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Marco Haeckermann: Welcome to the third quarter earnings call of CTS Eventim. My name is Marco Haeckermann, and I'm going to present the third quarter, followed by a Q&A session. So let's go. The headline for the Q3 result is very clear. We are leaving the noise of Q2 behind, and we are talking about strong signals we've seen in Q3. Ticketing has posted positive like-for-like growth in the third quarter. Adjusted EBITDA margin in the segment is up by more than 200 basis points despite ongoing integrations from See Tickets and France Billet. The development in Ticketing is backed by very strong organic margin growth in the third quarter year-over-year. Live Entertainment returned to growth in the third quarter after a muted Q2. Adjusted EBITDA margin is up by more than 100 basis points in Q3 year-over-year, and our venue operations delivered on prior year's level. We've seen a positive financial result in the third quarter of a little bit more than EUR 2 million versus a negative result of around EUR 0.5 million in Q3 last year. And putting all this together gives us enough confidence to again confirm what we've said already in August when we released the half year results that we confirm our group KPIs and ticketing with regards to the outlook for 2025. Let's look at some highlights for the first 9 months in 2025. The first impression is right, all the arrows point in the right direction and show a green color. Group revenue is up to EUR 2.1 billion, which represents growth of 6% year-over-year. Adjusted EBITDA was almost at EUR 340 million, up by almost 5%. And EBIT is above EUR 260 million, which represents growth of even more than 6%. The development of our retail tickets and the tickets outside Germany posted a tremendous growth of 29% and almost 43%, which is still positive affected by the ongoing integration and first-time consolidation of See Tickets and France Billet. And our last 12 months GTV reached almost EUR 9 billion by the end of September. Let's dig a little bit deeper into the first 9 months results. The growth in revenues of 6% was driven by both segments. Ticketing growth came in across all subsegments despite the nonrecurring Paris 2024 revenues we've seen last year. And Live Entertainment, as I've said earlier, has returned to growth after the second quarter. Adjusted EBITDA is up by almost 5% with margin levels back at prior year's level, mostly driven by very strong organic margin growth in Ticketing and Live Entertainment returning to last year's EBITDA margin level. The impact on EBIT is comparable with almost 6%, which is, of course, reported on an unadjusted basis. Looking at the results from a quarterly perspective, Q3 posted the highest revenue over the last 7 quarters. And the second -- the third quarter in Ticketing captured See Tickets for the first time on a clean like-for-like basis. Live reported positive momentum quarter-on-quarter. The adjusted EBITDA had no adjustments in 2025, while there was in the comparable period last year, an adjustment for M&A-related transaction expenses of a high single-digit million amount. As said, the margin expansion was driven by both segments, which is, of course, a very positive development compared to what we have discussed in August this year. And let's not forget, the main quarter from an earnings perspective is still to come with the fourth quarter of 2025. Bridging now from adjusted EBITDA of almost EUR 340 million to our net profit versus previous year, you see here that our adjusted EBITDA was up by EUR 15 million. And then after depreciation, the financial result, we posted earnings before taxes of EUR 260 million. It is important to highlight that the negative trend in the financial results is mostly determined by what we have discussed already with the H1 numbers as the third quarter financial result was positive, but within the first half, we had negative effects from foreign exchange, mostly U.S. dollar of roughly EUR 15 million. There was a nonrecurring dividend payment of around EUR 14 million from our autoTicket project and the lower interest income, which translated as well to roughly EUR 15 million less interest income in the first half. But this, as I said, was mostly attributable to the first half and Q3 has posted a positive financial result. Adding it all up, we end up with almost EUR 150 million of net profit attributable to CTS shareholders. Taking now a look at the segments. Ticketing revenues grew by 2%, although the organic growth was in the mid-single-digit percentages, and this effect comes from last year's third quarter having seen a high single-digit million contribution from Paris '24, which is a nonrecurring item. The third quarter growth was driven largely across all our core markets. The disproportionate development on adjusted EBITDA shows how strong the organic business has improved its profitability in the third quarter. Even without considering the nonrecurring earnings impact from Paris 2024, adjusted EBITDA has grown by 8% year-over-year in the third quarter. And even with the ongoing integrations and the still dilutive impact on adjusted EBITDA margins from the newly acquired entities, we are able to expand our profitability in the third quarter, mostly backed by very strong performances in our core markets on adjusted EBITDA profitability. Taking a look at our retail ticket volume. The retail ticket volume in the third quarter went up from 36 million to 42 million. And looking at the right side of this slide, you see that due to the ongoing integration of the international businesses, which we've acquired in See tickets and France Billet, the share of Europe is increasing based on the retail ticket volume. Taking now a look at Live Entertainment. Revenue in the third quarter grew by 5.5% despite muted development in Q2. All leading indicators as of 30th September '25 are up. With leading indicators, I'm referring to, for example, prepayments which we have received, which is -- which you can consider an order intake or a KPI for deferred revenue of our Live Entertainment segment for the next season, which is a very positive indicator for what's to come in the next year. As we've discussed in summer, we continue to have our festival portfolio under review where we expect positive impact next year. The strong EBITDA development in Q3 shows that overall, the season and the content has been very helpful to our overall development and is mostly backed by our German and Italian businesses in Live Entertainment. Our venue business, which we report in this segment as well, remains highly profitable at previous year's level. Overall, we see that the Live Entertainment segment has returned into its target margin corridor with 7% in Q3. And this concludes the presentation of our Q3 results for today. And now I hand over back to the operator to open the line for your questions. Thank you. Operator: And we're coming to the first question, and it comes from Olivier Calvet from UBS. Olivier Calvet: Maybe I'll take them one by one. But first, to clarify the guidance comment. On the last call, you guys were saying sort of the 5% to -- that we should take the lower end of the 5% to 15% growth at EBITDA level. It sounds like you're now pointing again to the full range. So I'm just wondering if you'd be able to narrow it down a little bit for us now with only about a month left to the year. Marco Haeckermann: Yes. Thank you, Olivier. So as I said, we would prefer to leave the commentary unchanged versus H1, although having seen the very strong development in Live Entertainment in the third quarter, I can say that we have gained a little bit more headroom in what we've said. But for now, I would leave the guidance unchanged. But you can be sure that we as well are taking into consideration the strong return to positive momentum in Live Entertainment as well. Olivier Calvet: Okay. Okay. And how is Ticketing developing into Q4? Any sort of color you could give here also on the 2026 artist lineup that would be helpful as well. Marco Haeckermann: Yes. I mean while we are still in this quarter, I can't say anything about it in financial terms. But I mean, the highlights we've seen so far, I can say that the demand side is very well on track, seeing what we have put through the pipeline, whether it was big festivals. We're seeing great lineups even for festivals in the second tier. On the other side, we have had some really renowned bands going on sales so far in the fourth quarter. But it's always important to highlight, particularly for us, yes, it's always visible to look at the top act, but the majority of our tickets really come from a very, very diverse content portfolio. And all I can say is here that throughout Q4, what we have seen so far, we see unchanged momentum from artists going on tour and wherever we can make it visible that these shows are on sale, that we will activate the demand and put fans in front of the stages to have a good time with their artists. Olivier Calvet: Okay. Okay. Then just one on the festivals business. Is there -- are there any specific festivals you've made a decision on in terms of going forward, what -- whether they will be operating in 2026 or '27? Is there any such decisions you could point to? And the second one also on -- within LE, the Milan venue ramp, if you could just shed a bit of light on that ramp, how to think about it into next year? Marco Haeckermann: Yes. I mean with regards to the festivals, there are no particular names. And it would be a little bit unfair because I know that our Live Entertainment management is working very closely together with the promoters to plan out what's to come for the next year, looking at the infrastructure. And it is, of course, a completely wrong take to just look at the name of the festivals because there's a very complex infrastructure behind this, how you book artists, through which festivals or even other events you would want to route them. They are very busy. The team around Frithjof Pils together with the