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Operator: Good morning, everyone, and thank you for joining us today for Caledonia Investments Plc Half Year Results Presentation. [Operator Instructions] Please note that this call is being live streamed to a webcast for a wider audience and will be recorded. I would now like to hand over to Mat Masters, Chief Executive Officer, to open the presentation. Please go ahead. Mat Masters: Hello. I'm Mat Masters, CEO of Caledonia Investments, and welcome to our results presentation for our half year to 30th September 2025. You will also hear from Tom Leader, who leads our private capital strategy; and Rob Memmott, our Chief Financial Officer. Before we go through these results, a short reminder about Caledonia. We are long-term stewards of our shareholders' capital, including the Cayzer family who have entrusted us with theirs for generations. Looking after multigenerational capital shapes everything we do. We need to make returns, but do so whilst limiting the risk of losing capital. We target absolute returns of inflation plus 3% to 6%, and this influences the level of risk we're prepared to take. Over time, our approach to investing has delivered results at the top end of this target range at 9.8% per annum, outperforming inflation by 6.5% per annum, and we have consistently increased our dividend for over half a century. Our approach to investing is straightforward. We invest in high-quality businesses and hold them for the long term. Our maximum time well invested captures the essence of our approach perfectly. Our in-house investment team is fully aligned with shareholders. We do not manage anyone else's money, and there is no fundraising. Performance is measured against NAV per share over time and rewarded in Caledonia shares. So our incentives are directly tied to long-term value creation. Our investment strategy is perfectly encapsulated by time well invested. We use our strong balance sheet, long-term approach and in-house investment team to underpin our focus on long-term results and be robust during downturns and in fact, aim to use these to our advantage. We're organized across 3 main strategies, providing access to private and public companies across different sectors and geographies. We're looking for the same 3 key ingredients, which are attractive markets to operate in, resilient businesses with strong fundamentals and return characteristics and that are well managed and aligned with shareholders. The strategies have together generated Caledonia's overall performance, which is shown in the chart. Over 5 and 10 years, we have delivered at or beyond the top end of our targets and across all periods, both NAV per share total return and share price total return have kept ahead of inflation, which is our core aim. In the last 3 years, share price total return has been stronger than NAV per share total return as the discount has reduced from 37% to 33%. Moving on to the highlights for the half year. We're pleased to report another positive performance with NAV total return of 4.4% and total shareholder return of 8.5%. This was driven by strong public companies and private capital performance, partially offset by funds and including the impact of the pound strengthening against the dollar, reducing NAV by approximately 2%. Today, we are announcing our interim dividend of 3.68p per share, which reflects the change in dividend payment profile to 50% of the prior year's annual total dividend. This dividend will be paid on 8th of January 2026. Moving on to public companies. This comprises 2 portfolios, each taking a concentrated approach to making long-term investments in high-quality companies. We're looking for high-quality, durable businesses, which we think have got great futures ahead of them. We aim to buy well and hold for the long term. The overall public company strategy delivered 9.9%, driven by a capital portfolio and within that, primarily Oracle, Microsoft and Alibaba who are benefiting from continuing demand for cloud-based services, including AI. We initiated a new position in Charles Schwab, the U.S.-listed brokerage business that we've been tracking since 2017. We like Schwab because of its massive scale with just over $10 trillion in client assets and market-leading focus on driving down costs for its clients. Its track record speaks for itself with annualized total shareholder return of 17% since it listed in 1987. It's well managed with good continuity of leadership with the eponymous Charles Schwab still on the board. We deployed GBP 35 million, mostly on 7th of April, shortly after President Trump's Liberation Day, which was followed by a downturn in the equity markets and presented the lowest price that Schwab and the market traded in the last year. This derisked our point of entry and is a good demonstration of our time well invested approach. We purposely set ourselves up to buy shares in wonderful companies when they become more attractively priced. On the same theme, Oracle delivered a standout performance for us, and we were able to realize gains, selling 3/4 of the value of our holding at the start of the period as its share price doubled and its risk characteristics changed. We first invested in Oracle in 2014 when it was rated as legacy tech and judged late to the cloud and as a service. We look closer and saw a business with a good market position in an attractive market, excellent business fundamentals with high levels of recurring revenue and plans to increase this and excellent returns metrics, run by a management team that was certainly aligned with shareholders and very well proven. Our analysis helped us establish that long-term ownership was very likely to be rewarded. And as you can see from the chart, Oracle took a little while to get going, but we could see that they were doing what great long-term businesses do, which is accept some short-term pain as they invested in a comprehensive move to the cloud and as-a-service offering, whilst using their low rating to undertake a massive share buyback with them buying back $120 billion of their shares and the share count reduced by 38%. As their transition to the cloud and as a service became better understood by the market, share price performance improved. And more recently, Oracle's cloud offering and incumbent position in corporate and governmental data places them very well for AI, and this has driven the doubling of its share price during the first half of our year. Our overall investment performance from only Oracle has been good with GBP 35 million invested, delivering GBP 101 million in cash returns through top slicing and dividends with the position worth GBP 89 million at the end of the period, so 5.4x our money. I will now hand over to Tom to talk about private capital. Tom Leader: Thank you, Mat. Today, I'll walk you through our performance, portfolio highlights and recent developments, focusing on how we continue to support private companies in creating enduring value. As a reminder, Caledonia Private Capital is focused on making direct investments, usually on a majority basis into high-quality mid-market U.K.-centric businesses. Our model is built on permanent capital, genuine partnership, a patient long-term perspective with moderate use of leverage. Unlike private equity firms whose funds have limited life spans, restricting the time when investments must be made, grown and sold, we have no time limitations on our investments. We can build genuine partnerships with strong management teams and help them create enduring value without the constraints of short-term capital. Our current portfolio has a net asset value of GBP 907 million, invested across 8 companies and represents approximately 30% of the NAV of Caledonia as a whole. For the half year, we delivered a total return of 7.7%. This result was primarily driven by the agreed sale of our minority stake in Stonehage Fleming to Corient Wealth, on which we exchanged contracts in September, along with continued good operating performance from AIR-serv. I will cover Stonehage Fleming in a bit more detail on the next slide. But clearly, the sale, when it completes, will deliver an excellent result for Caledonia. AIR-serv was another strong performer, valued at GBP 193 million as at 30th of September. In the half year, it delivered an 11% return, driven by strong revenue and profit growth. The business paid Caledonia a dividend of GBP 24.5 million in the period. The other companies in the portfolio continue to make progress in executing their value creation plans. Looking at our long-term performance, Private capital has delivered annualized returns of 8.5% over 3 years, 20.7% over 5 years and 12.5% over 10 years, all versus our 14% target. Stonehage Fleming is a full-service multifamily office, helping discerning clients address the challenges of creating and preserving wealth. It is focused on the ultra-high net worth market, which is the fastest-growing segment of the wealth market. The firm's clients have entrusted it with the management, fiduciary oversight and administration of assets in excess of USD 175 billion. Stonehage Fleming provides its services from 20 offices in 14 geographies. With an initial investment of approximately GBP 90 million in July 2019, we acquired a minority stake alongside Giuseppe Ciucci and the other founder partners. The management were not looking for a conventional private equity investor, but instead for a capital provider, which shared their long-term perspective and multigenerational approach to preserving and growing capital. Together, we restructured the balance sheet and the shareholder base of the group to position it for the next phase of growth. Over the following 6 years, we have worked in close partnership with the leadership team to deliver upon our original investment thesis, which entailed, first, streamlining the governance structure by financing and supporting succession management; second, investing in technology, which improved margins and allowed Stonehage Fleming to internalize services that were previously outsourced; third, enhancing business development, which delivered strong organic growth; and fourth, completing 4 strategic acquisitions, which have expanded the firm's geographic reach and diversified its product and service offering. The business has been a consistent performer, a true compounder. Strong cash generation and disciplined reinvestment have driven returns steadily upward through our ownership. This investment is a hallmark example of our unique approach, long-term partnership-driven and unconstrained by fixed fund life and has delivered exceptional value for all stakeholders. We expect the deal to close in mid-2026, subject to the required regulatory consents at which point it should deliver cash proceeds of approximately GBP 288 million, representing including dividends received along the way, a 3.2x multiple on cost of investment. As of 30th September, Stonehage Fleming was valued in the portfolio at GBP 259.7 million, net of approximately 10% discount to reflect the transaction execution risk and the time value of money. The bubble chart here illustrates for all our major realizations since 2012 on the X-axis, the realized IRR and on the Y-axis, the NAV uplift at exit compared to the carrying value 12 months prior to exit. For Stonehage Fleming, the expected exit proceeds of GBP 288 million represent a 30% uplift to its carrying value as at the 31st of March 2025. This result is comparable with a 37% uplift relative to the carrying value when we sold 7iM in January 2024. Overall, across the portfolio, we have a strong track record of realizations. Since 2012, we've generated GBP 1.4 billion in proceeds, returning around GBP 700 million in net cash to Caledonia. Our realized investments have delivered a 17% IRR and a 2x multiple on cost, which, given the low appetite for and use of leverage, compares very favorably with the returns delivered by U.K. mid-market private equity. Let me finish by saying we continue to deliver strong and consistent returns, underpinned by our disciplined approach and the strength of our partnerships. The success of Stonehage Fleming exemplifies the power of our permanent capital model, enabling us to back exceptional businesses and management teams, support their long-term growth and realize substantial value for our shareholders. Thank you, and I'll now hand over to Rob. Rob Memmott: Thank you, Tom. Our funds pool has been running for more than 15 years. The opportunity is significant. These funds tend not to market in Europe, meaning that we are often the only European investor, a real differentiator. The pool NAV of GBP 884 million is a diverse portfolio invested in some 82 funds by 46 managers and in more than 600 underlying businesses. 64% of the NAV is focused on the North America lower mid-market buyouts. The funds are typically the first institutional investment into relatively small often owner-managed businesses. The playbook is to transform the companies by strengthening the management team, improving operational efficiency, growing sales by product and geography, both organically and through bolt-on acquisitions. These improved companies with greater scale provide feedstock to mid-market private equity. It's a very pure form of capitalism. Of the North American companies, 2/3 are providing services with the balance having very little exposure to international trade flows. 36% of the pool NAV is invested in Asian buyout, growth and venture. The buyout assets are focused on domestic consumption and supply chains, fueled by the aging population, growing middle class and tech adoption. The venture and growth funds are invested in government supported new technologies and health. Whilst there is very limited exposure to the direct impact of trade tariffs, as expected, economic uncertainty has reduced investment and realization activity in the short term. The pool has delivered solid returns of 13.3% over 5- and 10-year periods. Performance over the 6 months reflects the continuation of trends experienced for the last 3 years. During that period, the North American pool delivered local currency returns of 8.9%, driven by the trading performance of the underlying companies. In Asia, the companies are making progress. However, the continued reduction in capital market flows has impacted on fundraising and exits suppressing our returns. Overall, the pool NAV grew by 4.3% in local currency, but reduced by 1.8% in sterling. Our capital commitments are GBP 394 million, 75% of which is to North America. GBP 52 million was invested in the 6-month period and $55 million of new commitments were made to 2 North American managers. Looking at the cash flows in a bit more detail. The chart shows the realization and investment activity over recent 6-month periods. As I mentioned earlier and as expected, economic uncertainty has reduced investment activity in the last 6 months, which can be seen on the graph. The pie chart details the weighted average life of the primary portfolio. For North America, the weighted average life is 4.3 years. For Asia, it's 5.5 years. We expect a longer hold period in Asia given that the assets are weighted towards venture growth and fund of fund investments. And so to the numbers. During the 6-month period, our NAV total return was 4.4%, growing our NAV to just over GBP 3 billion, of which GBP 2.9 billion is invested in a diversified portfolio of listed and privately held companies and funds that have got global reach. Cash on balance sheet was GBP 105 million. This, combined with our undrawn revolving credit facility of GBP 325 million, enables us to act quickly to invest in companies and funds that we find attractive. This was demonstrated in April when we deployed approximately GBP 50 million into the public company strategy, taking advantage of opportunities provided by the market volatility around Liberation Day. We have reprofiled the interim dividend such that it is 50% of the prior year total. This equates to 3.68p, which will be paid to shareholders on the 8th of January 2026. And now to my beloved waterfall chart. This chart shows the movement in NAV over the period. We started the year at GBP 2.9 billion. The portfolio return of GBP 145 million includes the negative impact of foreign exchange. We then deduct management expenses of GBP 17 million. There is then the cash returned to shareholders, GBP 14 million allocated to share buybacks and GBP 28 million for the final dividend from the prior year. That results in a closing NAV of just over GBP 3 billion. Our OCR is 87 basis points, slightly up on the prior year, reflecting some investment in our teams. I expect this to increase slightly over the next 12 months, taking account of full year effects. 54% of our assets are domiciled in U.S. dollars and 37% in sterling. Movements in the sterling-dollar exchange rate will, therefore, impact our in-period results. In the last 6 months, we suffered an FX loss of GBP 59 million, reducing our NAV by approximately 2%. We have a robust balance sheet with no structural leverage. Walking you through the cash movements, we started the year with GBP 151 million, and net GBP 27 million has been invested. The investment income from our assets was GBP 47 million, higher than in previous periods as it includes the GBP 25 million dividend from AIR-serv. We have consumed GBP 24 million in the cash cost of management expenses and working capital. And next, there is the payment of the prior year final dividend, GBP 28 million and GBP 14 million allocated to share buybacks, resulting in a closing cash position of GBP 105 million. This, combined with our undrawn revolving credit facility of GBP 325 million means that we have liquidity of GBP 430 million. Of the revolving credit facility, GBP 150 million has just under 4 years remaining duration and GBP 175 million just under 2 years. We expect to complete the sale of Stonehage Fleming in Q2 2026 once all the regulatory approvals are obtained. GBP 251 million will be received on completion with 2 further amounts of GBP 18 million being due 6 and 12 months following. These amounts will come back on to the balance sheet. We feel no pressure to invest, and we will continue to appraise investment opportunities on their merits and as they arise. The discount at the end of the period was 33%. We believe this fundamentally undervalues the quality of the portfolio, our track record and prospects. We are taking actions over the things that we can control, including share buybacks, which remain an attractive investment for us. We have a prudent capital allocation policy to investments, our dividend and when appropriate, share buybacks. During the 6 months, we allocated GBP 14 million to share buybacks, increasing the total since March '24 to GBP 78 million, delivering a 7.44p NAV per share accretion. We continue to evolve our IR and communications to ensure that the Caledonia investment proposition is understood and rated. We held capital market spotlight events in January and June, focused on private capital and public companies. If you've not had the opportunity, I would encourage you to visit the website and watch the presentations. They provide a great insight into how the pools operate, what differentiates us and how we add value. When you visit the website, you will see that this has been significantly improved with new content. A date for your diaries, the 27th of January 2026, we will be holding the third spotlight session focused on the funds pool. We believe Caledonia is a great home for long-term investors. Following shareholder approval, we have completed the 10 for 1 share split. In addition, we have rebalanced the profile of the dividend, increasing the interim to 50% of the prior year total rather than the historic rate of approximately 25%. These measures will improve visibility of income, make payments more balanced, and I expect will improve accessibility for all shareholders. I'll now pass back to Mat. Mat Masters: Thanks, Rob. We're pleased with our 6-month performance, which supports our track record of delivering NAV total return of 9.8% per annum over the last 10 years, which is at the top end of our target range. Across both public and private markets, our portfolio is high quality, diversified and deliberately positioned to withstand short-term market volatility while compounding value over time. And none of this would be possible without our strong balance sheet, exceptional team fully aligned with shareholders and focused on long-term value creation. Thank you very much for joining us today, and we will now take questions. Operator: [Operator Instructions] Our first question comes from Iain Scouller with Stifel. Iain Scouller: I just wanted to ask about the valuation of Stonehage. I think in the statement, you're saying it's at a 5% discount to the expected proceeds. But in the presentation, you're talking about a 10% discount. So I just wondering if you could clarify that. Tom Leader: Certainly, the total discount relative to the expected proceeds is approximately 10%, comprising 2 separate adjustments: one, approximately 5% discount for execution risk and a 5% discount for the time value of money. The total discount relative to the expected proceeds is 10%. Iain Scouller: Okay. And when do you expect to receive the proceeds? Tom Leader: We expect to receive the proceeds on completion of all the regulatory approvals. But there are, in fact, slightly more than 20 regulatory approvals required in multiple jurisdictions. That process will take several months. So we expect the deal to complete towards the back end of the first half of calendar 2026. Operator: Our next question comes from Anthony Leatham with Peel Hunt. Anthony Leatham: A couple of questions, if I may. You were particularly active kind of April, that liberation day volatility on the public company side. How are you feeling about the environment and the positioning of the portfolio today? And then I had a couple of questions on the private equity side. Maybe a comment on the maturity profile of the funds portfolio. And then we're hearing from private equity trusts and managers that realization activity is actually improving. And I didn't know whether you had seen the same trend within your holdings. Mat Masters: Anthony, thanks for the question. Mat here. So yes, we did. So following President Trump's what's been Liberation Day sort of announcements and things, the stock markets sold off. And we added -- very pleased to add Charles Schwab to the portfolio. And that is absolutely sort of the playbook when we sort of invest in the quoted markets is to keep our powder dry until opportunities present themselves. And we also topped up other holdings in the wake of that, and that's all thus far performed very well for us. The portfolio is a long-term portfolio. We try not to judge precisely where it is on any particular day, but we do feel as we risk manage the portfolio as we go forward, we obviously talk about the fact that we to Oracle as that went up in value and loss rating went up, we did that across the whole portfolio. So we feel good about the medium and long-term prospects of the portfolio. Obviously, impossible to predict what share prices do on a day-to-day basis, I'm sure you'll appreciate. Maybe Rob could tackle the funds questions. Rob Memmott: Yes. Thanks, Anthony. Just in terms of the fund’s activity, as we mentioned in the presentation, the level of realization and investment activity in the last 6 months has reduced quite significantly. And what we're seeing is that start to increase the weighted average life of the portfolio compared to where we were a year ago. In terms of recent activity in the market, certainly, there is sort of noise of increased activity taking place. We're yet to see that sort of flow through into sort of real pound notes coming back through to us. And certainly, from a sort of planning and thinking about sort of liquidity, we're sort of still quite cautious in terms of the speed of that recovery getting back up to the norms, which I guess we were experiencing in the prior financial year. Operator: [Operator Instructions] There are no further questions on the webinar. I will now hand over to [Beck Hughes] to read out the written questions. Please go ahead. Unknown Executive: So the first question is about Oracle. What is your view and future prospects for your Oracle holding? And have you sold any more since the period end? Mat Masters: Thanks for the question. Mat here again. So we think Oracle has a fantastic future ahead of it. Most of its current trading is still sort of legacy type business. And what's really happened is its forward order book, it's grown a lot and a lot of that is sort of AI related. So actually, that's reflecting the opportunity expanding ahead of it. So we're quite excited about the future for Oracle. Nevertheless, the rating has changed materially during the period. And so we do sort of respond to that. And so we have also the size of the position during the we talked about the money we've had it over the course of our investment period. But over the year -- over the half year rather, we've taken GBP 54 million of it. So we have trimmed the holding according to the change in risk -- really around rating risk with it. We remain pretty excited about its medium and long-term future. Unknown Executive: A question on Stonehage. Are the proceeds contingent on anything or just deferred? And what are the most attractive areas for new investment? Tom Leader: So dealing with the Stonehage completion mechanism first. As I alluded to earlier, completion is conditional on reg approval in multiple jurisdictions. That will crystallize payment of the bulk of the proceeds, just over GBP 250 million. There is a deferred element, which is payable in 2 tranches 6 and 12 months post completion. Those deferred proceeds are interest-bearing, and they are subject to adjustment depending on the finalization of a closing balance sheet audit, which includes a true-up mechanism. So that could go either up or down, positive or negative against the estimated closing balance sheet just prior to closing. So there is bound to be a small difference between the 2, but we do not expect it to be material. In terms of the second part of the question, future opportunities, we scan somewhere between 300 and 350 new opportunities a year across a very broad range of sectors. Our historic strengths have been in financial services and business services and technology-driven industrial businesses. And there is a regular flow of opportunities in all of those sectors. But I would add that it is a difficult market in which to deploy capital. Good quality assets are still transacting at very high prices, and less good quality assets are either taking longer to sell or not selling at all. So we will remain selective and we have the liquidity to finance new acquisitions if and when we can find the right opportunity. Unknown Executive: Thanks, Tom. A question around discount. What plans do you have to reduce the very large discount now the buyback may have marginal benefits, but does not seem to benefit? And why have you only bought back GBP 13 million worth of stock given the discount is just over 30% and you have a lot of liquidity. Rob Memmott: Yes. Thank you, Beck. So as you rightly point out, the discount of around 33%, we certainly feel undervalues the value of the portfolio, our track record and our prospects. I guess the buybacks, we sort of see those as an investment opportunity for us. We don't see that -- we don't have a discount control mechanism. The things that we are doing to influence the discount are the things that we can control, which is continue to invest in a good quality, high-quality portfolio, make sure that we communicate with as large an investor base as possible to make sure that we -- the proposition is properly understood and rated. And then there are some smaller sort of tactical things that we've done around the share split, rebalancing the dividend payment to make sure that the shares are as attractive to a broader investor base as possible. Unknown Executive: Another question here about hedging. You mentioned return in sterling is diminished by your U.S. dollar weakness. Do you hedge? Rob Memmott: And the answer to that is that we do not hedge. We're a long-term investor. And if you like, the short-term volatility coming from exchange rates, we sort of understand those and sort of monitor them, but it is about sort of long-term sort of value sort of creation. And generally, if you sort of hedge the balance sheet position, you pay a premium in order to end up in the same place. So we don't hedge unless there are specific cash flows that we would do so for. And I think that the weighting of the portfolio is more dollar denominated reflects the fact that the size and the quality of the companies which we're investing in, a lot of those are based in North America or headquartered in North America. Unknown Executive: Another question here on special dividend. In the past, there was a loose policy of providing a special dividend every 3 years or so. Is this policy still operative? Mat Masters: So we have -- thanks for the question. We have a track record of occasionally paying special dividends. I don't think we've ever sort of announced a policy about when we would do it. And we've not made any announcement about paying a special dividend. So that is the case at the moment. Unknown Executive: Another question here about equity market valuations. What do you think of them. Mat Masters: Well, thanks for the question. So equity market valuations vary around the globe, and there'll be one market up and one market not quite so far up. And actually, it's a really difficult question to address and actually respond to in your portfolio. And so what we do is to try and keep it very simple. We invest in good quality companies and hold them for the longer term and try not to worry too much about what's going in the macro and make sure we invest in things where we don't have to worry too much about the macro. Okay. Well, we have gone through the questions now, and we're very grateful for everyone joining us on the call today and for the questions, and we look forward to connecting with you next time. Operator: Thank you for joining today's call. We are no longer live. Have a nice day.
Operator: Ladies and gentlemen, thank you for standing by, and welcome to the Zhihu Inc. Third Quarter 2025 Financial Results Conference Call. [Operator Instructions] Today's conference is being recorded and webcasted. At this time, I would like to turn the conference over to Yolanda Liu, Director of Investor Relations. Please go ahead, ma'am. Yolanda Liu: Thank you, operator. Hello, everyone. Welcome to Zhihu's Third Quarter 2025 Financial Results Conference Call. Joining me today on the call from the senior management team are Mr. Zhou Yuan, Founder, Chairman and Chief Executive Officer; and Mr. Wang Han, Chief Financial Officer. Before we begin, I'd like to remind you that today's discussion will include forward-looking statements made under the safe harbor provisions of U.S. Private Securities Litigation Reform Act of 1995. These statements involve inherent risks and uncertainties. As such, actual results may be materially different from the views expressed today. Further information regarding these and other risks and uncertainties is included in our public filings with the U.S. Securities and Exchange Commission and the Hong Kong Stock Exchange. The company does not assume any obligation to update any forward-looking statements, except as required under the applicable law. Additionally, the discussion today will include both GAAP and non-GAAP financial measures for comparison purpose only. For a reconciliation of these non-GAAP measures to the most directly comparable GAAP measures, please refer to our earnings release issued earlier today. In addition, a webcast replay of this conference call will be available on our IR website at ir.zhihu.com. This quarter, Victor Zhou, Zhou Yuan's AI agent will once again deliver the prepared remarks in English on his behalf. Victor is still in training, so we appreciate your patience as he continues to improve. Victor, please go ahead. Yuan Zhou: Thank you, Yolanda. Hello, everyone, and thank you for joining Zhihu Third Quarter 2025 Earnings Call. I am Victor Zhou, and I am pleased to deliver today's opening remarks on behalf of Mr. Zhou Yuan, Founder, Chairman and CEO of Zhihu. The third quarter marked another meaningful step toward our goal of achieving non-GAAP breakeven on a full year basis. As our structural optimization initiatives continue to take effect, we further refined our service offerings and balanced commercialization with community health. We also maintained disciplined cost control and improved operating efficiency. As a result, our non-GAAP operating loss narrowed by 16.3% year-over-year in the third quarter. At the same time, our community ecosystem continues to strengthen user mix and engagement improved, while MAUs increased modestly from the second quarter. Daily time spent continued to trend higher year-over-year and quarter-over-quarter. Our users and creators remain highly active, supporting improved core user retention and a steady stream of reliable high-quality content on the platform. With our high-quality content, expert network and AI capabilities working greater synergy. We are accelerating our agentic AI upgrades to deliver trusted and differentiated experiences to users, both within and beyond the community. As the AI industry enters a new phase of real-world integration and accelerated deployment, Zhihu as a trusted source of high-quality content and data upstream of Chinese LLMs and AI applications is gaining prominence, creating expanding opportunities for collaboration. With rising high-quality content, a highly active base of professional creators and accelerating AI integration, our community ecosystem radiates vitality. Our competitive moat of trusted content continues to strengthen. In the third quarter, daily creation of high-quality content increased by over 25% year-over-year, with professional AI-focused content up by more than 30% compared to the same period last year. As AI technologies and applications rapidly advance in China, Zhihu remains a go-to platform for frontline engineers and researchers for sharing and lively discussions. AI-focused content covers a range of subjects, including deep technical analysis, innovative product applications, emerging industry trends, personal growth, career development and a growing array of emerging topics driven by rapid AI adoption from the technical debate between MiniMax and Moonshot AI over efficient attention, which sparks heated discussions on Zhihu and highlighted China's diverse approaches to LLM innovation to the in-depth engineering analysis of new models shared by leading companies. Zhihu has become a trusted source for authentic first-hand exchanges. These discussions have made our platform a place where AI innovations are first interpreted, validated and shared. Meanwhile, we continue to strengthen our trustworthy content ecosystem through ongoing improvements to content governance mechanisms and recommendation algorithms. Professional creators are a vital force in our community. In the third quarter, daily active high-tier creators increased significantly on both year-over-year and a sequential basis. The number of verified honored creators also grew by 29% year-over-year. Engagement among AI-focused creators also continues to strengthen. Zhihu now brings together more than 60 million continuous learners and 3.56 million proficient creators in science and AI and 150,000 ecosystem builders. These contributors not only add consistent high-quality input to our AI content ecosystem, but also show significant potential as future service providers for enterprises. Beyond the science and AI, creator activity in humanities and social sciences also remains strong across the platform. In September, we launched the co-benefit co-creation initiative [Foreign Language] in collaboration with leading institutions such as Alibaba Foundation, Tencent Charity Foundation, One Foundation, and Greenpeace alongside the psychologists, medical experts and the writers. This initiative generated a wide range of high-quality content across disability rights, mental health, environmental protection and more joining over 80 million views. We also hosted the 2025 Zhihu Humanities Season, Zhihu Renwenji event, which brought creators together through a blend of online and offline engagement. The campaign attracted nearly 30 influential creators, driving a 7.5% quarter-over-quarter increase in creator activity in the humanities category and generating 5.82 million topic views, reinforcing Zhihu's professional influence and cultural relevance. To better support professional creators, we continue to enhance the content creation and distribution experience. Our ideas product supports knowledge-based expression from high-tier creators and enables more diverse short-form content creation among mid-tier creators. As a result, average daily content volume and interactions increased by 21.7% and 33.1% quarter-over-quarter, respectively. Our Circles product also continues to serve as a focused space for users with shared interests to gather and interact with average daily views more than tripling sequentially during the quarter. We also continue to advance our agentic AI upgrades across the community. From a product perspective, Zhihu Zhida evolved into the agentic mode at the end of September, delivering more accurate and smarter search results. Most notably, Zhihu Zhida now serves as a helpful partner for deep thinking and creativity, capable of understanding user intent, performing multistep reasoning and synthesizing information across research, learning and content creation. Our advancements in agentic AI are also amplifying the value of our creators. By strengthening the attribution of content to trusted creators across the knowledge base and search, AI-generated responses now sites to verify the knowledge during the reasoning stage, significantly reducing hallucination and improving trust. This strengthens creator influence within the generative AI landscape and gives Zhihu a distinct advantage as a trusted content provider in the emerging AI ecosystem. Now moving on to commercialization. In the third quarter, our commercialization continued to recover on a healthier base with total revenues reaching RMB 658.9 million in the third quarter. We also made notable progress in exploring new monetization avenues by leveraging our core strengths. Let's take a closer look at our performance by business unit. In the third quarter, marketing services revenue was RMB 189.4 million. Notably, the year-over-year decrease narrowed, indicating the bottoming out of our adjustment cycle. We expect marketing services revenue to begin growing on a sequential basis in the fourth quarter. During the quarter, we made a solid progress in both optimizing our client mix and upgrading our advertising products. We continue to optimize client mix by deepening our focus on high-value accounts with our brand power and expanding commercial IP, driving strong uptake from enterprise clients, particularly in technology and other high-value verticals. In late September, we hosted the TechClub Conference, bringing together AI experts and some of the most influential tech creators from the Zhihu community to explore the latest developments and future applications of AI. The event showcased the technology's transforming role in everyday life and our unique ability to connect professional content with meaningful brand engagement, further expanding our high-value client base. Through the Zhihu platform, leading companies such as Gree, China Mobile, Huawei and FY Tech further strengthened their brand positioning in technological innovation and product excellence. Backed by the credibility of our brand and strong commercial efficiency created by professional discussions across our community, we made a solid progress in acquiring new clients across diverse sectors such as automotive, consumer and health care. This quarter, we also further upgraded a wide range of our commercial products by integrating AI more deeply across our portfolio. Our dual ecosystem optimization and product efficiency engines drove a significant increase in positive feedback from clients. For example, we launched the upgraded CCS for idea scenarios and introduced the product to more clients. By offering this short content plus precise scenarios format, it bridges authentic experiences and purchase decisions for brands and merchants. At the same time, it makes content consumption and the decision-making for users substantially more efficient. We are also seeing rising demand from clients to improve brand and product presentation in AI-generated answers. Leveraging our trusted content and high citation rate across the Internet, we launched our new GEM marketing solution in early November. This new solution provides core insights such as visibility across AI platforms and citation analytics. Leading technology clients we have worked with include Lenovo, FlightTech, Vivo and Proa. We have received a positive endorsement as we help enhance both their SEO and GEO performance for brands and new products. Looking ahead, with a healthier ecosystem, stronger client base and more robust service offerings, we will continue to leverage AI to drive a steady recovery and long-term growth in our marketing services business. And now for our paid membership business. In the third quarter, average monthly paid members increased by 8.1% sequentially to 14.3 million, with revenue reaching RMB 386 million. Our efforts to boost member retention and ARPU through diversified initiatives continue to generate positive feedback from both creators and users. The Yanyan Story long-form writing marathon came to a successful close in late October after 6 months campaign, generating tens of thousands of submissions in the third quarter alone. This initiative opened up new development pathways for aspiring creators and provided a steady pipeline of content for our library and the future IP development. At the same time, voice live streaming saw a further improvement in paid conversion rates. We also unlocked further commercial potential for our IP adaptations in China and overseas. During the quarter, revenue from IP licensing maintained its triple-digit growth rate year-over-year and generated high double-digit growth quarter-over-quarter. Year-to-date, revenue has nearly doubled compared with the same period last year. In mid-October, Yanyan Story debuted at the Frankfurt Book Fair, showcasing Chinese digital literature on a global stage for the first time. It also draw coverage from the U.K. magazine, the bookseller, which noted the new growth path for Chinese short-form digital literature in the international markets. By the end of October, Yanyan Story licensed more than 100 titles for publication across major Asian markets, including Japan, South Korea, Thailand and Vietnam. A number of works have also been adapted into short dramas for overseas markets and performed well, reflecting the growing popularity of Chinese short-form content abroad. Meanwhile, Yanyan Story has established partnerships with international platforms such as Mobile Reader and GoodNovel to translate works into English, Spanish, Japanese, Korean, Portuguese, Thai, Indonesian and other languages, further expanding its international reach. Going forward, we will pursue a diversified set of initiatives to improve member retention and ARPU. By enhancing content supply, membership benefits and personalized experiences, we aim to strengthen long-term member value. As AI enables more efficient content creation, the potential for IP development and commercialization will expand, unlocking new growth opportunities for our membership business. Starting this quarter, we are simplifying our revenue breakdown and will begin reclassifying vocational training revenue into other revenues to align with our overall strategy. Other revenues were RMB 83.9 million, of which we will continue to adjust our vocational training business with a focus on improving operational efficiency and prioritization. Although our vocational training business has been reclassified, we continue to build on its creator-driven foundation with the development of our column product. Designed primarily to serve super creators, column is intended to enhance the creator ecosystem rather than act as a new commercial growth driver. During the quarter, we enhanced the product by rolling out a PC version and AI tools that help creators generate column descriptions and cover designs. This enhancement drove sequential growth in both the number of leading column creators and creator user engagement. Monetization models for column creators is also becoming more diversified with overall GMV more than doubling compared with last quarter. Going forward, we will continue to operate with discipline, maintaining stability while investing prudently for sustainable growth. With the ongoing enhancements in efficiency and steady cost optimization, we are confident in achieving our full year profitability target. Building on this foundation, we will continue to invest with a long-term view to strengthen our AI capabilities and improve the efficiency of our core operations. Deeper AI integrations will drive greater synergies across content creation, distribution and monetized on Zhihu. Meanwhile, we will further refine our product and marketing strategies to capitalize on new growth opportunities from high-quality users and enterprise clients. With a healthier operating structure and ongoing innovation, we are well positioned to thrive in this next stage of high-quality growth. With that, I will hand the call over to our CFO, Wang Han. Han, please go ahead. Wang Han: Now I will review the details of our third quarter financials. For a complete overview of our third quarter 2025 results, please refer to our earnings release issued earlier today. In the third quarter, we maintained disciplined cost management and drove further improvements in operational efficiency. As a result, our non-GAAP operating loss narrowed by 16.3% year-over-year. We continue to invest in areas that reinforce our long-term growth potential, striking a healthy balance between efficiency and investment. Our total revenues for the quarter were RMB 658.9 million compared with RMB 845 million in the same period of 2024. The decrease was mainly the result of our continued efforts to optimize revenue mix and focus on sustainable, high-quality growth. Notably, the year-over-year decrease narrowed for the third consecutive quarter, in line with our expectations. Our marketing services revenue for the quarter was RMB 189.4 million compared with RMB 256.6 million in the same period of 2024. This decrease was mainly driven by our proactive refining of service offerings and optimization of client mix. Encouragingly, the year-over-year decrease narrowed meaningfully, indicating that our adjustment cycle has bottomed out. Paid membership revenue was RMB 385.6 million compared with RMB 459.4 million in the same period of 2024. While the number of average monthly subscribing members fell year-over-year, they rebounded and grew 8.1% sequentially to 14.3 million. We also continued to enhance retention and ARPU through diversified content and membership initiatives. Other revenues were RMB 83.9 million compared with RMB 129 million in the same period of 2024. The decrease was primarily due to the strategic refinement of our vocational training business. Our gross profit for the quarter was RMB 403.6 million compared with RMB 540.1 million in the same period of 2024. Gross margin was 61.3% compared with 63.9% in the same period of 2024. Our total operating expenses for the quarter decreased by 19.4% year-over-year to RMB 503.5 million. The decrease was primarily due to a more efficient cost structure and disciplined resource allocation across key operating areas. Selling and marketing expenses decreased by 14.9% to RMB 330.1 million from RMB 388 million in the same period of 2024. The decrease was mainly due to tighter control over promotional spending and optimized personnel-related expenses. Research and development expenses decreased by 36.2% to RMB 114.4 million from RMB 179.3 million in the same period of 2024. The decrease was primarily driven by continued improvement in research and development productivity and efficiency. General and administrative expenses were RMB 59 million compared with RMB 57.2 million in the same period of 2024. Our GAAP net loss for this quarter was RMB 46.7 million compared with RMB 9 million in the same period of 2024. On a non-GAAP basis, our adjusted net loss was RMB 21 million compared with RMB 13.1 million in the same period of 2024. As of the 30th of September 2025, we had cash and cash equivalents, term deposits, restricted cash and short-term investments of RMB 4.6 billion compared with RMB 4.9 billion as of the 31st of December 2024. As of the 30th of September 2025, we repurchased 31.1 million Class A ordinary shares for an aggregate value of USD 66.5 million on the open market. Additionally, we repurchased a total of 22.5 million Class A ordinary shares for an aggregate value of USD 34.5 million through the trustee of the company as of the end of the third quarter. Looking ahead, we are on track to achieve full year breakeven on a non-GAAP basis. We will continue to further strengthen our monetization capabilities and pursue new revenue opportunities that leverage Zhihu's strength in high-quality content creator expertise and AI-driven innovation. Together, these efforts will reinforce our business resilience and support sustainable long-term growth. This concludes my prepared remarks on our financial performance for this quarter. Let's turn the call over to the operator for the Q&A session. Operator: [Operator Instructions] We will now begin with our first question, and this is from Vicky Wei from Citi. Yi Jing Wei: Will management share some color about the AI progress of Zhihu? For example, the penetration rate of Zhihu Zhida and the progress of the AI integration with the Zhihu Community. Yuan Zhou: [Interpreted] Thank you for question. This is from Zhou Yuan, Zhihu CEO. First of all, I would like to say sorry about my weak voice because I didn't recover yet from my cold. Anyway, I would just start with your first question. So as you can see, Zhida remains one of our key products. Its overall usage and penetration rate continued to increase in the third quarter with the penetration rate existing 15%, nearly 4x higher than the same period last year. This not only reflects the ongoing evolution of our foundational AI capability across the community, but also demonstrates strong user endorsement of a very strategic depending of AI plus community. This also gives us a very strong confidence to continue upgrading this AI plus community experience updates across more touch points. Now let me just share some recent progress and upcoming plans. First of all, in the search scenario, by late November, Zhida will fully augment our general AI search capability to include Zhida-generated content for all users. Additionally, we will soon launch pilot features such as cross-topic content aggregation and the community trend summaries. This will formally navigate Zhida from secondary entry point to a primary one, further boosting AI adoption across the entire community. And second of all, on the content creation side, we are empowering professionals with strong AI copilot. In this quarter, we launched a suite of AI assistant writing tools for our creation assistant, which includes smart headlines, grammar and fact checking and lead paragraph generation. This will help creators optimize long-form structures and expert-level content. So by the end of 3Q, adoption of these new AI features has already surpassed 20%. Looking ahead, we plan to introduce additional capabilities such as AI-powered multi-model content conversion, intelligent formatting and short-form content generation and et cetera. These tools will significantly lower the barrier to entry for mid-tier creators, enabling more users to express themselves effortlessly to increase posting frequency, creation frequency and engage more actively. In addition, on the content consumption and distribution side, we are also expanding Zhida into high-frequency consumption scenarios. For example, AI-powered daily briefing on Zhihu's training topics and other vertical-specific topics as well as the ability to mention Zhida in threats or to also summarize discussions and surface key insights will help users quickly grasp complex conversations and participate more meaningfully. We believe this will further strengthen user engagements and community stickiness. Thank you. Operator: We'll now take the next question. This is from Luqing Zhou from Goldman Sachs. Luqing Zhou: So my question is on how do you see the current status of Zhihu's user ecosystem? And based on that, could management share more color on the directions for improving Zhihu's future product design and how is the progress so far? Yuan Zhou: [Interpreted] Thank you for your question. This is from Zhou Yuan, Zhihu CEO. We believe, overall, the community ecosystem is very healthy. We do not rely on any single metric to assess its health. Instead, we focus on content quality, user structure and user quality and whether our content creator incentives are forming a virtuous cycle. We have also deployed AI as a core product driver at a strategic level. Over the past few quarters, we have made the synergistic development of high-quality content, multiply expert network, multiply AI capabilities as a core path for driving our ecosystem in a positive direction. From this perspective, our ecosystem is stable and continuously improving. This is fully in line with our expectations as well. First of all, the trustworthiness and professionalism of our content are very crucial. They are crucial indicators of the ecosystem health. Over the past few quarters, we have continued to strengthen our trustworthy content ecosystem and our expert network while also cracking down on low-quality content and traffic to keep the ecosystem healthy at its core and reinforce the virtuous cycle. As a result, we have delivered several consecutive quarters of double-digit growth in daily high-quality content creation. The AI category is the most reflective of this progress with the professional AI-related content regarding double-digit growth for 4 consecutive quarters. On this basis, users' trust in our content has also continued to increase steadily. And secondly, our user structure and user quality have improved and users' need across different scenarios has been addressed. As we can see from last Q4, our MAU has remained stable on a sequential basis for 4 consecutive quarters. And building on that, average daily user time spent, which we believe as a proxy for engagement and retention has delivered double-digit year-over-year growth for 6 consecutive quarters. Our users remain mainly young and focused on learning and growth with user age between 18 to 30, accounting for more than 65% of our total user base. Among them frontline professionals in technology and AI have become one of the most representative groups. They have long-term professional learning, frontier exploration and interest development needs and contribute more content and provide a stronger positive feedback to the ecosystem. And last but not the least, the content -- the creator ecosystem continues to grow and expand. Output from top-tier professional creators have remained stable over 7 consecutive quarters. At the same time, by using AI tools, we are continuously lowering the creation threshold for mid-tier creators and increasing the creation frequency of the entire creator group. This makes the supply side of the community more diverse and keep social interaction within the community growing. So in summary, ecosystem health is foundational to Zhihu. Going forward, we'll continue to invest in trust content and expert network so that as a community scales, it can maintain its professionalism, vibrancy and trustworthiness. Let me just turn to the second question you mentioned. It's about our core product going forward plan. Here, we hold a few key beliefs. First of all, over the next 3 years, people will consume more AIGC content. At the same time, human-to-human interaction will become more valuable. So we believe both trends will coexist. And the second belief we hold here is that stronger AI becomes, the more people will experience a sense of diminished presence, which means the participation, social capital and relationships enabled by community will become increasingly scarce and increasingly demanded. And the third belief here is that high-quality human-generated content and data will become extremely scarce as well as valuable on the supply end. This supply matters on both ends. It's crucial for the advancement of AI as well as for human development. So going forward, Zhida will definitely integrate with our users' functional social needs. For example, when a user wants to ask a question, search or look for resources, AI will dramatically raise efficiency. And Zhida will push the community further towards utility, enabling even the first day users to get a meaningful experience immediately. At the same time, we will double down on the social needs that come from real human connection things like building recognized, growing together and finding people who share your identity. We want to build these things with user feel like a sense of belonging in an environment grounded in real people, real culture and trusted interactions. So our future product direction is built around 2 pillars: utility and identity. My hope is for Zhihu to become the connection layer for humans in AI era as a place where people can use AI tools to understand the world as well as a community where they can find renaissance and understanding from one another. At the same time, we plan to build a trusted content and expert network as 2 foundational layers of infrastructure. Thank you. Thank you again for your question. Operator: We will take next question. This is from Daisy Chen from Haitong International. Kewei Chen: Could management update the progress of the adjustments in each business line? Did you see any signs that the revenue has bottomed out or started to rebound? In particular, how do you expect the future of the advertising business? And also, could you share your outlook on the company's profitability? Wang Han: [Interpreted] Thank you for your question, Daisy. This is from Wang Han, Zhihu CFO. So I will just pick up your second question. Here's a quick take on our profitability outlook. After delivering solid profits in the first 2 quarters, we now see a very high likelihood of achieving our first full year non-GAAP profitability in 2025. So with that buffer in place, we are using Q3 and Q4 as a window to keep fine-tuning and investing where needed. That's why you will see -- you can see a small loss in Q3, which is well within what we can comfortably take. Let me just walk through the adjustments across our major revenue lines. First, about the marketing services. As we mentioned last quarter, this Q3 is -- it will become the bottom. And we expect a sequential recovery starting in Q4. What we see now give us confidence to maintain that guidance. Looking ahead to next year, our goal is for each quarter to stay above the baseline set by Q3 this year. And second, about the pay membership. This segment is still in a transition period. As we said before, even the best libraries and bookstores separate fiction from nonfiction, the real challenge here is how to differentiate and integrate them in a way that feels natural to users. We will continue experimenting here. So we cannot say membership -- pay membership revenue has hit its bottom yet. But even if there is some decline, it will be about products or cohorts with lower ROI and weaker profitability or less than ideal retention. Search is about vocational training. This business is no longer a drag on our overall bottom line. Given this relatively low base or small scale, we have now reclassified it into others. So overall, you've seen us deliver several consecutive quarters of profitability followed by the small loss in Q3. Even though we remain confident in achieving full year profitability. With that foundation, we are taking this period to make necessary adjustments and targeted investments. As we approach our first full year of profitability, we also want to use this moment to shed some legacy inefficiencies and to start fresh. We have no intention of staying where we are and simply just squeezing out profits. We are now operating from a healthier foundation and getting back onto a trajectory that aligns with Zhihu's long-term development. Also, we have a solid -- very solid cash position, and we are not reverting to the old model of spending aggressively just forth go. And this new AI cycle or in this AI era, our focus is on strengthening Zhihu's position in real people interactions, expert network and trusted content areas. And these capabilities are becoming increasingly important and carry real social value. Thank you for your questions. Operator: We will now take the next question. And this is from [ Jing Yi Wang from Guangfa ]. Unknown Analyst: Could management share some more color about the shareholder return pay in progress. Wang Han: [Interpreted] Thank you for your question. This is from Wang Han, Zhihu CFO. We can see over the past 2 years, we've been one of the most active buyback companies among U.S.-listed Chinese names. That conviction came from our confidence in reaching profitability. And this year, we expect to demonstrate that our outlook and the targets set 2 years ago are being delivered. Even so Zhihu's current market cap remains significantly below the cash on our balance sheet. So we believe we are super undervalued. Therefore, we intend to maintain our buyback program and expect to remain one of the most active repurchase in this sector. Thank you again for your question. Operator: That concludes today's Q&A session. At this time, I will turn the conference back to Yolanda for any additional or closing remarks. Yolanda Liu: Thank you once again for joining us today. If you have any further questions, please contact our IR team directly or Christensen Advisory. Thank you so much. Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]
Operator: Listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touch tone phone. To withdraw your question, please press star then 2. Please note this event is being recorded. At this time, I'd like to turn the floor over to Gregory McNiff. Investor Relations. Sir, please go ahead. Thank you. Gregory McNiff: Joining me on today's call are Cheryl P. Beranek, Clearfield's President and CEO, and Daniel R. Herzog, Clearfield's CFO. As a reminder, Clearfield, Inc. publishes a quarterly shareholder letter which provides an overview of the company's financial results, operational highlights, and future outlook. You can find both the shareholder letter and the earnings release on Clearfield's Relations website. After prepared remarks, we will open the floor for a question and answer session. Please note that during this call, management will be making remarks regarding future events and the future financial performance of the company. These remarks constitute forward-looking statements for purposes of the safe harbor provisions of the Private Securities Litigation Reform Act. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements. It is important to also note that the company undertakes no obligation to update such statements except as required by law. The company cautions you to consider risk factors that could cause actual results to differ materially from those in the forward-looking statements contained in today's press release, shareholder letter, and on this conference call. The Risk Factors section in Clearfield's most recent Form 10-K filing with the Securities and Exchange Commission and its subsequent filings on Form 10-Q provide a description of these risks. Additionally, as announced on November 12, 2025, Clearfield, Inc. has sold its Nestor Cables business. Following the divestiture of Nestor, we are reporting only on the Clearfield segment. Beginning with this release, Clearfield is reflected as continuing operations, with Nestor classified as discontinuing operations and held for sale for fiscal 2025 and all prior periods on our financials. With that, I would like to turn the call over to Clearfield's President and CEO, Cheryl P. Beranek. Cheryl? Cheryl P. Beranek: Good morning, everyone. And thank you for joining us to discuss Clearfield's fourth quarter and full year fiscal 2025 results. I'll begin with a brief overview of the quarter, discuss our decision to divest the Nestor business, share updates on our long-term strategy, and then turn the call over to Dan for a summary of our financial performance and outlook for fiscal 2026. Fourth quarter net sales from Clearfield's continuing operations of $41.1 million were up 13% year over year. For the full year, Clearfield's continuing operations net sales grew 20% to $150 million, demonstrating solid execution as we continue to focus on growing within the industry and driving market share gains. After a thorough and comprehensive review of the NEF segment, we made the decision to divest the business. This move allows us to redeploy resources toward our core North American operations and higher return opportunities. Our acquisition of Nestor was focused on gaining access to a key technology, namely the ability to manufacture our own line of FieldShield cable, and we achieved our objective. We strengthened our vertical integration and Build America, Buy America compliance through the successful transfer of cable manufacturing technology into our US and Mexico facilities. However, expanding Nestor's business beyond Finland into the European market proved to be a lower margin opportunity. Despite our efforts to improve margins through process improvements and new product introductions, it resulted in a suboptimal use of capital. The transaction resulted in a $10.4 million noncash write-down in the fourth quarter with minimal cash impact. Importantly, the operational benefits from Nestor's integration remain embedded in our manufacturing platform. This divestiture sharpens our focus, improves our long-term margin profile, and better aligns resources with Clearfield's strategic priorities. Looking ahead, our focus remains on protecting what defines Clearfield: craftsmanship, reliability, and service while leveraging our core strength and expanding into areas where we can create the most value. We continue to execute on our Better Broadband and Beyond strategy through three core pillars: protecting our core community broadband business by ensuring that the broadband service providers who have long relied on Clearfield continue to have the products, service, and support they need to succeed; leveraging our market position into new applications and environments where fiber connectivity plays a growing role, including next-generation wireless networks from the metro core to the cell site; and expanding into adjacent markets by utilizing our core competencies to allow us to reach new customers and to strengthen our leadership in broadband fiber infrastructure. As hyperscalers rely on smaller ISPs to push part of their compute workloads closer to the edge, Clearfield's position with regional providers opens a new growth vehicle to the company. This disciplined approach positions Clearfield for measured growth as the market continues to recover. As part of this next phase, Clearfield will introduce two significant new product lines. In 2026, we will launch a complete line of splice cases, expanding our offering and deepening engagement with customers who operate in environments that require splicing. After extensive review and months of successful field demonstration, we believe this new solution represents the best in class. Following that product introduction, we will release a next-generation fiber management cassette, optimized for non-hyperscale data centers, a fast-growing market where Clearfield's modular design and innovation provide a unique advantage. These launches mark the start of a new generation of innovation as we extend our reach within and beyond traditional broadband markets. Another important element of our strategy is investing in sales development and expanding our distribution channels. We have enhanced our leadership team to support the new phase of growth. Anise Kanakam, our new Chief Commercial Officer, is integrating sales and marketing to align go-to-market strategy with product innovation. Mike Ward, who recently joined as our new Vice President of Broadband Sales, and Mark Hempel, who joined as Vice President of Distribution Channels and Strategic Alliances, bring deep industry experience and will strengthen our tier one and channel sales capabilities. Together, these leaders bring renewed focus, operational rigor, and energy to the organization, positioning Clearfield for the next chapter of growth. With respect to our distribution channels, our long-standing partners remain essential contributors to our success, connecting Clearfield Solutions to broadband service providers. Building on that strong foundation, we recently added Wiremasters as a distribution partner who has begun to distribute Clearfield's fiber optic connectivity and management products globally, with an emphasis on the defense and aerospace markets. And we plan to add a wireless-focused partner early in fiscal 2026, opening new opportunities in cellular backhaul and emerging edge applications. These efforts strengthen our access to new customer groups while maintaining close collaboration with new existing partners who continue to be key to our growth. I want to briefly comment on the BEAD program. We are pleased that 18 of the 52 submitted proposals have been approved by the NTIA. Fiber remains the overwhelming medium for delivering broadband based on the proposals submitted. We intend to vigorously pursue this opportunity and will keep you updated as we approach the deployment stage. Fiscal year 2025 was a transformational year for Clearfield, one defined by strategic focus, leadership investment, and a return to growth and profitability. As we enter fiscal 2026, we are executing with confidence on our Better Broadband and Beyond strategy, driving innovation across our core markets while expanding into adjacent opportunities that enhance long-term shareholder value. With that, I'll turn the call over to Daniel R. Herzog, who will review our fourth quarter and full year results and provide our outlook for fiscal 2026. Daniel R. Herzog: Thank you, Cheryl, and good morning, everyone. I will now review our fourth quarter results, beginning with sales. This quarter marks the first period in which Nestor's results are classified under discontinued operations on our income statement. As a result, the Clearfield segment now reflects our continuing operations, and all quarter, full year, and prior period comparisons are now provided on a Clearfield continuing operations only basis to ensure clarity. Fourth quarter net sales from Clearfield's continuing operations were $41.1 million, up 13% over the same period from $36.2 million in the prior year. Gross margin improved from 26.6% to 34.6%, which was driven by better manufacturing efficiencies and overhead absorption with higher volume. Net income per share from continuing operations was 13¢ in 2025, versus a loss of 1¢ per share in the comparable period last year. For the full fiscal year, net sales from continuing operations were $150.1 million, up 20% from $125.6 million in fiscal year 2024. Gross margin expanded from 20.6% to 33.7%, mainly as a result of better overhead absorption with higher volume, lower inventory reserve charges as a result of improved inventory utilization, along with increases in production efficiency from our continuous improvement programs. While we reported an overall loss per share for fiscal 2025 of 58¢, Nestor's discontinued operations and our impairment write-down of that business contributed a net loss of $1.03 per share. This was offset by net income per share of 45¢ from Clearfield's continuing operations, which compares to a net loss per share of 58¢ in the comparable period in fiscal 2024. These results underscore the strength of our continuing operations moving forward, which continue to demonstrate solid execution and share gains. We ended the quarter with approximately $166 million in cash and investments, up from $153 million in the prior year, reflecting continued strength in our balance sheet and disciplined operational execution. This financial position enables us to invest in innovation, product development, and market expansion programs that will drive long-term value creation. The company also invested $16.5 million in repurchasing 551,000 shares during the fiscal year. In addition, our board of directors has increased our share buyback authorization from $65 million to $85 million, providing us with $28.4 million available for additional repurchases when added to the $8.4 million repurchase amount remaining on September 30, 2025. For the full year fiscal 2026, we expect net sales from continuing operations in the range of $160 to $170 million. We expect growth to be driven by steady demand for fiber connectivity with continued strength across our large regional and MSO customers. We expect the late start to the BEAD program and the recent government shutdown to pressure investments both from private funding as well as government programs in our community broadband market early in the year. We expect operating expenses as a percentage of revenue to remain consistent with fiscal 2025 and earnings per share from continuing operations in the range of 48¢ to 62¢. For 2026, we anticipate net sales from continuing operations in the range of $30 million to $33 million, total operating expenses remain consistent with 2025, and net loss per share in the range of 8¢ to breakeven. The earnings per share ranges are based on the number of shares outstanding at the end of the fourth quarter and do not reflect potential share repurchases completed. And with that, we will open the call to your questions. Operator: We will now begin the question and answer session. Gregory McNiff: To ask a question, Operator: you may press star then 1 on your touch tone phone. If you are using a speaker phone, please pick up your handset before pressing the key. If at any time your question has been addressed, and you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. The first question today comes from Ryan Boyer Koontz with Needham and Co. Please go ahead. Ryan Boyer Koontz: Great. Thanks. Good morning. I wanted to ask about your comments about the shutdown. Obviously, it may be some impacts on BEAD here, but were there other programs, subsidy programs, or customer behaviors you could point to that might have impacted, you know, either revenue or bookings or your outlook for Q4? I'm sorry. Your fiscal Q1. Cheryl P. Beranek: Mhmm. Right. Yeah. Good morning, Ryan. We saw it in everything, you know, kind of across the board, probably, you know, A chem, probably the most effective. You know, not that it's going to diminish the amount of money available, but it did affect bookings, you know, in the fourth quarter that would then both because of our short lead times, both ship in the fourth quarter and lead into first. So it's, you know, an unfortunate circumstance and one of those things that, you know, I guess we all don't even realize how much government funding and government affect us. Ryan Boyer Koontz: Do you, Cheryl, do you have a kind of a timeline when you expect that to catch up to normal? I would think, maybe over the next few quarters? Or is it just a Cheryl P. Beranek: Yeah. We'll be back to normal by the second quarter as it relates to the government shutdown. So the government shutdown did affect, you know, bookings and our forecast for a soft first quarter into next year. But I don't expect it to affect the total year. So second quarter, we should be normalized. Ryan Boyer Koontz: Got it. And specifically there then within your reported fourth quarter, Community Broadband looked a little soft. I that's what you're pointing to there? In the Yeah. The Cheryl P. Beranek: Right. The government the community broadband, it was soft, I mean, in the fourth quarter. It's actually kind of flat over last year, which is really unusual. Even down a little bit over last year. Community broadband is part of was partly the government shutdown. I would say more affected over the course of the year by the delay in BEAD. You know, certainly, the smaller the service provider, the more the delay in BEAD has affected both their deployments and their planning. You know, their engineering dollars and their engineering availability, and then, you know, financing, setting aside money to deal with BEAD. And we even saw it in private investment as well. Kind of in that smaller space because, you know, community broadband is more than just the tier three operator. It's, you know, some of the private equity money that is, you know, being used at the smaller level. And we just saw money being set it was kind of sitting on the sidelines waiting for BEAD to figure out where it's going to be deployed. Because, you know, you we don't sometimes think about that where the BEAD dollars go affects where the private investment the timing of private investment because you want to leverage the money that or the fiber that's going into a BEAD network can be leveraged for, you know, a middle mile and other work elsewhere. So it does have a follow-on or a kind of a waterfall effect. So we're anxious to get the BEAD awards out. And while it won't the 26 yeah. I think we're going to see 26 have BEAD dollars. But the biggest impact of it is going to be private money coming back because BEAD is now actually finally figured out. Ryan Boyer Koontz: Got it. Helpful. And, Dan, on the gross margin outlook there relative to where you are in continuing operations. How do you think about broadly margins going forward? Is it purely a matter of scale at this point? And you expect some modest improvements in gross margin going forward with higher revenues? Daniel R. Herzog: Yep. That's exactly how to read that, Ryan. Obviously, volume dependent. So first quarter would be looking a little bit lighter. But, and scaling, with the revenue increases from there. Mhmm. Ryan Boyer Koontz: Got it. And, Cheryl, any thoughts about industry fiber supply right now? Is that coming up much of a concern? Have you heard that from your customers at all in terms of raw fiber? Unfortunately. Cheryl P. Beranek: Over and over. And then and then in every customer regardless of the size. So the data center glut of utilization of fiber is affecting Corning's allocation. And then it affects Corning's allocation to other service providers, which in turn, you know, will affect, you know, broadband deployments. So we're aggressively help both for our own sake as well as for our customer's sake. Sourcing all of and identifying equivalent fibers that can be approved in those networks. Ryan Boyer Koontz: Got it. Really helpful. That's all I've got for now. Thank you. Yeah. Operator: Mhmm. The next question comes from Scott Searle with Roth Capital. Please go ahead. Scott Searle: Hey, good morning. Thanks for taking the questions. Hey, maybe just a couple of quick calibration questions. Dan, I'm just wondering what Nestor was in September just to kind of look at our published numbers apples to apples. And then looking into December, could you give us a little bit of color in terms of the sequential outlook by the different customer classifications? It sounds like community broadband will be under a little bit of pressure. Given BEAD and government shutdowns, but I'd love to have a little bit of color on that front. And what you need in terms of turns to get to the lower end of the range and what the visibility is in the immediate outlook? Then I had a follow-up. Daniel R. Herzog: Yes, I'll take the first one there. Nestor finished their fourth quarter with $9.4 million in revenue. So with the Clearfield being $41.1 million. So that would have put us at $50.4 million roughly exactly. Scott Searle: Helpful. And then in terms of the December outlook, Cheryl P. Beranek: Mhmm. Yes. Community broadband is definitely a bit pressured as I indicated both from the government's and, you know, and the private money that goes around it. We continue to be extremely pleased with our work in the large regional group as well in the regional MSO markets. They now comprise about close to 40% of our business. And, you know, that really is a means of leveraging our existing sales channel in that, you know, the large regional and the regional cable operator, typically, and we'll have deployments in the same neighborhoods as the community broadband team. And so our work, our reputation, and our sales channel excuse me, in community broadband is what we're able to leverage for that MSO in large regional markets. Anyone knows our larger customers, than the community broadband team. Is, and it means we'll get some larger orders some opportunity to scale with it. So, with community broadband coming back, in fact, let me look through for a second. I mean, the MSOs were up for the year close to 40%. Large regionals for the year were up close to 60%. So with that momentum and with community broadband, hopefully, we anticipate coming back in the second quarter. We could have, you know, a really strong, bill season for next year. I just wanted to go back a little bit to the lack of fiber that Ryan brought up earlier. And that's one of the reasons that we're if people look at our long-term annual forecast, our annual forecast is guided by what we can see. That's part of our record reputation, as a company is to be, I wouldn't say conservative, but I would say deliberate about our forecast. And with the lack of fiber, being outside of our control, that could be one of the contributing factors of our long-term numbers. Scott Searle: Great. Thank you. And Cheryl, if I could, just to follow-up in terms of the annual outlook, starting the year slow, but it sounds like you start to see normalization in the second quarter. The math on the $160 to $170 million range implies kind of mid-forties through the rest of the year, so I assume that's kind of ramping. But I'm wondering what you're factoring into that forecast. Is it just normalization of the existing customer base and spending patterns? Much are you factoring in for BEAD? And if you got some new products, seem like they're kind of intriguing in terms of your next-gen splicing and data center. I'm wondering how they fit into the equation well. Cheryl P. Beranek: Right. We are not identifying a significant amount of revenue for new product introductions. Only a few million dollars because, typically, you know, you need a full especially for outside plant products, you need a full year for them to go through an outside weather cycle before you have a long-term commitment from, for, you know, high high-end revenue. We see high the new product splice case and really excited about the NextGen, cassette line. As being more significant revenue in '27. Scott Searle: Very good. And just in terms of how you're thinking about BEAD, in that numbers, in that $160 to $170 million? Definitely. Yeah. I would say the we're looking at, you know, probably Cheryl P. Beranek: less than $10 million, and that's going to be remember, they gotta build first with passing home, with kind of middle mile stuff and the actual construction of placing cabinets is probably gonna be in our fourth quarter, and that's one of the things that we have to remember for our numbers is that since our numbers end in September, we tend to miss some of the fall numbers, in the bill season. So as best with would you so next year's fourth quarter and first quarter will be significantly stronger than what we're seeing here. Scott Searle: Great. And Leslie, if I could, new products what does that do to your addressable market? You know, because ettes, I'm sure, is just extending your existing position. But is what does the data center do? And I'll get back in the queue. Cheryl P. Beranek: The next generation cassette line is all about new customers, as well as being, eventually, there'll be transformational back to our existing customers. So the, as we talked about the next center, to go after the non-hyperscale data center is a I use the word disciplined approach. Because we could go after hyperscalers, and we would lose. Because, you know, that's a high volume, low mix solution That's not the way Clearfield is designed. It's not the way our manufacturing lines are set up. We compete aggressively in a low volume, high mix world. And so data centers at the edge that push to the edge where we're gonna see our customers and smaller data centers picking up the compute power requirements, you know, from the big guys as they move out that's where we're really gonna have a significant opportunity. Because it's our space. It's a space in which that high volume manufactured doesn't work. You gotta be able to do a lot more you know, push and pull. And so the new data center cassette is gonna allow a lot of unique configurations inside of a particular nine-inch panel, and so that you can design by cassette. So you can expect to see that launched around BICSI in January, and it'll be fully on debut and on display in that January show. Scott Searle: Great. Thanks so much. I'll get back in the queue. Operator: As a reminder, if you would like to ask a question, The next question comes from Timothy Paul Savageaux with Northland Capital Markets. Please go ahead. Timothy Paul Savageaux: Hey, good morning. I want to stay on the BEAD theme here. With a couple of questions. First, we've seen some of your peers in the access system space talk about receipt of initial orders for BEAD. I think historically, maybe you have some correlation there on the cabinet side, but you know, it sounds like you're talking about an overall uptick in activity with these approvals. There was maybe some delay from shutdown. But can you talk to when you expect initial orders, or have you seen them yet for BEAD? Cheryl P. Beranek: Right. You know, because of our short lead time, you know, what we're seeing is quoting activity, but not necessarily, you know, shipping, you know, activity associated with it. You know, we know pretty much what customers have been identified as anticipating to be receiving money. And so that's freed up some planning dollars. I would expect we'll see but we I don't think we'll see significant revenue until the summer construction season, so third and fourth quarter. Timothy Paul Savageaux: Yeah. It makes sense. And just to get a sense of the magnitude of that opportunity, We had a recent you know, big round of approvals I think that was maybe $9 billion in the aggregate. And I think the total is beyond that. I think you mentioned it earlier. And you know, in terms of opportunity for Clearfield, total award value. I used to I think we used to talk about maybe four to 5% of that As addressable by the company. Does that remain the case? And you know, because just on that recent round of approvals that, you know, get you close to $500 million, which is, you know, pretty relative to what you're doing now. So are those metrics we can still think about? Cheryl P. Beranek: They absolutely are. So four to 5% of the cost of deployment are products that we offer. We increasingly are working to become that portfolio of supplier so that we would get, you know, the solutions of both being able to pass and to connect the home. The full line and next generation of splice cases is a part of that strategy, keeping our portfolio customers out away from our competition and being able to give those customers who are using our competition splice cases a reason to be able to come back, you know, to our generation and fully being, you know, integrated into our world. You know, every time we place a patch only cabinet, somebody else's splice case was being used, and then previously somebody else's vault. So completing out our product line is really a defensive, more aggressive move in order to put that together. You know, our competition likes to you know, Adtran said, you know, they're gonna get 25% of the BEAD market. Calix put numbers out there with big numbers. You know, we could tout $500 million, and that's accurate. But remember, this is a four to five-year build. So we want to make sure that we don't get everybody's you know, their eyes bigger than their stomach. You know, we think we're gonna get a big part of that share, but it would be irresponsible for me to give you a particular number. Timothy Paul Savageaux: Got it. Very much then. Good and helpful color. Cheryl P. Beranek: You're welcome. Operator: This concludes our question and answer session. I would like to turn the conference back over for any closing remarks. Cheryl P. Beranek: Yes. Well, thank you so much for the opportunity to, you know, to speak with you this morning. Our apologies that our numbers were delayed by a week, but you can understand with the divestiture of Nestor that we had a few numbers to be able to tie out and put together. We wish our friends at Nestor well. We think the opportunity to focus, you know, having been able to bring that infrastructure into our world, be able to transform Clearfield into a vertically integrated supply chain is really exciting for our potential gross margin and our ability to be that portfolio supplier is exciting. We like I said, we wish Nestor well. We think the transformation of Clearfield into being a bigger, broader supplier with a fully integrated line as we move forward will be opportunistic for our world. And '26 will be transformational putting us together for that long-term strategy plan of Better Broadband and Beyond. Thank you for our world. I'm grateful to you now at Thanksgiving time, and I wish you the best and the most joyous of Thanksgiving holidays. Enjoy your families. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Conversation: Justin Platt: Good morning, everybody. Thank you for joining us today. Welcome to the Marston's preliminary results for financial year '25. My name is Justin Platt, CEO. And with me, I have Stephen Hopson, our new Chief Financial Officer. We'll take you through our results today, and we'll do that with the following running order. I'll start with the headlines. Stephen will then share the financial results, and I'll then give some insight into the strategic progress we've been making through the year before wrapping up and taking any questions you might have. So the headlines, 2025 has been a very strong year for Marston's. It's been a year when we've been very focused on delivery, delivery of the strategy we outlined a year or so ago at the Capital Markets Day. And the results bear out that the strategy is working and driving real progress for us as a business, with profit before tax of GBP 72 million, that's year-on-year growth of 71%, and that's on top of the 65% growth we delivered a year ago. And that profit delivery has helped us drive cash flow. So cash flow at GBP 53 million. That's ahead of our GBP 50 million target, and it's also earlier than planned. Alongside that, it's really pleasing we've made great progress with our new pub formats, 31 launches this year. They're performing very strongly for us and driving big revenue uplifts. It's very clear now that these formats can be a significant growth engine for us in the future. And we've been doing all of that while giving our guests a great time. So record satisfaction scores with a reputation score at 816. So overall, a really good set of results, and it's a set of results that leave us feeling very positive in our outlook going forward. So that's the summary. I'll now hand over to Stephen, and he'll take you through the financials. Stephen Hopson: Thanks, Justin, and good morning, everyone. As Justin said, this is my first set of full year results at Marston's, and I joined the business at what is clearly an exciting time for Marston's. As these numbers show, we're making great progress and delivering against our goals with lots more to come. On my first slide, I'd like to begin by looking at some of the key group financial metrics. Total revenue was GBP 898 million, which showed growth of 1.6% on a like-for-like basis. EBITDA was up 7% to GBP 205 million, with the margin expanding by 140 basis points to 22.8%. That's been driven by good operational discipline, particularly on labor and controlling input costs alongside the revenue growth. As a result of the EBITDA growth and lower finance costs, PBT stepped on significantly. Underlying profit before tax was GBP 72 million, nearly 3x where we were just 2 years ago. And importantly, this has translated into stronger cash generation. Recurring free cash flow was GBP 53 million, which is up 22% year-on-year and ahead of our GBP 50 million recurring free cash flow target. Finally, we've made real progress on the balance sheet. Net debt has reduced from 5.2x, to 4.6x EBITDA as we continue to delever. So overall, excellent progress on both profit and cash. Turning now to look at our income statement in a bit more detail on the next slide. As I mentioned, FY '25 marked another year of substantial profit growth for Marston's with PBT up 71%. Reported revenue was flat, although this masks the impact of the FY 2024 disposal program, which I'll show on the next slide. I've already mentioned that EBITDA was up 6.5%, and that GBP 12.6 million of EBITDA improvement basically flowed through to operating profit, which was up 8.6% to GBP 159.9 million. Net finance costs were significantly lower year-on-year as a result of ongoing delevering and last year's CMBC disposal, leading to that very significant jump upwards in PBT. And whilst our effective tax rate increased, this simply reflects a return to the U.K.'s headline rate of corporation tax after a period of a lower rate. Together, this income statement shows a stronger and more profitable business with improved earnings quality and stronger margins. Turning to revenue performance. As I've already touched on, revenue for 2025 was GBP 898 million and was broadly flat year-on-year, but I would like to pick out 2 points on this chart. First, that the revenue includes a negative movement of about GBP 40 million in relation to the disposal of pubs over FY 2024 and 2025. To put the disposals into context, about GBP 50 million of assets were sold as part of the disposal program. So it's important to consider that impact when assessing year-on-year revenue progression. And the second point is that our like-for-like performance continues to be ahead of the market, which grew by 0.7% in the year, with positive contributions across all key categories of drink, food and machines. Turning now to look at margin. A key target for the group outlined at the CMD was to grow our underlying EBITDA margin by 200 to 300 basis points from FY '24 levels, giving a target range of 23.4% to 24.4%. And I'm pleased to say that this year, we've delivered 140 basis points of margin expansion, achieving total EBITDA margin of 22.8% in the year. Labor productivity gains were the single biggest contributor, supported by the rollout of improved scheduling tools, which Justin will cover in a bit more detail later on. The labor productivity benefits in the year were enough to fully offset the increases in the National Living Wage and National Insurance contributions, which came in from April 2025. We also saw benefits from improved food and drink margins, energy savings and other operational efficiencies. These gains were partially offset by inflationary pressures, including those employment cost increases that I mentioned and some investment in key areas, including more marketing. But overall, we've made real progress embedding cost discipline and delivering margin expansion across the business, and we feel that our EBITDA margins really do benchmark very well across the whole pub sector. We view ourselves as a high-margin local pub company, and we see further opportunity to increase the EBITDA margin in FY '26 as we move towards our CMD target. Turning now to look at capital expenditure. Total CapEx for the year was GBP 61.2 million, which is equivalent to 6.8% of revenue, and we're now approaching the 7% to 8% of revenue range that we talked about in the CMD. This is an increase from GBP 46.2 million last year, with the main driver being our pub format conversions, which I'll come back to shortly. Of this total, GBP 53.2 million was in maintenance and other CapEx deployed across our 1,300-strong pub estate. This includes works such as maintenance, estate management, investment in new IT platforms and other items. But I also want to pull out a bit more granular information on our pub format conversions, which are very important to our overall growth plans and which Justin will cover in more detail. In the year, we covered 31 conversions to our differentiated formats, which are delivering strong results. Average revenue uplifts were 23% year-on-year, and EBITDA returns are over 30% to date, in line with our CMD targets. At an average cost of GBP 260,000 a site, we believe these conversions represent excellent value for money. And of course, we've only completed a small number so far in comparison to our estate. So there's a lot more to go at in this space. Clearly, the driver of increasing our capital expenditure is to improve the quality of our estate. So let's turn to that now. On this slide, we show that we ended the year with 1,328 pubs following the continuation of our estate optimization strategy. This included a small number of disposals in the T&L estate as well as conversion of some pubs to the partner model. As a result, the managed and partnership estate consisted of 1,182 pubs and the T&L estate had 146 sites at the year-end. EBITDA per pub increased to GBP 154,000, which, as you can see, is a 28% improvement over the last 2 years. This uplift reflects both operational improvements and tighter estate management with gains in both, our managed and partnership estate and the remaining T&L pubs. The result is a higher-quality, better-performing pub estate that's delivering stronger returns at a site level. I think this is a really important slide as it shows how the improvements being made to the business model are feeding through at pub level. Turning now to our cash performance in the year, which was another highlight. The takeout from this slide is that we delivered and, in fact, exceeded our CMD target of GBP 50 million of recurring free cash flow ahead of schedule, with GBP 53.2 million delivered in the period. And how was that delivered? Well, cash from ops increased year-on-year by GBP 5.6 million, which included the improvements in EBITDA I described earlier. Within that number, we also had a GBP 6 million saving from lower contributions to our DB pension scheme. And offsetting that, we had a small working capital gain, but it wasn't as large as last year's gain. Finally, we started making cash tax payments again of GBP 5.3 million as our profits improved. And as a smaller side, investors and analysts should note that in FY '26, we expect to move into the very large company corporation tax regime, which will accelerate our cash tax payments this year. And then in the second line on the chart, we had a GBP 15 million saving on interest, offset by GBP 15 million more CapEx year-on-year, as I just described, together with lower banking fees. So recurring cash was strong and now over GBP 50 million, which we expect to be able to exceed again this year. I also wanted to draw out on this slide that this strong free cash flow is fully absorbed by scheduled debt repayments, GBP 43.8 million of securitized debt repayments and GBP 8.6 million of lease liabilities. Clearly, this does mean that the group is delevering, as I'll show on the next slide, but also that our cash generation is currently fully utilized. And then just to complete the chart, after other movements in borrowing and disposals, there was a cash outflow of GBP 9.6 million in the year. And I'm now going to return to that progress about delevering in the group. This slide shows the different elements of the group's financing structures and the overall movement in net debt year-on-year. So starting at the bottom, net debt, excluding lease liabilities, reduced by GBP 46.2 million, to GBP 837.5 million. This takes our net debt-to-EBITDA multiple, excluding leases, down to 4.6x from 5.2x last year. That continues the recent downward trend and reflects the group's stronger cash generation and disciplined approach to capital investment. And then to briefly cover what makes up our financing structures, the largest element shown at the top is the securitization, which provides long-term predictable financing for the group. It does also impose some restrictions, both in terms of the assets that are tied up in the securitization structure and in our ability to move assets and cash around the group. However, these restrictions are manageable at present. Swaps are in place to fix the interest that we pay on the securitized debt. Other lease-related borrowings are essentially loans that were raised against other properties in the group outside the securitization. They were legally structured as sale and leasebacks, but where we have the option to buy back the properties at the end of the period for a nominal fee. Therefore, we treat these properties as effective freehold. And as noted in the slide, we're currently paying interest only on those borrowings. And I've put a new slide in the appendices showing investors how those structures will work over coming years. Our GBP 200 million bank facility was renewed in the year and now extends to July 2027 with relatively low drawings at the year-end, and cash balances ended the year at GBP 35.9 million. So in summary, we're continuing to delever at pace while preserving the secure long-term funding arrangements in the group. If I then broaden this to look at the group's whole balance sheet rather than just the net debt elements, this slide shows the evolution of our balance sheet and our net asset value per share, which increased to GBP 1.25 this year. And actually, the movements year-on-year are pretty straightforward. Our balance sheet is underpinned by GBP 2.2 billion of property assets, of which 81% of the estate by number of pubs are effective freeholds. The net book value of those assets increased by over GBP 100 million in the year, reflecting our annual estate reval and also our ongoing investment into the business. Net debt, as I've just described, reduced GBP 837.5 million, excluding lease liabilities, and lease liabilities were GBP 5.5 million lower. So total net debt was GBP 51.7 million lower year-on-year. Other liabilities increased by GBP 28.4 million, almost entirely due to an increase of GBP 28.5 million in deferred tax liabilities relating to the upward property revaluation. So overall, the property reval with its associated tax movements as well as the net cash generation of the group, drove GBP 136 million increase in net assets, which was a 21% increase year-on-year, to GBP 791 million, which equates to GBP 1.25 per share. Given the progress made on the balance sheet, I want to finish by looking at our capital allocation framework. And if I start by saying that this is not a change to our capital allocation policy, which remains consistent with what we laid out at the CMD, we remain focused on delivering sustainable shareholder value through a disciplined balance of investment in the business, delevering and ultimately, shareholder returns. That said, there are a couple of updates we wanted to share this morning. On the right-hand side of the chart, you'll see our continued progress on leverage, which, as I mentioned, has reduced substantially. We are pleased with that progress, but would like to see leverage continue to decrease. And today, we're committing to reduce leverage to below 4x on a pre-IFRS 16 basis. When we get to that level, we anticipate the start of capital returns to shareholders through dividends, share buybacks or a combination of both. What that looks like will depend on circumstances at the time, including the share price and investor preferences. To be clear, we also expect to see the group continue to delever below 4x even after the recommencement of shareholder returns. We believe this disciplined approach continues to be the right strategy to create and sustain long-term value. So to conclude, we've delivered a strong financial performance this year with clear progress on margin, profit and cash flow, and we expect further progress this year. And before I hand back to Justin, I'll briefly touch on 5 forward-looking points. First, we remain confident in the trading outlook for FY '26 with like-for-like sales currently tracking in line with last year and Christmas bookings up 11%. Second, we expect further progress towards our margin target of 200 to 300 basis points of growth versus 2024 following the 140 basis point gain this year. Our format growth engine will be accelerated this year with at least a further 50 refurbishments and our CapEx is expected to be within the target range of 7% to 8% of total revenue. And after achieving our CMD target ahead of schedule this year, we expect to deliver another year of GBP 50 million in recurring free cash flow in FY '26. And lastly, we've significantly reduced our debt profile over the past couple of years and expect to continue to do so with leverage now at 4.6x and progressing well towards our sub-4x target. So overall, we're delivering against our targets, and we remain firmly on track to drive further financial and strategic progress in the year ahead. Thanks very much, and I'll now hand back to Justin. Justin Platt: Thank you, Stephen. So I'll now take you through the progress we've been making as we've implemented our strategy through the year. You will remember from the Capital Markets Day, we're very focused on being a high-margin, highly cash-generative local pub company. And we'll do that with a portfolio of brands that appeal across a range of consumer segments. 