own balance sheet. So it's just an interest rate arbitrage thing. It's nothing else? Brendan Ryan: Yes, that's correct. Operator: The next question comes from Owen Birrell with RBC. Owen Birrell: Look, first question for me, just again on the omega-3. I just wanted to get a better indication from you as to your current omega-3 oil inventory position. Just wanted to get a sense as to how much oil was actually produced through '25 and therefore, what's your carryover inventory into '26? And just acknowledging the comment that you said about no crop being grown in '26, does that mean there's going to be zero oil generated in '26? Brendan Ryan: Yes. Thanks for the question, Owen. Just clarifying on omega-3 inventory position, I won't call it metric tons, that's quite commercially sensitive. But what we have is a carryover of the inventory into '26 from the crop last year, and that's been valued at the current North Atlantic fish oil pricing, which one person referred to a $29 million non-cash revaluation. So that's the -- effectively a benefit that carries through to the sales profile in financial year '26. In terms of new crop, there is a legacy crop coming from the FY '25 plantings. That will -- we're factoring in that there will be some revaluation on that crop relative to where fish oil pricing may go in the future. So it's a factor of that. And then, I guess, overall, the focus is on managing that inventory in terms of optimally gaining cash position from it. And that's in parallel then with managing the demand requirements from our customers. Owen Birrell: I know the -- effectively the $29 million write-down of that inventory position, but are you able to give us a sense as to what the -- how much -- what the value of that inventory sits on your books right now post that write-down? Brendan Ryan: Look, the value of that book is probably closer on the majority of the omega-3 facility, which is disclosed in the accounts. So it's in the order of -- I give an approximate of about $100 million, which is pretty close to that. Owen Birrell: Okay. And just second question, just on the bioenergy platform. You mentioned quite extensively the sort of new capital-light model. But I'm just wondering if you can give us a sense, I guess, functionally or operationally, how has the model changed from what you were previously doing? Brendan Ryan: The model hasn't previously changed. So the model hasn't changed in terms of 3 years into the agreement. It's a capital-light model in terms of -- from our perspective, as we take no balance sheet. So no inventory comes on to our balance sheet and also through the partnership, some of the supporting costs and capital requirements are co-funded. Owen Birrell: So previously, you were taking that inventory on your balance sheet? Is that what I'm reading into there? Brendan Ryan: No. we're taking no inventory to the balance sheet previously. Just other than the underlying carinata seeds, no oil, no carinata oil or biofuel oil on our balance sheet. Owen Birrell: Okay. But it sounds like the capital-light is very much that the capital contributions are coming from BP rather than yourself? Is that the difference? Brendan Ryan: It's co-funded between us and BP. Owen Birrell: Okay. I'm just trying to understand what's actually different. What's changed? You're talking about a capital-light model, but it doesn't sound like anything has actually changed. Brendan Ryan: Nothing has changed. Just stating that it's a capital-light model. Operator: The next question comes from Scott Ryall with Rimor Equity Research. Scott Ryall: My first question relates to Slide 13 and the talk about R&D expenditure. I just want to make sure I heard Brendan correctly that the R&D expenditure, broadly speaking, is expected to continue to grow. Did I catch that right? And if so, I guess I'm looking at the material items -- the slide before. We've impaired some intellectual property on sunflower and canola. And I'm just wondering, and the question stands, regardless of what the outlook for R&D is. But how do you make sure that you get your real bang for buck? And how are you ensuring that you learn from whatever has gone wrong with that intellectual property? And how does that fit within your reprioritization, please? Brendan Ryan: Well, thanks for the question. Just on R&D, just to clarify. So the expenditure going forward into financial year '26 has a lower level of expenditure than financial year '25, and that's primarily driven by the near-term focus on the research and development pipeline. Sorry, what was your second part of the question? Scott Ryall: Just R&D and making sure that you're not -- your material items in the future are not writing off intellectual property, which presumably is where the R&D has gone to. How does that fit within the reprioritization, please? Brendan Ryan: Yes. So thanks for that. In terms of material items, the material item relating to the sunflower is a result of the position or the conflict going on in Ukraine and Russia. It's been much more prolonged and severe than we initially anticipated. And given it's a significant sunflower market, that was the driver in terms of the impairment around the sunflower IP. In terms of more broadly managing the benefit that comes from our investments in R&D, there's a rigorous process around identifying the research and development product line that provides, I guess, a balance, both in the short term and the medium term, followed with a disciplined approach around stage gating and review in terms of monitoring the progress in terms of the delivery of the benefits. I might pass to Rico, he might add a few more comments just around that. Rico Christensen: Yes, sure. I think we expect the R&D cost to be lower in FY '26 compared to FY '25. It's due to some of those reasons Brendan mentioned around more efficiency around stage gate processes and so on and also because we did have some one-offs in our R&D cost in '25 that we've announced in different press releases we've done in agreements with different partners. Again, those are capital-light models compared to different -- what different companies are doing on R&D. So generally speaking, we do spend a lot less on R&D than our competitors because of those partnerships that we have. Scott Ryall: Okay. All right. And then, Rico, my last question is just for you. I -- sorry for the football results overnight, by the way. So you've been onboarded in Nufarm for more than 3 years. I guess I'm just wondering, how do you think the position of Nufarm will change over the next 3 to 5 years relative to what you've observed the position has been over the year has changed over the last 3? What do you really think is going to be where the change in direction for the company, please? Rico Christensen: I think it's a good question, and I also spoke to it a little bit about in the priorities and the outlook. And I think... Scott Ryall: That was just for 1 year, right? Rico Christensen: Yes. Well, exactly. So as I said in the -- in my comments, the short-term focus is really on -- around capital discipline and cash discipline. We have -- we want to get our leverage down as we've stated. But at the same time, obviously, we also have to solve for the growth for tomorrow in Nufarm, and we continue to do that through our investments in R&D in both seeds and cost protection where we have a strong near, medium and long-term pipeline. And I think as we talked about earlier, when you see the impact of our new product introductions across the business in Crop Protection. We've said overly it's around 15% on revenue. But in fact, it is a little bit more when we talk about gross margin. And what you will see over time is that as those new products coming into the portfolio, they will keep improving our gross margin profile and therefore, also the earnings for the company. Operator: There are no further questions at this time. I'll now hand the call back to Rico Christensen for closing remarks. Please go ahead. Rico Christensen: Yes. Thank you. I just wanted to end up by saying, thanks for dialing in. I look forward to catching up with many of you over the coming days. And this then concludes our call. Thank you. Operator: That does conclude our conference for today. Thank you for participating. You may now disconnect.
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