promoters to focus on the profitability. And like I said throughout the call, we are confident to see positive impact from their work on the overall portfolio already next year, but it shouldn't stop there because as we've discussed in summer, overall, in that part of the value chain, you have to cope with permanent OpEx inflation, artists asking for more money. The overall infrastructure to operate these formats is not getting cheaper. And it is always the more important to roll over these OpEx inflation onto the ticket price and to become better in selling them at the right price to make these events profitable for everyone. With regards to Milan, everything is on plan, I would say. It's, of course, difficult now to say something more particular about bookings because the venue has to open. But I think it's fair to say we are already seeing a very good demand for that venue. And when we look at nights, which a venue can be booked, which is an important KPI there, I must say that we are positively surprised by how well this new piece of valuable infrastructure for the live entertainment scene in Italy has been received so far and that's -- up to now, even where the venue is still in its final construction stages that we are coming close to a triple-digit number of bookings, which at least promoters and various content providers are asking for where they would wish to host shows in our new arena. Olivier Calvet: Okay. And any ETA on when you would hope to start having shows there, a rough idea? Marco Haeckermann: Yes. I mean the opening act is, of course, the Winter Olympics. And once the ice is off the stage, yes, you can put the speakers on, and host great live music shows there. Sorry, just to be clear, I'm referring to ice because the ice hockey matches will be hosted there, in case someone is listening who hasn't heard about this yet. Operator: Next up is Ed Vyvyan from Rothschild & Co Redburn. Edward Vyvyan: Congratulations on -- it looks like a pretty strong set of results. I have three questions. So just firstly, on Live Entertainment, your adjusted EBITDA came in well, well above consensus. So could you maybe just walk us through some of the moving parts in the quarter? I think last year, you did have a drag from U.S. Touring JV. So it would be good to understand the comp there. Ticketing, sort of a similar question. If you could walk us through what happened with organic margins when you exclude integration costs and then maybe the Paris Olympics, could you sort of quantify these effects? And then lastly, kind of moving away from the quarter, you've been making a lot of changes, it looks like internally to prepare for mobile ticketing. So when should we expect mobile ticketing to be rolled out in a more meaningful way? And could you maybe give us an idea of expected penetration rates and the margin uplift from that? Marco Haeckermann: Thank you, Ed. So first of all, with regards to Live Entertainment and the strong development of the profitability, I mean, on the one side, we, mostly in Germany and Italy, had a very good lineup, just to name one name, Ed Sheeran, makes probably the top of that part in the third quarter with a large number of shows, which we've promoted there. On the other hand, while we were talking about festival, and this is what we've discussed already in August, and now we are seeing the positive side of it. I mean, we had some pre-incurred expenses in the second quarter for the festivals, as we said, which were now compensated by the revenues which we have generated. And as we've discussed as well, there was, for example, one festival, which we've acquired within See Tickets, Garorock, which took place last year in June and which flipped over into the third quarter, but this only had a minor impact on revenues and profitability there. But it was a profitable festival, so it's worth highlighting. On the last bit with regards to the U.S. development, not so much has changed. We are seeing now other acts coming through the pipeline there. And we just had a discussion about this. It seems like that in the U.S. as well, now moving a little bit the portfolio towards higher ages and not to the target group between 15 and 20 years, which seems to be more affected by what's going on in the economy in the U.S. and the willingness to pay high prices for tickets, while now, for example, acts like [ Brandy and Monica, ] the only one I remember, to be honest, which are selling to a little bit more older audience where the $50 notes or $100 notes are a little bit loose, more loose to pay for these tickets. And this is a development which we are curious to see of how it pans out throughout the end of Q4, but this was as well in Q3, any changes in the U.S. had a minor impact. So we were basically running where we were in Q3 last year as well. With regards to Ticketing, excluding the integration costs, we have seen very good organic margin momentum. And I must say this was particularly due to our core markets in Central Europe, including Germany as well. But here, again, it was not particularly a topic driven by top shows. But as I said earlier, we should never forget, although it's always flashy to talk about the big names, yes, we should not trick ourselves a little bit that the large part of our portfolio are not the big acts, but the acts from Tier 2, Tier 3, very independent acts, but other names that fill arenas and which gives us a much more constant flow and which helps us, of course, to leverage our customer reach in very efficient ways to help them to sell out the shows better than the year before, which is a constant task our team is working on and which then ultimately is reflected in constant operating leverage. So if we sell the same category year in and year out, you can always be sure that we become more profitable on that overall genre. Other changes with regards to mobile ticketing, I must say, as you've seen and as we've discussed throughout the first 9 months, hiring new responsibilities starting off at the very top with Karel Dorner as a CTO, and Karel having brought on stream new colleagues for products, for the overall IT infrastructure and development going forward. We are already seeing that development is gaining momentum and where we will become -- where we will be more active in rolling out these parts of the infrastructure, but it's, of course, part of a broader story. And here, with the year to come, we would expect to start reporting material increases in mobile penetration rates. But what is more important than to talk really about the capabilities of the new product generation. As you, of course, know that once you have a customer on the mobile channel, it's not only that you have a direct connection to every ticket buyer or ticket holder, but you have a communication stream on -- which gives you the chance for better cross and upsell opportunities, which, of course, given the market projections, not only in Continental Europe, but I would say, globally over the next 5 to 10 years will become a very important theme, not only to sell more tickets, but as well to increase the GTV per customer and focus on that. And therefore, mobile infrastructure is key. And this won't be a bottleneck for us to utilize the opportunities and capture the value over the next couple of years for CTS Eventim. Operator: And next up is Annick Maas from Bernstein. Annick Maas: So my first question is you just touched on mobile penetration. So I'd be quite keen to understand how many tickets you are selling through fanSALE today. The second one is, I don't have access to the slides, so maybe it's on the slides, but could you isolate the integration costs for Q3? And just confirm that Q3 was really the last quarter with the integration cost and in Q4, it's -- they are none left basically. And then you announced a new CFO. So the background seems not the most obvious to ticketing. So can you just maybe give us a bit more explanation on why the CFO, yes. Marco Haeckermann: Thanks, Annick. So your first question was with regards to fanSALE, and which is a different element, I would say. I mean, rolling out the mobile infrastructure, of course, facilitates better liquidity in the aftermarket for which we can then have fanSALE coming more to fruition with its full potential. As of now, our reselling activities and always considering, of course, that our dominant markets in the EU see more and more regulation on that, but this is not a holdback for us because with being the biggest ticketing platform in Europe, we can provide this aftermarket liquidity with fanSALE, which, of course, mobile penetration is a key growth driver for and where we have already the EVENTIM.Pass product, which facilitates ticket exchanges after the initial distribution. This is becoming a very interesting topic over the next 3 to 4 years. But as of now, the revenue contribution from fanSALE is still negligible, I would say. Integration costs for the third quarter, as we said in summer, we would expect to come in somewhere in the low to mid-single-digit millions, which is on track. But in contrast to the second quarter, the very strong organic development overlapped this impact. What we've said with regards to Q4 was that we might still expect a low single-digit million effect from ongoing integration. But overall, we would expect a net impact so that the overall development will cover the last EUR 1 million or EUR 2 million of integration effects. And with looking at the Q3 development and the strong organic margin development, I must say that this is a very reassuring development because we are even beyond target here because the operating development even covered the integration cost in the third quarter, which is a very positive leading indicator for the fourth quarter. With regards to our new CFO, I mean, first off, we are looking forward to give him a very warm Eventim welcome. As per his past, I think it's very worth highlighting that he brings tremendous expertise in -- not only in M&A, but in the broader finance space from various perspectives. I