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Louise Curran: Good morning, everyone. I'm Louise Curran, Head of Investor Relations at Johnson Matthey, and a very warm welcome this morning to our half year results presentation. Thank you, everyone, for coming along to the Andaz today, and welcome to those joining on the webcast as well. A little bit of admin before we start, if you could please turn your phones off or on to silent. And I'll point your attention to the cautionary statement. I'm very pleased today to welcome Liam Condon, Chief Executive Officer; and Richard Pike, our CFO. In terms of agenda, we'll follow the usual format. Liam will run you through an overview. Richard will then take you through the financial results, and then Liam will cover our strategic progress in the half. And we'll, of course, leave plenty of time at the end for Q&A, both in the room and then on the webcast. And with that, I'll hand over to Liam. Liam Condon: and big congratulations to you on your new role. And a big thanks also to your predecessor, Martin Dunwoodie, who've done great work for us. A warm welcome to everybody here in the Andaz Hotel. I'm really happy there's so many people here, so we can get some heat into the room because it was a very cold morning. And a warm welcome to everybody who's joining us online today. So I'm just going to hit some of the highlights of the half and then talk about some of the key priorities that we're working on that we're going to give you more color on throughout the presentation today. So first of all, I think the standout was the underlying operating performance increasing by 38%, an 11% increase in Clean Air and a 33% increase in Platinum Group Metals. So in the environment we're in, I think, a very strong overall performance and a good indication of the progress we're making here. Secondly, -- and Richard will talk extensively about this. You will see very good progress on our implementation of our new cash-focused business model. We had a significant cash outflow in the first half of last year. This time around, you will see a -- not a significant, you'll see a significant turnaround and a small inflow. So that's quite a big movement. And there is a lot more to come in the second half and then, of course, in the subsequent years. And the building blocks behind that, Richard is going to talk to you about. And the third point, which is very important as well, the sale of Catalyst Technologies to Honeywell is on track. We had said that, that will close in the first half, calendar half of '26, and that remains the case. And once we close that deal, as we said, we'll be returning GBP 1.4 billion to shareholders upon closure. A final point I'd make is we did -- we have made some announcements this morning around organizational changes. And I'm sure we'll -- I'll be talking a little bit about this later on, what the rationale behind that is. I'll make it clear for the purpose of today's presentation, Richard is in his CFO role only. When we get to the Q&A, you can gladly ask him about his motivation for the new role going forward. But first and foremost, it's the CFO role for today's presentation. So a couple of the top or a few of the top priorities that we have for the next 6 months for the full year and then subsequently and just the progress we're making around that. I've already mentioned the sale of Catalyst Technologies, and we'll unpick that a little bit later on. So what still needs to happen. But here, we're fully on track for that closing in the first half of calendar '26. Second one, we've spoken extensively about our ambition to significantly increase the margin of Clean Air. And here, you can see, again, very strong progress, a 200 basis point increase in the margin for Clean Air, an increase in absolute profitability. So despite declining volumes, this is a really strong performance and leaves us completely on track for our target of 14% to 15% margin of -- by the full year this year. And with that, on track for our ambition '27-'28 of getting to basically 16% to 18% margin. Very strong performance from Platinum Group Metal Services with 33% increase in underlying operating profit. This was clearly helped also by Platinum Group Metal pricing, the trading business -- but it's also refining, which has been doing well. And it's also efficiencies, which is where we've simply been running the business more efficiently. So a strong underlying performance here. Our new PGM refinery, which is a huge investment. And I think against the background of the importance of critical minerals, it's hard to underestimate how important this is, both for JM, I think the U.K. and globally. This is the world's biggest refining plant for platinum group metals that we're building in Royston out beside Cambridge. This is on track to start commissioning in -- by March of 2026. It's a very big capital project. It's about GBP 350 million capital expenditure here. And we do have a small delay of a few months. But because we have our ongoing refinery, our old refinery, our 60-year refinery, still running in parallel, this has no impact on our guidance or our ability to deliver to our customers. So in the bigger context, it's a smaller delay, but important to flag it, but it's a few months. On Hydrogen Technologies, we are on track. And again, this is now almost end of November. We're very much on track for breaking even by the end -- or have run rate breakeven by March '26. This is something that we had committed to, and we have line of sight of that. And we're confirming that again today. I think there was some skepticism that we might