5 key value drivers that get us there: executing a market-leading operating model; using CapEx to deliver differentiated formats; unlocking value with digital transformation; expanding our excellent managed and partnership management models; and in time, supporting that with targeted acquisitions. So I'll now deep dive on each of those value drivers to give you a flavor of some of the work that we've been doing. The first one I will spend some time on is the operating model. Really, this is the bread and butter of running a great pub business. It's the balance of revenue growth, cost efficiency and guest satisfaction. So first of all, I'll talk to revenue. Really good momentum this year. We've continued to do well, especially in our peak trading periods. Across our peak trading periods, we're up almost 6% on the year. And that's enabled us to grow our like-for-likes ahead of the market at 1.6%. And a lot of what's behind that is our event plan. Our event plan has been a key thing for us this year. In 2025, Marston's Pubs have been home to a darts tournament led by Luke Humphries, the world #1. Paddington and his new movie joined us from Peru. We had a national Trivial Pursuit quiz event. And through the summer, when Oasis Mania was sweeping the U.K., we had a series of '90s throwback events with tribute bands and the like in our pub life. So all of these are designed to give people reasons to visit our pubs, a range of guest demographics. I think that's essential at any time of year, but especially so in the summer when, of course, this year, we had no big football tournament. So events are big success for us and an important driver in supporting our revenue growth. So secondly, on costs. As Stephen has shown you, we've made excellent progress during '25 on our journey to being a high-margin business in adding 140 basis points to our margin despite significant and well-known headwinds. And we've done this with a relentless drive for efficiency across all areas of our cost base. The biggest area of our cost base is labor, where we've saved almost GBP 10 million, a little bit more than 1 percentage point on our margin. And this has been about continually getting smarter with the way we use our technology to enhance and optimize our labor teams and our labor schedules, all about getting the right people in the right place at the right time. I think probably the best way to bring to life for you the work we've done on labor is to pick a case study of one of our pubs. The lady pictured on the right is Kati. She's one of our fantastic general managers. She runs the King Charles pub in Chesham, a lot of work with our labor planning this year. They've actually reduced their labor costs through the year by 8%. And despite doing that, they've grown their revenue by 19% and also grown their guest satisfaction well ahead of our company average. So a good example in the way labor is playing out for us in one of our pubs, but it also represents our approach across the company. So secondly, in terms of food and drink, our formats allow us to simplify the ranges we offer because we're a lot clearer about the demographic by format. And so that allows you to be clear which food offer and which drink offer you need by pub. So that's allowed us to simplify our range. That's helped us with efficiencies. But alongside that, we've also renegotiated our key food and drink contracts to drive efficiencies where we can. So that's labor and food and drink. Finally, energy and estates. Every pound counts on energy. We've been that way for a number of years now, whether it be the usage that we manage, but also the contracts, there's a relentless focus on attempting to drive efficiencies there. But as Stephen said, we take a very judicious approach to estates more broadly with our CapEx, looking at our maintenance cycles, spending strictly in maintenance cycles, and that helps us on efficiencies with our repairs budget. So overall, really good progress on the cost side of things. And then finally, on the operating model, guest satisfaction. I mean this is all about ensuring that when our guests come and see us, they have a great time. And it's very pleasing in the context of the efficiency gains I've just talked to that we're still delivering better and better experiences through our guests. So from a score of 766 in '23 to 800 last year, 816 this year is a very pleasing performance. And this really is a combination of many of the initiatives coming together, whether it be our events program, and the visual there is of our Oktoberfest event that we run during September, whether it be through digital ordering or some of the menu enhancements we've made. All of these things together add up to make a difference to the guest experience. It's worth saying, though, that the #1 factor that dominates, that really drives a great guest experience is, really strong guest service. That requires almost an obsession, a relentless obsession with getting that right day in, day out. And the work on that is never done. Our teams are very focused on delivering that experience all the way through the year. And as I say, it's pleasing that this year, we've been able to continually improve on that. So that's the operating model. When you take revenue, cost, satisfaction together, it's good that we've made strong progress across the piece. And this has been complemented with the work we've done on the digital transformation value driver. I think a key example of this would be the new order and pay app that we launched in March. Really well received. It's paying dividends with our guests in terms of both revenue and reputation, and it's complementing the personal service for those guests who want it. So we've got a 10% revenue uplift when using the app. And those pubs with a higher mix of order and pay usage do significantly better on reputation. What's also good about the app is it can work hand-in-hand with our events. So the Trivial Pursuit: Win a Wedge event drove a big uptake in the use of the app. So good progress overall on this area, digital, but a lot more opportunity here in the future as digital transformation can help us both on revenue and on cost. The third value driver I want to focus on is our new pub formats. So against 5 core consumer target segments across the market, we've designed 5 pub formats that are specifically designed to meet the needs of those target audiences. And through a series of test and learn launches in '25, we've been assessing the potential of these pubs to drive appeal and importantly, drive powerful CapEx returns. Now in May, I did a deep dive on the Two-Door format. So I thought this time around, we'd share some more information on the Grandstand brand. Grandstand is a local sports pub. So it targets adults who want an entertainment experience when they go to their local pub. I mean this is an absolute sports lover's dream. It's similar to a city center sports bar environment, but in the local community pub. Number of constituent parts to it. At its heart, state-of-the-art technology ensures that we've got 3-meter stadium screens, amazing sound systems. Alongside that, there's great match-day food suited to watching the big game. And these pubs will always be run by sports enthusiast general managers who know what their guests want and can work with them to give them a great experience. It's an absolute must visit for the big game, the atmosphere that we create. But more than that, because it's a local pub and it's a great environment, it's a place that you would want to go to on any night of the week, and we support that with a program of sports events through the week to give people reasons to come every night. So Grandstand has done really well this year. The guest reaction and the returns that we've had have been very, very impressive, and it's been a key part of our test and learn year. And test and learn overall this year has exceeded our expectations. We've done 31 launches through the year. So we did 21 Two Doors, 5 Grandstand and 5 Woodie's. Woodie's is our new family pub. All have done well. Guests love them. They've driven strong uplifts in revenue of 23% and all of that off relatively modest levels of CapEx. We've been driving ROIC of more than 30% on only GBP 260,000 per pub. So the test and learn phase really has proven the potential of this stream for us, real growth opportunity as we roll out across the estate. And all of our pubs have been mapped to the format opportunity they can play to over time. So over time, this really does give us an opportunity as a significant driver of growth. So great progress across our value drivers in '25, and this leaves us feeling very positive as we look towards 2026. Through this year, we'll have a big program of exciting events, all designed to encourage guests to come and visit us, not least with a big football tournament on the horizon that everybody will be very much focused on in the summer. And we'll complement that with our revenue management and order and pay disciplines to drive spend per guest. But alongside the demand drive, as I've just said, our new formats will play an increasingly important role in driving growth through the year. Given our success in '25, we're now accelerating the rollout plan. We'll have 50 or so launches focused on Two Door and Grandstand, and all of these will make a meaningful difference to both revenue and EBITDA performance through the year. So to summarize, another year of strong delivery in '25, significant growth in both profit and cash flow. We're very excited by the growth potential of our new formats, and we see a very promising outlook for the year ahead as we continue to deliver as a reliable growth company. And with that, we can now take some time for questions. Operator: [Operator Instructions]. The first question we have comes from Douglas Jack of Peel Hunt. Harold Jack: So I've got 2 questions, if that's okay. In terms of the new formats in 2026, is the choice of Grandstand and Two Door largely because they're the ones that have the greatest uplift potentially, adding to the number of reasons to visit, I think, obviously, they've got quite a lot of opportunity there. And then the second one was about margins. In 2026, what are the best margin opportunities do you see over this year? Justin Platt: Thanks for your questions. I'll take the first one on formats and then, Stephen, if you want to come to margins. In terms of choices, as you know, we were very clear to have the plank of a test and learn phase first to guide our implementation. So the primary choice is certainty of return in the sense that Two Door and Grandstand both launched earlier in the year last year than Woodie's, which allowed us to get more data on those through the year. Most of the Woodie's launches came sort of the summer onwards. So whilst all are performing well, we've just got longer data on the other 2. The other attraction, of course, with Grandstand is you absolutely want a bigger footprint of those pubs in the market in a year with the World Cup, which we've certainly got an eye on. But really, it's about certainty of returns, Doug. Stephen Hopson: And Doug, on your question on margins, I mean, yes, look, we've made really good progress in 2025. I think we do expect EBITDA margins to increase in 2026, but not to the same extent as 140 basis points we did in 2025. I mean I think the best opportunities for me, so there's a bit of flow-through stuff. So we made really good progress on labor. And Some of those things didn't come through until the second half last year. And so I think some of them will help H1 2026. And also, that is a continuing journey for us. So matching right people, right place, matching demand with supply of labor is something that we're going to be relentlessly focused on going forward. That may come through in terms of reduced cost. It may come through in terms of better customer service and therefore, improved sales, but I think there will be some upside from that. And then I think on gross margins, I mean, we've got pretty good visibility of both food and drink cost prices moving into next year. We're lock in quite a few contracts on that quite early. And I think, therefore, that gives us certainty on those lines. We'll continue the journey on things like revenue management and upselling and so on, and it should be an opportunity to move that further forward as well. Operator: The next question we have comes from Karan Puri of JPMorgan. Karan Puri: I've got 2 quick ones. One, on the 1.6% like-for-like momentum in '25. Just wondering if you could provide a split between pricing and volumes, number one. And number two, just coming back on the cash tax payment in '26. I know it's going to be higher than 2025, but in terms of magnitude, if you could share a bit more on that front would be helpful. Justin Platt: So I'll start with the like-for-likes. As we said in the release, food, drink and machines were all in growth, and that's a mix across them. As you'd expect in that, revenue management has played an important part for us and will continue to do so, particularly actually the premiumization as consumers are upgrading to more premium beers and also adding and upgrading on the menu. And then the second one, Stephen? Stephen Hopson: Yes, the cash tax. So yes, you're right. We flagged that it would increase. Last year, the cash tax payments were GBP 5.3 million. That will approximately double next year, to about GBP 10 million, Karan. So that's about the extent of it. We are still using some losses from previous trading period. So the cash tax is still relatively low, but it will be about GBP 10 million in FY '26. Karan Puri: Perfect. And then just a quick follow-up on that one. So do we -- can we expect it to be sort of normalized cash tax starting in 2027? Or will you still benefit from some loss in the previous period there as well? Stephen Hopson: Yes. 2027 will still be a little bit low. And then from 2028, it will go back to normalized levels. So it will be a step-up in 2027, but it won't be up to normalized levels, yes. And then from 2028, you should expect normalized levels of cash tax. Operator: [Operator Instructions]. The next question we have comes from Anna Barnfather of Panmure Liberum. Anna Barnfather: Just a couple of questions. Firstly, on the reformats, you've mentioned sort of acceleration sort of 50. Could you update us on your thinking of what proportion of the estate at this stage you think could benefit from a reallocation into 1 of the 5 formats? So how many of your sort of 1,300 pubs? And have you only done managed or have you done partnership ones as well? The second question, I was just thinking about the sort of peak trading. Obviously, you're doing really well in those big events, with peak trading periods up 5.8%. Are you tempted to sort of reduce opening hours on the sort of nonevent days? Or is there any sort of thinking on that as a way to cut down on overheads? And then just third question on the revenue mix. I think obviously, higher margins and gross margins, can you just give us a bit more color on perhaps some of the shifts in your sales mix? Justin Platt: Thanks, Anna. I'll take the first 2 and then Stephen, if you could take the third one. Let me start on peak trading, and then I'll come back to formats. We do look at our hours on a regular basis, but there's not a massive need to start big closure periods by any means. I mean one of the things that's most notable in pub trading today certainly versus 5 years ago is the growth of the early evening at the expense of the late evening. So if you look at booking patterns now, peak time for a table, the busiest time to get a table is 6:30 to 7:00. You go back 5 years, that was more like 8:00. So there's definitely an earlier day point to your business. And we do look at hours, but I don't think there's anything significant there in cost, particularly the local community environment where people are around the corner from their houses quite a lot. On the formats. So first of all, yes, we've actively launched formats across our managed and our partner estate, and they're performing equally well in each, neither is a differentiator actually in terms of performance, but they do work across both managed and partner. And then in terms of the numbers, as we showed earlier, 5 formats. The 2 that we didn't deep dive on were locals pubs and adult dining, signature pubs. Both of those, we have some of them in market already. I would say in terms of the opportunity, it's probably the locals pubs is the only bit that we wouldn't see as a sort of significant ROIC north of 30% opportunity, which probably takes you to 75% or so of our estate with the opportunity for those new formats. Stephen Hopson: And then, Anna, on the revenue mix, I mean, we're about 35% food in our business overall, but there is a big variation in that, as you'd expect between format and some of those local pubs versus, for example, our adult dining business, which is very, very different. And that has been growing. I mean, clearly, food across the market really has been growing quicker than drink over a period of time, but it's not huge. I mean that number has probably changed by 0.5% year-on-year. So it's not a huge mix. So hopefully, it gives you some idea about the sort of the food and drink pub. Operator: [Operator Instructions]. The next question we have comes from Fintan Ryan of Goodbody. Fintan Ryan: Two questions from me, please. Firstly, can you give us a sense of what your sort of base case expectations are for the budget tomorrow in terms of, I guess, labor costs, anything that you might be expecting or hoping for business rates. Just to sort of get a sense of what the base case is for the outlook currently and maybe what can change within the next 24-odd hours. And then secondly, could you give some color on like like-for-like trading in Q4 and over the last 8 weeks, obviously, you reported flat like-for-likes. How much -- what's been sort of the volume versus pricing split in that? Can you give some color on the visibility for the Christmas trading? Obviously, you've got bookings up 11% year-on-year, but like typically how much of bookings are -- of your Christmas trading are bookings? And what you'd be at this point, assuming for incremental pricing for FY -- for the calendar '26, would be great. Stephen Hopson: Thanks, Fintan. If I start on, I guess, the hot topic of the day and tomorrow, which is the budget and expectations for that. I mean, our base expectations and sort of what's embedded into the guidance that we've given to the market is that we expect National Living Wage to increase, obviously. Our expectations are about a 4% increase in the headline rate of National Living Wage, and we're expecting the differential for under 21-year-olds to close slightly compared to where it is at the moment. We're not expecting any further changes to things like National Insurance. And then really, I know there have been lots of stories in the press, but at the moment, we're not making any expectations on changes for things like machine, gaming duty or business rates either. I mean the Chancellor has flagged that there'll be a review of the way business rates is levied. So that will be interesting to see. But we're not making any assumption on that because simply, we just don't have the information available to us at this point. Justin Platt: And before I answer the like-for-like, Fintan, if you've got any assumptions on the budget tomorrow, please share them with the group. In terms of the like-for-likes, look, as you know, quarter 1 is all about Christmas. October and November are relatively small months in the grand scheme of things. December performance is really what matters. And within that, it's the key 2 weeks from kind of 19th of December until 2nd of January, quite time, tight time. And bookings pace, as we've said, is very good at 11%, and that's off the back of last year. I think we grew Christmas at about 11% last year in like-for-like terms. So it's pleasing the stage we're at. But to your point, walk-ins are also important at Christmas. So we've still got a lot of work to do in order to land that. And that's both in encouraging people to spend their Christmas with us but also then in managing spend per guest, so we drive the revenue return as well. Fintan Ryan: Great. And just in terms of the pricing and current expectations? Justin Platt: Well, again, we -- as you know, we don't -- we kind of manage price through the year in a broader revenue basis. So in terms of our revenue management initiatives around booking density, around premiumization. And yes, lead price is part of that mix, but we don't have like a hard and fast target. It's overall spend per that we look at. Operator: Ladies and gentlemen, at this stage, there are no further questions. I would now like to hand back to the management team for closing comments. Justin Platt: Well, just to say, thanks, everybody, for joining us. Really good engagement. Obviously, we'll all see what comes tomorrow. And I'll wish you an early best wishes for the festive season. Thank you. Operator: Thank you. Ladies and gentlemen, that then concludes today's conference. Thank you for joining us. You may now disconnect your lines. Justin Platt: Good morning, everybody. Thank you for joining us today. Welcome to the Marston's preliminary results for financial year '25. My name is Justin Platt, CEO. And with me, I have Stephen Hopson, our new Chief Financial Officer. We'll take you through our results today, and we'll do that with the following running order. I'll start with the headlines. Stephen will then share the financial results, and I'll then give some insight into the strategic progress we've been making through the year before wrapping up and taking any questions you might have. So the headlines. 2025 has been a very strong year for Marston's. It's been a year when we've been very focused on delivery, delivery of the strategy we outlined a year or so ago at the Capital Markets Day. And the results bear out that the strategy is working and driving real progress for us as a business, with profit before tax of GBP 72 million, that's year-on-year growth of 71%, and that's on top of the 65% growth we delivered a year ago. And that profit delivery has helped us drive cash flow. So cash flow at GBP 53 million. That's ahead of our GBP 50 million target, and it's also earlier than planned. Alongside that, it's really pleasing we've made great progress with our new pub formats, 31 launches this year. They're performing very strongly for us and driving big revenue uplifts. It's very clear now that these formats can be a significant growth engine for us in the future. And we've been doing all of that while giving our guests a great time. So record satisfaction scores with a reputation score at 816. So overall, a really good set of results, and it's a set of results that leave us feeling very positive in our outlook going forward. So that's the summary. I'll now hand over to Stephen, and he'll take you through the financials. Stephen Hopson: Thanks, Justin, and good morning, everyone. As Justin said, this is my first set of full year results at Marston's, and I joined the business at what is clearly an exciting time for Marston's. As these numbers show, we're making great progress and delivering against our goals with lots more to come. On my first slide, I'd like to begin by looking at some of the key group financial metrics. Total revenue was GBP 898 million, which showed growth of 1.6% on a like-for-like basis. EBITDA was up 7% to GBP 205 million, with the margin expanding by 140 basis points to 22.8%. That's been driven by good operational discipline, particularly on labor and controlling input costs alongside the revenue growth. As a result of the EBITDA growth and lower finance costs, PBT stepped on significantly. Underlying profit before tax was GBP 72 million, nearly 3x where we were just 2 years ago. And importantly, this has translated into stronger cash generation. Recurring free cash flow was GBP 53 million, which is up 22% year-on-year and ahead of our GBP 50 million recurring free cash flow target. Finally, we've made real progress on the balance sheet. Net debt has reduced from 5.2x to 4.6x EBITDA as we continue to delever. So overall, excellent progress on both profit and cash. Turning now to look at our income statement in a bit more detail on the next slide. As I mentioned, FY '25 marked another year of substantial profit growth for Marston's with PBT up 71%. Reported revenue was flat, although this masks the impact of the FY 2024 disposal program, which I'll show on the next slide. I've already mentioned that EBITDA was up 6.5%, and that GBP 12.6 million of EBITDA improvement basically flowed through to operating profit, which was up 8.6% to GBP 159.9 million. Net finance costs were significantly lower year-on-year as a result of ongoing delevering and last year's CMBC disposal, leading to that very significant jump upwards in PBT. And whilst our effective tax rate increased, this simply reflects a return to the U.K.'s headline rate of corporation tax after a period of a lower rate. Together, this income statement shows a stronger and more profitable business with improved earnings quality and stronger margins. Turning to revenue performance. As I've already touched on, revenue for 2025 was GBP 898 million and was broadly flat year-on-year, but I would like to pick out 2 points on this chart. First, that the revenue includes a negative movement of about GBP 40 million in relation to the disposal of pubs over FY 2024 and 2025. To put the disposals into context, about GBP 50 million of assets were sold as part of the disposal program. So it's important to consider that impact when assessing year-on-year revenue progression. And the second point is that our like-for-like performance continues to be ahead of the market, which grew by 0.7% in the year, with positive contributions across all key categories of drink, food and machines. Turning now to look at margin. A key target for the group outlined at the CMD was to grow our underlying EBITDA margin by 200 to 300 basis points from FY '24 levels, giving a target range of 23.4% to 24.4%. And I'm pleased to say that this year, we've delivered 140 basis points of margin expansion, achieving total EBITDA margin of 22.8% in the year. Labor productivity gains were the single biggest contributor, supported by the rollout of improved scheduling tools, which Justin will cover in a bit more detail later on. The labor productivity benefits in the year were enough to fully offset the increases in the National Living Wage and National Insurance contributions, which came in from April 2025. We also saw benefits from improved food and drink margins, energy savings and other operational efficiencies. These gains were partially offset by inflationary pressures, including those employment cost increases that I mentioned and some investment in key areas, including more marketing. But overall, we've made real progress embedding cost discipline and delivering margin expansion across the business, and we feel that our EBITDA margins really do benchmark very well across the whole pub sector. We view ourselves as a high-margin local pub company, and we see further opportunity to increase the EBITDA margin in FY '26 as we move towards our CMD target. Turning now to look at capital expenditure. Total CapEx for the year was GBP 61.2 million, which is equivalent to 6.8% of revenue, and we're now approaching the 7% to 8% of revenue range that we talked about in the CMD. This is an increase from GBP 46.2 million last year, with the main driver being our pub format conversions, which I'll come back to shortly. Of this total, GBP 53.2 million was in maintenance and other CapEx deployed across our 1,300 strong pub estate. This includes works such as maintenance, estate management, investment in new IT platforms and other items. But I also want to pull out a bit more granular information on our pub format conversions, which are very important to our overall growth plans and which Justin will cover in more detail. In the year, we covered 31 conversions to our differentiated formats, which are delivering strong results. Average revenue uplifts were 23% year-on-year and EBITDA returns are over 30% to date, in line with our CMD targets. At an average cost of GBP 260,000 a site, we believe these conversions represent excellent value for money. And of course, we've only completed a small number so far in comparison to our estate. So there's a lot more to go at in this space. Clearly, the driver of increasing our capital expenditure is to improve the quality of our estate. So let's turn to that now. On this slide, we show that we ended the year with 1,328 pubs following the continuation of our estate optimization strategy. This included a small number of disposals in the T&L estate as well as conversion of some pubs to the partner model. As a result, the managed and partnership estate consisted of 1,182 pubs and the T&L estate had 146 sites at the year-end. EBITDA per pub increased to GBP 154,000, which, as you can see, is a 28% improvement over the last 2 years. This uplift reflects both operational improvements and tighter estate management with gains in both, our managed and partnership estate and the remaining T&L pubs. The result is a higher-quality, better-performing pub estate that's delivering stronger returns at a site level. I think this is a really important slide as it shows how the improvements being made to the business model are feeding through at pub level. Turning now to our cash performance in the year, which was another highlight. The takeout from this slide is that we delivered and, in fact, exceeded our CMD target of GBP 50 million of recurring free cash flow ahead of schedule, with GBP 53.2 million delivered in the period. And how was that delivered? Well, cash from ops increased year-on-year by GBP 5.6 million, which included the improvements in EBITDA I described earlier. Within that number, we also had a GBP 6 million saving from lower contributions to our DB pension scheme. And offsetting that, we had a small working capital gain, but it wasn't as large as last year's gain. Finally, we started making cash tax payments again of GBP 5.3 million as our profits improved. And as a smaller side, investors and analysts should note that in FY '26, we expect to move into the very large company corporation tax regime, which will accelerate our cash tax payments this year. And then in the second line on the chart, we had a GBP 15 million saving on interest, offset by GBP 15 million more CapEx year-on-year, as I just described, together with lower banking fees. So recurring cash was strong and now over GBP 50 million, which we expect to be able to exceed again this year. I also wanted to draw out on this slide that this strong free cash flow is fully absorbed by scheduled debt repayments, GBP 43.8 million of securitized debt repayments and GBP 8.6 million of lease liabilities. Clearly, this does mean that the group is delevering, as I'll show on the next slide, but also that our cash generation is currently fully utilized. And then just to complete the chart, after other movements in borrowing and disposals, there was a cash outflow of GBP 9.6 million in the year. And I'm now going to return to that progress about delevering in the group. This slide shows the different elements of the group's financing structures and the overall movement in net debt year-on-year. So starting at the bottom, net debt, excluding lease liabilities, reduced by GBP 46.2 million, to GBP 837.5 million. This takes our net debt-to-EBITDA multiple, excluding leases, down to 4.6x from 5.2x last year. That continues the recent downward trend and reflects the group's stronger cash generation and disciplined approach to capital investment. And then to briefly cover what makes up our financing structures, the largest element shown at the top is the securitization, which provides long-term predictable financing for the group. It does also impose some restrictions, both in terms of the assets that are tied up in the securitization structure and in our ability to move assets and cash around the group. However, these restrictions are manageable at present. Swaps are in place to fix the interest that we pay on the securitized debt. Other lease-related borrowings are essentially loans that were raised against other properties in the group outside the securitization. They were legally structured as sale and leasebacks, but where we have the option to buy back the properties at the end of the period for a nominal fee. Therefore, we treat these properties as effective freehold. And as noted in the slide, we're currently paying interest only on those borrowings. And I've put a new slide in the appendices showing investors how those structures will work over coming years. Our GBP 200 million bank facility was renewed in the year and now extends to July 2027 with relatively low drawings at the year-end, and cash balances ended the year at GBP 35.9 million. So in summary, we're continuing to delever at pace while preserving the secure long-term funding arrangements in the group. If I then broaden this to look at the group's whole balance sheet rather than just the net debt elements, this slide shows the evolution of our balance sheet and our net asset value per share, which increased to GBP 1.25 this year. And actually, the movements year-on-year are pretty straightforward. Our balance sheet is underpinned by GBP 2.2 billion of property assets, of which 81% of the estate by number of pubs are effective freeholds. The net book value of those assets increased by over GBP 100 million in the year, reflecting our annual estate reval and also our ongoing investment into the business. Net debt, as I've just described, reduced GBP 837.5 million, excluding lease liabilities, and lease liabilities were GBP 5.5 million lower. So total net debt was GBP 51.7 million lower year-on-year. Other liabilities increased by GBP 28.4 million, almost entirely due to an increase of GBP 28.5 million in deferred tax liabilities relating to the upward property revaluation. So overall, the property reval with its associated tax movements as well as the net cash generation of the group drove GBP 136 million increase in net assets, which was a 21% increase year-on-year, to GBP 791 million, which equates to GBP 1.25 per share. Given the progress made on the balance sheet, I want to finish by looking at our capital allocation framework. And if I start by saying that this is not a change to our capital allocation policy, which remains consistent with what we laid out at the CMD, we remain focused on delivering sustainable shareholder value through a disciplined balance of investment in the business, delevering and ultimately, shareholder returns. That said, there are a couple of updates we wanted to share this morning. On the right-hand side of the chart, you'll see our continued progress on leverage, which, as I mentioned, has reduced substantially. We are pleased with that progress, but would like to see leverage continue to decrease. And today, we're committing to reduce leverage to below 4x on a pre-IFRS 16 basis. When we get to that level, we anticipate the start of capital returns to shareholders through dividends, share buybacks or a combination of both. What that looks like will depend on circumstances at the time, including the share price and investor preferences. To be clear, we also expect to see the group continue to delever below 4x even after the recommencement of shareholder returns. We believe this disciplined approach continues to be the right strategy to create and sustain long-term value. So to conclude, we've delivered a strong financial performance this year with clear progress on margin, profit and cash flow, and we expect further progress this year. And before I hand back to Justin, I'll briefly touch on 5 forward-looking points. First, we remain confident in the trading outlook for FY '26 with like-for-like sales currently tracking in line with last year and Christmas bookings up 11%. Second, we expect further progress towards our margin target of 200 to 300 basis points of growth versus 2024 following the 140 basis point gain this year. Our format growth engine will be accelerated this year with at least a further 50 refurbishments and our CapEx is expected to be within the target range of 7% to 8% of total revenue. And after achieving our CMD target ahead of schedule this year, we expect to deliver another year of GBP 50 million in recurring free cash flow in FY '26. And lastly, we've significantly reduced our debt profile over the past couple of years and expect to continue to do so with leverage now at 4.6x and progressing well towards our sub-4x target. So overall, we're delivering against our targets, and we remain firmly on track to drive further financial and strategic progress in the year ahead. Thanks very much, and I'll now hand back to Justin. Justin Platt: Thank you, Stephen. So I'll now take you through the progress we've been making as we've implemented our strategy through the year. You will remember from the Capital Markets Day, we're very focused on being a high-margin highly cash-generative local pub company. And we'll do that with a portfolio of brands that appeal across a range of consumer segments. 5 key value drivers that get us there: executing a market-leading operating model; using CapEx to deliver differentiated formats; unlocking value with digital transformation; expanding our excellent managed and partnership management models; and in time, supporting that with targeted acquisitions. So I'll now deep dive on each of those value drivers to give you a flavor of some of the work that we've been doing. The first one I will spend some time on is the operating model. Really, this is the bread and butter of running a great pub business. It's the balance of revenue growth, cost efficiency and guest satisfaction. So first of all, I'll talk to revenue. Really good momentum this year. We've continued to do well, especially in our peak trading periods. Across our peak trading periods, we're up almost 6% on the year. And that's enabled us to grow our like-for-likes ahead of the market at 1.6%. And a lot of what's behind that is our event plan. Our event plan has been a key thing for us this year. In 2025, Marston's Pubs have been home to a darts tournament led by Luke Humphries, the world #1. Paddington and his new movie joined us from Peru. We had a national Trivial Pursuit quiz event. And through the summer, when Oasis Mania was sweeping the U.K., we had a series of '90s throwback events with tribute [ bans/bands ] and the like in our pub life. So all of these are designed to give people reasons to visit our pubs, a range of guest demographics. I think that's essential at any time of year, but especially so in the summer when, of course, this year, we had no big football tournament. So events are big success for us and an important driver in supporting our revenue growth. So secondly, on costs. As Stephen has shown you, we've made excellent progress during '25 on our journey to being a high-margin business in adding 140 basis points to our margin despite significant and well-known headwinds. And we've done this with a relentless drive for efficiency across all areas of our cost base. The biggest area of our cost base is labor, where we've saved almost GBP 10 million, a little bit more than 1 percentage point on our margin. And this has been about continually getting smarter with the way we use our technology to enhance and optimize our labor teams and our labor schedules, all about getting the right people in the right place at the right time. I think probably the best way to bring to life for you the work we've done on labor is to pick a case study of one of our pubs. The lady pictured on the right is Kati. She's one of our fantastic general managers. She runs the King Charles pub in Chesham, a lot of work with our labor planning this year. They've actually reduced their labor costs through the year by 8%. And despite doing that, they've grown their revenue by 19% and also grown their guest satisfaction well ahead of our company average. So a good example in the way labor is playing out for us in one of our pubs, but it also represents our approach across the company. So secondly, in terms of food and drink, our formats allow us to simplify the ranges we offer because we're a lot clearer about the demographic by format. And so that allows you to be clear which food offer and which drink offer you need by pub. So that's allowed us to simplify our range. That's helped us with efficiencies. But alongside that, we've also renegotiated our key food and drink contracts to drive efficiencies where we can. So that's labor and food and drink. Finally, energy and states. Every pound counts on energy. We've been that way for a number of years now, whether it be the usage that we manage, but also the contracts, there's a relentless focus on attempting to drive efficiencies there. But as Stephen said, we take a very judicious approach to estates more broadly with our CapEx, looking at our maintenance cycles, spending strictly in maintenance cycles, and that helps us on efficiencies with our repairs budget. So overall, really good progress on the cost side of things. And then finally, on the operating model, guest satisfaction. I mean this is all about ensuring that when our guests come and see us, they have a great time. And it's very pleasing in the context of the efficiency gains I've just talked to that we're still delivering better and better experiences through our guests. So from a score of 766 in '23 to 800 last year, 816 this year is a very pleasing performance. And this really is a combination of many of the initiatives coming together, whether it be our events program, and the visual there is of our October Fest event that we run during September, whether it be through digital ordering or some of the menu enhancements we've made. All of these things together add up to make a difference to the guest experience. It's worth saying, though, that the #1 factor that dominates, that really drives a great guest experience is, really strong guest service. That requires almost an obsession, a relentless obsession with getting that right day in, day out. And the work on that is never done. Our teams are very focused on delivering that experience all the way through the year. And as I say, it's pleasing that this year, we've been able to continually improve on that. So that's the operating model. When you take revenue, cost, satisfaction together, it's good that we've made strong progress across the piece. And this has been complemented with the work we've done on the digital transformation value driver. I think a key example of this would be the new order and pay app that we launched in March. Really well received. It's paying dividends with our guests in terms of both revenue and reputation, and it's complementing the personal service for those guests who want it. So we've got a 10% revenue uplift when using the app. And those pubs with a higher mix of order and pay usage do significantly better on reputation. What's also good about the app is it can work hand-in-hand with our events. So the Trivial Pursuit: Win a Wedge event drove a big uptake in the use of the app. So good progress overall on this area, digital, but a lot more opportunity here in the future as digital transformation can help us both on revenue and on cost. The third value driver I want to focus on is our new pub formats. So against 5 core consumer target segments across the market, we've designed 5 pub formats that are specifically designed to meet the needs of those target audiences. And through a series of test and learn launches in '25, we've been assessing the potential of these pubs to drive appeal and importantly, drive powerful CapEx returns. Now in May, I did a deep dive on the Two-Door format. So I thought this time around, we'd share some more information on the Grandstand brand. Grandstand is a local sports pub. So it targets adults who want an entertainment experience when they go to their local pub. I mean this is an absolute sports lover's dream. It's similar to a city center sports bar environment, but in the local community pub. Number of constituent parts to it. At its heart, state-of-the-art technology ensures that we've got 3-meter stadium screens, amazing sound systems. Alongside that, there's great match-day food suited to watching the big game. And these pubs will always be run by sports enthusiast general managers who know what their guests want and can work with them to give them a great experience. It's an absolute must visit for the big game, the atmosphere that we create. But more than that, because it's a local pub and it's a great environment, it's a place that you would want to go to on any night of the week, and we support that with a program of sports events through the week to give people reasons to come every night. So Grandstand has done really well this year. The guest reaction and the returns that we've had have been very, very impressive, and it's been a key part of our test and learn year. And test and learn overall this year has exceeded our expectations. We've done 31 launches through the year. So we did 21 Two Doors, 5 Grandstand and 5 Woodie's. Woodie's is our new family pub. All have done well. Guests love them. They've driven strong uplifts in revenue of 23% and all of that off relatively modest levels of CapEx. We've been driving ROIC of more than 30% of only GBP 260,000 per pub. So the test and learn phase really has proven the potential of this stream for us, real growth opportunity as we roll out across the estate. And all of our pubs have been mapped to the format opportunity they can play to over time. So over time, this really does give us an opportunity as a significant driver of growth. So great progress across our value drivers in '25, and this leaves us feeling very positive as we look towards 2026. Through this year, we'll have a big program of exciting events, all designed to encourage guests to come and visit us, not least with a big football tournament on the horizon that everybody will be very much focused on in the summer. And we'll complement that with our revenue management and order and pay disciplines to drive spend per guest. But alongside the demand drive, as I've just said, our new formats will play an increasingly important role in driving growth through the year. Given our success in '25, we're now accelerating the rollout plan. We'll have 50 or so launches focused on Two Door and Grandstand, and all of these will make a meaningful difference to both revenue and EBITDA performance through the year. So to summarize, another year of strong delivery in '25, significant growth in both profit and cash flow. We're very excited by the growth potential of our new formats, and we see a very promising outlook for the year ahead as we continue to deliver as a reliable growth company. And with that, we can now take some time for questions. Operator: [Operator Instructions]. The first question we have comes from Douglas Jack of Peel Hunt. Harold Jack: So I've got 2 questions, if that's okay. In terms of the new formats in 2026, is the choice of Grandstand and Two Door largely because they're the ones that have the greatest uplift potentially, adding to the number of reasons to visit, I think, obviously, they've got quite a lot of opportunity there. And then the second one was about margins. In 2026, what are the best margin opportunities do you see over this year? Justin Platt: Thanks for your questions. I'll take the first one on formats and then, Stephen, if you want to come to margins. In terms of choices, as you know, we were very clear to have the plank of a test and learn phase first to guide our implementation. So the primary choice is certainty of return in the sense that Two Door and Grandstand both launched earlier in the year last year than Woodie's, which allowed us to get more data on those through the year. Most of the Woodie's launches came sort of the summer onwards. So whilst all are performing well, we've just got longer data on the other 2. The other attraction, of course, with Grandstand is you absolutely want a bigger footprint of those pubs in the market in a year with the World Cup, which we've certainly got an eye on. But really, it's about certainty of returns, Doug. Stephen Hopson: And Doug, on your question on margins, I mean, yes, look, we've made really good progress in 2025. I think we do expect EBITDA margins to increase in 2026, but not to the same extent as 140 basis points we did in 2025. I mean I think the best opportunities for me, so there's a bit of flow-through stuff. So we made really good progress on labor. And Some of those things didn't come through until the second half last year. And so I think some of them will help H1 2026. And also, that is a continuing journey for us. So matching right people, right place, matching demand with supply of labor is something that we're going to be relentlessly focused on going forward. That may come through in terms of reduced cost. It may come through in terms of better customer service and therefore, improved sales, but I think there will be some upside from that. And then I think on gross margins, I mean, we've got pretty good visibility of both food and drink cost prices moving into next year. We're lock in quite a few contracts on that quite early. And I think, therefore, that gives us certainty on those lines. We'll continue the journey on things like revenue management and upselling and so on, and it should be an opportunity to move that further forward as well. Operator: The next question we have comes from Karan Puri of JPMorgan. Karan Puri: I've got 2 quick ones. One, on the 1.6% like-for-like momentum in '25. Just wondering if you could provide a split between pricing and volumes, number one. And number two, just coming back on the cash tax payment in '26. I know it's going to be higher than 2025, but in terms of magnitude, if you could share a bit more on that front would be helpful. Justin Platt: So I'll start with the like-for-likes. As we said in the release, food, drink and machines were all in growth, and that's a mix across them. As you'd expect in that, revenue management has played an important part for us and will continue to do so, particularly actually the premiumization as consumers are upgrading to more premium beers and also adding and upgrading on the menu. And then the second one, Stephen? Stephen Hopson: Yes, the cash tax. So yes, you're right. We flagged that it would increase. Last year, the cash tax payments were GBP 5.3 million. That will approximately double next year, to about GBP 10 million, Karan. So that's about the extent of it. We are still using some losses from previous trading period. So the cash tax is still relatively low, but it will be about GBP 10 million in FY '26. Karan Puri: Perfect. And then just a quick follow-up on that one. So do we -- can we expect it to be sort of normalized cash tax starting in 2027? Or will you still benefit from some loss in the previous period there as well? Stephen Hopson: Yes. 2027 will still be a little bit low. And then from 2028, it will go back to normalized levels. So it will be a step-up in 2027, but it won't be up to normalized levels, yes. And then from 2028, you should expect normalized levels of cash tax. Operator: [Operator Instructions]. The next question we have comes from Anna Barnfather of Panmure Librium. Anna Barnfather: Just a couple of questions. Firstly, on the reformats, you've mentioned sort of acceleration sort of 50. Could you update us on your thinking of what proportion of the estate at this stage you think could benefit from a reallocation into 1 of the 5 formats? So how many of your sort of 1,300 pubs? And have you only done managed or have you done partnership ones as well? The second question, I was just thinking about the sort of peak trading. Obviously, you're doing really well in those big events, with peak trading periods up 5.8%. Are you tempted to sort of reduce opening hours on the sort of nonevent days? Or is there any sort of thinking on that as a way to cut down on overheads? And then just third question on the revenue mix. I think obviously, higher margins and gross margins, can you just give us a bit more color on perhaps some of the shifts in your sales mix? Justin Platt: Thanks, Anna. I'll take the first 2 and then Stephen, if you could take the third one. Let me start on peak trading, and then I'll come back to formats. We do look at our hours on a regular basis, but there's not a massive need to start big closure periods by any means. I mean one of the things that's most notable in pub trading today certainly versus 5 years ago is the growth of the early evening at the expense of the late evening. So if you look at booking patterns now, peak time for a table, the busiest time to get a table is 6:30 to 7:00. You go back 5 years, that was more like 8:00. So there's definitely an earlier day point to your business. And we do look at hours, but I don't think there's anything significant there in cost, particularly the local community environment where people are around the corner from their houses quite a lot. On the formats. So first of all, yes, we've actively launched formats across our managed and our partner estate, and they're performing equally well in each, neither is a differentiator actually in terms of performance, but they do work across both managed and partner. And then in terms of the numbers, as we showed earlier, 5 formats. The 2 that we didn't deep dive on were locals pubs and adult dining, signature pubs. Both of those, we have some of them in market already. I would say in terms of the opportunity, it's probably the locals pubs is the only bit that we wouldn't see as a sort of significant ROIC north of 30% opportunity, which probably takes you to 75% or so of our estate with the opportunity for those new formats. Stephen Hopson: And then, Anna, on the revenue mix, I mean, we're about 35% food in our business overall, but there is a big variation in that, as you'd expect between format and some of those local pubs versus, for example, our adult dining business, which is very, very different. And that has been growing. I mean, clearly, food across the market really has been growing quicker than drink over a period of time, but it's not huge. I mean that number has probably changed by 0.5% year-on-year. So it's not a huge mix. So hopefully, it gives you some idea about the sort of the food and drink [ pub/part ]. Operator: [Operator Instructions]. The next question we have comes from Fintan Ryan of Goodbody. Fintan Ryan: Two questions from me, please. Firstly, can you give us a sense of what your sort of base case expectations are for the budget tomorrow in terms of, I guess, labor costs, anything that you might be expecting or hoping for business rates. Just to sort of get a sense of what the base case is for the outlook currently and maybe what can change within the next 24-odd hours. And then secondly, could you give some color on like like-for-like trading in Q4 and over the last 8 weeks, obviously, you reported flat like-for-likes. How much -- what's been sort of the volume versus pricing split in that? Can you give some color on the visibility for the Christmas trading? Obviously, you've got bookings up 11% year-on-year, but like typically how much of bookings are -- of your Christmas trading are bookings? And what you'd be at this point, assuming for incremental pricing for FY -- for the calendar '26, would be great. Stephen Hopson: Thanks, Fintan. If I start on, I guess, the hot topic of the day and tomorrow, which is the budget and expectations for that. I mean, our base expectations and sort of what's embedded into the guidance that we've given to the market is that we expect National Living Wage to increase, obviously. Our expectations are about a 4% increase in the headline rate of National Living Wage, and we're expecting the differential for under 21-year-olds to close slightly compared to where it is at the moment. We're not expecting any further changes to things like National Insurance. And then really, I know there have been lots of stories in the press, but at the moment, we're not making any expectations on changes for things like machine, gaming duty or business rates either. I mean the Chancellor has flagged that there'll be a review of the way business rates is levied. So that will be interesting to see. But we're not making any assumption on that because simply, we just don't have the information available to us at this point. Justin Platt: And before I answer the like-for-like, Fintan, if you've got any assumptions on the budget tomorrow, please share them with the group. In terms of the like-for-likes, look, as you know, quarter 1 is all about Christmas. October and November are relatively small months in the grand scheme of things. December performance is really what matters. And within that, it's the key 2 weeks from kind of 19th of December until 2nd of January, quite time, tight time. And bookings pace, as we've said, is very good at 11%, and that's off the back of last year. I think we grew Christmas at about 11% last year in like-for-like terms. So it's pleasing the stage we're at. But to your point, walk-ins are also important at Christmas. So we've still got a lot of work to do in order to land that. And that's both in encouraging people to spend their Christmas with us but also then in managing spend per guest, so we drive the revenue return as well. Fintan Ryan: Great. And just in terms of the pricing and current expectations? Justin Platt: Well, again, we -- as you know, we don't -- we kind of manage price through the year in a broader revenue basis. So in terms of our revenue management initiatives around booking density, around premiumization. And yes, lead price is part of that mix, but we don't have like a hard and fast target. It's overall spend [ per ] that we look at. Operator: Ladies and gentlemen, at this stage, there are no further questions. I would now like to hand back to the management team for closing comments. Justin Platt: Well, just to say, thanks, everybody, for joining us. Really good engagement. Obviously, we'll all see what comes tomorrow. And I'll wish you an early best wishes for the festive season. Thank you. Operator: Thank you. Ladies and gentlemen, that then concludes today's conference. Thank you for joining us. You may now disconnect your lines.
Dominic Blakemore: Good morning, and welcome to our full year results. 2025 was another great year for Compass. We delivered strong organic growth and margin progress with profit up nearly 12%. Cash conversion was also very good as we generated $2 billion of free cash flow for the first time. Net new business, the cornerstone of our growth was 4.5%, underpinned by strong new business wins and client retention of over 96%. This was the fourth consecutive year we've delivered net new growth within our 4% to 5% target range. This performance, together with a significant market opportunity, reinforces confidence in the sustainability of our growth algorithm and our ability to deliver long-term compounding shareholder returns. I'll talk more about this later. But before I do, first over to Petros to give you more details on the financials. Petros Parras: Thanks, Dominic. Good morning, everyone. We've made good progress across all our key metrics as we delivered profit growth ahead of revenue growth. Importantly, free cash flow was also strong, growing faster than profit. Let's start by looking at revenue growth. Net new business continues to be in the middle of our 4% to 5% target range with pricing and volume growth consistent with the first half of the year. With our disposal program now complete, acquisitions are contributing to growth. Operating profit increased nearly 12% to over $3.3 billion. Interest was $315 million, reflecting higher debt due to acquisitions. For fiscal year '26, we expect an interest charge of around $350 million, reflecting the purchase of Vermaat, subject to regulatory approval. As anticipated, our effective tax rate was 25.5%, and this is expected to be the rate in 2026. Importantly, earnings per share were up by just over 11% in constant currency. And turning to cash, CapEx was 3.3% of revenue. Consistent with our guidance, we expect CapEx to be around 3.5% of revenue this year. Working capital improved in the second half, in line with our normal seasonal profile and was broadly neutral for the year. We expect a similar profile in 2026. As a result of our strong cash management, free cash flow conversion improved to 88%. Turning to the regions. In North America, organic revenue increased by over 9%. Operating profit was up nearly 11%, reflecting margin progress. In International, organic revenue growth was nearly 8%. Operating margin was up 20 basis points to 6.1% as the region benefited from overhead leverage, resulting in strong profit growth of nearly 13%. Group organic revenue growth was nearly 9%, with the fourth quarter particularly strong as we benefited from increased catering and hospitality events across certain sectors. Excluding these one-off factors, our underlying Q4 growth was around 8%. We expect this to moderate further in 2026, reflecting a lower inflation. Group margin increased to 7.3% in the second half of 2025 with our unit margin now fully recovered. Looking forward, we are confident of further margin progress whilst balancing growth and investment. We see opportunities to improve margin in both regions and to leverage group overhead. We expect to continue to make incremental gains in North America as we continue to improve productivity across our MAP framework and better utilizing tech and data. In International, as you are aware, we've invested in sales and retention to drive higher net new business growth. We expect faster margin progress in this region as we leverage these investments and benefit from M&A synergies. Dominic will talk about this later. Turning to the balance sheet. Net debt-to-EBITDA was 1.4x. As you are aware, last year, we acquired high-quality businesses, including Dupont and 4Service to capitalize on attractive growth opportunities through further subsectorization. This year, we expect to complete Vermaat along with other bolt-on deals. As a result, leverage is likely to be above our target range in 2026, peaking at the half year. However, our capital allocation model remains unchanged, and we expect to deleverage in 2027 as the business grows and we deliver the M&A synergies. With our disposal program now complete, M&A is contributing to profit. Including Vermaat, we expect acquisitions to add around 2% to profit growth in 2026. Now turning to fiscal year '26 guidance. We expect operating profit growth of around 10% on a constant currency basis, driven by organic revenue growth around 7%, around 2% profit growth from M&A and ongoing margin improvement. Now back to Dominic. Dominic Blakemore: Thanks, Petros. As you've seen, the business continues to perform well and is in great shape. We're often asked, what's the secret to our success and continued market outperformance. There are 2 key factors. First, we have a unique sectorized business model, which is decentralized with many of our brands still led by the original founder owner entrepreneurs. This model, which was strengthened through M&A over many decades, is incredibly difficult to replicate. And second, we combine the advantages of this localized approach with the benefits of scale, particularly in food procurement and technology. In short, we combine the best of both worlds. We operate in a hugely attractive market with a significant runway for growth, which is continuing to expand. We're investing organically and in M&A to provide us with additional capabilities to accelerate sub-sectorization. For food services alone, our addressable market is worth around $360 billion, of which we have less than 15% market share. And in addition, we see further growth opportunities in targeted high-value support services, where we estimate the market could be worth at least $800 billion. It's worth remembering we're already one of the world's leading support services businesses, generating more than $6 billion of revenue. The business and industry segment of the food services market is worth around $130 billion on its own. You may think as the most outsourced sector, it would have one of the lowest growth rates. In fact, the opposite is true. This year, B&I is our best-performing sector with organic revenue up 11% and the highest net new business growth. We continue to invest in this hugely innovative and dynamic sector, increasing our addressable market by entering new subsectors or through flexible offers such as vending. Our experience in B&I bodes really well for the rest of the group. Our volumes are benefiting from increased participation in our restaurants as we deliver an even more attractive food proposition. The advantages of our business model mean we can provide a high-quality offer at a superior value compared to the high street. As a reminder, we typically don't pay many of the expenses that retailers do as we operate on client premises. We also leverage our procurement scale and have more menu flexibility, allowing us to change ingredients more easily to help mitigate inflation. Our clients also recognize the importance of food and often subsidize our offer. They are hosting more events on site and increasingly use food as a cultural glue and a key enabler for networking and team collaboration. Acquisitions enhance our capabilities and accelerate subsectorization. Targets are usually sourced locally and have been known to us for several years. We look for exceptional businesses with entrepreneurial teams and attractive returns. And the businesses we acquire benefit from continued autonomy under our decentralized model. We provide them with access to Foodbuy as well as global best practice sharing. Having completed many acquisitions over the years, we've established a proven track record of successful M&A. In vending and micro markets, we've been operating a rollout strategy of many small bolt-on deals in North America. Together with strong organic growth, Canteen has now grown revenues to over $4 billion. These acquisitions are hugely value accretive to Compass with returns typically above our cost of capital from year 1. We're also investing in GPOs and recently acquired Regency Purchasing in the U.K. As well as scale, we've benefited from their technology and systems, helping build out sectorization. Regency volumes have doubled since we bought the business with double-digit ROCE in year 2. And most recently, we acquired 4Service in the Nordics, accelerating access to the multi-tenant building subsector in particular. Integration is ahead of schedule, delivering high single-digit growth with financials ahead of our investment case. We've also recently agreed to acquire Vermaat, subject to regulatory approval, a truly exceptional premium food services provider with a market-leading presence in the Netherlands. Vermaat will further improve our ability to deliver tailored on-site concepts and innovative retail solutions as well as providing us with outstanding talent. Once approved, we expect Vermaat to be margin and EPS accretive to Compass in our first full year of ownership. As Petros said earlier, over recent years, we've invested in technology and data to support our sales processes, procurement functions and to drive operational efficiencies. We think of it as benefiting both growth and margin as well as automating some daily tasks for our colleagues. For example, we're optimizing every stage of the sales funnel by using improved processes and data. We now have more visibility of future gross new wins by more accurately tracking the size of the pipeline, our probability and win rates. We've increased the use of automation tools for bid writing to improve their quality and to reduce preparation time. Tech and data are also transforming the client and consumer experience. We have a strong competitive advantage in this space, having invested in digital for many years with around 1,600 people now working in this area alone. With hubs in the U.S., U.K., France and India, we share innovations and best practice across our businesses, leveraging our breadth and our scale. We're using AI to improve our customer proposition using proprietary analytical tools to optimize our product mix and pricing. This helps us to better match our offer to changing customer demand as well as benchmarking pricing in our sites with the local high street. And finally, when it comes to our frontline colleagues, we're increasingly using AI to automate day-to-day tasks such as recruitment. In the U.S., we streamlined our hiring process and reduced the number of recruiters. In Japan, we've implemented an AI chatbot for our frontline colleagues, which answers any queries they may have in seconds, delivering impressive productivity gains. In summary, 2025 has been another strong year for Compass as we continue to deliver on our growth algorithm. We expect to sustain this performance in the long term, delivering high single-digit profit growth with the building blocks being mid- to high single-digit organic revenue growth, ongoing margin progress and contributions from bolt-on M&A now that our disposal program is complete. For 2026, profit growth is expected to be even higher at around 10% as we benefit from the Vermaat acquisition. Now over to Q&A. The operator will share instructions on how to ask questions. [Operator Instructions] Operator, over to you. Operator: [Operator Instructions] Our first question comes from Jamie Rollo from Morgan Stanley. Jamie Rollo: Three questions, please. First of all, could you talk a bit about what drove that very strong fourth quarter for organic sales, about 9%. I think you said 1% was from sort of one-offs. Maybe talk a bit about what those were. I think we saw a similar thing a year ago and even the year before that, the sort of one-off benefits to keep happening. But also the 7% guidance looks quite conservative even in the context of an underlying sort of plus 8% exit rate. So how should we think about the sort of cadence of organic sales through the year? Secondly, again, it's a question on the guidance, but on the margin side, so 1% profit growth from underlying margins, about 7 basis points, again, looks a little bit conservative. I think for that alone adds about 5 basis points to the group because it's double-digit margin. So could you talk about the upside to margins? And also, how should we think about that 200 basis points gap between North America and International sort of closing, if at all? And then finally, you've given us sort of lots of the AI benefits to the business and your clients on Slide 24. Could you talk a bit about how you might mitigate against sort of the impact of job losses driven by AI on sort of office meal demand in general, please? Dominic Blakemore: Jamie, thanks for your questions. Let me hand over to Petros for the first 2 questions on run rate and margin guidance, then I'll pick up on the AI point. Petros Parras: We feel our Q4 underlying rate is about 8%, as you said. We had particularly strong volumes in B&I, Education and Sports & Leisure that we're pleased with. Some of this, we believe it's a onetime in nature. And practically, we have taken this in our guidance for '26. If you think about what has changed as we move to '26 versus '25, it's to do with inflation. We're seeing inflation slowing down a fraction faster than what we thought last year, end of the last year. Spot rate and inflation about 4% blended. We believe it's going to be close to 3%. And we mitigate part of this for our clients. So when you consider our guidance for next year, it assumes a lower rate of inflation within the 7%. It assumes a 4% to 5% corridor in a fifth consecutive year of delivering our strategy and a net positive contribution for volume. When it goes to margin, I think you give us too much credit of being able to forecast 7 basis points or 10 basis points on a going-forward basis. I think our approach there is profit has to grow faster than revenue, call it the 10 basis points on average. What is interesting is our unit profit margin has exceeded what used to be pre-COVID, which gives us sound financials within the units in operations. We benefited from overhead leverage, and we expect to make consistent margin progression going forward. We do not see a ceiling to it. You will continue to see international business to grow faster with some group overhead leverage and some marginal gains in North America. I'll take a pause, and I'll pass to Dominic. Dominic Blakemore: Very good. Thank you, Petros. Jamie, when it comes to AI, I think in summary, we see it as a net positive for the business. As you rightly say, we shared some examples today of where we're deploying data and AI within the business, most specifically around our growth processes where we think we can get better outcomes on the pipeline build, the preparation for meetings and the conversion into growth. So we're very, very excited about what we're seeing there. We're also very targeted around purchasing and the value we can derive from our purchasing processes and the efficiencies we can introduce for our frontline teams to enable them to dedicate more of their time to their consumer and their clients. When it comes more specifically to the question you raised around net employment numbers, I mean, first of all, just a reminder, B&I is our fastest-growing sector as a group and also both within North America and international. Over 50% of that growth is coming from first-time outsourcing, which is very exciting. And as you've heard Petros say, we had strong volumes in quarter 4 within B&I. So we think our B&I sector is in rude health right now. When it comes to AI, look, we're seeing new clients emerge, particularly on the West Coast, where we've got a number of smaller start-ups, which we are serving through our commissaries and SME type offer. We're seeing some of those scale into significant clients, and we're excited by that. When we talk to our clients in the technology sector, they're very focused on talent retention and attraction, particularly as they seek to get the right capabilities to be best placed with AI. And I think we have a very important role to play there in them helping address that. And then lastly, we're seeing new subsectors emerge like data centers. So with regard to data centers, there's an opportunity for remote feeding through the construction phase. And then once in operation, there's an opportunity for us to provide on-site services, either in the form of restaurants and cafeterias or micro markets. And of course, there's a whole range of different FM services that we're well placed to provide to them in an environment where those services are very highly valued. So right now, we are seeing it as an opportunity, both in terms of what it's bringing to our business and the opportunity it's providing within our client estate. Operator: We now take our next question from Kate Xiao from Bank of America. Kate Xiao: My first question is also on AI. I guess thanks for explaining all of the benefits. I guess, any way you could help us quantify the positive impact on the business, either on the revenue enhancement side or cost savings? Any kind of examples or quantification you could give there would be really helpful. And then my second question is on your secured new business, $3.8 billion. That's up 11% year-on-year, which is very, very encouraging. I guess, could you elaborate a little bit on this number? I think the definition is the new business wins over the past 12 months. So would some of the business already be in the FY '25 revenue number already? Or is it mostly the pipeline for FY '26 growth? Dominic Blakemore: Thank you, Kate, and welcome. I think this is your first call with us. When it comes to quantifying AI, look, we don't think we're in a place to do that right now. I think like many things we see, we see puts and takes that drive volumes and new business opportunity. At the moment, on the sort of volumes and new business side, as you heard me say, we think it's a net positive. And then with regard to the savings that we're generating within the business, I think what we're seeing most of all is an opportunity for greater effectiveness and the ability to redeploy our people's time on more value-creating opportunities. We're certainly seeing that within sales. And what would I say, maybe we're generating 15% to 20% time efficiency, which can be redirected into more value-creating preparation for meetings and bid preparation, for example. So that's really how we're thinking about it. It's how do we redeploy effort and time into the bigger opportunities. And then specifically on the new business ARO, yes, $3.8 billion. We're super pleased. We need to continue to grow that relentlessly year in, year out. Our pipelines look very attractive. More importantly, almost than the gross new business wins, our pipelines are growing at the rate we need to see them grow. You've seen us speak today to the increase in the market that has come by way of some of the acquisitions we've made, which opens the total addressable market up for us. So we've now got a market which is over $360 billion. That's what's really exciting. The more we can target sectors and subsectors of opportunity where our operating model is best placed to win, then the more sustainable we believe the growth is. As you heard Petros say, we're super excited that this is 4 years now reported within 4% to 5%. We're well placed to see another year of growth within the 4% to 5%. And our objective is to continue to build our TAM and our processes deploying AI such that we can sustain those growth rates and those retention rates over the long term and deliver within the growth algorithm that we've shared with you. As you rightly say, some of that business will have deployed in financial '25 and will be rolling into '26 on an annualized basis. Some of it will be yet to deploy in '26. And the odd contract would have been one which will deploy in future years as we've also witnessed in the past where we've got some business that comes online. So the correlation between new business won and the in the year benefit within that 4% to 5% range is rolling. But we're really pleased that we've delivered that 11% increase year-on-year, which gives us every confidence that we can sustain the 4% to 5% as the business scales and the absolute numbers get bigger. Operator: And our next question comes from Simon LeChipre from Jefferies. Simon LeChipre: Three as well, if I may. First of all, on the $3.8 billion new business wins, I'm not sure you mentioned the mix of FTO within this number. I think it was 48% by Q3. So keen to get an update on this. Secondly, on net new, just wondering if net new was also within the 4% to 5% range for the international region. And lastly, I mean, in the U.S., you mentioned some opportunities in data centers. But more broadly, do you believe you could benefit from different investment plan going on like the Infrastructure investments, CHIPS Act and so on. Just wondering if it's something relevant for you. Dominic Blakemore: Thank you, Simon. Yes, let me pick up on your third question, and then I'll hand the first 2 to Petros. Absolutely, we're super excited by investment in new -- all new forms of technology, and we see those as opportunities for us. So I obviously referenced data centers, but yes, semiconductor manufacturer where it's been onshore in particular, is presenting opportunities for us. We're seeing data centers all around the world as an area of opportunity for us. And particularly where we see the build of new energy technology, those present opportunities for us. So there are -- as we've always witnessed, there are new sectors and subsectors of business and industry that emerge at pace and scale. And we believe that we've got a range of offers that can play into those, which means we've always got what the client is looking for. What's really important is that we're spotting these trends. We're moving quickly, and we are building an offer that is compelling for the client in their needs. Petros? Petros Parras: On the $3.8 billion Dom referenced, it's growing 11%. FTO around 45%, which is very pleasing to see. If you go back to pre-COVID, it was about 1/3 of our source of new business wins, continues to be elevated, which plays back to the complexities of the clients and our ability to serve and solve some of the challenges. I would say it's broad-based and represents a fair share of our sectors. And as Dom referenced, particularly with B&I continue to have great momentum within this $3.8 billion. When it goes to net new international, let's take a step back here. And if you look at from 2019 all the way back, international was nearly flat. We have 4 years of consistent good growth. We have 4 years of elevated net new for this part of the business. And the most pleasing thing for us is retention. You look at retention, we used to be in the low 90s. We are mid-90s sustainably. We would like to do better as we move forward in international business. We have opportunities. If you look in North American business, retention, some of our international business, the more sectorized we become, the more GPOs we deploy the Compass full toolkit, we should be in a position to drive marginal gains in international business. But we recognized consistent and good growth, and we're working towards sustaining this good growth in international part of the business. Dominic Blakemore: Yes. I mean I would probably just add to that. If there's anything that pleases me most about the business, it's the performance of the international region. We've seen an acceleration in our net new and improvement in our retention. As Jamie pointed out earlier, there's still a couple of points difference between the margins of North America and International. We see an opportunity to close that gap over time. We think the North America margin will continue to nudge forward. We see an opportunity for the international margin to grow faster as we make margin-accretive acquisitions, as we move toward GPOs in each of the individual international geographies, we see a good opportunity on margin there. There's still a delta in retention between North America and international. We think we can close that gap too as we deploy our processes, and we're seeing consistent improvement. What's most important, though, is the sustainability and consistency of that. And we're starting to build a bit of a track record, as Petros said, over the last few years, and we need to sustain that going forward, and we're confident we can. Having said all of that, I'd also just like to remind us that the North America performance was extremely strong last year, and we're incredibly proud of that. We think that we have every reason to believe that, that's sustainable, too. Operator: And our next question will come from Jaafar Mestari from BNP Paribas. Jaafar Mestari: I have 3 questions, if that's okay. Firstly, because you've provided this all-in guidance, which includes M&A and Vermaat, just a couple of questions on this. One, what timing of the Vermaat consolidation have you assumed in the guidance? And two, how should we look at the $350 million net finance cost guidance in this context? Is it $300 million run rate until the Vermaat consolidation and then it's $350 million as you pay for it? Or does the financing that you have in place mean that it's $350 million regardless of the exact timing of the deal closing? And then more fundamentally, one of your competitors has announced they would be investing in sales force -- in their sales headcount in at least one large U.S. vertical because they signed so little. Another one of your competitors paid their sales team $25 million extra bonus because they signed so much this year. How do you keep and motivate your hunters? You've talked about the founders involvement. Could you give us some more color on the sales teams themselves who bring in $3.8 billion? How many are they? What sort of background? What sort of support do they have, how they run and how they paid? Dominic Blakemore: I'll speak to the question on our sales resource, and then I'll hand over to Petros for the first 2 questions around Vermaat. Look, I think the first thing to say is the consistency of our track record. You've seen us deliver the new business growth now globally across North America and international, as I said, over 4 years. We've got great line of sight of the fifth year. More importantly, we've been doing that in North America for certainly the 13 years I've been with the group and probably over 20 years. So there is a consistency to our process and execution that I think is critical to the strength of our performance. We've got longevity and tenure in many of the people who work with us. Our organization, as we talk about often, is designed around sectors and subsectors. So we have dedicated sellers for each of the offers that we provide to our clients. We have dedicated sellers who are focused on the first-time outsourcing opportunity. Often that's a longer sell. And so we are incentivizing them over multiyear rather than individual year's performances. I won't speak to the independent -- the individual reward structures, but we have processes that have worked for us repeatedly. Our pipeline looks out 1 and 3 years, and we're excited by that. When you speak about the different competitive pressures, again, having been around this business for a while now, I've seen the competitive pressures ebb and flow. I see no real difference today to that which we've experienced previously. I think it's really important that we keep doing what we're doing. And that starts with expanding the TAM so that we've got ever more opportunity, being relentlessly focused on what the pipelines look like 1, 2, 3 years out, being relentlessly focused on our retention and how we secure and preempt to minimize the retention risk. We've seen a consistent improvement in retention. We put that down to our SAG processes, our non-SAG processes, which we're getting more dedicated to all of the time. And actually, the use of data around consumer NPS and our client feedback on an anonymized basis is allowing us to make even better decisions around that. So we just remain relentlessly focused on doing what we're doing on sharing our best practices and scaling our teams. We're always adding sellers into the business to ensure we can continue to grow at scale. But what I come back to is how important it is to continue to expand the TAM to give us the marketplace to grow into. And again, elevating the conversation, we have a 15% global market share in an industry that's still 50% self-op. There's huge runway for all of us to grow into. Petros Parras: On Vermaat, just to remind everyone, it's still subject to regulatory clearance. We have taken an assumption on contribution as of the first quarter of '26. We have line of sight we are in the final stint of this being closed, and we remain very excited to welcome the Vermaat team within the Compass Group family. When it goes to the interest expense for next year, about $350 million. This assumes Vermaat including the numbers and a bit of [ in-field ] M&A that we'll continue to invest in the business as we move forward. Jaafar Mestari: So just to be clear, it's going to be $350 million regardless of that timing? Petros Parras: Yes. Jaafar Mestari: Can I have a short follow-up on this, please? What's your assessment of the EPS accretion of the deal? You said positive for this year because you're presumably closing it late in the year, but you immediately have that higher finance costs. It doesn't look like we can justify even a decimal upside to consensus EPS. But if we annualize this on the full year, what sort of accretion do you think this deal if everything happened at the same time, interest costs and consolidation, please? Petros Parras: I think in Dominic's script, I think we say it's going to be accretive on EPS and a full year of ownership. You have to appreciate depending on when this deal is going to close, there is a different contribution of profit vis-a-vis the interest cost, will be accretive to growth as it closes. And importantly, with the synergy cases as we go in delivering good growth and some synergies on the cost lines, we should be able to drive further EPS accretion on a year 2 and year 3 basis. Operator: Our next question will come from Leo Carrington from Citigroup. Leo Carrington: If I could ask 3 as well, please. Firstly, on the North America H2 margins, which were flat despite the organic growth. Is there anything to call out as weighing on the margins this year, possibly the $440 million of M&A spend -- anything there would be useful. Secondly, I do appreciate the focus of yours is on B&I today. But in health care, your U.S. peer on a big multisite contract. Is this part of an acceleration in outsourcing in North America healthcare segment that you can also see or something of a one-off? And then lastly, I was interested in the Slide 29 showing the guidance evolution pre post pandemic. What exactly do you attribute the improvement, the increase in like-for-like volume growth to that you expect to see? Dominic Blakemore: Okay. Thank you, Leo. Why don't I take your second and third question and then Petros can speak to North American margins. Look, first of all, yes, I mean, the health care sector remains incredibly exciting for us. It's one of the sectors with the most significant first-time outsourcing opportunity, both in North America and international. We are seeing contracts come out on a multisite, multiservice basis, which are first-time outsourcing opportunities. So whether we would call that an acceleration or it's the normal trend, I think we'll determine as we go. But there are some very exciting opportunities in the sector, and that's been the case both in North America and international. And I could say the same for higher ed as well. So look, our sectors remain vibrant. We see lots of opportunities, not just in B&I, but across all of the sectors and really informs our sort of confidence today in sustaining our net new growth algorithm and the ever-expanding TAM. And then when it comes to like-for-like volume growth, look, I think there's quite a few puts and takes that we could pull apart, whether it's sort of return to office over time and so forth. But I think the biggest single trend to me is the one that we sort of called out in the slides today. And that is, I think, the greater appreciation of the value that we offer relative to the high street. I'm very confident that the quality of what we offer is on a par. I think we've got some exceptional consumer offers now within our estate, but we're providing that to our consumers at a very, very significant discount to the high street. And through this period of elevated pricing, that delta has become ever more. We talked about why that is. Obviously, it's the fact that we typically aren't paying utilities on site. But I think our scale of purchasing is just so much greater than the high street competitor set. That provides advantage and our menu flexibility is so much greater. And I think therein lies a huge opportunity to create value for our consumer. That combined with the opportunity or the case where many of our clients are partially or fully subsidizing the offer. I think that's meant that we are capturing more people on our estate and they're having more daypart occasions with us. And I really do believe that, that is what is behind our successful volume growth. And I think you can see that in a number of our sectors. And then when you think more about where you've got the type of consumer that would be within the sort of Sports & Leisure, the event sector, I think we've got even better at retailing, understanding per capita spend, consumer trends. We've got data analytics businesses that are helping us drive an understanding of those. And we're working very closely with our clients because the clients see it such an important part of their hospitality performance to be able to drive that. And hence, we benefit from that, too. I think you see that in the Q4 volumes, where we have a positive calendar of events, we're also performing positively on volumes. Petros Parras: On North America, we're really pleased on what the business has achieved. If you really step back and you look at North America operating margin is fully recovered to pre-COVID. Within '25, there was noticeable margin progress as this business grows. I want to remind you, business is 65% bigger to pre-COVID and enjoying this elevated growth and still delivering margin progress is quite remarkable for our teams, I think. On a going-forward basis, we will expect still to do some marginal gains as we grow, more of an overhead leverage. And we remain positive on the trajectory of this business. If you're referring to the half 2 versus half 1, we made progress versus both halves of last year. And as we came to a fully normalized world on recovering the margin, there is some seasonality in there. North America has always been stronger margin in the first half to second half. Dominic Blakemore: Yes. I would add on margins as a group, I probably feel as confident as I've ever been that we will see steady, consistent incremental margin progress in North America and International. Why is that? Just remind ourselves of the portfolio work we did where we exited a number of the more volatile markets. I think we've got much more consistent business now. We've got a much more sustainable foundation and base, and I think we can grow from that consistently from here. So that's what's informing our confidence both in North America and International that we should see consistent, steady margin progression. Operator: Our next question will come from Estelle Weingrod from JPMorgan. Estelle Weingrod: I've got a first question on North America. You talked about the very good performance of B&I. Can you give us an update on other segments, in particular, higher education? Any indication on the full terms enrollment numbers? And the second question on Europe. Can you provide a bit more granularity on the underlying momentum? You mentioned B&I and Sports & Leisure. Can you be more specific perhaps on a country basis or at least any country you call out underpinning this solid momentum? And have you noticed or have you witnessed any signs of a softer macro in some countries in Europe, like in France impacting volumes? Dominic Blakemore: Petros, do you want to take the North American higher-ed question, and I'll speak to Europe. Petros Parras: So North America, as Dominic referenced, very strong B&I, low double-digit growth, broad-based across all subsectors. If you look in the rest of the sectors, we're in the high single-digit growth territory, which is quite pleasing. It's what we call broad-based growth. And actually, if you look at our sector footprint, we expect to be this way as we are fully sectorized and we're winning good businesses within every sector. When it comes to education, I think enrollments came in good, in line with our expectations, continues to have some good momentum in the education business as we move to the fiscal year '26 year. Dominic Blakemore: And with regard to Europe, yes, I mean, actually, Estelle, you spoke to it. We are 2/3 of B&I business in Europe. So for us to grow, we need to be seeing positive growth in B&I, which is the case. We've got a very exciting pipeline. We've won some really nice opportunities in the Nordic region, in France, in Germany, we continue to perform extremely well in Spain and in Turkey. So we've got a strong portfolio of countries that are all growing together. Importantly, and going back to the earlier conversation, what's really stepped up has been our retention performance in Europe. Again, if we compare it to the years that Petros described when we were sort of flatlining for growth, the real difference there is that 3 percentage point improvement in our retention rates, which we believe are sustainable. We've got very rigorous retention processes that we've trained out and we're managing through the region, and that gives us good confidence in momentum. We've got a very exciting pipeline for Europe. And I think the other feature is, for example, we've launched our Levy Sports & Leisure brand into Europe, and we're managing that across all of our international markets now actually. And we're seeing good momentum as we start to win our first accounts. Obviously, we talked about not in Europe, but the Australian Tennis Open, which was won last year. But also we're seeing our first ones in the sports areas in Europe, which is exciting. And then lastly, obviously, the acquisitions we've made 4Service in the Nordics and others are starting to give us access to new subsectors within B&I, which gives us even increased confidence on sustaining those growth rates in Europe. So look, we think that it's an ever-improving performance that we can expect in Europe, and we'll continue to nudge up within our net new growth range of 4% to 5%. On the macro point, sorry, at this point, we aren't seeing any degradation on our volumes from the macro, but we remain watchful. And look, I know there's some concern out there about are we likely to enter any recessionary conditions across the piece. I think a reminder, first of all, we're not seeing it. And then secondly, we do believe that the resiliency of this business can demonstrate itself in those times. First of all, our clients look for value and cost savings. And whenever there's been a tighter macro, we've seen an acceleration in first-time outsourcing and also in rebidding of contracts for more value. And I think we're very, very well placed there. And then secondly, if the consumer is looking for value in tougher times, then I think everything I said about what's driving the volume performance will stand us in incredibly good stead. So look, I think we feel well placed whatever may be ahead of us. Operator: The next question will come from Ivar Billfalk-Kellyfrom UBS. Ivar Billfalk-Kelly: You've mentioned FM a couple of times in passing on the calls, where it usually feels like we go several quarters without it being mentioned at all. Can this be an indication that it's a bigger focus going forward? And can you talk about the relative margin contribution of FM services compared to the traditional food service and the outlook for growth? Secondly, you're investing in M&A and GPOs in the U.K. You still don't have much in the way of GPOs in the rest of Europe. What would realistic time lines be for rollout of GPOs in your Continental European operations? And what's actually needed for them to be successful? And thirdly, on the health care in North America, as I understand, a lot of the U.S. health groups already have their own GPOs. And since GPOs are a key element of your offering, what is your relative positioning compared to your peers, given I understand the GPOs in health care actually like you to use them rather than your own procurement. Any comments there would be helpful. Dominic Blakemore: Thank you for those questions. Actually, really interesting and thoughtful. First of all, FM, yes, look, we're predominantly a food services group, 85% of our business is food. But look, that 15% that we deliver support services across a spectrum of different services in FM is $6 billion. That makes us the fifth or sixth biggest support services company globally. We also operate support services with great capability in many markets. We've quietly got on with that. It's been growth neutral. So it's been growing at par with our food service business and actually is also margin neutral, so on a par with our food services business. So it's a good business for us. Where we sell it alongside our food as a multiservice offer or an integrated offer, it can be very sticky with clients. Typically, we've seen it in the defense sector, the remote sector, the health care sector and increasingly within the education sector. Within B&I, it's often sold separately rather than as an integrated offer. But look, we think it's an attractive market that in a number of countries, we are well placed for. We quantified the market today within our slides $800 billion. It's very fragmented. So there's a long runway for opportunity for growth. We're clearly not prioritizing that over our food service business, but we will consistently execute. And we really just wanted to remind everyone today of the scale of that business and the capabilities that we offer. And that I think if you're very selective in the services you provide and where you work with clients, then it can be an attractive adjacency to food. On the M&A for GPOs, you're absolutely right. We've been building out our U.K. Foodbuy business very successfully over time. We gave some great examples today, particularly Regency. Our U.S. Foodbuy business continues to be incredibly accretive for us and an important part of our portfolio. We have a Foodbuy business in Canada, Australia and the U.K. We already operate GPOs today in some of our European markets. So we operate them in the Scandinavian area within Belgium. We haven't yet built those out in some of the other bigger individual countries. It is an area of focus for us. You asked what is the sort of recipe for success. Actually, when we take a step back, what enabled both the U.S. and the U.K. to build credible and scale Foodbuy offer was first acquiring the capabilities of a GPO and then bringing the Compass volumes into that GPO to get aggregate scale and then to franchise the capabilities and the services alongside the scale into the third-party market so that we can grow disproportionately with our own estate, our acquisitions and the third-party growth. And we think that really is the sort of the recipe for success in other markets, and it's one that you should expect to see us pursue over time. And then finally, with regard to the North American health care GPOs. Yes, we partner with many health care GPOs that operate for themselves across their own health care estate. Remember, they're typically buying pharmaceuticals, equipment, linen and other nonfood categories where they've got significant scale, actually bringing their food volumes into our significant food buying volumes can yield even more value for them. So we think there's a really interesting and exciting way to partner with the North American health care GPOs to give them more value and bring more volume into our model. Operator: We have time for one final question today. Neil Tyler from Rothschild. Neil Tyler: Just a couple of quick follow-ups actually to previous questions. Firstly, just touching on the last question around FM support services. In your prepared remarks, I may have misheard, but I think you mentioned that you would consider adding to those services through M&A. I just wanted to make sure I understood that correctly in isolated instances, obviously, but if you could clarify there. And then secondly, Dominic, going back to the point or the focus you put on the expanded addressable market, the additional sort of $40 billion or so. Can you just talk a little bit more about where that's come from? You mentioned it's come through the acquired expertise over the last 12 months or so. And are there opportunities to continue to replicate what's happened over the last 12 months through further M&A? Dominic Blakemore: Yes. Thank you, Neil. Look, on the first point, I think we'll consider tuck-in bolt-ons wherever appropriate within our portfolio to ensure that we've got the right offer for our clients and that we can continue to either defend our estate or to grow the TAM. And that would apply within bolt-ons within FM and Support Services as necessary. Separately, your question on the TAM, yes, I think it's been a really positive feature and one of the driving reasons for the M&A that we've done over recent years. If you think about 4Service, it's given us access to the multi-tenant market where previously we would seek to win business through our clients, we now partner with the real estate owners as they construct new facilities, which are multi-tenanted and multiservice. It's an exciting segment that we weren't previously as exposed to and didn't necessarily have the capabilities for. It's a trend in the Northern European countries, and it gives us the capabilities that we can build into other European markets. I think that's a great example. We've done a number of micro market acquisitions in the U.K. to build a canteen type micro market offer in the U.K. That comes first with technology and then by building a regional presence such that we can offer our clients national coverage with a technology-enabled solution. That's opened up the micro market and vending subsector in the U.K. to us where we previously didn't have the capability or range of services to deliver that, that's something that we feel we can replicate in other international countries, given the learnings that we've had in the U.S. and Canada, in particular. The HOFMANN acquisition gave us access through a high-quality frozen offer into SMEs where we can deliver in at a lesser scale, a consistently high-quality offer that can be frozen and used over time. That's an exciting part of the market that we previously didn't necessarily access. And with Vermaat, although not yet closed, they have an exciting joint program, which is a sort of technology-enabled delivered in solution, which, again, we can leverage and learn from. So I think all of the M&A, we talk about giving ourselves access to capability, both in terms of the business model and offer, but also the people running the businesses. And I think those are great examples of that and where we'll focus as we go forward. Operator: With this, I'd like to hand the call back over to Dominic Blakemore for closing remarks. Over to you, sir. Dominic Blakemore: I mean just quick to say thank you all for joining us today, and we look forward to hosting you with the first quarter results in February next year. In the meantime, wishing those of you a happy Thanksgiving or happy Christmas holidays. Operator: 6 Thank you. This concludes today's conference call. Thank you for your participation, ladies and gentlemen. You may now disconnect.