think it's fair to say that with his expertise coming from Lufthansa, he knows complexity, which is something we're working on to reduce day by day. So I'm very sure that he can help us on our mission there because it's always important to highlight when we talk about our profitability levels here, forgive me, my blunt answer, but there are still too many Excel spreadsheets, which we send around with e-mails. So even behind our very strong profitability levels, there are deep pockets of efficiency gains where I'm very sure that our new colleague, which we will welcome at the beginning of next year, will help us because he probably have seen many of those cases in his former job. So ideally, he brings the protocol to bring us even forward there. So that's why we're looking forward to welcome him as of 1st of January. Operator: The next question comes from Bernd Klanten from Barclays. Bernd Klanten: Maybe first question on organic Ticketing growth. I guess, year-to-date, you should be in the low to mid-single-digit range. I guess without giving any specific guidance, would you expect these organic trends to broadly continue into year-end and into next year? Then second question, can you remind us of just very roughly combined revenue and cost synergy expectations for France Billet and See Tickets maybe also into next year? And any color maybe that you can share on their respective margin developments so far? And then a question somewhat related to the Milan question earlier, how much revenue and margin contribution do you expect for the Winter Olympics next year? And how should we think about the relative attribution to Ticketing and Live there? Marco Haeckermann: Bernd, thanks for your question. So with regards to organic Ticketing growth, I would rather say that so far in the first 9 months, organic growth in Ticketing has been more like in the mid-single-digit percentages. And this is a run rate which we expect going forward into the -- throughout the fourth quarter. Overall, I must say that as we've said earlier, our midterm perspective and expectations for growth, not only for Ticketing, but for the overall live entertainment industry in Europe and even globally points towards 5% to 7% growth until 2030, 2031. And it goes without saying that our ambition is not to grow less than how the markets are growing. Revenue and cost synergies for See Tickets and France Billet, I mean we have said earlier, and this remains unchanged that overall, once the integration project is completed, that as from this combination between our legal entities and the ones which we've acquired that on both sides, we would expect cost synergies somewhere in the low double-digit millions. And with regards to Milan, given that there are contract specifics, I don't want to split out our revenue and earnings expectations for the Olympics in particular. What I think is more important for the overall project is that once the Olympics are done and we have seen the new ice hockey Olympic champion, as I've said earlier, I mean, there are many promoters waiting to put up their gear to host shows in our new arena, which will be more important for the overall profitability in the very first year, although it will still be a ramp-up year, and there will be many more interesting years to come after 2026. Operator: And now we're coming to the next questioner. It is Lars Vom-Cleff from Deutsche Bank. Lars Vom Cleff: Two to three quick questions remaining, if I may. I mean, doing a back-of-the-envelope calculation, gross transaction value per ticket seems to be up 9% quarter-on-quarter. So is that for me an indication that pricing is still strong and that customers are still expecting -- still accepting price hikes? Or is it rather a mix effect we're seeing? Marco Haeckermann: So I mean, honestly, I haven't done this back-of-the-envelope math yet for the third quarter, but it points in the right direction, I can say this. What I -- what is hard for me now to strip out what is really the contribution from the newly acquired entities there, as we know that France Billet and See Tickets, they are selling at lower face values per ticket, which has, of course, an impact, which you've seen on the highlight slide that, for example, the ticket volume KPIs are significantly higher up than the revenue numbers. But given that underlying pricing has been and will continue to be a strong driver for our GTV, it points somewhere in the right direction, but don't name me on whether it's 9% or whether it's somewhere in the mid- to higher single-digit percentages. Lars Vom Cleff: Okay. Perfect. And then thank you very much for sharing your view on synergy effects and integration costs for the French acquisitions and integrations. Just for me to be absolutely sure, this will all be gone in '26, right? We shouldn't expect any additional headwinds for '26 anymore? Marco Haeckermann: Yes, that's the plan. Lars Vom Cleff: Okay. Perfect. And then I think in one of the earlier calls, you or your CFO said that we should expect a low to midsized 2-digit financial result in '25, where you said that looks likely. I mean, after 9 months, you're at minus EUR 4 million. Is that still valid, low to midsized 2-digit financial results? Marco Haeckermann: Honestly, I'm not quite sure whether he said that in particular because we have seen versus last year quite a significant drawdown in the first half due to the effect which we have named. And I think it's important now to look at Q3 as it has been posted in the -- in today's report that although this has turned positive with around -- a little bit more than EUR 2 million, but it is unrealistic to expect for the fourth quarter now an impact that will reverse what we have seen in the first half. And I'm not quite sure whether Holger has said something in that direction. But if that was your perception, I mean, my back-of-the-envelope math now with regards to financial results makes this nearly impossible, simply because the foreign exchange effects and of course, the nonrecurrence of the autoTicket dividend, for example, that's something very hard to capture. Lars Vom Cleff: Understood. Perfect. And then a quick last one. Yesterday, I saw an article in the [indiscernible] that it will be far harder for Vienna to finance the arena in Vienna and that they seem to be struggling. Is there any news on the Vienna arena from your side? Or is it still pending and nothing to add to what you said in the past? Marco Haeckermann: No, there's nothing to add from our side. I've seen some news flow, but this was city related, the way of -- how I saw it, but there's nothing which we could add to what we haven't said in the past. Operator: And next up is Craig Abbott from Kepler Cheuvreux. Craig Abbott: Yes. First of all, just real quick on Live Entertainment. Obviously, a very good quarter in Q3. But obviously, it's always been traditionally lumpy and Q4 traditionally has been a seasonally soft quarter, although the U.S. is a little bit more even out over the year. I just wondered were there any special effects in Q3 that we might see that back out in Q4, if you could at least give us like some color there? And also looking into '26, you mentioned some of the KPIs were shaping up well for '26. I mean, at this stage and given the efforts you're taking on making your festival portfolio more profitable, should we be thinking about Live Entertainment being within its target corridor profitability-wise next year? And then on Ticketing, sorry, I just -- maybe I just missed it. Could you just be a little more precise on the organic development, both for the revenue and the margin, particularly in Ticketing in Q3? Yes, those are my two questions at this stage. Marco Haeckermann: Yes. Okay. So with regards to Live Entertainment, I can say that so far, the strong development in the third quarter, as we said, had some tail -- not really had some tailwinds. I think the only real mentionable spillover effect was this one festival, but this is not really moving the needle on whether it would have occurred in Q2 or -- well, it now occurred in Q3. It was really good lineup, as we said, mostly in Germany and Italy. I referred to at Ed Sheeran doing a tremendous number of shows, which was very helpful here. But I wouldn't really want to flag it as something particular. We are expecting the trends which we have seen so far to roll into the fourth quarter. And as I've said earlier in regards to a question related to the guidance, although we are reiterating what we've said in August, but the strong development of Live Entertainment in the third quarter gives us more confidence, but we would now prefer to take this headroom into the fourth quarter. But overall, I think to that degree, Live Entertainment has been punished in August, led by March, maybe I don't want to ask for an apology, but I think that we will be able to level that out of what Live Entertainment has been punished for in the second quarter. I hope this gives you a direction. With regards to leading indicators, 2026, yes, I mean, it's, of course, a very strong leading indicator when your deferred revenue is up by more than EUR 100 million. If you look at the balance sheet date, 30th of September, I'm referring to the prepayments received, which means the tickets that have been sold for our own Live Entertainment and the revenue which has been generated but will be recognized when shows actually take place next year. So -- and from that perspective, we have no other reasons to believe that we continue throughout 2026 operating in our target margin corridor because, as I've said earlier, that our Live Entertainment management is working very close together with the promoters to optimize the portfolio. And this will definitely be helpful to be in our target margin corridor between 6% and 8% EBITDA margin as well in 2026. And maybe if I can add with regards to next year, while we are talking about Live Entertainment, but we have other great events coming into the pipeline. And just one I would like to mention is that although it's