get there, but we absolutely have line of sight to that. And that's why we are reconfirming that we will break even with that business or have run rate breakeven by March '26. And then the final point, and again, Richard will talk to this extensively, is the significant improvement in free cash flow and the building blocks going forward to give you that confidence that we will be generating GBP 250 million free cash flow going forward on a consistent basis. And what's behind that, Richard will explain. So they're kind of the highlights. We'll unpick different elements of this as we go through the presentation. But first, I think it would be helpful to go through the detail of the half year results, and then I'll come back and share some more color on these strategic priorities. And with that, Richard, over to you. Richard Pike: Thanks, Liam. Good morning, everybody. So building on Liam's introduction, just to remind everybody, we've now treated Catalyst Technologies discontinued. So the results that we'll present are excluding CT. Obviously, still a very much an integral part of the group until we affect the sale to Honeywell, but all the numbers in here are talking about essentially the remaining business going forward. So as Liam said, I think we're really pleased with this in terms of -- against the targets we set out in May, actually, we think we've made really strong progress pretty much across the board against where we said we would focus. So you can see that despite sales being modestly down as a result of primarily Clean Air volume decline, basically, you're seeing strong improvement in underlying operating profit significantly because we're focusing on the things that are within our control. That feeds through to earnings per share. And to my mind, and I will, as Liam said, spend quite a bit of time on this. I think for me, possibly, despite those headline operating profit numbers, which I think are really quite impressive in the current environment, I think the free cash flow focus in the modest time we've actually started to shift gear on this is moving very well in the right direction. Our net debt is up. That's primarily because CT had cash outflow in the first half and the dividend. So -- and we've also had a significant stock build in our U.S. refinery because we took it down for a maintenance shut in October. So despite the stock build and despite metal prices being higher, I actually think this is all quite a good news story, and I'll talk about how that's going to play through in the second half. As a result of which we're maintaining our dividend at 22p per share. In terms of looking at the P&L, I mean, I've just touched on the highlights there. The only real thing I go to draw out is the interest charge you can see is higher year-on-year. That's because we had a couple of one-off nonrecurring items in the prior year. This level of interest charge gives you a feel for the run rate of where interest cost is on an ongoing basis. Coming down to the businesses. So in Clean Air, pretty much if you look across the piece in terms of how we're performing. LDD pretty much in line with market. Europe has been difficult for us this year, but pretty much in line. LDG, worse than market. But if you recall, several years ago, we made a shift from gasoline towards diesel to the primary focus. So we came out of a number of those. We've had platforms that were on running off over time, and this is the picture you're seeing that running off. In more recent times, we had an increased focus primarily towards hybrid. You've seen that in some announcements, but they take a while to come through. So sort of you've got a gap between when we announce something and it's in the numbers. So there's no surprises in here from our point of view. And actually, HDD, we're actually start ahead of the market. So in the area that we consider is likely to continue to grow going forward and where we're strongest in terms of market share and positioning, we're actually doing better than the market as well. Over and above the sales position, basically, what you can see here is the strong focus on our costs. I said basically the full year, if you looked at our plan to get us from the sort of 12% last year into the mid-teens this year, a lot of that will be about overhead reduction. You can see that coming through in terms of the margin improvement. Also the operational excellence, commercial excellence, those areas are getting more ingrained in the organization. So I think this gives us a strong belief that actually we're heading towards that 16% to 18% margin range. PGMS, good half. We had a weak first half last year. We have been benefited from higher metal prices this year versus last year. And actually, it's been a more volatile trading environment. So the trading side of our business benefits when it's more volatile. So those things have been through, but pleased there in terms of year-on-year improvement. And there's a lot of focus at the moment. Liam touched on, obviously, the build of our 3CR facility. That's critical for us going forward. We've still got a couple of years of running this old asset. So focusing on consistency of operations and actually maintaining our assets in a reliable fashion as possible is really key to Liam's point around delivering for our customers. That's where the strong focus is in the side of the business. Hydrogen, as Liam just said, you can see here improvement year-on-year in terms of the run rate. For those eagle eye of you, you'll notice that our losses in the first half of this year are higher than the second half of last year. That's