Operator: Welcome, everyone, to Accsys Technologies plc Interim Results Presentation for the 6 months ended September 30, 2025. Today's speakers are Dr. Jelena Arsic van Os, Chief Executive Officer of Accsys Technologies; and Sameet Vohra, the company's Chief Financial Officer. Jelena and Sam will take you through an overview of the business and financial performance for the year before we open the floor to questions. Please note that we will prioritizing questions from analysts. [Operator Instructions] With this, I would like to pass over to our speakers. Jelena Arsic Os: Good morning, everybody, and welcome to Accsys' interim results presentation for the 6 months ended September 30, 2025. I am very pleased to report that we have delivered an excellent first half with a significant improvement in profitability. Our growth across all regions is beating the underlying market trends, showing our FOCUS strategy is effective and that the company is delivering on its promises. Accoya has seen strong growth across its sales regions with a 22% increase in total sales volumes, gaining market share from competitive and alternative materials. Our premium market positioning is proving resilient against continuing macroeconomic challenges. Group revenues increased by 23% on a like-for-like basis compared to the prior year. This comparison adjusts for the transfer of North American sales from the group to Accoya USA, our joint venture with Eastman Chemicals after it commenced operations toward the end of H1 last year. Accoya USA has had an excellent H1 performance. It has shown rapid volume growth with North American sales up 61% and positive momentum throughout the period. This demonstrates the strength of our technology, the Accoya brand and our customer relationships in the sizable North American market. Joint venture reported close to breakeven EBITDA for H1. This translates to Accsys joint venture equity accounted a modest EBITDA loss of EUR 0.3 million. This marks substantial progress compared to the equity accounted losses of EUR 4.3 million last year, and we are all excited about what's to come. Accsys maintained gross margin above our target of 30%, maintaining pricing discipline. We also continue to maintain cost discipline and have retained EUR 2.3 million in benefits from the business transformation program that we began in FY '24. We increased adjusted EBITDA for the half year by 160% to EUR 10.4 million. This is just slightly lower than the EUR 10.8 million we reported for the full financial year 2025. With our EBITDA margin at 11.6%, Accsys is almost at the level of our Phase 1 FOCUS strategy target. Crucially, we have made solid progress on deleveraging the balance sheet, a key strategic priority. Net debt has decreased by EUR 2.8 million since 31st March 2025, driven by improved operating cash flow, and we have improved our leverage ratio from 2.5x to 2.1x at September 30, 2025. During the period, we achieved operating cash flow of EUR 8 million. In October 2025, outside of this reporting period, we successfully negotiated new improved terms for financing our debt with ABN AMRO and HSBC. This refinancing strengthens our capital structure and further derisks our profile, positioning us to execute our strategy with greater confidence. Our good performance is a clear signal of our continuous progress. Accsys is delivering on its commitments and is laying a solid foundation for further growth. I want to take this opportunity to sincerely thank the entire team across Accsys and Accoya USA as well as our customers and partners. Thank you for your dedication. Your efforts continue to drive our success and position us very well for the future. We are progressing our FOCUS strategy, transforming Accsys into a fundamentally strong operationally efficient, customer-centric united, safe and sustainable business. Together, these efforts are creating a strong and lasting platform for growth. Compared to the first half last year, we have significantly derisked the company, having no exposure to large unfinished CapEx projects and significantly improved financial performance. The company now operates 3 production sites, Arnhem, Barry and the Accoya USA and has secured future growth funding on improved terms with the extended maturity to October 2029. We are operationally more efficient with like-for-like gross margin improvement of 1.1% compared to the prior period, driven by efficiency measures, amongst them, improved utilization of acetic anhydride in production. In addition, we have retained EUR 2.3 million of benefits from the business transformation program. As a growth company, we nevertheless continue to invest in volume expansion. We are investing in a new acetyl storage in Arnhem and have more than doubled our Accoya Color capacity in Barry from 6,000 to 14,000 cubic meters. Accsys aligns all its initiatives, investments and growth plans around maximizing customer value. With our fantastic products, we have customer centricity at our core and we continue expanding Accoya availability, adding 3 new distribution partners in the period, and Accoya projects continue winning awards, like a recent DNA Paris Design 2025 award for Casa Angra coastal home in Brazil. Accoya is gaining market share globally despite relatively soft overall market sentiment in the building material industry. An organization is only as strong as its talent. We are strengthening our workforce across sites through ongoing investments in revenue-generating commercial head count and strengthening our site teams. Last, but certainly not least, in the first half, we invested in health and safety and environment, improving working conditions in our Stacker hall in Arnhem. We also established our sustainability strategy, staying true to our purpose and values, and reaffirmed our commitment to building a better, more sustainable future. Accsys Cares sustainability plan introduced our first decarbonization commitments and targets, enhancing the already strong sustainability credentials of our products and our business. Before I hand over to Sam to discuss our financials, I wanted to share a short video of one of our projects highlights from this period, Accoya being used for the new roof and public space at a landmark NEMO Museum building in Amsterdam. [Presentation] Sameet Vohra: A truly remarkable project. Thank you, Jelena. Over the next few slides, I'm going to talk you through the financial results for the half year in more detail. This slide summarizes the strong financial performance for the first half of the financial year. I'll go into more detail on the financial performance in the next couple of slides by highlighting some of them now. Group sales volumes were up 1% to 30,575 cubic meters compared to the prior period. However, when you exclude the 3,802 cubic meters of sales made by the group to North America in the prior period before the Accoya USA joint venture commenced operations, the group sales volumes were up by 15%, with strong demand in all regions. Total sales volumes, which includes all of the sales volumes from the JV and more clearly shows global demand for Accoya increased by 22% to 38,618 cubic meters with 8,043 cubic meters coming from the JV. Group revenue increased by 5% to EUR 76.1 million for the first half of the year. However, like-for-like revenue, which adjusts for the group North America sales made in the prior periods increased by 23% year-on-year. Aggregated revenue, which includes 60% of the revenue of the JV was up 21% to EUR 89.9 million. Gross profit was EUR 1 million higher than the prior period at EUR 23.2 million, and the gross profit margin remains above our target level of 30%. Underlying EBITDA, which excludes the results of the joint venture increased by 29% to EUR 10.7 million compared to EUR 8.3 million in the prior period with a 260 basis point increase in the underlying EBITDA margin to 14.1%. This reflects a strong sales volume and revenue growth, maintaining a gross margin above 30% and the tight cost control discipline we have over operating costs. It was really pleasing to see that the Accoya USA JV was close to EBITDA breakeven for the first half of the year compared to a loss of EUR 4.3 million in the prior period. Sales are accelerating in North America, and we expect the joint venture to be EBITDA positive for the financial year. Adjusted EBITDA on a profitability performance measure was up by 160% to EUR 10.4 million, with an impressive 620 basis points increase in the margin to 11.6%, which is just below the target that we set for the end of Phase 1 of our strategy. The EUR 10.4 million adjusted EBITDA is also slightly lower than the EUR 10.8 million that we reported for the whole of the last financial year. Net debt at 30th of September 2025 stood at EUR 39.8 million, lower than the prior period and the figure at the end of March 2025. The leverage ratio improved to 2.1x. I'll discuss the changes in revenue, profitability and net debt in more detail in the coming slides. Going into more detail on our revenue performance for the year. As I previously mentioned, group revenue increased by 5% to EUR 76.1 million in the prior period, excluding the EUR 10.3 million of revenue from sales made to North America before the joint venture starts operations, like-for-like revenue growth was 23%. The sales growth we've seen in H1 across all regions has fully replaced the North America volumes transferred to the JV. Despite the challenging macroeconomic environment, we have maintained strong pricing discipline with a 1.7% increase in average Accoya sales price for the period. As Jelena previously mentioned, we doubled capacity in our Barry Color facility during the period due to increased demand for our color product. We saw a favorable product mix effect for this with the Accoya Color now making up a high proportion of group sales volumes through the prior period. Accoya Color also undertakes tolling for the JV and sales in the period increased by EUR 2.8 million from this. License fee and royalty income from the JV was EUR 1.6 million higher than the prior period as the group receives a royalty based on sales made by the JV. The final license fee payment was also received during the period, following successful completion of the performance test of the Kingsport plant, thereby granting exclusivity for the North American market to the joint venture. Other represents Tricoya panel sales and sales of acetic acid which are broadly in line with the prior period. Aggregated revenue, which includes 60% of the joint venture's revenue, increased by 21% to EUR 89.9 million. On a constant currency basis, aggregated revenue grew by 23%, given the weakness of U.S. dollar against the euro. On the face of it, the gross margin decreased by 20 basis points to 30.5% for the period. However, the prior period includes sales that were made to North America prior to the joint venture commencing operations. These sales amounted to 3,802 cubic meters, which represented 13% of group sales volume in the prior period. They contributed EUR 4 million of gross margin in the prior period and EUR 2.9 million of EBITDA as the average sales price in North America is higher than all other regions. Therefore, a more representative way to look at gross margin progression in the first half of this financial year is to exclude the EUR 4 million from the comparator, resulting in the like-for-like gross margin improving by EUR 5 million to EUR 23.2 million and 110 basis points to 30.5%. This EUR 4 million gross margin reduction has been offset by sales volume growth, favorable sales mix and higher average sales price from other regions, together with the receipt of royalties and license fees from the joint venture. Our main production costs related to raw material spend on raw wood and net acetyls. Raw wood costs are in line with the prior period as higher appearance grade raw wood costs have been offset by lower wood chip grade costs. We saw an improvement in gross margin arising on net acetyls from improved utilization of acetic anhydride in the production process, change in the supply mix and favorable FX as the U.S. dollar weakened against the euro. The increase in other costs reflects the investment in talent and headcount in operations to support sales growth, the effect of the annual salary increase and higher inventory handling costs. The gross margin at 30.5% continues to remain above our strategic level of 30%. This slide shows the adjusted EBITDA progression during the year, reflecting the strong financial performance. From an overall perspective, we saw a 160% increase in adjusted EBITDA from EUR 4 million to EUR 10.4 million and a 620 basis point increase in the adjusted EBITDA margin to 11.6%. This is already very close to the 12% target that we set for the end of Phase 1 of our FOCUS strategy, and it's very encouraging to see. The gross margin benefit to EBITDA amounted to EUR 1 million or EUR 5 million on a like-for-like basis, and we tightly controlled operating costs, which only increased by EUR 0.2 million compared to the prior period. EUR 2.3 million of the benefits from the business transformation program in FY '24 have been retained even after the investments we've made in sales and marketing and operational headcount and strengthening local management teams in key areas. There are no further costs associated with Hull after the business was placed into liquidation in December 2024. The joint venture is close to EBITDA breakeven for the period with our 60% share of the EBITDA loss amounting to only EUR 0.3 million as the Kingsport plant ramps up with accelerating North American sales growth. This is an improvement of EUR 4 million compared to the EUR 4.3 million loss recorded in the prior period. From a segmental perspective, EBITDA from our Accoya segment increased from EUR 10.7 million to EUR 12.7 million with healthy margin of 16.7%, up from 14.8% in the prior period. This growth is primarily due to the strong sales growth, the improvement in gross margin and tight cost control discipline on operating costs. Corporate costs amounted to EUR 2 million and were EUR 0.4 million lower than the prior period. Therefore, underlying EBITDA, excluding the joint venture increased by 28% from EUR 8.3 million to EUR 10.7 million. The margin improved by 260 basis points to 14.1%, reflecting the strong underlying profitability of the group. As I mentioned before, adjusted EBITDA increased by 160% from EUR 4 million to EUR 10.4 million. This slide shows the evolution of net debt during the year. Net debt at the end of September 2025 stood at EUR 39.8 million, a decrease of EUR 2.8 million compared to the start of the financial year. Debt reduction and deleveraging the balance sheet remains a key priority for us, and net leverage reduced from 2.5x to 2.1x at the end of September 2025. We experienced an increase in net working capital of EUR 4.2 million in the period, which is primarily related to higher inventory levels. This increase in inventory was planned to ensure product availability to support strong demand and customer service as well as building up inventory ahead of the annual maintenance stock, which took place in Arnhem in October. Accordingly, operating cash flow conversion was 75%, in line with our Phase 1 target. Tight working capital management remains a key area of focus for us. CapEx is EUR 2.9 million during the period, and this included expansionary growth CapEx on increasing our acetyl storage and making health safety and environmental improvements in the Stacker hall in Arnhem. Interest paid and accrued amounted to EUR 2.3 million, of which EUR 1.1 million related to accrued interest on the convertible loan notes. Tax received was EUR 0.7 million in respect to previous tax years. We recently completed the refinancing of our debt facility with a new EUR 55 million facility with ABN AMRO and HSBC on improved financial terms. The refinancing strengthens our capital structure, enhance its financial flexibility and further derisks our profile, positioning us to execute our FOCUS strategy and growth plans with greater confidence and resilience. The refinancing demonstrates continued strong support from ABN AMRO, and we are delighted to partner with HSBC, a bank of significant strength and reputation. So in summary, we've had an excellent first half of the year with a significant improvement in profitability. We saw strong total sales volume growth of 22%, with accelerating sales in North America, which increased by 61%. The joint venture was close to breakeven EBITDA in H1. Adjusted EBITDA was EUR 10.4 million, with a 11.6% margin, close to our Phase 1 target of 12%. We have continued to focus on deleveraging the balance sheet with net leverage decreasing to 2.1x and the recently completed refinancing strengthens our capital structure and enhances financial flexibility on improved terms. I'd like to now hand you back to Jelena, who will take you through the business review. Jelena Arsic Os: Thank you, Sam. In January 2025, we set out our FOCUS strategy, which will be delivered in 3 phases. The first phase to FY '27 focuses on resetting operationally, maximizing returns and cash flow from our existing operations and reinforcing the fundamentals, including reducing the debt and optimizing our capital structure. Our half year results demonstrate good progress against our Phase 1 targets. Our strong sales growth put us on a good trajectory to meet run rate target of 100,000 cubic meters by the end of FY '27. We have also significantly improved profitability moving from 5.4% in adjusted EBITDA margin from last year to 11.6%. We are very close to our adjusted EBITDA margin target of 12%. We are also in line with our operating cash flow conversion at 75%. Importantly, we are deleveraging and derisking the business, placing the company in a stronger position for growth. Our successful October refinancing gives us more favorable payment terms with a reduction in quarterly repayments going forward. Global demand for our products has been strong. We had outstanding growth in the U.S., which I will provide more details on in the coming slides. We saw very good growth in our key European markets despite continued macroeconomic uncertainty. The European market landscape reflects a mix of cautious recovery signals and ongoing challenges across key regions, shaped by economic pressures, regulatory changes, and involving demand in the construction and timber industries. Europe grew 22% in the reporting period. We saw growth in Germany, driven primarily by strong demand in the outdoor living market, high energy costs and slowing housing permits weigh on German outlook, but commercial and renovation segments remain more resilient. European growth was also supported by a good performance in Benelux where we had positive momentum in Belgium after onboarding a recent distributor. Government initiatives for energy-efficient building materials continues to favor sustainable timber products. We achieved 14% growth in the U.K. and Ireland, our most established market as we continue to build a strong reputation for joinery applications and gain more facade specifications. The softwood market in the U.K. remains weak with subdued import volumes and merchants limiting stock positions, pending market clarity with the U.K. budget approaching. The U.K. budget is being announced tomorrow with uncertainty of governmental measures to address the fiscal gap that is estimated between GBP 20 billion and GBP 50 billion. Across the rest of the world, we saw 28% growth with bright spots in Australia and New Zealand, as our partnerships with our distributors continue to develop and expand our presence. Accoya for Tricoya sales grew at a more moderate pace, with sales weighting towards the start of the period. Finally, we will be launching a new finished decking products in the second half with a phased market rollout. This will be the first time that we offer a finished product to the market and is an exciting new development for Accsys. We also continue to see Accoya specified for incredible projects worldwide. The start-up of Accoya USA last year was a significant milestone for Accsys. And I am very proud to share that it has got off to an excellent start. In North America, the joint venture grew sales volumes by an impressive 61% with sales acceleration across the period, driven predominantly by our existing distributors, many of whom we have a long-standing relationship with. The local availability and production provide them with the confidence to run faster. While a 10% tariff was announced in October on imported lumber, we have taken proactive steps to manage the impact of this going forward. So let's look at the more detail at the U.S. market developments. Our sales in the U.S. are outpacing overall market growth, allowing us to gain share from competitors. With forecast indicating strong and sustained demand for modified wood over alternative materials, we are confident that Accoya USA will continue to expand its presence in the growing market. Our main drivers in the U.S. are cladding and decking. These markets both have strong growth rates for modified wood with double-digit growth forecast for decking. Traditional timber products are seeing sharp declines in demand as customers opt for higher performance modified and engineered solutions. Furthermore, increased regulation on the import of hardwoods ipê and cumaru from Brazil has had a positive benefit for Accoya in the U.S.A., and it has limited the supply of these woods. As you can see in the table, the hardwood market for decking is expected to contract. Our growth in the U.S. predominantly came from our existing distributors. In addition, we have added 3 new distributors in the period, including one of the largest in the U.S. hardwood specialty products, GMX Group, a wholesale distributor with a focus on retail customer, and our first Mexican direct distributor, Klinai and expect to see these new channels contribute strongly in H2. We continue to strengthen our relationship, both with the direct distributors and our approved manufacturing partners. Our products are extremely well regarded in the marketplace, that this testimonial from Delta Millworks featuring the owner and CEO, Robbie Davis, and Baker Donnelly, regional sales manager, one of our long-standing Accoya manufacturing customers testifies. [Presentation] Jelena Arsic Os: This fantastic Delta video highlights value that resonates strongly with us: quality, performance and the long-term reliability. These principles are at the core of how we strive to build and maintain our customer relationship, and they are something I'm incredibly proud of. A big part of our FOCUS strategy is to maximize returns from our existing assets, driving sustainable profitable growth from our core sites in Arnhem and Barry. During this period, we have invested EUR 2.5 million in Arnhem to expand our acetyl storage capacity. From December 2025 onwards, we will gain improved logistical flexibility and increased uptime, enabling us to complete more batches per month. Furthermore, our logistical costs will reduce as we can now unload more acetyls during the week rather than in the weekend. On top of that, we are less vulnerable to interruptions in the chemical supply chain. In Barry, in response to strong demand for Accoya Color globally, we have taken steps to double our capacity. This includes introducing the second shift, expanding our own storage capacity and outsourcing some external drying. This builds on the planning facilities we added last December to be able to produce finished decking boards. We expect Accoya Color and finished decking boards to continue to be important demand drivers. Growth for this product range, including volumes sold out to the joint venture showed an increase of 56% year-on-year. We are very proud today to launch Accsys Cares, our first sustainability plan, which aims to deliver long-term value from all of our stakeholders. The plan highlights our commitments across 4 key pillars: people, planet, profit and governance. It introduces our first decarbonization commitments and targets, further enhancing the already strong sustainability credentials of our products and our business. Finally, wrapping up today's messaging, we have delivered a strong H1 and we entered the second half of the year from a position of strength. Our trading remains robust going into H2, supported by sustained global demand for our premium differentiated products. We expect continued sales acceleration in North America, and notwithstanding the impact of the recently announced tariffs, we expect the joint venture to be EBITDA positive for the financial year. While noting continuous macroeconomic challenges, the Board is confident the company will continue to deliver further growth and profitability improvements for the year ahead, consistent with expectations and to make further progress towards our strategic targets. Looking ahead, we remain confident in the long-term potential of our technology and strategy. We have a clear road map, market-leading products in attractive growth markets and a fully funded manufacturing base that position us to deliver significant shareholder value. I continue to be very excited by the prospects for our business. We are transforming we are delivering, and we are growing. Thank you all for your attention. With this, I will hand over to our operator now for the Q&A session. Operator: [Operator Instructions] We will now take the first question from the line of Martijn den Drijver from ABN AMRO. Martijn den Drijver: I have 4 questions, and I'll take them one by one, if I may. To start off on the U.S., just to give us a bit of a sense on where the existing -- so not the 3 new ones that you mentioned, but the existing distributors, can you give some color on where they stand in terms of ordering levels versus assumed potential? Just give us a sense of what -- with the existing distributors, what type of growth lays ahead? Jelena Arsic Os: Well, Martijn, our existing distributors are already active in the U.S. for a very long time. And as we know, the Accoya sales are pretty technical sales. You need to pursue the market that you do have, by far, the best product in terms of performance, stability and the long-term durability. We are seeing in this period significant growth. Most of the U.S. growth that you are seeing in this result is actually coming from our existing distribution partners. They are today placed on the East Coast of the U.S., West Coast and in Texas. We are working on increasing our presence in the Texas area because there, we do have big OEMs like Delta Millworks that you just saw the video about, they are located in Texas. But we do believe that, that area could provide us some more opportunity to grow. So new distributors that we put in place in this half of the year, they are all starting to take the inventories and to push the market predominantly gaining the market share and not fighting for the same business that our existing distributors are already having. So there is a lot of efforts from our side going into education, specification selling and helping the new distributors predominantly to actually focus on the new business generated and creating the Accoya pie to be bigger in this very sizable and profitable North American market. Martijn den Drijver: Just 1 follow-up, Jelena. The total distributors now, how much do you think you need more in terms of distributors to have a full national coverage, perhaps both in the U.S. and in Mexico? Jelena Arsic Os: I think in Mexico, this Klinai is quite a large player. So I believe we are going to give them an opportunity to deliver what we think that they can deliver. In the U.S., we do believe that today, we have a quite good mix of large regional players, and they have also quite a good network of secondary distributors that are working with them. So we do not expect that we will be adding a large amount of new distributors in the U.S. We would like the distributors that we already now appointed to actually prove that they can deliver on the expectations. And so we have a quite defined KPIs in place that we follow very, very clearly. So for the next half of the year, we are going to give the existing and the new ones chance to fully deliver. Martijn den Drijver: Got it. Got it. Then the second question on the U.S. for Sam. The breakeven has been achieved faster than expected. You're now guiding for profitable EBITDA levels for the full year. Does this have an impact on the planned/forecast equity injections from the group into the JV? I seem to remember that where guidance was still for EUR 4 million in fiscal 2026. Does that still stand? Or should we assume a different amount now? Sameet Vohra: Yes. Thanks, Martijn. Good question. So yes, I mean, as you saw the JV was very close to breakeven for the first half of the year, and we do fully expect it to be profitable for the full year. Our initial expectations were and in terms of what your modeling has in terms of capital injections going into the JV, that's all to do with growth. We -- the business needs wood and it effectively needs a high level of working capital to meet that significant level of growth that we're seeing, not just for this financial year, but also coming financial year because really, our strategy is about filling up that plant, and having it operating at full capacity within the 5 years of our strategy, so by the end of Phase 2. So any additional capital injections that we may need to put into the business will be all to do with providing it with additional working capital to fund growth. Martijn den Drijver: So it might actually end up a little bit higher than the initial guidance. Sameet Vohra: No, I don't think it will be any more than EUR 4 million that you've already got factored in. Martijn den Drijver: All right. Then moving on to Europe. I was just wondering, you mentioned good developments in the Benelux, Germany, already very strong in U.K. and Ireland. But you mentioned plans to support France. Can you elaborate a little bit on your plans in France? And perhaps on Germany, what type of -- where does Germany stand relative to prior sales levels? Are they approaching it? Or are they still far away from it? Jelena Arsic Os: Well, we saw -- as I told you, the levels in Germany are increasing. Of course, if you look from the period of a couple of years ago, we still have a space to develop. But if you look at the previous year, we do have quite a significant growth, and this is coming predominantly from the demand coming from outdoor living markets and with the outdoor living market, that is really decking, what we are seeing that it is taking off with our Accoya Color range being available in Germany. So we are continuing to work with our existing -- we have a very large distributor in Germany. We are continuing to work with them, but we are also working on expanding that distribution network as we go into H2. Looking at France, we are predominantly now looking to strengthen our team in France, and we need to add commercial headcount to help us to cover this quite large and still unexplored market for Accoya. We had a couple of very nice projects that we deliver in the country, but certainly with the size of France, there is quite a large opportunity to grow there. So we have good distributors in place, but we are adding a headcount -- commercial headcount in the region to help us grow this market share. Martijn den Drijver: Great. Then one final question on Color. Can you shed some light on what you produced in H1 in Color, given the capacity expansions that would probably help us to understand what could be expected going forward? Jelena Arsic Os: Well, what we said, we actually increased almost more than a double capacity of Color in Barry, starting from 6,000, what we had last year, and now we should be having certainly capacity of -- we could be able to produce up to 14,000. We do believe that in the -- given the good strong demand for Accoya Color, we certainly could be doubling what we actually produce, so 6,000 to up to 12,000 in this financial year. Of course, decking season is a seasonal -- so demand is quite seasonal. We do see that the season starts in spring and our distributors are starting to build inventories starting from beginning of our Q4. So that's why also our Q4 is one of the larger quarters that we have as a company due to this specific effect. Martijn den Drijver: All right. And my really final question is on your EBITDA -- adjusted EBITDA margin, close to your FOCUS one target already. If I look at Bloomberg consensus, it's considerably higher for fiscal '26, '27, around the 16% level. Is that something you feel comfortable with given these very positive developments, both in Europe and the U.S.? Sameet Vohra: Sorry, can you just repeat that percentage that Bloomberg is showing? Martijn den Drijver: Yes. Bloomberg is -- I think it says it's not quite clear whether that is now group or adjusted, but it's 16% level. Sameet Vohra: Yes. I mean, that's probably around group. I mean, we're already at group level. We are already -- I mean, as you saw for H1 at 14% underlying margin with the group at what adjusted being just over 12% target. So I mean, we're very confident, and we firmly believe that we're on track to deliver the margin targets that we laid out in our Investor Strategy Day earlier this year by the end of Phase 1 of our strategy. Operator: We will now take the next question from the line of Johan van den Hooven from Edison Group. Johan van den Hooven: Only 3 questions is for me for now. If you look at the volume growth was, of course, strong. We already talked about U.S.A Looking at the volume growth of Accoya for Tricoya that is, well, only 6%. Is there a special reason that there's a bit of a slowdown or is it just a mix effect or a different focus on the U.S.? That's the first question, and we'll do the others later. Jelena Arsic Os: Yes, you're absolutely right, Johan. As we reported, Accoya for Tricoya volume grew 6.4%. This is also lower than percentage-wise, what we also put in our market update in September, where we saw at the time, 25% growth of Accoya for Tricoya. The reason for it is basically slower demand from our customers for Tricoya that is also linked to the season, but also overall subdued soft market sentiment in the -- they all operate in that MDF space. So we are seeing this demand increasing and starting to pick up as of December this year. So they were really running through the inventory reduction going towards the end of the calendar year. And now we are seeing the order book for Tricoya starting to fill in as we go into December. Johan van den Hooven: Okay. That's clear. Another question about your sort of guidance for EBITDA. EBITDA for the full year is in line with your expectations. But I seem to remember that previously, sometimes we refer to consensus or in different words, is it too simple to just double the EBITDA of the first half -- for the full year, I mean? Sameet Vohra: So I think when you look at seasonality in terms of our business, quarter 4 is our largest quarter by sales volumes really because from a decking and cladding perspective, a lot of sales take place ahead of that spring season. So quarter 4 being our largest by volume, quarter 3 ultimately being our smallest because you've got the effect of December, our customers effectively stop ordering and taking collections just after mid-December, the Christmas shutdown. And then obviously in October, we have the annual maintenance stop in Arnhem, where we're selling out our finished goods. So you could think -- despite that revenue and volume seasonality, I mean, profitability is going to be very similar to 50-50 between H1 and H2, and that's why we're seeing it in line with our expectations. Johan van den Hooven: Okay. But then -- okay. So we can look at the doubling. But in the first half, of course, you had EUR 2 million license income, which might not reoccur in the second half, which also then not helps EBITDA? Sameet Vohra: No. I mean, you've got -- I mean, it's not just license income. You also get the royalty. The largest part of that EUR 2 million is actually the royalty that we get from Accoya USA sales. So we get a fixed percentage on their revenue. So as you've seen, as their sales are accelerating, we're getting a higher royalty fee from them. Johan van den Hooven: Yes. Last question for now, just about the import tariffs. It's only 10%, and you've said you've taken some actions, but can you tell us a bit more? Is it just raising prices, lowering costs or a mix? Jelena Arsic Os: Well, it is predominantly raising the prices, Johan. We already put it in place and we didn't receive too much of the pushbacks from our customers. I think everybody in the U.S. market is now getting accommodated to the tariffs having impact on the price inflation of overall materials, if you like. So we put a price increase in place starting from 1st of November. And we also have, of course, an ongoing dialogue with the sawmills where we are actively tracking what is the sentiment in the U.S. market and also looking with them how we can, if you like, share the pain, if that pain become larger. But so far with the 10%, we do believe that we can manage this quite well. Operator: [Operator Instructions] Our next question comes from the line of Alastair Stewart from Progressive Equity Research. Alastair Stewart: Two or three questions. First on the U.S.A., given that you've now got what tends to be a very solid distributor base and enthusiastic uptake by customers, have you any sort of -- can you give us any sort of guidance when you could be looking at further reactors from the U.S. facility? So that's the first question. Secondly, interested to see a new distributor in Mexico. But what sort of size do you think that -- what proportion of U.S. output could Mexico be? And is that -- is it in a similar sort of mainly decking and cladding markets? And looking above the bar, are there any plans for Canada or any indications of how Canadian uptake could develop? Jelena Arsic Os: Yes. Thank you, Alastair. Thank you very much. Good questions. So if you look at our distribution base in the U.S., we do believe that with capacity of the plant today at 43,000 cubic meters, we do have enough capacity for at least next 2 years to feed demand and growth in this region. So we are focusing the organization, and we are focusing basically everybody to get more returns from the existing assets in the next year or 2. So this is -- this was a part of our Phase 1 of the FOCUS strategy. So we just continue working on it. Now we are going to see in next -- in the next half of the financial year and also in the beginning of the financial year '27, which is a key year for the company because this marks end of our Phase 1 FOCUS strategy, how things are developing. And in order to start talking about second reactor, you need at least 12 to 16 or 18 months from the design to basically ordering the equipment and putting it in place. Today, we have enough space in the U.S. and already a foundation put in place for the next reactors. So that should speed up that process when the time comes. So we do have enough space in the U.S. to put additional 6 reactors if that is necessary but I would like to really spend next year, 1.5 years, next 18 months, utilizing what we already have. And we do believe that we have enough capacity to meet the demand from a broader North American market, not only U.S. but also talking about Canada and Mexico as well. Now your comment on -- does this answer your question? Alastair Stewart: Sorry, I would just add -- I was asking about Mexico again, sort of potential growth there. Is it the same sort of end market that decking and cladding -- and while I'm on also, it was interesting to hear about France as well. They seem to be slightly late to the party as it were. What's driving the uptick in demand from France? And that will be all my questions. Jelena Arsic Os: Okay. So let me go back to Mexico and Canada because I think that those were the other 2 questions. So the Klinai is a quite a large distributor that also have significant milling capacity. So they are also capable of making some of the end products. So they will be focusing on cladding and decking predominantly. And the market in Mexico is large. We also are supporting the Caribbean region from the U.S. So -- and we do have already a couple of very nice projects that are happening there. Is Mexico going to be bigger than the U.S.? I don't so. Alastair Stewart: No, I don't think I was suggesting that, but how big could it be as part of the U.S. output? Jelena Arsic Os: Well, we do have a quite ambitious expectations from them, but we just signed off that agreement with Klinai. I would like to give them at least half a year to see what they can deliver in order to start shaping an expectations and certainly communicating those expectations internally. They are quite capable professional company with the milling capacity that could be important for us. But for us, our U.S. market, is by far the fastest growing, the most profitable and certainly more than 90% of the Accoya USA sales should come from the U.S. itself. Looking at the Canada, we do have one of our largest -- well, actually, the largest distributor we have in the U.S. is a U.S. Canadian company with the roots in Canada. So we do sell Accoya in Canada already for some years. With the tariffs, import tariffs from Canada and between Canada and the U.S., some of the trade is being slowing down. But nevertheless, we also have an opportunity, if necessary, to ship smaller amount from Europe directly to Canada, if that is going to serve customers better. So as said, we do expect U.S. plant predominantly to serve U.S. market, but we do have now today established partners in Canada, Mexico and Caribbean as well. So in France, also decking and cladding market, we had a couple of good projects that were done in the country. And we also have a good collaboration with the architects in France. But you know, it is a huge country and with Accoya Color now being more available, also coming with the new decking collection, we do need more feet on the ground to educate and push growth to the faster pace. So predominantly, cladding and decking and Accoya Color is one of the most wanted products we see in France. Operator: We will now take the next question from the line of Adrian Kearsey from Panmure Liberum. Adrian Kearsey: Well done on a good set of results, guys. A couple of questions for me, although I have some more, but most of them have been asked already. Could you perhaps give us sort of a bit some more color in terms of the pricing environment across different territories? Are we seeing greater pricing in certain territories rather than the others? And then to go back to the question on distributor relationships. Would you be able to sort of give some indication about how conversations are progressing in certain territories with signing additional distributor clients? Jelena Arsic Os: Yes. So pricing, as we already reported today, the average sales price in the reporting period went up with 1.7%. We are not reporting specifically per country or per region. But in average, this was the good, I would say, marker for you to look across -- both across Europe and the U.S., very, very similar price increase. We do -- of course, we are very careful, and we know that what we are selling is the value. So we are very careful of keeping that premium place in the building materials. So we are reacting on the tariffs in the U.S. We are reacting on the inflationary pressures in Europe and U.K., and we will continue to do that. And it looks to us that market is actually accepting that as well. Looking at the distributors, adding new distributors across the region. As I already mentioned, we are talking with the distribution partners in Germany. We are also talking with the new distribution partners in Central and Eastern Europe. I'm not ready to announce anything yet but we do expect that we will be expanding our distribution base predominantly in the next half year in the markets where Accsys is providing Accoya and we do believe that as of today, the number of distributors and coverage in the U.S. is good, and we want to give our new distribution partners chance to actually deliver on the expectations that we have for them. I hope this answers your question, Adrian. Operator: I would now like to turn the conference back to Dr. Jelena Arsic van Os for closing remarks. Jelena Arsic Os: So thank you very much. As I said in the last page of our presentation, we are remaining confident in the long-term potential of our technology and strategy. Company is transforming. We are growing, and we are delivering, and we have a very clear road map in front of us with a market-leading product in very attractive growth markets. So we will continue to do what we are doing and then hopefully, next half year when we hear each other, we will just confirm the expectations that we all have. So thank you very much. And with this, we will close our results call for today. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Kylie Yeung: Good evening, and good morning, everyone. Welcome to Tongcheng Travel's 2025 First Quarter Results Conference Call. I'm Kylie Yeung, Investor Relations Director of the company. Joining us today on the conference call are our Executive Director and CEO, Mr. Hope Ma; our CFO, Mr. Julian Fan; and our Chief Capital Officer, Ms. Joyce Li. For today's call, our management team will provide a review of the company's performance in the first quarter. Hope will brief us on the company's strategies, Joyce will discuss our business and operational highlights, and then Julian will address the details of our financial performance accordingly. We will take your questions during the Q&A session that follows. As always, our presentation contains forward-looking statements. Such statements are based on management's current expectations and current market operating conditions and relate to events that involve known or unknown risks, uncertainties and other factors, which may cause the company's actual results, performance or achievements to differ from those in the forward-looking statements. This presentation also contains some unaudited non-IFRS financial measures. They should be considered in addition to, but not as a substitute for measures of the company's financial performance prepared in accordance with IFRS. For a detailed discussion of non-IFRS measures, please refer to our disclosure documents in the IR section of our website. Now let me introduce our CEO, Hope. Hope will be presenting in Mandarin, and our colleague will provide the English translation afterwards. Hope, please go ahead. Heping Ma: [Interpreted] Thank you, and good evening, everyone. Welcome to our 2025 third quarter earnings call. In the third quarter of 2025, China's travel market continued to unleash its growth potential, driven by profound changes in tourism consumption patterns and behaviors. Notably, we have observed a growing trend toward more diversified and personalized consumer demand. Experience-oriented consumption, including emerging segments such as event-driven economy and concert economy has gained significant traction. The ongoing emergence of innovative service scenarios and business models has introduced new momentum into the industry, fostering sustainable growth. Riding on this tailwind, we swiftly identified changing market demand and proactively grow product innovation to meet these evolving needs. Benefiting from these initiatives, our ending paying users in the third quarter reached a historic high and surpassed 250 million, which demonstrates our organizational agility to capture new opportunities and our continuously expanding brand influence. Horizontally, we're expanding our business by proactively enriching our product and service offerings to cater to diverse demand while maintaining steady growth in our core domestic OTA business. Vertically, we're deepening our value chain integration through exploring potential growth opportunities to build a solid foundation for our long-term development. Driven by our effective expansion strategy and outstanding execution capabilities, we delivered robust results in the third quarter, marking a milestone in our overall development. In the National Day holiday, the travel industry exhibited a healthy growth momentum supported by sustained travel enthusiasm, validating the resilience and growth potential of China's travel industry. As a leading travel platform in China, we will consistently embrace technological innovation to drive product and service upgrades with a steadfast focus on delivering high-quality, convenient and diversified travel experiences for our users. Concurrently, we remain committed to executing our core strategy. While maintaining focus on mass market to consolidate our domestic leadership, we will continue to expand our outbound business and explore opportunities across the travel industry to seek new growth drivers. On October 16, 2025, we successfully completed the acquisition of Wanda Hotel Management, which we believe will accelerate the growth trajectory of our hotel management business, contributing to further expansion and strengthening of our company. Going forward, we will further promote the integration of AI technologies and our supply chain resources to persistently enhance operational efficiency and user experience. We have strong conviction that our clear strategic road map and excellent operational capabilities will enable us to achieve long-term sustainable growth and generate more value for all stakeholders. Next, I will hand over the call to Joyce, who will share with you our business and operational highlights of the third quarter of 2025. Joyce, please go ahead. Joyce Li: Thank you. Since the start of this year, China's travel market has been demonstrating an upward trajectory, characterized by rising demand for immersive natural and cultural experience. Against the backdrop of the evolving consumer preference, we continue to achieve solid growth across all segments, underpinned by the precise execution of our strategies. In the third quarter, our accommodation business sustained its growth momentum, reaching record highs in both daily room nights sold and quarterly revenue. During this period, we focused on addressing users' evolving demand for higher-quality hotels, resulting in a meaningful increase in the proportion of high-quality accommodation on our platform, with more than 20% growth in its room nights sold. In the meantime, we will reinforce our value for money proposition to further solidify our presence in the mass market. Our upgraded membership program has been instrumental in enhancing user engagement, enabling users to freely redeem their points on our platform. This, combined with the fast response to user inquiries has greatly increased user purchase frequency and strengthen user loyalty. In our international accommodation business, we remain focused on strengthening cooperation with third-party partners and expanding our product service offerings. These efforts were designed to better meet the diverse needs of our users and drive further growth in the segment. As for our transportation business, it demonstrated solid growth during the third quarter, supported by enhanced monetization capabilities. Throughout the quarter, we prioritized improving user experience and deepening connections with targeted users. Leveraging our acquisition capabilities and further integrating live transportation options, we provided users with more seamless, feasible and convenient travel solutions. Through engaging and entertaining marketing campaigns, we aim to strengthen mind share among younger demographics and enhance our brand positioning as an experience-driven platform rather than merely a ticketing service provider. In the past quarter, we launched an AI-driven interactive game that allow users to discover travel destinations tailored to their disposition. Such entertaining initiatives has successfully enhanced our brand appeal among younger users over the past years. In terms of our international air ticketing business, we're focusing on strengthening user loyalty and fortifying our market position by implementing a disciplined incentive policy and improving operational efficiency. We maintain a balanced approach to growth in both volume and value. These efforts contributed to healthy volume growth and further improvement in the monetization capability of this segment, aligned with our long-term growth strategy. We see significant growth potential in China's hotel industry and have been actively investing in the hotel management business since 2021, which we believe will serve as a key growth driver for the company. Over the third quarter, our efforts were focusing on expanding our geographic network, while prioritizing quality growth, to optimize operations, we streamed our brand portfolio and concentrated resources on several major brands so as to precisely target segmented markets. At the end of September, the total number of hotels in operation has risen to nearly 3,000 with 1,500 in the pipeline. In mid-October, we completed acquisition of Wanda Hotel Management. The companies are processing multiple upscale hotel brands with a strong presence and influence in the Tier 2 and below cities along with the network of 239 hotels, both domestically and internationally at the end of September. We believe Wanda Hotel's valuable brand equity combined with profound industry expertise, while diversifying our brand portfolio and accelerate the growth and expansion of our hotel management segment, further strengthening our competitive positioning in this industry. Besides the addition of Wanda Hotel will also have positive financial impact on the company. By implementing innovative and effective user engagement initiatives, we have built an extensive and steadily expanding user base across China. For the past 3 months, our 12-month annual paying sustained its growth trajectory and recorded another historical high of 253 million, representing a year-over-year growth of 8.8%. In the meantime, the cumulative number of passengers served on our platform over the past 12 months exceeded 2 billion, indicating stable annual pay purchase frequency of 8x per year -- per user. Furthermore, our MPUs for the quarter also reached a record high of 47.7 million, suggesting a year-over-year growth of 2.8%. Besides our annual ARPU by the end of September increased by 6% year-over-year to more than RMB [ 17.4 ]. The Weixin ecosystem remained a crucial traffic channel during the period, where we focus on enhancing operational efficiency as well as maximizing user value. At the same time, our standalone app, a key driver for acquiring new users maintained strong growth momentum during the last quarter with its DAU hitting an all-time high of nearly 5 million before the National Day holiday. By introducing innovative products, and launching engaging marketing activities, our standalone app has attracted a significant number of younger users. Additionally, social media platforms have become an increasingly important channel for user engagement, particularly among the younger experience-oriented travelers. So collaboration with influencers and the distribution of creative content, we strengthened user mind share and has broadened user reach within this high potential demographics. To further amplify the brand visibility and a deeper engagement with top users, we have made consistent investments in brand equity. This summer, we collaborated with Tencent Music and exclusively sponsored 3-day music festival in Macau, effectively capturing the attention of younger audience and significantly boosting brand exposure among them. Additionally, we appointed a popular stand-up comedian as our brand ambassador to reinforce our valuable money proposition and strengthen our positioning as a dynamic and entertaining platform. These efforts have not only elevated our brand presence, but also positioned us as a preferred choice for value-conscious, experience-driven travelers, driving user loyalty. As a technology-driven travel platform, we proactively embrace cutting-edge technologies and seek to upgrade our business capabilities and deliver enhanced value to our users. In March, we launched our AI-driven travel planner DeepTrip, which generates viable and personalized travel itineraries for users by leveraging the reasoning capabilities of DeepSeek and the supply chain advantage of our platform. Since its debut, it has more than 5 million users in total with a steadily increasing number of orders placed directly through the portal. In the foreseeable future, we will remain focused on iterating DeepTrip's functionalities and expand its application across our business processes, in an effort to cultivate user mind share and strengthen user trust. In the area of customer service, we have made meaningful progress in integrating AI technology to enhance operational efficiency and improve user experience. By embedding AI tools into every stage of the customer service process, we have eased the workload of our customer service staff and shortened handling time. These AI-powered capabilities allow our staff to better understand user inquiries and provide timely, accurate response to address user concerns, ultimately enhancing user satisfaction. We will continue our investments in AI capabilities to deliver seamless and efficient service while fostering long-term user loyalty. We remain deeply committed to advancing our ESG performance to align with the highest global standards and best practices. Through years of dedicated efforts, we have achieved exceptional results in ESG performance, earning significant international recognition. Notably, our MSCI ESG rating has achieved the highest level of AAA, placing us among the top 5% of companies globally in our industry. In addition, our CSA score has improved consistently over the past 3 years and was awarded industry mover by S&P Global. These achievements underscore our commitment to ESG principles and demonstrating our ability to continuously enhance our ESG performance, establishing us as an ESG leader among global peers. I will stop here to hand over the call to our CFO, Julian. He will walk with you through our financial highlights for the third quarter. Julian, over to you. Lei Fan: Thank you, Joyce. Good evening, everyone. In the past quarter, China's travel industry maintained robust growth with travel demand demonstrating strong momentum. During the summer peak season, we observed steady increases in diversified travel scenarios, including family trips, graduation trips and educational tours, leveraging our precise understanding of user needs and agile operational capabilities, we successfully captured emerging opportunities across various travel scenarios, driving impressive growth in our Core OTA business. In the third quarter of 2025, we achieved outstanding results for both top line and bottom line. We reported a net revenue of RMB 5.5 billion, marking a 10.4% year-over-year increase from the same period of 2024, thanks to our effective marketing investment and enhanced operational efficiency of our OTA business. We achieved a remarkable adjusted net profit of RMB 1,060 million reflecting a 16.5% year-over-year growth, with adjusted net margin expanding to 19.2% compared to 18.2% in the same period of last year. Our Core OTA business revenue registered an excellent growth of 14.9% year-over-year and recorded RMB 4.6 billion, supported by growth across our accommodation reservation, transportation, ticketing and other business segments. Our accommodation reservation business achieved RMB 1.6 billion in revenue for the third quarter of 2025, representing a 14.7% increase from the same period in 2024. The revenue growth was mainly attributable to the increase in hotel room nights sold as well as the slight increase in ADR. For the domestic accommodation business, we rapidly responded to emerging user demands and actively explored new consumption scenarios to capitalize on new growth opportunities. For the international accommodation business, we continue to deepen cooperation with global suppliers and strengthen our footprint in outbound designations favored by Chinese travelers, in order to solidify user mind share, driven by changes of consumer preferences on our platform and our proactive adjustments to user subsidy strategies, our ADR sustained a year-over-year increase and once again outperformed the industry. Additionally, during the third quarter, our blended take rate maintained at a relatively high level which was similar to that of the same period last year, mainly fueled by our precise and disciplined marketing strategies. Our transportation ticketing revenue for the third quarter reached RMB 2.2 billion, marking a 9.0% year-over-year increase compared with the same period of 2024. During the past quarter, we continued to optimize our VAF offerings and enhance user experience to improve the monetization capabilities of the segment. The revenue growth is a testament to our profound user insights and operational refinement. Furthermore, supported by enhanced user mind share along with our disciplined operational approach, our international air ticketing business maintained stellar growth momentum and accounted for around 6% of our total transportation ticketing revenue, up about 2 percentage points year-over-year. Other business segments continued to expand rapidly with revenue reaching RMB 821 million in the third quarter, marking a growth of 34.9% year-over-year. This growth was primarily fueled by the outstanding performance of our hotel management business. Our tourism business achieved a revenue of RMB 900 million, representing an 8% decrease from the same period in 2024. This decline was mainly caused by travelers persistent safety concerns regarding travel to Southeast Asia since the beginning of this year and our strategic scaling back of prepurchased business to reduce operational risks. In terms of profitability, our gross profit increased by 14.4% year-over-year to RMB 3.6 billion with gross margin rising to 65.7% for the third quarter of 2025. Our operating profit for the Core OTA business achieved RMB 1.4 billion, with margin increasing to 31.2% in the third quarter of 2025. The margin improvement was primarily attributable to our efforts to enhance the ROI of sales marketing investments and improve operational efficiency. The operating profit for the tourism business reached RMB 12.4 million with 1.4% margin. Our adjusted EBITDA increased by 14.5% and reached RMB 1.45 billion, with a 27.4% margin compared to 26.4% margin in the same period last year. Adjusted net profit grew by 16.5% to RMB 1,060 million with a 19.2% margin, up from 18.2% in the third quarter of 2024, demonstrating consistent year-over-year margin improvement. Service development and administrative expenses in the third quarter of 2025 decreased by 3.2% from the same period of 2024. Excluding share-based compensation charges, service development and administrative expenses in total accounted for 13.8% of revenue in the third quarter compared with 14.7% of revenue in the same period of 2024. Selling and marketing expenses in the third quarter of 2025 increased by 16.9% from the same period of 2024, excluding share-based compensation charges, selling and marketing expenses accounted for 31.0% of revenue in the third quarter compared with 29.2% of revenue in the same period of 2024. As of September 30, 2025, the balance of cash, cash equivalents, restricted cash and short-term investment was RMB 13.6 billion. In the first 3 quarters of 2025, the Chinese travel market continues its upward trajectory with travel enthusiasm flourishing. During the National Day holiday, a nationwide increase in travel activity was observed, further demonstrating the resilience of travel market. According to official government data, both the summer and National Day holidays recorded solid year-over-year growth in a number of domestic tourists indicating that travel is one of the key contributors to high-quality economic development. Heading into the fourth quarter, we remain committed to capitalizing on market opportunities, navigating challenges with agility and efficiency, and managing risks with discipline and prudence. We are dedicated to balancing market expansion and profitability, aiming for robust growth in both top line and bottom line. Looking ahead, we will unwaveringly focus on our Core OTA business. In this context, we will enhance user value and operational efficiency in our domestic business while actively expanding outbound business and strengthening our global market presence. Concurrently, we will continue expanding our presence across the travel industry, strategically advancing the development of our hotel management business to unlock more growth potential. Through this strategic initiative, we are posted to further solidify our industry-leading position, while maintaining sustainable growth and decent profitability, which we believe will deliver greater value to all stakeholders. With that, operator, we are ready to take questions now. Thank you. Operator: [Operator Instructions] Our first question comes from the line of Qiuting Wang from CICC. Qiuting Wang: Congratulations on the solid performance. I have 2 questions regarding for your future growth engines. The first one is about international business, what is your expected growth rate in the following years? And what are the key growth drivers? And how will the company balance monetization rate and volume growth? And what is the better margin for next year? And the second one is about hotel management business, how many hotels are expected to be opened in the next 2 or 3 years? And what measures will be taken to effectively manage these hotels? And after the acquisition with Wanda Hotel Management, what will -- how will the company achieve synergy with your Core OTA business? Joyce Li: Thank you, Qiuting, for the questions. I will take these 2 questions. And the first is concerning our international business, mainly the outbound business, we would say that outbound business has been our growth driver for our Core OTA business right now. For our outbound accommodation business, we have continued to deepen the partnerships with global suppliers and strengthen our presence in regions levered by Chinese travelers. Destinations like Hong Kong, Macau and Asian regions continued to attract high demand and performed exceptionally well on our platform. Our outbound air ticketing business maintained a steady growth momentum. This has been supported by our competitive pricing strategy focused on expanding user mind share combined with a disciplined marketing approach aimed at maximizing efficiency and return on investment. These efforts positioning us well to capture the increasing demand and deepen our market presence in the outbound travel segment. In third quarter, our international air ticketing business accounted for around 6% of our total transportation ticketing revenue, representing nearly 2-percentage-point increase year-over-year. And in 2025, we introduced a margin improvement program for outbound business, as we mentioned, concentrating on marketing and promotional efficiency. As a result, our outbound business turned profitable in the third quarter. Looking ahead, we will continue to enhance our outbound travel offerings through strategic partnerships with the leading global OTAs, wholesalers, airlines and overseas TSPs. We plan to increase investments in research and development to improve service capabilities and ensure a seamless booking experience, but also exploring cross-selling opportunities from outbound air tickets to accommodation to drive further revenue and profit growth. In the next 2 to 3 years, expanded business volume and user base growth remains our key prioritized with a strong focus on profitability. We anticipate rapid growth in outbound segment, targeting a revenue contribution of 10% to 15%, making it a major growth driver with higher margins than our domestic business. Overall, we are on track for breakeven this year with international business poised to positive impact margins and become a significant revenue contributor in the future. And in terms of the hotel management business, as a comprehensive travel platform, we are dedicated to expanding our influence throughout industry trend to ensure sustainable growth. Hotels play a vital role in China's travel ecosystem and deepen our involvement in hotel management will further solidify our positioning in this travel industry. We have seen significant potential for our hotel management business to become our second growth driver, playing a vital role in our long-term strategy. Our objective is to become a key player in China's hotel industry by offering a diverse range of brands that create exceptional value for hotel owners and travelers like. In 2024, already ranked 8 in China's hotel group scale ranking, measured by the number of rooms in our hotel portfolio. In the last month, we have successfully completed the acquisition of Wanda Hotel Management company, and now we are progressing with the integration and transition. Wanda Hotel Management has a comprehensive portfolio in 9 major upscale hotel brands with strong marketing trends, as we mentioned. So together with eLong Hotel management platform, we are currently operating over 3,000 hotels. Given its stable and mature development as well as strong brand influence in the market, the Wanda brand will be retained. This will allow the brand to complement our existing hotel portfolio and strengthen our overall offerings. The core management team and the key staff of that company largely remain in place, continuing to oversee and execute strategic development and operations. From a financial perspective, as I mentioned, the hotel business we acquired has decent profitability. Although the acquisition impact only around 3 months this year, it is expected to contribute positively to our revenue and profit. We believe the acquisition will accelerate growth of our hotel management business, supporting further expansion and strengthening of the company. We are confident that our clear strategy road map and clear operational capabilities will drive long-term sustainable growth and create great value for all stakeholders. Operator: Our next question comes from the line of Yang Liu from Morgan Stanley. Yang Liu: Congratulations on the solid results. I have 2 questions here. The first is -- question is about the management's view on the future hotel ADR trend and also Tongcheng's take rates for hotels given that the recent high-frequency data suggest some improvement from the value chain, do you think this will translate to even better ADR trends for Tongcheng? And the second question is regarding the competition in domestic market, we noticed that certain peers announced a pretty good GMV data since the fourth quarter this year. Does there -- any bring -- any incremental competitive pressure to Tongcheng and that company need to fight back or need to do anything to retain its market position? Lei Fan: Liu, thank you for the question. For the hotel industry, actually, we mentioned a lot of times that the domestic ADR has largely stabilized year-on-year in quarter 3 and our domestic ADR already turned positive since quarter 2 and the trend continued in quarter 3. This great improvement is driven by 2 factors. The one is the recovery of the ADR across the industry. And the second is the shift in user behavior in our platform, as users increasingly prefer high-quality products, which has resulted in shift from 2-star hotel to 3-star or above hotel bookings in our platform. In quarter 3, the proportion of higher quality accommodation bookings on our platform increased meaningfully with more than 20% -- more than 20% growth in the room night sales. Given this trend, we expect that the growth in ADR will be a positive factor contributing to accommodation segment's revenue growth this year and also for the next few quarters. At the same time, we have adopted a more disciplined and targeted approach for user subsidies. This approach has also helped us to maintain our net take rate at a very decent level, ensuring a balanced focus on both expansion and the profitability. Our outstanding performance in accommodation business in the past few quarters demonstrated that the pricing pressures of the industry had a rather limited impact on our revenue as ADR on our platform remains relatively resilient, thanks to our extensive exposure in the mass market and our ability to swiftly seize market opportunities. So in the future, we think the trend of ADR improvement are still ongoing because there's a lot of space will be released for the high-quality hotel booking along with the user value and user maturity improved in our platform. In terms of the competition landscape, I think you will have, Joyce. Joyce Li: Thank you, Julian. In terms of competition landscape, as we mentioned a lot of times before, we believe established OTAs with deeper supply chains, user understanding and service capabilities maintain strong defensive moat. First, for the new entries in the OTA market, supply chain will be one of the major challenges for them. As a leading OTA with over 20 years of industry experience, we have an extensive hotel supply chain and deeply established relationships with TSPs. Efficiently managing hotels supplies requires complex systems and close communication with hotels, especially when handling the price fluctuation and room availability constraints. This strong supply chain advantages are difficult for new entries to replicate quickly. Secondly, purchase of travel product services tend to be relatively low frequency and involve longer, more complicated decision-making process. Therefore, converting users into paying customers in OTA space is particularly challenging, as it requires thorough understanding of users' preference and behaviors. And thirdly, our focus on OTAs on delivering superior service and user experience, heavily investing in innovative value-added products tailored to market demand, coupled with a dedicated customer service team, addressing user needs rapidly. These competitive ages are not easily matched by newcomers. Besides, we have upgraded our membership program to enhance user engagement by providing faster response to inquiries and allowing users to redeem their points as cash on our platform. These enhancements aim to boost purchase frequency and deepen user loyalty. The OTA market is complex and requires significant time, resources and experience to build sustainable competitive advantages. We expect near-term competition to remain relatively stable, and our current strategy continues to focus on improving operational efficiency with the profit expectations unchanged. So we remain vigilant to make adjustments as market dynamics evolve. Thank you. Operator: Our next question comes from the line of Brian Gong from Citi. Brian Gong: Congratulations on the solid results. Two questions. First, management just talked about ADR and wondering how should we think about room night growth in the first quarter and any initial color for next year? And the second question is our take rate on transportation has been persistently improving this year. But I heard that airline ticketing pricing has been under pressure. And it seems airline companies also lowered commission fees to some extent. Not sure if this will impact our transportation revenue growth ahead. Lei Fan: Thank you for the question, Brian. I would like to give you some color for the Q4 performance first and then provide more color on the transportation side from the airline companies. As mentioned throughout this year, the company remains focused on striking the balance between top line and bottom line as well as enhancing user value and ARPU. In quarter 4, actually, the margin improvement will remain our key priority, while we simultaneously pursue maximum growth and market share gains, both for accommodation and transportation. For accommodation business, we believe that the growth will be driven by both volume expansion and also the ADR improvement like what I imagined. Our volume is expected to continue outpacing the market growth. While our ADR will be benefited from the ongoing upgrade in hotel store mix driven by the shift in user preference like I mentioned in previous question. For transportation, actually, the ATV has already turned positive in quarter 3 because we monitor that there's more demand released in the long haul in the summer vacation and also the October holidays because the October holidays, we have 8 days holidays this year. So actually, for the industry, the ATV has already turned positive. And also the ATV has also turned positive in our platform as well. We don't have any pressure for the commission decrease from the airline companies. We don't have any information from that. For the fourth quarter, the transportation business volume growth will be still in line with the market. The market is only single digits. While the take rate still have some space to improve, driven by cross-sell and VS will continue to contribute the revenue growth. In the long run for the transportation business, actually, we will continue to emphasize innovation in our products and services to meet the diverse needs in our users during their travel journeys, thereby increasing the monetization of our transportation business. As our platform progresses towards becoming a fully integrated one-stop travel solution, we are starting to explore opportunities for cross-selling from long-haul transportation to a broader area of short-haul options with our Huixing and AI capabilities. Our goal is to develop comprehensive travel combo solutions that extend beyond selling individual tickets, which will help enhance the monetization capability and drive revenue growth in the future for our transportation segment. And in terms of the color for next year, actually, it's still too early to say because of the booking window is shortened lately. So we may give you more information on that, I think, in next call, February, March next year. I think that will be more accurate than now. So thank you for the questions. Operator: Our next question comes from the line of Wei Xiong from UBS. Wei Xiong: Congrats on the solid quarter. First, I want to ask about the margin trend. So after our encouraging effort to improve cost efficiency this year, how should we think about the room for margin expansion next year as well as the drivers behind? And second, just regarding AI because given the technology advancement, we do see investor discussion on the potential AI disruption to vertical platforms like OTA. So I want to get your latest thoughts on the topic as well as our strategy to navigate such potential risk. Lei Fan: Thank you for the question, Xiong. In terms of the margin expansion, actually, as we discussed, as always, our strategy for 2025 and beyond is to balance the revenue growth with profitability improvement. Margin improvement remains a key priority while we continue to pursue maximum growth and market share gains. In the second half of 2025, the quarter 3 and quarter 4, the net margins for both the company and our Core OTA business will improve year-over-year, mainly driven by gross margin expansion and operational leverage. The broad applications of AI have significantly improved automation and efficiency across customer service and tech development processes such as coding, further supporting our margin performance. Looking ahead, we still see a lot of room for our service development and G&A expenses ratio to trend down in second half of 2025 and 2026, as overall operating efficiency continues to improve. This efficiency gain will remain an important long-term driver of margin expansion, while on selling and marketing expenses in the second half of 2025, specifically, we expect the ratio to stay broadly stable compared with last year, since we have already realized savings in G&A and delivered solid margin improvement. We will maintain an appropriate level of marketing investment to support growth and strengthen our marketing position and to seek more market share and opportunities. That said, we will continue to strengthen our ROI and efficiency of sales and marketing spending over the long term to ensure sustainable margin improvement for our business in the next 2 to 3 years. So that is my comments on margin expansion. In terms of the AI, Joyce, please. Joyce Li: Sure. First of all I would say that the development of AI technology will largely benefit OTA like us. As we mentioned lot times before, we have remained dedicated to developing our technology, which has been instrumental in improving our operational efficiency and enhancing the user experience. I think DeepTrip is a vivid example of how we embrace this advancement of AI technology. And I would say that we have keep investing in the implement of DeepTrip's functionality and it has already overcome the limitation of traditional travel recommendations and delivers reliable and actionable insights to users. It offers ample access to a wide range of options on our platform and support seamless closed bookings. Moving forward, DeepTrip will continue to evolve through the generative updates to meet users' needs more effectively. And I think DeepTrip's benefits from our extensive resources, including a comprehensive portfolio of online travel products and services. While general purpose large models can generate travel guides, they offer less ability to match recommendations with actual real-time travel resources availability. DeepTrip provides a more practical and actionable solution by directly integrating Tongcheng products into the planning and booking process. Our strong connections and close relationships with supply end enable us to secure competitive pricing and high-quality products to satisfy diverse travel needs. And secondly, I think AI technology has helped improve our operational efficiency and reduce manual work. Julian also have touched on that. Currently, generative AI has reduced our coding workload by 20%. Generative AI also handles over 60% of our accommodation related to online consultations and more than 70% of Internet phone inquiries. It delivers improved accuracy and efficiency. We have made significant progress in integrating AI into our customer service operations, embedding AI robots across entire service process to lighten staff workload and shorten the response times. This enables our team to better understand user inquiries and provide timely, accurate answers, resulting in a 10% reduction in handling time. So we will continue investing in AI to deliver seamless, efficient service and foster long-term use loyalty. In parallel, AI will also help us identify new application scenarios, product innovations or traffic opportunities, supporting both revenue expansion and efficiency-driven profitability improvement in the future. Thank you. Operator: Our next question comes from the line of Thomas Chong from Jefferies. Thomas Chong: My question is about the impact coming from a recent Japan incident. And how is the latest market situation right now? And how does that affect the business performance, if any? Joyce Li: Thank you, Thomas. Currently, we expect that there will be slight impact on our business. But we strongly believe that people's devise for outbound travel remains very strong. So they will be willing to explore other destinations. And we believe for OTA users, it is quite easy for them to change the travel plan and destinations but the impact on the group tools of our tourism business may be a little more obvious, and we will closely monitor further policy developments and adjust our product mix and marketing strategies accordingly to mitigate the impact. Overall, we do not expect a material impact on our full year performance at this stage. Thank you. Operator: Thank you. There are no further questions at this time. So I'll hand the call back to Kylie for closing remarks. Kylie Yeung: Thank you. We are closing the call now. If you wish to check out our presentation and other financial information, please visit the section of our company website. Thank you, and see you next quarter. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect. Speakers, please stand by. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]
Operator: Thank you for standing by, and welcome to the Web Travel Group Limited First Half FY '26 Results Briefing. [Operator Instructions] I would now like to hand the conference over to Mr. John Guscic, Managing Director. Please go ahead. John Guscic: Thank you, Harmony. Good morning, everyone. Welcome to the Web Travel Group results for the first half of FY '26. Joining me today is our CFO, Tony Ristevski. Grab your ticket and your suitcase, thunders rolling down the tracks. Web knows where it's going, and we know we'll never go back. Investors, if you're weary, lay your head upon my chest. We'll take what we can carry, and we'll leave the rest. Big Web rolling through fields where sunlight streams, meet me in the land of hope and dreams. Welcome, guys. We said that we would deliver world-class growth in FY '26, and we said that margins would stabilize. And we've done both things. If you go to Slide 3, you'll see that our TTV is up 22%. Our margin is at 6.5%. We'll talk about how we get there and the construct in a second. EBITDA for the group is up 17%. If we break it down to the underlying performance of WebBeds, TTV of $3.2 billion, up 22% on the first half of '25, revenue of $204.6 million, up 20%, EBITDA of $94 million, up 21% on the corresponding period. We've maintained market-leading TTV growth rates while maintaining margins. Revenue is a reflection virtually identical with TTV and EBITDA is up almost exactly the same. We'll go through the construct of how that all transpired in a second. If we get to the overall group performance, underlying EBITDA is up $81.7 million after corporate costs of $12.3 million. NPAT is $48.6 million, and we continue to skew out cash at a rate well above our contemporaries where we're up circa $120 million in the year. CapEx is in line with our expectation at $18.6 million. And our cash position is exceptionally strong, notwithstanding that we spent $150 million on buying back shares in the second half of the last financial year. What we have done is to provide greater flexibility is increased our undrawn revolver credit facility from $40 million to $200 million. Moving through to our key metrics. I've covered most of these, but bookings at 5.70 million, TTV at $3.17 million. In both cases, we're seeing strong organic growth in all regions. And our bookings and TTV combination reflects the expansion of the network in which -- or the distribution network in which we participate in both various geographies and various channels that have all expanded during the first half of '26. Record revenue at $204.6 million and record EBITDA at $94 million, obviously, reflecting our revenue growth as well as our planned increase in operating expenses as we future-proof our business to maintain the margin levels that we are currently delivering and expect to deliver for the foreseeable future. Let's go through the highlights. Bookings up 18% across all regions. TTV up 22%. Revenue, 20%, expenses up 19%. That's reflecting CPI increases, the reintroduction of the bonus scheme, which we didn't get paid in FY '25, as well as the previously flagged investment in hotel contracting. In functional currency, we expect expenses to go up in high single digits. We'll talk a little bit about the functional currency in a little while as we go through what has transpired. EBIT is up 21%. We said at the start of the year, we reaffirmed during the AGM that EBITDA margins will be between 44% and 47%, and we are at 45.9%. So let's get into a little bit more of the detail of what we've been able to deliver. As those who are familiar with the business are aware that we carve out our superior growth rate in 3 separate buckets. One is what does the market growth or system growth look like. What are we adding to the pile through new customers and through improved supply arrangements or entering into new markets. And the third is same-store sales, which we call conversion, what are we doing to increase the sales that we make from our existing customer base. So if you look at systems growth, so if you're not growing at 5%, you're going backwards against the market. We think our estimates are the overall hotel supply and distribution market grew circa 5%. We looked at our business and what's different between the first half in specific inventory that we've sold and/or specific clients that we've sold to. That accounted for about 5% of our growth. And all the rest is the singular focus of an organization of circa 1,900 employees looking to ensure that we provide the right product at the right price at the right time for our customer base and enhancing the value of our supply partners by giving them global distribution. And again, we had another standout result where we improved our conversion by another 12% in the first half of '26. All right. Let's get a little bit technical here, and we're going to have to talk about the vagaries of the FX market and how that played out for us over the year and talk specifically about the regional performance of our respective markets and how that's been translated to our functional currency. So as you can see, in aggregate, globally, our bookings are up 18%, but in the functional euro currency, we're only up 14%. This is an anomaly from this perspective. What we have seen in FY '26, as we compare the exchange rates of the euro, in particular, against FY '25 is the euro has appreciated considerably, in particular, against the U.S. dollar. The net effect of that is that at a functional currency level, we're only up 14%. At a bookings level, which is activity, we're up 18%. At Aussie dollar level, we're up 22%, and 22% is circa normal. If you had a bookings growth rate of 18%, then you would expect average booking values to go up circa 3% to 4%. So 22% is the expected outcome of bookings of 18%. How we got there is a little bit unusual. So let's go through the individual markets and call out what's actually happened. So Americans had clearly, the standout performance in the half, up 36%, a factor of, again, some great client wins and massive market share gains from existing clients driving a massive outperformance in that particular market. And yet when you translate that to euros, it's only up 27%. The vast majority of that delta is the previously mentioned exchange rate between the U.S. dollar and euro. Let's go to Europe. Europe, very strong results at a bookings level, up 14% in the most mature distribution market in the B2B landscape. That is a superior result. And perversely, TTV in euros is down 12%. And that's because there are not just the euro that we sell in Europe, we're selling GBP pounds. We're selling Scandinavian currencies, we're selling Eastern European currencies. The way we account, we've got Turkish lira in there, and all of those currencies have depreciated against the euro, which shows the 14% bookings translating to 12% at a TTV level. Okay. Let's go to APAC and strong growth, double-digit growth in APAC and TTV growing faster than bookings. That's purely a function of average booking value increasing quite significantly in APAC because there was an FX drag on many of those currencies against the euro. So we saw ABV rates of circa 5%, driving a 2% net TTV to euro improvement. And the starkest example is the Middle East, where solid bookings, 6%. They were up massively in April and May, as you will have at our full year highlights as we -- of FY '25 when we called out our respective results, they were up significantly. There's been a significant softening in the Middle East market as a consequence of the war in Israel and Gaza and the bombing in particular, of Iran and Qatar saw a significant slowdown in region of that particular, in market, and that resulted in the subdued growth. We have high conviction that our Middle East business will continue to grow at above market rates. And as we'll talk about in the forward-looking element of our presentation, as the FX exchange rate delta ameliorates over time, that will translate to double-digit TTV growth in the market. So overall, really strong performance and that's how we landed in our respective marketplaces. Moving on to Slide 9. Again, for those who have been on us for this particular journey, in particular, in the post-COVID world, you've seen a significantly streamlined business doing significantly more volume, significantly more profit with lower resources invested in that effort. So the time scale to the right shows you the history of our business. In particular, it's a proud moment for our entire organization to see that growth rate continuing at our expectation of delivering towards our $10 billion TTV target. We're on track for that particular effort. We spoke about our margin where -- we said that we would be circa a year ago, I said that we would be at least 6.5% over the next 3 half reporting periods, which is an 18-month period. We continue to be on track to deliver 6.5% not only for FY '26, but with all the things that we've done in our business for FY '27, and I'll talk about those when we get to the forward-looking statements about our business. How we get to improve margins when clearly 6.5% is less than 6.6% is during the course of the year, we sold our DMC business, which is a high-margin business, low volume. That accounts for circa 20 basis points, and we actually improved our margin across the board to deliver 6.5%. So the most simple way of looking at it is the -- we're on a run rate to circa $6 billion in TTV this year. We delivered circa $5 billion last year. And what we've done is deliver the exact same TTV plus the incremental circa $1 billion over the full year, and we've maintained margins across the entire pool of business that we've sold to, which is in line with our overarching strategy over the last 12 months of ensuring that we solidify that margin and anchor it to the 6.5% and continue to deliver superior revenue and TTV growth as we deliver across the 3 piles that I talked about, systems growth, new customer supply and markets and improved conversion. So moving on to Slide 10. We're expanding our customer base. I've had opportunities through various presentations internally over the last few weeks to reflect upon the journey that we've undertaken from a customer base. And in essence, we started as a business where we sold Dubai as a destination to the Middle East. We made a small acquisition in Sunhotels in which we sold Mediterranean beach holidays to Scandinavians, and it was predominantly through a retail channel and predominantly through a narrow focus of customers. What we've done exceptionally well over the post-pandemic recovery period is broaden out that customer mix, in particular, looking at where are the fastest-growing customers globally and how can we tap into meeting their needs as a wholesale bedbank provider. And we've done that very well, and you see the superior results, in particular, in the Americas where we're partnered with the most innovative OTAs in the region to maintain our superior growth rates. Our customer diversification extends to what I've just described in America versus the tour operator business that we provide the same offering to and the same level of success in Europe, let alone the super apps in Asia or the corporate clients that we deal with in the Middle East. So we've got a really broad portfolio of customers that we continue to expand, and we have a strong pipeline for the balance of FY '26 and into FY '27. The next element is our supply mix in which we have a renewed sense of focus over the course of the last 12 months, and it's the most important strategic focus -- sorry, most important operational focus of our business going forward. So we were unhappy with our performance in FY '25, where there was the wrong inventory being sold at the wrong prices to some of our clients. We are addressing that, in particular, with our efforts to improve directly contracting sales in Americas, in particular, where we are significantly underweight. There's an enormous opportunity for us as we play out that particular strand of our tactical initiatives, and that will continue into FY '27. The second thing that has been, again, a credit to the hybrid business model we have of directly contracted inventory and partnering with the major third-party suppliers is we've seen an increase in supply of last-minute accommodation over the course of this half. Our average booking window has compressed by circa 5%, which is material in as someone who's been in this industry for 20-odd years. So it's the most significant compression of the booking window because of the broad range of supply that we have, we're able to tap into that particular compressed booking window and our percentage of last-minute bookings is up significantly against the same period of last year. And as we continue to grow, we have increased our relevance and presence with the major hotel chains. And we've got to the -- we've got into now the consideration set of being a viable distribution partner on a semi-exclusive basis to some of the largest hotel chains in the world, and we couldn't make that claim 2 to 3 years ago. As we were a business of circa $2 billion to $3 billion, we're a long way from having the global reach and presence that we now do have. And that dialogue is changing, and there will be some considerable success stories as we roll out our chain strategy over the course of the next 2 to 3 years. Moving on to geographic mix. In a Utopian world, we think we'll have 3 equal regions of roughly 30% each between Europe, America and APAC. We're getting pretty close to that. Middle East will be circa 10% of our overall business. We will continue to grow in all regions. We are not underinvesting in any. We have high-quality individuals who are running our sourcing and sales organizations in all those regions. And that's why we continue to outperform our competitors at both the TTV and EBITDA level. One of the significant contributors, and those who have followed our story will know that Europe is our highest margin region. We have improved margins in our highest margin region. And as we've grown faster in some of those regions, it's more than compensated for that TTV margin geographic mix that would have been down with pressure on us, and it's one of the reasons why we're so confident about delivering 6.5% for the balance of this year but also into FY '27. Finally, if we talk a little bit about scalability in the biggest hat tip I can give to the operational element of our organization and the people responsible for efficiency across the entire organization. It's an incredible achievement that we're now delivering bookings at circa triple what we were doing per FTE pre-pandemic. We're up 174%, and that number will continue to expand as we deliver the multitude of initiatives that we have within our organization that enable us to leverage technology to become more relevant and embedded in our business and to drive greater efficiency. And that's, as I said, a credit to, in particular, the operations teams within our business, which are all in-house. If we move to AI, there are a number of things that we have done. In particular, we have delivered margin optimization over the last number of years through a significant investment that we have made in that particular space. We think that we have market-leading solutions there. We also have a number of other AI initiatives undertaken within the business to improve how we surface inventory, the quality of the inventory we surface and how we service that inventory once it's been sold. There's been a little bit of a conversation about most particularly in the last week or so from industry commentary about the impact of what AI tools by some of the large language models will have on our business. The short answer is that will be another growth engine for us. The most recent example is Google announced their new travel initiative. And as I've shared previously with my colleagues on this particular call, there's only one team -- one time in the history of my 14 years, I generally thought -- apart from COVID, of course, but what I generally thought we faced an existential threat was when Google Flights was launched at the top of the funnel on all Google Search to displace the existing meta providers and take and capture demand before it fell to people like Webjet back in the day. The new Google -- and if that had been -- if that had played out, you wouldn't see the success of the large OTAs globally and Webjet's continued success over that intervening 10-year period. Now there are many reasons for that because at the end of the day, in this Google AI initiative and the various others that are coming down the track that we are aware of, what they all are is fixing a specific problem. And it's a problem that we have discussed many times internally when we were Webjet is how do you improve the search experience for customers, and we now have the answer: AI makes it infinitely better than typing in a date range, number of packs and a location and hoping that the 1,000 properties in Paris come to in the sequence that you would like. So it's an incredible fill up for those businesses that have -- that will -- sorry, for consumers that will enable them to derive superior results faster and have it tracked and be able to keep a log of everything that you're looking at before you make your booking decision. But the booking decision will not be made by the AI. The booking decision, and this is straight from Google last week, the booking decision will be -- they will not be the merchant of record. They'll pass that through to their partners. They will not service the customer. They will not go through all the things that we go through to enable that to happen. And where we fit in and why this is going to be a sustainable growth channel within our organization is we feed the people who are the consumer-facing level. We feed the OTAs that are going to be partnering with them. We feed any of the other channels that they choose to partner with. So rather than being a displacement for us, we think this will continue to enable us to grow faster as we have because we have a very broad range of inventory as demonstrated by the fact that we're on track to sell $6 billion of it. And it's not going to become less attractive in an AI world. What AI will do is deliver these incredible insights to get to our inventory faster. So we're very excited about that particular initiative. Finishing off the scalability, investment in contracting staff, we think will have a meaningful impact, in particular, in Americas, where we believe our margins will go up on the back of that. And in light of the fact that 5 or 6 years ago, we were the only publicly listed company that had publicly declared data about this industry, you'll see that with new people coming into the public markets, it still remains a significantly fragmented market, which continues to create opportunities, and we will look to take advantage of those opportunities over the course of this and the next financial year. So with that, I will now hand over to Tony to go through the finances. Tony Ristevski: Thank you, John. Good morning, everyone. Can you turn to Slide 12, which is our first financial summary, the P&L. Consistent now for the better part of 7 years, we've presented the P&L in the statutory format, which is to the left and the one that's more relevant, which is the underlying format to the right. John has already gone through the key operational results as it relates to review and EBITDA for the WebBeds business. Corporate cost is the next idea there in line, and that is pretty much consistent to what I said 6 months ago, where we're on track to do circa $24 million, but I'll talk a bit a bit about that in the next slide. And our operating expenses, which we do exclude from underlying of $5.5 million for the half is really predominantly a function of a mark-to-market to the equity-linked instrument that is a function of share price. Our share price obviously at 30 September is lower than what it was at 31 March, and that resulted in a revaluation downwards, which we do exclude from the result. The other key item there to call out is our effective tax rate at an underlying level. It is on track to be around 17% for the year. But this time last year, when we were part of the enlarged Webjet Group, we had the benefit of Australian earnings to offset the corporate losses, which were incurred in root, which for this half, we don't get that benefit. So consistent with what I said 6 months ago, our effective tax rate going forward will be in the vicinity of around 17%. The other key thing to call out on the slide is, as you can see, there at an underlying NPAT level, despite the record earnings for the half. But at an NPAT level, we are down versus last year, and that is really a function of the demerger, which I'll take you through the next slide, which is quite important. So if you then turn to Slide 13. What our NPAT represents in the first half of '26 is really the stand-alone business in its post-demerger format. So if you then look to the left there of corporate expenses, being $12.3 million, if you go back 6 months ago, second half '25, the exit run rate for corporate cost was $11.1 million. So when you then look at it in the context of the $12.3 million, it's the natural progression as we stand into an individual corporate function post demerger. Then if you then go to the next item, which is depreciation and amortization, the compare is a function of the demerger allocation. But then if you look at the second half of '25, that was $13 million approximately in D&A, and that did grow up 20% into the first half into $15.5 million and on track to be around $31 million for the full year. And then if you then go to the right there with net interest and finance costs, 12 months ago, at the half, we were in a positive situation, $600,000. Then in the second half of '25, we went to a negative $4.3 million, resulting in a $3.7 million for the full year of a net expense. Obviously, in the first half, we're at $7.4 million of net expense. And that's really a function of a couple of items there. Firstly, we did upsize our revolver, which does have a cost. Secondly, we did effectively reduce our cash balance by approximately $300 million, which we're getting the benefit for, firstly, through the demerger, handing $143 million over to Webjet. And then in the second half, $150 million through the buyback. And obviously, as has been the case over the last 7 or 8 years, our option premium costs are pretty much growing in line with our TTV numbers. So all in all, we're expecting net finance costs to be around $15 million for the full year. Going on to the next slide, which is our balance sheet. Strong healthy cash number, which John talked to earlier. Our working capital, which is our debtors and creditors is consistent now as we normalize after last year, where we did have a contraction around creditor days. Debtor days are sort of around 20 days going forward and creditor days are around the mid-30s going forward. So overall, quite pleased to see that both have stabilized. And I'll talk about the cash consequences of that on the next slide. Turning to the next item of substance, which is probably borrowing costs. You would see in our statutory accounts with the convertible notes due to mature April of '26, the borrowing cost has now been classified as current as opposed to noncurrent. But equally, as you would have seen 6 months ago during the April period of '25, we did upsize our revolver from $40 million to effectively $200 million, plus we've got an undrawn facility there of another $18 million. So all in all, we currently sit around $700 million of liquidity. So to the extent that we will be looking at a potential redemption event, we are well capitalized and have a well amount of liquidity to deal with that eventuality. Lastly, on capital efficiency, the key thing there is that it has grown materially from where we were at this time last year as our earnings grow organically through the generation of cash and earnings, it has now grown to almost 22%. And when I look back over the previous slide, it is now sitting in record territory, ROIC. And that will only continue to expand as we organic grow our business into the financial year. Then I'll turn to the next slide, on Slide 15, which is talk about cash. As always, our cash comes from our profits. And then the other key element to consider here is obviously working capital. We are working capital positive in the first half, which is consistent with the trading over that summer shoulder period. You got to recall, when we look at our TTV numbers being record levels across that August, September period, we do collect that cash. And then there's an unwind of payables that typically occurs across October and November. So what you'll see consistent with past years is in the second half, we'll have negative working capital, and that will result in approximately a cash conversion number of about circa 100%. Looking down to the next items there from a financing dividend perspective. Obviously, we'll continue to invest in our business and the prospects around growth. So no dividend has been declared. Talked about cash conversion being approximately 100%. And in terms of capital management, we talked about this 6 months ago. We obviously completed the buyback in the second half, which did address 88% of the potential dilution that could come from the node. We upsized the revolver, and coupled with the cash from operations, we are well equipped from a liquidity perspective to deal with whether it's commercial or redemption come April of '26. But come May of '26, we'll be a bit more explicit around how we think about capital management going forward once that event is behind us. And lastly, on the last slide being CapEx. No surprise there. We did churn spend half-on-half as a result of the point-of-sale solution being accelerated this time last year, which is why we ended up being smaller in spend this half. Going forward, we do see CapEx to be effectively like-for-like in terms of underlying functional currency versus '26 versus '25. And then from an outlook perspective, we do see that it will grow in line with inflation. So on that note, I'll hand over to John. John Guscic: Thank you, Tony. For those who have seen the ASX announcement this morning, you'll note that Tony has resigned from our business. It's bittersweet to make that announcement. We have sat across the table from each other for 15 of these half year results and full year results update. We will, in turn, spend plenty of time celebrating everything that Tony has done with us during the next 6 months. Tony will still be with us at the full year results, and we'll give him a proper sendoff there. And in between times, he will get his regular torture from me. So thank you for everything you've done for us, Tony. Tony Ristevski: Looking forward to it. John Guscic: So let's go on Slide 18 reconfirming the financial outlook statements. As you'll see on the left-hand side, in relation to WebBeds in functional currency, we made the following promises at the AGM in August that our TTV margin would be at least 6.5%. We are on track. Expenses to grow in high single digits. We are on track. EBITDA margin is expected to be between 44% and 47%. We delivered that in the first half, and we are on track. CapEx to be in line with FY '25, as Tony just covered, on track. If we get to the mothership at Web Travel Group, corporate cost is $24 million. We're consistent with what we said in August, D&A at $31 million. That's consistent with what we said in August. Net financing costs are at $15 million, that's circa $1 million lower than what we said in August, underlying effective tax rate, 17%, full year cash conversion, 100%. So everything we said in August, we have ticked and bashed. So now I spoke earlier about the impact of the euro to USD headwinds and the AUD to euro tailwinds. As we roll forward another 6 months, we expect that to be less pronounced based on existing exchange rates. And therefore, the results in FY -- in the second half of FY '26 will be less impacted by currency fluctuations based on what has happened today. I make no forward-looking statement about what might happen with those exchange rates. Moving on to FY '26 trading update and guidance. So second half TTV up until the 21st of November, we are up 23% versus the same time this last year. So strong growth in the second half, remarkably consistent with the growth in the first half. First half was skewed to first quarter outperforming second quarter being a little bit below that number. And now we're seeing a nice rebound into the third quarter, and we expect that to continue for the full year. Our EBITDA guidance is between $147 million to $155 million. That is an increase of circa the bottom range, 22% to the top 29%, which means basically that we are delivering significantly superior EBITDA in the second half because we delivered 17% in the first half. So to get to 22% means the second half at a minimum is going to be high 20s, 27-odd, and it could be as high as mid-30s in second half performance, which goes to the conviction and the confidence of all the things I spoke about of why the business has delivered against the promise of superior TTV growth and stabilized take rate, delivering increased and superior EBITDA, notwithstanding the continued investment that we make in our business. If we move to the final slide, and we start to think of what's next year going to look like. We continue to build out our marketplace. Our marketplace continues to be more relevant for all of our major players and all of our major partners. So we see no reason that we won't be able to deliver on our TTV growth rates that enable us to get to 30 -- sorry, $10 billion by FY '30. This time last year, I said that we just delivered circa 6.5% TTV margin we would for the next 12 months. I mean in the same position today, we will deliver it for the back half of this year. We'll deliver that number again in FY '27. I've spoken a couple of times about this, but I just want to make the point that the investment that we've made this year is in our OpEx this year around contracting staff, we believe will make a meaningful impact to our results in FY '27. And WebBeds remains a highly scalable business, and we expect to deliver circa 50% EBITDA margins in FY '27. So information, Web will provide for you and will stand by your side. You'll need a good companion for this part of the ride. Leave behind your sorrows, let this day be the last. Tomorrow, there'll be sunshine and all this darkness past. Big Web roll through fields where sunlight streams. Meet me in the land of hope and dreams. With that, Harmony, we will take questions. Operator: Your first question comes from Sam Seow from Citi. Samuel Seow: Congrats on the results. Just if I could just quickly ask on that 10 basis points of improvement in the revenue margin. You called out that optimization initiatives driving the growth. Could you possibly present some color on that? Is it direct contracting? Is it something you've done in Europe there looks like? Or yes, just any color on that would be greatly appreciated? And then maybe a question for Tony. What kind of uptick do you expect purely from the accounting change in the second half? John Guscic: Thanks for the question, Sam. We have increased the proportion of directly contracted sales during the half. So that's contributed to it. We have increased pricing in some jurisdictions. And as you will have noted from previous conversations where we've been very explicit, the other 3 regions beyond Europe, operate at a lower margin. And notwithstanding that they've grown in aggregate faster, we've still been able to increase the margin because of those activities. So that sharpening of focus around who we're selling -- what we're selling to who is what's contributed to that outcome. Tony Ristevski: And on the second part there, Sam, that uptick in trading is effectively offsetting less than pronounced delta half-on-half around the accounting change. I would describe probably 6 to 12 months ago. The underlying business performance is actually improving as a result. What we're seeing is less what I would call, variability half-on-half around that retrospective approach to the error rates that I would describe 12 months ago, landing on a margin for the year at least 6.5%. Samuel Seow: Got it. Got it. And just quickly, I noticed when you break down your TTV, your underlying market growth there at 5%, normally, that's pretty standard. But just of interest to me, obviously, particularly in the first half of your year, the market appeared to be quite volatile. So just kind of wondering how you put that 5% together? Is that your market specifically? Is it just more domestic focused? Because obviously, inbound in the U.S. was quite soft and some of your peers talking about channel changes, et cetera, and percentage of last minute bookings. But yes, just kind of that color on the 5%, it seems quite robust. John Guscic: Your question is very relevant, and it's one of the things that we've tried over the course of the last 4 to 5 years to talk about our geographic spread. We talk about our channel mix and in that portfolio of businesses, you have winners and losers. And even with the market up 5%, I'll be hazarding a guess that 15% of our customers went backwards. 10% of our geographies went backwards. You've called out the one that everyone can call out, which is inbound to America is down circa 15%. Americans going to Canada or Canadians go to America is down, I don't know, 20-odd percent. So all those things play out. I tend not to get overly focused on the individual travel corridors. I have lots of people in our organization who spend an infinite amount of time looking at these travel corridors. But when we roll them all up to a business that's up at $6 billion, there are winners and losers, and we end up with more winners than losers and that's why we continue to outperform the market. The second thing I'll touch on, which you, again, I think, was implicit in your question, and I didn't call it out, even though I spoke about it, even though it was written down in the deck somewhere that the macro events do impact us, but they impact us for a very short period because unless you're into a global issue, the markets are growing at, say, the underlying GDP growth is 2%, for example, and it goes to 1.5%, it has an outsized influence on businesses that are directly correlated to the underlying growth rate of their individual market. We're not in that state. So I called out in August that for the 2-week period, when Israel bombed Iran, all markets went backwards, and we still delivered 22% TTV growth and 18% bookings growth. At a transactional level, all of that, we had massive cancellations during that period that exceeded creative bookings, and we still delivered 18% bookings over the half. We had a phenomenal first 7 weeks, which we called out, that was significantly impacted, and we've recovered nicely into the second half of FY '26. So giving you more color is not going to help you is the short answer. It's in the aggregate. Does our business continue to grow faster than market? Checked. Where is it coming from? We've given you all of the regions. Within each of those regions, there's still winners and losers. There's still customers that win and lose. There's still geographies that win and lose. That's just the nature of having a global business in which we sell in more than 100 countries, and we sell to thousands of endpoints, and we sell thousands of destinations. Samuel Seow: That is actually very helpful. Just to kind of get an understanding of that diversification, but I might just jump back in line and appreciate some of your commentary. Operator: Your next question comes from Tim Plumbe from UBS. Tim Plumbe: Just 2 questions from me, if possible, please. John, just the first one around the directly contracted hotel strategy. Can you give us a sense in terms of how far progressed you are with the hiring? Do you still need to put on incremental heads? And in terms of getting full momentum of contracted hotels, where are we currently? And when would you expect to see full momentum? Is that kind of first half of '27 or second half of '26? John Guscic: Thanks, Tim. Look, we have -- depending on how you count it, we have circa 1/4 of our employees involved somehow in getting inventory onto the system through contracts or through negotiating contracts or through loading contracts through the myriad of solutions that we provide all of our partners to get those contracts for sale at any point in time. What I've called out in the -- at the end of last year's financial results is, well, I'll call it out here, we are well over 60% directly contracted in all regions except the Americas. And what we are doing is addressing that specifically in the Americas. So in aggregate, we're over 50% directly contracted but we're under 50% in the Americas, and we want to lift the Americas closer to what we're doing in the other 3 regions. There are some unique elements of that, which suggests that if we got to 50%, that would be an optimal structure for us. I don't think it will get to the circa 2/3 that we do in some of the other regions. For the large domestic market that we're servicing in America and the broad geographic spread of that, it just becomes inefficient to have more contractors. So our focus beyond our existing circa 500 people is adding contracting in America, and we expect that to -- it will start to improve our overall margins and our -- the surface ability of that inventory in FY '27. Tim Plumbe: Great. And then just the second question was a bit of a follow-on from Sam and for Tony. So just thinking about that seasonal skew, you mentioned less pronounced than before, like if you back solve the guidance that you guys put out previously, it kind of implied a 20 to 60 basis point half-on-half seasonal tailwind in the second half. Are you saying that there will still be a seasonal tailwind but less pronounced than previously expected? Or there is no seasonal tailwind? John Guscic: Correct. Tony Ristevski: Less than pronounced than, Tim. So as I said, you can do the math to back off the 6.5% is less pronounced than what we anticipated because of the portfolio growth in the business and the way it has. Operator: Your next question comes from Ben Gilbert from Jarden. Ben Gilbert: Just the first one for me. Just in terms of sort of the 3 pillars of growth as you look forward, it's been pretty consistent in terms of the composition. Do you envisage the composition changing much moving forward? I'm just interested in the comment around the change strategy that you talked over next 2 to 3 years. Is that more an opportunity around conversion? Or is that going to provide new supply in markets around the world? John Guscic: Supply will -- look, customers, we're slowing down in the rate of new substantial customers that can be added. That is slowing down, but supply is actually increasing. Not only for the direct customer conversation we had with regard to the incremental investment that we are making, but in particular to some of the larger chain hotels in getting greater access to the various rate plans that those hotels have on offer. So it's not unusual for a hotel to have 20 rate plans depending on your geography, the channel, the period, the season, et cetera. So we're getting -- as we become more relevant and more deeply entrenched as a reliable supply partner with those partners, we're getting access to more rate plans. So we see supply continuing to grow, customers are at a more moderate level. And the consequence of that will be that our conversion rate will continue to grow. And if I was to take a prediction 3 to 4 years out, the conversion factor would still be at least 3x the underlying new customer new supply mix because we are getting -- the data analytics in our business now has is remarkable compared to where we were 2 to 3 years ago. The sophistication of our conversations with our distribution partners and our supplier partners is predicated on that data. So we're not just saying, give us a deal, we're good guys. We're saying this is what we can do for you. This is how we will do it, and this is the benefit that you'll get. So that's why the conversion number ultimately continue to outperform the other 2 metrics. Ben Gilbert: So this is a lot of that work you did around the consolidation of the tech stack, right, when you sort of put the hotels, the DOTW in. So you're giving your customers also client or your supply partners confidence around your pricing deck, which is what's then allowing you to get the exclusives, little bit of that moat, if you like, so that you can then sell on to your customers. Is that fair? John Guscic: Correct. Ben Gilbert: Yes. So in terms of the competitive pressure you're seeing out there, it doesn't seem like there's any escalation in the competitive threat out there's. There's chatter previously that some of the bigger global OTAs might be trying to push into your space, but it doesn't really seem like there's much evidence of them having any impact at all based on the strength of those numbers. Is that fair? John Guscic: The simplest -- the way I can put your mind at rest, Ben, is that our sales to the largest global OTAs is greater than our underlying bookings growth of 18%. Operator: Your next question comes from Andrew Hodge from Canaccord Genuity. Andrew Hodge: Just a question sort of extending on that idea around the contracted increase, if you like, with the business development that you're putting in. When you think about the impact to the business, does it have a greater impact on your revenue margin or on your TTV growth? John Guscic: Thank you for the question, Andrew. I'll take a step back and see, just doing -- let's just do simple math. This is a hypothetical example. So last year, we're doing -- and I'll say, completely hypothetical, so don't take it literally. Last year, we did $5 billion of TTV. Let's say we did 50% directly contracted at that $5 billion. So we go back to our hotel partners and say we're selling you at a rate of $2.5 billion, and we're selling now from other people at $2.5 billion. And then I go to this year, and we're run rate of $6 billion. So we're selling, let's say, 60%, and again it's hypothetical. I'm not suggesting the delta is that great. Just the math works easier in my mind, and we deliver $3.6 billion of directly contracted hotels and only $2.4 billion of third party. So our $2.5 billion has gone to $3.6 billion. Our hotel partners see that. Then they're going, s***, these guys are delivering. And then our guys going, of course, we are. We always told you we would. It's only the investment analysts who didn't believe that we would deliver. But the rest of us, we believe we would deliver. So how do we fix -- how do we continue to show that we are a great partner, and we can get you sales from around the world. And then, as I said, go back to the previous question, what's the data analytic tools that we have that we arm our guys with, it gives them insights in where they're performing against their peers, where they're not performing against their peers, where their price is too high, where their price is too low. We're having that conversation. When you have that conversation, getting access to inventory, is a hell of a lot easier because, one, you're demonstrably better than you were a year ago. Two, you're giving them insights that they don't have. At the end of the day, a hotelier has an OTA as a booking engine to compare themselves but doesn't have the demand pattern that we do. So we can show them. Yes, this is what your price. You're $10 more expensive here, but it's costing you 10 basis points of occupancy or you're $10 cheaper, you can go up and still get the same occupancy that you're getting, et cetera. These are the conversations that we have, which are very different to the conversations we had when we just went in there and said, we promised to do good by you by selling your stuff. Andrew Hodge: And then just a clarification on the second half '26 trading update. I just want to make sure that, that's your report, that the numbers that you provided there are in your reporting currency rather than the functional currency? John Guscic: Correct. Aussie dollars. Operator: Your next question comes from Wei-Weng Chen from RBC Capital Markets. Wei-Weng Chen: So I appreciate your comments before about the consumer AI tools and I guess, downplaying the threat. But is there an opportunity for you guys to go maybe for a lack of better term, B2B2C kind of via partnering with these AI companies like Google and supplying them with inventory? John Guscic: I'll answer it that over the course of the last 2 years, in particular, as we're seeing this coming down the pipe, we have had many, many conversations about how we will take advantage of this and how we will -- how we think we can mitigate the risk to our business. So we have no confirmed plans about B2B2C, but it's certainly something that we focus on internally of how do we maximize the growth rate of our business and having a business like that potentially gets you there. I'm not saying we're going to do it, but it's one of the ones -- and there are a myriad of others, Wei-Weng, that we're also considering, but there are other opportunities as well that are in our consideration set as well. Wei-Weng Chen: Yes. Okay. And then I guess, speaking about opportunities. I mean your name is Web Travel Group, but in terms of operating businesses, you're still a group of one. So I guess what's the thinking in terms of building out more operating pillars? What are some of the organic opportunities you're looking into and maybe some of the inorganic options that might be available? John Guscic: I just came from a Board meeting yesterday where we perhaps made a more derisory comment about Web Travel Group versus WebBeds as the naming convention. We're still ambitious to be a travel group. We spend a little bit of time in the presentation talking about liquidity, and we spent a little bit of time talking about the fragmented nature of the industry. All of those things remain relevant to our thinking about what we do on an inorganic side. And on the organic side, you touched on it with your question. Are there other adjacencies to what we do, white labels, B2B2C, et cetera, how do they fit into the strategy? They're all things that we are currently contemplating. Wei-Weng Chen: Yes. Cool. And then just last question for me. I guess noting the comments about the business being increasingly Northern Hemisphere based and the challenges of managing out of Australia. Do you have a preference for where your next CEO -- CFO, sorry, is going to be based, balancing, I guess, management considerations with the fact that you've got a predominantly Australian investor base? John Guscic: The new CFO will be based in Australia. Operator: Your next question is from Abraham Akra from Shaw and Partners. Abraham Akra: Two questions from me. I suppose some of the concerns related to Google's agentic AI push into travel is increase in direct bookings to hotels and away from some of your customers like OTAs. What do you think about this assessment? John Guscic: It's a little bit muted. If the question was, are they going to be using OTAs more or less than currently? Abraham Akra: Using OTAs less given Google is going to partner with some of the hotel chains and hotel partners. John Guscic: Well, yes, that will be dilutive to everybody if they do that, clearly, but that would be an outcome that would be suboptimal to getting the overall results because the whole thing about what they're trying to do is they are the most sophisticated meta search in the world and the most sophisticated booking engine -- I'm sorry, the most anticipated results delivered agent in the world focused around your needs, you're not going to be just getting -- serving up chain hotels, you're going to be serving up everything. And if it is chains that they go through and chains bypass OTAs, yes, that will be a potential downside risk. I would hazard to guess that if we looked at what our performance would be in circa 3 years after this has launched, and let's pretend there's been a 10% dislocation to this market, 20%, pick a number, doesn't really matter. It's all conjecture at this point. Pick a number, 20% improvement -- sorry, this channel becomes 20% of the overall market, it will be a net contributor to Web Travel Group's business. Abraham Akra: Understood. John Guscic: Let me give you just one bit of color just so to put your minds at rest about why this is -- this is a threat, don't get me wrong, but it needs to be put into the context of what the threat actually is. So go to a market like Italy, massive destination for many people as an inbound market. I don't have the number off the top of my head, but I think it's circa 80 million or 90 million tourists go to Italy a year. And in Italy, they have 94% independent hotels. So as we have said previously, when we set this business up more than 10 years ago, we said we would be the distribution arm for independent hotels. That would be one of the strengths of our business, still remains one of the strengths, notwithstanding chain hotels. Chain hotels are massively important. They're our biggest supply partner and increasingly a bigger supply partner. And I don't have the time on this call to explain it to you, but if you go through the travel ecosystem and the legacy technology that sits within that travel ecosystem, you will know that there is nobody who ever can do everything for all people, whether you're an agentic AI or not. Just from a fundamental element of having a PMS, they are so old and clunky and putting booking engines on them has improved their direct conversion, but they still have significantly more supply from third-party distribution as a hotel chain than they do from direct. That's after 20 years of trying. So that's inevitable. Abraham Akra: Very helpful. And I suppose your comment earlier around the average booking window compression by 5%. Is that a function of your booking mix or customer booking trends? John Guscic: It's impossible for me to answer that with any certainty. All I can tell you is what's happened. It's a little bit like someone -- usually on one of these calls, some will say, who are you winning share from? How do I know? I just know we are. So I just know it is. I'm not sure why it's happening. It might be geographic mix, it might be the fact that -- but it's happening in 3 regions out of 4. So that's just unusual. That's all I'd point out. Just been a lot of last -- shorter booking window, last-minute bookings are less, the length of stays, moderately down, et cetera. Abraham Akra: Got it. And last one for me -- just a quick one. John Guscic: You've outplayed your hands. You have to cover the questions, Wei-Weng. Tony Ristevski: No, it's Abe. John Guscic: Apologies, Abe. I'm apologizing you. I apologize to Wei-Weng. Abraham Akra: He's a good analyst. And lastly, the 23% year-on-year TTV growth year-to-date in the second half. Do you mind providing a regional breakdown? John Guscic: We've given you in the first half. All 4 regions are up. They're not massively different to where they were so that's where we're at. Operator: Your next question comes from Mitch Sonogan from Macquarie. Mitchell Sonogan: Just a quick one on the EBITDA margin target in '27, guiding to around that 50% range. I guess can you maybe just talk to the key swing factors on how you're balancing that, just noting, obviously, given the 44% to 47% range for FY '26. So yes, just trying to understand the specific target around 50% and how you're thinking about it? John Guscic: Yes. We're seeing revenue growth faster than EBITDA -- sorry, expenses, and it doesn't require a big tick to go from somewhere between 44% and 47% to get to 50%. So it's not a stretch target in that sense. If we keep the revenue margin consistent and added the expected TTV increase, and we still had low single-digit expenses, it gets us there. So they're the sort of guardrails for you to think about. Mitchell Sonogan: Yes. And just noting you talked to potential impacts from macro events that have occurred over the last 6 to 12 months. Can you maybe just talk to what percentage of bookings in the different regions are domestic versus international, whether you can give that by the major regions? Because obviously, lots of people have looked at softer Australia into U.S. international travel, but the U.S. is a pretty domestic market. So yes, just keen to understand if you can give us some color on how we should think about that looking at future events that may come our way. John Guscic: There's always a sense of amusement when I see some travel-related data being announced publicly and all the travel stocks fall in unison in relation to it, in particular, in our case, less than 2% of our TTV is Australia. So in the game earlier of swings and roundabouts, if the entire Australian market was eliminated for some reason, we would have grown at 20% instead of 22%. So as I said, just -- I chuckle when I see investor response to news that's not relevant to what's happening to us as a global business. So to go to it, I'll just explain it as I have historically. Our biggest domestic market is clearly the U.S. And in most of our other markets, the domestic component is substantially less than half and what our sweet spot is, is interregional travel, Asians going to Asia, Americans going to America, Europeans going to Europe, Middle East going to the Middle East. That's where the vast majority of what we tap into which is, as you would expect, it's more frequent travel. It's short-haul travel. It's not your once-a-year Aussie going to Europe or going to New York and doing that. That's part of -- obviously part of our business, but it's not the main part of our business because that's -- you're once in a multi-generation trip. Our efforts on people going for 3 nights from Italy to Switzerland as going 6 nights from Paris to Majorca. There's a myriad of combinations. And literally, we have a dashboard that goes through them, and we look at the ups and the downs. But in the end, overall, the vast majority of our business is what we consider short-haul international travel, less than 6 hours. Most of it's around 3 hours flight time and you see what our average booking value is. All right. Have we lost everyone? Operator: Your next question comes from Patrick Cockerill from Ord Minnett. Patrick Cockerill: On behalf of John O'Shea. Just 2 very quickly from me. Firstly, on the revenue margin, noting that 6.5% now seems to be going longer than the initial 18 months or 3 reporting periods. Can you just give us a little bit of color around the factors at play there that has made that continue into your expectations for FY '27? John Guscic: I won't go through all the things I've said previously, Patrick, other than we have seen and will continue to see a noticeable shift towards directly contracted hotels operating at higher margins. And we continue to focus on geographic expansion, but it's sort of offset by some of the channel expansion, which gives us greater confidence in our ability to maintain that beyond -- into the next 3 reporting periods. So that's the major reason, and I've covered off that a few times already. So that's the key driver, Patrick. Patrick Cockerill: And then very quickly, just on your EBITDA guidance and the more pronounced 1H skew. Is this something we should expect going forward? John Guscic: More pronounced in what sense? The EBITDA number or the gross number? Patrick Cockerill: Skewed to 1H? John Guscic: But what's skewed? Sorry, I don't understand. Tony Ristevski: Look, I think, Patrick, we've always had a skew to first half. If you look at our reporting over the last so many years, that's why we changed our year-end from 30 June to 31 March to capture in the first half ending September, the contribution of the higher TTV that we get from Europe, which continues to be the trend in this reporting period. Operator: Your next question comes from Brian Han from Morningstar. Brian Han: John, in terms of future proofing the business to sustain growth, is it possible for cost growth to stay elevated in that high single-digit regions for the next couple of years? John Guscic: I wouldn't say that would be elevated if we're growing revenue at a multiple of it. So our focus -- whilst our public commentary is around things that investors can latch on to $10 billion TTV, 6.5% take rate, 50% EBITDA margin, our internal focus is on growing revenues at a rate faster than expenses with the exception of the markets in which we invest, and we've called it out in the presentation and in the Q&A about our investment in North American contracting. But if you strip that out and strip out the things that we are doing to maintain our overall competitiveness, our underlying growth rate is -- our expense growth rate is barely above CPI. Brian Han: Yes. I wasn't suggesting that that's actually a bad thing to grow your costs if it means, as you say, future-proofing the business to sustain the current growth rate? John Guscic: Yes. Look, look, the journey is an incredible journey that WebBeds as a business has been on, and you just need to go to slide -- we'll call it up, Slide 9 to see that. So over that journey, we've done things to enable us to continue to grow at the rate that we have. So whether it's building out specific tech for an individual region, building out analytics tools to support our sales initiative, building out efficiency tools to get better imaging, get better rates into the system faster, et cetera. We will continue to do that. We're not playing this game so that we can eke out system growth and defend our share. We are a disruptor in the overall industry and our growth rate reflects that. We have a clear vision about the value we add and how we can accentuate the difference between our competitors, and we've clearly demonstrated that over the last 15 years or 13 years. And there's no reason to suggest that, that run rate expires over the course of the next 2 to 3 years. There are lots of things for us to do, and we know what they are. Brian Han: It can't be clearer than $10 billion. Operator: Thank you. There are no further questions at this time. I'll now hand back to Mr. Guscic for closing remarks. John Guscic: Thank you, Harmony, and thank you to everyone who asked the questions. I'll just summarize that to all of our employees who have delivered this result, I'd like to give them a heartfelt thank you for their contribution to everything that we've been able to do in this year. We continue to have a highly engaged workforce, and none of this would be possible without them. So I'm delighted that they continue to provide the bulwark of what we need to enable us to continue to be the market leaders. And with that, I'll say, as I've said in the forward-looking statements, we've had a really strong first half. We will have an even stronger second half. With that, thank you very much. Operator: That does conclude our conference for today. Thank you for participating. You may now disconnect.