still a couple of years out before L.A. will actually host the Olympics in 2028, but our work starts way earlier. So we are very excited about 2026 and technically can't wait to start on with that. Craig Abbott: My other open question, and then I have one more. The open question was just again to give us a specific -- the organic development in Ticketing on revenues and margin in Q3. And then my last question is on Ticketing. I mean I know you cautioned us earlier not to focus too much on the big headline tours. But looking at the Ticketing outlook for Q4, I mean, actually, the flow of on sales these last weeks in October, November has been very, very good. I'm just a little bit surprised you're not a little bit more, say, confident on that Ticketing outlook for Q4, if there's any more color you want to add there. Marco Haeckermann: Of course. I mean, sorry, that I skipped your first question. Organic growth in Ticketing in the third quarter was around 4.5%, which is in line with the around, yes, 6% we've seen in Q1 and around 5% we've seen in the second quarter in Ticketing. And as I said earlier, we expect to remain on that level going through Q4. And as our projections for the overall market growth show at least this kind of growth going forward for the market that this is, I would say, a threshold more like on the bottom line above which we aim operating going into the next 3 to 5 years. With regards to the Ticketing outlook and the on sales you're referring to, yes, you're right. We have seen some good names. What is more important that even behind those good names, the larger part of the portfolio is developing well and that is not only a single market, but various markets. But again, we would like to stay where we are, which if you understand, we are now in a transition of the CFO role, which for me personally, I thought it's fair just to continue maybe with some more headroom as we thought we would have at the end of August, but with more confidence. And like I said earlier, give Mr. Willms a very warm Eventim welcome when he will report the full year results by end of March. Craig Abbott: That's very clear. Sorry, just to go back to my second question in the middle there, the organic Ticketing margin in Q3, please, and then I'm done. Marco Haeckermann: Was in the high 40s. Craig Abbott: So okay. Comparable with last year. Okay. Marco Haeckermann: Yes, was up versus last year. Operator: We have one more question in the line, and it is Christoph Blieffert from BNP Paribas Exane. Christoph Blieffert: I have one left, please. And this one is on the German Ticketing platform, please. Over summer, you have sent around EUR 10 vouchers, most likely to incentivize fans to buy tickets and you have also granted discounts for long tail events taking place in '26. I'm just wondering how you describe the fan demand, in particular for smaller events and whether you have created some pre-buying in the third quarter? Any comments would be helpful. Marco Haeckermann: Yes. Thanks, Christoph. I mean, first off, these are tools, marketing tools, mostly and products, which we haven't introduced now for the first time, right? So there is no change basically in what we have done. Maybe it has become a little bit more visible to you, which I would say is a positive development because it has been in the pipeline for many years and the more visible we can make to potential buyers in Germany, what we have on offer, the better basically it is for the overall content. So I would say there is no indication that we are seeing some kind of early buying or general timing effect, which was a big topic throughout the pandemic, for example. And overall, I must say, discounts and so forth, I mean, it is a very important, high-priority topic for us constantly and not only for us, I think, for the general industry to create awareness and get more eyeballs directed to where the content is because no matter which market you look at, whether it's Continental Europe and still in the U.S., the biggest problem in this industry is still that there are so many people we know who would love to attend an event, but they simply don't get the information on time. I would say even in the U.S. that when you have a group of target personas that would want to see a particular act of, say, 10 people that even with all the marketing power the market has, that only 7 to 8 are really made aware on time that this content is on offer. In Europe, I would say it's still only 5 or 6. So there is tremendous upside, which we will capture going forward while we are now scaling up and building capabilities and led by Karel Dorner, our new CTO. And just, again, while we are talking so much about back-of-the-envelope math, a EUR 10 voucher is so much below our average face value we're selling that let's assume that whatever the number was last year in the third quarter or fourth quarter of what we have sold in terms of EUR 10 vouchers versus this year, and even if that number would have gone up, in terms of revenues which we make from that voucher, it's really a very low number that would never move the dices on our Ticketing development. Then this concludes our earnings call for the 9 months' figures. Thank you very much for staying up a little bit longer and giving our friends from the West Coast a chance to join in our earnings call. And yes, wishing you all a good night, a maybe very early happy holiday season, and we look forward to seeing and hearing you again on our next earnings call, which will be hosted end of March next year. Thank you very much.
Operator: Good day, and thank you for standing by. Welcome to the UGI Corporation Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I'd now like to hand the conference over to Tameka Morris, Vice President of Investor Relations and ESG. Please go ahead. Tameka Morris: Good morning, everyone. Thank you for joining our fiscal 2025 fourth quarter earnings call. With me today are Bob Flexon, President and CEO; Sean O'Brien, CFO, and Mike Sharp, President of AmeriGas Propane. On today's call, we will review our fiscal '25 financial results and key accomplishments as well as the strategic priorities and financial outlook for fiscal '26 before concluding with a question-and-answer session. Before we begin, let me remind you that our comments today include certain forward-looking statements, which management believes to be reasonable as of today's date only. Actual results may differ significantly because of risks and uncertainties that are difficult to predict. Please read our earnings release and our annual report for an extensive list of factors that could affect results. We assume no duty to update or revise forward-looking statements to reflect events or circumstances that are different from expectations. We will also describe our business using certain non-GAAP financial measures. Reconciliations of these measures to the comparable GAAP measures are available within our presentation. And with that, I'll turn the call over to Bob. Robert Flexon: Thanks, Tameka, and good morning. UGI delivered record adjusted earnings per share of $3.32 through strong execution across multiple fronts, surpassing our revised guidance range of $3 to $3.15. Continued improvements at AmeriGas, which led to its higher EBIT, coupled with solid operational performance from our utility segment and significant tax benefits drove these exceptional results. We strengthened our balance sheet. We generated approximately $530 million of free cash flow, inclusive of cash generated from asset sales of selected LPG territories and return value to shareholders through dividend payments. Within our natural gas businesses, we successfully upgraded critical pipeline infrastructure and completed several new LNG and renewable natural gas facilities. These investments not only enhance our system integrity, but also expand our revenue-generating capabilities for future growth. At AmeriGas, we continue to make great strides in streamlining and transforming key business processes, better positioning the company for the upcoming winter. At UGI International, we successfully advanced our portfolio optimization strategy. This will allow us to more effectively utilize our resources on core customer segments where we can have competitive advantage and achieve superior returns. Most importantly, I am proud that we have begun to transform our organizational capabilities by investing in our people and fostering a performance-driven culture focused on driving extraordinary outcomes. This cultural evolution defines the way we work and is a critical driver of continued success. Building on this strong foundation, we are raising our long-term EPS growth expectations with a new EPS compound annual growth rate target of 5% to 7%. This increase underscores the multitude of intrinsic opportunities and our confidence in executing on our strategic vision. During fiscal 2025, we delivered on the strategic priorities we set at the beginning of the year. We are transforming the culture of UGI and embedding greater accountability and operational discipline across our teams and businesses. This is improving our competitive advantage to accelerate and realize success going forward. Our portfolio optimization initiatives were successful. We achieved approximately $150 million from LPG divestitures, excluding the impact of divesting the Austrian business, which is expected to close before the end of this calendar year. This year, we deployed roughly $900 million of capital, primarily in the natural gas businesses. At the utilities, we invested approximately $560 million largely towards replacing and upgrading our gas distribution infrastructure, including replacing nearly 130 miles of pipeline. At AmeriGas, while the operational transformation is ongoing, we're seeing meaningful results that Mike will speak to shortly. Notably, this fiscal year, we achieved a 30% reduction in recordable incidents which not only inspires the safety environment but benefits the business. We have deployed stringent project management