because we have a weighting in terms of when we recognize our revenues, it's second half weighted. And so we've got line of sight, very clear line of sight in terms of our contractual position with our customers, see what's coming through, hence real confidence about that getting to a breakeven run rate by the end of the year. And as I said, despite actually the profit number being in really good shape, this is probably where I'm most pleased actually in the first half. So you can see, obviously, with a starting point of profit improvement, that's a good starting point for our cash generation. But the really important thing here is that movement in working capital. And these things take a while to bed down. I talked at the year-end about the fact that actually, there's quite a lot of areas which are not rocket science. But in an organization that's not particularly being cash orientated, some of these things are sort of ingrained processes that need to change. And we've started with payables. I'll come back to that. There's more to do on receivables and inventory. Some of those things take longer. But actually, what you can see here is actually a shift in focus. There's still a lot to do here. This is nowhere near job done. It's a modest cash inflow in the first half. But given we have circa GBP 200 million of stock build associated with the refinery shutdown in October, and we've had higher metal prices, I actually think this is really positive because that stock build will unwind in the second half, and we've got ongoing focus in other areas. So to touch on those actions, particularly around the cash side of the to actually replicate the CT profits that sort of lost with the sale, we've said that we need to take a significant amount of overhead out. We used to be a much bigger group. We still have some overhead that sort of reflects the situation of the legacy of us being a bigger group. We're losing CT, a much more simple group. And actually, our overheads need to reflect that. We're making progress. And a decent chunk of that is on the Clean Air side. We talked about the fact that the most of the difference between the 12% last year and 14% to 15% this year was going to be about overhead reduction. You can see that actually Clean Air is already delivering on that and more to come in the second half. And a similar amount is coming through on the group side of things. And as Liam will come back to the organizational structure, as we simplify our group structure, simplify the way in which we run things, that will feed through to greater levels of overhead reduction going forward. CapEx, we're still at elevated levels, and that's going to continue through this year and next year, primarily because of 3CR, but also other areas within PGMS infrastructure, which feed into 3CR. And so our target of getting down to GBP 120 million, which is close to depreciation, we're on track for, but you're going to see that higher level of CapEx. And that's why, to a certain extent, not just that reason, but why it's quite important we're focusing on working capital in the near term because that working capital saving offsets some of that higher CapEx in the next couple of years. If you think about all of this coming together, what we said at the year-end was we'll sell CT, well on track, as Liam said, and he'll come back to that. Basically Clean Air, get it to 16% to 18% margin, well on track, get 3CR built. Yes, we've had a couple of hiccups, if you like. So we had industrial action with one of our contractors. And that's led to lack of productivity in terms of the people on site. So that pushes out the schedule and so on and so forth. I think what's been really important since the summer, our team where we changed the number of members, the general contractor and the subcontractor with in distraction have worked really hard to get to a schedule that everybody believes in, the detailed level of work that underpins that, everybody signed off on. Everybody is holding hands and actually intent actually we're really confident about the plan we've got in place. And if we actually generate the working capital improvements we promised for the next couple of years, that will actually underpin our cash generation while we're still spending more CapEx to then get to a situation of lower CapEx going forward, which underpins why we get to the GBP 250 million of sustainable cash flow from '27, '28. We've talked about this a few times, but just to reiterate on the shareholder return side, on the GBP 1.4 billion that we're returning, I spoke to pretty much every shareholder through the year-end process about where preference was. I think everybody recognizes that whilst there might be a preference in some areas for share buybacks, it would take us about 6 years to return this through share buybacks. So that's not realistic. So the majority is going to come back through a special dividend with the share consolidation and then the balance going back through share buybacks probably during the course of calendar '26. And then ongoing from '26, '27 onwards, we promised about GBP 200 million of returns from there. Depending on how the share buybacks play out, share consolidation and so forth, they also determine how many shares we have an issue and things. But I think you're looking at a situation where we'd like to have about 1/3 dividend, 2/3 share buybacks from '26, '27 onwards. And then outlook for the year, my last slide, basically. We're in good shape. We're very much expecting to deliver on our promises for the full year. PGMS will be down year-on-year in the second half. We've touched