Operator: Good day, and welcome to the Yiren Digital Ltd. Third Quarter 2025 Earnings Conference Call. Please note this event is being recorded. I would now like to turn the conference over to Keyao He. Please go ahead. Keyao He: Thank you, Operator. Good morning and good evening, everyone. Today's call features a presentation by our Founder, Chairman, and CEO of Yiren Digital Ltd., Mr. Ning Tang, and our CFO, Mr. Ka Chun Hui. There will be a Q&A session after the prepared remarks. Before beginning, we would like to remind you that discussions during this call contain forward-looking statements made under the Safe Harbor provision of the U.S. Private Securities Litigation Reform Act of 1995. Such statements involve risks, uncertainties, and factors that can cause actual results to differ materially from those contained in any such statements. Further information regarding such risks, uncertainties, or factors is included in our filings with the U.S. Securities and Exchange Commission. We do not undertake any obligation to update any forward-looking statements as required under the relevant law. During the call, we will be referring to certain non-GAAP financial measures and supplemental measures to review and assess our operating performance. These non-GAAP financial measures are not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with U.S. GAAP. For information about these non-GAAP financial measures and reconciliation to GAAP measures, please refer to our earnings press release. I will now pass it to Ning Tang for opening remarks. Thank you all for joining us today. Ning Tang: This past quarter presented a more challenging operating environment than we have seen in recent periods, driven primarily by heightened regulatory uncertainty and a more cautious credit backdrop. While these factors weighed on parts of our business, we moved quickly to adjust our risk posture and protect asset quality. I am pleased to share that these actions have been effective. At the same time, our Internet insurance segment continued to deliver solid growth, reinforcing the resilience and diversification of our platform. As we look ahead, we remain focused on disciplined execution and positioning the company for the next generation of fintech with AI and blockchain. As part of our ongoing transformation, we continue to advance our agentic AI capabilities to enhance process efficiency and strengthen unit economics. These innovations are helping us offset the margin pressure associated with rising credit risk. Our agentic platform, MagicQ, is already demonstrating meaningful impact, improving sales conversion, elevating risk controls, and driving greater overall productivity. With that, let me walk you through the key business highlights for the quarter. First, turning to our financial services segment. We facilitated RMB 20.2 billion in loan origination during this quarter, up 51% year over year. Our repeat borrowing rate remained at a record high of 77%, in line with last quarter and 16 percentage points higher than a year ago. While the number of our total borrowers decreased by 11% to 1.3 million compared to the same period last year due to the tightening of credit policies, our total cumulative borrower base increased by 21% year on year to 14 million. We also continued to see healthy structural improvements across our borrower base. The average size for new loans from our lending platform rose from RMB 7,000 to RMB 10,100, driven by our ongoing shift towards higher credit quality customer segments and better credit predictability from repeat borrowers. We expect this favorable mix trend to continue as we continue to trade up for better quality borrowers. Our agentic AI has delivered a remarkable boost in our operations. For marketing, our AI-driven marketing agent continues to deliver strong results. It enhanced customer profiling accuracy and expanded the pool of identified high-intent users by 38% quarter over quarter. In addition, our proprietary AI agent now generates tailored responses across a wide range of customer inquiries, effectively reactivating dormant users and driving a 15% increase in their ATP engagement. For customer service, our LLM-powered service robot continues to strengthen its performance, with response accuracy rising from roughly 80% to over 92%. Meanwhile, the rate of inquiries requiring escalation to human agents declined by nearly 15% quarter over quarter. For quality control and risk management, we continue to optimize our multi-model models. Fraud detection coverage increased from a weekly manual sampling of 450 cases to 5,800 by agentic AI, while accuracy improved to 91%. Now let's turn to capital allocation. As of September 30, 2025, our total outstanding loan balance is RMB 34.2 billion, representing 10% quarter-to-quarter growth. Our funding cost rose by 55 basis points during the quarter, in line with the sector trend. We are now included in the YBASE of nearly 30 compliant funding partners under the new regulatory framework, positioning us as one of the leading players in the market. Asset quality and credit risk, we continue to see industry-wide pressure this quarter. Although we proactively tightened our credit policies, our risk indicators edged up in Q3. As of September 30, our one to thirty-day delinquency rate stood at 2.7%, while the thirty-one to sixty-day and the sixty-one to ninety-day delinquency rates were 1.7% and 1.4%, respectively. The good news is that we see that risk indicators for the loan portfolio from new borrowers begin to trend down in November, which is proof of the effectiveness of our upgraded credit strategy. However, from a conservative point of view, we expect the industry-wide impact on the overall asset quality to continue in the fourth quarter and that the recovery is likely to begin early next year as the market stabilizes. Our AI-driven collection capabilities play an important role in mitigating early-stage synthesis. This automation drove productivity growth, reducing labor costs by an average of RMB 5 million per month, up from RMB 2.7 million in the second quarter, while improving service quality. Turning to our overseas business, our Indonesian operations launched on schedule in September 2025, and we expect this segment to contribute significant growth in 2026. Now turning to our insurance brokerage business. After navigating significant regulatory headwinds and commission pressure in 2024, we entered 2025 with a transformed operating model. Our insurance business has shifted from a high-touch, high-cost brokerage approach to a digital, low customer acquisition cost, high-margin model by tapping into new insurance demand within our existing customer acquisition channels on the platform. This has allowed us to focus on a healthier, more profitable customer base that is contributing meaningfully to segment margins. In 2025, gross written premium reached RMB 1.15 billion, an increase of 35% quarter over quarter. Revenue from the segment was RMB 84.2 million, up 45% from the prior quarter. Our Internet insurance business continued its rapid expansion, delivering RMB 196 million in annualized premium, representing 204% quarter over quarter growth. Total customer numbers rose 93% quarter over quarter to 229,353, driven by more precise marketing and still low penetration within the target segment. We expect the Internet insurance business to sustain strong momentum over the coming quarters. Finally, while we continue to strengthen and scale our core business, we are also investing strategically into the future. Building on our technology capabilities and our position within the broader fintech ecosystem, we are exploring new ways to better serve customers and manage assets through AI and blockchain-enabled solutions. We see AI and blockchain as core strategic pillars for the future of our business, especially as we expand our footprint globally. We are investing in the systems and capabilities needed to build our next-generation fintech infrastructure while deepening partnerships with key industry players. In October, we signed an MOU with TrainUp, a leading crypto solutions provider in Singapore, and we also announced our plan to launch an Ethereum staking service, which is currently undergoing testing. This initiative marks an important milestone in our journey toward delivering seamless 24/7 global financial services. Over the next few quarters, we look forward to introducing additional products designed to enhance financing efficiency and asset monetization for our customers. To conclude on the quarter, while the third quarter brought its share of challenges, the progress we have made demonstrates that our diversification and forward-looking strategy are working. We have built a stronger, more resilient foundation that positions us well for sustainable growth and value creation in the quarters ahead. I am confident that by staying disciplined and continuing to execute on our priorities, we will emerge even stronger. With that, I will now pass it over to Ka Chun Hui, who will provide more details on the financials for the quarter. Ka Chun Hui: Thank you, Ning. Hello, everyone. I will now walk you through our financial performance for the third quarter this year. Please refer to our earnings release and IR deck for further details, both available on our website. For the third quarter, total revenue grew by 5.1% year over year to RMB 1.55 billion, mainly attributable to 70% growth from the Financial Services segment. It was partially offset by the decline in revenue from the consumers and lifestyle segment, as we announced the mid-decommission of the business in 2024. In the Financial Services segment, total loan facilitation volume increased by 51% year over year. The increase was driven by growth in average loan ticket size, the growth of repeated borrowers, and an increase in loan referral revenue. The loans from repeat borrowers account for 77% of the total loan volume facilitated in the third quarter this year, up 16 percentage points compared to the same period last year. As the credit from repeated borrowers is more predictable, it allows us to extend the credit without substantially affecting our portfolio risk. The average size for new loans from our lending platform increased by 44% to RMB 10,100. Overall, the revenue from this segment increased by 70% year over year to RMB 1.4 billion in the third quarter. The revenue growth is driven by our loan guarantee services revenue, which reached RMB 1.4 billion in the third quarter, up nearly 2.4 times year over year, driven by higher loan facilitation under the risk-taking model. As our service revenue and loan facilitation from the risk-taking model increases, our provisions for contingency liability also increased by 68.8% year over year to RMB 460 million. But as the economic benefits of the guarantee services are recognized over the next few quarters, the total of guarantee liabilities of RMB 930 million will be recognized as revenue over the next few quarters. The contribution margin for the entire Financial Services segment improved from 5.2% in 2024 to 23% in the third quarter, driven by a 27.1% decrease in the origination expense while the revenue grew by 70%. In the insurance segment, our gross written premium in the third quarter was RMB 1.15 billion, up 35% from the second quarter this year. It is showing a sign of recovery for this business. Compared to the third quarter of 2024, the premium is still down by 15%. The total premium is slightly down by 1.5% year on year. We have successfully turned around the business. The main growth contributor is the Internet insurance line that we launched in the first quarter. In the third quarter, the gross premium from the Internet insurance line was RMB 196 million, representing 204% growth quarter over quarter. We expect this growth momentum will continue in the next few quarters and have significant revenue contribution to the overall insurance line. One thing to highlight is that the margin and the take rate for the Internet insurance business is much higher than the traditional brokerage line because the clients for this segment come from our customer traffic from insurance and other business segments. These customer segments are of better risk quality than traditional insurance carriers are not able to reach. As such, the Internet insurance business has lower customer acquisition costs, better revenue sharing with the carriers, and no commission cost. The margin is expected to increase as the premium scales, which will benefit the bottom line. On the expense side, sales and marketing expenses in the third quarter decreased by 1.2% year over year to RMB 332 million. The marketing expenses decreased while our total loan facilitation increased by 51%. This is the result of better AI-assisted precision marketing that drives a higher sales conversion, effectively lowering the borrower acquisition cost. Research and development expenses decreased by 39% year over year to RMB 92 million. This is because, during the same period last year, there was a one-off large system development project. The origination, servicing, and other operating costs decreased by 27% year over year to RMB 150 million because of the 27.1% decrease in the origination expense from the financial services business due to the improved collection efficiency driven by AI and lower commission costs from the traditional insurance brokerage line. General and administrative expenses for the quarter increased by 30% year over year to RMB 104 million, primarily due to increased personnel-related costs to strengthen our risk management and to fund the plan for new business initiatives such as the development of the next-generation fintech that we mentioned in the announcement in October. The allowance for contract assets and receivables and others for the quarter increased by 142% year over year to RMB 229 million. This is driven by higher receivables from loan facilitation services and guarantee services as the loan volume has grown with particular strength from the risk-taking model that generates higher service revenues. Along with the increase in the self-funded loan balance in 2025, provisions for contingent liability this year increased by 69% year over year to RMB 460 million because of the increase in loan volume facilitated under the risk-taking model. Net income for the third quarter was RMB 318 million, translating to RMB 3.65 per ADR share or USD 0.51 per ADR share. This represents a 12% decline from the second quarter of this year. The pressure on profitability is attributed to multiple reasons, including the substantial upfront provisions under our risk-taking loan facilitation model, industry-wide volatility in asset quality, a declining fee rate for the loan facilitation business following the new regulation, as well as the decreasing commission rate in our traditional insurance brokerage line. Our net margin declined slightly from 22% in the prior quarter this year to 20%. However, we maintain a very good cash position. The net cash outflow from operations in the third quarter was RMB 1 million, and our balance sheet remained robust with a total cash equivalent and restricted cash of RMB 4 billion. This will position us well to address any future challenges and to capture new opportunities. Looking ahead, we remain cautiously optimistic about our business. While we anticipate volatility in the credit and regulatory risk environment, our disciplined credit policy, enhanced risk management capability, and effective risk revenue model will position us well in this market environment. Our international business and Internet insurance segments are expected to drive higher revenue growth and margin growth in the next few quarters. For 2025, we are projecting revenue to be in the range of RMB 1.4 billion to RMB 1.6 billion, reflecting our disciplined approach to growth and risk management. That's the end of my part of the presentation. Thank you very much. Operator: Thank you. And operator, we are open for Q&A. We will now begin the question and answer session. The conference has now concluded. If you have any questions, you are welcome to contact the company's IR team. Thank you for attending today's presentation. You may now disconnect. Ka Chun Hui: Thank you.
Operator: Hello, everyone, and welcome to Burlington Stores, Inc. Third Quarter 2025 Earnings Webcast. Please note that this call is being recorded. After the speakers' prepared remarks, there will be a question and answer session. If you'd like to ask a question during that time, please press star followed by one on your telephone keypad. Thank you. I'd now like to hand the call over to Mr. David J. Glick, Group Senior Vice President, Investor Relations. Please go ahead. David J. Glick: Thank you, operator, and good morning, everyone. We appreciate everyone's participation in today's conference call to discuss Burlington Stores, Inc.'s fiscal 2025 third quarter operating results. Our presenters today are Michael O'Sullivan, our Chief Executive Officer, and Kristin Wolfe, our EVP and Chief Financial Officer. Before I turn the call over to Michael, I would like to inform listeners that this call may not be transcribed, recorded, or broadcast without our expressed permission. A replay of the call will be available until December 2, 2025. We take no responsibility for inaccuracies that may appear in this call by third parties. Our remarks and the Q&A that follows are copyrighted today by Burlington Stores, Inc. Remarks made on this call concerning future expectations, events, strategies, objectives, trends, or projected financial results are subject to certain risks and uncertainties. Actual results may differ materially from those that are projected in such forward-looking statements. Such risks and uncertainties include those that are described in the company's 10-Ks and in our other filings with the SEC, all of which are expressly incorporated herein by reference. Please note that the financial results and expectations we discuss today are on a continuing operations basis. Reconciliations of the non-GAAP measures we discuss today to GAAP measures are included in today's press release. As a reminder, as indicated in this morning's press release, all profitability metrics discussed on this call exclude costs associated with bankruptcy-acquired leases. These pretax costs amounted to $11 million during 2025 and 2024 and $28 million and $9 million respectively, for the first nine months of 2025 and 2024. Now here's Michael. Michael O'Sullivan: Thank you, David. Good morning, everyone, and thank you for joining us. I would like to cover four topics this morning. Firstly, I will discuss our third quarter results. Secondly, I will review our updated fourth quarter and full-year guidance. Thirdly, I will provide some early thinking on the outlook for 2026. And lastly, I will comment on the progress we are making towards our longer-range financial goals. Then I will turn the call over to Kristin to provide additional details. Okay. Let's start with our Q3 results. Total sales increased 7% in the third quarter at the high end of our guidance. This was on top of 11% sales growth last year. This means that year-to-date, total sales have increased 8% on top of 11% year-to-date growth last year. Comp store sales for the third quarter increased 1%. We started the quarter well with a strong back-to-school trend, but in September, we saw a significant drop-off in traffic to our stores driven by warmer-than-usual weather. As we have discussed previously, we have very strong brand equity in outerwear. Many shoppers still think of us as Burlington Coat Factory. Outerwear is a great business and a source of competitive strength. But this means that in Q3, our comp trend is very sensitive to weather, much more so than competitors. In some years, the impact is positive. In some years, it is negative. This year, it was negative. That said, in mid-October, once the weather turned cooler, our comp trend picked up to the mid-single digits. And that momentum of mid-single-digit comp growth continued through the first three weeks of November. Finishing up on Q3, I would like to comment on earnings. Despite the weather-driven slowdown in our sales trend in Q3, we still delivered margin expansion that was well ahead of last year and earnings growth that significantly beat our guidance. It's worth calling out that this was despite the considerable headwind that we faced from tariffs. Moving on to the fourth quarter, we are maintaining our previously issued comp store sales guidance of 0% to 2%. We feel good about our recent trend, but it is still early in the quarter, and in the coming weeks, we'll be up against very strong comparisons from last year. So it makes sense to remain cautious. That said, given the strong margin and expense trends that we are seeing, we are increasing our Q4 margin and EPS guidance. To be clear, we are adjusting our full-year 2025 earnings guidance, passing along all of our beat to earnings in Q3 and factoring in our higher Q4 earnings outlook. I would like to call out that we started this fiscal year with EBIT margin guidance of flat to up 30 basis points. Our updated full-year 2025 guidance now calls for expansion of 60 to 70 basis points. This is despite pressure from tariffs and is on top of 100 basis points of margin improvement in 2024. We are excited about the progress we are making on margin expansion. I will return to this topic in a few moments when I talk about our longer-range financial goals. But first, I would like to share our initial thoughts on the outlook for 2026. We are early in the budget process, but as a starting point, we're planning for total sales growth in the high single digits. We now expect to open 110 net new stores in 2026. This is higher than previously discussed and it reflects the strength of our new store pipeline and the performance we are seeing from new stores. We are excited for these new store openings. For comp sales, we are assuming growth of flat to 2% in 2026. This should sound familiar. It is our typical off-price playbook. There is significant economic uncertainty and we do not know how this might affect our business in 2026. So we will plan our business conservatively at 0% to 2% comp sales growth and then be ready to chase if the trend is stronger. In terms of operating margin expansion, for budgeting purposes, we are assuming that at 2% comp growth, our operating margin would be flat versus this year, then 10 to 15 basis points higher for each point of comp above 2%. Before I turn the call over to Kristin, there is one more topic that I would like to talk about. I would like to provide an update on our longer-range financial goals. As a reminder, two years ago, we shared our objective of getting to approximately $1.6 billion in operating income in 2028. The headline is that we feel good about the progress that we are making toward this goal. We are tracking in line with where we thought we would be at this point. We are especially pleased with the progress we have made in driving operating margin. This means that at the high end of our updated 2025 margin guidance, we will have achieved 170 basis points of the 400 basis points of opportunity that we identified two years ago. And of course, we will have achieved this despite the negative headwind from tariffs. Apart from margin expansion, the other drivers of our long-range financial model are new store sales and comp store sales growth. On new store sales, we are even more bullish now about our new store opening program than we were two years ago. Originally, we had assumed that we would open 100 net new stores a year in the period 2024 to 2028. In fact, this year, we will open 104, and in 2026, we are now planning to open 110 net new stores. Based on our new store pipeline, there is a possibility that we could sustain or even exceed this stronger pace of new store openings. The other major driver of our long-range model is comp sales growth. As I discussed in the context of our Q3 results, leaving weather aside, we feel good about the underlying comp trends that we are seeing. We believe that we can achieve average annual comp sales growth in the range of 4% to 5% over the remaining years of the long-range plan. In other words, between now and 2028. Of course, we recognize there are a lot of external variables that can affect comp growth. So in the nearer term, as we always do, we will plan our business conservatively. And then chase. Now I would like to turn the call over to Kristin to review our Q3 results, updated 2025 guidance, and high-level outlook for 2026 in more detail. Kristin Wolfe: Thank you, Michael. And good morning, everyone. I will start with some additional color on Q3. Then I will talk about our updated guidance. Lastly, I will comment on our initial outlook for 2026. Starting with the third quarter, total sales grew 7%, while comp store sales increased 1%, both within our guidance range. As Michael described, our comp trend in the third quarter fell off significantly after the back-to-school period driven by warmer weather, but then picked up to mid-single digits in mid-October. The gross margin rate for the third quarter was 44.2%, an increase of 30 basis points versus last year. This was driven by a 10 basis point increase in merchandise margin and a 20 basis point decrease in freight expenses. Moving down the P&L, our Q3 product sourcing costs were $2 million versus $29 million in the third quarter of last year. Product sourcing costs decreased 40 basis points compared to last year. This was primarily driven by leverage in supply chain, through continued cost savings and efficiency initiatives. Adjusted SG&A cost in Q3 levered 20 basis points versus last year. This leverage was primarily achieved in store-related costs. Our store teams drove significant leverage in store payroll, through numerous efficiency and productivity initiatives. Q3 adjusted EBIT margin was 6.2%, 60 basis points higher than last year. This was well above our guidance range of down 20 basis points to flat. Our Q3 adjusted earnings per share was $1.8, which came in well above our guidance range. This represents a 16% increase versus the prior year. At the end of the quarter, comparable store inventories were down 2% versus the end of 2024. Let me provide a little more context here. In Q3, we saw a significant slowdown in our comp trends, a weather-driven slowdown, but using our merchandising 2.0 tools, our planners and merchants were able to react very quickly to adjust receipts, especially in cold weather categories. So despite the slowdown, our store inventories are well balanced, current, and very clean going into the fourth quarter. Moving on to our reserve inventory. Reserve inventory was 35% of our total inventory versus 32% of our inventory last year. In dollar terms, reserve inventory was up 26% compared to last year. We are pleased with the quality of the merchandise and the values and brands that we have in reserve. And as a reminder, we use reserve inventory as ammunition to chase the sales trend. For example, our reserve includes great out-of-revise that we made earlier this year, that we've been pulling out over the last few weeks to fuel the trend since the weather turned cold in mid-October. We ended the third quarter with approximately $1.5 billion in liquidity. This consisted of $584 million in cash and $948 million in availability on our ABL. We had no outstanding borrowings on the ABL at the end of the quarter. During the third quarter, we repurchased $61 million in stock, and at the end of the quarter, we had $444 million remaining on our repurchase authorization. In Q3, we opened 73 net new stores, bringing our store count at the end of the quarter to 1,211 stores. This included 85 new store openings, 10 relocations, and two closings. We now expect to open 104 net new stores in fiscal 2025, up from our original estimate of 100 net new stores. Now I will turn to our outlook for the fourth quarter and full year for fiscal 2025. We are maintaining our fourth quarter fiscal 2025 guidance for comp sales and total sales. We are guiding comparable store sales to be flat to up 2% with total sales to increase 7% to 9% for the fourth quarter. We are raising our adjusted EBIT margin and adjusted earnings per share guidance for the fourth quarter. We now expect our adjusted EBIT margin to increase by 30 to 50 basis points. This margin outlook now translates to an adjusted earnings per share range of $4.5 to $4.7, an increase of 9% to 14% versus the fourth quarter of last year. For full-year fiscal 2025, after factoring in our actual Q3 results and our improved outlook for Q4, we expect comp store sales growth of 1% to 2%, total sales to increase approximately 8%, and EBIT margins to range from an increase of 60 to 70 basis points. As Michael noted earlier, this fiscal 2025 EBIT margin guidance is 40 basis points higher than our original full-year guidance at the high end, and this is despite the significant pressure from tariffs. Finally, factoring in Q3 actuals and updated Q4 guidance, adjusted earnings per share are now expected to be in the range of $9.69 to $9.89, an increase of 16% to 18% for the full year 2025. Finally, I would like to touch on our preliminary FY 2026 outlook. We are in the early stages of the budgeting process, so this could change. But at this point, we are planning on total sales growth in the high single digits. We are assuming at least 110 net new stores, and we're planning comp store sales in the range of flat to up 2%. For operating margin, as Michael said, we are assuming that at a 2% comp growth, our operating margin would be flat to this year. And we expect leverage of 10 to 15 basis points for each additional point of comp. And now I will turn the call back over to Michael. Michael O'Sullivan: Thank you, Kristin. Before I turn the call over to the operator for your questions, I would like to summarize a few of the key points from today's call. Firstly, Q3 was impacted by warmer weather in September through early October. Once the weather normalized, our trend improved to mid-single-digit comp growth. And we are off to a strong start for Q4 with comps up mid-single digits for the first three weeks of November. Secondly, we are pleased with our margin trends. We are updating our full-year 2025 guidance to reflect the earnings beat in Q3 as well as our improved earnings outlook for Q4. At this point, we are maintaining our previously issued Q4 comp guidance of 0% to 2%. Thirdly, we are pleased with how we are tracking towards our long-range financial goals, especially the pace of margin expansion. And within this long-range financial plan, we think there may be additional upside in terms of our new store opening program. Now I would like to turn the call over for your questions. Operator: We are now opening the floor for the question and answer session. Please press star followed by one on your telephone keypad. Your first question comes from the line of Matthew Robert Boss of JPMorgan. Your line is now open. Matthew Robert Boss: Great. Thanks. Good morning, Michael. Good morning, Matt. Good morning. So on relative performance, your comp this quarter came in below both of your off-price peers. This is a clear reversal from results in the second quarter and over the last year. Clearly, you cited weather was a factor, but how concerned are you by this change in your relative comp versus peers? Michael O'Sullivan: Well, good morning. Good morning, Matt. Thank you for the question. You're right. Just to lay out the facts, we ran a 1% comp in Q3, our peers were 6% to 7%. Very impressive. That's a very significant difference. I can't give you a complete bridge, but at a high level, let me try and dissect that gap. I'll start with the obvious. We know that weather was the biggest driver of our slowdown in Q3. It's not an excuse, but it is a partial explanation. You know, we changed our name some years ago, but shoppers still call us Burlington Coat Factory. So mild weather in September and October has a huge impact on our business. You know, this is a real thing, and it is unique to us, I think, versus our peers. Now in September and October, cold weather merchandise balloons to more than 20% of our assortment. In the third quarter, our comp sales for ladies and men's coats, jackets, boots, and cold weather accessories, all these important categories were down double digits. Now they bounced back in mid-October, once it turned cold, but by then it was too late to really drive the comps up. Let me go a little further and try to quantify the weather impact on our comp in Q3. If you strip out the drag on our overall comp from cold weather categories, the categories I just listed, and if I make an adjustment for the impact that lower weather-related traffic had on the rest of the store, then I can get to the low end of a mid-single-digit comp. In other words, I do not get to 6% or 7% comp. So in my view, weather only explains half of the gap versus peers. Now, you know, usually, in off-price, when your comp is lower than your peers, it's just the customer telling you that they preferred the value and the assortment that they found elsewhere. In the second quarter, when we ran a 5% comp, growth ahead of our peers, the customer was voting for us. But in Q3, that changed. Now we have some hypotheses on why, but we have more work to do to really tear that apart. And then aggressively go after that performance difference. But before I leave the question, let me just call out a silver lining. The comp numbers that our peers have just reported reaffirm that the off-price shopper at all income levels is alive and well. You know, leaving aside the weather, the major implication for us is that we need to take better advantage of that than we did in the third quarter. Matthew Robert Boss: Great. And then, Kristin, as a follow-up, could you provide more color on the 60 basis points of operating margin expansion in the quarter, particularly just given as we think about the pressures that you faced from tariffs and the 1% comp? Kristin Wolfe: Good morning, Matt. Thanks for the question. Yes. First, it's worth reiterating that we really are pleased with the 6.2% operating margin in the quarter, up 60 basis points versus last year on a 1% comp, as you noted in your question. Let me provide the major puts and takes starting with gross margin. First, our merchandise margin increased 10 basis points. And within merchandise margin, there was a lot going on. Tariffs had a negative impact on markup, but we were able to offset this impact through numerous actions such as negotiating with our vendors, adjusting the mix, and driving a faster turn. The net impact of all this was much more favorable than we originally guided back in August. This was really driven by our tariff mitigation strategies. Now staying in gross margin, freight levered by 20 basis points. This was due to greater efficiencies and cost savings initiatives, particularly in transportation. So our overall gross margin increased 30 basis points versus the third quarter of last year, all this despite the impact from tariffs. On product sourcing costs, moving down the P&L, we drove 40 basis points of leverage here. This was driven by supply chain and efficiency initiatives in our DCs. We're excited about the consistent progress we've made in streamlining our chain costs. And moving on to SG&A, we showed about 20 basis points of leverage here on a 1% comp, and this was driven by efficiency initiatives in stores, such as speeding up checkout times at point of sale. Offsetting this leverage was higher depreciation, which delevered about 20 basis points driven by increased CapEx in supply chain and new stores. So taken altogether, this drove the 60 basis points of EBIT expansion in the quarter. Thanks, Matt. Operator: Next question comes from the line of Ike Boruchow of Wells Fargo. Your line is now open. Ike Boruchow: Hey, good morning, Michael, Kristin, and David. I guess my question kind of piggybacking off of Matt's is, so the comp growth in Q3 was lower than peers. But the margin and earnings were actually pretty much better. How should we reconcile that? And then really more importantly, were there choices that you made during the quarter that may have driven the higher margin at the expense of sales? Michael O'Sullivan: Well, I'll take that, Ike. Good morning. Thank you for the questions. It's a good question. I think the direct answer is yes. There were decisions or choices that we made that helped drive our margin in Q3 but may have had a negative impact on our sales. And I'll give you a couple of examples, but maybe I should just preface what I'm gonna say with a couple of points. Firstly, our margin and earnings performance in Q3 was very strong. Margins were up 60 basis points and adjusted EPS grew 16%. We've also taken up full-year earnings guidance. In other words, we've rolled right over tariffs. Secondly, on comp sales, to reiterate, the biggest driver of the slowdown that we saw was weather. If I adjust our comp for weather, we probably would have been pretty happy with the outcome. But as I explained a moment ago, that only explains half of the gap between our 1% comp growth and our peers' 6% to 7% comp. So if I come back to your question, yes, there were choices that we made that might explain our relatively strong margin and earnings performance, and our weaker comp growth in Q3. Now these were choices that we made as part of our tariff mitigation strategies. And let me describe two specific examples. Firstly, when tariffs were first introduced, we reduced our sales and receipt plans for categories where the margin impact was too significant. We did not feel like we could raise retails in those categories. And we did not want to accept the margin compression. That meant that in some businesses, especially some categories in home, our inventory levels and assortments were very light in Q3. And we saw that in terms of the sales in those categories. The sales were lower. Now that wasn't an error. It was a deliberate decision. I would say it was an economically rational decision. And it worked. It may have hurt sales, but it drove our earnings in Q3. Now I should add that as tariff rates have come down, we've gone back and we've taken up sales and receipt plans in most of the categories that were affected. So I would expect this impact to be less significant in Q4. A second example, as Kristin described a moment ago, another step that we took to help offset tariffs was to trim inventory levels in many businesses across the store and force a faster turn. Again, this helped to offset the margin pressure from tariffs. Now we only really took that step in Q3, not in Q4. We already turned very fast in Q4, so we didn't want to try and force a faster turn going into holiday. But again, in Q3, that approach drove earnings, but it may have hurt sales. So for both of the examples I've just given, at a high level, those decisions worked. You know, we fully absorbed tariff pressure on our margin, and we drove very strong margin and earnings growth in Q3. And all this happened actually despite a slowdown in comp sales due to weather, normally a slowdown like that would drive deleverage. Anyway, with that said, we really need to do a full after-action assessment on Q3. Now that we have our competitors' comp results, we need to go back and hindsight our performance and identify anything we could have done or should have done differently. Ike Boruchow: Got it. Thanks, Michael. And then maybe, Kristin, just to elaborate maybe a little more on the 2026 initial outlook, key risk opportunities in the outlook, anything else you could share? Kristin Wolfe: Yes. Great. Thanks, Ike. It's still somewhat early in the process. We're actively working through the budget for 2026. But let me give some headlines or how we're thinking about it. The outlook for next year is pretty hard to predict, with significant economic and political uncertainty that could absolutely affect consumers' discretionary spending. There are potential tailwinds like the possibility of higher tax refunds in the early part of next year. And then there are potential headwinds like tariff-driven price increases, which could put additional inflationary pressure on our core customer. Michael spoke to this earlier, but given this uncertainty, we're planning to stick with our off-price playbook. That really means planning comps at flat to 2% and positioning us to chase the trend if it's stronger. In terms of new stores, we mentioned this in the prepared remarks, but it's worth reiterating, we feel very good about the new store pipeline. We are planning to open at least 110 net new stores in 2026. So combined with our comp guidance, this should drive a high single-digit increase in total sales. On the operating margin side, as we said, we're modeling operating margin flat to last year at the 2% comp. We do expect 10 to 15 basis points of leverage for every point above a 2% comp. And then there's a couple of things in the margin. A couple of puts and takes. We are planning for slightly higher merch margin as we look to offset any impact of tariffs, particularly as we lap the fall season next year. We're planning for continued supply chain productivity gains next year, but there will be offsets here due to the start costs and the initial ramp-up of our new Southeastern distribution center, which we plan to open in 2026. And finally, we do expect fixed cost leverage on the high single-digit total sales growth, but we also are expecting higher depreciation, which creates deleverage. The higher depreciation is really due to the higher CapEx spend in supply chain and our increased number of new stores. Those are really the main callouts for 2026 at this point. Operator: Your next question comes from the line of Lorraine Hutchinson of Bank of America. Your line is now open. Lorraine Hutchinson: Thank you. Good morning. Michael, one of your off-price peers is accelerating comps with more focus on marketing, more in-store inventory, and a store refresh. Do you see any risk that Burlington Stores, Inc. will lose market share? Michael O'Sullivan: Good morning, Lorraine. Thank you for the question. It's a good question. I'm going to avoid talking about any specific competitor, but I think I can still try to answer your question maybe in more general terms. You know, I'll start by saying that actually we like innovation and fresh ideas. We believe in off-price retail. And anything that drives off-price awareness and excitement is a good thing. In fact, I'd go further and say that a strong off-price sector is important for us. So it's good that our off-price peers are achieving very strong results. But your question was more about potential risks to Burlington Stores, Inc. So let me come at it from that angle. I think there are two important points that I would make here. Firstly, when we talk among each other and when we talk to analysts and when we talk to investors, I think we sometimes talk about off-price as if it were a separate isolated ring-fenced segment of retail. But the customer does not think of it that way. The customer does not respect the boundaries of off-price. If she needs a pair of pants or a dress, she might shop Burlington Stores, Inc. or one of our off-price peers, but we know from our own research that she also cross-shops department stores, specialty retailers. In fact, any retailer where she likes the assortment. She doesn't care about our off-price business definition. She just cares about finding a great deal and great value in the categories, brands, and styles that she's looking for. Now if you're an investor in off-price, I think it's very important that you understand this. This is not like the retail market for office supplies. We aren't three companies just scrapping it out for market share in a limited space off-price. It's bigger than that. We compete in a very large and competitively fragmented market for apparel, accessories, shoes, home, beauty, and so on. Off-price is really just a small part of that overall market. Our opportunity is to take share from non-off-price retailers. That's what has been happening over a long period of time. So, I mean, just to bring it up to just to throw in some numbers. Today, we announced 7% total sales growth in Q3, on top of 11% growth last year. You know, at those growth rates, it's self-evident that we are taking market share. But so are our off-price peers. These share gains are not coming at the expense of each other. Mathematically, that wouldn't be possible. These share gains are coming from non-off-price. And, you know, I think that the shift from traditional full-price retail to off-price is unlikely to end anytime soon. So that's the first point. The second point I would make is that despite everything I've just said, I think it's very important and useful for us to pay close attention to our off-price peers. They matter. They operate a similar business model to us. They've been very successful over the years, and we can learn a lot from them. So if our off-price peers come up with new ways of doing things, new processes in stores, new innovative marketing programs, then we need to pay close attention. Now not all of those ideas will work, of course. And certainly, not all of them will make sense for us. But we need to be open to new ideas that could help drive our business and actually drive off-price retail in general. Let me finish up. Your question was about risk to Burlington Stores, Inc. Right now, I see off-price as a whole as being very healthy. For 2025, we now expect to grow total sales by 8% on top of 11% last year. And at the high end of our guidance, we now expect to achieve EPS growth of 18% on top of 34% last year. Those are by any metric, those are very healthy numbers. I anticipate that our off-price peers are going to be successful too. But I don't see that as a risk. In fact, it's better for us if the off-price segment as a whole continues to perform well. Lorraine Hutchinson: Thank you. And I wanted to follow-up on pricing. Did you take price in 3Q? And what impact did that have on your comp? And then what's your strategy on pricing for the fourth quarter? Michael O'Sullivan: Yes. That's a good question. I would sum up our pricing strategy in three words: be very careful. We recognize that because of tariffs, prices are going up across the retail industry. But we will not raise prices unless we've seen them go up elsewhere. And even then, we will test and monitor the impact of those price increases. We've said this many times before, we have a very price-sensitive customer. We know that the reason that they shop at Burlington Stores, Inc. is that they're looking for a great deal. Our core strategy is to offer great value. And, of course, that means keeping prices low. Now our approach to tariffs this year has been to avoid retail pricing increases, and to focus instead on finding other margin and expense offsets. Kristin described those actions earlier. We're very pleased with how that approach has worked. It's allowed us to avoid price increases but still to grow margin and earnings this year. Now of course, we have tested some things. We've tried some higher prices. And in Q3, when we saw other retailers take prices up, we tested higher retails in some categories. But I would say that those pricing tests were in a very limited number of areas. And mostly, the higher retails worked. We saw very little resistance from customers. So going forward, I would say that we will probably get more aggressive, but we kind of have to see what happens in Q4. And, also, of course, we need to see what happens with tariff rates going forward. Operator: Your next question comes from the line of John David Kernan of TD Cowen. Your line is now open. John David Kernan: Good morning. Happy almost Thanksgiving. Michael, it sounds like you see store openings and the cadence of growth. Sounds like you see an opportunity to take up the number of new stores. Can you expand a bit upon this? What are you seeing in terms of the new store pipeline, both from a real estate perspective and also potential new store productivity? Kristin Wolfe: Good morning, John. It's Kristin. I'll take this one. We're really pleased with the performance of our new stores across the board. They've been delivering results that are in line or better than expectations as well as our financial hurdles. It really reinforces the strength of our site selection process and the Burlington Stores, Inc. brand really across markets. And it's worth pointing out just with some data. Our Q3 comp course is at the midpoint of our guidance. But our total sales growth in Q3 was at the high end of our guidance, up 7%. And this was driven by new stores. And based on our Q4 guidance, our total sales increase is planned at 9% at the high end as we benefit from the slew of new stores we just opened in the third quarter, 73 net new. Now as I mentioned in the prepared remarks, we now expect to open 104 net new stores this year. This is a modest step up from our original plan of 100 net new. And this increase reflects really two things. First, the ability to pull forward some openings that were originally slated for 2026, and secondly, the strength of our real estate pipeline. Looking ahead to 2026, we're raising that new store target to at least 110 net new stores. This is supported by this robust pipeline, but also by 40 leases we secured from the Joanne Fabrics bankruptcy. These incremental sites really give us confidence in sustaining the high level of growth next year. And as for the pipeline for 2027 and beyond, it's still early to provide specific numbers, but I will say we feel very good about the long-term opportunity. Our real estate team continues to identify attractive locations. And we already have a very healthy pipeline for new stores beyond 2026. John David Kernan: Got it. Maybe as a follow-up, obviously, three off-price retailers are resonating strongly with consumers. I like how Michael framed the industry's opportunity. You're clearly feeling more bullish on the number of stores, maybe a little bit more cautious on comp sales, but more bullish on the potential margin expansion potential for the business. Is that the right way to think about it? Kristin Wolfe: Great. Yes. John, thanks for that question. It's a good question. So two years ago, we shared our objective of getting to approximately $1.6 billion in operating income by 2028. The headline is that we feel very good about the progress we're making towards this goal. We're tracking in line with where we thought we would be at this point. And we're especially pleased with the progress we made in driving operating margin at the high end. Michael said this thoroughly, but worth repeating. At the high end of our updated 2025 margin guidance, we will have achieved 170 basis points of the 400 basis points of opportunity that we identified two years ago. And we will have achieved this despite the negative headwinds from tariffs. So really, to sum up, we're pleased with the progress. But the way you characterize the long-range model in your question is about right. It's true. We're more bullish on new stores. And we are more bullish on margin expansion. On the comp, we still believe we can drive an average annual comp growth of 4% to 5% over the remaining three years of the long-range plan, but we recognize that there is external uncertainty so we are slightly more cautious here. Operator: Your next question comes from the line of Brooke Siler Roach of Goldman Sachs. Your line is now open. Brooke Siler Roach: Good morning and thank you for taking our question. Michael, I'd like to ask you about the trends that you're seeing with the lower-income customer. How did these customers perform in the third quarter? And are there any other callouts in terms of customer demographics that are worth sharing? Michael O'Sullivan: Well, good morning. Good morning, Brooke. Thank you for the question. The headline is that we feel very good about the lower-income customer. We've been and the trends that we're seeing with that demographic. We've been watching this particular demographic segment very closely all year. This is a critical customer for us. You know, given the economic uncertainty and the cost of living issues, we've been concerned about lower-income customers. But the good news is that this customer has been very resilient. When we look at our stores in lower-income trade areas, they continue to outperform the chain. This has been true for several quarters now. I should say as we listen to other retailers, it seems like this is a consistent pattern. You know, many retailers are reporting strength with lower-income consumers. In terms of other demographic callouts, there's one other callout. Specifically relating to Hispanic customers. Again, we've been watching this demographic very closely all year. It's an important customer for us. We have many stores across the country that are in trade areas with a high proportion of Hispanic households. You may recall that in previous quarters, we've said that our stores that are in trade areas with a high proportion of Hispanic households have been slightly outperforming the chain in terms of comp growth. Well, in Q3, the trend in those stores slipped. They've gone from slightly outperforming the chain to trailing the chain. Now the change in trend for those stores varies a lot depending on the specific market and even the specific particular location of the store. In other words, it's very localized to what's happening in those particular cities. And, of course, it's difficult for us to say how long those localized slowdowns might last. Brooke Siler Roach: Great. And then my follow-up would be for Kristin. Kristin, can you give us more color about your guidance for the fourth quarter, both in terms of comp sales and for earnings? Kristin Wolfe: Good morning, Brooke. Thanks for the question. Sure. Let me repeat a little bit. I think it's worth reiterating some of what we described earlier. On comp store sales and total store sales, we're maintaining our Q4 previously issued guidance. So comp of flat to 2% and total sales growth 7% to 9%. We do, as we said, feel really good about our recent trend in Q4, but it's still early in the quarter. The critical weeks are ahead of us. And in those coming weeks, we'll be up against very strong comparisons from last year. So we'll continue to take a cautious approach on sales. On the margin side, we are increasing our margin and EPS guidance for Q4. We now expect our Q4 adjusted EBIT margin to increase by 30 to 50 basis points. We do anticipate some tariff-driven pressure on merch margin in Q4, but we expect to more than fully offset that pressure and drive overall operating margin expansion in Q4 versus last year. And the drivers of the margin leverage should be similar to what we saw in Q3. We expect continued cost savings in freight and supply chain and in-store related initiatives. And finally, we should also see additional leverage in SG&A given the higher incentive comp accrual in the fourth quarter of last year. Operator: Your next question comes from the line of Alexandra Ann Straton of Morgan Stanley. Your line is now open. Alexandra Ann Straton: Great. Thanks for taking the question. Michael, can you talk about the availability of off-price merchandise as you're heading into the fourth quarter? And then I have a quick follow-up. Michael O'Sullivan: Yes. Good morning, Alex. Thank you for the question. I would characterize the buying environment for off-price as very, very strong. Earlier in the year when tariffs were first introduced, there were some concerns, a lot of concerns about whether vendors would be reluctant to bring potentially excess merchandise into the country. But frankly, concerns have just not materialized. Even some of the categories where supply was tighter in the summer, categories like housewares and home, also housewares and toys, have come back. I think that's probably pretty consistent with what you've heard from our off-price peers. A lot of great merchandise at great values, and we're taking advantage of it, both to flow to stores and to build up reserve. Alexandra Ann Straton: Perfect. And then just on the cold weather merchandise in the quarter, is there any just detail you can provide on that dynamic, the impact on the overall comp for the chain? I know you've given a lot of details, but anything else worth highlighting there? Michael O'Sullivan: Sure. Yeah. So after back-to-school, the cold weather merchandise becomes very important to our mix. As I said earlier, it expands to more than 20% of our total assortment during the quarter. Now, cold weather merchandise, just to define it, includes categories like coats, jackets, boots, and accessories like gloves and scarves. It's only stuff you need if it's cold outside. And our customer is very need-driven. For September through mid-October, our comp sales in those businesses were down in the negative mid-teens. Then in the last two weeks of October, once the weather turned cold, they grew up double-digit comp. You know, maybe if I step back for a moment, there are two ways in which milder weather in September and October affects our business. There is the direct drag on our overall comp growth from lower sales in the cold weather categories that I just mentioned. That's one impact. But there is also an impact on our non-cold weather businesses. Because if you think about it, if the customer comes in to buy a coat, she's probably gonna put some other things in the basket too. So if because the weather is mild, she doesn't come into the store to buy that coat, then this doesn't just hurt our coat sales. It impacts other businesses as well. Now mathematically, the drag on our overall comp from cold weather categories alone was worth about 200 basis points in Q3. If you then add the impact that lower traffic had on other non-cold weather categories, you can easily get up to a few points of comp. And I think that's somewhat consistent with the fact that we saw a bounce back to mid-single-digit comp growth in October, once the weather had turned cold. Operator: Your last question comes from the line of Mark R. Altschwager of Baird. Your line is now open. Mark R. Altschwager: Kristen, could you give us some more detail on regional trends, category trends as well as any of the detailed comp metrics for Q3? Kristin Wolfe: Good morning, Mark. Yes, absolutely. In terms of regional performance, the Southeast was our strongest region in the quarter. The West, Northeast, and Midwest were in line with the chain, while the Southwest trailed the chain. On category performance, we saw the strongest performance in beauty, accessories, and shoes. Apparel comped slightly above the chain, while home was softer, comping below the chain in Q3. In terms of the comp metrics, our traffic was down in the third quarter. That was largely driven by September and early October when weather was unseasonably warm, and this lower traffic was offset by a higher average basket size. So for the quarter, we were pleased to see that both conversions and basket size or average transaction size were higher than last year. So this tells us that once she's in the store, she liked what she saw. Mark R. Altschwager: Excellent. Thank you. And then, Michael, as we look at the Q4 comp guidance, do you view that as conservative just given typically less weather sensitivity in the fourth quarter? Thank you. Michael O'Sullivan: Good morning, Mark. Sometimes when we give comp guidance, we'll also sort of signal, if you like, if we think there may be upside. I don't think I don't see a lot of upside in our Q4 comp guidance. The reason I say that is that we're up against 6% comp growth from Q4 last year. So 6%. If you take our 0% to 2% guidance, that gets you to a two-year stack of 6% to 8%. Now we exceeded that in Q2 of this year, but we were well below it in Q3. I should also add that when I look at our off-price peers, the way I'm interpreting their guidance, it looks like they are slightly below us on a two-year stack basis. So even though we're happy with our recent trends, and with how we started the quarter, and we're excited for our holiday assortments, we're not anticipating significant upside to our Q4 comp sales guidance at this point. Operator: I'd now like to hand the call back to Mr. Michael O'Sullivan for final remarks. Michael O'Sullivan: Let me close by thanking everyone on this call for your interest in Burlington Stores, Inc. We would like to wish you all a very happy Thanksgiving. We look forward to talking to you again in March to discuss our fourth quarter and full-year 2025 results. Thank you for your time today. Operator: Thank you for attending today's call. You may now disconnect. Goodbye.
Ahmed Moataz: Hello, everyone. This is Ahmed Moataz from EFG Hermes and welcome to IDH's Third Quarter of '25 Results Conference Call. I'm pleased to be joined with Dr. Hend El Sherbini, Chief Executive Officer; Sherif El Zeiny, Vice President and Group CFO; and Tarek Yehia, Director of Investor Relations. The company, as usual, will start with a brief presentation and then we'll open the floor for Q&A. IDH management, please go ahead. Tarek Yehia: Thank you, Ahmed. Good afternoon, ladies and gentlemen and thank you for joining us for our third quarter analyst call. My name is Tarek Yehia, I'm Head of Investor Relations. Joining me today, Dr. Hend El Sherbini, our CEO; Mr. Sherif El Zeiny, our CFO and VP. Dr. Hend will begin the call with a summary of latest period main highlights. After that, I will discuss in more details the main macroeconomics and geopolitical trends seen across our markets. Then after my presentation, Mr. Sherif will offer a deeper analysis of our financial performance. Then we will open for Q&A. Dr. Hend will start now. Thank you. Hend El Sherbini: Thank you, Tarek and good afternoon, everyone. I'm Dr. Hend El Sherbini, CEO of IDH. As we approach the end of what has been another very strong year for the group, I'm pleased to report a robust set of results for the first 9 months of 2025. The performance we are presenting today reflects not only healthy market dynamics but also the tangible results of the strategic initiatives we have been implementing over the past 2 years, particularly around network and geographic expansion, operational optimization, digitization and service diversification. Throughout the year, we have continued to strengthen our core business in Egypt and Jordan, while making pronounced progress in newer markets, namely Nigeria and Saudi Arabia. We are also very encouraged by the sustained improvements in our profitability metrics, which confirm the scalability of our model and our ability to translate revenue growth into margin enhancement. We are particularly pleased to see the continued strength and stability of operating conditions in our home market of Egypt, where macroeconomic sentiment has improved and demand for high-quality diagnostic services remain strong. Turning to our performance in more detail. During the first 9 months of the year, we continued to build on the strong momentum established earlier, delivering 41% revenue growth year-on-year, supported by growth across both volume and value metrics. Test volumes increased by 10% with all operation geographies contributing to this expansion, supported by stronger patient engagement, deeper penetration in walk-in and corporate channels and improved referral flows. At the same time, our average revenue per test rose 28%, reflecting a richer test mix, broader uptake of high-value radiology and specialized diagnostics and favorable price adjustments introduced earlier in the year. These trends also helped us further strengthen our average test per patient, which reached 4.6 tests per encounter, demonstrating the continued depth of patient relationships and our success in expanding cross-service utilization across our platform. In Egypt, momentum strengthened further through Q3, supported by solid growth in both volumes and value alongside strong brand equity and stable market conditions. Test volumes in Egypt continued to grow steadily, while average revenue per test saw a significant uplift, owing to favorable mix dynamics and strong -- with strong traction in radiology, specialized diagnostics and corporate channels. Egypt remains the core engine of group performance, contributing 84% of total revenues in the 9 months of 2025 and continued to demonstrate high scalability, resilience and operating efficiency. The ongoing expansion of our physical network in Egypt continues to be a key growth driver. Over the past 12 months, we have added 103 new branches in Egypt, bringing the total up to 670 locations nationally as of September. These new sites have helped deepen our presence, not only in Greater Cairo but also in fast-growing regional cities, allowing us to better serve both corporate and walk-in patients. Our household service remains a strategic differentiator, sustaining its strong contribution of around 20% of Egypt's revenue, continues to demonstrate the effectiveness of our post-pandemic strategy and reinforces our position as an early mover in home-based diagnostics in the region. Al Borg Scan continues to demonstrate strong momentum as a key component of our long-term strategy to build a fully integrated diagnostics platform. Year-to-date scan volumes and patient traffic recovered well following the Q1 of Ramadan slowdown with Q3 recording clear sequential volume growth. The integration of Cairo Ray for radiotherapy, which was consolidated this quarter, is progressing well. This acquisition provides us with direct access to radiotherapy service and strengthens our positioning in oncology diagnostics, a fast-growing and strategically important segment. We expect radiology to play an increasingly prominent role in our growth mix over the coming quarters, supported by continued network expansion, enhanced service capability and rising demand for specialized imaging. Over the past 2 years, a key strategic priority for IDH has been the successful launch and scale up of our Saudi operations. I'm pleased to share that our presence in the Kingdom continues to develop very encouragingly with strong momentum supported by growing demand, deep market visibility and sustained improvement in both volume and value metrics. Year-to-date, we have seen revenues more than quadruple compared to the same period last year, reflecting rising test volumes, improving mix and early network scale benefits. This growth continues to highlight the effectiveness of our ramp-up strategy in the market, which aims to accelerate revenue growth and establish Biolab KSA as a key player in the large but high fragmented Saudi diagnostics market. As part of this plan, we inaugurate our third branch in Riyadh during the third quarter and we remain on track to open 3 additional locations over the coming months. These new branches will help extend our footprint across high potential catchment areas. At the same time, we continue to advance our growth approach, which includes targeted marketing campaigns to build brand recognition, selective promotional initiatives to drive patient acquisition and ongoing discussions with the insurers and corporate health care providers to broaden our referral and partnership networks. While still in the early stages of development, Biolab KSA is demonstrating strong operation traction and reaffirming our belief in the long-term potential of Saudi Arabia as a key pillar in the group's regional growth strategy. As always, profitability remains a core focus for us and we are very pleased to see sustained improvements across all levels of the income statement. We continue to benefit from strong operational leverage, tighter cost controls and better resource allocation across our subsidiaries, including Nigeria, where Echo-Lab remained positive EBITDA throughout the 9-month period, marking a key milestone in its turnaround and confirming the potential of its high -- of this high-growth market. Overall, both COGS and SG&A and share of revenue continued to decline, supported by disciplined cost management and our growing digitization efforts. COGS to revenue fell to 57%, while SG&A declined to 15% from 17% last year, underscoring the success of our optimization initiatives. Consequently, our EBITDA margin expanded to 35% from 30% last year, while gross profit margin rose to 43% compared with 38% in the 9 months of 2024. These efforts, combined with strong top line growth and improved pricing dynamics have translated into meaningful margin expansion and greater earnings quality with adjusted net profit more than doubling year-on-year while excluding FX effects. Before handing the call over to Tarek, I would like to briefly reiterate our full year guidance in light of our year-to-date performance and the momentum we are seeing across all markets. Given the strong results delivered over the first 9 months, coupled with relatively stable operating conditions, continue to expect full year revenue growth to come in at more than 35% in the full year of 2025. On the profitability front, we remain confident in delivering an EBITDA margin more than 30%, supported by sustained cost discipline, stronger operating leverage and the continued improvement in our Nigerian operations. With that, I will hand the call back over to Tarek and Sherif, who will take you through key trends across our markets and a more detailed breakdown of our financial performance of the period. Thank you very much. Tarek Yehia: Thank you, Dr. Hend. This year, we have continued to operation in relatively stable conditions with supportive macro trends and constructive across all our key markets as we approach the end of 2025. In Egypt, we are continuing to see slower inflation compared to prior years with the latest trading of September coming at a multi-month low of 11.7%. [ Decreasing ] increasing inflation pressure have been supported by relative strengthening of EGP versus dollar as well as increased ForEx inflows into Egypt as investor confidence recovers and remittance continue to rise. In fact, in recent weeks, we have seen EGP continuing to appreciate, reaching a low of 47.3 to dollar in October and as low as 46.92 last week. Successful rate cuts throughout the year continued to reach 6.25 points have now brought the overnight deposits to 21%. This will undoubtedly help prop up local investments activity and drive further recovery in consumer spending. Similar to Egypt, Nigeria also has seen relative stability in 2025. Inflation has come down from last year highs and expected to support gradual recovery in consumer spending. Over in Jordan and Saudi, the economic situation remained largely stable despite increased regional uncertainty. While Saudi Arabia economic could be tested by the ongoing global trade tensions, we remain confident that the excellent work done by the Saudi government to build resilience in the economy will help safeguard the country. Turning quickly to our latest results. Egypt continued to deliver strong growth with revenue rising 44% year-on-year, supported by both volume expansion and significant increase in average revenue per test, particularly driven by radiology and high-volume diagnostics. Meanwhile, Jordan continued its solid performance, reporting revenue growth in both AP and local currency terms. Test volume increased by 21% year-on-year, supported by Biolab ongoing promotion campaign and digital outreach initiatives. In a market where volume-driven growth is critical for long-term sustainability, we are pleased to see Biolab's strategy continue to deliver strong volume momentum and patient retention through community engagement and service quality. In Nigeria, Echo-Lab has maintained its positive EBITDA momentum supported by successful implementation of our turnaround strategy launched last year. We are increasingly confident in long-term potential for our Nigerian subsidiary to expand its radiology and specialized testing capability and capture the significant upside of a growing market. In Saudi, the ramp-up progressed ahead of expectations with revenue more than quadrupling year-on-year and [ subscription ] growth supported by increasing brand visibility and network expansion. Finally, in Sudan, operation remains significantly constrained by the ongoing conflict with only one branch partially operating and no material updates to report at this stage. I will now handle the call to Mr. Sherif, who will provide a more detailed overview of our cost and profitability for the first 9 months. Sherif Mohamed El Zeiny: Good morning -- good afternoon, ladies and gentlemen and thank you for your time today. As Tarek mentioned, during my presentation, I will focus on costs, margins, profitability and our working capital position before opening up the floor to your questions. In line with our guidance, profitability for the first 9 months of the year has continued to improve, supported by our group-wide efforts to boost operational efficiency and keep spending at bay. A major focus area over the last 18 months has been digitalization, where we have continued integrating advanced data tools and analytics into our internal platforms, procurement systems and financial planning to enhance decision-making and improve cost discipline. These efforts, combined with a stronger operation leverage and better resource allocation helped drive meaningful improvements in efficiency with both COGS and SG&A as a share of revenue declining versus last year. In parallel, we also -- we are also keenly focused on keeping costs down. Our efforts here have translated in a 9 percentage point drop in our total cost to revenue ratio for that period compared to last year. More specifically, our COGS to revenue ratio improved to 57% in 9 months '25, down from 62% in the same period of last year, supported by disciplined inventory management and stronger purchasing processes. The most notable improvements came within raw materials, which decreased to 19.6% of revenue, down from 21.9% last year, reflecting our scale advantages and smarter procurement practices. At the same time, total wage and salaries as a share of revenue remained broadly stable, underscoring our balance between supporting our staff with appropriate salary adjustment while continuing to optimize headcount. As you can see in the bottom right chart, these efficiency gains translated directly into a stronger profitability with gross profit margin expanding to 43% from 38% last year and EBITDA margins rising to 35% from 30% in 9 months 2024. On the SG&A front, spending remains well contained with SG&A as a share of revenue declined to 15%. The main increase within SG&A was in advertising and marketing expenses, which continued to support the ramp-up in Saudi Arabia and targeted promotional initiatives in Egypt and Jordan. Moving to our bottom line. We reported a net profit of EGP 964 million in 9 months 2025, up 33% year-on-year. As highlighted earlier, last year's reported net profit, including substantial ForEx gains, which distort direct comparisons. When controlling for those ForEx gain, adjusted net profit increased more than 119% year-on-year with an associated adjusted net profit margin of 17% versus 11% last year. As always, we maintained a disciplined approach to working capital management as we supported rising demand while preserving strong liquidity. Similarly, we saw our cash conversion cycle improved further to reach 127 days in September 2025 versus 155 days at the end of '24. It is also important to mention that as expected, we saw a decline in days inventory outstanding, stronger sales momentum and more efficiency inventory turnover during the second and third quarters of the year following the seasonal Ramadan slowdown in March. Finally, as 30th of September 2025, our total cash reserves stood at EGP 1.8 billion with a net cash balance of EGP 271 million. Thank you for your attention. We now welcome any questions you may have. Thank you. Ahmed Moataz: [Operator Instructions] There is one question in the chat on whether you're at a position right now to disclose the planned price increases in Egypt that would start from January of 2026. Tarek Yehia: We're still in the process of preparing the budget, and it's too early to comment on this but of course, will be a price increase for next year. Ahmed Moataz: Understood. The second is on whether you can disclose a time line for the breakeven for Nigeria -- sorry, Saudi operations. And if you have a targeted revenue contribution over, let's say, 3, 5 or even longer than that as a percentage of total revenue. Tarek Yehia: For the EBITDA, we are expecting a breakeven by end of 2026. Ahmed Moataz: Understood. And is there something on the revenue contribution as well? Tarek Yehia: Revenue continued to grow year-over-year and contribution to the top line still less than 1% but by time, gradually will increase. Still Egypt represents 82% and Jordan represents 14%, 84% for Egypt and 14% for Jordan. Ahmed Moataz: All right. Two questions from [ Johannes ]. Can you talk us through the change of ownership of the Actis stake and what you expect from Elliott? That's one. The second is, what is your dividend policy at the moment? Hend El Sherbini: So I mean the Actis stake has been bought by Elliott as a part of a bigger deal. We don't really have any visibility on this right now. And regarding the dividends, as usual, any money that we have, which are not used for investments and for the work, we give it back as -- we give it back to investors as dividends, as long as it's -- we are able to do that. Ahmed Moataz: [Operator Instructions] We'll take questions from the line of [ Darren ]. Unknown Analyst: Dr. Hend, you just -- you commented that the Actis sale is part of a bigger deal. What does that mean exactly? Do you have any other color there you can share? Hend El Sherbini: I know that Actis have [ exited ] private equity and they sold their shares in IDH and other companies to Elliott. But I don't know exactly -- I don't have the exact details of this deal. Unknown Analyst: Okay. Understood. So you're saying there's other businesses that have been sold to Elliott. And you haven't had -- the management team hasn't had any correspondence with Elliott at all? They haven't reached out to you or you guys haven't reached out to them to get a sense of what their plans are? Hend El Sherbini: I've seen them when I was in London. I've met with them. And -- but this was like an introductory meeting, nothing -- no specifics. Unknown Analyst: And do you have a sense, is it their intention just to be passive shareholders? Is it a purely financial investment? Or is there something more strategic? My understanding is they have, I think, interest in another Egyptian diagnostics business, if that's correct? Hend El Sherbini: No, this I don't know. Which other diagnostic business? Unknown Analyst: I think it's a much smaller one but they were part of a transaction in last year, I believe. But I can't remember the name of the firm but anyways. Hend El Sherbini: I haven't heard -- and they didn't mention it, no. Ahmed Moataz: We received 2 questions in the chat. I'll take them one by one. First one is how much CapEx have you got planned for Saudi operations and expansions? Tarek Yehia: For Saudi, we have a plan for the next 5 years with a CapEx of $20 million. Ahmed Moataz: All right. This is 2025 included? Or when you say 5 years, this is 2026 and beyond? Tarek Yehia: This starts from 2026. Ahmed Moataz: Starts from 2026. Okay. Two more questions in the chat. The first one, [indiscernible]. Please, can you share your expectations on growth beyond this year in terms of volume and value? And can you also comment on market-specific growth expectations? Tarek Yehia: We're still in the process of preparing the budget but we are aiming to targeting growth across all the geographies we are working at -- operating in. Ahmed Moataz: Understood. [ Ali Masood ] is asking, how many Actis Board representatives are on IDH's Board? And any expectations on if and when those members will step down? Hend El Sherbini: So there's only one Board member from Actis and he's also representing -- I mean, he's not stepping down because he's -- I think he's going to be also Elliott's representative. Ahmed Moataz: Understood. Can you comment on your expectations for branch additions in Egypt in 2026? Will it be at a similar level to 2025, higher or low? Tarek Yehia: It is -- we're still also the same for the budget. We're still in the process but we will see growth in the number of branches as -- and our growing brand -- ongoing process of growth each year. Ahmed Moataz: Sure. [indiscernible] is asking, how will the growing contribution from Saudi impact group returns and margins when Saudi is in steady state? Tarek Yehia: After 5 years for the 5-year plan for Saudi to represent 7% from the group revenue. Ahmed Moataz: Okay. And the question was more on how do you expect this when it has a 7% revenue contribution to impact your overall returns and margins. I think the question is trying to assess whether Saudi operations by itself is margin accretive or not relative to what you're generating right now and at the same time, return accretive or not? Do you want me to repeat the question? Hend El Sherbini: We're expecting it in the 5 years to be in the vicinity of the 30%, if this is -- if this answers the question. Ahmed Moataz: [Operator Instructions] All right. We haven't received any -- no, we actually did one, sorry, 2 questions. What does the $20 million Saudi CapEx imply for the number of branches in Saudi 2030 Vision. Sorry, one second, I'll re-read the question. Actually, we'll skip this one and I'll go back to it. Are margins at 38% sustainable? Or do you think it's a function of the strong EGP FX taking place this year? Hend El Sherbini: I mean, as long as we have a stable currency, I think this is sustainable. We're getting back to our 40% margins. And the strong FX has nothing to do with our improvement in margin. However, the stabilization of the currency is, of course, is helping in maintaining our margins. Ahmed Moataz: All right. Back to [ Farooq's ] question. How does the $20 million Saudi CapEx imply for the number of branches by 2030? So by the end of the year plan, how many -- or by the end of the 5 years, how many total branches you have in Saudi? That's one. And the second is, is the Saudi strategy branch-focused more? I think he means corporate or wholesale contract focus because [ Farooq ], can you send a clarification on the second part of the question until they answer the branches part? Hend El Sherbini: So we're expecting 45 branches by the end of the 5 years. And this is where the CapEx is going together with, of course, the instruments and everything else. This in terms of CapEx. In terms of revenue, we're expecting a breakdown of 50% corporate and 50% walk-in. Ahmed Moataz: Understood. Could you also please talk us through the outlook on margins for Jordan? Tarek Yehia: Jordan margin for the current year, in the range of 30%. Ahmed Moataz: All right. [ Ali Naser ] is asking, can you please provide details on the Cairo Ray acquisition? What was the investment size? And what is the annualized P&L impact on the consolidated level? And lastly, how much did it impact third quarter results? Tarek Yehia: The total investment cost was around $400 million. sorry, EGP 400 million. Ahmed Moataz: And the rest of the question, please, what is the annualized P&L impact? And how much did it impact third quarter results? Tarek Yehia: For the quarter, it is minimal because we already consolidated for a small portion in Q3. The same will apply for Q4 and more contribution will be done in the full year next year. Ahmed Moataz: Understood. [indiscernible] is asking, what is a stable long-term level for COGS and SG&A as a percentage of revenue? How much more cutting or savings do you expect and the potential uplift to EBITDA margins? Tarek Yehia: For the COGS to revenue ratio, which already improved to 57% in the 9 months, coming down from 62%, we're expecting we can go down 1% or 2 more percent going forward. And also for the SG&A, it already went down from 21.9% to 19.6%. And going forward, we can see 1% or 2% more advantage from recruitment and a lot of cost optimization that we are in process improvement year-over-year. Ahmed Moataz: Understood. [ Marina ] is asking, how do you see the contract and walk-in dynamic play out in Egypt over time, let's say, for the next -- sorry, 3 to 5 years? Do you expect contract volumes to continue growing faster than walk-ins? And what does that mean for longer-term margins? Hend El Sherbini: So yes, we expect the contract contribution to grow. However, we're also seeing increase in the walk-in volumes. So both are increasing. And this -- I mean, this is not -- this is affecting -- this is not really affecting our margins directly because in the corporates, we are seeing increased volumes. So the test per patient in the corporate side is much higher than in the walk-in side. And as this is an economy of scale, we always want both things, the increase in volume as well as the increase in pricing. So this is -- I think this dynamic we have been seeing for a few years now and it hasn't affected our margins. Ahmed Moataz: Understood. [indiscernible] is asking, volume growth in Egypt was solid at 9%. Is this primarily driven by the 103 new branches opened over the last year? Or are you seeing same-store sales growth in the more mature branches? Hend El Sherbini: We are seeing volume growth in both the new and the existing branches on both sides, corporate and walk-ins. Ahmed Moataz: [indiscernible] has a question. Unknown Analyst: Just a follow-up on the question I asked about Cairo Ray. I don't think you answered that. Please again but I know you bought it for EGP 400 million but I wanted to ask about what is the revenue of this company? What's the EBITDA of this company? What's the net income of this company on a trailing 12-month basis or maybe '26 basis? Sherif Mohamed El Zeiny: Our full year estimates on the top line is around EGP 52 million and on the EBITDA level, around EGP 16 million. This translates to around 30% EBITDA margin. Ahmed Moataz: All right. I'll pass it back to you, Dr. Hend, Sherif or Tarek for any concluding remarks. Tarek Yehia: Thank you, everyone. If you have any more questions, you have our contact. We're happy to have a follow-up call, any -- respond to any e-mails. Thank you, everyone, for attending today and thank you, Ahmed, for hosting the call. Hend El Sherbini: Thank you. Thank you, everyone. Ahmed Moataz: Thank you, everyone, and to IDH's management as well. Have a good rest of the day, everyone. This concludes today's earnings call. Tarek Yehia: Thank you.