discipline to drive more efficient business processes through analysis and redesign while increasing technological adoption, including AI throughout the organization, beginning with AmeriGas. Ultimately, these initiatives are strengthening our overall financial profile better positioning the company to deliver long-term shareholder value, which leads me to our strategic vision. Our vision is to create sustainable shareholder value by driving operational excellence throughout our businesses. There are many opportunities to unlock intrinsic value throughout our portfolio. AmeriGas is at the forefront of this strategic evolution. The team has already made substantial progress in transforming operations that will cement AmeriGas as the premier propane company in the U.S., one that optimizes and takes advantage of our distribution network and establishes a business that is safe, reliable and highly efficient. At UGI International, we will maintain strong operational discipline while positioning LPG as a viable alternative to fuel oil. The strategic and operational transformations underway in our global LPG businesses will generate increased cash flows and provide greater flexibility for future capital allocation. Our natural gas businesses operate in a dynamic environment, and are well positioned to capitalize on the significant energy expansion happening, particularly in Pennsylvania. With the prolific investment coming into the region, we are capitalizing on the opportunities whether through increased throughput for our utilities business or incremental opportunities for our midstream assets. All of these operational pillars are underpinned by our commitment to strengthen our balance sheet. Now I'll hand the call over to Mike to provide you with an update on the progress and efforts we are making at AmeriGas. Michael Sharp: Thanks, Bob, and good morning, everyone. I'm excited to speak with you today about the actions we are taking at AmeriGas. As can be seen on the slide, there are 5 strategic pillars, which guide everything we do. First, our stand is that everyone and everything is always safe. We are committed to maintaining a zero harm culture across operations because nothing is more important than ensuring everyone goes on safely each day. Our customers are at the heart of our strategy. We are building deeper relationships with our customers through reliable performance and improved customer service quality. We are driving efficiency through business process improvements as well as optimizing existing and employing new technology. Our success depends on our people and we are investing in known. We are fostering an engaged culture that empowers our employees and encourages transparency, innovation and ownership at every level. Finally, we are exercising financial discipline to enable investment in organic growth while delivering consistent value to our shareholders. These 5 pillars work together to position AmeriGas for sustainable success. Over the past several months, you've heard Bob speak about the fact that we are focused on fundamentally transforming our operations and customer experience. This starts with our customer value and retention work stream where we are working to improve satisfaction and retention by looking at who we serve and how we may better serve them. As part of these efforts, we have segmented our customer base to better understand each group's unique characteristics and needs. This allows us to tailor our service and pricing more effectively while staying true to our stand that every customer matters. As an example, after performing a customer profitability assessment, we decided to exit the wholesale business that represented roughly 11% of our total volumes, but was largely a breakeven business. This decision streamlines our system and removes operational clutter, allowing us to focus squarely on profitable volumes. Ultimately, our goal is to improve customer retention and growth while ensuring that our resources and infrastructure are deployed where they create the most value. Next is a supply and logistics work stream where our goal is to leverage our size and get the best value in our propane supply, allowing us to offer more competitive prices to our customers while ensuring reliable service. We've made great strides in this area and strengthen the team with individuals who have additional commercial expertise. We have enhanced our forecasting analytics, reassessed the number of our suppliers and strengthen our contracting process. We have optimized our supply points and storage locations. We have also improved our hedging practices to provide greater price stability for our customers. In October, we rolled out a new routing and delivery process to reduce inefficiencies and increase reliability for our customers. Our initial pilots demonstrated that we can achieve approximately 10% savings in fuel costs through this approach. By optimizing our scheduling and route planning, we will operate more efficiently and achieve a lower cost to serve our customers. Through dynamic routing, adjusting our schedule period and enhancing use of our existing technology, we have realized broader efficiency gains we intend to capture, including fuel savings. Next, we are working to improve both response quality and customer connection in our call center operations. We are in the process of reshoring our call centers to the United States. Today, we are 40% to 50% complete with that process, and we'll have a hybrid approach as winner to ensure a smooth transition. We've also invested in training and leveraging new technology, including AI to provide better service for our customers. Finally, we are simplifying our billing process to improve clarity and accuracy, which will ultimately reduce cost center volume and free our teams to handle more complex customer needs. All of these operational improvements support our return to growth by strengthening our foundation, we expect to retain existing customers. In addition, we are creating a platform to achieve continued growth through organic customer additions. This strategy is already delivering results with 17% EBIT growth this year, and more importantly, we are expecting sustained year-over-year EBIT growth in the coming years. Each improvement we make builds on the others creating a compounding effect that will drive sustainable, profitable growth. And with that, I'll hand the call over to Sean. Sean O’Brien: Thanks, Mike, and good morning. First, let me highlight our strong financial performance for the year. UGI delivered impressive results in fiscal 2025 with adjusted diluted EPS of $3.32, $0.26 higher than the prior year. This achievement was largely driven by increased contribution from the AmeriGas and midstream and marketing segments, partially offset by reduced EPS at UGI International. AmeriGas generated strong results with EPS of $0.27 due to operational momentum and income tax benefits. The segment achieved a $24 million increase in EBIT while also benefiting from the effect of the 1 Big Beautiful Bill Act, which restored interest expense deductibility. Midstream and Marketing was up $0.12, largely due to a $66 million increase in investment tax credits associated with the RNG facilities placed into service this year, which offset the impact of lower midstream margins. UGI International declined by $0.12 due to higher income tax expense and lower margin contribution from the business. Turning to the key drivers for each reportable segment. Our regulated utilities reported record EBIT of $403 million, up $3 million over the prior year, largely due to higher total margin offset by increased operating and administrative expenses as well as higher depreciation expenses. Total margin increased $39 million, reflecting the 10% increase in core market volumes stemming from the colder than prior year weather, higher gas base rates in West Virginia and continued customer growth. During the year, the utility segment added over 11,500 residential heating and commercial customers, increasing our customer base to roughly 967,000 customers in Pennsylvania, West Virginia and Maryland. Operating and administrative expenses increased $25 million, reflecting, among other things, higher personnel expenses, general insurance costs and maintenance expenses. In our Midstream & Marketing segment, EBIT was $293 million, down $20 million versus the prior year, largely due to lower margin and reduced income from equity method investments. Total margin decreased $11 million as lower margins from natural gas gathering and processing operations as well as the 2024 divestiture of our power generation asset, Hunlock Creek, were partially offset by increased margins from gas marketing activities. Turning to the global LPG businesses. UGI International reported $314 million of EBIT, $9 million below the prior year as reduced margin and lower realized gain on foreign currency exchange contracts was partially offset by lower operating and administrative expenses. LPG volumes were down 4% from the effects of continued structural conservation and the absence of certain customers who previously converted from natural gas to LPG. These declines were partially offset by the effects of colder weather and higher crop drying campaigns. The effect of this volume decline was partially offset by higher LPG unit margins and the translation effects of stronger foreign currencies, leading to a $38 million decline in total margin. Operating and administrative expenses decreased $35 million, primarily due to lower personnel-related distribution, maintenance and uncollectible account expenses as well as from the exit of the energy marketing business. These decreases were partially offset by the translation effects of the stronger foreign currency. Lastly, at AmeriGas, the business reported EBIT of $166 million, $24 million or 17% above the prior year. LPG volumes were largely consistent year-over-year as the effect of customer attrition was offset by the effect of colder than prior year weather. Total margin