on this before. There's low metal recoveries, there's higher maintenance costs given the age of the asset, but nothing different to what we actually said at the year-end. So we feel we're in good shape for the year. We feel we're in good shape in terms of delivering on our '27, '28 targets. And on that, I'll hand back to Liam to give you a bit more detail. Thank you. Liam Condon: Great. Thanks a lot, Richard. So if we jump in on the strategic topics, the first one, which is top of mind is probably the Catalyst Technology sale. So what still needs to happen on this? Well, we have a binding sales and purchase agreement with Honeywell, which is publicly available, where also what needs to happen is listed in that document. But in essence, it's 2 things. One is the regulatory approvals. We need regulatory approval in 12 jurisdictions. We have 11 and the 12th is progressing smoothly as planned. So we believe that's very much on track. And then there's the carve-out, which is 2 elements. This is basically the legal reorganizations which is very much on track. And then the transitional service agreements and long-term supply agreements to ensure that customers and employees are looked after, and that's all very much on track as well. So they are the 2 big elements that need to happen for us to close. And then based on where we are today and the very good collaboration with Honeywell, our expectation is, as we have previously stated, that we will close in the first half calendar of '26. I think it's important to note that the business has been -- had a weaker performance or the CT business had a weaker performance versus prior year, significantly weaker. This is completely market related. And if we look at it from a market share point of view, the CT business has maintained market share in every key market and in some instances, even improved the overall market share. So the underlying performance from a market point of view is very good. It's just the market is pretty weak right now. We have continued to win new significant new sustainability-related projects. These are typically in the sustainable aviation fuel space. So the pipeline remains very, very robust. And with that, the growth outlook for that business remains very strong. So that's the overall situation for Catalyst Technologies and the sale to Honeywell, which is very much on track. Now if we go to new JM then without CT, we had outlined previously what we're really doing here is focusing on our core competency of Platinum Group Metals. This is what this company has done for over 200 years. We would consider ourselves world champions as far as Platinum Group Metals is concerned. We don't think there's anybody who can manufacture, trade and recycle as well as we can, and that's what we're really known for. And we build businesses that typically use Platinum Group Metals, and there are multiple applications. The biggest is, of course, Clean Air, catalytic converters. But within the PGM business, there's many other industries that are served and serviced by the PGM business. And as we outlined, we have a big opportunity now with a more streamlined group to run the business much more efficiently. To be very honest, we don't -- you don't need a big corporate center if you have 2 businesses that are very closely interlinked with each other, the PGM and the Clean Air business. So -- and I'll explain this a little bit later when we talk about organizational design, there's plenty of opportunities for us here to further streamline how we run the business to be simply more successful in the market. Now if we go to the first of the big businesses in here. Just a reminder again of our ambition, we said by '27, '28, we want to achieve at least GBP 2 billion in sales and a 16% to 18% margin. You'll recall in 2022, we were at a margin of 8.7%. This half, you can see that we're up to 12.4%. -- so a really significant jump in the last few years. And we have line of sight to the 14% to 15%. And with that, we think from a trajectory point of view, we're very much on track here. Now if we have a look at how we're doing from a winning point of view, and Richard explained a little bit what's happening in the market. Question is that kind of at least GBP 2 billion, what's the confidence level? Well, at least 90% of that business has already been won. So that, I think, should underpin our confidence in this business. So very strong overall win rates. And what's, I think, been really encouraging recently because we've been focusing on the hybrid space, we've actually started winning business with leading Chinese OEMs who are typically the leading hybrid players. And if you can win with a Chinese OEM in China, then your -- both your technology and your cost must be really good. And this is not just servicing then the Chinese market. This is also for export to the rest of the world. So this is actually a significant step forward and gives us a lot of confidence in the portfolio and again, our ability to win in this space. Lots of progress on partnerships with our strategic customers. And the point that I won't elaborate on much this year, but right now, but rather talk about it more extensively at the full year results. We do have a small kind of almost like a start-up business within Clean Air. And I think there's a general perception that Clean Air is maybe sunset industry sunset business. But there are elements that are growing, like, for example, the hybrid business, like, for example, the heavy-duty diesel business. But there's also something what we call Clean Air Solutions, which is using the core emissions technology