Conversation: Justin Platt: Good morning, everybody. Thank you for joining us today. Welcome to the Marston's preliminary results for financial year '25. My name is Justin Platt, CEO. And with me, I have Stephen Hopson, our new Chief Financial Officer. We'll take you through our results today, and we'll do that with the following running order. I'll start with the headlines. Stephen will then share the financial results, and I'll then give some insight into the strategic progress we've been making through the year before wrapping up and taking any questions you might have. So the headlines, 2025 has been a very strong year for Marston's. It's been a year when we've been very focused on delivery, delivery of the strategy we outlined a year or so ago at the Capital Markets Day. And the results bear out that the strategy is working and driving real progress for us as a business, with profit before tax of GBP 72 million, that's year-on-year growth of 71%, and that's on top of the 65% growth we delivered a year ago. And that profit delivery has helped us drive cash flow. So cash flow at GBP 53 million. That's ahead of our GBP 50 million target, and it's also earlier than planned. Alongside that, it's really pleasing we've made great progress with our new pub formats, 31 launches this year. They're performing very strongly for us and driving big revenue uplifts. It's very clear now that these formats can be a significant growth engine for us in the future. And we've been doing all of that while giving our guests a great time. So record satisfaction scores with a reputation score at 816. So overall, a really good set of results, and it's a set of results that leave us feeling very positive in our outlook going forward. So that's the summary. I'll now hand over to Stephen, and he'll take you through the financials. Stephen Hopson: Thanks, Justin, and good morning, everyone. As Justin said, this is my first set of full year results at Marston's, and I joined the business at what is clearly an exciting time for Marston's. As these numbers show, we're making great progress and delivering against our goals with lots more to come. On my first slide, I'd like to begin by looking at some of the key group financial metrics. Total revenue was GBP 898 million, which showed growth of 1.6% on a like-for-like basis. EBITDA was up 7% to GBP 205 million, with the margin expanding by 140 basis points to 22.8%. That's been driven by good operational discipline, particularly on labor and controlling input costs alongside the revenue growth. As a result of the EBITDA growth and lower finance costs, PBT stepped on significantly. Underlying profit before tax was GBP 72 million, nearly 3x where we were just 2 years ago. And importantly, this has translated into stronger cash generation. Recurring free cash flow was GBP 53 million, which is up 22% year-on-year and ahead of our GBP 50 million recurring free cash flow target. Finally, we've made real progress on the balance sheet. Net debt has reduced from 5.2x, to 4.6x EBITDA as we continue to delever. So overall, excellent progress on both profit and cash. Turning now to look at our income statement in a bit more detail on the next slide. As I mentioned, FY '25 marked another year of substantial profit growth for Marston's with PBT up 71%. Reported revenue was flat, although this masks the impact of the FY 2024 disposal program, which I'll show on the next slide. I've already mentioned that EBITDA was up 6.5%, and that GBP 12.6 million of EBITDA improvement basically flowed through to operating profit, which was up 8.6% to GBP 159.9 million. Net finance costs were significantly lower year-on-year as a result of ongoing delevering and last year's CMBC disposal, leading to that very significant jump upwards in PBT. And whilst our effective tax rate increased, this simply reflects a return to the U.K.'s headline rate of corporation tax after a period of a lower rate. Together, this income statement shows a stronger and more profitable business with improved earnings quality and stronger margins. Turning to revenue performance. As I've already touched on, revenue for 2025 was GBP 898 million and was broadly flat year-on-year, but I would like to pick out 2 points on this chart. First, that the revenue includes a negative movement of about GBP 40 million in relation to the disposal of pubs over FY 2024 and 2025. To put the disposals into context, about GBP 50 million of assets were sold as part of the disposal program. So it's important to consider that impact when assessing year-on-year revenue progression. And the second point is that our like-for-like performance continues to be ahead of the market, which grew by 0.7% in the year, with positive contributions across all key categories of drink, food and machines. Turning now to look at margin. A key target for the group outlined at the CMD was to grow our underlying EBITDA margin by 200 to 300 basis points from FY '24 levels, giving a target range of 23.4% to 24.4%. And I'm pleased to say that this year, we've delivered 140 basis points of margin expansion, achieving total EBITDA margin of 22.8% in the year. Labor productivity gains were the single biggest contributor, supported by the rollout of improved scheduling tools, which Justin will cover in a bit more detail later on. The labor productivity benefits in the year were enough to fully offset the increases in the National Living Wage and National Insurance contributions, which came in from April 2025. We also saw benefits from improved food and drink margins, energy savings and other operational efficiencies. These gains were partially offset by inflationary pressures, including those employment cost increases that I mentioned and some investment in key areas, including more marketing. But overall, we've made real progress embedding cost discipline and delivering margin expansion across the business, and we feel that our EBITDA margins really do benchmark very well across the whole pub sector. We view ourselves as a high-margin local pub company, and we see further opportunity to increase the EBITDA margin in FY '26 as we move towards our CMD target. Turning now to look at capital expenditure. Total CapEx for the year was GBP 61.2 million, which is equivalent to 6.8% of revenue, and we're now approaching the 7% to 8% of revenue range that we talked about in the CMD. This is an increase from GBP 46.2 million last year, with the main driver being our pub format conversions, which I'll come back to shortly. Of this total, GBP 53.2 million was in maintenance and other CapEx deployed across our 1,300-strong pub estate. This includes works such as maintenance, estate management, investment in new IT platforms and other items. But I also want to pull out a bit more granular information on our pub format conversions, which are very important to our overall growth plans and which Justin will cover in more detail. In the year, we covered 31 conversions to our differentiated formats, which are delivering strong results. Average revenue uplifts were 23% year-on-year, and EBITDA returns are over 30% to date, in line with our CMD targets. At an average cost of GBP 260,000 a site, we believe these conversions represent excellent value for money. And of course, we've only completed a small number so far in comparison to our estate. So there's a lot more to go at in this space. Clearly, the driver of increasing our capital expenditure is to improve the quality of our estate. So let's turn to that now. On this slide, we show that we ended the year with 1,328 pubs following the continuation of our estate optimization strategy. This included a small number of disposals in the T&L estate as well as conversion of some pubs to the partner model. As a result, the managed and partnership estate consisted of 1,182 pubs and the T&L estate had 146 sites at the year-end. EBITDA per pub increased to GBP 154,000, which, as you can see, is a 28% improvement over the last 2 years. This uplift reflects both operational improvements and tighter estate management with gains in both, our managed and partnership estate and the remaining T&L pubs. The result is a higher-quality, better-performing pub estate that's delivering stronger returns at a site level. I think this is a really important slide as it shows how the improvements being made to the business model are feeding through at pub level. Turning now to our cash performance in the year, which was another highlight. The takeout from this slide is that we delivered and, in fact, exceeded our CMD target of GBP 50 million of recurring free cash flow ahead of schedule, with GBP 53.2 million delivered in the period. And how was that delivered? Well, cash from ops increased year-on-year by GBP 5.6 million, which included the improvements in EBITDA I described earlier. Within that number, we also had a GBP 6 million saving from lower contributions to our DB pension scheme. And offsetting that, we had a small working capital gain, but it wasn't as large as last year's gain. Finally, we started making cash tax payments again of GBP 5.3 million as our profits improved. And as a smaller side, investors and analysts should note that in FY '26, we expect to move into the very large company corporation tax regime, which will accelerate our cash tax payments this year. And then in the second line on the chart, we had a GBP 15 million saving on interest, offset by GBP 15 million more CapEx year-on-year, as I just described, together with lower banking fees. So recurring cash was strong and now over GBP 50 million, which we expect to be able to exceed again this year. I also wanted to draw out on this slide that this strong free cash flow is fully absorbed by scheduled debt repayments, GBP 43.8 million of securitized debt repayments and GBP 8.6 million of lease liabilities. Clearly, this does mean that the group is delevering, as I'll show on the next slide, but also that our cash generation is currently fully utilized. And then just to complete the chart, after other movements in borrowing and disposals, there was a cash outflow of GBP 9.6 million in the year. And I'm now going to return to that progress about delevering in the group. This slide shows the different elements of the group's financing structures and the overall movement in net debt year-on-year. So starting at the bottom, net debt, excluding lease liabilities, reduced by GBP 46.2 million, to GBP 837.5 million. This takes our net debt-to-EBITDA multiple, excluding leases, down to 4.6x from 5.2x last year. That continues the recent downward trend and reflects the group's stronger cash generation and disciplined approach to capital investment. And then to briefly cover what makes up our financing structures, the largest element shown at the top is the securitization, which provides long-term predictable financing for the group. It does also impose some restrictions, both in terms of the assets that are tied up in the securitization structure and in our ability to move assets and cash around the group. However, these restrictions are manageable at present. Swaps are in place to fix the interest that we pay on the securitized debt. Other lease-related borrowings are essentially loans that were raised against other properties in the group outside the securitization. They were legally structured as sale and leasebacks, but where we have the option to buy back the properties at the end of the period for a nominal fee. Therefore, we treat these properties as effective freehold. And as noted in the slide, we're currently paying interest only on those borrowings. And I've put a new slide in the appendices showing investors how those structures will work over coming years. Our GBP 200 million bank facility was renewed in the year and now extends to July 2027 with relatively low drawings at the year-end, and cash balances ended the year at GBP 35.9 million. So in summary, we're continuing to delever at pace while preserving the secure long-term funding arrangements in the group. If I then broaden this to look at the group's whole balance sheet rather than just the net debt elements, this slide shows the evolution of our balance sheet and our net asset value per share, which increased to GBP 1.25 this year. And actually, the movements year-on-year are pretty straightforward. Our balance sheet is underpinned by GBP 2.2 billion of property assets, of which 81% of the estate by number of pubs are effective freeholds. The net book value of those assets increased by over GBP 100 million in the year, reflecting our annual estate reval and also our ongoing investment into the business. Net debt, as I've just described, reduced GBP 837.5 million, excluding lease liabilities, and lease liabilities were GBP 5.5 million lower. So total net debt was GBP 51.7 million lower year-on-year. Other liabilities increased by GBP 28.4 million, almost entirely due to an increase of GBP 28.5 million in deferred tax liabilities relating to the upward property revaluation. So overall, the property reval with its associated tax movements as well as the net cash generation of the group, drove GBP 136 million increase in net assets, which was a 21% increase year-on-year, to GBP 791 million, which equates to GBP 1.25 per share. Given the progress made on the balance sheet, I want to finish by looking at our capital allocation framework. And if I start by saying that this is not a change to our capital allocation policy, which remains consistent with what we laid out at the CMD, we remain focused on delivering sustainable shareholder value through a disciplined balance of investment in the business, delevering and ultimately, shareholder returns. That said, there are a couple of updates we wanted to share this morning. On the right-hand side of the chart, you'll see our continued progress on leverage, which, as I mentioned, has reduced substantially. We are pleased with that progress, but would like to see leverage continue to decrease. And today, we're committing to reduce leverage to below 4x on a pre-IFRS 16 basis. When we get to that level, we anticipate the start of capital returns to shareholders through dividends, share buybacks or a combination of both. What that looks like will depend on circumstances at the time, including the share price and investor preferences. To be clear, we also expect to see the group continue to delever below 4x even after the recommencement of shareholder returns. We believe this disciplined approach continues to be the right strategy to create and sustain long-term value. So to conclude, we've delivered a strong financial performance this year with clear progress on margin, profit and cash flow, and we expect further progress this year. And before I hand back to Justin, I'll briefly touch on 5 forward-looking points. First, we remain confident in the trading outlook for FY '26 with like-for-like sales currently tracking in line with last year and Christmas bookings up 11%. Second, we expect further progress towards our margin target of 200 to 300 basis points of growth versus 2024 following the 140 basis point gain this year. Our format growth engine will be accelerated this year with at least a further 50 refurbishments and our CapEx is expected to be within the target range of 7% to 8% of total revenue. And after achieving our CMD target ahead of schedule this year, we expect to deliver another year of GBP 50 million in recurring free cash flow in FY '26. And lastly, we've significantly reduced our debt profile over the past couple of years and expect to continue to do so with leverage now at 4.6x and progressing well towards our sub-4x target. So overall, we're delivering against our targets, and we remain firmly on track to drive further financial and strategic progress in the year ahead. Thanks very much, and I'll now hand back to Justin. Justin Platt: Thank you, Stephen. So I'll now take you through the progress we've been making as we've implemented our strategy through the year. You will remember from the Capital Markets Day, we're very focused on being a high-margin, highly cash-generative local pub company. And we'll do that with a portfolio of brands that appeal across a range of consumer segments. 5 key value drivers that get us there: executing a market-leading operating model; using CapEx to deliver differentiated formats; unlocking value with digital transformation; expanding our excellent managed and partnership management models; and in time, supporting that with targeted acquisitions. So I'll now deep dive on each of those value drivers to give you a flavor of some of the work that we've been doing. The first one I will spend some time on is the operating model. Really, this is the bread and butter of running a great pub business. It's the balance of revenue growth, cost efficiency and guest satisfaction. So first of all, I'll talk to revenue. Really good momentum this year. We've continued to do well, especially in our peak trading periods. Across our peak trading periods, we're up almost 6% on the year. And that's enabled us to grow our like-for-likes ahead of the market at 1.6%. And a lot of what's behind that is our event plan. Our event plan has been a key thing for us this year. In 2025, Marston's Pubs have been home to a darts tournament led by Luke Humphries, the world #1. Paddington and his new movie joined us from Peru. We had a national Trivial Pursuit quiz event. And through the summer, when Oasis Mania was sweeping the U.K., we had a series of '90s throwback events with tribute bands and the like in our pub life. So all of these are designed to give people reasons to visit our pubs, a range of guest demographics. I think that's essential at any time of year, but especially so in the summer when, of course, this year, we had no big football tournament. So events are big success for us and an important driver in supporting our revenue growth. So secondly, on costs. As Stephen has shown you, we've made excellent progress during '25 on our journey to being a high-margin business in adding 140 basis points to our margin despite significant and well-known headwinds. And we've done this with a relentless drive for efficiency across all areas of our cost base. The biggest area of our cost base is labor, where we've saved almost GBP 10 million, a little bit more than 1 percentage point on our margin. And this has been about continually getting smarter with the way we use our technology to enhance and optimize our labor teams and our labor schedules, all about getting the right people in the right place at the right time. I think probably the best way to bring to life for you the work we've done on labor is to pick a case study of one of our pubs. The lady pictured on the right is Kati. She's one of our fantastic general managers. She runs the King Charles pub in Chesham, a lot of work with our labor planning this year. They've actually reduced their labor costs through the year by 8%. And despite doing that, they've grown their revenue by 19% and also grown their guest satisfaction well ahead of our company average. So a good example in the way labor is playing out for us in one of our pubs, but it also represents our approach across the company. So secondly, in terms of food and drink, our formats allow us to simplify the ranges we offer because we're a lot clearer about the demographic by format. And so that allows you to be clear which food offer and which drink offer you need by pub. So that's allowed us to simplify our range. That's helped us with efficiencies. But alongside that, we've also renegotiated our key food and drink contracts to drive efficiencies where we can. So that's labor and food and drink. Finally, energy and estates. Every pound counts on energy. We've been that way for a number of years now, whether it be the usage that we manage, but also the contracts, there's a relentless focus on attempting to drive efficiencies there. But as Stephen said, we take a very judicious approach to estates more broadly with our CapEx, looking at our maintenance cycles, spending strictly in maintenance cycles, and that helps us on efficiencies with our repairs budget. So overall, really good progress on the cost side of things. And then finally, on the operating model, guest satisfaction. I mean this is all about ensuring that when our guests come and see us, they have a great time. And it's very pleasing in the context of the efficiency gains I've just talked to that we're still delivering better and better experiences through our guests. So from a score of 766 in '23 to 800 last year, 816 this year is a very pleasing performance. And this really is a combination of many of the initiatives coming together, whether it be our events program, and the visual there is of our Oktoberfest event that we run during September, whether it be through digital ordering or some of the menu enhancements we've made. All of these things together add up to make a difference to the guest experience. It's worth saying, though, that the #1 factor that dominates, that really drives a great guest experience is, really strong guest service. That requires almost an obsession, a relentless obsession with getting that right day in, day out. And the work on that is never done. Our teams are very focused on delivering that experience all the way through the year. And as I say, it's pleasing that this year, we've been able to continually improve on that. So that's the operating model. When you take revenue, cost, satisfaction together, it's good that we've made strong progress across the piece. And this has been complemented with the work we've done on the digital transformation value driver. I think a key example of this would be the new order and pay app that we launched in March. Really well received. It's paying dividends with our guests in terms of both revenue and reputation, and it's complementing the personal service for those guests who want it. So we've got a 10% revenue uplift when using the app. And those pubs with a higher mix of order and pay usage do significantly better on reputation. What's also good about the app is it can work hand-in-hand with our events. So the Trivial Pursuit: Win a Wedge event drove a big uptake in the use of the app. So good progress overall on this area, digital, but a lot more opportunity here in the future as digital transformation can help us both on revenue and on cost. The third value driver I want to focus on is our new pub formats. So against 5 core consumer target segments across the market, we've designed 5 pub formats that are specifically designed to meet the needs of those target audiences. And through a series of test and learn launches in '25, we've been assessing the potential of these pubs to drive appeal and importantly, drive powerful CapEx returns. Now in May, I did a deep dive on the Two-Door format. So I thought this time around, we'd share some more information on the Grandstand brand. Grandstand is a local sports pub. So it targets adults who want an entertainment experience when they go to their local pub. I mean this is an absolute sports lover's dream. It's similar to a city center sports bar environment, but in the local community pub. Number of constituent parts to it. At its heart, state-of-the-art technology ensures that we've got 3-meter stadium screens, amazing sound systems. Alongside that, there's great match-day food suited to watching the big game. And these pubs will always be run by sports enthusiast general managers who know what their guests want and can work with them to give them a great experience. It's an absolute must visit for the big game, the atmosphere that we create. But more than that, because it's a local pub and it's a great environment, it's a place that you would want to go to on any night of the week, and we support that with a program of sports events through the week to give people reasons to come every night. So Grandstand has done really well this year. The guest reaction and the returns that we've had have been very, very impressive, and it's been a key part of our test and learn year. And test and learn overall this year has exceeded our expectations. We've done 31 launches through the year. So we did 21 Two Doors, 5 Grandstand and 5 Woodie's. Woodie's is our new family pub. All have done well. Guests love them. They've driven strong uplifts in revenue of 23% and all of that off relatively modest levels of CapEx. We've been driving ROIC of more than 30% on only GBP 260,000 per pub. So the test and learn phase really has proven the potential of this stream for us, real growth opportunity as we roll out across the estate. And all of our pubs have been mapped to the format opportunity they can play to over time. So over time, this really does give us an opportunity as a significant driver of growth. So great progress across our value drivers in '25, and this leaves us feeling very positive as we look towards 2026. Through this year, we'll have a big program of exciting events, all designed to encourage guests to come and visit us, not least with a big football tournament on the horizon that everybody will be very much focused on in the summer. And we'll complement that with our revenue management and order and pay disciplines to drive spend per guest. But alongside the demand drive, as I've just said, our new formats will play an increasingly important role in driving growth through the year. Given our success in '25, we're now accelerating the rollout plan. We'll have 50 or so launches focused on Two Door and Grandstand, and all of these will make a meaningful difference to both revenue and EBITDA performance through the year. So to summarize, another year of strong delivery in '25, significant growth in both profit and cash flow. We're very excited by the growth potential of our new formats, and we see a very promising outlook for the year ahead as we continue to deliver as a reliable growth company. And with that, we can now take some time for questions. Operator: [Operator Instructions]. The first question we have comes from Douglas Jack of Peel Hunt. Harold Jack: So I've got 2 questions, if that's okay. In terms of the new formats in 2026, is the choice of Grandstand and Two Door largely because they're the ones that have the greatest uplift potentially, adding to the number of reasons to visit, I think, obviously, they've got quite a lot of opportunity there. And then the second one was about margins. In 2026, what are the best margin opportunities do you see over this year? Justin Platt: Thanks for your questions. I'll take the first one on formats and then, Stephen, if you want to come to margins. In terms of choices, as you know, we were very clear to have the plank of a test and learn phase first to guide our implementation. So the primary choice is certainty of return in the sense that Two Door and Grandstand both launched earlier in the year last year than Woodie's, which allowed us to get more data on those through the year. Most of the Woodie's launches came sort of the summer onwards. So whilst all are performing well, we've just got longer data on the other 2. The other attraction, of course, with Grandstand is you absolutely want a bigger footprint of those pubs in the market in a year with the World Cup, which we've certainly got an eye on. But really, it's about certainty of returns, Doug. Stephen Hopson: And Doug, on your question on margins, I mean, yes, look, we've made really good progress in 2025. I think we do expect EBITDA margins to increase in 2026, but not to the same extent as 140 basis points we did in 2025. I mean I think the best opportunities for me, so there's a bit of flow-through stuff. So we made really good progress on labor. And Some of those things didn't come through until the second half last year. And so I think some of them will help H1 2026. And also, that is a continuing journey for us. So matching right people, right place, matching demand with supply of labor is something that we're going to be relentlessly focused on going forward. That may come through in terms of reduced cost. It may come through in terms of better customer service and therefore, improved sales, but I think there will be some upside from that. And then I think on gross margins, I mean, we've got pretty good visibility of both food and drink cost prices moving into next year. We're lock in quite a few contracts on that quite early. And I think, therefore, that gives us certainty on those lines. We'll continue the journey on things like revenue management and upselling and so on, and it should be an opportunity to move that further forward as well. Operator: The next question we have comes from Karan Puri of JPMorgan. Karan Puri: I've got 2 quick ones. One, on the 1.6% like-for-like momentum in '25. Just wondering if you could provide a split between pricing and volumes, number one. And number two, just coming back on the cash tax payment in '26. I know it's going to be higher than 2025, but in terms of magnitude, if you could share a bit more on that front would be helpful. Justin Platt: So I'll start with the like-for-likes. As we said in the release, food, drink and machines were all in growth, and that's a mix across them. As you'd expect in that, revenue management has played an important part for us and will continue to do so, particularly actually the premiumization as consumers are upgrading to more premium beers and also adding and upgrading on the menu. And then the second one, Stephen? Stephen Hopson: Yes, the cash tax. So yes, you're right. We flagged that it would increase. Last year, the cash tax payments were GBP 5.3 million. That will approximately double next year, to about GBP 10 million, Karan. So that's about the extent of it. We are still using some losses from previous trading period. So the cash tax is still relatively low, but it will be about GBP 10 million in FY '26. Karan Puri: Perfect. And then just a quick follow-up on that one. So do we -- can we expect it to be sort of normalized cash tax starting in 2027? Or will you still benefit from some loss in the previous period there as well? Stephen Hopson: Yes. 2027 will still be a little bit low. And then from 2028, it will go back to normalized levels. So it will be a step-up in 2027, but it won't be up to normalized levels, yes. And then from 2028, you should expect normalized levels of cash tax. Operator: [Operator Instructions]. The next question we have comes from Anna Barnfather of Panmure Liberum. Anna Barnfather: Just a couple of questions. Firstly, on the reformats, you've mentioned sort of acceleration sort of 50. Could you update us on your thinking of what proportion of the estate at this stage you think could benefit from a reallocation into 1 of the 5 formats? So how many of your sort of 1,300 pubs? And have you only done managed or have you done partnership ones as well? The second question, I was just thinking about the sort of peak trading. Obviously, you're doing really well in those big events, with peak trading periods up 5.8%. Are you tempted to sort of reduce opening hours on the sort of nonevent days? Or is there any sort of thinking on that as a way to cut down on overheads? And then just third question on the revenue mix. I think obviously, higher margins and gross margins, can you just give us a bit more color on perhaps some of the shifts in your sales mix? Justin Platt: Thanks, Anna. I'll take the first 2 and then Stephen, if you could take the third one. Let me start on peak trading, and then I'll come back to formats. We do look at our hours on a regular basis, but there's not a massive need to start big closure periods by any means. I mean one of the things that's most notable in pub trading today certainly versus 5 years ago is the growth of the early evening at the expense of the late evening. So if you look at booking patterns now, peak time for a table, the busiest time to get a table is 6:30 to 7:00. You go back 5 years, that was more like 8:00. So there's definitely an earlier day point to your business. And we do look at hours, but I don't think there's anything significant there in cost, particularly the local community environment where people are around the corner from their houses quite a lot. On the formats. So first of all, yes, we've actively launched formats across our managed and our partner estate, and they're performing equally well in each, neither is a differentiator actually in terms of performance, but they do work across both managed and partner. And then in terms of the numbers, as we showed earlier, 5 formats. The 2 that we didn't deep dive on were locals pubs and adult dining, signature pubs. Both of those, we have some of them in market already. I would say in terms of the opportunity, it's probably the locals pubs is the only bit that we wouldn't see as a sort of significant ROIC north of 30% opportunity, which probably takes you to 75% or so of our estate with the opportunity for those new formats. Stephen Hopson: And then, Anna, on the revenue mix, I mean, we're about 35% food in our business overall, but there is a big variation in that, as you'd expect between format and some of those local pubs versus, for example, our adult dining business, which is very, very different. And that has been growing. I mean, clearly, food across the market really has been growing quicker than drink over a period of time, but it's not huge. I mean that number has probably changed by 0.5% year-on-year. So it's not a huge mix. So hopefully, it gives you some idea about the sort of the food and drink pub. Operator: [Operator Instructions]. The next question we have comes from Fintan Ryan of Goodbody. Fintan Ryan: Two questions from me, please. Firstly, can you give us a sense of what your sort of base case expectations are for the budget tomorrow in terms of, I guess, labor costs, anything that you might be expecting or hoping for business rates. Just to sort of get a sense of what the base case is for the outlook currently and maybe what can change within the next 24-odd hours. And then secondly, could you give some color on like like-for-like trading in Q4 and over the last 8 weeks, obviously, you reported flat like-for-likes. How much -- what's been sort of the volume versus pricing split in that? Can you give some color on the visibility for the Christmas trading? Obviously, you've got bookings up 11% year-on-year, but like typically how much of bookings are -- of your Christmas trading are bookings? And what you'd be at this point, assuming for incremental pricing for FY -- for the calendar '26, would be great. Stephen Hopson: Thanks, Fintan. If I start on, I guess, the hot topic of the day and tomorrow, which is the budget and expectations for that. I mean, our base expectations and sort of what's embedded into the guidance that we've given to the market is that we expect National Living Wage to increase, obviously. Our expectations are about a 4% increase in the headline rate of National Living Wage, and we're expecting the differential for under 21-year-olds to close slightly compared to where it is at the moment. We're not expecting any further changes to things like National Insurance. And then really, I know there have been lots of stories in the press, but at the moment, we're not making any expectations on changes for things like machine, gaming duty or business rates either. I mean the Chancellor has flagged that there'll be a review of the way business rates is levied. So that will be interesting to see. But we're not making any assumption on that because simply, we just don't have the information available to us at this point. Justin Platt: And before I answer the like-for-like, Fintan, if you've got any assumptions on the budget tomorrow, please share them with the group. In terms of the like-for-likes, look, as you know, quarter 1 is all about Christmas. October and November are relatively small months in the grand scheme of things. December performance is really what matters. And within that, it's the key 2 weeks from kind of 19th of December until 2nd of January, quite time, tight time. And bookings pace, as we've said, is very good at 11%, and that's off the back of last year. I think we grew Christmas at about 11% last year in like-for-like terms. So it's pleasing the stage we're at. But to your point, walk-ins are also important at Christmas. So we've still got a lot of work to do in order to land that. And that's both in encouraging people to spend their Christmas with us but also then in managing spend per guest, so we drive the revenue return as well. Fintan Ryan: Great. And just in terms of the pricing and current expectations? Justin Platt: Well, again, we -- as you know, we don't -- we kind of manage price through the year in a broader revenue basis. So in terms of our revenue management initiatives around booking density, around premiumization. And yes, lead price is part of that mix, but we don't have like a hard and fast target. It's overall spend per that we look at. Operator: Ladies and gentlemen, at this stage, there are no further questions. I would now like to hand back to the management team for closing comments. Justin Platt: Well, just to say, thanks, everybody, for joining us. Really good engagement. Obviously, we'll all see what comes tomorrow. And I'll wish you an early best wishes for the festive season. Thank you. Operator: Thank you. Ladies and gentlemen, that then concludes today's conference. Thank you for joining us. You may now disconnect your lines. Justin Platt: Good morning, everybody. Thank you for joining us today. Welcome to the Marston's preliminary results for financial year '25. My name is Justin Platt, CEO. And with me, I have Stephen Hopson, our new Chief Financial Officer. We'll take you through our results today, and we'll do that with the following running order. I'll start with the headlines. Stephen will then share the financial results, and I'll then give some insight into the strategic progress we've been making through the year before wrapping up and taking any questions you might have. So the headlines. 2025 has been a very strong year for Marston's. It's been a year when we've been very focused on delivery, delivery of the strategy we outlined a year or so ago at the Capital Markets Day. And the results bear out that the strategy is working and driving real progress for us as a business, with profit before tax of GBP 72 million, that's year-on-year growth of 71%, and that's on top of the 65% growth we delivered a year ago. And that profit delivery has helped us drive cash flow. So cash flow at GBP 53 million. That's ahead of our GBP 50 million target, and it's also earlier than planned. Alongside that, it's really pleasing we've made great progress with our new pub formats, 31 launches this year. They're performing very strongly for us and driving big revenue uplifts. It's very clear now that these formats can be a significant growth engine for us in the future. And we've been doing all of that while giving our guests a great time. So record satisfaction scores with a reputation score at 816. So overall, a really good set of results, and it's a set of results that leave us feeling very positive in our outlook going forward. So that's the summary. I'll now hand over to Stephen, and he'll take you through the financials. Stephen Hopson: Thanks, Justin, and good morning, everyone. As Justin said, this is my first set of full year results at Marston's, and I joined the business at what is clearly an exciting time for Marston's. As these numbers show, we're making great progress and delivering against our goals with lots more to come. On my first slide, I'd like to begin by looking at some of the key group financial metrics. Total revenue was GBP 898 million, which showed growth of 1.6% on a like-for-like basis. EBITDA was up 7% to GBP 205 million, with the margin expanding by 140 basis points to 22.8%. That's been driven by good operational discipline, particularly on labor and controlling input costs alongside the revenue growth. As a result of the EBITDA growth and lower finance costs, PBT stepped on significantly. Underlying profit before tax was GBP 72 million, nearly 3x where we were just 2 years ago. And importantly, this has translated into stronger cash generation. Recurring free cash flow was GBP 53 million, which is up 22% year-on-year and ahead of our GBP 50 million recurring free cash flow target. Finally, we've made real progress on the balance sheet. Net debt has reduced from 5.2x to 4.6x EBITDA as we continue to delever. So overall, excellent progress on both profit and cash. Turning now to look at our income statement in a bit more detail on the next slide. As I mentioned, FY '25 marked another year of substantial profit growth for Marston's with PBT up 71%. Reported revenue was flat, although this masks the impact of the FY 2024 disposal program, which I'll show on the next slide. I've already mentioned that EBITDA was up 6.5%, and that GBP 12.6 million of EBITDA improvement basically flowed through to operating profit, which was up 8.6% to GBP 159.9 million. Net finance costs were significantly lower year-on-year as a result of ongoing delevering and last year's CMBC disposal, leading to that very significant jump upwards in PBT. And whilst our effective tax rate increased, this simply reflects a return to the U.K.'s headline rate of corporation tax after a period of a lower rate. Together, this income statement shows a stronger and more profitable business with improved earnings quality and stronger margins. Turning to revenue performance. As I've already touched on, revenue for 2025 was GBP 898 million and was broadly flat year-on-year, but I would like to pick out 2 points on this chart. First, that the revenue includes a negative movement of about GBP 40 million in relation to the disposal of pubs over FY 2024 and 2025. To put the disposals into context, about GBP 50 million of assets were sold as part of the disposal program. So it's important to consider that impact when assessing year-on-year revenue progression. And the second point is that our like-for-like performance continues to be ahead of the market, which grew by 0.7% in the year, with positive contributions across all key categories of drink, food and machines. Turning now to look at margin. A key target for the group outlined at the CMD was to grow our underlying EBITDA margin by 200 to 300 basis points from FY '24 levels, giving a target range of 23.4% to 24.4%. And I'm pleased to say that this year, we've delivered 140 basis points of margin expansion, achieving total EBITDA margin of 22.8% in the year. Labor productivity gains were the single biggest contributor, supported by the rollout of improved scheduling tools, which Justin will cover in a bit more detail later on. The labor productivity benefits in the year were enough to fully offset the increases in the National Living Wage and National Insurance contributions, which came in from April 2025. We also saw benefits from improved food and drink margins, energy savings and other operational efficiencies. These gains were partially offset by inflationary pressures, including those employment cost increases that I mentioned and some investment in key areas, including more marketing. But overall, we've made real progress embedding cost discipline and delivering margin expansion across the business, and we feel that our EBITDA margins really do benchmark very well across the whole pub sector. We view ourselves as a high-margin local pub company, and we see further opportunity to increase the EBITDA margin in FY '26 as we move towards our CMD target. Turning now to look at capital expenditure. Total CapEx for the year was GBP 61.2 million, which is equivalent to 6.8% of revenue, and we're now approaching the 7% to 8% of revenue range that we talked about in the CMD. This is an increase from GBP 46.2 million last year, with the main driver being our pub format conversions, which I'll come back to shortly. Of this total, GBP 53.2 million was in maintenance and other CapEx deployed across our 1,300 strong pub estate. This includes works such as maintenance, estate management, investment in new IT platforms and other items. But I also want to pull out a bit more granular information on our pub format conversions, which are very important to our overall growth plans and which Justin will cover in more detail. In the year, we covered 31 conversions to our differentiated formats, which are delivering strong results. Average revenue uplifts were 23% year-on-year and EBITDA returns are over 30% to date, in line with our CMD targets. At an average cost of GBP 260,000 a site, we believe these conversions represent excellent value for money. And of course, we've only completed a small number so far in comparison to our estate. So there's a lot more to go at in this space. Clearly, the driver of increasing our capital expenditure is to improve the quality of our estate. So let's turn to that now. On this slide, we show that we ended the year with 1,328 pubs following the continuation of our estate optimization strategy. This included a small number of disposals in the T&L estate as well as conversion of some pubs to the partner model. As a result, the managed and partnership estate consisted of 1,182 pubs and the T&L estate had 146 sites at the year-end. EBITDA per pub increased to GBP 154,000, which, as you can see, is a 28% improvement over the last 2 years. This uplift reflects both operational improvements and tighter estate management with gains in both, our managed and partnership estate and the remaining T&L pubs. The result is a higher-quality, better-performing pub estate that's delivering stronger returns at a site level. I think this is a really important slide as it shows how the improvements being made to the business model are feeding through at pub level. Turning now to our cash performance in the year, which was another highlight. The takeout from this slide is that we delivered and, in fact, exceeded our CMD target of GBP 50 million of recurring free cash flow ahead of schedule, with GBP 53.2 million delivered in the period. And how was that delivered? Well, cash from ops increased year-on-year by GBP 5.6 million, which included the improvements in EBITDA I described earlier. Within that number, we also had a GBP 6 million saving from lower contributions to our DB pension scheme. And offsetting that, we had a small working capital gain, but it wasn't as large as last year's gain. Finally, we started making cash tax payments again of GBP 5.3 million as our profits improved. And as a smaller side, investors and analysts should note that in FY '26, we expect to move into the very large company corporation tax regime, which will accelerate our cash tax payments this year. And then in the second line on the chart, we had a GBP 15 million saving on interest, offset by GBP 15 million more CapEx year-on-year, as I just described, together with lower banking fees. So recurring cash was strong and now over GBP 50 million, which we expect to be able to exceed again this year. I also wanted to draw out on this slide that this strong free cash flow is fully absorbed by scheduled debt repayments, GBP 43.8 million of securitized debt repayments and GBP 8.6 million of lease liabilities. Clearly, this does mean that the group is delevering, as I'll show on the next slide, but also that our cash generation is currently fully utilized. And then just to complete the chart, after other movements in borrowing and disposals, there was a cash outflow of GBP 9.6 million in the year. And I'm now going to return to that progress about delevering in the group. This slide shows the different elements of the group's financing structures and the overall movement in net debt year-on-year. So starting at the bottom, net debt, excluding lease liabilities, reduced by GBP 46.2 million, to GBP 837.5 million. This takes our net debt-to-EBITDA multiple, excluding leases, down to 4.6x from 5.2x last year. That continues the recent downward trend and reflects the group's stronger cash generation and disciplined approach to capital investment. And then to briefly cover what makes up our financing structures, the largest element shown at the top is the securitization, which provides long-term predictable financing for the group. It does also impose some restrictions, both in terms of the assets that are tied up in the securitization structure and in our ability to move assets and cash around the group. However, these restrictions are manageable at present. Swaps are in place to fix the interest that we pay on the securitized debt. Other lease-related borrowings are essentially loans that were raised against other properties in the group outside the securitization. They were legally structured as sale and leasebacks, but where we have the option to buy back the properties at the end of the period for a nominal fee. Therefore, we treat these properties as effective freehold. And as noted in the slide, we're currently paying interest only on those borrowings. And I've put a new slide in the appendices showing investors how those structures will work over coming years. Our GBP 200 million bank facility was renewed in the year and now extends to July 2027 with relatively low drawings at the year-end, and cash balances ended the year at GBP 35.9 million. So in summary, we're continuing to delever at pace while preserving the secure long-term funding arrangements in the group. If I then broaden this to look at the group's whole balance sheet rather than just the net debt elements, this slide shows the evolution of our balance sheet and our net asset value per share, which increased to GBP 1.25 this year. And actually, the movements year-on-year are pretty straightforward. Our balance sheet is underpinned by GBP 2.2 billion of property assets, of which 81% of the estate by number of pubs are effective freeholds. The net book value of those assets increased by over GBP 100 million in the year, reflecting our annual estate reval and also our ongoing investment into the business. Net debt, as I've just described, reduced GBP 837.5 million, excluding lease liabilities, and lease liabilities were GBP 5.5 million lower. So total net debt was GBP 51.7 million lower year-on-year. Other liabilities increased by GBP 28.4 million, almost entirely due to an increase of GBP 28.5 million in deferred tax liabilities relating to the upward property revaluation. So overall, the property reval with its associated tax movements as well as the net cash generation of the group drove GBP 136 million increase in net assets, which was a 21% increase year-on-year, to GBP 791 million, which equates to GBP 1.25 per share. Given the progress made on the balance sheet, I want to finish by looking at our capital allocation framework. And if I start by saying that this is not a change to our capital allocation policy, which remains consistent with what we laid out at the CMD, we remain focused on delivering sustainable shareholder value through a disciplined balance of investment in the business, delevering and ultimately, shareholder returns. That said, there are a couple of updates we wanted to share this morning. On the right-hand side of the chart, you'll see our continued progress on leverage, which, as I mentioned, has reduced substantially. We are pleased with that progress, but would like to see leverage continue to decrease. And today, we're committing to reduce leverage to below 4x on a pre-IFRS 16 basis. When we get to that level, we anticipate the start of capital returns to shareholders through dividends, share buybacks or a combination of both. What that looks like will depend on circumstances at the time, including the share price and investor preferences. To be clear, we also expect to see the group continue to delever below 4x even after the recommencement of shareholder returns. We believe this disciplined approach continues to be the right strategy to create and sustain long-term value. So to conclude, we've delivered a strong financial performance this year with clear progress on margin, profit and cash flow, and we expect further progress this year. And before I hand back to Justin, I'll briefly touch on 5 forward-looking points. First, we remain confident in the trading outlook for FY '26 with like-for-like sales currently tracking in line with last year and Christmas bookings up 11%. Second, we expect further progress towards our margin target of 200 to 300 basis points of growth versus 2024 following the 140 basis point gain this year. Our format growth engine will be accelerated this year with at least a further 50 refurbishments and our CapEx is expected to be within the target range of 7% to 8% of total revenue. And after achieving our CMD target ahead of schedule this year, we expect to deliver another year of GBP 50 million in recurring free cash flow in FY '26. And lastly, we've significantly reduced our debt profile over the past couple of years and expect to continue to do so with leverage now at 4.6x and progressing well towards our sub-4x target. So overall, we're delivering against our targets, and we remain firmly on track to drive further financial and strategic progress in the year ahead. Thanks very much, and I'll now hand back to Justin. Justin Platt: Thank you, Stephen. So I'll now take you through the progress we've been making as we've implemented our strategy through the year. You will remember from the Capital Markets Day, we're very focused on being a high-margin highly cash-generative local pub company. And we'll do that with a portfolio of brands that appeal across a range of consumer segments. 5 key value drivers that get us there: executing a market-leading operating model; using CapEx to deliver differentiated formats; unlocking value with digital transformation; expanding our excellent managed and partnership management models; and in time, supporting that with targeted acquisitions. So I'll now deep dive on each of those value drivers to give you a flavor of some of the work that we've been doing. The first one I will spend some time on is the operating model. Really, this is the bread and butter of running a great pub business. It's the balance of revenue growth, cost efficiency and guest satisfaction. So first of all, I'll talk to revenue. Really good momentum this year. We've continued to do well, especially in our peak trading periods. Across our peak trading periods, we're up almost 6% on the year. And that's enabled us to grow our like-for-likes ahead of the market at 1.6%. And a lot of what's behind that is our event plan. Our event plan has been a key thing for us this year. In 2025, Marston's Pubs have been home to a darts tournament led by Luke Humphries, the world #1. Paddington and his new movie joined us from Peru. We had a national Trivial Pursuit quiz event. And through the summer, when Oasis Mania was sweeping the U.K., we had a series of '90s throwback events with tribute [ bans/bands ] and the like in our pub life. So all of these are designed to give people reasons to visit our pubs, a range of guest demographics. I think that's essential at any time of year, but especially so in the summer when, of course, this year, we had no big football tournament. So events are big success for us and an important driver in supporting our revenue growth. So secondly, on costs. As Stephen has shown you, we've made excellent progress during '25 on our journey to being a high-margin business in adding 140 basis points to our margin despite significant and well-known headwinds. And we've done this with a relentless drive for efficiency across all areas of our cost base. The biggest area of our cost base is labor, where we've saved almost GBP 10 million, a little bit more than 1 percentage point on our margin. And this has been about continually getting smarter with the way we use our technology to enhance and optimize our labor teams and our labor schedules, all about getting the right people in the right place at the right time. I think probably the best way to bring to life for you the work we've done on labor is to pick a case study of one of our pubs. The lady pictured on the right is Kati. She's one of our fantastic general managers. She runs the King Charles pub in Chesham, a lot of work with our labor planning this year. They've actually reduced their labor costs through the year by 8%. And despite doing that, they've grown their revenue by 19% and also grown their guest satisfaction well ahead of our company average. So a good example in the way labor is playing out for us in one of our pubs, but it also represents our approach across the company. So secondly, in terms of food and drink, our formats allow us to simplify the ranges we offer because we're a lot clearer about the demographic by format. And so that allows you to be clear which food offer and which drink offer you need by pub. So that's allowed us to simplify our range. That's helped us with efficiencies. But alongside that, we've also renegotiated our key food and drink contracts to drive efficiencies where we can. So that's labor and food and drink. Finally, energy and states. Every pound counts on energy. We've been that way for a number of years now, whether it be the usage that we manage, but also the contracts, there's a relentless focus on attempting to drive efficiencies there. But as Stephen said, we take a very judicious approach to estates more broadly with our CapEx, looking at our maintenance cycles, spending strictly in maintenance cycles, and that helps us on efficiencies with our repairs budget. So overall, really good progress on the cost side of things. And then finally, on the operating model, guest satisfaction. I mean this is all about ensuring that when our guests come and see us, they have a great time. And it's very pleasing in the context of the efficiency gains I've just talked to that we're still delivering better and better experiences through our guests. So from a score of 766 in '23 to 800 last year, 816 this year is a very pleasing performance. And this really is a combination of many of the initiatives coming together, whether it be our events program, and the visual there is of our October Fest event that we run during September, whether it be through digital ordering or some of the menu enhancements we've made. All of these things together add up to make a difference to the guest experience. It's worth saying, though, that the #1 factor that dominates, that really drives a great guest experience is, really strong guest service. That requires almost an obsession, a relentless obsession with getting that right day in, day out. And the work on that is never done. Our teams are very focused on delivering that experience all the way through the year. And as I say, it's pleasing that this year, we've been able to continually improve on that. So that's the operating model. When you take revenue, cost, satisfaction together, it's good that we've made strong progress across the piece. And this has been complemented with the work we've done on the digital transformation value driver. I think a key example of this would be the new order and pay app that we launched in March. Really well received. It's paying dividends with our guests in terms of both revenue and reputation, and it's complementing the personal service for those guests who want it. So we've got a 10% revenue uplift when using the app. And those pubs with a higher mix of order and pay usage do significantly better on reputation. What's also good about the app is it can work hand-in-hand with our events. So the Trivial Pursuit: Win a Wedge event drove a big uptake in the use of the app. So good progress overall on this area, digital, but a lot more opportunity here in the future as digital transformation can help us both on revenue and on cost. The third value driver I want to focus on is our new pub formats. So against 5 core consumer target segments across the market, we've designed 5 pub formats that are specifically designed to meet the needs of those target audiences. And through a series of test and learn launches in '25, we've been assessing the potential of these pubs to drive appeal and importantly, drive powerful CapEx returns. Now in May, I did a deep dive on the Two-Door format. So I thought this time around, we'd share some more information on the Grandstand brand. Grandstand is a local sports pub. So it targets adults who want an entertainment experience when they go to their local pub. I mean this is an absolute sports lover's dream. It's similar to a city center sports bar environment, but in the local community pub. Number of constituent parts to it. At its heart, state-of-the-art technology ensures that we've got 3-meter stadium screens, amazing sound systems. Alongside that, there's great match-day food suited to watching the big game. And these pubs will always be run by sports enthusiast general managers who know what their guests want and can work with them to give them a great experience. It's an absolute must visit for the big game, the atmosphere that we create. But more than that, because it's a local pub and it's a great environment, it's a place that you would want to go to on any night of the week, and we support that with a program of sports events through the week to give people reasons to come every night. So Grandstand has done really well this year. The guest reaction and the returns that we've had have been very, very impressive, and it's been a key part of our test and learn year. And test and learn overall this year has exceeded our expectations. We've done 31 launches through the year. So we did 21 Two Doors, 5 Grandstand and 5 Woodie's. Woodie's is our new family pub. All have done well. Guests love them. They've driven strong uplifts in revenue of 23% and all of that off relatively modest levels of CapEx. We've been driving ROIC of more than 30% of only GBP 260,000 per pub. So the test and learn phase really has proven the potential of this stream for us, real growth opportunity as we roll out across the estate. And all of our pubs have been mapped to the format opportunity they can play to over time. So over time, this really does give us an opportunity as a significant driver of growth. So great progress across our value drivers in '25, and this leaves us feeling very positive as we look towards 2026. Through this year, we'll have a big program of exciting events, all designed to encourage guests to come and visit us, not least with a big football tournament on the horizon that everybody will be very much focused on in the summer. And we'll complement that with our revenue management and order and pay disciplines to drive spend per guest. But alongside the demand drive, as I've just said, our new formats will play an increasingly important role in driving growth through the year. Given our success in '25, we're now accelerating the rollout plan. We'll have 50 or so launches focused on Two Door and Grandstand, and all of these will make a meaningful difference to both revenue and EBITDA performance through the year. So to summarize, another year of strong delivery in '25, significant growth in both profit and cash flow. We're very excited by the growth potential of our new formats, and we see a very promising outlook for the year ahead as we continue to deliver as a reliable growth company. And with that, we can now take some time for questions. Operator: [Operator Instructions]. The first question we have comes from Douglas Jack of Peel Hunt. Harold Jack: So I've got 2 questions, if that's okay. In terms of the new formats in 2026, is the choice of Grandstand and Two Door largely because they're the ones that have the greatest uplift potentially, adding to the number of reasons to visit, I think, obviously, they've got quite a lot of opportunity there. And then the second one was about margins. In 2026, what are the best margin opportunities do you see over this year? Justin Platt: Thanks for your questions. I'll take the first one on formats and then, Stephen, if you want to come to margins. In terms of choices, as you know, we were very clear to have the plank of a test and learn phase first to guide our implementation. So the primary choice is certainty of return in the sense that Two Door and Grandstand both launched earlier in the year last year than Woodie's, which allowed us to get more data on those through the year. Most of the Woodie's launches came sort of the summer onwards. So whilst all are performing well, we've just got longer data on the other 2. The other attraction, of course, with Grandstand is you absolutely want a bigger footprint of those pubs in the market in a year with the World Cup, which we've certainly got an eye on. But really, it's about certainty of returns, Doug. Stephen Hopson: And Doug, on your question on margins, I mean, yes, look, we've made really good progress in 2025. I think we do expect EBITDA margins to increase in 2026, but not to the same extent as 140 basis points we did in 2025. I mean I think the best opportunities for me, so there's a bit of flow-through stuff. So we made really good progress on labor. And Some of those things didn't come through until the second half last year. And so I think some of them will help H1 2026. And also, that is a continuing journey for us. So matching right people, right place, matching demand with supply of labor is something that we're going to be relentlessly focused on going forward. That may come through in terms of reduced cost. It may come through in terms of better customer service and therefore, improved sales, but I think there will be some upside from that. And then I think on gross margins, I mean, we've got pretty good visibility of both food and drink cost prices moving into next year. We're lock in quite a few contracts on that quite early. And I think, therefore, that gives us certainty on those lines. We'll continue the journey on things like revenue management and upselling and so on, and it should be an opportunity to move that further forward as well. Operator: The next question we have comes from Karan Puri of JPMorgan. Karan Puri: I've got 2 quick ones. One, on the 1.6% like-for-like momentum in '25. Just wondering if you could provide a split between pricing and volumes, number one. And number two, just coming back on the cash tax payment in '26. I know it's going to be higher than 2025, but in terms of magnitude, if you could share a bit more on that front would be helpful. Justin Platt: So I'll start with the like-for-likes. As we said in the release, food, drink and machines were all in growth, and that's a mix across them. As you'd expect in that, revenue management has played an important part for us and will continue to do so, particularly actually the premiumization as consumers are upgrading to more premium beers and also adding and upgrading on the menu. And then the second one, Stephen? Stephen Hopson: Yes, the cash tax. So yes, you're right. We flagged that it would increase. Last year, the cash tax payments were GBP 5.3 million. That will approximately double next year, to about GBP 10 million, Karan. So that's about the extent of it. We are still using some losses from previous trading period. So the cash tax is still relatively low, but it will be about GBP 10 million in FY '26. Karan Puri: Perfect. And then just a quick follow-up on that one. So do we -- can we expect it to be sort of normalized cash tax starting in 2027? Or will you still benefit from some loss in the previous period there as well? Stephen Hopson: Yes. 2027 will still be a little bit low. And then from 2028, it will go back to normalized levels. So it will be a step-up in 2027, but it won't be up to normalized levels, yes. And then from 2028, you should expect normalized levels of cash tax. Operator: [Operator Instructions]. The next question we have comes from Anna Barnfather of Panmure Librium. Anna Barnfather: Just a couple of questions. Firstly, on the reformats, you've mentioned sort of acceleration sort of 50. Could you update us on your thinking of what proportion of the estate at this stage you think could benefit from a reallocation into 1 of the 5 formats? So how many of your sort of 1,300 pubs? And have you only done managed or have you done partnership ones as well? The second question, I was just thinking about the sort of peak trading. Obviously, you're doing really well in those big events, with peak trading periods up 5.8%. Are you tempted to sort of reduce opening hours on the sort of nonevent days? Or is there any sort of thinking on that as a way to cut down on overheads? And then just third question on the revenue mix. I think obviously, higher margins and gross margins, can you just give us a bit more color on perhaps some of the shifts in your sales mix? Justin Platt: Thanks, Anna. I'll take the first 2 and then Stephen, if you could take the third one. Let me start on peak trading, and then I'll come back to formats. We do look at our hours on a regular basis, but there's not a massive need to start big closure periods by any means. I mean one of the things that's most notable in pub trading today certainly versus 5 years ago is the growth of the early evening at the expense of the late evening. So if you look at booking patterns now, peak time for a table, the busiest time to get a table is 6:30 to 7:00. You go back 5 years, that was more like 8:00. So there's definitely an earlier day point to your business. And we do look at hours, but I don't think there's anything significant there in cost, particularly the local community environment where people are around the corner from their houses quite a lot. On the formats. So first of all, yes, we've actively launched formats across our managed and our partner estate, and they're performing equally well in each, neither is a differentiator actually in terms of performance, but they do work across both managed and partner. And then in terms of the numbers, as we showed earlier, 5 formats. The 2 that we didn't deep dive on were locals pubs and adult dining, signature pubs. Both of those, we have some of them in market already. I would say in terms of the opportunity, it's probably the locals pubs is the only bit that we wouldn't see as a sort of significant ROIC north of 30% opportunity, which probably takes you to 75% or so of our estate with the opportunity for those new formats. Stephen Hopson: And then, Anna, on the revenue mix, I mean, we're about 35% food in our business overall, but there is a big variation in that, as you'd expect between format and some of those local pubs versus, for example, our adult dining business, which is very, very different. And that has been growing. I mean, clearly, food across the market really has been growing quicker than drink over a period of time, but it's not huge. I mean that number has probably changed by 0.5% year-on-year. So it's not a huge mix. So hopefully, it gives you some idea about the sort of the food and drink [ pub/part ]. Operator: [Operator Instructions]. The next question we have comes from Fintan Ryan of Goodbody. Fintan Ryan: Two questions from me, please. Firstly, can you give us a sense of what your sort of base case expectations are for the budget tomorrow in terms of, I guess, labor costs, anything that you might be expecting or hoping for business rates. Just to sort of get a sense of what the base case is for the outlook currently and maybe what can change within the next 24-odd hours. And then secondly, could you give some color on like like-for-like trading in Q4 and over the last 8 weeks, obviously, you reported flat like-for-likes. How much -- what's been sort of the volume versus pricing split in that? Can you give some color on the visibility for the Christmas trading? Obviously, you've got bookings up 11% year-on-year, but like typically how much of bookings are -- of your Christmas trading are bookings? And what you'd be at this point, assuming for incremental pricing for FY -- for the calendar '26, would be great. Stephen Hopson: Thanks, Fintan. If I start on, I guess, the hot topic of the day and tomorrow, which is the budget and expectations for that. I mean, our base expectations and sort of what's embedded into the guidance that we've given to the market is that we expect National Living Wage to increase, obviously. Our expectations are about a 4% increase in the headline rate of National Living Wage, and we're expecting the differential for under 21-year-olds to close slightly compared to where it is at the moment. We're not expecting any further changes to things like National Insurance. And then really, I know there have been lots of stories in the press, but at the moment, we're not making any expectations on changes for things like machine, gaming duty or business rates either. I mean the Chancellor has flagged that there'll be a review of the way business rates is levied. So that will be interesting to see. But we're not making any assumption on that because simply, we just don't have the information available to us at this point. Justin Platt: And before I answer the like-for-like, Fintan, if you've got any assumptions on the budget tomorrow, please share them with the group. In terms of the like-for-likes, look, as you know, quarter 1 is all about Christmas. October and November are relatively small months in the grand scheme of things. December performance is really what matters. And within that, it's the key 2 weeks from kind of 19th of December until 2nd of January, quite time, tight time. And bookings pace, as we've said, is very good at 11%, and that's off the back of last year. I think we grew Christmas at about 11% last year in like-for-like terms. So it's pleasing the stage we're at. But to your point, walk-ins are also important at Christmas. So we've still got a lot of work to do in order to land that. And that's both in encouraging people to spend their Christmas with us but also then in managing spend per guest, so we drive the revenue return as well. Fintan Ryan: Great. And just in terms of the pricing and current expectations? Justin Platt: Well, again, we -- as you know, we don't -- we kind of manage price through the year in a broader revenue basis. So in terms of our revenue management initiatives around booking density, around premiumization. And yes, lead price is part of that mix, but we don't have like a hard and fast target. It's overall spend [ per ] that we look at. Operator: Ladies and gentlemen, at this stage, there are no further questions. I would now like to hand back to the management team for closing comments. Justin Platt: Well, just to say, thanks, everybody, for joining us. Really good engagement. Obviously, we'll all see what comes tomorrow. And I'll wish you an early best wishes for the festive season. Thank you. Operator: Thank you. Ladies and gentlemen, that then concludes today's conference. Thank you for joining us. You may now disconnect your lines.