increased by $10 million due to higher LPG unit margins, partially offset by lower fee income and slightly lower retail volumes sold. Operating and administrative expenses decreased $9 million, reflecting, among other things, lower uncollectible account and vehicle fuel costs. In summary, fiscal 2025 was a strong year marked by solid execution across the business. We delivered a 42% total shareholder return and year-over-year growth in adjusted diluted EPS reflecting the strength of our operating strategy. Our cash generation was robust, exceeding $500 million in free cash flow, which enabled us to return approximately $320 million to shareholders through dividends while strengthening our balance sheet. We ended the year with leverage at 3.9x for UGI Corporation and 4.9x at AmeriGas, the result of disciplined debt reduction combined with improved top line performance. Additionally, we deployed approximately $900 million of capital, primarily in our natural gas business, positioning us for future earnings growth. Our performance through the year underscores the durability of our business model, and we look to build momentum in the coming year. Yesterday, we announced our fiscal 2026 guidance range for adjusted diluted EPS of $2.85 to $3.15, which assumes normal weather based on the 10-year average as well as the current tax environment. This guidance range demonstrates our continued growth trajectory with an expected 5% to 7% increase in reportable segment EBIT on a year-over-year basis. Our core business fundamentals remain strong, and we are well positioned to deliver solid operational performance. While we anticipate higher interest expense and normalization of our effective tax rate, largely due to the absence of approximately $0.40 of investment tax credits received in fiscal 2025. We expect to deliver strong top line growth, positioning the company for long-term success. Looking at each segment specifically, in our regulated utilities, higher gas base rates went into effect this month and we anticipate similar trends in customer growth as we saw in fiscal 2025. At the Midstream and Marketing segment, we expect continued earnings growth in the business, which is underpinned by margins that are highly fee-based and with limited commodity exposure. At AmeriGas, we expect to realize year-over-year growth in both retail volume and EBIT due to the operational transformation underway. Lastly, UGI International is expected to be fairly in line with the current year as strong margin management and organic growth initiatives offset the impact of continued structural conservation. Looking ahead to our fiscal 2026 to 2029 plan. We are targeting an EPS compound annual growth rate of 5% to 7%, which is supported by a robust capital investment program of $4.5 billion to $4.9 billion. These investments support strategic growth opportunities and actions to modernize our infrastructure, enhance system reliability, and position us for long-term success across our portfolio. We continue to project a rate base growth of 9% or higher, which demonstrates the significant regulated utility investments opportunities we see ahead. This strong rate base expansion will provide increasingly predictable earnings and cash flows, further strengthening our business. From a balance sheet perspective, we remain committed to maintaining financial discipline. We are targeting a leverage ratio at or below 3.75x at UGI Corporation, while our AmeriGas business will operate at or below 4.0x leverage. These targets ensure we maintain the appropriate degree of financial flexibility in order to take advantage of attractive investment opportunities. Taken together, these metrics reflect a clear path forward. One more disciplined capital deployment, operational excellence and prudent financial management are the driving force to consistently create value. We are committed to executing our strategy, and these targets represent our commitment to you, our shareholders, for sustainable long-term growth. And now I'll hand it back to Bob. Robert Flexon: Before we open the line for your questions, I want to reinforce 3 critical takeaways that demonstrate the strength of our current position and our trajectory going forward. First, this year, we delivered record adjusted diluted earnings backed by a stronger balance sheet and enhanced liquidity position. This improved earnings profile represents the fundamental strengthening of our financial foundation that positions us for sustained success. Second, the operational and financial improvements underway at AmeriGas and expanding throughout the company are showing meaningful results and will continue to drive year-over-year organic growth well into the future. Finally, our focused approach to talent management and development along with our structured framework for driving operational change is transforming our culture as to how we operate as a business. These initiatives will work together to unlock the intrinsic value within our portfolio as we strive to deliver positive energy every day. Thank you for your time with us today, and we will open the line for questions. Operator: [Operator Instructions] Our first question comes from Gabriel Moreen with Mizuho. Gabriel Moreen: Just if I could just ask may be in terms of -- if I can ask maybe on the guidance, you gave some assumptions for what you're looking for next year out of some of your segments. It seems like the utility growth is awfully transparent over the next couple of years given the rate base growth. But can you talk about what you're expecting from midstream in the LPG businesses in the 5-year plan? Should we expect continued growth out of those businesses and just your expectations there a little bit more? Robert Flexon: Sure, Gabe. So over that planning horizon, we expect to have growth in all of the business lines overall. So we'll see low double-digit growth over that planning period. So we expect to have a continued growth rate in the businesses and our earnings over that planning horizon. Sean O’Brien: A couple of things Gabe as well. When you look at EBIT, we gave the 5% to 7% EBIT growth for this year. I want to make sure people understand that guidance is not back-end loaded. We've got consistent fairly linear growth as you go from '26, '27 to '28 into '29. And as Bob said, the nat gas businesses is more of the same. We've got that kind of locked and loaded. But one of the more exciting things is we do -- we feel very confident we've got a good outlook on the LPG side as well. Specifically, AmeriGas, we're seeing some very consistent growth in that plan over the years coming from that business line as well. Gabriel Moreen: If I could maybe follow up on the natural gas side of things. Last quarter, Bob, you mentioned all the NDAs that you had signed around some of the activity happening in your backyard maybe if you can get an update on that. And then anything, I guess, data center adjacent that might be embedded within your midstream growth plan or utility growth plan over that outlook? Robert Flexon: Yes, we still continue to see a lot of activity even more so than when we last spoke about it. We've advanced some of the projects with some interested parties. We have NDA so we can't necessarily go into it. But again, the amount of NDAs that we have with counterparties is north of 50. I mean, we've got significant discussions underway and in various stages with the various counterparties. So these things take time, but we are definitely keenly focused on it and looking to be part of all the growth that we're expected to see in Pennsylvania. Gabriel Moreen: And then if I could just squeeze 1 last one in. I think there were some media reports about potentially putting your electric utility on the market. Just wondering if you could maybe comment on that and also within the role of just larger expectations around continued portfolio optimization either at utility, midstream or LPG businesses. Robert Flexon: As you know, Gabe, we take a look at our portfolio all the time. We did a lot of that this past year on the LPG side of the business to see. Where do we have particular assets or opportunities to see there's greater value in holding or divesting. We will continuously look at our portfolio for those opportunities. I won't comment directly on anything in either the LPG side or the natural gas side. But looking at portfolio optimization continues to be one of the things that we will always consider. What I think really drives the value in this company for the next several years as we have just a lot of opportunities for intrinsic value growth. That's low risk, high return things that I'd love to find and you'll hear from Mike a little bit more this morning on what we're doing at AmeriGas, but I see that across our portfolio, these opportunities to really drive our growth rates that Sean was talking about by driving intrinsic value. Operator: Our next question comes from Julien Dumoulin-Smith with Jefferies. Julien Dumoulin-Smith: Can you guys hear me okay? So maybe just a follow-up on a few of these things. First off, look, I just wanted to understand a little bit more about the AmeriGas targets here. I mean how do you think about getting to that sub 4x. And specifically, is that deleveraging? Or is that principally going to be underlying adjusted EBITDA improvement? And how do you think about the time line to get there at those sub 4x target? Robert Flexon: Well, I'll go first, and I'll let Mike chirp in. But AmeriGas has a lot of opportunities to really drive value. And we're going to grow the AmeriGas business by winning business. We're not going to go out and buy business. But a lot of the things that Mike and team are working on have just outstanding returns. And if I think things like routing and delivery, the kind of work that Mike and his team is doing there. When you look at the NPV or something like that, it goes according to my math, in triple digits. You're talking $100-plus million NPV on that type of work because we're driving efficiencies in the business and the