of Clean Air for nonautomotive type use cases, typically stationary use cases. And one -- and the example that's mentioned here is we've just won several multiyear contracts for emission control technology for engine systems for data centers. And of course, data centers is a hyper growth area right now. Most of those data centers are fueled by fossil fuels. So they require emission control technology. Otherwise, you're going to have toxic fumes. And that's where our core competence is again. So this is an area that's growing, and we'll unpick that further at full year. But I just want to highlight, there's -- within Clean Air, there's enough opportunity in here to give us a lot of confidence about the targets that we've set for '27, '28. Now beyond winning commercially, we do continue to drive efficiency. This is really important for us. This is also why our margin has been improving. There's been a significant reduction in overheads, especially SG&A, some R&D as well. And as we do that and as we're winning business, I think where we're really encouraged is our Net Promoter Score has actually increased significantly. This is almost unheard of that the Net Promoter Score is up 15 points. This means at a point in time where we are improving our profitability, our customers are thinking more highly of us. That's not necessarily to be taken for granted. And it's really a sign of how much value the commercial teams together with the tech teams are adding for our customers. So I think really strong progress here. And we will continue on the journey of footprint optimization. When we started in '22, we had 50 production lines. We're down to 21 now. And that journey of consolidation between production lines and site consolidation will continue, and it continues at the pace that the market is evolving. The market evolves faster in a certain direction, we can move faster from consolidation or we move slower. So we just adapt to what's happening in the market. But all of this gives us, again, the strong confidence that we can -- we'll get the margin up to 16% to 18% by '27, '28. So that's Clean Air. If we go to Platinum Group Metals, -- and again, in a world that's very concerned about critical minerals, this is a jewel in the crown, I think, for the U.K., but for -- basically from a global point of view to have the know-how and portfolio and the people that we have for this business, very profitable business that has a big moat around it. And we've given out the targets, the guidance, GBP 450 million sales by '27, '28 and a circa 30% operating margin. You can see there's 3 parts to this business. In essence, it's producing products, so typically alloys, anything that uses PGMs for multiple different industrial and other applications might be for life science, might be for defense. There's many different use cases, and we produce products often customized for our customers then. We also refine. We're the world's biggest refiner and recycler. And again, this -- the vast majority of that happens in the U.K. currently with a very old refinery and in future with a brand spanking new refinery, which will be absolutely state-of-the-art. There will be nothing else out there in the world like what we will have then when this is complete, which is relatively soon. And we also have a trading business. So we buy and sell and manage metals on behalf of our customers. And that's important because this stuff is super valuable. A normal -- an average industrial company doesn't really have the infrastructure from a security and a logistical point of view to actually manage precious metals. We have all of that. And this, again, this is a service component that we offer for our customers. So fantastic business. I mentioned both myself and Richard have mentioned how important the new refinery is. And we're very -- we're on track now to start commissioning by March of '26. This is really important. Richard already elaborated, there was some industrial action that's cost us a few months. But it means we will still be fully operational within the calendar year '27. And to underpin that confidence about being fully operational, we also have a clear plan to start decommissioning the old refinery within '27 as well. So by the end of '27, we'll start decommissioning the old refinery. And we always said we would only start decommissioning when we're 100% certain that the new refinery is up and running. And from everything that we can see today, we have complete line of sight of that. As Richard said, we have our best teams on this. Everyone has joined hands. It's got the utmost focus, and we're very confident about the schedule that's in place now. And thankfully, we still have the old refinery to keep supplying customers as long as this one is not up and running, but it will be up and running in calendar '27. And the old one, we will then start to take down. So that's the overall situation for 3CR, and that's why we're very confident that this will be a big, big benefit for us going forward. Now besides the business, I mentioned earlier on that we have an opportunity to basically streamline how we run the business. And again, if you think about the situation, CT is moving out. With Clean Air and PGMs, we have 2 businesses that are intricately linked through Platinum Group Metals. They all use lots of Platinum Group Metals. We manufacture products. We also recycle products on behalf of our customers. We manage their metals. So there's a lot of synergy in here. So we gave a lot of thought together with our Board about how we could set ourselves up for success in the future and really accelerate