Operator: Ladies and gentlemen, welcome to the Arrowhead Pharmaceuticals Conference Call. Throughout today's recorded presentation, all participants will be in a listen-only mode. After the presentation, there will be an opportunity to ask questions. I will now hand the conference call over to Vince Anzalone, Vice President of Investor Relations for Arrowhead Pharmaceuticals. Please go ahead, Vince. Vincent Anzalone: Thank you, Andrew. Good afternoon, and thank you for joining us today to discuss Arrowhead Pharmaceuticals' results for its 2025 fiscal year ended September 30, 2025. With us today from management are President and CEO, Dr. Christopher Anzalone, who will provide an overview; Bruce Given, outgoing Chief Medical Scientist, who will provide an overview of the Rodemplo FDA approval; Andy Davis, Senior Vice President and Head of the Global Cardiometabolic Franchise, who will provide an update on commercialization activities; Dr. James Hamilton, Chief Medical Officer and Head of R&D, who will discuss our development programs; and Dan Appel, Chief Financial Officer, who will review the financials. Following management's prepared remarks, we will open up the call to questions. Before we begin, I would like to remind you that comments made during today's call contain certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical fact are forward-looking statements and are subject to numerous risks and uncertainties that could cause actual results to differ materially from those expressed in any forward-looking statements. For further details concerning these risks and uncertainties, please refer to our SEC filings, including our most recent annual report on Form 10-K and our quarterly reports on Form 10-Q. I'd now like to turn the call over to Christopher Anzalone, President and CEO of the company. Christopher Anzalone: Thanks, Vince. Good afternoon, everyone, and thank you for joining us today. Before we begin, I'd like to announce that this will be Bruce Given's final earnings call. He's been a valuable member of the Arrowhead Pharmaceuticals team for almost fifteen years. He will continue to help Arrowhead Pharmaceuticals as a trusted adviser, but now that Rodemplo has received its first FDA approval, he will be stepping back from day-to-day operational responsibilities and, hopefully, he can finally enjoy his time in retirement. Or his re-retirement, which is probably more accurate. His contributions to Arrowhead Pharmaceuticals' success, both current and future, have been critical, and we owe him a heartfelt thank you. Later in the call, you will hear from Bruce, who will discuss the Rodemplo FDA approval when he came back to Arrowhead Pharmaceuticals and out of retirement to help us get across the finish line. Bruce leaves us in a strong position with a very strong group of leaders across the organization. As you all know, James Hamilton has already assumed much of Bruce's prior responsibilities as Chief Medical Officer and Head of R&D. So thank you again, Bruce, for getting us to today. Thank you, James, for taking us into the next chapter for Arrowhead Pharmaceuticals. Let's now turn to our business and what progress we've made during the recent period. This has been a very busy and enormously productive last few months. The most impactful change is the FDA approval of Rodemplo. On November 18, we announced that the FDA approved Rodemplo, indicated as an adjunct to diet to reduce triglycerides in adults with familial chylomicronemia syndrome or FCS. FCS is a severe, rare disease with an estimated 6,500 people in the United States living with genetic or clinical FCS characterized by triglyceride levels that can be ten to 100 times higher than normal, leading to a substantially higher risk of developing acute recurrent, potentially fatal pancreatitis. This is Arrowhead Pharmaceuticals' first FDA-approved medicine, marking a major milestone for the company as it transitions into a commercial stage. Rodemplo is the first and only FDA-approved siRNA medicine for people living with FCS and can be self-administered at home with a simple subcutaneous injection once every three months. Rodemplo is the first and only FDA-approved medicine to be backed by adequate well-controlled studies that include patients with genetically diagnosed and clinically diagnosed FCS. After many months of preparation, our commercial team was able to hit the ground running, and I'm happy to report that we have the drug in the channel a mere week after approval. We also launched Reliant Rodemplo, a patient support program providing support services and resources for patients at each stage of the treatment journey with Rodemplo, including financial assistance options for eligible patients. In addition, we also announced the one Rodemplo pricing model that creates one consistent price across current and potential future indications. This is important. We are committed to sustainable innovation. This requires rational drug pricing according to the value a medicine offers to patients and healthcare systems. It also means that we will not ask different patients to pay different amounts for the same drug based solely on what disease they've been diagnosed with. Rodemplo is a pancreatitis drug, and when we think about pricing, we look to those patient populations who are at greatest risk of acute TG-related pancreatitis. The patients we are serving now are also those at greatest risk of pancreatitis, people with FCS. This includes those with a defined set of mutations as well as those who share the same level of chylomicronemia symptoms but with more heterogeneous and often less well-characterized genetic backgrounds, who we refer to as clinically defined or phenotypic FCS. The broader patient population would substantially increase the risk of acute pancreatitis for those with persistent chylomicronemia, meaning fasting triglycerides greater than 880 milligrams per deciliter. We believe there are approximately 750,000 of these patients in the US, and while they often have less day-to-day symptoms than FCS patients, they are clearly at high risk for acute pancreatitis. The one Rodemplo pricing model has these patients in mind, and the $60,000 annual WAC price is designed to provide real value to patients and healthcare systems in this population. Our Shasta 3 and Shasta 4 Phase III studies are designed to support an sNDA for this population, and while those studies are ongoing and we are actively serving the FCS population, we will have time to help payers properly appreciate Rodemplo's value, and payers will have time to plan and budget for its possible eventual adoption and regulatory review and approval. Outside of Rodemplo, we have also made good progress with two other pipeline programs in the cardiometabolic space. Zidaziran, aerodimer PA. Let's start with zodasiran. During the recent period, we dosed the first subject in the Yosemite Phase III clinical trial of zidaziran, our clinical candidate being developed as a potential treatment for homozygous familial hypercholesterolemia, or HoFH. HoFH is a rare genetic condition that leads to severely elevated LDL cholesterol and early-onset cardiovascular disease. Yosemite will enroll approximately sixty subjects over the age of 12 who will be randomized to receive four doses once every three months of two hundred milligrams of zidaziran or placebo. The primary endpoint is the percent change from baseline to month twelve in fasting LDL-C. The Phase II data in this patient population were encouraging, and we hope to have this study fully enrolled in 2026, complete the study in 2027, and if successful, enable an NDA filing by the end of 2027 and launch in 2028. The next new pipeline program in cardiometabolic is Aerodimer PA. During the last quarter, we filed a request for regulatory clearance to initiate a Phase III clinical trial of Aerodimer PA, being developed as a potential treatment for atherosclerotic cardiovascular disease or ASCVD, due to mixed hyperlipidemia, in which both LDL cholesterol and triglycerides are elevated. This is a very large population without proper treatment options. We believe there are approximately twenty million people in the US with mixed hyperlipidemia. Aerodimer PA is a dual-function RNAi therapeutic designed to silence the expression of the PCSK9 and APOC3 genes in the liver, designed to reduce both LDL-C and TGs. This represents an important step forward for the RNAi field as we believe it is the first clinical candidate to target two genes simultaneously in one molecule and an important step forward for preventative cardiology as both LDL and TGs have epidemiologic support as being important drivers of ASCVD risk. Both these programs fit well strategically with our growing commercial focus on the cardiometabolic space and on the physicians that treat these patients. Also during the quarter, we expanded our clinical pipeline in CNS. We filed a CTA to initiate a Phase III clinical trial of ARO MAPT as a potential treatment for tauopathies, including Alzheimer's disease. ARO MAPT is Arrowhead Pharmaceuticals' first therapy to utilize a new proprietary delivery system, which in preclinical studies has achieved blood-brain barrier penetration and deep knockdown of target genes across the CNS, including deep brain regions, after subcutaneous injections. Nonclinical evaluations in monkeys with subcutaneous administration of ARO MAPT using clinically translatable doses have shown better than 75% knockdown of the tissue level of MAPT mRNA in CNS. Importantly, monkey tissue level knockdown has translated into CSF tau protein reductions with a duration of effect supportive of either monthly or quarterly subcutaneous dosing. This is an exciting program, and we look forward to initiating the study shortly. We also continue to make good progress on our first two obesity programs. ARO I and HBE, and ARO AP7. Together, we have randomized one hundred and ninety-two patients, all with a BMI greater than thirty. Because we started ARO I and HBE earlier, it is about two quarters further into the Phase I study than ARO AP7. Our plan has been to share early data at the end of the year, but due to travel schedules and the holidays, this will push a couple of weeks later into the early part of 2026. We also expect to have more fulsome data toward the end of 2026. We also made important progress in business development. First, as we announced yesterday, we earned a $200 million milestone payment from Sarepta following a drug safety committee review and subsequent authorization to dose escalate, and achievement of the second prespecified patient enrollment target for ARO DM1. This follows a $100 million milestone earned previously when Arrowhead Pharmaceuticals reached the first of two prespecified enrollment targets and subsequent authorization to dose escalate in a Phase I/II clinical study of ARO DM1. This partnership continues to be productive, and we look forward to continued progress. In addition to progress on the constructive partnership, we announced a new global licensing collaboration agreement with Novartis for Arrow SNCA, Arrowhead Pharmaceuticals' preclinical stage siRNA therapy against alpha-synuclein for the treatment of Parkinson's disease. The collaboration includes a limited number of additional targets outside our pipeline that will utilize Arrowhead Pharmaceuticals' proprietary TRiM platform. Arrowhead Pharmaceuticals received a $200 million upfront payment from Novartis and is also eligible to receive development, regulatory, and sales milestone payments of up to $2 billion. Arrowhead Pharmaceuticals is further eligible to receive tiered royalties on commercial sales up to low double digits. As I mentioned before, the recent approval of Rodemplo is clearly the most important recent development. Arrowhead Pharmaceuticals has been busy across the pipeline and in business developments during the recent period. Business development and licensing are critical to our business model, and we are pleased to have these two significant deals closed this year. With that overview, I'd now like to turn the call over to Bruce Given. Bruce Given: Thanks, Chris. Good afternoon, everyone. I'm happy to give my final update to Arrowhead Pharmaceuticals shareholders at such an important time and with Arrowhead Pharmaceuticals in such a position of strength. We have built something truly unique and powerful at Arrowhead Pharmaceuticals, and with the first FDA approval behind us, it feels like the right time for me to step back and retire. So let's review some of the key parts of the recent FDA approval that we announced last week. Mostly, I'll discuss the label and information contained in the packaged insert. Rodemplo is approved as an adjunct to diet to reduce triglycerides in adults with FCS. The recommended dose of Rodemplo is twenty-five milligrams, and it can be self-administered at home by subcutaneous injection once every three months. Rodemplo has no contraindications, warnings, or precautions. The most common adverse reactions include hyperglycemia, headache, nausea, and injection site reactions. The FDA submission was supported by clinical data from the Phase III PALISADE study in patients with both genetic FCS and those with the same clinical manifestations of the disease but without solely a genetic cause, referred to as clinically diagnosed FCS. The blinded portion of the trial compared a year of therapy with Rodemplo or placebo dosed every three months and tested two doses of Rodemplo versus placebo. The primary endpoint was the change in median triglycerides at month ten. There were also multiplicity-controlled secondary endpoints, all of which were statistically significant, including notably the occurrence of acute pancreatitis, for which the twenty-five and fifty-milligram doses were combined for comparison to placebo as called for in the analysis plan. Rodemplo achieved deep and durable reductions in median triglycerides as early as one month when the first measurement was taken. Overall, these reductions were around eighty percent from baseline, and reductions largely maintained median triglyceride levels below the usual guideline-directed threshold of five hundred milligrams per deciliter throughout the year of treatment. Five hundred milligrams per deciliter is the recognized threshold where the risk of pancreatitis increases relative to a normal population. Importantly, patients with genetic FCS versus clinical FCS showed similar reductions from baseline. We see the clinical FCS population as having the same high unmet need as the genetic FCS group, and as such, we think it is crucial to have shown that both patient populations showed similar large reductions from baseline triglycerides with Rodemplo therapy. Rodemplo is also labeled as having reduced the rate of adjudicated pancreatitis events versus placebo, a very welcome finding for FCS patients and their caregivers and an important validation that reductions in triglycerides can, in fact, lead to reductions in pancreatitis. Let me close by saying that it's gratifying to have been a part of Arrowhead Pharmaceuticals from the early days of our siRNA developments and part of the Rodemplo program at its inception and again over the last several years. And more importantly, it's exciting to hear the enthusiasm about this new medicine from patients, caregivers, and physicians. I'd also like to wish all of you an enjoyable Thanksgiving holiday. I'll now turn the call over to Andy Davis. Andy Davis: Thank you, Bruce. It's been exactly one week since the launch of Rodemplo, and the early feedback we've received from healthcare professionals, patient societies, and payers has been very encouraging. We hear lots of enthusiasm about the differentiating attributes of Rodemplo, which generally fall into five value pillars, some of which the team has touched on briefly already. First, the reduction in triglycerides is both significant and sustained. In PALISADE, Rodemplo reduced triglycerides by an unprecedented minus 80% from baseline as early as month one and maintained this marked reduction with minimal variation throughout the full twelve-month treatment period. This compared to a minus 17% reduction in the pooled placebo group. With Rodemplo, patients now have real hope, many for the first time, of achieving triglyceride levels below guideline-directed risk thresholds associated with acute pancreatitis, such as five hundred milligrams per deciliter. In PALISADE, fifty percent of patients at the twenty-five milligram dose achieved TG levels below five hundred milligrams per deciliter, with approximately seventy-five percent achieving levels below eight hundred and eighty milligrams per deciliter at month ten. Second, the numerical incidence of acute pancreatitis in patients treated with Rodemplo was lower compared with placebo. As we all know, this is the outcome of most importance for healthcare professionals, patients, and payers. Third, Rodemplo demonstrated favorable safety and tolerability. Importantly, the US-approved package insert contains no contraindications, no warnings, and no precautions associated with the use of Rodemplo. Fourth, Rodemplo can be self-administered at home with a simple subcutaneous injection once every three months, just four injections per year. Physicians tell us this infrequent dosing schedule is likely to reduce the treatment burden on physicians, patients, and caregivers. And fifth, early feedback on the one Rodemplo pricing model has been positive. As Chris highlighted, this model creates one consistent price of $60,000 per patient per year across current and potential future indications such as severe hypertriglyceridemia. Again, this means that we will not ask different patients to pay different amounts for the same drug based solely on what disease they have. We have been in important discussions with payers, and early signs for market access are encouraging. As a reminder, we believe there are an estimated 6,500 people in the US living with genetic or clinical FCS, and the prescriber base comprises specialist physicians such as lipidologists, endocrinologists, preventive cardiologists, and internal medicine physicians with a focus on lipid disorders. These specialists often operate within multidisciplinary teams that may include gastroenterologists, advanced practice providers, and specialized dietitians. At launch, we are targeting approximately 5,000 healthcare professionals through personal engagement. And finally, our Reliant Rodemplo patient support program is operational and designed to make every step of the journey easier. This program is designed to assist patients and physicians with insurance verification, financial assistance options, a first dose starter kit, and supplemental injection training. We launched just one week ago, but our care coordinators are already actively processing Rodemplo start forms, conducting patient welcome calls, and engaging payers to obtain approvals. And as Chris stated, we're happy to announce that we already have the drug available in the channel ahead of schedule. I will now turn the call over to James Hamilton to discuss the broader R&D portfolio. James Hamilton: Thank you, Andy. I'd like to give a quick review of the status of our late-stage Phase III studies and also describe the design of a couple of our early-stage programs. Let's start with the suite of Phase III studies of Rodemplo designed to potentially support a supplemental NDA filing to expand the label beyond genetic and clinical FCS. Shasta 3 and Shasta 4 are Phase III studies designed to compare reductions in triglycerides with twenty-five milligrams of Rodemplo compared with placebo over twelve months of treatment. Between the two studies, we enrolled approximately 750 patients. In addition, the MIRROR III study enrolled approximately 1,400 patients. This study in patients with mixed hyperlipidemia is designed to supplement the safety database we file the sNDA for Rodemplo in severe hypertriglyceridemia. We are not planning to seek approval in the mixed hyperlipidemia patient population. We completed enrollment in the global Shasta 3 and Shasta 4 as well as MIRROR III Phase III clinical studies in June 2025. We anticipate completing the primary portions of these studies in mid-2026 with top-line data expected in the second half of 2026. If successful, we plan to make submissions before the end of 2026 for regulatory review and potential approval. The SHTG program also features a study named Shasta 5 to directly assess the ability of Rodemplo to reduce the risk of acute pancreatitis as the primary endpoint in SHTG patients at high risk of acute pancreatitis. We are currently enrolling patients in that study. Of note, we will also be assessing pancreatitis risk reduction in Shasta 3 and Shasta 4 as a key secondary endpoint, but Shasta 5 is the first event-driven study to assess acute pancreatitis as the primary endpoint. I would also like to provide an update on our obesity programs ARO Inhibit E and ARO ALK7. Both of these programs target the known active impact that is involved in signaling to adipocytes to store fat. ARO Inhibit E inhibits one of the ligands in the pathway, and ARO ALK7 inhibits the receptor on the adipocyte that these ligands bind. So essentially, we are trying to reduce the message sent to store fat and the way the message is received at the end of the service. ARO Inhibit E started enrolling patients in December 2024, and ARO ALK7 initiated in May 2025. Both programs are currently in Phase I/IIa, first-in-human dose-escalating studies to evaluate safety, tolerability, pharmacokinetics, and pharmacodynamics. Both programs include Part one, designed to assess single and multiple doses as monotherapy, and Part two designed to assess multiple doses in combination with other therapies. As ARO Inhibit E started about two quarters earlier, we have more mature data in that study. The study is nearly fully enrolled, and we are on schedule and currently planning to share initial data from this program around the middle of 2026. This is a rather robust first-in-man study that is collecting multiple measures of drug activity and pathway activity, and we are eager to share initial findings. We were originally planning on sharing the first data around the end of the year, but due to the holidays and travel, January worked best for all schedules. For ARO ALK7, we intend to provide a brief snapshot of early safety and target engagement results from that study. Both targets have strong genetic validation, and both programs have yielded promising results in preclinical studies. So it will be interesting to see similarities and differences in patient response in the clinical trials. I will now turn the call over to Dan Appel. Dan Appel: Thank you, James, and good afternoon, everyone. I'll provide a brief outline of our financial results. As we reported today, our net loss for fiscal year 2025 was $2 million for a loss of $0.01 per share, based on 133.8 million fully diluted weighted average shares outstanding. This near breakeven result compares with a net loss of approximately $599 million for a loss of $5 per share based on 119.8 million fully diluted weighted average shares outstanding in fiscal year 2024. Revenue for fiscal year 2025 totaled $829 million and was driven entirely by our license and collaboration agreements with Sarepta, Sanofi, and GSK. Of the $829 million, roughly $697 million pertain to the Sarepta arrangement. Of that $697 million, $587 million relates to the ongoing recognition of initial surrender consideration, $94 million relates to the achievement of the first EM-one milestone, and $16 million relates to the reimbursement of incurred collaboration program costs. Additionally, the license to Sanofi for Greater China rights to Rodemplo added $130 million to our fiscal 2025 revenue. And lastly, to round things out, we recorded $2.6 million earlier in the year related to a milestone payment under the GSK HBV agreement. Turning to expenses, total operating expenses for fiscal year 2025 were approximately $731 million compared to $605 million for fiscal 2024, an increase of $126 million. The year-over-year increase was driven by $101 million of higher R&D expenses and $25 million of higher SG&A, both of which I will explain in brief. The key drivers of research and development spend included costs to run our clinical trials, our clinical manufacturing costs, as well as expenses related to active programs in the preclinical stage. 2025 R&D costs were heavily impacted by our Phase III clinical trials for Rodemplo and SHTG. It's worth noting that in fiscal year 2025, nearly two-thirds of our clinical trial spend can be attributed to the late-stage development of Rodemplo and SHTG. As we have mentioned, the SHTG registration studies are now fully enrolled, and we expect data to read out next year. Accordingly, the majority of remaining Phase III registration clinical trial costs are expected to occur over the next twelve months. Our SG&A costs increased by $25 million year-over-year, driven primarily by our preparations for the commercialization of Rodemplo. All of us here at Arrowhead Pharmaceuticals are enormously proud of the capabilities we have built to commercialize Rodemplo, not only in our commercial functions but also across regulatory, supply chain, order to cash, and indeed across all of our enabling support functions. Turning now to cash flow, net cash provided by operating activities during fiscal year 2025 was $180 million, compared with net cash used in operating activities of $463 million in the prior year, for a net positive change year-over-year of $643 million. This increase in cash from operating activities is driven by cash received from licensing and collaboration agreements, partially offset by the aforementioned increase in R&D and SG&A costs. Turning to the balance sheet, our cash and investments, including available-for-sale securities, totaled $919 million as of September 30, 2025, compared to $681 million as of September 30, 2024. The increase in our cash and investments was primarily related to our licensing and collaboration agreements with Sarepta, Sanofi, and GSK, partly offset by our ongoing cash burn. Our common shares outstanding as of the end of the quarter were 135.7 million, down 2.4 million from the prior quarter due mainly to the repurchase of shares from Sarepta. I'll use this opportunity to reiterate two developments that are subsequent to the fiscal year and leading up to today, which were financially meaningful for Arrowhead Pharmaceuticals and our balance sheet. Firstly, as Chris mentioned earlier on the call, we announced a licensing and collaboration agreement with Novartis for ARO SMTA, Arrowhead Pharmaceuticals' preclinical stage siRNA targeting alpha-synuclein for the treatment of synucleinopathies, such as Parkinson's disease. Novartis will also be eligible to select a limited number of additional collaboration targets outside of Arrowhead Pharmaceuticals' current pipeline to be developed using our proprietary TRiM platform. The closing occurred last month, and we have already received $200 million in the bank as an upfront payment. As a reminder, we are also eligible to receive up to $2 billion in future milestone payments from Novartis, as well as royalties on commercial sales. Secondly, just yesterday, we announced we earned our second development milestone under the Sarepta collaboration agreement for ARO DM1. As Chris mentioned, this triggered a $200 million obligation from Sarepta that will be recorded in 2026, and we expect to receive the cash in January of 2026. This is, of course, additional to the $100 million earned for the first ARO DM1 milestone in fiscal quarter four of 2025. Finally, we are not providing detailed financial guidance at this time for the coming fiscal year, beyond reiterating that, while we view the launch of Rodemplo as a truly transformational event for the company, we do not anticipate that the commercial sales of Rodemplo will have a substantial impact on our financial statements in fiscal year 2026. We also believe our cash runway, even in the absence of any further capital from new deals or other sources, and all the while funding a broad ambitious set of commercial clinical programs, to be sufficient to extend into fiscal year 2028. With that, I will now turn the call back to Chris. Christopher Anzalone: Thanks, Dan. Arrowhead Pharmaceuticals has been working to bring important medicines to patients in need for over fifteen years. As Bruce mentioned, it's very gratifying to see Rodemplo approved by the FDA and the overwhelmingly encouraging feedback we received from the FCS community. But Rodemplo is just one part of a large pipeline we've created to help potentially millions of patients in a diverse set of disease areas. We spent years building the TRiM platform to enable us to bring RNAi where it is needed. We are now able to address seven different cell types and have current clinical programs in five of these. Further, we will meet our twenty in twenty-five goal whereby we will have 20 individual drug candidates in clinical trials by the end of this year. Our partnering has been helpful but judicious, with approximately half of our clinical pipeline wholly owned and half partnered. We have late-stage studies ongoing, again, both independently and with partners, that may potentially lead to multiple new commercial launches over the next few years. In addition, we have a strong financial position that enables us to properly invest in our growth today and in the future. We believe we now have everything we need to be in the next class of large and ultimately profitable biotech companies. Thanks for joining us today, and I would now like to open the call to your questions. Operator? Operator: Thank you. To ask a question, please press 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. And we ask that you please limit yourself to one question. One moment, please. Our first question comes from the line of Luca Issy with RBC Capital Markets. Luca Issy: Bruce, congrats on your re-retirement, I should say. So all the best in the next chapter. And then maybe if I can stick with you, can you just maybe talk about what's the plan to show in terms of acute pancreatitis for Rodemplo? Are you confident just the three and four in Q3 2026 can actually hit acute pancreatitis? Or is the base case scenario, those two trials, are maybe underpowered to show benefit and you actually need Shasta five to actually hit on acute pancreatitis given the positive death population is enriched for history of acute pancreatitis. The only reason why I'm asking is it looks like you doubled the size of the n, I should say, in the Shasta five trial according to clinicaltrials.gov. As of Monday last week. So, again, any call there, much appreciated. Thanks so much. Bruce Given: Well, I sure will. And, you know, thank you for your kind regards. Shasta three and four were powered on the basis of triglyceride reduction, which is the primary endpoint. So, you know, we did not specifically power Shasta three and four for pancreatitis. However, it was on our mind, and as was also done in the core studies, you know, there is the intent and by design, the capability to pool both Shasta three and four for evaluating versus, you know, placebo on reduction of pancreatitis. And, of course, we only have one dose of Rodemplo, instead of two doses, you know, two different doses like we had, for instance, in the Phase II program. So, you know, there's, I would say, reasonably good power for, you know, for seeing a difference in acute pancreatitis. But we're not dependent on it because we've designed Shasta five specifically to, obviously, be able to have a primary endpoint of acute pancreatitis. We did change the design of it in Shasta five recently to make it a more generalizable population in patients with persistent chylomicronemia and a history of pancreatitis. The original design was a much more enriched population, but it would have actually been less representative than, you know, the duly designed trial. So it's not so much a matter that we've been powered so much as we, you know, broadened the power of the patient population to be more inclusive of the high-risk population in SHTG. So, you know, we certainly we oftentimes refer to it as a belts and suspenders approach. You know, there's a, you know, obviously, a decent chance that we will show statistical significance in the Shasta three and four programs, but we're not entirely dependent on that because of Shasta five, which is a, you know, study. The first of its kind specifically designed to demonstrate a benefit versus placebo in acute pancreatitis. Luca Issy: Got it. Thanks so much. Congrats again. Operator: Thank you. One moment, please. Our next question comes from the line of Prakhar Agrawal with Cantor Fitzgerald. Prakhar Agrawal: Hi. Thank you for taking my questions and congrats on the quarter as well as the update throughout the quarter. Maybe on the obesity side, I had a couple of questions. So on ARO Inhibit E for the update early next year, if you can just provide more details on how much data will be disclosed, especially on the MAD side. And how much follow-up will you have on ARO Inhibit E for both monotherapy and combo cohorts? And also the same question on ARO ALK7. What cohorts will be disclosed and will there be any weight loss data at all from ARO ALK7 early in the year? Thank you so much. James Hamilton: Yeah. Sure, Prakhar. This is James. I can cover that. So for ARO Inhibit E, it's a little bit ahead, as Chris mentioned, probably by a couple of quarters. So the study is nearly fully enrolled. We have a good amount of data in both the SAD and MAD healthy volunteer or obese healthy volunteer cohorts. So we'll have biomarker data, MRI data, and as well as safety in those cohorts. And then the combo cohorts are almost fully enrolled. I think we're waiting on a few more diabetic patients to enroll in the highest dose combo cohorts and should have probably not through the end of the study, but ample post-dose follow-up in both the diabetic and the nondiabetic cohorts from ARO Inhibit E. And then ARO ALK7 will be a little bit more limited, focused mostly on monotherapy safety and knockdown data, knockdown of the target for that study. Christopher Anzalone: Yeah. And keep in mind here that we want to present data that are interpretable, and we're not going to have all cohorts. We're not going to have all patient data in all cohorts even if they're fully enrolled. We don't get data in real-time necessarily. So you'll have probably two bites of the apple, maybe three bites, but certainly two bites of the apple. You know, our goal here is this first round of data is to give you an idea about how these are going. And then, you know, the fuller story should come out once we have the more wholesome datasets in later 2026. Prakhar Agrawal: Got it. Thank you so much. Operator: You're welcome. Thank you. Our next question comes from the line of Maury Raycroft with Jefferies. Maury Raycroft: Hi, thanks for taking my question and congrats on the progress and best wishes, Bruce, in retirement. I was gonna ask a follow-up to Luca's question earlier. We're expecting to see the patient baseline profile for your SHTG pivotal next week. What are your estimates on AP events to accrual based on your patient's baseline characteristics? And also your change in plans to broaden the AP adjudication criteria. Bruce Given: You know, Maury, I think it's a little bit hard to answer just because we have adapted our protocols now to go ahead and adapt the modified Atlanta criteria, you know, since those have been accepted by both FDA and EMA, and here in the US, at least payers. And this is really gonna be our first experience with using that particular scale, which makes it a little hard to estimate exactly how many events we will have. So it's hard to say. What you will see next week is you will see the percentage of patients that had a history of pancreatitis that were enrolled in the study. And, you know, based on that, you know, that, I think you'll see that, you know, there's a good chance that we'll have, you know, the necessary number of events. But I'm a little bit uncomfortable trying to give any real prediction when we're using a scale that we haven't used before. Maury Raycroft: Understood. That's helpful. Thanks for taking my question. Operator: Thank you. And our next question comes from the line of Jason Gerberry with Bank of America. Gina: Hi. This is Gina on for Jason. Congrats on all the progress this quarter, and thank you so much for taking part in the question. Just a couple from us. I guess, first on your ARO MAPT program, maybe just discuss which aspects of the drug are maybe differentiated from A and J's recently failed anti-tau antibody and what kind of still gives you the confidence in the target after the failure. And then based on your current cash position and the progress that you've made on these partner milestone triggers, do you have any updates on your visibility on launching a CVOT study? Is that more tied to seeing how the FCS and central SHTG launches are progressing? And then can you just remind us of any potential milestone triggers from the Sarepta programs that you're expecting in 2026? Thank you so much. Christopher Anzalone: Alright. I count three questions. James, want to take the first one? James Hamilton: Sure. Yeah. I'll take the first one on the MAPT program. So the J and J antibody, the monoclonal as well as other monoclonals, are, you know, IV administrated monoclonal antibodies. Probably a small fraction of those molecules cross the blood-brain barrier and then are primarily focused on binding to that extracellular tau. So tau that's been released from damaged cells or has been secreted and that can propagate and bind to tau that's outside of the cell. Our approach is very different. We use a targeting ligand to facilitate delivery of the siRNA across the blood-brain barrier into the neuron to silence the expression of tau. So we're sort of turning off the faucet for all of the expression and preventing the neurofibrillary tangles to form in the first place. We should get that over time to be able to reduce the level of intracellular tau and extracellular tau, whereas the monoclonal antibodies are really just able to get the extracellular tau. So that's the key differentiator. Christopher Anzalone: And on the other two questions, I'll answer the last one first. Sarepta milestones. So we are eligible to receive the first of $550 million annuities in February. So we expect that over the next several months. That's correct. February. Right, Dan? Dan Appel: Yes. Correct. Christopher Anzalone: On the visibility on the CVOT. So that CVOT, as you know, is for the dimer. That's a big opportunity for us. And so we are moving as quickly as we can to that CVOT. We'll have a good idea, I think, this summer if we have a drug. You know, we'll know PCSK9 knockdown. We'll know APOC3 knockdown. We'll know LDL decreases. We'll know triglyceride decreases. And so given what those data look like, I think, again, as early as this summer, I think we'll know if we have something that really could be an important treatment for these mixed hyperlipidemia patients. Should that be successful? Should that look good? We are not waiting on anything, you know, to start those studies other than finishing this Phase I/II. Our plan is to be able to roll directly into pivotal studies after these Phase I/II studies. Again, should they all go well and there's nothing gating there other than the data looking good. We also are hoping to have parallel pivotal studies, you know, one that will be a CVOT and then one that will be looking at simply lowering LDL, you know, over the course of the year. As you know, that has been an approval endpoint in the past for PCSK9 inhibitors. And we think that could be a good way to get to market very quickly and, frankly, help us to pay for the CVOT. So that's our plan now. We'll have a much better idea about how quickly we can move in the summertime once we start to see data. We're really looking forward to seeing those data. Gina: Thank you. Operator: Thank you. And our next question comes from the line of Edward Tenthoff with Piper Sandler. Edward Tenthoff: Great. Thank you very much. And Bruce, wishing you all the best, and James, wishing you all the best of luck. It really is a super exciting time for the company. I wanted to get a sense just with respect to upcoming data readouts next year, specifically asking, do you think you'll have your first look from the Aerodimer PA next year? And what other datasets beyond the obesity data in the first half should we be thinking about? Christopher Anzalone: Thanks, Ted. We have a bunch of, I think, potentially very interesting data readouts throughout 2026. As you mentioned, obesity will be the first. You know, as I mentioned, we should have two bites of an apple or thereabouts, and we'll have our first early dataset, you know, in January. And then as the data mature in both those programs, say towards, you know, the end of the second quarter or something around then, we'll have a much larger dataset. We think those are important. In the summertime, we expect to have dimer data. I think those are extraordinarily important. You know, the idea that we might have a drug candidate that can simultaneously lower LDL and triglycerides to treat twenty million or so people in the United States with mixed hyperlipidemia is a very exciting opportunity. And, again, we'll I think we'll know if we have something that could really fit there in the summertime. Also in the summertime, I think we'll have our first bit of ARO MAPT data. And we'll be looking for tau levels in the CSF. That also would be extraordinarily exciting. We could be sitting on one of the most exciting potential Alzheimer's drugs in the clinic. And, hopefully, we'll be derisking the entire blood-brain barrier platform that can enable us to treat a variety of CNS diseases. So that's an important readout. Of course, also in the third quarter or so, we expect to have the readout for Shasta three and four. You know, that are designed to enable the sNDA by the end of the year. And then, of course, at the end of the year, we expect to file our sNDA. So look, there will be other things happening during the year, but, you know, those to me feel like the primary ones. And, of course, we'll be in the market. You'll be in the market, and, you know, we will be really looking forward to seeing the adoption curve that Rodemplo is gonna have. Edward Tenthoff: Great. Any update on ARO RAGE just to be comprehensive? Thank you. Christopher Anzalone: Yeah. Thank you. Yes. So as you know, Ted, the data so far for ARO RAGE have been enticing. You know, we've seen that we can knock down RAGE deeply, both looking at circulating biomarkers as well as valve. You know, that's super interesting. Where we've struggled is looking for biomarkers to show potential clinical benefit. And so rather than running directly into a large asthma or COPD Phase II, we were hoping to have a baby step to see some evidence of that. So we have started a challenge study. Don't expect to have data in '26, maybe at the very end of '26, but we've just started that. And so my hope is that that will show us that knocking down RAGE is an important thing. Look, it's been an undruggable target for some time, and now we can drug it. So now let's see what that does for us. I think at the end of that, we can then ask ourselves, do we want to build out a pulmonary franchise or do we want to partner that? And I think a positive challenge study readout would allow us to partner that under attractive terms. Edward Tenthoff: Great. Well, guys, congrats on all the great progress. I'm really excited to see the Rodemplo launch. It's a great job. Christopher Anzalone: Thank you, Ted. Operator: Thank you. Our next question comes from the line of Mani Foroohar with Leerink Partners. Mani Foroohar: Yes. Thanks for taking the question. Congrats on the progress in the first product launch. And best wishes also to Bruce on his re-retirement. So something tells me you're gonna pop up again soon. I don't think you're done with us. Apropos of the question, can I want to follow-up on sort of broader pipeline? I know Ted touched on new ARO RAGE study, etcetera. How do we think about Aerodimer application in terms of pursuing CVOT, the right target for that technology? And where are the right places for you to put that to work? Now that you've got sort of a very different place in terms of your balance sheet? Bruce Given: I'm happy to take that. You know, obviously, we're excited about the Rodemplo and APOC3 inhibition generally for, you know, patients with severe hypertriglyceridemia. You know, that's been a very, very poorly treated population, you know, for a long time. You know, the LDL side of the equation, on the other hand, has been really a different story. And other than HoFH, you know, there's a pretty good number of tools in the tool chest for dealing with LDL. You know, the patients on that LDL side of the equation, patients with heterozygous familial hypercholesterolemia, which is, you know, a pretty good-sized population, for instance. But the twenty-some million patients in the US alone that have mixed hyperlipidemia has been an interesting population. You know, we could address the LDL part, but we've done really a terrible job historically of being able to address the triglyceride piece of that. And, you know, the post hoc analyses that have been done of CVOT have shown that for the same LDL reduction, you can really rank order the risk, you know, that patients have by how high their triglycerides are. And, of course, the Mendelian randomization data has also said that triglycerides are an independent predictor of events and mortality in that mixed hyperlipidemia population is huge. It's a very big population. So, you know, there's never really been a very good way of addressing, you know, both sides of the problem in mixed hyperlipidemia, both the LDL and the triglycerides. And here we're talking about a drug that could potentially do it with a single, you know, say, injection, you know, get both their LDL and their triglycerides, probably on top of the statins. I think you're gonna always have a statin there if the patients could tolerate it. But you could have a daily statin and a quarterly dimer injection, and that's and potentially, you know, treat, you know, that twenty million patients, you know, to low-risk levels of LDL and triglycerides. That would be, you know, quite an amazing opportunity, I think, from a marketing perspective. Compared to what you can do today, which is you can probably get the LDL taken care of today, but you probably can't do much at all, you know, worthwhile in the triglycerides. So this is what makes this, you know, to us, such an interesting proposition. Christopher Anzalone: Yeah. As you know, Mani, what we used to former strategy was to make Rodemplo, you know, a three-step drug. Step one is FCS. Step two is SHTG. Step three after a CVOT would be this, you know, would be to be part of a treatment in mixed hyperlipidemia. Once we were able to perfect, at least in animals, the dimer platform, it didn't make any sense any longer. You know, we like the idea of keeping Rodemplo as a pure play pancreatitis drug. Full stop. And now I think we'll have a tool to more completely treat that mixed hyperlipidemia population should this dimer translate well from animals to humans. Mani Foroohar: That's helpful. And as a follow-up, when you think about potential dimer applications, etcetera, how are you thinking about the data next year from Horizon and how and potential applications of combining what hopefully will be a validated APOC3 target with other approaches to their risk-elevating elements of the lipid profile? James Hamilton: Yeah. Sure. So of course, our siRNA is targeting LPA is partnered with Amgen. So we would have to work with them on, you know, any kind of dimer applications. But there are other applications beyond, of course, the PCSK9, APOC3. I mean, we're looking at other dimers in the CV space, both targeting the hepatocytes and extrahepatic cell types. So this is probably not the only dimer that you'll see out of Arrowhead Pharmaceuticals. Mani Foroohar: Alright. Thanks, guys. That's really helpful, and congrats again. Operator: Thank you. And our next question comes from the line of Patrick Trucchio with H.C. Wainwright. Patrick Trucchio: Congrats on all the progress. I have a few follow-up questions. Just the first is just regarding, I'm wondering if the FDA has provided clarity on what level of pancreatitis evidence would be required for a future pancreatitis risk reduction claim, particularly in the high-risk SHTG patient population. And separately, wondering if there's been discussions around a potential pediatric pathway just given that FCS presents in childhood? And then just on the MAPT program, I'm wondering what level of CSF tau knockdown or biomarker response would you consider clear clinical proof of concept in humans just given I think you have greater than seventy-five percent knockdown in the NHP data? Bruce Given: So the first one is less level of AP that we think the FDA is required to have it on the label. Yeah. You know, we have not discussed with the FDA specifically what it would take to get a claim per se. I'm not sure we've really felt that was necessary. I mean, I think physicians, you know, have no real question about the relationship of triglycerides to pancreatitis risk, especially now that it's been proven. And payers haven't seemed to be concerned about that either, at least in the US. So I'm not sure, you know, what the value of a claim would be. And, of course, at this point, it's untested, you know, whether the agency, you know, would consider providing that, you know, that claim. I don't know that we've really thought of it as being necessary, Patrick, to be clear. In FCS. Patrick, is your question on SHTG or FCS? Patrick Trucchio: It's around actually the high-risk SHTG patient population. Bruce Given: Yeah. But the answer is the same, I think. You know, we at least have not approached asking them, you know, when they give a claim, what it would take to get that claim. It's very possible that what they would require is something, you know, like Shasta five. But, you know, the Shasta five was really designed primarily, you know, on the possibility that the payers in countries outside the US might require a dedicated outcome study. So it was more payer-focused than it was regulatory-focused. And, you know, we know, we really were not committed one way or the other about whether it'd be submitted to regulators asking for a label change. We were more interested really in protecting the possibility that there would be payers outside of the US that would require, you know, a specific proof of concept in a dedicated study. So we really haven't raised this with regulators, you know, anywhere on a global basis at this point. James Hamilton: In terms of what we're looking for based on the data, as you mentioned, at the tissue level, we were seeing seventy-five percent plus reductions. And similar reductions in the CSF in monkeys. I mean, we typically translate well from cynos into the clinic into humans. And I think based on some of the other data out there with the intrathecal intrathecally administered ASO, and they were able to achieve CSF reductions of about 50% to 60% and those CSF reductions corresponded to improvements in tau PET signals. So, you know, I think that's probably where we're aiming for in our clinical study is at least 50% to 60% reduction in the CSF. That's what others have shown that seems to have translated into a meaningful tau PET signal. Patrick Trucchio: Great. Thanks so much. Operator: Thank you. Your next question comes from the line of Andrea Newkirk with Goldman Sachs. Andrea Newkirk: Good afternoon. Thanks for taking the question. Maybe one more on the Rodemplo launch. Recognize it's only been about a week since the approval. But now that you have launched, just curious if you'd be willing to comment on your expectations for the cadence of the initial launch here in FCS and how you think it may be similar or different from that of the Triglyceride launch, particularly in the context of the significant pricing differential that you have? Thank you so much. Andy Davis: Happy to take that, Andrea. This is Andy. So we do have very high ambitions for the Rodemplo launch. Expected to be the best in class. And as you know, there are a number of reasons why we believe that to be the case. Largely around the attributes of Rodemplo that we do believe make it a special molecule in this category. We talked about obviously the significant and sustained TG reduction. We've talked about the reduced incidence of acute pancreatitis. But even more importantly, we hear a lot of positive feedback around the safety and tolerability profile. So no contraindications, no warnings, and no precautions. And we do have a lot of physicians and patients who are enthusiastic about the once every three-month dosing regimen. So with those product attributes, we have very high ambitions for the launch of Rodemplo in FCS specifically. Operator: Thank you. And our next question comes from the line of Mike Ulz with Morgan Stanley. Mike Ulz: Good afternoon. Thanks for taking the question, and congratulations on all the progress as well. Maybe just a follow-up on the Shasta three and four studies. You mentioned adopting the modified Atlanta criteria. Just curious now that you've seen some more detail around the core studies, are you considering any sort of, you know, adjustments or fine-tuning to your studies going forward? Thanks. Bruce Given: Other than adapting the ATLANTIC criteria, I think we're, you know, feeling pretty good about the design and, you know, it was negotiated with the FDA. I don't think we saw anything in core that, you know, would cause us to, you know, see a need to change anything else. There's nothing that comes to mind. You know, James, would you see it any differently? You don't look closely at this too. James Hamilton: Yeah. I agree. It didn't inspire any changes in the protocol. So, yeah. Mike Ulz: Great. Thank you. Operator: Thank you. Our next question comes from the line of Madison Elsadi with B. Riley. Madison Elsadi: Good afternoon. Thanks for taking our question. I wanted to ask about your neuromuscular franchise. Just given your integrin-targeted delivery mechanism, which, you know, one could assume may be safer and perhaps more targeted than a TFR-mediated approach. Should we expect DMPK knockdown and splice correction data comparable to kind of the pure benchmark levels? And, relatedly, wondering what dose do you anticipate observing really optimal biomarker activity? I believe previously, you said that even a low dose may be active. Thanks. James Hamilton: Sure. Yeah. I think most of that will defer to Sarepta. Probably can't comment on the dose where we'd expect to see maximum knockdown. We don't know that yet. And so I would, you know, want to venture a guess there yet. In terms of the knockdown, I mean, I think that is probably a goal is to have something that looks at least similar to or equivalent to what others have shown for DMPK knockdown and splice correction with this platform. Madison Elsadi: Got it. And then, if I may, are there any bile cells associated with hitting a certain threshold or are the milestones largely related to regulatory progression? James Hamilton: Yeah. Based only on regulatory and commercial, there are no sort of activity-based or PD-based milestones. Madison Elsadi: Got it. Got it. Thanks. Operator: Thank you. And our last question comes from the line of Joseph Tome with TD Cowen. Joseph Tome: Hi there. Good afternoon. Thank you for taking my question. Just another quick one on the dimer. Just curious based on your work in SHTG, what proportion of patients are already on an anti-PCSK9 treatment? Is this, you know, an under-treated population on both sides? And then can you give us an indication in terms of the triglyceride and LDL cutoffs that you're looking in patients enrolled into the early dimer study? Thank you. James Hamilton: Sure. Yeah. I think based on the work that we've done, I mean, a lot of those patients may be on a statin, probably less so on fibrates and very few of them on PCSK9 inhibitors. Actually, they're not that commonly used in that population. In terms of the cutoffs and the inclusion criteria, so we allow patients in that study with mixed hyperlipidemia or triglycerides up to 880. So it's a pretty high threshold. And they have to have either that non-HDL of a 100 or an LDL greater than 70 to get into the study. So they have to have true mixed hyperlipidemia, both high triglycerides and high non-HDL or LDL cholesterol. Joseph Tome: Thank you. I'll now hand the call back over to President and CEO, Chris Anzalone, for any closing remarks. Christopher Anzalone: Thanks very much for joining us today. Again, thank you to Bruce, you know, for all he has brought to the company. He is re-retiring. He is not going to be gone, however, and I do trust that he will still be around and helping us out going forward. So, again, thanks to Bruce and thanks to James for continued and ongoing leadership. Again, thank you all for joining us today, and I hope you have a pleasant Thanksgiving holiday. Operator: Ladies and gentlemen, thank you for participating. This does conclude today's program, and you may now disconnect.
Operator: Ladies and gentlemen, welcome to today's VIG Conference Call and Live Webcast. I am Matilda, the Chorus Call operator. [Operator Instructions] And the conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Mr. Hartwig Loger. Please go ahead. Hartwig Loger: Yes. Very warm welcome from Ringturm in Vienna, and thanks for joining our call with information to the main topics we have prepared for you. So we already last week announced the outstanding performance of our group for Q1 to Q3. So today, we have the chance to deepen the information about this very successful first 3 quarters of this year and which was also announced that we already raised the outlook for our profit before taxes for this year 2025 to EUR 1.1 billion to EUR 1.15 billion. And Liane Hirner, our CFO, will then give more details to the topic of the results of the first 3 quarters. The second big topic, and we know that there is big expectation also from your side that we today are ready to give you first information about our interest in Nurnberger, and we also released the information that the public purchase offer, which ended on the 21st of November this year at an acceptance rate of 98.38%. So out of that, Gerhard Lahner, he is responsible Board member of VIG for this project. He also will give some information in detail about this topic. Myself, I will then follow with information about the new strategic program in the name of Evolve '28, which will be the new strategy for '26 to '28, and which will not only further strengthen our group, but mainly will focus also on the long-term profitable growth. Today, I will offer you the structure, the main topics. And I have to excuse that the targets to this strategic program will be approved by the Supervisory Board next week. So we will come to the detailed targets back to you as soon as possible after the approval of next week. We also are happy and glad that Peter Hofinger, Deputy CEO of Vienna Insurance Group is also attending this meeting and is also ready for questions from your side after our presentation. Saying this, I hand over now for the first topic about the performance to our CFRO, Liane Hirner. Please go onward. Liane Hirner: Thank you, Hartwig. Let's start on Slide 4 with the key figures over the first 3 quarters this year, which highlights the ongoing strong performance of VIG. Insurance service revenue of EUR 9.7 billion is up by 8.6%. Here, both P&C and Life & Health showed top line growth of more than 8% each, and I will go into more detail on that on Slide 6 in terms of the individual market development. Profit before taxes as preannounced last week and despite the goodwill impairment taken already at half year for Hungary increased by 31% to EUR 872.8 million. Main driver for this outstanding profit before taxes growth in the third quarter was an excellent technical result in P&C supported by low net combined ratio. The biggest contributor to this more than EUR 200 million additional pretax profit in absolute terms was Czech Republic, followed by Austria in the Special Markets segment. VIG's P&C net combined ratio improved to 92.1%, driven by favorable weather conditions. Our strong capitalization is reflected in a solvency ratio of 286% compared to the solvency ratio at half year of 278%, the SCR of roughly EUR 4.1 billion remained fairly stable, mainly due to the slightly higher capital requirements for non-life, life and health insurance, reflecting the increased business volume. The own funds of VIG of about EUR 11.7 billion increased by almost 4% or more than EUR 400 million in the third quarter. This is driven by operating earnings and the positive development also on the capital markets, resulting in higher market values of our investments. The solvency ratio, excluding transitional measures, stands at equally very strong 267% and increase also compared to the half year. It is clearly above our solvency target range of 150% to 200%, which does not consider transitional measures, and this also underpins the capital strength and the resilience of our group. Now on the next slide, we show the gross written premium development by segment. Premiums overall increased by 8.6% to EUR 12.5 billion. Double-digit growth rates were recorded in Poland, plus 13.5% and the Special Markets segment, plus 18.4%. The strongest contribution in absolute terms is coming from the Extended CEE segment, plus EUR 314 million, where especially Romania, Hungary, Slovakia and the Baltics made up for close to 3/4 of the additional premium. Special Markets, mainly driven by Turkiye as well as Austria, Poland and the Czech Republic, all increased their premium volumes by more than EUR 130 million each. In IFRS terms, this relates or translates into a very solid insurance service revenue development, which is shown on Slide 6. Here, in line with gross written premiums, the insurance service revenue also increased by 8.6% to EUR 9.7 billion. I would like to draw your attention to the Extended CEE segment. Insurance service revenues of overall EUR 2.87 billion already exceeds the level of Austria. Again, it's the market in the Extended CEE segment, for example, Baltics, Slovakia, Romania and Bulgaria, performing extremely well. In the Special Markets segment, it's a dynamic business in Turkiye despite hyperinflation, which accounts for the significant increase. This segment also includes Germany, Georgia and Liechtenstein with Germany and our Life and Non-Life companies InterRisk, they are contributing EUR 140 million in insurance service revenue. Last but not least, Austria, Czech Republic and Poland, all 3 with solid growth rates and a strong performance also in the first 3 quarters this year. The dynamic top line development of our group supported by weather-related claims translated in the third quarter into an exceptionally strong increase of our profit before taxes. On Slide 7, you will find a short summary of the results development and the figure for the net weather-related claims recorded in the first 3 quarters. Compared to about EUR 338 million in last year in the first 9 months last year, which were related to storm Boris, we recorded only EUR 160 million of weather-related claims so far this year, thanks really to the absence of the severe nat cat events. As already mentioned by Hartwig, the strong performance of our group so far this year provides us with the confidence to raise the target range for the group profit before taxes between EUR 1.1 billion to EUR 1.15 billion for the whole year 2025. Finally, I would also like to highlight the rating upgrade by Standard & Poor's, confirming VIG's excellent A+ rating and raising the outlook to positive. This was driven by our progress in broader diversification and followed the announcement of our intention to acquire a controlling stake in NURNBERGER, which was very positively received by Standard & Poor's. With this, I hand over to Gerhard, who will now share his insight to NURNBERGER with you. Gerhard, please go ahead. Gerhard Lahner: Thank you, Liane. Let me provide you with some background and also my personal take on the NURNBERGER transaction to explain you the strategic rationale and why we are highly confident that this is an excellent fit and will increase shareholders' value over the mid and long term. The following slides in this presentation will substantiate my top-down view and provide you with further details on German market and NURNBERGER. Let me draw your attention to the disclaimer on Page #8 and specify that we are still in the nondisclosure phase of the due diligence. And let me stress out that any figures published by NURNBERGER are seen in -- are to be seen as National GAAP German accounting principles, which are not comparable to IFRS 17/9. Well, earlier this year, VIG was approached by NURNBERGER management whether we would be interested to start talks about potential strategic partnership. Given the attractiveness of the German insurance market for VIG as a Special Market, with a high insurance density and penetration while being one of Europe's largest and most mature markets, well governed by BaFin, we entered into these discussions with a clear aim to increase our exposure in Germany in combination with our local company just recently mentioned by Liane, InterRisk Life and Non-life. So it should be clearly stated that this is not a market entry, but this is an expansion on an existing market that is with the VIG portfolio for 35 years plus. After first talks, both sides quickly realized that joining forces and simplifying the shareholder structure would be the most efficient way to return NURNBERGER back to a profitable and stable company. With a state-of-the-art IT landscape to best leverage on the strong brand and the sales footprint in across Germany. From our perspective, it became clear right away that NURNBERGER management has a clear strategic vision for the company to become a profitable player in the German market with a clear focus on prevention, occupational disability and a restructured Non-Life portfolio. Well, against this backdrop of the strong commitment of NURNBERGER's management, the cost efficiency program started by them Back to Black for the Non-Life part, but also the further diversification potential through the partially complementary life insurance portfolio and the experience in turnaround and IT transformation that VIG would bring to the table, we intensified our discussion. We strongly prepared for the nonbinding offer phase and we were finally granted exclusivity for a detailed due diligence. And in this due diligence, we clearly found ourselves confirmed in our basic assumption, which was further supported by the publication of NURNBERGER half year's result that the management is well on track to deliver. Right from the beginning, it became clear that the solid solvency position of NURNBERGER is, of course, combined with the attractive brand, the countrywide operating sales force and the strong determination of the local team to get back to the historic level of profitability, a very attractive asset. The unrestricted Tier 1 of EUR 1.9 billion will strengthen VIG's resilient foundation for further expansion in CEE, which clearly remains the strategic focus of our group. Through this transaction, right after closing the deal, all Tier 1, Tier 2 and 3 limits will increase as NURNBERGER has become part of VIG Group and therefore, provides the potential for further growth in CEE without diluting existing shareholders. At the same time, the risk profile of the SCR of NURNBERGER will provide a buffer when it comes to VIG's sensitivity of shifting interest rates downward out of the Austrian life back book. Most importantly, the investment can be financed from VIG's own liquid funds, providing us with the flexibility to optimize our funding structure in a more opportunistic way and taking benefit of deleveraging the last period. In addition to VIG's own funds, there is also a EUR 500 million revolving credit facility in place. So given the spirit of local entrepreneurship at NURNBERGER, the multichannel distribution system across Germany and a conservative reinsurance policy, we are very confident that the multi-brand approach with a strong NURNBERGER brand, combined with the additional scope for further diversification is going to support our operations in Germany in a profitable way, providing a resilient internal financing structure source when it comes to the future expansion in CEE region. As we are convinced that biometric risk in connection with occupational disability is a core competence that will be increasingly relevant to support our business in different Central and Eastern European countries, the addition with NURNBERGER team and their know-how in this field is just a perfect fit for VIG. In terms of cultural fit, with NURNBERGER being an independent insurance group for the last 140 years, the entrepreneurial management style as well as the historical proximity for Germany and Austria will provide a good foundation for NURNBERGER to become a strong member of VIG. In summary, we had a chance to look into the books of NURNBERGER and are confident that the company's turnaround will be successful. And through the acquisition from VIG truly supported by our involvement. So given, first, VIG's experience in turnaround non-life portfolios in challenging market environment; second, VIG's experience in IT transformation, especially in Austria, where the digital landscape is very similar to the ones at NURNBERGER and was successfully completed in 2023, a strong NURNBERGER management with a clear vision how to generate consistent cash streams for VIG's further growth in Central and Eastern Europe and VIG to leverage on the know-how of NURNBERGER in biometrics and occupational disability, VIG will benefit from the NURNBERGER's strong solvency position from day 1, enhancing its internal financing capacities over the midterm. Please note that after the announcement, intention to acquire NURNBERGER, Standard & Poor's, as mentioned by Liane, upgraded our rating A+ with a positive outlook with a particular focus on our financial strength and diversification potential for further growth in Central and Eastern Europe. If you allow me now, I would like to go -- to hand over to Hartwig Loger, CEO, for the presentation about the strategy. Hartwig Loger: Thank you, Gerhard. I will now give you the first insight about the structure of the new strategic program for '26 to '28. As you all know, we are still in the end spirt of the group-wide strategic program, VIG '25 ending this year. And I think with the expected performance, we raised, as we already said, to EUR 1.1 billion to EUR 1.15 billion, we see also the success of the activities of our running strategic program. With Evolve '28, as you can see also on the Slide #16, we used also a name which gives the first intention what we are looking for. It is not the big revolution, but a dynamic evolution, which is built up on the success of the last years and also the current performance we can show as VIG. The frame, which is shown here is in our understanding of the, I would say, USB model we are living as VIG. Our understanding is not being a big tanker in a centralized form, but being a dynamic fleet with responsible ships and this framing, which is shown here in these 4 parts will secure that this fleet has a common direction and the strategic performance also in the upcoming years. To start, maybe also in the description, you see on the bottom Values and Principles. I will go deeper afterwards, but we already were sure that it is the need maybe also to evaluate and also to a little bit, yes, renew the values and principles for the upcoming years and the challenges we are seeing in front. On the left side, with country portfolio and company strategies, this is more or less the backbone of this strategic part for the next years. What is meant, and I will also show afterwards, there are 50 individual company strategies. So over the last year, we developed under a common structure and on the basis of deep analysis of each market, a common strategic implication for each market of our group. And then the CEOs of the companies in the markets developed their company strategies for the next 3 years, and they were following a common structure of 5 strategic fields. This means that this framework for the next 3 years already has a detailed definition for each company of our group in targeting and action plans for their activities to improve the performance also for the next years. You see the group programs. We defined also 5 group-wide programs. These programs are not initiatives as we have defined it in VIG '25 because initiatives have been the offer to the companies in our group if they will also join these initiatives, the 5 group programs now we are focusing are really for group-wide activities seen, and they are coordinated by the holding or also competence centers out of our group. On the right side, you see also the fourth part, which is ongoing in CO3. Here, we define our activities in communication, collaboration, which is needed to really bring added value out of the best practice and the innovation and creative projects in between the group and cooperation, which is focusing also to find the synergies in between the companies working on one market. On the next slide, you get the overview. I will not now present in detail, but we clearly define the 5 values for our group. Plurality, which is the basis for our fleet. We have not only 50 companies in 30 countries, we also have a very high diversification in between also the different markets, the different brands, also the different sales channels. We are active all over our brands and companies. We have the basis of our 33 million customers already, which will be improved and increased also by incoming NURNBERGER customers in Germany soon. And this is the Plurality basis, which is also our understanding that this Plurality in the activity of the fleet is the added value of our model. Entrepreneurship following this Plurality idea means that especially the local entrepreneurship, the self-responsibility in between the management of the ships in our fleet and the companies, it is the strength and the motivation and identification of all our managers and leaders. Responsibility on one side, of course, to the society, but also as we know, out of the challenges of climate change, there is a broad basis in our understanding that we want to make sure that our economic value today is not in any form destroying the future of our society. Excellence, which is clear in the focus of our company activities on the customer basis to make sure that in all our services, products, processes, we are focusing also to deliver excellent services and products, and that's the base of our performance. And passion, it is needed also to create and find out the right form that we are clear for our 33 million customers, yes, I would say, best partner in all our solutions. The Principles on the next slide, we also evaluated to make sure that the description in the way how we work together in this group. And I'm open to say that the interest also in the partnership, which was developed now also in the purchase of NURNBERGER that NURNBERGER, as it was also said by Gerhard Lahner, it will be a perfect strategic fit also in the understanding of a group-wide common activity also in the future. Now a little bit deeper in the content on Slide #19. You see here the 5 strategic fields. This is the common structure of each individual strategy of each company of our group. The one field, the most important and the first one is the expand of the customer base and also the enrichment in the activities that there, we will focus in all the companies in also cross-selling and upselling potential out of this base we already have and this base, we also want to increase in the number of customers. The second topic in line is to enhance the distribution footprint. As you know, we have a very strong diversified sales channel activity. And including also bank and direct sales, it will be the basis to improve on a better way and also to use also the challenges and advantages which will come up in the development also on digital basis. And also, we will come further on to that in artificial intelligence solutions in services which are provided in this form. Next part is Products. We enlarge also the product offerings. It was mentioned that here, we use the collaboration in between the group really to improve also the broad Plurality of offerings we have. And also besides this, there will be added services also as basis to strengthen our customer experience. Next is Operation. This field, the strategic field in each of the strategies of the companies is focusing on the effectiveness and effectivity of processes in our operations and also with improving the automation in between these processes in best practice forms in between the group. And last but not least, the fifth and very important basis employees to foster the people who are already active and to find also the best experts in our companies, which are needed for the innovation transformation we see all over our base. On the next slide, here, you see the 5 already mentioned group programs. which were developed also on a broad discussion basis in between the CEOs of our group. Here, we build on the relevant trends. We also discussed on broad basis, the trends already existing and upcoming for the next years and the challenges. And out of that, we clearly defined the main programs on one side, sustainability, which is an ongoing program, which has already been started 3 years ago. But there will be, again, a strong focus in delivering also solutions on the basis of underwriting as our key activity, but also in the asset management and operations field and which is important also for VIG to not only focus on the ecological part, but also on the social part, which includes society, our customers and also our employees. Capital management. In the understanding of the group, it's very important also for the efficiency in between the capital management of our companies in the group. And Gerhard Lahner is leading this capital management program starting in a pilot last year, and we will work out for the next 3 years that we have a very professional also management of the upstream of dividends out of the performance of our companies. Banking cooperation, which is mainly driven by the backbone, which we have in the strategic partnership with Erste Group, but we will not only work on the improvement of this strategic partnership with Erste, where we are active already in 7 markets together. And we also see the opportunity all over the group in all the other markets to expand with additional partners beside the 7 markets of Erste. Artificial intelligence, I think it's clear for all of us that there has to be a focus in the activities, which already is on a broad basis. I sometimes already mentioned that in the activities of our VIG Accelerate program, more than 50% of the projects which are brought in by the companies in this kind of platform of project for digital solutions, we have more than 50% already on the basis of AI. But it is needed, and this is what we will focus in the next 3 years to optimize also the efficiency in the use of the use cases in between the group and all over the group. And the fifth program, focusing on health, which we see in all the markets in different forms as a high potential for developing not only on product, but especially on service basis, and there, we also will have a focus in analyzing and then also supporting our companies in a group-wide form on these solutions. The next slide, evolve28, CO3, I already mentioned, I will not go deeper. Just repeat, collaboration here shown in the symbol of Spider-Net. This is really supporting the added value created out of the broad innovation and creative basis of all our companies. This is really, I would say, a boost in the way of creating new solutions in all forms in between our business. Cooperation, yes, inside, we say ensures independence in the way that there is a clear focus in the optimization of the cooperation in between our companies in one market. For example, in the back office optimization between Wiener Stadtische and Donau in Austria, also other companies in Czech, Slovakia, Poland, and there is a big range where we can deepen also the optimization, partly also automization of common activities. Communication already mentioned, we have as information already provided more than 40 communities, which are active in between our experts and specialists in between the group. So there is also a very strong interlink between our fleet. Last but not least, on the Slide #22, I offer to you also knowing your expectation. And we already mentioned by myself and also Gerhard Lahner, there is still a little need of patience from your side. Why? We have now the performance of Q1 to Q3 for this year, and we also raised our outlook for the result of '25. Regarding now the program evolve28, which I shortly presented in its structure and content, there will be the next week, our Supervisory Board meeting where we will approve the targets for the next 3 years, including also the targets coming up from evolve28 strategic program. What we can offer is then next week after the Supervisory Board meeting, there, we will also then comment and declare the targets and the figures for the next 3 years to you. And Peter Hofinger and me, we will join also in a dance program, all bank conferences, which are offered in London, in Frankfurt, in Hamburg and also the others, where we then hope that we will have the chance also to present to you maybe also in personal talks then not only the program, but also the targets and some interesting discussions. The closing of NURNBERGER. And I know that there is a big expectation also regarding the detailed KPIs and targets from the inclusion from NURNBERGER, but we still have the need that the closing, which we expect until the second half -- beginning of second half of '26, there will be then the start of the financial integration, which cannot be done before. But immediately after this financial integration phase, we will also have the chance then to integrate the targets of NURNBERGER also in the strategic targets of this evolve28 program. And then we really can not only opens, but give a deep insight in also the calculations and also the valuation of all this influence of integration of NURNBERGER. So I know that there might be a bigger expectation, but there are also the legal frameworks we have to declare. And out of that, we are also open now to answer your question, and we are looking forward to the first questions you have. Operator: [Operator Instructions] Thank you very much. The first question comes from the line of August Marcan from UBS. August Marcan: I have too many, but let's start with 3. First one on the combined ratio. This year, the 9-month combined ratio benefited a lot from benign weather. And last year, we had worries. So in the last 2 years, we kind of had the opposite extremes. So I was wondering if you could tell us what you see as a normalized combined ratio level for the group going forward? Then the second question, a rather simple one, apologies for that on your new strategic plan. I'm not sure I fully understood the time line. You said that next week, you're going to have the approval from the Board. Are you then immediately going to have an event or publish this? Or what exactly is the time line? And if -- again, on the CMD, you said that the financial targets are going to be published there. Could you just tell us now if -- what the KPIs are, not the numbers, but what the metrics are that we're going to be looking at because I think your last strategic plan didn't have a lot of financial KPIs. So I'm not sure what this one will include. Peter Höfinger: Thank you for the question to the combined ratio. Yes, you are quite right that the comparison of last year to this year is quite difficult as having Boris, which was a gross claim of but you know and we have presented this that we do have a quite conservative reinsurance policy. We are still able also over the last years in the hardening of the reinsurance market, keeping low self-retention. So also last year, for the first 9 months, we had a combined ratio of 94.3%. This year, it is considerably better with 92.1%. But you also see that the difference, if you compare the amount of the events is not so significant as we have as a mitigation element, reinsurance, which we are willing to buy in quite in a bigger amount. What was beneficial this year to our results, and this is outstanding is the phenomenon of having less frequency of small- to medium-sized events. So this has had quite an impact on our improvement of our loss ratio. The mild climate and the absence of this frequency of small to medium events, we are not impacted in a year by the big events due to our reinsurance. So therefore, I think you see the limited volatility of our combined ratio from last year to this year, having a very big event and having this year an outstanding event. So I think between 92% and 94% is what is our combined ratio to be expected going forward. Hartwig Loger: Okay. Thank you, August, for your question. I will take question 2 and 3 from my side. First, yes, there will be also an information immediately next week when we have the approval from the Supervisory Board to the targets 26 to 28 next week. And what you can expect, there will be a very transparent basis also in the information about these targets. It will be a target about the growth a target about profits. It will also include combined ratio, which you asked before to Peter Hofinger. And there will be also a target clear on return on equity as an operative return on equity, and there will be also targeting the solvency ratio. So these are the targets which will be discussed in the Supervisory Board, and then we will clearly make it transparent to the capital market about the targets we have for the next 3 years out of our program. Operator: Next question comes from the line of Rok Stibric from ODDO BHF. Rok Stibric: Yes, I would have just one question and it's -- forgive me if I'm being a bit impatient. Usually, you disclose these things with half year and full year results, but I would still like to hear your view on future investment income expectations. So the question is, do you expect future investment income to be roughly at the same level as this year? Or do you expect this line of your P&L to improve in the future or maybe given the changing interest rate environment to even decrease? I was just wondering what your thought is on developments in the future. Liane Hirner: Liane, I'm happy to take your question regarding the investment income. What I can say is that we have a very positive development in the investment income in the first 3 quarters. So this year, so no impairments, no one-offs. Also, we have a positive development of the interest rates, especially in CEE also, for example, including Turkiye. And due to the increased business volume, also interest income or financial income is increasing. So I would expect a positive development also on this side in the upcoming quarters. I hope this answers your question. Operator: We now have a question from the line of Youdish Chicooree from Autonomous Research. Youdish Chicooree: I've got 2 questions. The first one is on the top line development. I was wondering whether you could provide a split between Life and the main lines in Non-life, like [indiscernible] other property, et cetera? And then secondly, on NURNBERGER, could you tell us, I mean, how long will the turnaround of this business take? And are you able to share what your view is of the sustainable earnings power of that company, please? Peter Höfinger: Okay. I'm happy to take the question about the development of the business lines. If you look on our non-life portfolio, so we are growing all over the group in health business. And what is very positive to see, we are growing by 12% in health. What is very positive to see that we have a quite very good dynamic in health business in Central Eastern Europe. We see a growing demand by our clients and by our markets getting health insurance, and we are having quite innovative concepts and also offering this market-to-market depending on result. On the framework of the social security laws there. We do have a growth in property and casualty of around 5.6% all over the group. Also here, you will see a stronger growth dynamic in Central Eastern Europe as this is also linked to the overall GDP growth and the economic dynamic. And as you know, there is a quite positive GDP growth in Central Eastern Europe, where we are benefiting with our property business. When we come to the motor business, we have to differentiate between motor TPL and motor own damage. In motor TPL, it is around 11%. And in motor own damage, it's more than 6%. The background here is over the last years, we have seen in Central Eastern Europe quite an overproportional salary inflation. Differently to maybe Western Europe, increased salaries more or less go immediately into consumption and not just on the savings book. Part of this consumption also goes in cars and buying new cars. This is the growth driver for motor own damage, but also in motor TPL. If you look on the Life business, I think you also asked, overall, the life business is growing by more than 8%. Here, it is the classical life business, which is growing, but also in unit-linked, we are closer to 6% of the performance. So also here, we have, I think, a quite attractive dynamic. The same true, what I said for the other business lines. The driver of this growth is Central Eastern Europe, where the demand for old age savings is growing, and we also see this as one of our further future potentials of growth in the years to come. I hope I have answered your question. Gerhard Lahner: Let me take the second one on NURNBERGER. I will -- in my first part of the answer, I will refer to publicly available information. NURNBERGER itself has announced that the turnaround for the non-life part will last until 2027. We have seen quite a strong development this year, supported, of course, also by favorable claims development as well as a positive market cycle on the German insurance market when it comes to non-life profitability. So we trust the management to be well on track with the turnaround of the non-life part. The IT part will take probably a little longer. Nevertheless, given the status as which -- in which we are as of today, I think that we will have the chance to have more deep dive with NURNBERGER management on that issue when the closing has been done. Nevertheless, we are aware of that this will, of course, also long term decrease the cost base. So I think that from our point of view, we are -- I think that the NURNBERGER management is well aware of that we are expecting them when you ask me to return to historical profitability levels. As you know, not only you are impatient, but we as well -- I guess this is also well known to the NURNBERGER management. Youdish Chicooree: And can I ask a follow-up question, please? Gerhard Lahner: Yes. Youdish Chicooree: So you're expecting the closing in the second half of next year. So do we have to wait till then to get, let's say, IFRS 17 numbers for NURNBERGER basically? Gerhard Lahner: I would like to give you a different answer, but the answer is clearly yes. Operator: [Operator Instructions] The next question comes from the line of Thomas Unger from Erste Group. Thomas Unger: I'll connect to the last question and answer on. NURNBERGER. What can VIG do here to advance and accelerate the transformation process for NURNBERGER? And you already said that the time line remains about the same as what NURNBERGER guided. But when do you expect the first dividends from NURNBERGER to VIG? That will be my first set of questions. And upon closing, do you expect any significant one-offs to be incurred or immediate major investments that you anticipate for the second half of 2026? And then also, I'd like to ask you now that you're in the process of this takeover, how does that affect your growth strategy in Central and Eastern Europe? Are you able to take advantage of any M&A opportunities or other growth opportunities that may arise in the next 1 to 2 years? I don't know you haven't said anything or any details given any details on the capital hit that you'll be taking as you attractive opportunities in Central and Eastern Europe in the next 1 or 2 years? And if you allow me to also ask you on the dividend, the upcoming dividend from 2025 earnings. Will the NURNBERGER acquisition in any way affect the management Board's decision process leading up to the dividend proposal from 2025 earnings? Gerhard Lahner: On what can VIG bring to the table? I think that in different markets and especially in challenging market circumstances, I guess that VIG has shown that we know what it means to turn around, especially non-life portfolios. But I think that what we see is that the NURNBERGER management is very well in place and know what they do on the restructuring and turning around the non-life portfolio. Nevertheless, I guess that we can bring some know-how. In addition, I think that I'm not sure if everybody is aware of, but VIG has taken advantage of IT transformation program executed by Wiener Stadtische and Donau [Insurance] the last years ended in 2023. And what VIG can bring to the table is that given the fact that the IT landscape is very, very comparable to -- between VIG in Austria and NURNBERGER IT landscape, we are very confident that we know what needs to be done, first point. Second point is when it comes to talent, we have the team that was successfully doing this transformation in the DACH region still on board. You just should probably know that we decommissioned a lot of all systems in Austria which finally gives you also going forward, quite some flexibility on the digital journey that, of course, you need sooner or later. Second of all, dividend expected. I think that, in general, our intention is that NURNBERGER will keep on paying dividends in general. Nevertheless, of course, we -- and this leads to, I guess, your third question, one-off investment, we will need to judge what is the best way to finance the long-term IT transformation program of NURNBERGER. Nevertheless, we don't expect this to be a big upfront amount, but probably be spent over several years. And then we would probably judge on what is the most efficient way to deploy capital in NURNBERGER or within the entire group. I guess the fourth question is twofold. One is the financial part of the flexibility for further -- taking further advantages of inorganic growth or M&A transactions in Central and Eastern Europe. And the second one is the managerial question. I would take the first part. So definitely, given the deleveraging that VIG has gone through the last periods and the financial flexibility that we have from our balance sheet, I do not see any immediate restriction out of either the transaction nor anything upcoming. The managerial part of the answer, I would ask probably Hartwig Loger to give you the answer. Hartwig Loger: Okay. Thank you, Gerhard. I will take also the question about our possibility also to invest and go on in the growth of Central Eastern Europe. This is clear the target, and we also including our investment in NURNBERGER, we are ready and also in part of the program of evolve28, we are still interested in possible profitable growth and also investment in the enlargement of our activities in Central Eastern Europe. And as we expect maybe coming up soon also with some targets, we have also already on our radar. I think the most important thanks also for that question, our investment in NURNBERGER will not have any impact to the dividend payment out of the outperformance of '25, which is expected. So we have the clear definition of our policy to dividends. So there is the floor, and we are clear that with the performance on the operative side, there will be also the definition and the increase on the dividend payment for this year. I hope this gives security to you. Operator: We have a follow-up question from the line of August Marcan from UBS. August Marcan: Two quick questions on NURNBERGER. One is with this acquisition, you're getting some businesses that maybe are not core for Vienna like the banking business. Have you considered what you want to do? Do you want to keep the business, keep NURNBERGER as a whole? Or are you looking to dispose of the non-insurance asset that NURNBERGER has? And then the second question, you're also bringing from NURNBERGER a sizable investment portfolio and their asset allocation is quite different from yours. They have much more equities and a bit more real estate than you do and much less bonds. Have you considered what the plan is here? Are you going to move them to your strategic asset allocation? Or are you going to leave it as is? Gerhard Lahner: Thank you very much for those questions. The first one is it's probably still too early. Definitely, the focus of the acquisition for us is the core business, which is the entire insurance business of NURNBERGER. So this is the focus. The rest we will see further down the road when we are able to judge immediately after closing. The second one is on the asset allocation. VIG will not move away from the conservative asset principles that we have in place. Of course, there is an interlink between the asset portfolio of NURNBERGER. So we will first very thoroughly analyze what are impacts. But definitely, we are supposing to continue VIG's conservative investment approach in the long run. Operator: Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Nina, Head of Investor Relations, for any closing remarks. Higatzberger-Schwarz Nina: Thank you for your participation in today's call and your questions and interest. As mentioned by Hartwig Loger, our CEO, our evolve28 targets will be announced next week. Investor Relations is available to provide support and assistance with any further questions or requests for meetings. And I hope to be in touch soon. In the meantime, goodbye. Operator: Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines.
Operator: Hello, everyone, and welcome to Burlington Stores, Inc. Third Quarter 2025 Earnings Webcast. Please note that this call is being recorded. [Operator Instructions] I'd now like to hand the call over to Mr. David Glick, Group Senior Vice President, Investor Relations. Please go ahead. David Glick: Thank you, operator, and good morning, everyone. We appreciate everyone's participation in today's conference call to discuss Burlington's fiscal 2025 third quarter operating results. Our presenters today are Michael O'Sullivan, our Chief Executive Officer; and Kristin Wolfe, our EVP and Chief Financial Officer. Before I turn the call over to Michael, I would like to inform listeners that this call may not be transcribed, recorded or broadcast without our expressed permission. A replay of the call will be available until December 2, 2025. We take no responsibility for inaccuracies that may appear in transcripts of this call by third parties. Our remarks and the Q&A that follows are copyrighted today by Burlington Stores. Remarks made on this call concerning future expectations, events, strategies, objectives, trends or projected financial results are subject to certain risks and uncertainties. Actual results may differ materially from those that are projected in such forward-looking statements. Such risks and uncertainties include those that are described in the company's 10-K and in our other filings with the SEC, all of which are expressly incorporated herein by reference. Please note that the financial results and expectations we discuss today are on a continuing operations basis. Reconciliations of the non-GAAP measures we discuss today to GAAP measures are included in today's press release. As a reminder, as indicated in this morning's press release, all profitability metrics discussed on this call exclude costs associated with bankruptcy acquired leases. These pretax costs amounted to $11 million and $0 million, respectively, during the fiscal third quarters of 2025 and 2024 and $28 million and $9 million, respectively, for the first 9 months of 2025 and 2024. Now here's Michael. Michael O'Sullivan: Thank you, David. Good morning, everyone, and thank you for joining us. I would like to cover 4 topics this morning. Firstly, I will discuss our third quarter results. Secondly, I will review our updated fourth quarter and full year guidance. Thirdly, I will provide some early thinking on the outlook for 2026. And lastly, I will comment on the progress we are making towards our longer-range financial goals. Then I will turn the call over to Kristin to provide additional details. Okay. Let's start with our Q3 results. Total sales increased 7% in the third quarter at the high end of our guidance. This was on top of 11% sales growth last year. This means that year-to-date, total sales have increased 8% on top of 11% year-to-date growth last year. Comp store sales for the third quarter increased 1%. We started the quarter well with a strong back-to-school trend, but in September, we saw a significant drop-off in traffic to our stores, driven by warmer-than-usual weather. As we have discussed previously, we have very strong brand equity in outerwear. Many shoppers still think of us as Burlington Coat Factory. Outerwear is a great business and a source of competitive strength. But this means that in Q3, our comp trend is very sensitive to weather, much more so than competitors. In some years, the impact is positive. In some years, it is negative. This year, it was negative. That said, in mid-October, once the weather turned cooler, our comp trend picked up to the mid-single digits. And that momentum of mid-single-digit comp growth continued through the first 3 weeks of November. Finishing up on Q3, I would like to comment on earnings. Despite the weather-driven slowdown in our sales trend in Q3, we still delivered margin expansion that was well ahead of last year and earnings growth that significantly beat our guidance. It's worth calling out that this was despite the considerable headwind that we faced from tariffs. Moving on to the fourth quarter. We are maintaining our previously issued comp store sales guidance of 0% to 2%. We feel good about our recent trend, but it is still early in the quarter. And in the coming weeks, we'll be up against very strong comparisons from last year. So it makes sense to remain cautious. That said, given the strong margin and expense trends that we are seeing, we are increasing our Q4 margin and EPS guidance. To be clear, we are adjusting our full year 2025 earnings guidance, passing along all of our beat to earnings in Q3 and factoring in our higher Q4 earnings outlook. I would like to call out that we started this fiscal year with EBIT margin guidance of flat to up 30 basis points. Our updated full year 2025 guidance now calls for expansion of 60 to 70 basis points. This is despite pressure from tariffs, and it is on top of 100 basis points of margin improvement in 2024. We are excited about the progress we are making on margin expansion. I will return to this topic in a few moments when I talk about our longer-range financial goals. But first, I would like to share our initial thoughts on the outlook for 2026. We are early in the budget process, but as a starting point, we are planning for total sales growth in the high single digits. We now expect to open 110 net new stores in 2026. This is higher than previously discussed, and it reflects the strength of our new store pipeline and the performance we are seeing from new stores. We are excited for these new store openings. For comp sales, we are assuming growth of flat to 2% in 2026. This should sound familiar. It is our typical off-price playbook. There is significant economic uncertainty, and we do not know how this might affect our business in 2026. So we will plan our business conservatively at 0% to 2% comp sales growth and then be ready to chase if the trend is stronger. In terms of operating margin expansion, for budgeting purposes, we are assuming that at 2% comp growth, our operating margin would be flat versus this year, then 10 to 15 basis points higher for each point of comp above 2%. Before I turn the call over to Kristin, there is one more topic that I would like to talk about. I would like to provide an update on our longer-range financial goals. As a reminder, 2 years ago, we shared our objective of getting to approximately $1.6 billion in operating income in 2028. The headline is that we feel good about the progress that we are making toward this goal. We are tracking in line with where we thought we would be at this point. We are especially pleased with the progress we have made in driving operating margin. This means that at the high end of our updated 2025 margin guidance, we will have achieved 170 basis points of the 400 basis points of opportunity that we identified 2 years ago. And of course, we will have achieved this despite the negative headwind from tariffs. Apart from margin expansion, the other drivers of our long-range financial model are new store sales and comp store sales growth. On new store sales, we are even more bullish now about our new store opening program than we were 2 years ago. Originally, we had assumed that we would open 100 net new stores a year in the period 2024 to 2028. In fact, this year, we will open 104. And in 2026, we are now planning to open 110 net new stores. Based on our new store pipeline, there is a possibility that we could sustain or even exceed this stronger pace of new store openings. The other major driver of our long-range model is comp sales growth. As I discussed in the context of our Q3 results, leaving weather aside, we feel good about the underlying comp trends that we are seeing. We believe that we can achieve average annual comp sales growth in the range of 4% to 5% over the remaining years of the long-range plan, in other words, between now and 2028. Of course, we recognize there are a lot of external variables that can affect comp growth. So in the nearer term, as we always do, we will plan our business conservatively and then chase. Now I would like to turn the call over to Kristin to review our Q3 results, updated 2025 guidance and high-level outlook for 2026 in more detail. Kristin? Kristin Wolfe: Thank you, Michael, and good morning, everyone. I will start with some additional color on Q3, then I will talk about our updated guidance. Lastly, I will comment on our initial outlook for 2026. Starting with the third quarter, total sales grew 7%, while comp store sales increased 1%, both within our guidance range. As Michael described, our comp trend in the third quarter fell off significantly after the back-to-school period, driven by warmer weather, but then picked up to mid-single digits in mid-October. The gross margin rate for the third quarter was 44.2%, an increase of 30 basis points versus last year. This was driven by a 10 basis point increase in merchandise margin and a 20 basis point decrease in freight expenses. Moving down the P&L. Our Q3 product sourcing costs were $214 million versus $209 million in the third quarter of last year. Product sourcing costs decreased 40 basis points compared to last year. This was primarily driven by leverage in supply chain through continued cost savings and efficiency initiatives. Adjusted SG&A costs in Q3 levered 20 basis points versus last year. This leverage was primarily achieved in store-related costs. Our store teams drove significant leverage in store payroll through numerous efficiency and productivity initiatives. Q3 adjusted EBIT margin was 6.2%, 60 basis points higher than last year. This was well above our guidance range of down 20 basis points to flat. Our Q3 adjusted earnings per share was $1.80, which came in well above our guidance range. This represents a 16% increase versus the prior year. At the end of the quarter, comparable store inventories were down 2% versus the end of the third quarter of 2024. Let me provide a little more context here. In Q3, we saw a significant slowdown in our comp trends, a weather-driven slowdown. But using our merchandising 2.0 tools, our planners and merchants were able to react very quickly to adjust receipts, especially in cold weather categories. So despite the slowdown, our store inventories are well balanced, current and very clean going into the fourth quarter. Moving on to our reserve inventory. Reserve inventory was 35% of our total inventory versus 32% of our inventory last year. In dollar terms, reserve inventory was up 26% compared to last year. We are pleased with the quality of the merchandise and the values and brands that we have in reserve. And as a reminder, we use reserve inventory as ammunition to chase the sales trend. For example, our reserve includes great outerwear buys that we made earlier this year that we've been pulling out over the last few weeks to fuel the trend since the weather turned cold in mid-October. We ended the third quarter with approximately $1.5 billion in liquidity. This consisted of $584 million in cash and $948 million in availability on our ABL. We had no outstanding borrowings on the ABL at the end of the quarter. During the third quarter, we repurchased $61 million in stock. And at the end of the quarter, we had $444 million remaining on our repurchase authorization. In Q3, we opened 73 net new stores, bringing our store count at the end of the quarter to 1,211 stores. This included 85 new store openings, 10 relocations and 2 closings. We now expect to open 104 net new stores in fiscal 2025, up from our original estimate of 100 net new stores. Now I will turn to our outlook for the fourth quarter and full year for fiscal 2025. We are maintaining our fourth quarter fiscal 2025 guidance for comp sales and total sales. We are guiding comparable store sales to be flat to up 2%, with total sales to increase 7% to 9% for the fourth quarter. We are raising our adjusted EBIT margin and adjusted earnings per share guidance for the fourth quarter. We now expect our adjusted EBIT margin to increase by 30 to 50 basis points. This margin outlook now translates to an adjusted earnings per share range of $4.50 to $4.70, an increase of 9% to 14% versus the fourth quarter of last year. For full year fiscal 2025, after factoring in our actual Q3 results and our improved outlook for Q4, we expect comp store sales growth of 1% to 2%, total sales to increase approximately 8% and EBIT margins to range from an increase of 60 to 70 basis points. As Michael noted earlier, this fiscal 2025 EBIT margin guidance is 40 basis points higher than our original full year guidance at the high end, and this is despite the significant pressure from tariffs. Finally, factoring in Q3 actuals and updated Q4 guidance, adjusted earnings per share are now expected to be in the range of $9.69 to $9.89, an increase of 16% to 18% for the full year 2025. Finally, I would like to touch on our preliminary FY '26 outlook. We are in the early stages of the budgeting process, so this could change. But at this point, we are planning on total sales growth in the high single digits. We are assuming at least 110 net new stores, and we're planning comp store sales in the range of flat to up 2%. For operating margin, as Michael said, we are assuming that at a 2% comp growth, our operating margin will be flat to this year, and we expect leverage of 10 to 15 basis points for each additional point of comp. And now I will turn the call back over to Michael. Michael O'Sullivan: Thank you, Kristin. Before I turn the call over to the operator for your questions, I would like to summarize a few of the key points from today's call. Firstly, Q3 was impacted by warmer weather in September through early October. Once the weather normalized, our trend improved to mid-single-digit comp growth. And we are off to a strong start to Q4 with comps up mid-single digits for the first 3 weeks of November. Secondly, we are pleased with our margin trends. We are updating our full year 2025 guidance to reflect the earnings beat in Q3 as well as our improved earnings outlook for Q4. At this point, we are maintaining our previously issued Q4 comp guidance of 0% to 2%. Thirdly, we are pleased with how we are tracking towards our long-range financial goals, especially the pace of margin expansion. And within this long-range financial plan, we think there may be additional upside in terms of our new store opening program. Now I would like to turn the call over for your questions. Operator: [Operator Instructions] Your first question comes from the line of Matthew Boss of JPMorgan. Matthew Boss: So on relative performance, your comp this quarter came in below both of your off-price peers. This is a clear reversal from results in the second quarter and over the last year. Clearly, you cited weather was a factor, but how concerned are you by this change in your relative comp versus peers? Michael O'Sullivan: Thank you for the question. You're right. Just to lay out the facts, we ran a 1% comp in Q3. Our peers were 6% and 7%, very impressive. That's a very significant difference. I can't give you a complete bridge, but at a high level, let me try and dissect that gap. I'll start with the obvious. We know that weather was the biggest driver of our slowdown in Q3. That's not an excuse, but it is a partial explanation. We changed our name some years ago, but shoppers still call us Burlington Coat Factory. So mild weather in September and October has a huge impact on our business. This is a real thing, and it is unique to us, I think, versus our peers. Now in September and October, cold weather merchandise balloons to more than 20% of our assortment. In the third quarter, our comp sales for ladies and men's coats, jackets, boots and cold weather accessories, all these important categories were down double digits. Now they bounced back in mid-October once it turned cold. But by then, it was too late to really drive the quarter. Let me go a little further and try to quantify the weather impact on our comp in Q3. If you strip out the drag on our overall comp from cold weather categories, the categories I just listed, and if I make an adjustment for the impact that lower weather-related traffic had on the rest of the store, then I can get to the low end of a mid-single-digit comp. In other words, I do not get to 6% or 7% comp. So in my view, weather only explains half of the gap versus peers. Now usually, in off-price, when your comp is lower than your peers, it's just the customer telling you that they preferred the value and the assortment that they found elsewhere. In the second quarter, when we ran a 5% comp growth ahead of our peers, the customer was voting for us. But in Q3, that changed. And we have some hypotheses on why, but we have more work to do to really tear that apart and then aggressively go after that performance difference. But before I leave the question, let me just call out a silver lining. The comp numbers that our peers have just reported reaffirm that the off-price shopper at all income levels is alive and well. Leaving aside the weather, the major implication for us is that we need to take better advantage of that than we did in the third quarter. Matthew Boss: Great. And then, Kristin, as a follow-up, could you provide more color on the 60 basis points of operating margin expansion in the quarter, particularly just given as we think about the pressures that you faced from tariffs and the 1% comp? Kristin Wolfe: Matt, thanks for the question. Yes, first, it's worth reiterating that we really are pleased with the 6.2% operating margin in the quarter, up 60 basis points versus last year on a 1% comp, as you noted in your question. Let me provide the major puts and takes. Starting with gross margin. First, our merchandise margin increased 10 basis points. And within merchandise margin, there was a lot going on. Tariffs had a negative impact on markup, but we were able to offset this impact through numerous actions such as negotiating with our vendors, adjusting the mix and driving a faster turn. The net impact of all this was much more favorable than we originally guided back in August. This was really driven by our tariff mitigation strategies. Now staying in gross margin, freight levered by 20 basis points. This was due to greater efficiencies and cost savings initiatives, particularly in transportation. So our overall gross margin increased 30 basis points versus the third quarter of last year, all this despite the impact from tariffs. On product sourcing costs moving down the P&L, we drove 40 basis points of leverage here. This was driven by supply chain and efficiency initiatives in our DCs. We're excited about the consistent progress we've made in streamlining our supply chain costs. And moving on to SG&A, we showed about 20 basis points of leverage here on a 1% comp, and this was driven by efficiency initiatives in stores such as speeding up checkout times at point of sale. Offsetting this leverage was higher depreciation, which delevered about 20 basis points, driven by increased CapEx in supply chain and new stores. So taken all together, this drove the 60 basis points of EBIT expansion in the quarter. Operator: Next question comes from the line of Ike Boruchow of Wells Fargo. Irwin Boruchow: I guess my question kind of piggybacking off of Matt's. So the comp growth in Q3 was lower than peers, but the margin and earnings were actually pretty much better. How should we reconcile that? And then really more importantly, are there choices that you made during the quarter that may have driven the higher margin in Q3 at the expense of sales? Michael O'Sullivan: Well, I'll take that, Ike. Thank you for the question. It's a good question. I think the direct answer is yes. There were decisions or choices that we made that helped drive our margin in Q3, but may have had a negative impact on our sales. And I'll give you a couple of examples, but maybe I should just preface what I'm going to say with a couple of points. Firstly, our margin and earnings performance in Q3 was very strong. Margins were up 60 basis points and adjusted EPS grew 16%. We've also taken up full year earnings guidance. In other words, we've rolled right over tariffs. Secondly, on comp sales, to reiterate, the biggest driver of the slowdown that we saw was weather. If I adjust our comp for weather, we probably would have been pretty happy with the outcome. But as I explained a moment ago, that only explains half of the gap between our 1% comp growth and our peers' 6% and 7% comp. So if I come back to your question, yes, there were choices that we made that might explain our relatively strong margin and earnings performance and our weaker comp growth in Q3. Now these were choices that we made as part of our tariff mitigation strategies. And let me describe two specific examples. When -- firstly, when tariffs were introduced -- first introduced, we reduced our sales and receipt plans for categories where the margin impact was too significant. We did not feel like we could raise retails in those categories, and we did not want to accept the margin compression. That meant that in some businesses, especially some categories in home, our inventory levels and assortments were -- they were very light in Q3. And we saw that in terms of the sales in those categories. The sales were lower. Now that wasn't an error. It was a deliberate decision. I would say it was an economically rational decision, and it worked. It may have hurt sales, but it drove our earnings in Q3. Now I should add that as tariff rates have come down, we've gone back and we've taken up sales and receipt plans in most of the categories that were affected. So I would expect this impact to be less significant in Q4. A second example, as Kristin described a moment ago, another step that we took to help offset tariffs was to trim inventory levels in many businesses across the store and force a faster turn. Again, this helped to offset the margin pressure from tariffs. Now we only really took that step in Q3, not in Q4. We already turned very fast in Q4. So we didn't want to try and force a faster turn going into holiday. But again, in Q3, that approach drove earnings, but it may have hurt sales. So -- for both of the examples I've just given, at a high level, those decisions worked. We fully absorbed tariff pressure on our margin, and we drove very strong margin and earnings growth in Q3. And all this happened actually despite a slowdown in comp sales due to weather. Normally, a slowdown like that would drive deleverage. Anyway, with that said, we really need to do a full after-action assessment on Q3. Now that we have our competitors' comp results, we need to go back and hindsight our performance and identify anything we could have done or should have done differently. Irwin Boruchow: Got it. And then maybe, Kristin, just to elaborate maybe a little more on the 2026 initial outlook, key risk opportunities in the outlook, anything else you could share? Kristin Wolfe: Yes. Great. Thanks, Ike. We're still -- it's still somewhat early in the process. We're actively working through the budget for 2026. But let me give some headlines or how we're thinking about it. The outlook for next year is pretty hard to predict with significant economic and political uncertainty that could absolutely affect consumers' discretionary spending. There are potential tailwinds like the possibility of higher tax refunds in the early part of next year. And then there are potential headwinds like tariff-driven price increases, which could put additional inflationary pressure on our core customer. Michael spoke to this earlier, but given this uncertainty, we're planning to stick with our off-price playbook. That really means planning comps at flat to 2% and positioning us to chase the trend if it's stronger. In terms of new stores, we mentioned this in the prepared remarks, but it's worth reiterating, we feel very good about the new store pipeline. We are planning to open at least 110 net new stores in 2026. So combined with our comp guidance, this should drive a high single-digit increase in total sales. On the operating margin side, as we said, we're modeling operating margin flat to last year at the 2% comp. We do expect 10 to 15 basis points of leverage for every point above a 2% comp. And then there's a couple of things in the margin, a couple of puts and takes. We are planning for slightly higher merch margin as we look to offset any impact of tariffs, particularly as we lap the fall season next year. We're planning for continued supply chain productivity gains next year, but there will be offsets here due to the start-up costs and the initial ramp-up of our new Southeastern distribution center, which we plan to open in the first half of 2026. And finally, we do expect fixed cost leverage on the high single-digit total sales growth, but we also are expecting higher depreciation, which creates deleverage. The higher depreciation is really due to the higher CapEx spend in supply chain and our increased number of new stores. Those are really the main call-outs for 2026 at this point. Operator: Your next question comes from the line of Lorraine Hutchinson of Bank of America. Lorraine Maikis: Michael, one of your off-price peers is accelerating comps with more focus on marketing, more in-store inventory and a store refresh. Do you see any risk that Burlington will lose market share? Michael O'Sullivan: Lorraine, thank you for the question. It's a good question. I'm going to avoid talking about any specific competitor, but I think I can still try to answer your question maybe in more general terms. I'll start by saying that actually, we like innovation and fresh ideas. We believe in off-price retail. And anything that drives off-price awareness and excitement is a good thing. In fact, I'd go further and say that a strong off-price sector is important for us. So it's good that our off-price peers are achieving very strong results. But your question was more about potential risks to Burlington. So let me come at it from that angle. I think there are 2 important points that I would make here. Firstly, when we talk among each other -- to each other and when we talk to analysts and when we talk to investors, I think we sometimes talk about off-price as if it were a separate isolated ring-fenced segment of retail. But the customer does not think of it that way. The customer does not respect the boundaries of off-price. If she needs a pair of pants or a dress, she might shop Burlington or one of our off-price peers. But we know from our own research that she also cross-shops department stores, specialty retailers. In fact, any retailer where she likes the assortment, she doesn't care about our off-price business definition. She just cares about finding a great deal and great value in the categories, brands and styles that she's looking for. Now if you're an off-price -- if you're an investor in off-price, I think it's very important that you understand this. This is not like the retail market for office supplies. We aren't 3 companies just scrapping it out for market share in a limited space called off-price. It's bigger than that. We compete in a very large and competitively fragmented market for apparel, accessories, shoes, home, beauty and so on. Off-price is really just a small part of that overall market. Our opportunity is to take share from non-off-price retailers. That's what has been happening over a long period of time. So I mean, just to bring it up to -- just to throw in some numbers, today, we announced 7% total sales growth in Q3 on top of 11% growth last year. At those growth rates, it's self-evident that we are taking market share, but so are our off-price peers. These share gains are not coming at the expense of each other. Mathematically, that wouldn't be possible. These share gains are coming from non-off-price. And I think that the shift from traditional full-price retail to off-price is unlikely to end anytime soon. So that's the first point. The second point I would make is that despite everything I've just said, I think it's very important and useful for us to pay close attention to our off-price peers. They matter. They operate a similar business model to us. They've been very successful over the years, and we can learn a lot from them. So if our off-price peers come up with new ways of doing things, new processes in stores, new innovative marketing programs, then we need to pay close attention. Now not all of those ideas will work, of course. And certainly, not all of them will make sense for us, but we need to be open to new ideas that could help drive our business and actually drive off-price retail in general. Let me finish up. Again, your question was about risk to Burlington. Right now, I see off-price as a whole as being very healthy. For 2025, we now expect to grow total sales by 8% on top of 11% last year. And at the high end of our guidance, we now expect to achieve EPS growth of 18% on top of 38 -- sorry, 34% last year. Those are -- by any metric, those are very healthy numbers. I anticipate that our off-price peers are going to be successful, too. But I don't see that as a risk. In fact, it's better for us if the off-price segment as a whole continues to perform well. Lorraine Maikis: And I wanted to follow up on pricing. Did you take price in 3Q? And what impact did that have on your comp? And then what's your strategy on pricing for the fourth quarter? Michael O'Sullivan: Yes. That's a good question. I would sum up our pricing strategy in 3 words. Be very careful. We recognize that because of tariffs, prices are going up across the retail industry, but we will not raise prices unless we've seen them go up elsewhere. And even then, we will test and monitor the impact of those price increases. We've said this many times before, we have a very price-sensitive customer. We know that the reason that they shop at Burlington is that they're looking for a great deal. Our core strategy is to offer great value. And of course, that means keeping prices low. Now our approach to tariffs this year has been to avoid retail price increases and to focus instead on finding other margin and expense offsets. Kristin described those actions earlier. We're very pleased with how that approach has worked. It's allowed us to avoid price increases, but still to grow margin and earnings this year. Now of course, we have tested some things. We've tried some higher prices. And in Q3, when we saw other retailers take prices up, we tested higher retails in some categories. But I would say that those pricing tests were in a very limited number of areas. And mostly the higher retails worked. We saw very little resistance from customers. So going forward, I would say that we will probably get more aggressive, but we kind of have to see what happens in Q4. And also, of course, we need to see what happens with tariff rates going forward. Operator: Your next question comes from the line of John Kernan of TD Cowen. John Kernan: Michael, sounds like you see an opportunity to take up the number of new store openings and the cadence of growth. Can you expand a bit upon this? What are you seeing in terms of the new store pipeline, both from a real estate perspective and also potential new store productivity? Kristin Wolfe: John, it's Kristin. I'll take this one. We're really pleased with the performance of our new stores across the board, they've been delivering results that are in line or better than expectations as well as our financial hurdles. It really reinforces the strength of our site selection process and the appeal of Burlington really across markets. And it's worth pointing out just some data. Our Q3 comp, of course, was at the midpoint of our guidance, but our total sales growth in Q3 was at the high end of our guidance, up 7%, and this was driven by new stores. And based on our Q4 guidance, our total sales increase is planned at 9% at the high end as we benefit from the slew of new stores we just opened in the third quarter, 73 net new. Now as I mentioned in the prepared remarks, we now expect to open 104 net new stores this year. This is a modest step-up from our original plan of 100 net new. And this increase reflects really two things. First, the ability to pull forward some openings that were originally slated for 2026; and secondly, the strength of our real estate pipeline. Looking ahead to 2026, we're raising that new store target to at least 110 net new stores. This is supported by this robust pipeline, but also by 45 leases we secured from the Joann Fabrics bankruptcy. These incremental sites really give us confidence in sustaining the high level of growth next year. And as for the pipeline for 2027 and beyond, it's still early to provide specific numbers, but I will say we feel very good about the long-term opportunity. Our real estate team continues to identify attractive locations, and we already have a very healthy pipeline for new stores beyond 2026. John Kernan: Got it. Maybe as a follow-up, obviously, all 3 off-price retailers are resonating strongly with consumers. I liked how Michael framed the industry's opportunity. You're clearly feeling more bullish on the number of stores, maybe a little bit more cautious on comp sales, but more bullish on the potential margin expansion potential for the business. Is that the right way to think about it? Kristin Wolfe: Great. Yes. John, thanks for that question. It's a good question. So 2 years ago, we shared our objective of getting to approximately $1.6 billion in operating income by 2028. The headline is that we feel very good about the progress we're making toward this goal. We're tracking in line with where we thought we would be at this point. And we're especially pleased with the progress we made in driving operating margin at the high end, Michael said this earlier, but it's worth repeating, at the high end of our updated 2025 margin guidance, we will have achieved 170 basis points of the 400 basis points of opportunity that we identified 2 years ago. And we will have achieved this despite the negative headwind from tariffs. So really, to sum up, we're pleased with the progress. But the way you characterized the long-range model and your question is about right. It's true, we're more bullish on new stores, and we are more bullish on margin expansion. On the comp, we still believe we can drive an average annual comp growth of 4% to 5% over the remaining 3 years of the long-range plan, but we recognize that there is external uncertainty, so we are slightly more cautious here. Operator: Question comes from the line of Brooke Roach of Goldman Sachs. Brooke Roach: Michael, I'd like to ask you about the trends that you're seeing with the lower income customer. How did these customers perform in the third quarter? And are there any other callouts in terms of customer demographics that are worth sharing? Michael O'Sullivan: Brooke, thank you for the question. The headline is that we feel very good about the lower-income customer. We've been -- and the trends that we're seeing with that demographic. We've been watching this particular demographic segment very closely all year. This is a critical customer for us. Given the economic uncertainty and the cost of living issues, we've been concerned about lower-income customers. But the good news is that this customer has been very resilient. When we look at our stores in lower-income trade areas, they continue to outperform the chain. This has been true for several quarters now. I should say, as we listen to other retailers, it seems like this is a consistent pattern. Many retailers are reporting strength with lower-income consumers. There is -- in terms of other demographic call-outs, there's one other call out, specifically relating to Hispanic customers. Again, we've been watching this demographic very closely all year. It's an important customer for us. We have many stores across the country that are in trade areas with a high proportion of Hispanic households. You may recall that in previous quarters, we've said that our stores that are in trade areas with a high proportion of Hispanic households have been slightly outperforming the chain in terms of comp growth. While in Q3, the trend in those stores slipped. They've gone from slightly outperforming the chain to trailing the chain. Now the change in trend for those stores varies a lot depending on the specific market and even the specific or the particular location of the store. In other words, it's very localized to what's happening in those particular cities. And of course, it's difficult for us to say how long those localized slowdowns might last. Brooke Roach: Great. And then my follow-up would be for Kristin. Kristin, can you give us more color about your guidance for the fourth quarter, both in terms of comp sales and for earnings? Kristin Wolfe: Brooke, thanks for the question. Sure. Let me repeat a little bit. I think it's worth reiterating some of what we described earlier. On comp store sales and total store sales, we're maintaining our Q4 previously issued guidance. So comp of flat to 2% and total sales growth of 7% to 9%. We do, as we said, feel really good about our recent trend in Q4, but it's still early in the quarter. The critical weeks are ahead of us. And in those coming weeks, we'll be up against very strong comparisons from last year. So we'll continue to take a cautious approach on sales. On the margin side, we are increasing our margin and EPS guidance for Q4. We now expect our Q4 adjusted EBIT margin to increase by 30 to 50 basis points. We do anticipate some tariff-driven pressure on merch margin in Q4 but we expect to more than fully offset that pressure and drive overall operating margin expansion in Q4 versus last year. And the drivers of the margin leverage should largely be similar to what we saw in Q3. We expect continued cost savings in freight and supply chain and in store-related initiatives. And finally, we should also see additional leverage in SG&A given the higher incentive comp accrual in the fourth quarter of last year. Operator: The question comes from the line of Alex Straton of Morgan Stanley. Alexandra Straton: Michael, can you talk about the availability of off-price merchandise as you're heading into the fourth quarter? And then I have a quick follow-up. Michael O'Sullivan: Yes. Alex, thank you for the question. I would characterize the buying environment for off-price as very, very strong. Earlier in the year, when tariffs were first introduced, there were some concerns, a lot of concerns about whether vendors would be reluctant to bring potentially excess merchandise into the country. But frankly, those concerns have just not materialized. Even some of the categories where supply was tighter in the summer, categories like housewares and home also housewares and toys have come back. I think that's probably pretty consistent with what you've heard from our off-price peers. There's a lot of great merchandise at great values, and we're taking advantage of it, both to flow to stores and to build up reserve. Alexandra Straton: Perfect. And then just on the cold weather merchandise in the quarter. Is there any just additional detail you can provide on that dynamic, the impact on the overall comp for the chain? I know you've given a lot of details, but anything else worth highlighting there? Michael O'Sullivan: Sure. Yes. Yes. So after back-to-school, the cold weather merchandise becomes very important to our mix. As I said earlier, it expands to more than 20% of our total assortment during the quarter. Now cold weather merchandise, just to define it, includes categories like coats, jackets, boots and accessories like gloves and scarves. So it's only stuff you need if it's cold outside. And our customer is very need-driven. For September through mid-October, our comp sales in those businesses were down in the negative mid-teens. Then in the last 2 weeks of October, once the weather turned cold, they grew up double-digit comp. Maybe if I step back for a moment, there are 2 ways in which milder weather in September and October affects our business. There is the direct drag on our overall comp growth from lower sales in the cold weather categories that I just mentioned. That's one impact. But there is also an impact on our non-cold weather businesses because if you think about it, if the customer comes in to buy a coat, she's probably going to put some other things in the basket, too. So if -- because the weather is mild, she doesn't come into the store to buy that coat, then this doesn't just hurt our coat sales, it impacts other businesses as well. Now mathematically, the drag on our overall comp from cold weather categories alone was worth about 200 basis points in Q3. If you then add the impact that lower traffic had on other non-cold weather categories, you can easily get up to a few points of comp. And I think that's somewhat consistent with the fact that we saw a bounce back to mid-single-digit comp growth in the second half of October once the weather had turned cold. Operator: Your last question comes from the line of Mark Altschwager of Baird. Mark Altschwager: Kristin, could you give us some more detail on regional trends, category trends as well as any of the detailed comp metrics for Q3? Kristin Wolfe: Mark, yes, absolutely. In terms of regional performance, the Southeast was our strongest region in the quarter. The West, Northeast and Midwest were in line with the chain, while the Southwest trailed the chain. On category performance, we saw the strongest performance in beauty, accessories and shoes. Apparel comp slightly above the chain, while home was softer, comping below the chain in Q3. In terms of the comp metrics, our traffic was down in the third quarter. That was largely driven by September and early October when weather was unseasonably warm. And this lower traffic was offset by a higher average basket size. So for the quarter, we were pleased to see that both conversion and basket size or average transaction size were higher than last year. So this tells us that once she's in the store, she liked what she saw. Mark Altschwager: Excellent. And then, Michael, as we look at the Q4 comp guidance, do you view that as conservative just given typically less weather sensitivity in the fourth quarter? Michael O'Sullivan: Mark, sometimes when we give comp guidance, we'll also sort of signal, if you like, if we think there may be upside. I don't think -- I don't see a lot of upside in our Q4 comp guidance. The reason I say that is that we're up against 6% comp growth from Q4 last year, so 6%. If you take our 0% to 2% guidance, that gets you to a 2-year stack of 6% to 8%. Now we exceeded that in Q2 of this year, but we were well below it in Q3. I should also add that when I look at our off-price peers, the way I'm interpreting their guidance, it looks like they are slightly below us on a 2-year stack basis. So even though we're happy with our recent trends and with how we started the quarter, and we're excited for our holiday assortments. We're not anticipating significant upside to our Q4 comp sales guidance at this point. Operator: I'd now like to hand the call back to Mr. Michael O'Sullivan for final remarks. Michael O'Sullivan: Let me close by thanking everyone on this call for your interest in Burlington Stores. We would like to wish you all a very happy Thanksgiving. We look forward to talking to you again in March to discuss our fourth quarter and full year 2025 results. Thank you for your time today. Operator: Thank you for attending today's call. You may now disconnect. Goodbye.