work Mike and team are doing in these other work streams is just going to have AmeriGas growing throughout that time period. I'll let Mike maybe comment a little bit more of what's going on in AmeriGas since it's his first call since joining about a year ago when I joined and Mike and I have a history going backwards, and I knew he was the right person to drive the improvements in AmeriGas that we're seeing. Michael Sharp: Thank you, Bob. Julien, as Bob said, there's a tremendous amount of intrinsic value here at AmeriGas, right? And to unlock that value, we have the 6 PMO projects that are in progress right now at various stages from supply to around the delivery, customer value proposition, billing. So a number of initiatives, again, that we're seeing -- already seeing the results or the fruits from those projects. So really successfully executing those projects. And we have a number of other projects that we don't advertise outside the PMO, which are also creating -- will create -- creating tremendous intrinsic value. So a lot of effort around there. As Sean mentioned, we had a 70% EBIT growth last year. We foresee this year being in that ballpark, right, the same ballpark. And then going forward, there's additional value going forward. But this isn't a onetime thing. It's an ongoing thing. There's a lot of improvement at AmeriGas. I think anyone this call, it's not a secret that the last several years here at AmeriGas has been difficult but we have stabilized the business, right? So 17% growth in EBIT. Our volumes are virtually flat this year, which is the first time this has happened in 5 years. It's been a sustained decline. So we flattened volumes and then getting all these things right, as Bob says, is there's just a tremendous amount of intrinsic value growth ahead of us. Sean O’Brien: Julien, maybe to answer that last question, I'm just going to add on real quick. So this year, we went from a leverage ratio of about 6 when you look back coming into the year to 4.9, which we're incredibly proud of. That happened in 2 ways. Mike and the team grew EBIT $24 million, 17%. Obviously, that has a positive impact. And we delevered another $200 million, came into the year with about $1.9 billion of debt exited the year close to $1.7 billion. And you were asking in the future, where do we see that going? I'm pretty confident you're going to see us in '26 start to approach or even beat a 4.5 leverage rate in AmeriGas, somewhere in that range, maybe even a little lower, and that's going to come in the same way. We're continuing to delever a little bit more. And as Bob and Mike said, we're expecting low double-digit growth out of AmeriGas in '26. So more of the same and it'll be a pretty impressive day when that leverage rate is sub-4.5. Julien Dumoulin-Smith: Excellent. And then just following up a little bit on the credits and the reset here with '26 here a little bit. Can you speak a little bit more to just the consistency ex credits and just confirm effectively that going forward, you don't have any kind of onetime tax credit items that will roll off or what have you. I just want to make sure that we're abundantly transparent on the same page about this. Sean O’Brien: Yes. Yes. I think -- and I think you've got it pretty right. I mean, there's OB3. I'll start with OB3, it's the smaller of the 2. We lost interest deductibility at AmeriGas. So there was about $0.10 in the numbers this year that related to '24 and '23. So those are hits we took in 2024 and 2023, they will not be ongoing. So there's no more detriment or benefit, right? We were just recouping some hits we took on our interest deductibility. And then the other big one, and I think you picked up on it, Julien, is the ITCs. The bulk of our RNG projects went into service this year. This was all anticipated. We optimized it a little bit, but the bulk of the projects went into service. That was very large. We talked about $0.40 of positive impact. So that kind of timing is out of the forecast. We have no expectations going forward on any ITCs, although we do have -- and we've been clear, we have about $0.09 of PTCs in the ongoing forecast so much lower level. So OB3 out of the picture and then the timing of the ITC is essentially out of the picture, you're seeing a very normalized run rate as you think about '26 through '29 coming out of the company. Julien Dumoulin-Smith: Awesome. And then lastly, the shift in CapEx relative to the $200 million increase in shareholder return, is that meant to be a reduction in utility CapEx and then an increase in dividends or pivot towards midstream CapEx. I know a lot of different moving things, but just super quick, if you can. Sean O’Brien: Yes. I mean, Julien, the way I look at it, the utility CapEx, and I know you're comparing to a prior plan, I see it pretty consistent, maybe even slightly up. So we can go off-line with you. But we pulled back a little bit in '23. But when you look at '24 through '27 and including '28 and '29, we're actually growing the utility CapEx a little bit. So we feel really confident there. One thing I'll say on that is we're a few miles away from completing our cast iron program. So that's a pretty big milestone for the team. You do see a little more midstream capital coming into the equation, and I think you've picked up on our commitment to the dividend in the out years as well. So I think you've got a model pretty quickly, but pretty accurately. But we do see the utility capital at or above the levels that we would have had, I think the last time I gave guidance on that. Operator: Our next question comes from Paul Fremont with Ladenburg Thalmann. Paul Fremont: I just wanted to sort of follow up on the 45Z credits, is the first year that you're going to be collecting that in '26? Or did you collect any in '25? Robert Flexon: It will be '26 will be the first time. Paul Fremont: And then the other question I have is, were you using sort of a negative credit score to calculate the 45Z credits going forward? Robert Flexon: Yes. Not sure about that one. We'll need to get back to you on that. Operator: That concludes today's question-and-answer session. I'd like to turn the call back to Bob Flexon for closing remarks. Robert Flexon: Well, thank you for dialing in. And just to reiterate, on our year, we had a very strong fiscal year '25, adjusted EPS $3.32, record earnings for us. Really love seeing the EBIT growth of 17%. Our leverage getting back in line and, of course, the TSR to our shareholders of 42%. So a great year for us. We continue to be focused very much on our operations across the board. We've got great progress in AmeriGas leading the way on improvement. So that's going to be driving our growth in these future years. Talent management, we've got new people in the right spots and combined with the existing workforce, we've got the right people to bring this forward. So I really look forward to more discussions with you in the future. We'll see a lot of intrinsic growth, we'll be capitalizing on what's happening in Pennsylvania with the data center investments and the future looks very bright for us. So with that, thank you very much for your time, and we'll be speaking to you more in the future. Thank you. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Good morning. Thank you for standing by, and welcome to Buckle's Third Quarter Earnings Release Webcast. [Operator Instructions]. Members of Buckle's management on the call today are Dennis Nelson, President and CEO; Tom Heacock, Senior Vice President of Finance, Treasurer and CFO; Adam Akerson, Vice President of Finance and Corporate Controller; and Brady Fritz, Senior Vice President, General Counsel and Corporate Secretary. Before beginning, the company would like to reiterate its policy of not providing future sales or earnings guidance. All forward-looking statements made on the call are pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially due to risks and uncertainties described in the company's SEC filings. The company undertakes no obligation to publicly update or revise these statements, except as required by law. Additionally, the company does not authorize the reproduction or dissemination of transcripts or audio recordings of the company's quarterly conference calls without its expressed written consent. Any unauthorized reproductions or recordings of the calls should not be relied upon as the information may be inaccurate. As a reminder, today's webcast is being recorded. And I'd now like to turn the conference over to your host, Tom Heacock. Thomas Heacock: Good morning, and thanks for being with us this morning. Our November 21, 2025, press release reported that net income for the 13-week third quarter ended November 1, 2025, was $48.7 million or $0.96 per share on a diluted basis compared to net income of $44.2 million or $0.88 per share on a diluted basis for the prior year 13-week third quarter, which ended November 2, 2024. Year-to-date net income for the 39-week period ended November 1, 2025, was $128.9 million or $2.55 per share on a diluted basis, compared to net income of $118.3 million or $2.35 per share on a diluted basis for the prior year 39-week period ended November 2, 2024. Net sales for the 13-week third quarter increased 9.3% to $320.8 million compared to net sales of $293.6 million for the prior year 13-week third quarter. Comparable store sales for the quarter increased 8.3% in comparison to the same 13-week period in the prior year, and our online sales increased 13.6% to $53 million. Year-to-date net sales increased 7.2% to $898.7 million compared to net sales of $838.5 million for the prior year 39-week fiscal period. Comparable store sales for the year-to-date period increased 6.3% in comparison to the same 39-week period in the prior year, and our online sales increased 11.6% to $142.9 million. For the quarter, UPTs decreased approximately 1.5%, the average unit retail increased approximately 4% and the average transaction value increased about 2.5%. Year-to-date, UPTs decreased approximately 1%, the average