progress. And what we've agreed on is a new streamlined organizational model. So we're moving away from divisions and sectors with individual CEOs. And given that we'll only have 2 businesses that are intricately linked, we're going to move to an operating model where we have one Chief Operating Officer who can ensure that we're tapping into all the synergies across those businesses. And basically, we'll move from 9 people on the Executive Committee down to 6. And I think this is -- it's a good reflection if you think where our business was and is, it will be a smaller business going forward. So the streamlining should really start at the top. This is a team that's been working together very intensively and very successfully, particularly since this summer on developing the new strategy, the new JM going forward. We have a lot of fun together. And based on kind of how we're all interacting with each other and looking at the strengths of different people, what we've decided is Richard will become the Chief Operating Officer. And for those of you who are not so familiar with Richard's extensive curriculum vitae, he has a lot of experience running operations in other industrial companies, both on the manufacturing and the recycling side. He's super passionate about operations. He loves getting into the detail. And he wants to make sure that we can deliver on all these cash commitments that we're making. So he wants to be on the front line managing this. So we think this is a great move. And we're really lucky within JM that we have Alastair Judge, who many of you possibly know. Alastair is the current Head of Strategy and Operations. Alastair used to be the Interim CEO for Clean Air. So he knows Clean Air intricately, and he used to be the CEO for Platinum Group Metals. So there's nobody who kind of knows the business better than Alastair. What's important is Alastair is also a chartered management accountant. And for the vast majority of his working life, he's worked in financial roles. He was intricately involved in -- together with the entire team in developing the cash-focused business model going forward. So we think it's a great combination to have Alastair as the new CFO, Richard as the COO and then everybody else on the team who's a fantastic team, all working really closely together to deliver on our commitments. So we're absolutely convinced that this organizational model will help us to accelerate progress, and this is the way we're going. Maybe on that, because we have Anish with us here today in the audience, let me say Anish will be leaving. There was an announcement made today. Anish is taking up a great new role. He'll become Group CEO in another company. And that's a fantastic development. I'm super happy, Anish, for you personally. Anish has really strengthened Clean Air. And I think the most important thing Anish has done, he's developed a great team. There is a fantastic team within Clean Air. They're all ready to step up and they're all ready to support Richard. So I think this is -- for all of us, it's actually a really good news story. So big thanks to you, Anish, on behalf of everything that you have done for us. What's not on here is CT. The CT CEO will continue to report to me directly, but this is the new JM going forward. So will not be a member of this executive team and will continue to report to me as long as CT is within JM, which is up until the first half of the calendar year '26. So I hope that's relatively clear. Now this team also is -- has been placing a lot of emphasis on developing the right culture for us to be able to succeed with our commitments. And just to give you a few data points on how we're doing on that front, this is really important for us that we have a culture that really enables implementation of the strategy and not one that's holding us back. For us and particularly, I think anybody in the process-related industry, what's really important, everything starts with safety. Every meeting starts with a safety moment, really important for us. But it goes deeper at JM when we think about safety, it's about looking after each other. It's about taking pride in your workplace. It's about caring. And if you're -- I just have a fundamental belief if your safety stats are improving, probably your culture is going in the right direction. It's a sign that people care. It's a sign that they're looking out for each other. It's a sign they're taking more pride in their work. That's really important. And we've seen a significant improvement in our safety stats. We know we still have a long way to go. We need to continuously improve here, but it's important that we're seeing progress, and we are seeing progress here. Second one, and I've already mentioned Clean Air. It's not just Clean Air, all of our businesses. We've seen a significant improvement in customer satisfaction as measured by Net Promoter Score. Again, 13 points up for JM in total. That's an almost unheard of increase. in a very difficult market environment where everybody is dealing with lots of issues, our customers are thinking much more highly of us because they can see the value that we bring to them. So -- and this is really important for us that we have the customers front and foremost, we track this rigorously. Third point, data point, also super important, employee engagement, which is typically an early indicator of performance. There's usually a lag between where your engagement is and then how your performance turns out. And typically, when you have lots of change, external change, internal change, your employee engagement will drop typically. We've