Operator: Good morning, ladies and gentlemen, and thank you for standing by for Baozun's Third Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, today's conference call is being recorded. I will now turn the meeting over to your host for today's call, Ms. Wendy Sun, Senior Director of Corporate Development and Investor Relations of Baozun. Please proceed, Wendy. Wendy Sun: Thank you, operator. Hello, everyone, and thank you for joining us today. Our third quarter 2025 earnings release was distributed earlier before this call and is available on our IR website at ir.baozun.com as well as on PR Newswire services. We have also posted a PowerPoint presentation that accompanies our comments to the same IR website where they are available for your download. On the call today from Baozun, we have Mr. Vincent Qiu, Chairman and Chief Executive Officer; Ms. Catherine Zhu, our Chief Financial Officer; Mr. Junhua Wu, Director and Chief Strategy Officer of Baozun Group, and Mr. Ken Huang, Chief Financial Officer of Baozun Brand Management. Mr. Qiu will first share our business strategy and company highlights. Ms. Zhu will then discuss our financials and outlook, followed by Mr. Wu and Mr. Huang, who will share more about our e-commerce and brand management segment, respectively. They will all be available to answer your questions during the Q&A session that follows. Before we begin, I would like to remind you that this conference call contains forward-looking statements within the meaning of the U.S. Securities Act of 1933 as amended, the U.S. Securities Exchange Act of 1934 as amended, and the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements are based upon management's current expectations and current market and operating conditions and relate to events that involve known or unknown risks, uncertainties and other factors, all of which are difficult to predict and many of which are beyond the company's control, which may cause the company's actual results to differ materially from those in the forward-looking statements. Further information regarding these and other risks, uncertainties or factors is included in the company's filings with the United States Securities and Exchange Commission and its announcement notice or other documents published on the website of Stock Exchange of Hong Kong Limited. All information provided in this call is as of the date hereof and is based on assumptions that the company believes to be reasonable as of this date, and the company does not undertake any obligation to update any forward-looking statements, except as required under applicable law. Finally, please note that unless otherwise stated, all figures mentioned during this call are in RMB. You may now turn to Slide #2 for the executive highlights for the quarter. It is now my pleasure to introduce our Chairman and Chief Executive Officer, Mr. Vincent Qiu. Vincent, please go ahead. Wenbin Qiu: Thank you, Wendy. Hello, everyone, and thank you all for your time. I'm pleased that Baozun is advancing its strategic transformation with steady momentum, delivering a strong quarter marked by 5% total revenue growth and a big improvement in profitability. Fueled by strong gross margin expansion, our non-GAAP operating loss narrowed to RMB 11 million from RMB 85 million a year ago. These results show that our transformation is effective and demonstrate the strength of our business model. Both of our 2 core engines are driving this success. BEC's solid execution and growing agility continue to deliver strong results this quarter. Building on the 56% year-over-year increase in adjusted operating profit from Q2, BEC achieved its most profitable third quarter in recent years with non-GAAP operating profit of RMB 28 million compared with operating loss of RMB 30 million a year ago. This significant improvement in profitability, along with 6% services revenue growth and strong gains in creative content and marketplace connectivity shows that BEC is now more agile and efficient. BBM continued with strong top line growth with revenue up to 20% year-over-year, driven by impactful merchandising and marketing initiatives. This quarter, we engaged our first Gap China brand ambassador, a top-tier actor with 30 million followers on Weibo and 8 million on Douyin. We also launched a series of marketing campaigns and themed products to deepen emotional connections with local consumers. Hunter continued its brand momentum and opened our new store in Qingdao, bringing Hunter's total offline stores to 8, including 5 in China and 3 in Southeast Asia. These efforts contribute to sales growth, stronger gross margin and improved overall profitability for BBM. In summary, we are firmly on track with our strategic transformation. With a resilient e-commerce foundation, accelerating brand management momentum and the technology as our catalyst, we believe 2025 is a highly productive building phase. We anticipate 2026 to mark our inflection point, shifting from transformation investment to sustained profitable growth. Now I will hand the call over to our team for a deeper dive into our financials and the business performances. Catherine Yanjie Zhu: Thanks, Vincent, and hello, everyone. Now let me provide a more detailed overview of financial results for the third quarter of 2025. Please turn to Slide #3. Baozun Group's total net revenues for the third quarter of 2025 increased by 5% year-over-year to RMB 2.2 billion. Of this total, E-Commerce revenue grew by 2.4% to RMB 1.8 billion, while Brand Management revenue rose by 20% to RMB 396 million. Breaking down E-Commerce revenue by business model, services revenue increased 6.3% year-over-year to RMB 1.4 billion. This increase was driven by revenue growth in online store operations and digital marketing and IT solutions. BEC product sales revenue decreased 8.9% year-over-year to RMB 413.4 million, mainly due to decline in Appliances, and Health and Nutrition categories. BBM product sales totaled RMB 395.2 million, representing a 20% year-over-year growth. This growth was mainly driven by the strong performance of the Gap brand. Please turn to Slide #4. From a profitability perspective, our blended gross margin for product sales at the group level was 34.3%, an expansion of 620 basis points year-over-year. Gross profit increased by 26.1% year-over-year to RMB 277.4 million for the quarter. Breaking this down by our key business lines. Gross margin for E-Commerce product sales expanded to 13.1%, reflecting a 300 basis point improvement compared to 10.2% a year ago. This margin expansion was primarily driven by product mix diversification consistent with our progress throughout the year. Gross margin for BBM was 56.5% compared with 52.8% a year ago, reflecting the success of merchandising and marketing initiatives of BBM. Now please turn to Slide #5 for a walk-through of our OpEx. Sales and marketing expenses increased by 10.7% to RMB 886.6 million. This included an increase of RMB 67.5 million for BEC, which was mainly due to higher spending on creative content on Douyin and RedNote, and more revenue contribution from digital marketing for BEC during the quarter. BBM sales and marketing expenses increased by RMB 18.8 million due to higher front-end expenses from expanded offline network and more marketing initiatives for BBM during the quarter. Fulfillment cost for the quarter was reduced by 4.5% to RMB 495.9 million, reflecting our ongoing efforts in cost optimization. Technology and content expenses decreased by 18.2% to RMB 115.2 million as we continue to enhance tech monetization efficiency. G&A expenses decreased by 4.4% to RMB 168.9 million, primarily attributable to our ongoing efforts in efficiency enhancement and cost optimization. Turning to bottom line items, please refer to Slide #6. During the quarter, our non-GAAP loss from operations was RMB 10.8 million, a sharp improvement from RMB 85.2 million in the same period of last year. BEC's adjusted non-GAAP income from operations was RMB 28.1 million, while non-GAAP loss from operations was RMB 29.8 million a year ago. BBM reported a non-GAAP operating loss of RMB 38.7 million, an improvement of 30% compared to the same period of last year. As of September 30, 2025, our cash and cash equivalents, restricted cash and short-term investments totaled RMB 2.7 billion. Lastly, I'd like to quickly address an accounting update on the balance sheet to reflect expiration of options related to the Cainiao minority investment in Baotong, our warehouse and logistics business. According to the agreement with Cainiao, if certain triggering events occur, Cainiao had the right to exercise a put option requiring Baotong to redeem Baotong's shares within 12 months starting from August 2024. As a result, this investment was originally recorded as redeemable noncontrolling interest, which is a complex financial instrument classified between liabilities and equity. With these options expiring during the third quarter, the investment has now been reclassified as noncontrolling interest and equity item. Following this accounting adjustment, our total equity increased to RMB 5.5 billion compared with RMB 4 billion in the previous quarter. Importantly, this adjustment has no impact on our warehouse and logistics operations. Let me now pass the call over to Junhua to update you on BEC, our E-Commerce business. Junhua Wu: Thanks, Catherine, and hello, everyone. I'm pleased to share our progress and achievements for the third quarter. Building on the momentum established in the first half of the year, we continued advancing our strategic priorities with a clear focus on sustainable profitability and growth. As previously outlined, our 2025 roadmap follows a clear progression, Q1 for adjustment, Q2 for stabilization, and the second half for acceleration. I'm pleased to report that Q3 delivered meaningful progress across key business segments. BEC posted solid performance with a stabilizing revenue based a significantly improved revenue mix and quality, leading to a notable improvement in profitability. On a non-GAAP basis, operating profit reached RMB 28 million, making the most profitable third quarter in the recent years for BEC. Please turn to Slide #7. BEC product sales declined by 9% this quarter, reflecting our transition strategy towards a quality-driven portfolio, optimizing selected clients in the Health and Nutrition category and shifting certain clients in Beauty and Cosmetics category from a DC mode to a service model. In the Appliances category, top line softness persisted as we prioritize profitability over volume. These adjustments followed a thorough review of each segment's market dynamics and have led to stronger profitability under a distribution model. As a result, BEC delivered a 300 basis point improvement in gross profit margin to 13.1% for product sales. Just as importantly, enhancements in procurement discipline and turnaround management drove nearly a 20% improvement in inventory turnover days, enabling us to maintain a healthy and efficient inventory levels. In addition, we remain focused on building a more sustainable and quality-driven distribution portfolio. During the quarter, we achieved healthy growth in Beauty and Cosmetics, Alcohol and Apparel categories. Notably, we are expanding our pipeline into nonstandard categories, including Apparel within distribution mode. By leveraging our Brand Management expertise in our core category, we are increasingly able to apply deeper expertise and a more brand owner-oriented mindset. Looking ahead, we expect BEC product sales to return to top line growth in 2026. Turning to Slide #8. Our services revenue grew by 6% in the third quarter, primarily driven by strong performance from online store operations, which saw 16% growth and a 6% growth in DM and IT solutions. Within online store operations, the core apparel and accessory category was a key driver with all key segments generating encouraging top line growth. The strong performance of our services mode reflects how we have advanced the brand empowerment by utilizing our data-driven insights and expertise, and capturing opportunities from ever-changing industry dynamics. We remain committed to leading innovation in creative content as these are critical for consumer engagement and traffic attraction. On RedNote, we plant content seeds to drive interest and brand awareness, which enhances emotional connection and refines the consumer shopping experience. Furthermore, by leveraging enhanced connectivity between marketplaces such as the Tmall Red Cat and JD R.E.D. Jean collaborations, we help brands to generate better marketing conversion and sales performance. This quarter, we were accredited as a premium service partner, further validating our leadership position on this viral live platform and building on our earlier designation as one of the first batch of Red partners in February. On Douyin, we continue to pioneer live stream content and formats, including scenario-based showcases and celebrity collaborations to drive quality business contribution to our brands. In mid-September, we successfully partnered with a leading international electronics brand to launch its flagship stores to further enhance the brand's cultural engagement and product promotion. This initiative was immediately effective. Within a month, we helped the brand gain 3 million consumer followers and achieved the #1 GMV ranking in its category. We are proud to continue setting new industry benchmarks for Douyin brand e-commerce. Overall, this quarter is another solid quarter for BEC, marked by a return to profitability in a lower seasonality quarter, which demonstrates the effectiveness of our strategic focus on sustainable and high-quality growth. We are actively driving the bottom line through efficiency enhancing measures, including the ongoing application of artificial intelligence and automation tools as well as our lean cost control initiatives. We are confident that the foundation built throughout 2025 will continue to accelerate our momentum and deliver long-term value. Now I'll pass to Ken for an update on BBM. Ken Huang: Thank you, team, and hello, everyone. Please turn to Slide #9 for BBM's performance in the third quarter of 2025. I'm pleased to share that BBM maintained its strong growth momentum this quarter with total revenue growing 20% year-over-year to RMB 396 million. The strong growth was driven by improvements across key operating metrics, including same-store sales, traffic, average transaction value and network expansion. Overall, Gap's same-store sales growth was 7% for the quarter. Gross profit for BBM totaled RMB 223 million, an increase of 28% year-over-year, with gross profit margin expanding to 56.5%, up 370 basis points from 52.8% a year ago. This margin expansion, along with strong top line growth, highlights the effectiveness of our merchandising and marketing initiatives. The higher gross profits, combined with improved operating efficiency, further enhanced our overall profitability. As a result, BBM's non-GAAP operating loss for the quarter improved by 30% to RMB 39 million from RMB 55 million in the same period of last year. Now let me expand on our key initiatives for Gap China in the third quarter. First, marketing, as we made a major leap forward in brand storytelling and culture engagement this quarter. On September 15, we announced the appointment of Cheng Yi, one of China's most acclaimed actors, as the inaugural brand ambassador for Gap China. In accordance, we launched Mind the Gap, Bridge the Gap campaign using music as a bridge to engage younger audiences and reintroduce Gap as a comfort, confident, modern lifestyle brand. We also introduced the Gap Club Capsule collection and upgraded the brand image in our offline stores to reflect stronger creative energy and local relevance. To provide immersive experiences, we hosted 2 pop-up experience stores, one in Shanghai's Anfu Road and one on Shenzhen COCO Park, both featuring live performance, vinyl shops and art collaborations, successfully merging lifestyle and fashion. In this campaign, we also introduced innovative interactions with social PGC and UGC content. These efforts helped us attract more customers, strengthen brand awareness and deliver meaningful business results. In total, the campaign had more than 1.2 billion impression, 9 million interactions and 176,000 new followers. These efforts also drove a 25% increase in young customers and strengthened Gap's position as an authentic and aspirational brand for China's younger generation. Meanwhile, we continue to work closely with Gap Inc. to capitalize on its global marketing assets and upward momentum. This August, Gap Inc. partnered with KATSEYE on the Better in Denim campaign, blending Gap's iconic timeless denim with KATSEYE's contemporary and education sensibilities. And China is one of the few countries that offer KATSEYE's exclusive products to the market, also achieved a very satisfying result. Second, merchandising, which remains the core engine of our growth. We continuously sharpened the product offerings and introduced a higher mix of online exclusive and segmented products across different marketplaces over the summer and fall. We also deepened the collaboration with major platforms through exclusive assortments and joint marketing programs such as Tmall Fashion Show and Douyin Super Brand Day. This tailored e-commerce strategy, coupled with our participation in platform promotional events, accelerated traffic and conversion growth. At the same time, our improved supply chain ensured fast and localized fulfillment. We believe that our agility and flexibility in shifting between online and offline channels has become an important competitive advantage. From a channel perspective, we continue to expand our physical presence. For Gap, we opened 11 new stores in Tier 1 and Tier 2 cities, including Guangzhou and Yichang, while closing 4 low productivity stores. We also started to remodel existing stores in Wuhan and Wuxi this quarter to upgrade our store image, visual merchandising and the customers' experience. This brought the total number of Gap stores to 163 by the end of this third quarter. Together with Hunter's network expansion, our Baozun brand management offline portfolio now stands at 171 stores. In addition, we hosted a National Partner Conference in September, convening a dozen top-tier business partners, which cover all important provinces. Notably, half of these partners were new with strong brand portfolio and operating expertise in their regions. Cooperations with these new partners also aligned with our expansion plan by enhancing our business in the key cities in North, Southwest and South China. This event allowed our partners to directly experience our ascending brand influence and our marketing product and channel strategy in the coming year. Their positive feedback reaffirmed the strong partners' confidence in our brand direction. In summary, BBM delivered another quarter of healthy growth and brand revitalization. Furthermore, our integrated marketing campaigns have laid a solid foundation for the Gap brand to further unlock market potential. This was evident in the big improvements in brand rankings across all key divisions, men's, women's and kids during the most recent Double 11 campaign. This success places us on track to achieve Gap's first breakeven quarter in the upcoming fourth quarter. With both Gap and Hunter building stronger emotional relevance and culture momentum, we are confident in sustaining our growth through year-end and beyond. That concludes our prepared remarks. Thank you. Operator, we are now ready to begin the Q&A session. Operator: [Operator Instructions] Our first question comes from Alicia Yap with Citigroup. Alicis a Yap: Congrats on the solid results. Two questions. First, can you provide some observations on the latest consumer sentiment? So have you seen any shift of the consumer spending behavior recently, especially with the recent Singles' Day promotions? Any change of the consumer preference in terms of the purchase willingness? And then categories that you have seen doing better than you previously expected, and also categories that performing worse than you anticipated? And then also, what are the brands -- how are the brands' willingness to spend on the marketing budget during this year's Singles' Day? How should we be thinking about the impact from the Singles' Day to the fourth quarter outlook? And then second question is, I know it's a little bit early, but then any comments on the 2026 outlook in terms of your different business segments? And also, what are your top strategic priorities? For example, is there any target for margin expansions or any of these brand expansions? And also, how AI will play a role in helping you to achieve some of your 2026 priorities? Junhua Wu: Okay. This is Junhua. So let me address your first question, and maybe Vincent can address the second one. So in terms of the latest consumer sentiment, from our perspective, according to the just finished Double 11, so we realize that the consumer sentiment is getting better. So you can see a lot of consumers, they are paying for value. So they are not just -- they are being very targeted. They know what they want and they wait until all those kind of the values and profitabilities from the brand and all those coupons are addressed. So especially with the recent promotion, we can definitely expect a very strong finish for the Double 11 this year. And from the preference, so as far as our observation, so it's still towards the sports category and apparel category and the FMCG category follows. So if you're talking about some kind of the categories performing worse than we anticipated, I would say, after the pullback of the subsidiaries of the home appliance category, so consumers rather to wait for another kind of benefit from the platform and from another support when their subsidiaries are supported. But the willingness of the consuming power is still getting stronger and the willingness of the brand in spending marketing budget and allocate our new inventory is getting stronger. So after 6/18 this year and after Double 11, we are saying that we definitely can expect a stronger support in terms of the marketing fee from the brand perspective and the inventory allocation for the new year. A lot of brands during this past Double 11, they are focused on their P&L rather than the GMV growth. So a lot of our brand partners, they have increased their P&L to several point percent and which maybe lead better results from their global strategy. So that's my answer for the first question. Wenbin Qiu: Okay. Thank you for the question. This is Vincent. And I think your second question about our strategies is a very important question. Basically, we have 2 business divisions or units, BEC and BBM. One by one, for BEC, I think next year, the most important job for them to do is to expand the margin, and in the meanwhile, to optimize the cost efficiency. I think these 2 are very important. So for the margin expansion part, we are doing more and more distribution model. We are taking more ownership in the process of the sales, trying to get better margin. That is one side. The other side is that we are initiating a lot of these kind of lean operation initiatives to help us to get a better cost. So it is to do more with less strategy for BEC. On the other hand, we have the BBM business, which the priorities are quite different. So firstly, for the existing brands like Gap, Hunter and others, we are trying to make every brand to be successful business operations. That is very important, not only for the quarter-to-quarter business performance, but also for the future potential of how many and how well we can work with the other brands. So the first priority for the BBM is doing well for each brand. The second thing is that we are trying to develop the synergy between BBM and the BEC, trying to convene more and more knowledge, experiences and mechanisms to BEC to enable them to have more ownership in the distribution business. More ownership always means more margin and puts more potential on profitability. So that is very important. Because in the past 3 years, we spent a lot of time and energy in BBM and we gained, as a group, a lot of solid experiences, how to do higher ownership business. So this kind of knowledge, experience and mechanisms can transfer to BEC to make them a better potential to do this kind of high-quality distribution business, especially in the softer goods sections categories. So in the past more than 1 year, we have some of the experiments. We have several projects, which is quite more, apparel, fashion products, distribution model. They are very successful. So next year, we're trying to expand this model into more brands. So we are expecting a huge potential of growth for this soft goods distribution model. So this gives us a huge potential space to grow the business, not only the top line, but more importantly on the margin expansion side. So that is basically our plan for 2026 and the years ahead. So for the -- of course, we are actively looking for brands for the BBM portfolio. But I think we'll be very careful in bringing new brands in to make sure we have a good chance to be successful each brand, as I mentioned, for the first priority. And also, we are investing in data warehouse, AI, all these kind of technology factors, and we are seeing yields from these efforts and investments. We are going to do this in the future as well. So all these kind of technology, AI capability and data warehouse can contribute in the future. So synergy between BBM and BEC is very important. Just like what Ken just said, Mind the Gap, Bridge the Gap, yes. So BEC and BBM are getting more and more as one. Operator: And the next question comes from Yin Jiawei with CITIC. Jiawei Yin: Congratulations on this quarter's strong performance. I have 2 questions regarding BEC. The first question is that, as we have seen recently, premium consumption has shown signs of stabilizing and recovering. Has the company's relevant categories benefited from this trend? And my second question is, in recent years, the growth gap between content e-commerce and traditional e-commerce has narrowed. Meanwhile, China's online traffic and sales channels has become more diversified. With emerging platforms like RedNote and Bilibili, how does the company view the strategic shift brands should make? And how is Baozun adapting to this change? Junhua Wu: Okay. Let me address your 2 questions. The first one is a very positive answer. So yes. So premium luxury category is still taking the lead of the result, especially after Double 11. So I can make one example about a leading American premium brand, which maintains a 60% Y-o-Y, and the pattern keeps going for the past 3 years. So in this category, if you want to drive a higher margin, a higher GMV, it's not relied on listing more products online, it relies on the content-driven, how do you want to just set up the emotion linkage before making transactions. So I cannot review a lot of details, but if you have the chance to go to our live stream studio for that brand, you can see that. They are scenario-based. They are building a lot of different scenes for selling total look instead of a single article for top or for bottom. So the luxury and premium category, they can provide a very big value for consumers to purchase, and they can provide a lot of history, the brand storytelling, a lot of things. So this is very much promising in the future. And we realize that the consumer shopping is pay for value. So they rather wait until the good momentum and a good window to shop in all those premium and luxury brands. And the second question is related to content e-commerce and traditional e-commerce. So I mean, for the past 2, 3 years, there's no such thing to separate the content with the traditional e-commerce. They are merging together. They are interweaved with each other. You need to just build up the content before making transactions, not just getting the traffic to your store and let them convert. So the RedNote, before they had the Red Cat initiative, they were the UGC platform. That was the pure content. And in the past 6/18, their initiatives, all those RedCat initiatives link all those content to the transaction, which makes that the brands are shifting their strategy, putting a lot of marketing fee and marketing spending into an ROI-driven kind of the initiatives. So more and more brands realize that investing in content and getting more investment into the content creation, set up the emotion linkage is the key, because we can trace all those content, how much ROI can be driven from those content to the transaction. So we are providing -- the platforms are also providing a lot of tools and mechanism to validate all those kind of investments from the marketing to EC operations. So if in the future we believe that in that marketing and EC operation they are going to be rebudgeting for the future growth, from the brand perspective, you need to just harmonize the marketing spending and the EC operation, not just inside performance marketing driving traffic, but also invest in the content to drive from the content to transactions. Yes, that's my answer for 2 questions. Operator: And the next question comes from Joanna Ma with CMBI. Joanna Ma: Congratulations on a strong quarter. So I have 2 questions. The first is regarding what can management share with us regarding your revenue and profitability outlook in the last quarter and also for the full year '26. While my second question is, can management share with us your development plan for BBM business in the full year '26, both regarding Gap, Hunter and other new initiatives? Wenbin Qiu: Okay. This is Vincent. Let me answer these questions. For the first one, right now, we are already in late November. So we can see that from day-to-day business management and updates, we are quite confident for both BEC and BBM results in the coming quarter. We are trying to deliver another solid quarter in the near future. So, so far, I think it is quite on track, and we are quite confident for the results. For the coming year, 2026, we are hoping that both business with its performance and also with the synergy in between to be developed, we are expecting a big improvement in profitability for the whole business. Separately, BEC, we are expecting big improvements and also BBM because we are developing synergy. So in general, we are expecting big improvements for profitability. For the BBM business, as I just mentioned, the priority is that we just make each of the single brand to achieve the expectations and plan we made for this year and next and in the coming 3 years. And also, we are developing a synergy between BEC and the BBM. Certainly, we'll be actively looking for new opportunities, but we'll be very careful in bringing in new brands. So that is about the BBM strategy. Yes. Operator: [Operator Instructions] Our next question comes from [ Tao Xiaoming ] with Huatai Securities. Unknown Analyst: I have 2 questions. The first question is about quick commerce. Driven by the traffic from Taobao's quick commerce on the main app, Taobao's DAU recorded a noticeable year-on-year increase in third quarter with further momentum continuing into 4Q. Have we observed any positive impact from the increase in Taobao main site traffic on our third quarter performance, and in which aspect is this mainly reflected? And looking ahead to fourth quarter, should we expect any sustained positive influence or some potential action on the quick commerce? And my second question is about the recent new regulation on advertising spend and tax. Some of our brands under our portfolio in the beauty category, the new tax policy introduced updated requirements on advertising spending. Have we seen any impact on our advertising operations so far? How should we assess the potential magnitude and extent of this policy's impact on revenue and profitability going forward? Junhua Wu: Okay. Thank you for the question. This is Junhua. Let me address your 2 questions. The first one is related to the instant shopping, quick commerce. So when you're talking about the instant shopping, you need to talk about the categories. The category really just have that business nature, like FMCG, food, wine, some kind of category, they are more related to the instant shopping. So this is not our majority battlefield in the Baozun BEC business growth. We are in the fashion business, in the luxury business, electronic devices. Some of our FMCG and wine brands, they are pilot run and they devote themselves into the quick commerce. But it's very hard for us to imagine a premium luxury brand listing their products next to, for example, like birth control products. So that scenario is not our majority part of the battlefield. And this is the second one. The second one is the traffic pool from the instant shopping to the Tmall and Taobao, they are very different. So they are personalized to a very targeted traffic into different brands. So we are not targeting all those instant shopping traffic rather than we just targeted the OAIPL. So we need to just spend our money wisely in the big pool. So we are focused on more the top tier, I mean, the 300 million among the 800 million traffic among all the Tmall, for example. So this is our target traffic, not the instant shopping traffic. That's the first one. The second one, you mentioned about especially the cosmetics category because we realize that in that category, the marketing spending is mostly bigger than the other categories. But after the pandemic, all the brands are spending their money wisely. So even in the cosmetics brand, the brand doesn't really just spend that much pie like years ago. So within the regulation and policy, we have not realized any kind of impact about the regulation to us. So the brands in that category, also the other categories also still maintain a decent and very logical investment proportion among their GMV. Operator: And the last question comes from Yin Jiawei with CITIC. Jiawei Yin: I have one question regarding BBM. In September, Gap has signed a top-tier brand ambassador, and the Brand Management business also delivered a strong growth this quarter. So what impact has this collaboration had on Gap's brand awareness and user profile? And has there been any synergetic sales growth in other business lines like children's wear? And what is the company's long-term view on Gap's profit potential and the development vision? Ken Huang: Thank you for the question. This is Ken. I will answer your question. Firstly, as I mentioned before, in this campaign, we attracted more customers from the younger generations, 25% increase. It's not only increase in the young generation, but in the whole customer base, we see a big increase in all the AIPL customer base. And more importantly, we see a lot of new UGC content in the social media. Our brand and our products are discussed within the young generations and our consumers. And this campaign also helped us to promote our key category products, especially denim and sweatshirt. Our ambassador wears different colors, different fit, style, logo sweatshirts during the campaign. It helped us further strengthen the brand awareness and the key product awareness to the market. And second, for the kids and baby business, we do see that synergy, because kids and baby is a very strong division of Gap brand. And it's also our advantage because nearly all our stores sell both adult and kids and baby products. So this can be proved from our increase of our units per transaction. So we see more family customers also shop both adult and kids products at the same time. And for your last question about Gap's future profit potential, I think by capitalizing this marketing asset of this full campaign, we will continue using our winning formula to continue to expand our customer base, brand and sales in the coming quarters and the coming year. So we expect to continue our double-digit growth in Q4, around 20% increase. And for next year, we also expect a continuous double-digit increase in our sales. In Q4, we will also introduce our new store image. So with this new store image, we expect a bigger store sales productivity in our new store format in next year. So we will further accelerate our store expansion, keep the momentum of sales growth in both scale and unit stores, which in total, I think, will help us to improve the profit. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Ms. Wendy Sun for any closing remarks. Wendy Sun: Thank you, operator. On behalf of the Baozun management team, we'd like to thank you again for your participation in today's call. If you require any further information, feel free to reach out to us. Thank you for joining us today. This concludes the call. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Thank you for standing by, and welcome to the Web Travel Group Limited First Half FY '26 Results Briefing. [Operator Instructions] I would now like to hand the conference over to Mr. John Guscic, Managing Director. Please go ahead. John Guscic: Thank you, Harmony. Good morning, everyone. Welcome to the Web Travel Group results for the first half of FY '26. Joining me today is our CFO, Tony Ristevski. Grab your ticket and your suitcase, thunders rolling down the tracks. Web knows where it's going, and we know we'll never go back. Investors, if you're weary, lay your head upon my chest. We'll take what we can carry, and we'll leave the rest. Big Web rolling through fields where sunlight streams, meet me in the land of hope and dreams. Welcome, guys. We said that we would deliver world-class growth in FY '26, and we said that margins would stabilize. And we've done both things. If you go to Slide 3, you'll see that our TTV is up 22%. Our margin is at 6.5%. We'll talk about how we get there and the construct in a second. EBITDA for the group is up 17%. If we break it down to the underlying performance of WebBeds, TTV of $3.2 billion, up 22% on the first half of '25, revenue of $204.6 million, up 20%, EBITDA of $94 million, up 21% on the corresponding period. We've maintained market-leading TTV growth rates while maintaining margins. Revenue is a reflection virtually identical with TTV and EBITDA is up almost exactly the same. We'll go through the construct of how that all transpired in a second. If we get to the overall group performance, underlying EBITDA is up $81.7 million after corporate costs of $12.3 million. NPAT is $48.6 million, and we continue to skew out cash at a rate well above our contemporaries where we're up circa $120 million in the year. CapEx is in line with our expectation at $18.6 million. And our cash position is exceptionally strong, notwithstanding that we spent $150 million on buying back shares in the second half of the last financial year. What we have done is to provide greater flexibility is increased our undrawn revolver credit facility from $40 million to $200 million. Moving through to our key metrics. I've covered most of these, but bookings at 5.70 million, TTV at $3.17 million. In both cases, we're seeing strong organic growth in all regions. And our bookings and TTV combination reflects the expansion of the network in which -- or the distribution network in which we participate in both various geographies and various channels that have all expanded during the first half of '26. Record revenue at $204.6 million and record EBITDA at $94 million, obviously, reflecting our revenue growth as well as our planned increase in operating expenses as we future-proof our business to maintain the margin levels that we are currently delivering and expect to deliver for the foreseeable future. Let's go through the highlights. Bookings up 18% across all regions. TTV up 22%. Revenue, 20%, expenses up 19%. That's reflecting CPI increases, the reintroduction of the bonus scheme, which we didn't get paid in FY '25, as well as the previously flagged investment in hotel contracting. In functional currency, we expect expenses to go up in high single digits. We'll talk a little bit about the functional currency in a little while as we go through what has transpired. EBIT is up 21%. We said at the start of the year, we reaffirmed during the AGM that EBITDA margins will be between 44% and 47%, and we are at 45.9%. So let's get into a little bit more of the detail of what we've been able to deliver. As those who are familiar with the business are aware that we carve out our superior growth rate in 3 separate buckets. One is what does the market growth or system growth look like. What are we adding to the pile through new customers and through improved supply arrangements or entering into new markets. And the third is same-store sales, which we call conversion, what are we doing to increase the sales that we make from our existing customer base. So if you look at systems growth, so if you're not growing at 5%, you're going backwards against the market. We think our estimates are the overall hotel supply and distribution market grew circa 5%. We looked at our business and what's different between the first half in specific inventory that we've sold and/or specific clients that we've sold to. That accounted for about 5% of our growth. And all the rest is the singular focus of an organization of circa 1,900 employees looking to ensure that we provide the right product at the right price at the right time for our customer base and enhancing the value of our supply partners by giving them global distribution. And again, we had another standout result where we improved our conversion by another 12% in the first half of '26. All right. Let's get a little bit technical here, and we're going to have to talk about the vagaries of the FX market and how that played out for us over the year and talk specifically about the regional performance of our respective markets and how that's been translated to our functional currency. So as you can see, in aggregate, globally, our bookings are up 18%, but in the functional euro currency, we're only up 14%. This is an anomaly from this perspective. What we have seen in FY '26, as we compare the exchange rates of the euro, in particular, against FY '25 is the euro has appreciated considerably, in particular, against the U.S. dollar. The net effect of that is that at a functional currency level, we're only up 14%. At a bookings level, which is activity, we're up 18%. At Aussie dollar level, we're up 22%, and 22% is circa normal. If you had a bookings growth rate of 18%, then you would expect average booking values to go up circa 3% to 4%. So 22% is the expected outcome of bookings of 18%. How we got there is a little bit unusual. So let's go through the individual markets and call out what's actually happened. So Americans had clearly, the standout performance in the half, up 36%, a factor of, again, some great client wins and massive market share gains from existing clients driving a massive outperformance in that particular market. And yet when you translate that to euros, it's only up 27%. The vast majority of that delta is the previously mentioned exchange rate between the U.S. dollar and euro. Let's go to Europe. Europe, very strong results at a bookings level, up 14% in the most mature distribution market in the B2B landscape. That is a superior result. And perversely, TTV in euros is down 12%. And that's because there are not just the euro that we sell in Europe, we're selling GBP pounds. We're selling Scandinavian currencies, we're selling Eastern European currencies. The way we account, we've got Turkish lira in there, and all of those currencies have depreciated against the euro, which shows the 14% bookings translating to 12% at a TTV level. Okay. Let's go to APAC and strong growth, double-digit growth in APAC and TTV growing faster than bookings. That's purely a function of average booking value increasing quite significantly in APAC because there was an FX drag on many of those currencies against the euro. So we saw ABV rates of circa 5%, driving a 2% net TTV to euro improvement. And the starkest example is the Middle East, where solid bookings, 6%. They were up massively in April and May, as you will have at our full year highlights as we -- of FY '25 when we called out our respective results, they were up significantly. There's been a significant softening in the Middle East market as a consequence of the war in Israel and Gaza and the bombing in particular, of Iran and Qatar saw a significant slowdown in region of that particular, in market, and that resulted in the subdued growth. We have high conviction that our Middle East business will continue to grow at above market rates. And as we'll talk about in the forward-looking element of our presentation, as the FX exchange rate delta ameliorates over time, that will translate to double-digit TTV growth in the market. So overall, really strong performance and that's how we landed in our respective marketplaces. Moving on to Slide 9. Again, for those who have been on us for this particular journey, in particular, in the post-COVID world, you've seen a significantly streamlined business doing significantly more volume, significantly more profit with lower resources invested in that effort. So the time scale to the right shows you the history of our business. In particular, it's a proud moment for our entire organization to see that growth rate continuing at our expectation of delivering towards our $10 billion TTV target. We're on track for that particular effort. We spoke about our margin where -- we said that we would be circa a year ago, I said that we would be at least 6.5% over the next 3 half reporting periods, which is an 18-month period. We continue to be on track to deliver 6.5% not only for FY '26, but with all the things that we've done in our business for FY '27, and I'll talk about those when we get to the forward-looking statements about our business. How we get to improve margins when clearly 6.5% is less than 6.6% is during the course of the year, we sold our DMC business, which is a high-margin business, low volume. That accounts for circa 20 basis points, and we actually improved our margin across the board to deliver 6.5%. So the most simple way of looking at it is the -- we're on a run rate to circa $6 billion in TTV this year. We delivered circa $5 billion last year. And what we've done is deliver the exact same TTV plus the incremental circa $1 billion over the full year, and we've maintained margins across the entire pool of business that we've sold to, which is in line with our overarching strategy over the last 12 months of ensuring that we solidify that margin and anchor it to the 6.5% and continue to deliver superior revenue and TTV growth as we deliver across the 3 piles that I talked about, systems growth, new customer supply and markets and improved conversion. So moving on to Slide 10. We're expanding our customer base. I've had opportunities through various presentations internally over the last few weeks to reflect upon the journey that we've undertaken from a customer base. And in essence, we started as a business where we sold Dubai as a destination to the Middle East. We made a small acquisition in Sunhotels in which we sold Mediterranean beach holidays to Scandinavians, and it was predominantly through a retail channel and predominantly through a narrow focus of customers. What we've done exceptionally well over the post-pandemic recovery period is broaden out that customer mix, in particular, looking at where are the fastest-growing customers globally and how can we tap into meeting their needs as a wholesale bedbank provider. And we've done that very well, and you see the superior results, in particular, in the Americas where we're partnered with the most innovative OTAs in the region to maintain our superior growth rates. Our customer diversification extends to what I've just described in America versus the tour operator business that we provide the same offering to and the same level of success in Europe, let alone the super apps in Asia or the corporate clients that we deal with in the Middle East. So we've got a really broad portfolio of customers that we continue to expand, and we have a strong pipeline for the balance of FY '26 and into FY '27. The next element is our supply mix in which we have a renewed sense of focus over the course of the last 12 months, and it's the most important strategic focus -- sorry, most important operational focus of our business going forward. So we were unhappy with our performance in FY '25, where there was the wrong inventory being sold at the wrong prices to some of our clients. We are addressing that, in particular, with our efforts to improve directly contracting sales in Americas, in particular, where we are significantly underweight. There's an enormous opportunity for us as we play out that particular strand of our tactical initiatives, and that will continue into FY '27. The second thing that has been, again, a credit to the hybrid business model we have of directly contracted inventory and partnering with the major third-party suppliers is we've seen an increase in supply of last-minute accommodation over the course of this half. Our average booking window has compressed by circa 5%, which is material in as someone who's been in this industry for 20-odd years. So it's the most significant compression of the booking window because of the broad range of supply that we have, we're able to tap into that particular compressed booking window and our percentage of last-minute bookings is up significantly against the same period of last year. And as we continue to grow, we have increased our relevance and presence with the major hotel chains. And we've got to the -- we've got into now the consideration set of being a viable distribution partner on a semi-exclusive basis to some of the largest hotel chains in the world, and we couldn't make that claim 2 to 3 years ago. As we were a business of circa $2 billion to $3 billion, we're a long way from having the global reach and presence that we now do have. And that dialogue is changing, and there will be some considerable success stories as we roll out our chain strategy over the course of the next 2 to 3 years. Moving on to geographic mix. In a Utopian world, we think we'll have 3 equal regions of roughly 30% each between Europe, America and APAC. We're getting pretty close to that. Middle East will be circa 10% of our overall business. We will continue to grow in all regions. We are not underinvesting in any. We have high-quality individuals who are running our sourcing and sales organizations in all those regions. And that's why we continue to outperform our competitors at both the TTV and EBITDA level. One of the significant contributors, and those who have followed our story will know that Europe is our highest margin region. We have improved margins in our highest margin region. And as we've grown faster in some of those regions, it's more than compensated for that TTV margin geographic mix that would have been down with pressure on us, and it's one of the reasons why we're so confident about delivering 6.5% for the balance of this year but also into FY '27. Finally, if we talk a little bit about scalability in the biggest hat tip I can give to the operational element of our organization and the people responsible for efficiency across the entire organization. It's an incredible achievement that we're now delivering bookings at circa triple what we were doing per FTE pre-pandemic. We're up 174%, and that number will continue to expand as we deliver the multitude of initiatives that we have within our organization that enable us to leverage technology to become more relevant and embedded in our business and to drive greater efficiency. And that's, as I said, a credit to, in particular, the operations teams within our business, which are all in-house. If we move to AI, there are a number of things that we have done. In particular, we have delivered margin optimization over the last number of years through a significant investment that we have made in that particular space. We think that we have market-leading solutions there. We also have a number of other AI initiatives undertaken within the business to improve how we surface inventory, the quality of the inventory we surface and how we service that inventory once it's been sold. There's been a little bit of a conversation about most particularly in the last week or so from industry commentary about the impact of what AI tools by some of the large language models will have on our business. The short answer is that will be another growth engine for us. The most recent example is Google announced their new travel initiative. And as I've shared previously with my colleagues on this particular call, there's only one team -- one time in the history of my 14 years, I generally thought -- apart from COVID, of course, but what I generally thought we faced an existential threat was when Google Flights was launched at the top of the funnel on all Google Search to displace the existing meta providers and take and capture demand before it fell to people like Webjet back in the day. The new Google -- and if that had been -- if that had played out, you wouldn't see the success of the large OTAs globally and Webjet's continued success over that intervening 10-year period. Now there are many reasons for that because at the end of the day, in this Google AI initiative and the various others that are coming down the track that we are aware of, what they all are is fixing a specific problem. And it's a problem that we have discussed many times internally when we were Webjet is how do you improve the search experience for customers, and we now have the answer: AI makes it infinitely better than typing in a date range, number of packs and a location and hoping that the 1,000 properties in Paris come to in the sequence that you would like. So it's an incredible fill up for those businesses that have -- that will -- sorry, for consumers that will enable them to derive superior results faster and have it tracked and be able to keep a log of everything that you're looking at before you make your booking decision. But the booking decision will not be made by the AI. The booking decision, and this is straight from Google last week, the booking decision will be -- they will not be the merchant of record. They'll pass that through to their partners. They will not service the customer. They will not go through all the things that we go through to enable that to happen. And where we fit in and why this is going to be a sustainable growth channel within our organization is we feed the people who are the consumer-facing level. We feed the OTAs that are going to be partnering with them. We feed any of the other channels that they choose to partner with. So rather than being a displacement for us, we think this will continue to enable us to grow faster as we have because we have a very broad range of inventory as demonstrated by the fact that we're on track to sell $6 billion of it. And it's not going to become less attractive in an AI world. What AI will do is deliver these incredible insights to get to our inventory faster. So we're very excited about that particular initiative. Finishing off the scalability, investment in contracting staff, we think will have a meaningful impact, in particular, in Americas, where we believe our margins will go up on the back of that. And in light of the fact that 5 or 6 years ago, we were the only publicly listed company that had publicly declared data about this industry, you'll see that with new people coming into the public markets, it still remains a significantly fragmented market, which continues to create opportunities, and we will look to take advantage of those opportunities over the course of this and the next financial year. So with that, I will now hand over to Tony to go through the finances. Tony Ristevski: Thank you, John. Good morning, everyone. Can you turn to Slide 12, which is our first financial summary, the P&L. Consistent now for the better part of 7 years, we've presented the P&L in the statutory format, which is to the left and the one that's more relevant, which is the underlying format to the right. John has already gone through the key operational results as it relates to review and EBITDA for the WebBeds business. Corporate cost is the next idea there in line, and that is pretty much consistent to what I said 6 months ago, where we're on track to do circa $24 million, but I'll talk a bit a bit about that in the next slide. And our operating expenses, which we do exclude from underlying of $5.5 million for the half is really predominantly a function of a mark-to-market to the equity-linked instrument that is a function of share price. Our share price obviously at 30 September is lower than what it was at 31 March, and that resulted in a revaluation downwards, which we do exclude from the result. The other key item there to call out is our effective tax rate at an underlying level. It is on track to be around 17% for the year. But this time last year, when we were part of the enlarged Webjet Group, we had the benefit of Australian earnings to offset the corporate losses, which were incurred in root, which for this half, we don't get that benefit. So consistent with what I said 6 months ago, our effective tax rate going forward will be in the vicinity of around 17%. The other key thing to call out on the slide is, as you can see, there at an underlying NPAT level, despite the record earnings for the half. But at an NPAT level, we are down versus last year, and that is really a function of the demerger, which I'll take you through the next slide, which is quite important. So if you then turn to Slide 13. What our NPAT represents in the first half of '26 is really the stand-alone business in its post-demerger format. So if you then look to the left there of corporate expenses, being $12.3 million, if you go back 6 months ago, second half '25, the exit run rate for corporate cost was $11.1 million. So when you then look at it in the context of the $12.3 million, it's the natural progression as we stand into an individual corporate function post demerger. Then if you then go to the next item, which is depreciation and amortization, the compare is a function of the demerger allocation. But then if you look at the second half of '25, that was $13 million approximately in D&A, and that did grow up 20% into the first half into $15.5 million and on track to be around $31 million for the full year. And then if you then go to the right there with net interest and finance costs, 12 months ago, at the half, we were in a positive situation, $600,000. Then in the second half of '25, we went to a negative $4.3 million, resulting in a $3.7 million for the full year of a net expense. Obviously, in the first half, we're at $7.4 million of net expense. And that's really a function of a couple of items there. Firstly, we did upsize our revolver, which does have a cost. Secondly, we did effectively reduce our cash balance by approximately $300 million, which we're getting the benefit for, firstly, through the demerger, handing $143 million over to Webjet. And then in the second half, $150 million through the buyback. And obviously, as has been the case over the last 7 or 8 years, our option premium costs are pretty much growing in line with our TTV numbers. So all in all, we're expecting net finance costs to be around $15 million for the full year. Going on to the next slide, which is our balance sheet. Strong healthy cash number, which John talked to earlier. Our working capital, which is our debtors and creditors is consistent now as we normalize after last year, where we did have a contraction around creditor days. Debtor days are sort of around 20 days going forward and creditor days are around the mid-30s going forward. So overall, quite pleased to see that both have stabilized. And I'll talk about the cash consequences of that on the next slide. Turning to the next item of substance, which is probably borrowing costs. You would see in our statutory accounts with the convertible notes due to mature April of '26, the borrowing cost has now been classified as current as opposed to noncurrent. But equally, as you would have seen 6 months ago during the April period of '25, we did upsize our revolver from $40 million to effectively $200 million, plus we've got an undrawn facility there of another $18 million. So all in all, we currently sit around $700 million of liquidity. So to the extent that we will be looking at a potential redemption event, we are well capitalized and have a well amount of liquidity to deal with that eventuality. Lastly, on capital efficiency, the key thing there is that it has grown materially from where we were at this time last year as our earnings grow organically through the generation of cash and earnings, it has now grown to almost 22%. And when I look back over the previous slide, it is now sitting in record territory, ROIC. And that will only continue to expand as we organic grow our business into the financial year. Then I'll turn to the next slide, on Slide 15, which is talk about cash. As always, our cash comes from our profits. And then the other key element to consider here is obviously working capital. We are working capital positive in the first half, which is consistent with the trading over that summer shoulder period. You got to recall, when we look at our TTV numbers being record levels across that August, September period, we do collect that cash. And then there's an unwind of payables that typically occurs across October and November. So what you'll see consistent with past years is in the second half, we'll have negative working capital, and that will result in approximately a cash conversion number of about circa 100%. Looking down to the next items there from a financing dividend perspective. Obviously, we'll continue to invest in our business and the prospects around growth. So no dividend has been declared. Talked about cash conversion being approximately 100%. And in terms of capital management, we talked about this 6 months ago. We obviously completed the buyback in the second half, which did address 88% of the potential dilution that could come from the node. We upsized the revolver, and coupled with the cash from operations, we are well equipped from a liquidity perspective to deal with whether it's commercial or redemption come April of '26. But come May of '26, we'll be a bit more explicit around how we think about capital management going forward once that event is behind us. And lastly, on the last slide being CapEx. No surprise there. We did churn spend half-on-half as a result of the point-of-sale solution being accelerated this time last year, which is why we ended up being smaller in spend this half. Going forward, we do see CapEx to be effectively like-for-like in terms of underlying functional currency versus '26 versus '25. And then from an outlook perspective, we do see that it will grow in line with inflation. So on that note, I'll hand over to John. John Guscic: Thank you, Tony. For those who have seen the ASX announcement this morning, you'll note that Tony has resigned from our business. It's bittersweet to make that announcement. We have sat across the table from each other for 15 of these half year results and full year results update. We will, in turn, spend plenty of time celebrating everything that Tony has done with us during the next 6 months. Tony will still be with us at the full year results, and we'll give him a proper sendoff there. And in between times, he will get his regular torture from me. So thank you for everything you've done for us, Tony. Tony Ristevski: Looking forward to it. John Guscic: So let's go on Slide 18 reconfirming the financial outlook statements. As you'll see on the left-hand side, in relation to WebBeds in functional currency, we made the following promises at the AGM in August that our TTV margin would be at least 6.5%. We are on track. Expenses to grow in high single digits. We are on track. EBITDA margin is expected to be between 44% and 47%. We delivered that in the first half, and we are on track. CapEx to be in line with FY '25, as Tony just covered, on track. If we get to the mothership at Web Travel Group, corporate cost is $24 million. We're consistent with what we said in August, D&A at $31 million. That's consistent with what we said in August. Net financing costs are at $15 million, that's circa $1 million lower than what we said in August, underlying effective tax rate, 17%, full year cash conversion, 100%. So everything we said in August, we have ticked and bashed. So now I spoke earlier about the impact of the euro to USD headwinds and the AUD to euro tailwinds. As we roll forward another 6 months, we expect that to be less pronounced based on existing exchange rates. And therefore, the results in FY -- in the second half of FY '26 will be less impacted by currency fluctuations based on what has happened today. I make no forward-looking statement about what might happen with those exchange rates. Moving on to FY '26 trading update and guidance. So second half TTV up until the 21st of November, we are up 23% versus the same time this last year. So strong growth in the second half, remarkably consistent with the growth in the first half. First half was skewed to first quarter outperforming second quarter being a little bit below that number. And now we're seeing a nice rebound into the third quarter, and we expect that to continue for the full year. Our EBITDA guidance is between $147 million to $155 million. That is an increase of circa the bottom range, 22% to the top 29%, which means basically that we are delivering significantly superior EBITDA in the second half because we delivered 17% in the first half. So to get to 22% means the second half at a minimum is going to be high 20s, 27-odd, and it could be as high as mid-30s in second half performance, which goes to the conviction and the confidence of all the things I spoke about of why the business has delivered against the promise of superior TTV growth and stabilized take rate, delivering increased and superior EBITDA, notwithstanding the continued investment that we make in our business. If we move to the final slide, and we start to think of what's next year going to look like. We continue to build out our marketplace. Our marketplace continues to be more relevant for all of our major players and all of our major partners. So we see no reason that we won't be able to deliver on our TTV growth rates that enable us to get to 30 -- sorry, $10 billion by FY '30. This time last year, I said that we just delivered circa 6.5% TTV margin we would for the next 12 months. I mean in the same position today, we will deliver it for the back half of this year. We'll deliver that number again in FY '27. I've spoken a couple of times about this, but I just want to make the point that the investment that we've made this year is in our OpEx this year around contracting staff, we believe will make a meaningful impact to our results in FY '27. And WebBeds remains a highly scalable business, and we expect to deliver circa 50% EBITDA margins in FY '27. So information, Web will provide for you and will stand by your side. You'll need a good companion for this part of the ride. Leave behind your sorrows, let this day be the last. Tomorrow, there'll be sunshine and all this darkness past. Big Web roll through fields where sunlight streams. Meet me in the land of hope and dreams. With that, Harmony, we will take questions. Operator: Your first question comes from Sam Seow from Citi. Samuel Seow: Congrats on the results. Just if I could just quickly ask on that 10 basis points of improvement in the revenue margin. You called out that optimization initiatives driving the growth. Could you possibly present some color on that? Is it direct contracting? Is it something you've done in Europe there looks like? Or yes, just any color on that would be greatly appreciated? And then maybe a question for Tony. What kind of uptick do you expect purely from the accounting change in the second half? John Guscic: Thanks for the question, Sam. We have increased the proportion of directly contracted sales during the half. So that's contributed to it. We have increased pricing in some jurisdictions. And as you will have noted from previous conversations where we've been very explicit, the other 3 regions beyond Europe, operate at a lower margin. And notwithstanding that they've grown in aggregate faster, we've still been able to increase the margin because of those activities. So that sharpening of focus around who we're selling -- what we're selling to who is what's contributed to that outcome. Tony Ristevski: And on the second part there, Sam, that uptick in trading is effectively offsetting less than pronounced delta half-on-half around the accounting change. I would describe probably 6 to 12 months ago. The underlying business performance is actually improving as a result. What we're seeing is less what I would call, variability half-on-half around that retrospective approach to the error rates that I would describe 12 months ago, landing on a margin for the year at least 6.5%. Samuel Seow: Got it. Got it. And just quickly, I noticed when you break down your TTV, your underlying market growth there at 5%, normally, that's pretty standard. But just of interest to me, obviously, particularly in the first half of your year, the market appeared to be quite volatile. So just kind of wondering how you put that 5% together? Is that your market specifically? Is it just more domestic focused? Because obviously, inbound in the U.S. was quite soft and some of your peers talking about channel changes, et cetera, and percentage of last minute bookings. But yes, just kind of that color on the 5%, it seems quite robust. John Guscic: Your question is very relevant, and it's one of the things that we've tried over the course of the last 4 to 5 years to talk about our geographic spread. We talk about our channel mix and in that portfolio of businesses, you have winners and losers. And even with the market up 5%, I'll be hazarding a guess that 15% of our customers went backwards. 10% of our geographies went backwards. You've called out the one that everyone can call out, which is inbound to America is down circa 15%. Americans going to Canada or Canadians go to America is down, I don't know, 20-odd percent. So all those things play out. I tend not to get overly focused on the individual travel corridors. I have lots of people in our organization who spend an infinite amount of time looking at these travel corridors. But when we roll them all up to a business that's up at $6 billion, there are winners and losers, and we end up with more winners than losers and that's why we continue to outperform the market. The second thing I'll touch on, which you, again, I think, was implicit in your question, and I didn't call it out, even though I spoke about it, even though it was written down in the deck somewhere that the macro events do impact us, but they impact us for a very short period because unless you're into a global issue, the markets are growing at, say, the underlying GDP growth is 2%, for example, and it goes to 1.5%, it has an outsized influence on businesses that are directly correlated to the underlying growth rate of their individual market. We're not in that state. So I called out in August that for the 2-week period, when Israel bombed Iran, all markets went backwards, and we still delivered 22% TTV growth and 18% bookings growth. At a transactional level, all of that, we had massive cancellations during that period that exceeded creative bookings, and we still delivered 18% bookings over the half. We had a phenomenal first 7 weeks, which we called out, that was significantly impacted, and we've recovered nicely into the second half of FY '26. So giving you more color is not going to help you is the short answer. It's in the aggregate. Does our business continue to grow faster than market? Checked. Where is it coming from? We've given you all of the regions. Within each of those regions, there's still winners and losers. There's still customers that win and lose. There's still geographies that win and lose. That's just the nature of having a global business in which we sell in more than 100 countries, and we sell to thousands of endpoints, and we sell thousands of destinations. Samuel Seow: That is actually very helpful. Just to kind of get an understanding of that diversification, but I might just jump back in line and appreciate some of your commentary. Operator: Your next question comes from Tim Plumbe from UBS. Tim Plumbe: Just 2 questions from me, if possible, please. John, just the first one around the directly contracted hotel strategy. Can you give us a sense in terms of how far progressed you are with the hiring? Do you still need to put on incremental heads? And in terms of getting full momentum of contracted hotels, where are we currently? And when would you expect to see full momentum? Is that kind of first half of '27 or second half of '26? John Guscic: Thanks, Tim. Look, we have -- depending on how you count it, we have circa 1/4 of our employees involved somehow in getting inventory onto the system through contracts or through negotiating contracts or through loading contracts through the myriad of solutions that we provide all of our partners to get those contracts for sale at any point in time. What I've called out in the -- at the end of last year's financial results is, well, I'll call it out here, we are well over 60% directly contracted in all regions except the Americas. And what we are doing is addressing that specifically in the Americas. So in aggregate, we're over 50% directly contracted but we're under 50% in the Americas, and we want to lift the Americas closer to what we're doing in the other 3 regions. There are some unique elements of that, which suggests that if we got to 50%, that would be an optimal structure for us. I don't think it will get to the circa 2/3 that we do in some of the other regions. For the large domestic market that we're servicing in America and the broad geographic spread of that, it just becomes inefficient to have more contractors. So our focus beyond our existing circa 500 people is adding contracting in America, and we expect that to -- it will start to improve our overall margins and our -- the surface ability of that inventory in FY '27. Tim Plumbe: Great. And then just the second question was a bit of a follow-on from Sam and for Tony. So just thinking about that seasonal skew, you mentioned less pronounced than before, like if you back solve the guidance that you guys put out previously, it kind of implied a 20 to 60 basis point half-on-half seasonal tailwind in the second half. Are you saying that there will still be a seasonal tailwind but less pronounced than previously expected? Or there is no seasonal tailwind? John Guscic: Correct. Tony Ristevski: Less than pronounced than, Tim. So as I said, you can do the math to back off the 6.5% is less pronounced than what we anticipated because of the portfolio growth in the business and the way it has. Operator: Your next question comes from Ben Gilbert from Jarden. Ben Gilbert: Just the first one for me. Just in terms of sort of the 3 pillars of growth as you look forward, it's been pretty consistent in terms of the composition. Do you envisage the composition changing much moving forward? I'm just interested in the comment around the change strategy that you talked over next 2 to 3 years. Is that more an opportunity around conversion? Or is that going to provide new supply in markets around the world? John Guscic: Supply will -- look, customers, we're slowing down in the rate of new substantial customers that can be added. That is slowing down, but supply is actually increasing. Not only for the direct customer conversation we had with regard to the incremental investment that we are making, but in particular to some of the larger chain hotels in getting greater access to the various rate plans that those hotels have on offer. So it's not unusual for a hotel to have 20 rate plans depending on your geography, the channel, the period, the season, et cetera. So we're getting -- as we become more relevant and more deeply entrenched as a reliable supply partner with those partners, we're getting access to more rate plans. So we see supply continuing to grow, customers are at a more moderate level. And the consequence of that will be that our conversion rate will continue to grow. And if I was to take a prediction 3 to 4 years out, the conversion factor would still be at least 3x the underlying new customer new supply mix because we are getting -- the data analytics in our business now has is remarkable compared to where we were 2 to 3 years ago. The sophistication of our conversations with our distribution partners and our supplier partners is predicated on that data. So we're not just saying, give us a deal, we're good guys. We're saying this is what we can do for you. This is how we will do it, and this is the benefit that you'll get. So that's why the conversion number ultimately continue to outperform the other 2 metrics. Ben Gilbert: So this is a lot of that work you did around the consolidation of the tech stack, right, when you sort of put the hotels, the DOTW in. So you're giving your customers also client or your supply partners confidence around your pricing deck, which is what's then allowing you to get the exclusives, little bit of that moat, if you like, so that you can then sell on to your customers. Is that fair? John Guscic: Correct. Ben Gilbert: Yes. So in terms of the competitive pressure you're seeing out there, it doesn't seem like there's any escalation in the competitive threat out there's. There's chatter previously that some of the bigger global OTAs might be trying to push into your space, but it doesn't really seem like there's much evidence of them having any impact at all based on the strength of those numbers. Is that fair? John Guscic: The simplest -- the way I can put your mind at rest, Ben, is that our sales to the largest global OTAs is greater than our underlying bookings growth of 18%. Operator: Your next question comes from Andrew Hodge from Canaccord Genuity. Andrew Hodge: Just a question sort of extending on that idea around the contracted increase, if you like, with the business development that you're putting in. When you think about the impact to the business, does it have a greater impact on your revenue margin or on your TTV growth? John Guscic: Thank you for the question, Andrew. I'll take a step back and see, just doing -- let's just do simple math. This is a hypothetical example. So last year, we're doing -- and I'll say, completely hypothetical, so don't take it literally. Last year, we did $5 billion of TTV. Let's say we did 50% directly contracted at that $5 billion. So we go back to our hotel partners and say we're selling you at a rate of $2.5 billion, and we're selling now from other people at $2.5 billion. And then I go to this year, and we're run rate of $6 billion. So we're selling, let's say, 60%, and again it's hypothetical. I'm not suggesting the delta is that great. Just the math works easier in my mind, and we deliver $3.6 billion of directly contracted hotels and only $2.4 billion of third party. So our $2.5 billion has gone to $3.6 billion. Our hotel partners see that. Then they're going, s***, these guys are delivering. And then our guys going, of course, we are. We always told you we would. It's only the investment analysts who didn't believe that we would deliver. But the rest of us, we believe we would deliver. So how do we fix -- how do we continue to show that we are a great partner, and we can get you sales from around the world. And then, as I said, go back to the previous question, what's the data analytic tools that we have that we arm our guys with, it gives them insights in where they're performing against their peers, where they're not performing against their peers, where their price is too high, where their price is too low. We're having that conversation. When you have that conversation, getting access to inventory, is a hell of a lot easier because, one, you're demonstrably better than you were a year ago. Two, you're giving them insights that they don't have. At the end of the day, a hotelier has an OTA as a booking engine to compare themselves but doesn't have the demand pattern that we do. So we can show them. Yes, this is what your price. You're $10 more expensive here, but it's costing you 10 basis points of occupancy or you're $10 cheaper, you can go up and still get the same occupancy that you're getting, et cetera. These are the conversations that we have, which are very different to the conversations we had when we just went in there and said, we promised to do good by you by selling your stuff. Andrew Hodge: And then just a clarification on the second half '26 trading update. I just want to make sure that, that's your report, that the numbers that you provided there are in your reporting currency rather than the functional currency? John Guscic: Correct. Aussie dollars. Operator: Your next question comes from Wei-Weng Chen from RBC Capital Markets. Wei-Weng Chen: So I appreciate your comments before about the consumer AI tools and I guess, downplaying the threat. But is there an opportunity for you guys to go maybe for a lack of better term, B2B2C kind of via partnering with these AI companies like Google and supplying them with inventory? John Guscic: I'll answer it that over the course of the last 2 years, in particular, as we're seeing this coming down the pipe, we have had many, many conversations about how we will take advantage of this and how we will -- how we think we can mitigate the risk to our business. So we have no confirmed plans about B2B2C, but it's certainly something that we focus on internally of how do we maximize the growth rate of our business and having a business like that potentially gets you there. I'm not saying we're going to do it, but it's one of the ones -- and there are a myriad of others, Wei-Weng, that we're also considering, but there are other opportunities as well that are in our consideration set as well. Wei-Weng Chen: Yes. Okay. And then I guess, speaking about opportunities. I mean your name is Web Travel Group, but in terms of operating businesses, you're still a group of one. So I guess what's the thinking in terms of building out more operating pillars? What are some of the organic opportunities you're looking into and maybe some of the inorganic options that might be available? John Guscic: I just came from a Board meeting yesterday where we perhaps made a more derisory comment about Web Travel Group versus WebBeds as the naming convention. We're still ambitious to be a travel group. We spend a little bit of time in the presentation talking about liquidity, and we spent a little bit of time talking about the fragmented nature of the industry. All of those things remain relevant to our thinking about what we do on an inorganic side. And on the organic side, you touched on it with your question. Are there other adjacencies to what we do, white labels, B2B2C, et cetera, how do they fit into the strategy? They're all things that we are currently contemplating. Wei-Weng Chen: Yes. Cool. And then just last question for me. I guess noting the comments about the business being increasingly Northern Hemisphere based and the challenges of managing out of Australia. Do you have a preference for where your next CEO -- CFO, sorry, is going to be based, balancing, I guess, management considerations with the fact that you've got a predominantly Australian investor base? John Guscic: The new CFO will be based in Australia. Operator: Your next question is from Abraham Akra from Shaw and Partners. Abraham Akra: Two questions from me. I suppose some of the concerns related to Google's agentic AI push into travel is increase in direct bookings to hotels and away from some of your customers like OTAs. What do you think about this assessment? John Guscic: It's a little bit muted. If the question was, are they going to be using OTAs more or less than currently? Abraham Akra: Using OTAs less given Google is going to partner with some of the hotel chains and hotel partners. John Guscic: Well, yes, that will be dilutive to everybody if they do that, clearly, but that would be an outcome that would be suboptimal to getting the overall results because the whole thing about what they're trying to do is they are the most sophisticated meta search in the world and the most sophisticated booking engine -- I'm sorry, the most anticipated results delivered agent in the world focused around your needs, you're not going to be just getting -- serving up chain hotels, you're going to be serving up everything. And if it is chains that they go through and chains bypass OTAs, yes, that will be a potential downside risk. I would hazard to guess that if we looked at what our performance would be in circa 3 years after this has launched, and let's pretend there's been a 10% dislocation to this market, 20%, pick a number, doesn't really matter. It's all conjecture at this point. Pick a number, 20% improvement -- sorry, this channel becomes 20% of the overall market, it will be a net contributor to Web Travel Group's business. Abraham Akra: Understood. John Guscic: Let me give you just one bit of color just so to put your minds at rest about why this is -- this is a threat, don't get me wrong, but it needs to be put into the context of what the threat actually is. So go to a market like Italy, massive destination for many people as an inbound market. I don't have the number off the top of my head, but I think it's circa 80 million or 90 million tourists go to Italy a year. And in Italy, they have 94% independent hotels. So as we have said previously, when we set this business up more than 10 years ago, we said we would be the distribution arm for independent hotels. That would be one of the strengths of our business, still remains one of the strengths, notwithstanding chain hotels. Chain hotels are massively important. They're our biggest supply partner and increasingly a bigger supply partner. And I don't have the time on this call to explain it to you, but if you go through the travel ecosystem and the legacy technology that sits within that travel ecosystem, you will know that there is nobody who ever can do everything for all people, whether you're an agentic AI or not. Just from a fundamental element of having a PMS, they are so old and clunky and putting booking engines on them has improved their direct conversion, but they still have significantly more supply from third-party distribution as a hotel chain than they do from direct. That's after 20 years of trying. So that's inevitable. Abraham Akra: Very helpful. And I suppose your comment earlier around the average booking window compression by 5%. Is that a function of your booking mix or customer booking trends? John Guscic: It's impossible for me to answer that with any certainty. All I can tell you is what's happened. It's a little bit like someone -- usually on one of these calls, some will say, who are you winning share from? How do I know? I just know we are. So I just know it is. I'm not sure why it's happening. It might be geographic mix, it might be the fact that -- but it's happening in 3 regions out of 4. So that's just unusual. That's all I'd point out. Just been a lot of last -- shorter booking window, last-minute bookings are less, the length of stays, moderately down, et cetera. Abraham Akra: Got it. And last one for me -- just a quick one. John Guscic: You've outplayed your hands. You have to cover the questions, Wei-Weng. Tony Ristevski: No, it's Abe. John Guscic: Apologies, Abe. I'm apologizing you. I apologize to Wei-Weng. Abraham Akra: He's a good analyst. And lastly, the 23% year-on-year TTV growth year-to-date in the second half. Do you mind providing a regional breakdown? John Guscic: We've given you in the first half. All 4 regions are up. They're not massively different to where they were so that's where we're at. Operator: Your next question comes from Mitch Sonogan from Macquarie. Mitchell Sonogan: Just a quick one on the EBITDA margin target in '27, guiding to around that 50% range. I guess can you maybe just talk to the key swing factors on how you're balancing that, just noting, obviously, given the 44% to 47% range for FY '26. So yes, just trying to understand the specific target around 50% and how you're thinking about it? John Guscic: Yes. We're seeing revenue growth faster than EBITDA -- sorry, expenses, and it doesn't require a big tick to go from somewhere between 44% and 47% to get to 50%. So it's not a stretch target in that sense. If we keep the revenue margin consistent and added the expected TTV increase, and we still had low single-digit expenses, it gets us there. So they're the sort of guardrails for you to think about. Mitchell Sonogan: Yes. And just noting you talked to potential impacts from macro events that have occurred over the last 6 to 12 months. Can you maybe just talk to what percentage of bookings in the different regions are domestic versus international, whether you can give that by the major regions? Because obviously, lots of people have looked at softer Australia into U.S. international travel, but the U.S. is a pretty domestic market. So yes, just keen to understand if you can give us some color on how we should think about that looking at future events that may come our way. John Guscic: There's always a sense of amusement when I see some travel-related data being announced publicly and all the travel stocks fall in unison in relation to it, in particular, in our case, less than 2% of our TTV is Australia. So in the game earlier of swings and roundabouts, if the entire Australian market was eliminated for some reason, we would have grown at 20% instead of 22%. So as I said, just -- I chuckle when I see investor response to news that's not relevant to what's happening to us as a global business. So to go to it, I'll just explain it as I have historically. Our biggest domestic market is clearly the U.S. And in most of our other markets, the domestic component is substantially less than half and what our sweet spot is, is interregional travel, Asians going to Asia, Americans going to America, Europeans going to Europe, Middle East going to the Middle East. That's where the vast majority of what we tap into which is, as you would expect, it's more frequent travel. It's short-haul travel. It's not your once-a-year Aussie going to Europe or going to New York and doing that. That's part of -- obviously part of our business, but it's not the main part of our business because that's -- you're once in a multi-generation trip. Our efforts on people going for 3 nights from Italy to Switzerland as going 6 nights from Paris to Majorca. There's a myriad of combinations. And literally, we have a dashboard that goes through them, and we look at the ups and the downs. But in the end, overall, the vast majority of our business is what we consider short-haul international travel, less than 6 hours. Most of it's around 3 hours flight time and you see what our average booking value is. All right. Have we lost everyone? Operator: Your next question comes from Patrick Cockerill from Ord Minnett. Patrick Cockerill: On behalf of John O'Shea. Just 2 very quickly from me. Firstly, on the revenue margin, noting that 6.5% now seems to be going longer than the initial 18 months or 3 reporting periods. Can you just give us a little bit of color around the factors at play there that has made that continue into your expectations for FY '27? John Guscic: I won't go through all the things I've said previously, Patrick, other than we have seen and will continue to see a noticeable shift towards directly contracted hotels operating at higher margins. And we continue to focus on geographic expansion, but it's sort of offset by some of the channel expansion, which gives us greater confidence in our ability to maintain that beyond -- into the next 3 reporting periods. So that's the major reason, and I've covered off that a few times already. So that's the key driver, Patrick. Patrick Cockerill: And then very quickly, just on your EBITDA guidance and the more pronounced 1H skew. Is this something we should expect going forward? John Guscic: More pronounced in what sense? The EBITDA number or the gross number? Patrick Cockerill: Skewed to 1H? John Guscic: But what's skewed? Sorry, I don't understand. Tony Ristevski: Look, I think, Patrick, we've always had a skew to first half. If you look at our reporting over the last so many years, that's why we changed our year-end from 30 June to 31 March to capture in the first half ending September, the contribution of the higher TTV that we get from Europe, which continues to be the trend in this reporting period. Operator: Your next question comes from Brian Han from Morningstar. Brian Han: John, in terms of future proofing the business to sustain growth, is it possible for cost growth to stay elevated in that high single-digit regions for the next couple of years? John Guscic: I wouldn't say that would be elevated if we're growing revenue at a multiple of it. So our focus -- whilst our public commentary is around things that investors can latch on to $10 billion TTV, 6.5% take rate, 50% EBITDA margin, our internal focus is on growing revenues at a rate faster than expenses with the exception of the markets in which we invest, and we've called it out in the presentation and in the Q&A about our investment in North American contracting. But if you strip that out and strip out the things that we are doing to maintain our overall competitiveness, our underlying growth rate is -- our expense growth rate is barely above CPI. Brian Han: Yes. I wasn't suggesting that that's actually a bad thing to grow your costs if it means, as you say, future-proofing the business to sustain the current growth rate? John Guscic: Yes. Look, look, the journey is an incredible journey that WebBeds as a business has been on, and you just need to go to slide -- we'll call it up, Slide 9 to see that. So over that journey, we've done things to enable us to continue to grow at the rate that we have. So whether it's building out specific tech for an individual region, building out analytics tools to support our sales initiative, building out efficiency tools to get better imaging, get better rates into the system faster, et cetera. We will continue to do that. We're not playing this game so that we can eke out system growth and defend our share. We are a disruptor in the overall industry and our growth rate reflects that. We have a clear vision about the value we add and how we can accentuate the difference between our competitors, and we've clearly demonstrated that over the last 15 years or 13 years. And there's no reason to suggest that, that run rate expires over the course of the next 2 to 3 years. There are lots of things for us to do, and we know what they are. Brian Han: It can't be clearer than $10 billion. Operator: Thank you. There are no further questions at this time. I'll now hand back to Mr. Guscic for closing remarks. John Guscic: Thank you, Harmony, and thank you to everyone who asked the questions. I'll just summarize that to all of our employees who have delivered this result, I'd like to give them a heartfelt thank you for their contribution to everything that we've been able to do in this year. We continue to have a highly engaged workforce, and none of this would be possible without them. So I'm delighted that they continue to provide the bulwark of what we need to enable us to continue to be the market leaders. And with that, I'll say, as I've said in the forward-looking statements, we've had a really strong first half. We will have an even stronger second half. With that, thank you very much. Operator: That does conclude our conference for today. Thank you for participating. You may now disconnect.