unit retail increased approximately 3% and the average transaction value increased approximately 2%. Our gross margin for the quarter was 48%, a 30 basis point increase from 47.7% in the third quarter of 2024. The current quarter margin expansion was a result of 40 basis points of leverage buying, distribution and occupancy expenses, partially offset by a 10 basis point reduction in merchandise margins. Our year-to-date gross margin was 47.4%, up 50 basis points from 46.9% for the same period last year. The year-to-date increase was the result of a 20 basis point increase in merchandise margin, along with 30 basis points of leverage buying, distribution and occupancy expenses. Selling, general and administrative expenses for the quarter were 29% of net sales compared to 29.1% for the third quarter last year. And year-to-date, SG&A was 29.5% of net sales compared to 29.6% for the same period in the prior year. The third quarter decrease was due to a 35 basis point reduction related to nonrecurring digital commerce investments made a year ago, a 35 basis point decrease in store labor-related expenses and a 5 basis point decrease in certain other SG&A expense categories. These decreases were partially offset by a 50 basis point increase in incentive compensation accruals and a 15 basis point increase in G&A compensation-related expenses. Our operating margin for the quarter was 19% compared to 18.6% for the third quarter of fiscal 2024. And for the year-to-date period, our operating margin was 17.9% compared to 17.3% for the same period last year. Income tax expense as a percentage of pretax net income for both the current and prior year fiscal quarter was 24.5%, bringing third quarter net income to $48.7 million for fiscal 2025 compared to 44.2% -- $44.2 million for fiscal 2024. Income tax expense as a percentage of pretax net income for both the current and prior year, year-to-date periods was also 24.5% bringing year-to-date net income to $128.9 million for fiscal 2025 compared to $118.3 million in fiscal 2024. Our press release also included a balance sheet as of November 1, 2025, which included the following: Inventory of $165.8 million, which was up 11% from the same time a year ago and $371.3 million of total cash and investments. We ended the quarter with $162.3 million in fixed assets net of accumulated depreciation. Our capital expenditures for the quarter were $11.1 million and depreciation expense was $6.2 million. For the year-to-date period, capital expenditures were $34.5 million and depreciation expense was $18.2 million. Year-to-date capital spending is broken down as follows: $30.4 million for new store construction, store remodels and technology upgrades and $4.1 million for capital spending at the corporate headquarters and distribution center. During the quarter, we opened 2 new stores and completed 6 full store remodels, 3 of which were relocations in new outdoor shopping centers. Additionally, post quarter end and during November, we have opened 2 new stores and completed 2 store relocation projects in advance of the holiday selling season, which brings our year-to-date count through today to 6 new stores, 17 full remodels and 3 store closures. For the remainder of the year, we anticipate completing 4 additional full remodeling projects. Buckle ended the quarter with 442 retail stores in 42 states compared to 445 stores in 42 states as of the end of the third quarter last year. And now I'll turn it over to Adam Akerson, Vice President of Finance. Adam Akerson: Thanks, Tom, and good morning. Our women's business continued its acceleration in year-over-year growth rate during the quarter, with merchandise sales increasing about 19%, which was on top of 3% same week growth a year ago. For the quarter, our women's business represented approximately 51% of sales, which compares to 47% last year. This growth continued to be led by the performance of our denim category with women's denim increasing approximately 17.5% and average denim price points increasing from $81.15 in the third quarter of fiscal 2024 to $86.95 in the third quarter of fiscal '25. This AUR increase continues to be primarily the result of strong growth in our Buckle Black Label, which has outperformed the total denim business, along with strong growth of other higher price point national brands. Complementing our strong women's denim selection, our team continued delivering compelling trends and fashions for our guests, for the quarter, we achieved growth across all women's merchandise categories with the most notable growth in knits and sweaters, casual and fashion bottoms and accessories. In total, average women's price points increased about 6% from $49.95 to $53.05. On the men's side, we were pleased to see growth for the second consecutive quarter with men's merchandise sales up about 1% against the prior year, representing approximately 49% of total sales compared to 53% in the prior year. This growth was also led by our men's denim category, which was up about 1% for the quarter. Average denim price points increased from $88.10 in the third quarter of fiscal '24 to $88.15 in the third quarter of fiscal '25. In other categories, we saw nice performance in both our short and long sleeve tees business in a variety of lifestyles as well as strong selling of our vests, jackets and accessories. For the quarter, overall average men's price points increased approximately 2.5% from $54.30 to $55.70. On a combined basis, accessory sales for the quarter increased approximately 7.5% against the prior year, while footwear sales were essentially flat. These 2 categories accounted for approximately 10% and 4.5%, respectively, of third quarter net sales, which compares to 10% and 5% for each in the third quarter of fiscal '24. For the quarter, average accessory price points were up approximately 3.5% and average footwear price points were up 4.5%. Also on a combined basis, our kids business continued its strong growth trend, increasing approximately 22% year-over-year. This continues to be a category where our teams are excited to keep building the business and selection for our guests. For the quarter, denim accounted for approximately 46% of sales and tops accounted for approximately 29%, which compares to 46% and 29.5% for each in the third quarter of fiscal '24. As previously mentioned, with strong selling and trends in many of our brand styles, our private label business decreased as a percentage of our total mix for the quarter. For the quarter, private label represented 47.5% of sales versus 48.5% for the third quarter of fiscal 2024. And with that, we welcome your questions. Operator: [Operator Instructions]. Our first question comes from Mauricio. Mauricio Serna Vega: This is Mauricio Serna from UBS Research. First, maybe could you speak on a high level what you're seeing on the health of the U.S. consumer coming into the holiday season. There's been some talks about maybe some pressure on the lower income consumer. So I was interested in hearing from your side, what have you been seeing? And then also, could you speak about the denim business? I think you talked about the momentum in women's being up 17%. What do you -- how do you -- how are you thinking about the sustainability of this growth? And maybe could you talk about what you saw in men's denim demand over the quarter? Dennis Nelson: Thank you for the question. On the consumer, we haven't seen a big change in our stores. I mean the team and guests seem excited about our product response. There's probably a slight caution in some as our units per sale are off very slightly. But overall, we feel good about it. And if the guest is excited about the product and the quality we have, it's been going pretty well. The ladies denim business continues to be excellent. There's still a lot of variety of styles and fits. We've added some of our branded sources to the mix, which has added some higher price points, have been good for the business. And our fashion brands and our private brands continue to sell well. So we're optimistic about the gal's denim business throughout the rest of the year. On the men's denim, our private label brands are consistent and doing well, having good sell-throughs. We haven't seen as much from other brands adding to the private brands mix, but feel our denim business is solid in men's as well. Operator: There are no further questions in queue. [Operator Instructions]. Okay. It looks like we have another question from Mauricio. Mauricio Serna Vega: Great. Just on the other thing that I wanted to ask was the merchandise margin. It was down 10 basis points. Maybe could you elaborate on what were the puts and takes behind the merchandise margin trend in this quarter? Thomas Heacock: Thank you, Mauricio. This is Tom. Yes, merchandise margins were down 10 basis points for Q3 and up 10 basis points for Q2. So I think if you look year-to-date with everything going on with tariffs, we feel really strong about where we're at from a merchandise margin perspective. And we've been operating at a high level of merchandise margins for a long time and have continued to improve that. So both Q1 and Q2 were all-time highs merchandise margins and we were off just a little bit in Q3. So I feel really good about where we're at. The biggest drivers are really -- Adam called out the decrease slightly in private label business with some of the brands performing really well, especially in women's denim. That's the biggest driver probably of the shift this year and especially Q2 compared to Q3 and then a slight increase in costs with tariffs and other flow-throughs. Operator: There are no further questions in queue. [Operator Instructions]. Okay. It looks like there are no further questions. I will now turn the call back over to Buckle for any closing remarks. Thomas Heacock: Thank you for your participation today. It will be a quick call, but I wish everyone a wonderful weekend and a wonderful holiday season. So thank you for joining us today.
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