Operator: Welcome, everyone, to Accsys Technologies plc Interim Results Presentation for the 6 months ended September 30, 2025. Today's speakers are Dr. Jelena Arsic van Os, Chief Executive Officer of Accsys Technologies; and Sameet Vohra, the company's Chief Financial Officer. Jelena and Sam will take you through an overview of the business and financial performance for the year before we open the floor to questions. Please note that we will prioritizing questions from analysts. [Operator Instructions] With this, I would like to pass over to our speakers. Jelena Arsic Os: Good morning, everybody, and welcome to Accsys' interim results presentation for the 6 months ended September 30, 2025. I am very pleased to report that we have delivered an excellent first half with a significant improvement in profitability. Our growth across all regions is beating the underlying market trends, showing our FOCUS strategy is effective and that the company is delivering on its promises. Accoya has seen strong growth across its sales regions with a 22% increase in total sales volumes, gaining market share from competitive and alternative materials. Our premium market positioning is proving resilient against continuing macroeconomic challenges. Group revenues increased by 23% on a like-for-like basis compared to the prior year. This comparison adjusts for the transfer of North American sales from the group to Accoya USA, our joint venture with Eastman Chemicals after it commenced operations toward the end of H1 last year. Accoya USA has had an excellent H1 performance. It has shown rapid volume growth with North American sales up 61% and positive momentum throughout the period. This demonstrates the strength of our technology, the Accoya brand and our customer relationships in the sizable North American market. Joint venture reported close to breakeven EBITDA for H1. This translates to Accsys joint venture equity accounted a modest EBITDA loss of EUR 0.3 million. This marks substantial progress compared to the equity accounted losses of EUR 4.3 million last year, and we are all excited about what's to come. Accsys maintained gross margin above our target of 30%, maintaining pricing discipline. We also continue to maintain cost discipline and have retained EUR 2.3 million in benefits from the business transformation program that we began in FY '24. We increased adjusted EBITDA for the half year by 160% to EUR 10.4 million. This is just slightly lower than the EUR 10.8 million we reported for the full financial year 2025. With our EBITDA margin at 11.6%, Accsys is almost at the level of our Phase 1 FOCUS strategy target. Crucially, we have made solid progress on deleveraging the balance sheet, a key strategic priority. Net debt has decreased by EUR 2.8 million since 31st March 2025, driven by improved operating cash flow, and we have improved our leverage ratio from 2.5x to 2.1x at September 30, 2025. During the period, we achieved operating cash flow of EUR 8 million. In October 2025, outside of this reporting period, we successfully negotiated new improved terms for financing our debt with ABN AMRO and HSBC. This refinancing strengthens our capital structure and further derisks our profile, positioning us to execute our strategy with greater confidence. Our good performance is a clear signal of our continuous progress. Accsys is delivering on its commitments and is laying a solid foundation for further growth. I want to take this opportunity to sincerely thank the entire team across Accsys and Accoya USA as well as our customers and partners. Thank you for your dedication. Your efforts continue to drive our success and position us very well for the future. We are progressing our FOCUS strategy, transforming Accsys into a fundamentally strong operationally efficient, customer-centric united, safe and sustainable business. Together, these efforts are creating a strong and lasting platform for growth. Compared to the first half last year, we have significantly derisked the company, having no exposure to large unfinished CapEx projects and significantly improved financial performance. The company now operates 3 production sites, Arnhem, Barry and the Accoya USA and has secured future growth funding on improved terms with the extended maturity to October 2029. We are operationally more efficient with like-for-like gross margin improvement of 1.1% compared to the prior period, driven by efficiency measures, amongst them, improved utilization of acetic anhydride in production. In addition, we have retained EUR 2.3 million of benefits from the business transformation program. As a growth company, we nevertheless continue to invest in volume expansion. We are investing in a new acetyl storage in Arnhem and have more than doubled our Accoya Color capacity in Barry from 6,000 to 14,000 cubic meters. Accsys aligns all its initiatives, investments and growth plans around maximizing customer value. With our fantastic products, we have customer centricity at our core and we continue expanding Accoya availability, adding 3 new distribution partners in the period, and Accoya projects continue winning awards, like a recent DNA Paris Design 2025 award for Casa Angra coastal home in Brazil. Accoya is gaining market share globally despite relatively soft overall market sentiment in the building material industry. An organization is only as strong as its talent. We are strengthening our workforce across sites through ongoing investments in revenue-generating commercial head count and strengthening our site teams. Last, but certainly not least, in the first half, we invested in health and safety and environment, improving working conditions in our Stacker hall in Arnhem. We also established our sustainability strategy, staying true to our purpose and values, and reaffirmed our commitment to building a better, more sustainable future. Accsys Cares sustainability plan introduced our first decarbonization commitments and targets, enhancing the already strong sustainability credentials of our products and our business. Before I hand over to Sam to discuss our financials, I wanted to share a short video of one of our projects highlights from this period, Accoya being used for the new roof and public space at a landmark NEMO Museum building in Amsterdam. [Presentation] Sameet Vohra: A truly remarkable project. Thank you, Jelena. Over the next few slides, I'm going to talk you through the financial results for the half year in more detail. This slide summarizes the strong financial performance for the first half of the financial year. I'll go into more detail on the financial performance in the next couple of slides by highlighting some of them now. Group sales volumes were up 1% to 30,575 cubic meters compared to the prior period. However, when you exclude the 3,802 cubic meters of sales made by the group to North America in the prior period before the Accoya USA joint venture commenced operations, the group sales volumes were up by 15%, with strong demand in all regions. Total sales volumes, which includes all of the sales volumes from the JV and more clearly shows global demand for Accoya increased by 22% to 38,618 cubic meters with 8,043 cubic meters coming from the JV. Group revenue increased by 5% to EUR 76.1 million for the first half of the year. However, like-for-like revenue, which adjusts for the group North America sales made in the prior periods increased by 23% year-on-year. Aggregated revenue, which includes 60% of the revenue of the JV was up 21% to EUR 89.9 million. Gross profit was EUR 1 million higher than the prior period at EUR 23.2 million, and the gross profit margin remains above our target level of 30%. Underlying EBITDA, which excludes the results of the joint venture increased by 29% to EUR 10.7 million compared to EUR 8.3 million in the prior period with a 260 basis point increase in the underlying EBITDA margin to 14.1%. This reflects a strong sales volume and revenue growth, maintaining a gross margin above 30% and the tight cost control discipline we have over operating costs. It was really pleasing to see that the Accoya USA JV was close to EBITDA breakeven for the first half of the year compared to a loss of EUR 4.3 million in the prior period. Sales are accelerating in North America, and we expect the joint venture to be EBITDA positive for the financial year. Adjusted EBITDA on a profitability performance measure was up by 160% to EUR 10.4 million, with an impressive 620 basis points increase in the margin to 11.6%, which is just below the target that we set for the end of Phase 1 of our strategy. The EUR 10.4 million adjusted EBITDA is also slightly lower than the EUR 10.8 million that we reported for the whole of the last financial year. Net debt at 30th of September 2025 stood at EUR 39.8 million, lower than the prior period and the figure at the end of March 2025. The leverage ratio improved to 2.1x. I'll discuss the changes in revenue, profitability and net debt in more detail in the coming slides. Going into more detail on our revenue performance for the year. As I previously mentioned, group revenue increased by 5% to EUR 76.1 million in the prior period, excluding the EUR 10.3 million of revenue from sales made to North America before the joint venture starts operations, like-for-like revenue growth was 23%. The sales growth we've seen in H1 across all regions has fully replaced the North America volumes transferred to the JV. Despite the challenging macroeconomic environment, we have maintained strong pricing discipline with a 1.7% increase in average Accoya sales price for the period. As Jelena previously mentioned, we doubled capacity in our Barry Color facility during the period due to increased demand for our color product. We saw a favorable product mix effect for this with the Accoya Color now making up a high proportion of group sales volumes through the prior period. Accoya Color also undertakes tolling for the JV and sales in the period increased by EUR 2.8 million from this. License fee and royalty income from the JV was EUR 1.6 million higher than the prior period as the group receives a royalty based on sales made by the JV. The final license fee payment was also received during the period, following successful completion of the performance test of the Kingsport plant, thereby granting exclusivity for the North American market to the joint venture. Other represents Tricoya panel sales and sales of acetic acid which are broadly in line with the prior period. Aggregated revenue, which includes 60% of the joint venture's revenue, increased by 21% to EUR 89.9 million. On a constant currency basis, aggregated revenue grew by 23%, given the weakness of U.S. dollar against the euro. On the face of it, the gross margin decreased by 20 basis points to 30.5% for the period. However, the prior period includes sales that were made to North America prior to the joint venture commencing operations. These sales amounted to 3,802 cubic meters, which represented 13% of group sales volume in the prior period. They contributed EUR 4 million of gross margin in the prior period and EUR 2.9 million of EBITDA as the average sales price in North America is higher than all other regions. Therefore, a more representative way to look at gross margin progression in the first half of this financial year is to exclude the EUR 4 million from the comparator, resulting in the like-for-like gross margin improving by EUR 5 million to EUR 23.2 million and 110 basis points to 30.5%. This EUR 4 million gross margin reduction has been offset by sales volume growth, favorable sales mix and higher average sales price from other regions, together with the receipt of royalties and license fees from the joint venture. Our main production costs related to raw material spend on raw wood and net acetyls. Raw wood costs are in line with the prior period as higher appearance grade raw wood costs have been offset by lower wood chip grade costs. We saw an improvement in gross margin arising on net acetyls from improved utilization of acetic anhydride in the production process, change in the supply mix and favorable FX as the U.S. dollar weakened against the euro. The increase in other costs reflects the investment in talent and headcount in operations to support sales growth, the effect of the annual salary increase and higher inventory handling costs. The gross margin at 30.5% continues to remain above our strategic level of 30%. This slide shows the adjusted EBITDA progression during the year, reflecting the strong financial performance. From an overall perspective, we saw a 160% increase in adjusted EBITDA from EUR 4 million to EUR 10.4 million and a 620 basis point increase in the adjusted EBITDA margin to 11.6%. This is already very close to the 12% target that we set for the end of Phase 1 of our FOCUS strategy, and it's very encouraging to see. The gross margin benefit to EBITDA amounted to EUR 1 million or EUR 5 million on a like-for-like basis, and we tightly controlled operating costs, which only increased by EUR 0.2 million compared to the prior period. EUR 2.3 million of the benefits from the business transformation program in FY '24 have been retained even after the investments we've made in sales and marketing and operational headcount and strengthening local management teams in key areas. There are no further costs associated with Hull after the business was placed into liquidation in December 2024. The joint venture is close to EBITDA breakeven for the period with our 60% share of the EBITDA loss amounting to only EUR 0.3 million as the Kingsport plant ramps up with accelerating North American sales growth. This is an improvement of EUR 4 million compared to the EUR 4.3 million loss recorded in the prior period. From a segmental perspective, EBITDA from our Accoya segment increased from EUR 10.7 million to EUR 12.7 million with healthy margin of 16.7%, up from 14.8% in the prior period. This growth is primarily due to the strong sales growth, the improvement in gross margin and tight cost control discipline on operating costs. Corporate costs amounted to EUR 2 million and were EUR 0.4 million lower than the prior period. Therefore, underlying EBITDA, excluding the joint venture increased by 28% from EUR 8.3 million to EUR 10.7 million. The margin improved by 260 basis points to 14.1%, reflecting the strong underlying profitability of the group. As I mentioned before, adjusted EBITDA increased by 160% from EUR 4 million to EUR 10.4 million. This slide shows the evolution of net debt during the year. Net debt at the end of September 2025 stood at EUR 39.8 million, a decrease of EUR 2.8 million compared to the start of the financial year. Debt reduction and deleveraging the balance sheet remains a key priority for us, and net leverage reduced from 2.5x to 2.1x at the end of September 2025. We experienced an increase in net working capital of EUR 4.2 million in the period, which is primarily related to higher inventory levels. This increase in inventory was planned to ensure product availability to support strong demand and customer service as well as building up inventory ahead of the annual maintenance stock, which took place in Arnhem in October. Accordingly, operating cash flow conversion was 75%, in line with our Phase 1 target. Tight working capital management remains a key area of focus for us. CapEx is EUR 2.9 million during the period, and this included expansionary growth CapEx on increasing our acetyl storage and making health safety and environmental improvements in the Stacker hall in Arnhem. Interest paid and accrued amounted to EUR 2.3 million, of which EUR 1.1 million related to accrued interest on the convertible loan notes. Tax received was EUR 0.7 million in respect to previous tax years. We recently completed the refinancing of our debt facility with a new EUR 55 million facility with ABN AMRO and HSBC on improved financial terms. The refinancing strengthens our capital structure, enhance its financial flexibility and further derisks our profile, positioning us to execute our FOCUS strategy and growth plans with greater confidence and resilience. The refinancing demonstrates continued strong support from ABN AMRO, and we are delighted to partner with HSBC, a bank of significant strength and reputation. So in summary, we've had an excellent first half of the year with a significant improvement in profitability. We saw strong total sales volume growth of 22%, with accelerating sales in North America, which increased by 61%. The joint venture was close to breakeven EBITDA in H1. Adjusted EBITDA was EUR 10.4 million, with a 11.6% margin, close to our Phase 1 target of 12%. We have continued to focus on deleveraging the balance sheet with net leverage decreasing to 2.1x and the recently completed refinancing strengthens our capital structure and enhances financial flexibility on improved terms. I'd like to now hand you back to Jelena, who will take you through the business review. Jelena Arsic Os: Thank you, Sam. In January 2025, we set out our FOCUS strategy, which will be delivered in 3 phases. The first phase to FY '27 focuses on resetting operationally, maximizing returns and cash flow from our existing operations and reinforcing the fundamentals, including reducing the debt and optimizing our capital structure. Our half year results demonstrate good progress against our Phase 1 targets. Our strong sales growth put us on a good trajectory to meet run rate target of 100,000 cubic meters by the end of FY '27. We have also significantly improved profitability moving from 5.4% in adjusted EBITDA margin from last year to 11.6%. We are very close to our adjusted EBITDA margin target of 12%. We are also in line with our operating cash flow conversion at 75%. Importantly, we are deleveraging and derisking the business, placing the company in a stronger position for growth. Our successful October refinancing gives us more favorable payment terms with a reduction in quarterly repayments going forward. Global demand for our products has been strong. We had outstanding growth in the U.S., which I will provide more details on in the coming slides. We saw very good growth in our key European markets despite continued macroeconomic uncertainty. The European market landscape reflects a mix of cautious recovery signals and ongoing challenges across key regions, shaped by economic pressures, regulatory changes, and involving demand in the construction and timber industries. Europe grew 22% in the reporting period. We saw growth in Germany, driven primarily by strong demand in the outdoor living market, high energy costs and slowing housing permits weigh on German outlook, but commercial and renovation segments remain more resilient. European growth was also supported by a good performance in Benelux where we had positive momentum in Belgium after onboarding a recent distributor. Government initiatives for energy-efficient building materials continues to favor sustainable timber products. We achieved 14% growth in the U.K. and Ireland, our most established market as we continue to build a strong reputation for joinery applications and gain more facade specifications. The softwood market in the U.K. remains weak with subdued import volumes and merchants limiting stock positions, pending market clarity with the U.K. budget approaching. The U.K. budget is being announced tomorrow with uncertainty of governmental measures to address the fiscal gap that is estimated between GBP 20 billion and GBP 50 billion. Across the rest of the world, we saw 28% growth with bright spots in Australia and New Zealand, as our partnerships with our distributors continue to develop and expand our presence. Accoya for Tricoya sales grew at a more moderate pace, with sales weighting towards the start of the period. Finally, we will be launching a new finished decking products in the second half with a phased market rollout. This will be the first time that we offer a finished product to the market and is an exciting new development for Accsys. We also continue to see Accoya specified for incredible projects worldwide. The start-up of Accoya USA last year was a significant milestone for Accsys. And I am very proud to share that it has got off to an excellent start. In North America, the joint venture grew sales volumes by an impressive 61% with sales acceleration across the period, driven predominantly by our existing distributors, many of whom we have a long-standing relationship with. The local availability and production provide them with the confidence to run faster. While a 10% tariff was announced in October on imported lumber, we have taken proactive steps to manage the impact of this going forward. So let's look at the more detail at the U.S. market developments. Our sales in the U.S. are outpacing overall market growth, allowing us to gain share from competitors. With forecast indicating strong and sustained demand for modified wood over alternative materials, we are confident that Accoya USA will continue to expand its presence in the growing market. Our main drivers in the U.S. are cladding and decking. These markets both have strong growth rates for modified wood with double-digit growth forecast for decking. Traditional timber products are seeing sharp declines in demand as customers opt for higher performance modified and engineered solutions. Furthermore, increased regulation on the import of hardwoods ipê and cumaru from Brazil has had a positive benefit for Accoya in the U.S.A., and it has limited the supply of these woods. As you can see in the table, the hardwood market for decking is expected to contract. Our growth in the U.S. predominantly came from our existing distributors. In addition, we have added 3 new distributors in the period, including one of the largest in the U.S. hardwood specialty products, GMX Group, a wholesale distributor with a focus on retail customer, and our first Mexican direct distributor, Klinai and expect to see these new channels contribute strongly in H2. We continue to strengthen our relationship, both with the direct distributors and our approved manufacturing partners. Our products are extremely well regarded in the marketplace, that this testimonial from Delta Millworks featuring the owner and CEO, Robbie Davis, and Baker Donnelly, regional sales manager, one of our long-standing Accoya manufacturing customers testifies. [Presentation] Jelena Arsic Os: This fantastic Delta video highlights value that resonates strongly with us: quality, performance and the long-term reliability. These principles are at the core of how we strive to build and maintain our customer relationship, and they are something I'm incredibly proud of. A big part of our FOCUS strategy is to maximize returns from our existing assets, driving sustainable profitable growth from our core sites in Arnhem and Barry. During this period, we have invested EUR 2.5 million in Arnhem to expand our acetyl storage capacity. From December 2025 onwards, we will gain improved logistical flexibility and increased uptime, enabling us to complete more batches per month. Furthermore, our logistical costs will reduce as we can now unload more acetyls during the week rather than in the weekend. On top of that, we are less vulnerable to interruptions in the chemical supply chain. In Barry, in response to strong demand for Accoya Color globally, we have taken steps to double our capacity. This includes introducing the second shift, expanding our own storage capacity and outsourcing some external drying. This builds on the planning facilities we added last December to be able to produce finished decking boards. We expect Accoya Color and finished decking boards to continue to be important demand drivers. Growth for this product range, including volumes sold out to the joint venture showed an increase of 56% year-on-year. We are very proud today to launch Accsys Cares, our first sustainability plan, which aims to deliver long-term value from all of our stakeholders. The plan highlights our commitments across 4 key pillars: people, planet, profit and governance. It introduces our first decarbonization commitments and targets, further enhancing the already strong sustainability credentials of our products and our business. Finally, wrapping up today's messaging, we have delivered a strong H1 and we entered the second half of the year from a position of strength. Our trading remains robust going into H2, supported by sustained global demand for our premium differentiated products. We expect continued sales acceleration in North America, and notwithstanding the impact of the recently announced tariffs, we expect the joint venture to be EBITDA positive for the financial year. While noting continuous macroeconomic challenges, the Board is confident the company will continue to deliver further growth and profitability improvements for the year ahead, consistent with expectations and to make further progress towards our strategic targets. Looking ahead, we remain confident in the long-term potential of our technology and strategy. We have a clear road map, market-leading products in attractive growth markets and a fully funded manufacturing base that position us to deliver significant shareholder value. I continue to be very excited by the prospects for our business. We are transforming we are delivering, and we are growing. Thank you all for your attention. With this, I will hand over to our operator now for the Q&A session. Operator: [Operator Instructions] We will now take the first question from the line of Martijn den Drijver from ABN AMRO. Martijn den Drijver: I have 4 questions, and I'll take them one by one, if I may. To start off on the U.S., just to give us a bit of a sense on where the existing -- so not the 3 new ones that you mentioned, but the existing distributors, can you give some color on where they stand in terms of ordering levels versus assumed potential? Just give us a sense of what -- with the existing distributors, what type of growth lays ahead? Jelena Arsic Os: Well, Martijn, our existing distributors are already active in the U.S. for a very long time. And as we know, the Accoya sales are pretty technical sales. You need to pursue the market that you do have, by far, the best product in terms of performance, stability and the long-term durability. We are seeing in this period significant growth. Most of the U.S. growth that you are seeing in this result is actually coming from our existing distribution partners. They are today placed on the East Coast of the U.S., West Coast and in Texas. We are working on increasing our presence in the Texas area because there, we do have big OEMs like Delta Millworks that you just saw the video about, they are located in Texas. But we do believe that, that area could provide us some more opportunity to grow. So new distributors that we put in place in this half of the year, they are all starting to take the inventories and to push the market predominantly gaining the market share and not fighting for the same business that our existing distributors are already having. So there is a lot of efforts from our side going into education, specification selling and helping the new distributors predominantly to actually focus on the new business generated and creating the Accoya pie to be bigger in this very sizable and profitable North American market. Martijn den Drijver: Just 1 follow-up, Jelena. The total distributors now, how much do you think you need more in terms of distributors to have a full national coverage, perhaps both in the U.S. and in Mexico? Jelena Arsic Os: I think in Mexico, this Klinai is quite a large player. So I believe we are going to give them an opportunity to deliver what we think that they can deliver. In the U.S., we do believe that today, we have a quite good mix of large regional players, and they have also quite a good network of secondary distributors that are working with them. So we do not expect that we will be adding a large amount of new distributors in the U.S. We would like the distributors that we already now appointed to actually prove that they can deliver on the expectations. And so we have a quite defined KPIs in place that we follow very, very clearly. So for the next half of the year, we are going to give the existing and the new ones chance to fully deliver. Martijn den Drijver: Got it. Got it. Then the second question on the U.S. for Sam. The breakeven has been achieved faster than expected. You're now guiding for profitable EBITDA levels for the full year. Does this have an impact on the planned/forecast equity injections from the group into the JV? I seem to remember that where guidance was still for EUR 4 million in fiscal 2026. Does that still stand? Or should we assume a different amount now? Sameet Vohra: Yes. Thanks, Martijn. Good question. So yes, I mean, as you saw the JV was very close to breakeven for the first half of the year, and we do fully expect it to be profitable for the full year. Our initial expectations were and in terms of what your modeling has in terms of capital injections going into the JV, that's all to do with growth. We -- the business needs wood and it effectively needs a high level of working capital to meet that significant level of growth that we're seeing, not just for this financial year, but also coming financial year because really, our strategy is about filling up that plant, and having it operating at full capacity within the 5 years of our strategy, so by the end of Phase 2. So any additional capital injections that we may need to put into the business will be all to do with providing it with additional working capital to fund growth. Martijn den Drijver: So it might actually end up a little bit higher than the initial guidance. Sameet Vohra: No, I don't think it will be any more than EUR 4 million that you've already got factored in. Martijn den Drijver: All right. Then moving on to Europe. I was just wondering, you mentioned good developments in the Benelux, Germany, already very strong in U.K. and Ireland. But you mentioned plans to support France. Can you elaborate a little bit on your plans in France? And perhaps on Germany, what type of -- where does Germany stand relative to prior sales levels? Are they approaching it? Or are they still far away from it? Jelena Arsic Os: Well, we saw -- as I told you, the levels in Germany are increasing. Of course, if you look from the period of a couple of years ago, we still have a space to develop. But if you look at the previous year, we do have quite a significant growth, and this is coming predominantly from the demand coming from outdoor living markets and with the outdoor living market, that is really decking, what we are seeing that it is taking off with our Accoya Color range being available in Germany. So we are continuing to work with our existing -- we have a very large distributor in Germany. We are continuing to work with them, but we are also working on expanding that distribution network as we go into H2. Looking at France, we are predominantly now looking to strengthen our team in France, and we need to add commercial headcount to help us to cover this quite large and still unexplored market for Accoya. We had a couple of very nice projects that we deliver in the country, but certainly with the size of France, there is quite a large opportunity to grow there. So we have good distributors in place, but we are adding a headcount -- commercial headcount in the region to help us grow this market share. Martijn den Drijver: Great. Then one final question on Color. Can you shed some light on what you produced in H1 in Color, given the capacity expansions that would probably help us to understand what could be expected going forward? Jelena Arsic Os: Well, what we said, we actually increased almost more than a double capacity of Color in Barry, starting from 6,000, what we had last year, and now we should be having certainly capacity of -- we could be able to produce up to 14,000. We do believe that in the -- given the good strong demand for Accoya Color, we certainly could be doubling what we actually produce, so 6,000 to up to 12,000 in this financial year. Of course, decking season is a seasonal -- so demand is quite seasonal. We do see that the season starts in spring and our distributors are starting to build inventories starting from beginning of our Q4. So that's why also our Q4 is one of the larger quarters that we have as a company due to this specific effect. Martijn den Drijver: All right. And my really final question is on your EBITDA -- adjusted EBITDA margin, close to your FOCUS one target already. If I look at Bloomberg consensus, it's considerably higher for fiscal '26, '27, around the 16% level. Is that something you feel comfortable with given these very positive developments, both in Europe and the U.S.? Sameet Vohra: Sorry, can you just repeat that percentage that Bloomberg is showing? Martijn den Drijver: Yes. Bloomberg is -- I think it says it's not quite clear whether that is now group or adjusted, but it's 16% level. Sameet Vohra: Yes. I mean, that's probably around group. I mean, we're already at group level. We are already -- I mean, as you saw for H1 at 14% underlying margin with the group at what adjusted being just over 12% target. So I mean, we're very confident, and we firmly believe that we're on track to deliver the margin targets that we laid out in our Investor Strategy Day earlier this year by the end of Phase 1 of our strategy. Operator: We will now take the next question from the line of Johan van den Hooven from Edison Group. Johan van den Hooven: Only 3 questions is for me for now. If you look at the volume growth was, of course, strong. We already talked about U.S.A Looking at the volume growth of Accoya for Tricoya that is, well, only 6%. Is there a special reason that there's a bit of a slowdown or is it just a mix effect or a different focus on the U.S.? That's the first question, and we'll do the others later. Jelena Arsic Os: Yes, you're absolutely right, Johan. As we reported, Accoya for Tricoya volume grew 6.4%. This is also lower than percentage-wise, what we also put in our market update in September, where we saw at the time, 25% growth of Accoya for Tricoya. The reason for it is basically slower demand from our customers for Tricoya that is also linked to the season, but also overall subdued soft market sentiment in the -- they all operate in that MDF space. So we are seeing this demand increasing and starting to pick up as of December this year. So they were really running through the inventory reduction going towards the end of the calendar year. And now we are seeing the order book for Tricoya starting to fill in as we go into December. Johan van den Hooven: Okay. That's clear. Another question about your sort of guidance for EBITDA. EBITDA for the full year is in line with your expectations. But I seem to remember that previously, sometimes we refer to consensus or in different words, is it too simple to just double the EBITDA of the first half -- for the full year, I mean? Sameet Vohra: So I think when you look at seasonality in terms of our business, quarter 4 is our largest quarter by sales volumes really because from a decking and cladding perspective, a lot of sales take place ahead of that spring season. So quarter 4 being our largest by volume, quarter 3 ultimately being our smallest because you've got the effect of December, our customers effectively stop ordering and taking collections just after mid-December, the Christmas shutdown. And then obviously in October, we have the annual maintenance stop in Arnhem, where we're selling out our finished goods. So you could think -- despite that revenue and volume seasonality, I mean, profitability is going to be very similar to 50-50 between H1 and H2, and that's why we're seeing it in line with our expectations. Johan van den Hooven: Okay. But then -- okay. So we can look at the doubling. But in the first half, of course, you had EUR 2 million license income, which might not reoccur in the second half, which also then not helps EBITDA? Sameet Vohra: No. I mean, you've got -- I mean, it's not just license income. You also get the royalty. The largest part of that EUR 2 million is actually the royalty that we get from Accoya USA sales. So we get a fixed percentage on their revenue. So as you've seen, as their sales are accelerating, we're getting a higher royalty fee from them. Johan van den Hooven: Yes. Last question for now, just about the import tariffs. It's only 10%, and you've said you've taken some actions, but can you tell us a bit more? Is it just raising prices, lowering costs or a mix? Jelena Arsic Os: Well, it is predominantly raising the prices, Johan. We already put it in place and we didn't receive too much of the pushbacks from our customers. I think everybody in the U.S. market is now getting accommodated to the tariffs having impact on the price inflation of overall materials, if you like. So we put a price increase in place starting from 1st of November. And we also have, of course, an ongoing dialogue with the sawmills where we are actively tracking what is the sentiment in the U.S. market and also looking with them how we can, if you like, share the pain, if that pain become larger. But so far with the 10%, we do believe that we can manage this quite well. Operator: [Operator Instructions] Our next question comes from the line of Alastair Stewart from Progressive Equity Research. Alastair Stewart: Two or three questions. First on the U.S.A., given that you've now got what tends to be a very solid distributor base and enthusiastic uptake by customers, have you any sort of -- can you give us any sort of guidance when you could be looking at further reactors from the U.S. facility? So that's the first question. Secondly, interested to see a new distributor in Mexico. But what sort of size do you think that -- what proportion of U.S. output could Mexico be? And is that -- is it in a similar sort of mainly decking and cladding markets? And looking above the bar, are there any plans for Canada or any indications of how Canadian uptake could develop? Jelena Arsic Os: Yes. Thank you, Alastair. Thank you very much. Good questions. So if you look at our distribution base in the U.S., we do believe that with capacity of the plant today at 43,000 cubic meters, we do have enough capacity for at least next 2 years to feed demand and growth in this region. So we are focusing the organization, and we are focusing basically everybody to get more returns from the existing assets in the next year or 2. So this is -- this was a part of our Phase 1 of the FOCUS strategy. So we just continue working on it. Now we are going to see in next -- in the next half of the financial year and also in the beginning of the financial year '27, which is a key year for the company because this marks end of our Phase 1 FOCUS strategy, how things are developing. And in order to start talking about second reactor, you need at least 12 to 16 or 18 months from the design to basically ordering the equipment and putting it in place. Today, we have enough space in the U.S. and already a foundation put in place for the next reactors. So that should speed up that process when the time comes. So we do have enough space in the U.S. to put additional 6 reactors if that is necessary but I would like to really spend next year, 1.5 years, next 18 months, utilizing what we already have. And we do believe that we have enough capacity to meet the demand from a broader North American market, not only U.S. but also talking about Canada and Mexico as well. Now your comment on -- does this answer your question? Alastair Stewart: Sorry, I would just add -- I was asking about Mexico again, sort of potential growth there. Is it the same sort of end market that decking and cladding -- and while I'm on also, it was interesting to hear about France as well. They seem to be slightly late to the party as it were. What's driving the uptick in demand from France? And that will be all my questions. Jelena Arsic Os: Okay. So let me go back to Mexico and Canada because I think that those were the other 2 questions. So the Klinai is a quite a large distributor that also have significant milling capacity. So they are also capable of making some of the end products. So they will be focusing on cladding and decking predominantly. And the market in Mexico is large. We also are supporting the Caribbean region from the U.S. So -- and we do have already a couple of very nice projects that are happening there. Is Mexico going to be bigger than the U.S.? I don't so. Alastair Stewart: No, I don't think I was suggesting that, but how big could it be as part of the U.S. output? Jelena Arsic Os: Well, we do have a quite ambitious expectations from them, but we just signed off that agreement with Klinai. I would like to give them at least half a year to see what they can deliver in order to start shaping an expectations and certainly communicating those expectations internally. They are quite capable professional company with the milling capacity that could be important for us. But for us, our U.S. market, is by far the fastest growing, the most profitable and certainly more than 90% of the Accoya USA sales should come from the U.S. itself. Looking at the Canada, we do have one of our largest -- well, actually, the largest distributor we have in the U.S. is a U.S. Canadian company with the roots in Canada. So we do sell Accoya in Canada already for some years. With the tariffs, import tariffs from Canada and between Canada and the U.S., some of the trade is being slowing down. But nevertheless, we also have an opportunity, if necessary, to ship smaller amount from Europe directly to Canada, if that is going to serve customers better. So as said, we do expect U.S. plant predominantly to serve U.S. market, but we do have now today established partners in Canada, Mexico and Caribbean as well. So in France, also decking and cladding market, we had a couple of good projects that were done in the country. And we also have a good collaboration with the architects in France. But you know, it is a huge country and with Accoya Color now being more available, also coming with the new decking collection, we do need more feet on the ground to educate and push growth to the faster pace. So predominantly, cladding and decking and Accoya Color is one of the most wanted products we see in France. Operator: We will now take the next question from the line of Adrian Kearsey from Panmure Liberum. Adrian Kearsey: Well done on a good set of results, guys. A couple of questions for me, although I have some more, but most of them have been asked already. Could you perhaps give us sort of a bit some more color in terms of the pricing environment across different territories? Are we seeing greater pricing in certain territories rather than the others? And then to go back to the question on distributor relationships. Would you be able to sort of give some indication about how conversations are progressing in certain territories with signing additional distributor clients? Jelena Arsic Os: Yes. So pricing, as we already reported today, the average sales price in the reporting period went up with 1.7%. We are not reporting specifically per country or per region. But in average, this was the good, I would say, marker for you to look across -- both across Europe and the U.S., very, very similar price increase. We do -- of course, we are very careful, and we know that what we are selling is the value. So we are very careful of keeping that premium place in the building materials. So we are reacting on the tariffs in the U.S. We are reacting on the inflationary pressures in Europe and U.K., and we will continue to do that. And it looks to us that market is actually accepting that as well. Looking at the distributors, adding new distributors across the region. As I already mentioned, we are talking with the distribution partners in Germany. We are also talking with the new distribution partners in Central and Eastern Europe. I'm not ready to announce anything yet but we do expect that we will be expanding our distribution base predominantly in the next half year in the markets where Accsys is providing Accoya and we do believe that as of today, the number of distributors and coverage in the U.S. is good, and we want to give our new distribution partners chance to actually deliver on the expectations that we have for them. I hope this answers your question, Adrian. Operator: I would now like to turn the conference back to Dr. Jelena Arsic van Os for closing remarks. Jelena Arsic Os: So thank you very much. As I said in the last page of our presentation, we are remaining confident in the long-term potential of our technology and strategy. Company is transforming. We are growing, and we are delivering, and we have a very clear road map in front of us with a market-leading product in very attractive growth markets. So we will continue to do what we are doing and then hopefully, next half year when we hear each other, we will just confirm the expectations that we all have. So thank you very much. And with this, we will close our results call for today. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Good morning, and good evening, ladies and gentlemen. Thank you for standing by, and welcome to Tuya Inc.'s Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please be informed that today's conference is being recorded. I'll now turn the call over to your first speaker today, Ms. Regina Wang, Investor Relations Senior Manager of Tuya. Please go ahead. Regina Wang: Thank you, operator. Hello, everyone, and welcome to Tuya's Third Quarter 2025 Earnings Conference Call. Joining us today are Founder and CEO of Tuya, Mr. Jerry Wang; and our Co-Founder and CFO, Mr. Alex Yang. The third quarter 2025 financial results and website of today's conference call are available on our IR website at ir.tuya.com, and a replay will be posted shortly after our conclude. Before we continue, please note that our safe harbor statement in the earnings press release apply to today's call as we may make forward-looking statements. With that, let me now turn the call over to our Founder and CEO, Mr. Jerry Wang. Jerry will deliver his remarks in Chinese, which will be followed by a corresponding English translation. Jerry, please. Xueji Wang: [Interpreted] Hello, everyone. Thank you for joining Tuya's earnings call for the third quarter of 2025. In the third quarter, the external environment remains volatile, continuing the trend seen since the beginning of the year. The global consumer electronics industry experienced an uneven recovery with customer demand becoming more cautious in the ongoing macro uncertainties. In addition, the high base from the same period last year created added pressure on year-over-year growth. Against the backdrop, our total revenue for the quarter reached approximately USD 82.5 million, marking our ninth consecutive quarter of year-over-year growth and underscoring the strength of Tuya's business model. Gross margin remained above 48%. This result further reflects the resilience of our business structure and the steady improvements we have made in product mix and operating efficiency over recent quarters. In terms of profitability, supported by an improved gross margin profile, greater expense efficiency and sustained scale leverage, our non-GAAP net margin reached 24.4%, while GAAP net margin was 18.2%. Notably, GAAP net margin expanded by more than 23.6 percentage points year-over-year. Overall, while maintaining key investments in business development, we have continued to optimize our expense structure, enabling incremental revenue and gross profit to translate more effectively in operating profit. At the same time, on the strategic execution front, we continue to fully embrace AI and deepen its integration across our ecosystem. As of the end of Q3, smart devices equipped with AI capabilities accounts for 93.99% of total shipments, an increasement from the previous quarter, demonstrating that AI is swiftly becoming the default configuration from smart devices. On the user side, AI adoption is also scaling quickly. AI has clearly moved beyond single category features like AI voice to a broader spectrum of product categories. Tuya's AI agent service now handle 135 million daily interactions for global users, supporting diverse scenarios such as AI node, AI translate, AI health, AI energy, AI pet care, AI [ play ], AI gaming, AI secure [indiscernible] and AI robotics. AI continues to penetrate a broader range of daily devices and [ lab ] scenarios, laying the foundation for large-scale product innovation and long-term valuation creation. During the quarter, we also began global beta testing of our new AI agent app with Tuya ecosystem users, aligned with our Smart Life smart living mission, we are currently developing a universal AI life assistance for global users, which is scheduled for official release at the CES show in the United States in just over a month. Now let me turn the call over to our Co-Founder and CFO, Alex Yang, who will share more details about our financial performance and business progress. Yi Yang: Hello, everyone. This is Alex. I will now provide more details on the third quarter's results. Please note that all the figures are in U.S. dollar based and all the comparisons are year-over-year based. And we delivered a total revenue of approximately USD 82.5 million in the third quarter, representing a 1.1% year-over-year increase. Despite a strong comparison base last year and continued caution in external demand, we achieved our ninth consecutive quarter of year-over-year growth, underscoring our resilience and stability in our business. With the total revenue, our PaaS business delivered strong results, generating USD 59.2 million, a 2.4% year-over-year increase, driven primarily by our strategic focus on the customer demand and product optimization. In Q3, the number of PaaS premium customers reached 280, further strengthening our core customer base. In addition, fueled by growth in the cloud software products revenue, the SaaS and others business showed consistent expansion, generating USD 11.5 million this quarter, a 15.4% increase year-over-year. This momentum was driven by continued rise in installed devices and a high proportion of recurring revenues. Revenue from Smart Solutions reached USD 11.8 million during this quarter. We strategically scaled by lower efficiency projects and prioritize scalable high-value solutions such as AI energy management solution and spatial AI solution to further improve overall gross margin and cash recovery efficiency. From a regional perspective, in China market, AI Toy continued to show healthy growth in the third quarter. More than 50 customers, including brands, channel partners and solution providers, they launched products powered by Tuya and key product capabilities also continue to advance such as multimodal interactions, long-term memory and emotion expressions with several connectivity versions coming soon as well. These improvements further strengthened the foundation of expanding into new product categories and regional markets. In the European market, demand from AI-powered solutions such as AI cloud storage and AI energy saving solutions continue to rise. At the same time, we added several new industrial clients in the energy and HVAC sectors during this quarter. In Asia Pacific, deployment of Cube, the privatized platforms for several Southeast Asian telecom operators are scaling rapidly with additional cities entering the delivery phase. The Singapore HDB, Housing & Deployment Board of Singapore projects also progressed into implementation with the first bench of the hardware and software solutions delivered and installed in this quarter. In North America, AI-enabled products such as smart bird feeders continue to record healthy growth. The strong adoption validates the commercial potential of niche scenarios that integrates emotional values, frequent content interactions and long-term subscription model and underscores the structural growth opportunities for AI products in mature consumer markets. In summary, despite pressure in the global consumer environment, Tuya leveraged its diversified product portfolios and strong software capabilities to achieve a structural growth. Those trends further strengthen our resilience against external macro volatilities and uncertainties. Moving to gross margin. Our blended gross margin for Q3 in 2025 was 48.3%. Total gross profit reached approximately USD 39.8 million, representing a 6.1% year-over-year increase. This growth was primarily driven by concurrent improvements in both our revenue mix and cost structure. By segment, the PaaS gross margin rose to 48.8%, continued to upward trend from the second quarter of 2025. SaaS and others maintained a strong gross margin of 70.8%, remaining above 70% level. Smart Solutions posted a gross margin of 23.8%, slightly higher than last year's 23.5%. Overall, our Q3 performance in line with our expectations and continue to reinforce the profitability foundation at this stage. On the expense side, we continue to maintain prudent and disciplined financial management. Even as both our scale and profitability expanded, total operating expenses declined to $36 million. down 34.1% year-over-year. GAAP operating margins improved significantly to 4.6% and GAAP net margins increased 23.6 percentage points year-over-year to 18.2%, while ensuring that R&D investment in key AI initiatives and platform development remain intact, and we continue to exercise strategic cost control to balance growth quantity and profitability. On the cash flow front, operating net cash flow continued to grow steadily this quarter, reaching USD 30 million, a 25.7% increase year-over-year. Our cash collection cycles remain stable and cash flow quantity materially improved. At the end of the Q3, our net cash balance stayed above USD 1 billion, giving us ample flexibility to balance shareholders' returns, manage external uncertainties and support long-term strategic investment. Next, I'd like to briefly highlight some recent progress in our AI capabilities and developers ecosystem, which serves as a crucial foundation for Tuya long-term growth. At the end of the Q3, Tuya's platform had 1.62 million registered developers, representing a 23% year-over-year increase. AI adoptions across smart devices also continue to accelerate. Commercial AI developers have collectively created more than 12,000 AI agents on the Tuya platform, covering a broad range of smart products categories, including toys and pet products, electronic, home appliances, IP cameras and wearables. Meanwhile, we continue to deepen and strengthen our AI developer ecosystem, anchored by TuyaOS, TuyaOpen and the T-Series AI Developer Board. On the open source front, TuyaOpen has seen steady growth in both documentation and code engagement. Since the beginning of this year, the GitHub repository star count has increased by about 80%. To date, over 2.3 million lines of codes have been contributed to open source projects. Beyond the rise of the Tuya developer participation, the overall quality of the ecosystem is also improving significantly. In summary, despite the prevailing external uncertainties, we still demonstrate strong resilience and operational agility, achieving solid financial growth and impressive profitability, which steadily advancing the AI plus IoT developer ecosystem across our core business segments. Thank you, all. Operator. We can begin Q&A session right now. Operator: [Operator Instructions] Our first question comes from the line of Yang Liu from Morgan Stanley. Yang Liu: I have one question regarding the business outlook with more and more trade deals settling down in the international trade market, what is the business outlook going into fourth quarter this year, which is the peak season? And also, what is your early look for customers' demand going into 2026? Yi Yang: Thanks, Liu. I'd like to share 3 points. So the first one is that this year, we still see that with the kind of the softened demand on the growth side. And because of the uncertainties on the global macroeconomy situation this year. And so this year, the Q4, we'll see that the regular promotion season will be kind of the soften versus the last year. So we will keep a closing eye to review that while we already have the stable -- kind of the stable turns across multiple countries that whether the demand will be going to return steadily on December. So that will be the short term. And for 2026, what we see here is that because like Jerry shared earlier before, that all those kind of AI features and smartphone portfolios become more and more inevitable trend for the entire sector. So which means that more and more consumers are already starting to familiar with this type of products, they really become the beginning users of these type of things. And all the major brands and the players, manufacturers in industries are already starting to enter these sectors and bring that into their growth factors. So those type of trend will never stop. So in 2026, we'll have a very positive outlook about the growth -- keep growing the entire business sectors. And the third one I'd like to share is that by reviewing all the technology improvements in the past decade, and we review AI will be one of the booster that bring the IoT experience into next level because in the past, the smart home experience is majorly focused on the connectivities, some automation and control. But while coming out with the AI capabilities, the user experience will come to a next level to more friendly, more easy to use and more smart. And so that's why we decided to provide a new AI assistant for life, which connecting all the home scenarios and to ordinary people and have more people be able to enjoy the smart devices experience. So that will lower another bar for the entry user. So combine that 3 together, the short times, we will see that 2025, there is still some uncertainty and pressure on that. But it's become more and more inevitable and become a default options for major brands and players there, and we're trying to bring the bar lower for more users who are not become the smart devices user as well. So I think that will be the overall -- it's very positive in the long term and [ constant ] in short term. Operator: Our next question comes from the line of Timothy Zhao from Goldman Sachs. Timothy Zhao: Congrats on the solid results. I have 2 questions here. One is regarding the AI home agent that you just mentioned. Just wondering if you can share more color on the detailed specs and the use case of these AI agents that you are going to officially release at CES next month? And how do you think about the impact on the overall business of Tuya with this new product? Secondly, is about the AI overall impact on your PaaS and SaaS and smart solution business. Just wondering for example, for the segment growth this quarter, would you please break down in terms of by volume and by pricing? Has AI brought any positive impact on the overall pricing of your product and services and also the impact on the gross profit margin? Yi Yang: Okay. Thank you, Timothy. So the first one is that -- so we define this as AI assistant. So it's bigger than agent. And because we think that if we review the live scenarios, even only for home that you find that you have multiple things you want someone to help you with. So this is AI assistant come with multiple agents that can help you to do almost everything you need in a home. So that's the first one. That's how we design this new assistant. And the key value for the other part, we believe in 2 things. The first one is that while coming out with the adaptions of the GenAI app, including the GPT, including like the Gen-1, et cetera, you found that the AI can help you to do a lot of things, a lot of tasks on the software side. But there's no assistant focus on home. That's what you need for your home and how you want to taking care of the home. So for us is that we design the different type of agents and capabilities focus on those scenarios people want to interact and people want to have a better life quality or easier life experience in home. That's the first one. And the second one is that the key differentiation of this assistant among any generic assistant is that this assistant will naturally be able to interact with the physical scenarios through the hundreds of millions of the Powered by Tuya devices. So which means that we're trying to bring kind of science fiction to come true, like the JARVIS in Iron Man's house, every people appreciate that. Every people, I mean, admire that, but there is no that type of JARVIS yet. So we want to create that type of experience for the global people. So that's how we define the key features and value for the user side. And I think the -- what does it mean for the ordinary users. I think the key part is that right now, we found the smart devices is still kind of complicated. They become way more easier than 10 years before, but still kind of complicated to -- I mean, to learn to use, to interact with by many nonuser, I mean, for those beginners. So those bar is still there. But coming out through the assistant, so you don't have to learn to use the app anymore. And you don't even need -- you just need to know how to speak, right? Like how you can tell the housekeeper to do something, how to tell a servant to do something, it's same like the assistant will be able to take the orders and to do all those kind of complicated operation for you. So we believe that will lower the bar significantly to the -- for the new users for home. And right now, we see that while the penetration of even smart home is still in the low digits and by the entry bar, we'll be able to open more doors for those new users while they found that the smart devices will be accessible for them to use. So that's for the AI assistant part. And the second part -- second question is for the AI. And so first one is that this year, we consider the beginning year of the AI device. So we are very happy to see that finally, our education to the market, to the developers, to the customers are already starting to offer some feedback. So like the numbers we shared before, by end of the Q3, over 93% of the products we shipped this year already been turned on some AI capability. So which means that my customers, my developers are already very actively to try whatever AI features or capabilities they can provide through their devices, even their existing devices. So that's the first one. So we really have a lot of innovative developers trying to try the ideas and try to educate the end users and test end users' feedback. And we believe that will be a very, very typical starting point for any new technology adoption. And so we really have that kind of scale test field taking places. And the second one is that we still provide the AI seamlessly through our 3 business model. So including the PaaS, including the solution, including the SaaS, right now, we have different type of AI offering in different business model as well. So which means that for my customer side, on the procurement perspective, so they don't have to learn how they will be able to purchase something from Tuya differently. It's a similar like offering, but come with different features. And maybe come with a different pricing, maybe not. So for that part is that we try to open -- have almost all my customers defaultly be able to try AI -- try to bring AI into their existing products and solutions. And through that seamless integration into my existing business models, we believe that, that will help in 2 things. The first one is that coming out with a new feature set, any new feature set will bring new demand. So that will be able to speed up the penetration and adoption of the entire market. And we're looking forward to have the AI coming as a booster. And the second one is that with some really new feature set that we reprice that and that will improve our GPM as well. But we're looking forward to have the GPM impact coming very soon because it's still in the beginning. So we try to promote the market. We try to incubate the market in the beginning, but not running very aggressively on the profitability side on that type of niche sector. So that's the overall outlook, Timothy? Operator: Our next question comes from the line of Mingran Li from CICC. Mingran Li: Congrats on the solid results, and 2 questions from my side. First is that following adjustment of recent global tariff policy, could management share more color on the downstream order recovery progress in your overseas market, especially in North America? My second one is that could management share the latest progress on the AI technology, particularly in terms of commercialization? Yi Yang: Yes. So the first one is that a couple of weeks ago that we get a temporary 1-year terms between China and U.S., right? And so which means that all the merchants importers right now, they have stable cost levels at a specific timing. And so that will be the good things, at least we get some certainty. But the promotion for this year will be pretty locked in. So those kind of new terms will be able to impact for next year's demand. So we're looking forward to have that to be a positive impact. And right now, on the customers and importer side, they still kind of review, okay, what will be the tune for next year and they'd like to review what will be the turns of sell-throughs for this promotion season starting from this week, right? We have the Black Friday this week. So we're looking forward to have more feedback in December, like I described. And while people already know that what cost they're going to get for next year over a year and what will be the demand looks like and then how they set the [ teams ] for the new projects and the new sell-in reordering. So that's the first one. So still under review. And the second one is for the AI. I think that I already answered part of that to Timothy earlier for the earlier questions. So the first one is that right now, we're offering AI across almost all my categories. We have some generic AI capabilities, can work on anything. And we also have some differentiated vertical AI capability for specific type of the products. But all those kind of offerings are seamlessly integrated into my existing 3 services, the PaaS, the solution and the SaaS. That's the first one. And in this year, on the new device side, including the PaaS and solutions, we're really happy to see some breakthroughs into some new sectors like the toys, and we shared that earlier last quarter as well. So this will be 2, 3 new vertical categories come up with a large total addressable market size and that we didn't touch before. And the IoT never get be able to enter that sector. But coming out with AI, so right now, we'll open the door. And in this year only, we're running 3 quarters only, that's many of the key players in the industry, starting from China in the toy industry and already starting to profit with us. And in Q3, we already helped the customer to launch a lot of use cases to test the demand. And it turns out that the end users love it. And so I would say the trial sales for many of the customers works out. So we're looking forward to continue to improve the experience and also the customers starting to reordering and running a new type of promotion across its all sales channels to scale it. So that's why we see that the AI open new doors. So that's the second one. And the third one is that not only upgrades, kind of upgrades on existing categories and open new categories. So the third one we try to open is the 2C experience. So we're looking forward to using the new AI assistant to open all the new home users doors, especially for those ones who still don't have any smart devices, they still consider that type of devices will be kind of complicated for them. So we're using assistant to help them up. That's it. Operator: Our next question comes from the line of Matt Ma from Jefferies. Matt Ma: So I just have one question regarding smart solutions. So the smart solutions revenue declined by around 14% in third quarter. Just wondering what is the reason behind it? And then could management provide any growth outlook for the segment in 2026? And also any thoughts on product category expansion going forward? Yi Yang: Yes. So I think the first one is that in 2026, we're looking to have a better year versus 2025 because we should have less turbulence for the macroeconomy side on a global basis. And so like I described that the customers right now in many vertical sectors, the customers already think that the AI features or AIoT features will become more and more default for them. So like some categories that every single new project they've been doing, they have to come along with the AIoT. So we become to take a larger portion in their pie. So that's the first one. So we will see that the penetration will grow. I mean, for the overall industries, we continue to grow steadily, no matter what. It's only a matter of speed, which year will be the tipping point. And -- so that's the first one, 2026, and we keep closing eye. We think that we can share more colors around the second half of December, while the customers have more feedback on the end demand side and while they're starting to set the tunes for 2026 because they don't like to run in a very conservative operation base for a long time. They're really running for 2025. So that's -- I think that's for the first one. And the second one... Matt Ma: The second one is also regarding -- yes, it's also regarding smart solutions. So just want to understand what is our thoughts on product category expansion for smart solutions going forward. Yi Yang: Sorry, I missed one part. And so I think that for smart solutions, and we're very carefully looking for the expansion to new categories because we're already learning that business model for over 2 years. So I think for smart solutions, we still kind of focus on some strategically highly value categories. And for those ones that the AI can bring a total difference, like to bring some innovative idea to come true without the AI, it never exists and also to some categories that we're really helping customers to do a differentiation to help them out. So usually, the solutions is the one we design for the customers for their flagship model. So that's what we put out. So right now, the solutions, the major categories will be the video and related multimodeling capabilities, the control panels that's super comprehensive interactions on the touch panel side and including the gateways focused on specific scenarios and energy. So I think that for the middle term that we continue to put focus and scale those kind of verticals unless we see some opportunities with the scalabilities in some new vertical categories. Operator: There are no further questions at this time. I'll now hand the conference back to the management team for closing remarks. Regina Wang: Thank you, operator, and thank you all for participating on today's call and for your support. If you have any further questions, please feel free to reach out to our IR team. We look forward to speaking with you at our upcoming investor event. Thank you, everyone, and have a great day. Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect your lines. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]
Operator: Morning, and welcome to The J. M. Smucker Company's Fiscal 2026 Second Quarter Earnings Question and Answer Session. This conference call is being recorded and all participants are in a listen-only mode. Please limit yourselves to two questions and re-queue if you have additional. I will now turn the call over to Crystal Beiting, Vice President, Investor Relations and Financial Planning and Analysis. Thank you. You may begin. Crystal Beiting: Good morning, and thank you for joining our fiscal 2026 second quarter earnings question and answer session. I hope everyone had a chance to review our results as detailed in this morning's press release and management's prepared remarks, which are available on our corporate website at jmsmucker.com. We will also post an audio replay of this call at the conclusion of this morning's Q&A session. During today's call, we may make forward-looking statements that reflect our current expectations about future plans and performance. These statements rely on assumptions and estimates, and actual results may differ materially due to risks and uncertainties. Additionally, we use non-GAAP results to evaluate performance internally. I encourage you to read the full disclosure concerning forward-looking statements and details on our non-GAAP measures in this morning's press release. Participating on this call are Mark Smucker, Chief Executive Officer and Chair of the Board, and Tucker Marshall, Chief Financial Officer. We will now open the call for questions. Operator, please queue up the first question. Thank you. Operator: The question and answer session will begin at this time. For operator assistance, please press 0. As a reminder, please limit yourselves to two questions during the Q&A session. Should you have additional questions, please re-queue. Our first question today is coming from Andrew Lazar from Barclays. Your line is now live. Andrew Lazar: Great. Thanks so much for the question. And good morning, everybody. Maybe I wanted to start off with a question on sweet baked goods, if I could. Organic sales in that segment came in sort of better than I think most Street expectations. Trying to get a sense from you as, you know, how much of this do you see as sort of sustainable improvement versus maybe just, you know, easier year-ago compares or any transitory benefits? Mark Smucker: Morning, Andrew. It's Mark. Morning. Thanks for the question. First, we are very pleased with the progress that we're making on Sweet Baked Snacks and the Hostess brand. As you noted, we are seeing sequential improvement. Notably, we're seeing improved performance in c-store. Our volume shares are improving. Our focus on a more focused portfolio has been helping. You will recall that we had a three-pronged plan where we're strengthening our portfolio by actually eliminating 25% of the SKUs, and we've seen really strong flowback into our core brands, notably the number one brands of donuts and cupcakes, which each of those are the number one in their respective segments. And so that has been great. We recently relaunched SuzyQs after they've been out of the market for many years, and that has been off to a pretty good start. And then just, you know, elevating our execution around sales, we're streamlining our operations. The Indianapolis closure should be complete by the fourth quarter. And then continuing to invest in the brand. So long and short of it is, you know, the plan we put in place, decisive actions are working, and we just need to continue to do what we're doing over subsequent quarters, and we do expect to see acceleration over the next couple of quarters as well. Andrew Lazar: Got it. Great. Thanks for that. And then maybe, Tucker, how much of the $0.50 tariff impact this year is specifically coffee-related, such that if tariff policy remains sort of unchanged from here going forward, how much of a benefit we could or should expect this to be to fiscal 2027? Thanks so much. Tucker Marshall: Andrew, good morning. The predominance of the $0.50, if not all, is related to green coffee tariffs. And so, therefore, stepping into FY 2027, it should be viewed as a tailwind while in FY 2026, it continues to be a headwind. Operator: Thank you. Our next question today is coming from Tom Palmer from JPMorgan. Your line is now live. Tom Palmer: Good morning. Thanks for the question. I wanted to follow-up on coffee as well. You noted not taking the third round of pricing as an incremental earnings overhang in the prepared remarks for this year. You've provided some really helpful bridges in terms of other items such as the tariff impact. I was wondering if you could maybe quantify how much that might have impacted your outlook to decision not to take pricing? And then just given the tariff guidance was kind of unchanged, should we think about tariffs flow through your P&L throughout fiscal 2026? And or is there a point where we start to see relief this year? Tucker Marshall: Good morning. As you think about this fiscal year, as we came out of our first quarter earnings call, we called out a net $0.50 impact as a result of tariffs. And that net $0.50 impact was receiving the benefit of recovering dollar-for-dollar cost inflation due to tariffs through an early winter pricing action and then ultimately making an assumption around a price elasticity of demand factor. That was all embedded in the $0.50 as we came out of the first quarter earnings call. We have essentially added that back as a result of being in a tariff-off environment moving forward. However, we have made the decision not to take pricing through US retail coffee in early winter, so we will be absorbing about $75 million of tariff-related costs incurred to date that we will realize, as I've noted, in our third quarter, which coincidentally is $0.50, which is why we're calling it out. Therefore, an impact to this fiscal year but a tailwind to next fiscal year. Tom Palmer: Understood. Thank you. On the SG&A side, there was the guidance reduction now flat year over year. Couple of pieces. One, is there a segment where that's going to be most evident? And then any update on marketing plans? Maybe I missed it. I think they were previously expected to be up around $40 million year over year. Any change there? Thank you. Tucker Marshall: So, Tom, let's begin with marketing. We remain committed to investing in the long-term health of our brands. And so marketing absolute dollars will be up year over year. And we're projecting that to be about 5.5% of net sales, which is pretty consistent throughout the year. We have sharpened the pencil as it relates to SG&A spend, not only throughout the entire network but also as we think about discretionary spend. And we've also sharpened the pencil in certain areas as it relates to marketing. We're still committed behind our growth brands, and you will see an increase year over year. Operator: Thank you. Next question is coming from Robert Moskow from TD Cowen. Your line is now live. Robert Moskow: Hi. Wanted to know, Tucker, about the profit results in Sweet Baked Snacks. Was that also in line with your expectations? Because, you know, sequentially, it's a step down. And it generally, you know, when you have these SKU rationalizations, it improves the profitability of the business because you get rid of some waste. Is there a reason why that's not happening in 2Q? Tucker Marshall: Rob, good morning. So the second quarter top line for Sweet Baked Snacks did exceed our expectations. The bottom line did not meet our expectations. We had anticipated sort of in line with Q1 to maybe slightly better in our second quarter. And as you've noted, we were just over $20 million. We do expect both the third and fourth quarters to get better so that we get back toward our outlook for the full fiscal year with respect to segment profit. And I would say that the second quarter shortfall to expectations really had much to do with the transition of our bakery network or environment and just more cost that we absorb through our supply chain, whether that be absorption, overhead, just the timing of transition. So we do expect benefit as we step into the third and fourth quarters. I would also remind you in our fourth quarter, we should benefit about $10 million from the closure of the Indianapolis facility, which is estimated to be a $30 million annual run rate impact, of which $10 million affects or benefits our fourth quarter this fiscal year. Robert Moskow: Okay. And maybe a follow-up on Petrete. In the commentary, you described the category dog treats as getting better. Your business is still down. What should we expect in the back half? I know there's some very easy, I think, some easy comparisons to some disruption last year. But are there marketing plans also to improve market share in what I guess is an improving category overall? Mark Smucker: Rob, it's Mark. And you actually are correct. You stated it. We are expecting a really strong lap, particularly as we get into this third quarter. So you will see Milk Bone getting back to growth, which is great news. And it's not only the lap, but I would just highlight it's all the work that we've been doing, and it is marketing. You know, we have continued to push on our campaign, which is called More Dog. And so you've probably seen that in various media channels. It has been helping, you know, just the, again, what we always remind you guys is just the spectrum from value-based all the way to premiumization. So as the consumers are looking for different things from their dog treats, the Milk Bone brand is definitely there delivering. And then just the innovation on peanut buttery bites has been very successful. And as we referenced in the prepared remarks, we are going to be launching another innovation after the beginning of the calendar year, which is also standing on another collaboration between the Jif brand and the Milk Bone brand. So that, including seasonal items, which we referenced as well, you know, there's a lot of really strong innovation in that category. It depends a lot on news for growth. So feeling really good about Milk Bone and the trajectory of the brand. And then just overall, our pet business and the growth that's gonna be driven by Meow Mix, we expect to continue as well. Tucker Marshall: Rob, in support of your question, we are anticipating low single-digit growth for our pet portfolio in the third and fourth quarters behind the momentum of Milk Bone and Meow Mix. Operator: Next question is coming from Yasmeen Deswande from Bank of America. Your line is now live. Yasmeen Deswande: Hey guys, thanks so much for the question. Just on the reduced net sales expectation for frozen handheld and spreads, I know that spreads, particularly peanut butter, was challenged in the second quarter. And the expectation is for that to continue for the balance of the year. So I'm asking around the reduced net sales expectation, is that simply flowing through the weaker 2Q? Or is that also, you know, spreads being enough of an offset that Uncrustables accelerating to double-digit growth won't be enough to offset the unforeseen weakness? Tucker Marshall: Yes. Good morning. As it relates to frozen handheld and spreads, we're really calling down that business a little over $80 million on a full-year basis. You're kinda seeing half of that come through the second quarter, and the balance will come through the back half of the year. Much of that is driven by the spreads portfolio, and we really haven't taken up the outlook on the Uncrustables brand. I can tell you that it still demonstrates growth and it is demonstrating a path or trajectory to being a billion-dollar brand by the end of this fiscal year. Yasmeen Deswande: Okay. And then Mark Smucker: Yeah. If I may, just add a little bit of color on a couple of these items. So on Uncrustables, Tucker just highlighted still gonna be a billion-dollar brand. The reason, you know, overall, saw 7% for the total company away from home has been extremely strong. We did see growth in retail as well. Maybe not as much as we would have expected because we were lapping a very strong Q2 last year, really strong merchandising and promo. But we do expect Uncrustables to get back to double-digit growth in the back half of the year, obviously supporting that billion-dollar ambition. And innovation is playing a key role. Right? So, you know, a couple of years ago when we had been capacity, we weren't able to innovate. Now we're launching seasonal flavors. The new one that just came out is this peanut butter and chocolate. It's called PB Choco Craze. And then we've got two new higher protein items that are meant to target sort of a morning daypart or breakfast daypart, and the uptake on those from our retail customers has been great as well. And then just on spreads, because we were expecting the question, I might just highlight peanut butter. Again, there is a very big lap against last Q2, we had multiple tropical storms in the Caribbean, and that drove a lot of stock up. And so we are seeing, you know, the Jif, the peanut butter business being down in the quarter, but regardless, it's generally holding share. So overall, still feel good about spreads, you know, making sure that we're getting our x right. But that is obviously supportive of the Uncrustables business. Yasmeen Deswande: Okay. Great. And if I could just squeeze another one in. I think the previous expectation was for in sweet baked snacks for SKU rationalization to be isolated to the second quarter. And with now that extending into the third quarter, is the expectation still for top-line stabilization in the second half? And I guess asked another way, given the expectation for sequential improvement, could 3Q be flattish in 4Q grow? Or is there still a possibility for, you know, March to be down? Tucker Marshall: I would say that one, the SKU rationalization is back to sort of single digits of growth. Crystal Beiting: Oh, your microphone is off. Tucker Marshall: Sorry. Yes. I'm sorry. We had a technical difficulty here. But to your question, I just want to acknowledge that the Q3 will be the completion of the SKU rationalization associated with the closure of the Indianapolis bakery. And then with respect to your question on growth, we should be flat to slightly down in the third quarter on a comparable basis. And then demonstrating a level of growth on a low single-digit basis in our fourth quarter for Sweet Baked Snacks. Thank you. Operator: Our next question is coming from Megan Klatt from Morgan Stanley. Your line is now live. Megan Klatt: Hi, good morning, Mark, Tucker, thank you. Maybe another question, Tucker, on coffee. Can you talk a little bit about how you're thinking about the pacing of coffee margins in 3Q and 4Q? The 3Q EPS outlook in the prepared remarks is a little bit softer than where the Street is. I assume most of that is just that you still have tariffed coffee flowing through the P&L that's sitting on the balance sheet today without the pricing. So is that the right way to think about it? And then do you still expect to get to mid-twenty percent margins in coffee in 4Q? Or will there be a lingering kind of tariff impact there as well? Thank you. Tucker Marshall: Megan, good morning. So we demonstrated an 18.2% second-quarter segment profit margin in coffee. Would anticipate a slight improvement to that in our third quarter, but it will not surpass 20%. And then as you step into our fourth quarter, we should move beyond 20%. I don't think that we'll get all the way to 25% just as we continue to digest a lot of cost and cost inflation. But just acknowledging, not taking pricing in early winter in our US retail coffee portfolio and absorbing the incurred coffee tariffs to date. So that will be approximately $75 million in our third quarter. Some of that may go into our fourth quarter, but the predominance is in the third, to your question. Megan Klatt: Okay. That's helpful. Thank you. And then maybe just putting together all of your comments on pet and sweet baked snacks and frozen handhelds. As you think about moving through the third quarter and the fourth quarter, you laid out for all segments an expectation for an acceleration in growth. So as you think about the 4Q exit rate, I guess, how are you feeling about outside of coffee, kind of the rest of the U.S. Retail portfolio contributing to or getting back to algo OSG as we finish the year? Thanks. Tucker Marshall: Megan, I would say that when you think of the midpoint of our guidance range today at the top line, it's 4% on a reported basis. Then you affect or isolate on a comparable basis divestitures and foreign exchange, and it's aligning to about 5.5% comparable growth year over year. And then underpinning that, we've got about $38 million worth of co-manufacturing sales that we're lapping. So all else equal, we're at 6%. On a comparable basis adjusted for the manufacturing sales for our outlook for this year. And, yes, much of that is driven by our coffee portfolio. But when you think about the balance of our portfolio, we're seeing tremendous momentum in the away-from-home aspect. We're seeing resilience and strength in our pet portfolio. We're seeing stabilization in sweet baked snacks. We obviously have great growth and momentum on Uncrustables. And we're addressing things within our spreads portfolio. And so I don't want to promise sort of what the exit rate is. What we're acknowledging is that we do have great organic sales growth. On a comparable basis. Our strategy is working, our execution is focused. We'll continue to drive the growth brands, and we'll continue to support the balance of the portfolio. Operator: Next question today is coming from Peter Grom from UBS. Your line is now live. Peter Grom: Great. Thank you. Good morning, everyone. Good morning. I wanted to just ask a follow-up on the tariff commentary in 2027. And I know you noted to both Andrew and Tom that this will be a tailwind to earnings. But I guess specifically, are you expecting those benefits to largely drop to the bottom line? Or would you look to maybe reinvest some of that upside? Tucker Marshall: As it relates to tariff-based inflation and in a tariff-off environment, and not taking pricing for tariffs and, in turn, not experiencing tariffs in our next fiscal year. That should benefit our bottom line, which is why we're effectively saying it should be a tailwind to our coffee portfolio next fiscal year. So, hopefully, it helps provide a little bit of context about how we're thinking about tariffs stepping into next year. Peter Grom: Okay. No. That's helpful. And then maybe just on coffee, can you maybe walk us through what you're now expecting in terms of elasticity? And I guess just as we think about modeling top-line growth through the balance of the year, can you maybe just understand how you see price versus volume at this stage? Especially considering that you're not going to take that additional price increase for the winter? Thanks. Tucker Marshall: Sure. So our current outlook for the coffee portfolio is 16% year-over-year growth. And what's embedded in that is 22% pricing offset by 6% down volume mix. That's an improvement to when we stepped into this fiscal year where we thought growth would be 11% against 22% pricing offset by negative 11% of volume mix. So what you can see is our elasticity assumptions have improved from point five stepping into this fiscal year to around point three where we stand. And, again, that's on average over the year. So hopefully that provides additional context as to the strength, the resilience of our coffee portfolio. Operator: Thank you. Our next question is coming from Matt Smith from Stifel. Your line is now live. Matt Smith: Hi, good morning. I wanted to dig in a bit on the Uncrustables sequential acceleration in the second half. Can you talk about some of the underpinnings to that acceleration, whether there's also unique comparisons there? And how we should be considering pricing in frozen handheld and spreads in the second half? Is there potentially increased promotional support behind Uncrustables to support that sequential acceleration? Thank you. Tucker Marshall: Yes. So we demonstrated 7% growth in our second quarter, which is really good momentum as we continue to advance to the billion-dollar ambition. As we think about our third and fourth quarters, we would anticipate low double-digit growth on the way to that journey of being a billion-dollar brand by the end of this year. We will continue to ensure that we're supporting with marketing, we continue to support our recent innovation launch around protein. We continue to round out distribution and also making sure that we have the right placement and promotion. I would also acknowledge that about 80% of sales run through our US retail portfolio and the balance of 20% flow through our away-from-home portfolio. And we are seeing great momentum in away-from-home on Uncrustables. And one example is the acceleration of growth in the convenience channel, not only due to our innovation behind the sandwich but also due to the capabilities that we acquired through the Hostess acquisition. Matt Smith: Thank you. And Mark, as a follow-up to some of the coffee commentary, elasticities are better than expected on average, but the performance by brand in the measured channel data that we see has varied. Specifically for the Dunkin' brand, elasticities have been softer than Folgers or Bustelo. Was that expected as you went into a more price-intensive environment? Has the performance of Dunkin' been different from what you anticipated coming into the year? Thank you. Mark Smucker: Yeah, Matt. A couple of things. So first of all, you're right that we have seen obviously very strong performance on Bustelo and Folgers. And so the resilience of the category overall gives us optimism, right, in terms of just how we've consumers still consuming coffee, our brands are resonating with consumers, you know, the investments we're making behind these brands is working, notably Bustelo, just had a phenomenal quarter. And then Dunkin' did in the quarter, so we did see a bit of improvement in Dunkin'. But as we've highlighted in previous quarters, we've seen some competitive pricing pressure that we have not overcome, but we are continuing to actually make surgical balancing, some surgical pricing investments as well as supporting innovation in terms of seasonals and so forth. So I think the long-term story on Dunkin' is that it's a great brand. We love the brand, and we still think it has plenty of runway. But over time, as we would expect pricing to moderate competitively, that will support the brand overall. Operator: Thank you. Next question is coming from Max Comfort from BNP Paribas. Your line is now live. Max Comfort: Thanks for the question. With regard to Uncrustables and the volume decline that we saw this quarter in the frozen handheld and spread segment, it sounds like you have plenty of confidence in the business. Distribution is gaining. Innovation is working. And you still see long-term opportunities. So I'm curious, is the volume decline we saw in the quarter really just due to any lapping items that you saw with the strong 2Q a year ago? And then also, could you comment on anything you're seeing from some of the new entrants in this space who have gotten distribution pretty quickly? Thank you. Mark Smucker: Yeah, Max. It's Mark. It is largely the lap. So, you know, again, that strong merchandising and promo in the last Q2 last year is what we're lapping. And as you highlighted, both the innovations Tucker, in his previous answer, talked a bit about the support that, you know, will be not out of the ordinary, but solid merchandising support. Coming into the back half is gonna continue to support the acceleration of that brand. And in broad strokes, you know, we have seen some competition come into the category. I would say that's largely been supportive over the longer term, seeing, you know, a couple of other brands, whether that might be private label. And some of the variety that you're seeing in the category in terms of and then pricing. Should continue to support the brand. But I think overall, you just think about the household penetration we've gained and the continued marketing that's and the innovation will continue to drive growth. Max Comfort: Great. Thanks. And then just to wrap it up with regards to the tariff impact, I just want to confirm, the $75 million in tariff expense that you're referring to, is that the total amount you expect to see in FY 2026, and it is essentially entirely due to coffee tariffs. Tucker Marshall: Correct. Operator: Thank you. Our next question is coming from Alexia Howard from Bernstein. Your line is now live. Alexia Howard: Good morning, everyone. Can I start with innovation and the pace of innovation? Are you able to quantify whether that's been accelerating? It sounds as though the pace has been picking up. I'm not sure whether you can give us numbers on the percentage of sales from new products. And is that pace of innovation now where you want it to be across the portfolio, or are there pockets where you would like to increase that still? Mark Smucker: Alexia, thanks. It's Mark. Yes is the short answer. Our pace of innovation has accelerated. I would say I'm very proud both of, well, actually, across the board, if you look at innovation on Hostess, innovation on pet, notably pet snacks, and more recently, the innovation on Uncrustables has all accelerated. The speed to which our teams have been able to get to market is as fast as we've ever done that. And so I think we're very proud of the work we've done. I mean, the Uncrustables innovations have been notable. And then I think we expect a little bit of a faster turnaround of both pet snacks and human snacks we've continued to deliver again. So thank you for the call out. Alexia Howard: And then a question for Tucker on leverage. You've been hovering a little above four times net debt to EBITDA for the last couple of quarters, and you're talking about getting it down to three times by 2027. How quickly does that start coming down? Should we expect it to start coming down more substantially in the near term? Tucker Marshall: Alexia, so we are committed to $975 million of free cash flow generation this fiscal year, which will support a half-billion dollars of debt pay down this fiscal year, and we anticipate the ability to pay down an additional $500 million in FY '27. As you think about the leverage profile this year, we'll probably hover around four times through the balance of fiscal year 2026. Then as we step into '27, we should begin to see the step down toward that three times amount in fiscal year 2027. Operator: Thank you. Next question is coming from Scott Marks from Jefferies. Your line is now live. Scott Marks: Hey, good morning. Thanks so much for taking our questions. First thing I wanted to ask about, we've heard some of your competitors speak to the need to reduce prices to offer value for the consumer. And we obviously haven't heard your team talk about that much. So just wondering if you can share any thoughts around that and whether you see any opportunities within the portfolio where you think that might be required. Mark Smucker: Scott, thanks. This is Mark. I would say first and foremost, our portfolio is very broad. And so as we look at each category, the fact that we play across the value spectrum allows us to deliver varying degrees of value to the consumer. So you think about Meow Mix is a mainstream brand that provides affordability for cat parents. Our Milk Bone brand, similarly, from base biscuits to more premium offerings like the peanut buttery bites, also has a range and obviously provides affordability to the consumer. It goes without saying in coffee as well, despite the fact that we've seen significant inflation, we're glad, of course, that the tariffs are off, and that affords us the ability to do the right thing for consumers, frankly, and our retail customers and holding our price. I would say on coffee more broadly, you know, history would show that over time, costs would moderate. And so although we don't have a clear view onto if and when that takes place as we get into a new coffee season, to the extent that we do see some meaningful deflation on the commodity, we would certainly pass that along to consumers as well. So, you know, I think the headline is the portfolio itself offers a tremendous amount of options for consumers and notably value all the way to more premium offerings. Scott Marks: Appreciate that. Thanks. And the second question for me would be, you've made comments again today just about fiscal '27. In terms of EPS growth, expectations for on algo were better. Obviously, the tariff relief provides a significant tailwind. So just wondering maybe how we should be thinking about base business expectations for '27 if you're willing to comment on it. Thanks. Tucker Marshall: Yeah. Scott, it's probably early to provide the FY '27 outlook. But the essence that we are trying to communicate is that with a stabilizing commodity environment and an off-tariff environment, as we continue to generate cash and pay down debt and we deliver a level of business momentum, there could be a path to that, and that's what we were trying to just lay out as you think about a $9 midpoint at this fiscal year. And all of the puts and calls that we've had to deal with in this fiscal year as we consider the future. So, hopefully, that provides a little context. Again, as we get to our fourth-quarter earnings call, we'll be able to lay out our outlook for FY '27. Operator: Thank you. We have reached the end of our question and answer session. I'd like to turn the floor back over for any further or closing comments. Mark Smucker: First of all, I would just like to thank all of you for joining our call this morning. Our second-quarter results demonstrate that our strategy is working. We delivered sequential acceleration in comparable net sales growth, which we anticipate will continue into next quarter. Our bottom-line results reflect increased investments in our brands, disciplined cost management, and strong execution. Our business continues to build positive momentum, and we are confident in our ability to deliver our financial outlook for this fiscal year while advancing our long-term objectives to increase shareholder value. As always, I would like to thank our outstanding employees for their continued hard work and dedication to our company. We wish all of you a very happy Thanksgiving and a great holiday week. Have a great day. Operator: Everyone, this concludes our conference call for today. Thank you all for participating, and have a nice day. All parties may now disconnect.