actually seen -- we've just measured this in October. We do this every 6 months. And we've seen another good increase in employee engagement. And this is over 80% of all of our employees reply to this survey. So this is a really big population and a good increase in engagement. So again, these are all data points that tell you something is improving and give us confidence that we can continue to drive performance. We've aligned incentives. We never had targets for cash in the past. We always -- it was always underlying OP and margin where typically and sometimes sales would typically be the KPIs we would use. Now we also have clear targets and incentives for cash so that people have skin in the game for what we have committed to externally. And that, we believe, is also helping us drive performance, which you can see then in the results that we've delivered in the first half. So just a reminder of what you can expect from us by '27, '28, at least mid-single-digit CAGR in pro forma operating profit going forward for which we're very much on track then this year so far. Annualized free cash flow of at least GBP 250 million and returns, as Richard outlined, returns to shareholders of at least GBP 200 million per annum. So that's what you can expect from us. Tracking progress, as usual, we give some milestones that hopefully enable you beyond the financial reporting just to be able to hold our feet to the fire because we need to do that for ourselves, but we want to be transparent about it. These are the areas that we think matter the most. And we give you a kind of a traffic light, and we'll do this every half year. And whenever there's any significant change to any of these variables, we will update you. As you can see, everything is on track. We've put the refinery on yellow because we have a few months delay. But again, this has no impact whatsoever on our guidance or our financials because we have the ongoing refinery, which will ensure that our customers continue to be supplied. So that's overall the strategic milestones. We'll continue to update you on that. And then just in summary, again, we think we've had a good start with the new model, significant increase in profitability, turnaround in cash with lots more to come and the sale of Catalyst Technologies on track. And we believe the organizational changes we're making will actually help us accelerate progress. So we have a lot to do. We have a lot to look forward to. And now we look forward to your questions. Thank you very much. Louise Curran: So thank you, Liam and Richard, for the presentation. We'll firstly take questions from the room, and then we'll move to questions from the webcast. [Operator Instructions] So Geoff? Geoffery Haire: It's Geoff Haire from UBS. Just first of all, on the ramp-up cost that you sort of alluded to back in May this year for the new refinery, I think you said it would be about GBP 20 million to GBP 30 million. Could you give us an update on what that would be now that you've got more line of sight as it were to when that refinery is coming online? Richard Pike: Still similar, Geoff. I mean, basically increased maintenance costs, dual running, lower metal and that sort of order. So in terms of what we set out in May, that's still sort of trajectory we're looking at. Geoffery Haire: Okay. And the second question I just wanted to ask was, and I don't want this to sound shirlish, but obviously, you've done a lot of work on working capital. Why has that not been able to be done before? And also, do you run the risk that you're working your inventory levels are too low for what you need to produce within the business? How do you manage that risk? Richard Pike: Yes. Look, this has been a growth-focused business. Actually, if you look at where over time, the capital has been deployed, where people have been focused in growth. And generally, when you actually focus on growth, you're actually growing working capital. It's not been focused as much on net cash generation. So to be fair to people, when you target a particular way and that's what we focused on, there are other things that you don't focus on. Now whether we should or shouldn't, it's sort of a bit irrelevant because you can't change the past. What I would say is there is a significant opportunity. [indiscernible] opportunity in payables because we've been paying people too quickly, actually and sometimes ahead of when we actually needed to. There's a significant opportunity in receivables because we've actually been collecting monies too slowly, and we carry far too much inventory. So we're way off a situation where we're potentially driving this to levels that are unsustainable. We actually -- we're only scratching the surface today. Louise Curran: Tristan? Tristan Lamotte: Tristan Lamotte, Deutsche Bank. was wondering a question on PGMS. Could you talk through conditions in -- currently in PGMS and why it would be down in H2? And I'm particularly interested in volumes and feedstock availability. And then linked to that, what kind of PGMS trajectory do you see in the next few years? And is there any change to that trajectory at all with the plant pushout? Richard Pike: We are seeing higher metal prices. So that feeds through in terms of underlying refining performance and to our trading side and that's because of increased volatility in the trading environment, our trading business makes more money when the environment is volatile. So that's benefiting. On the flip side, we have had one of the large mines in the U.S. that's closed. So therefore, there's been lower volumes on the refining side. But as I've also mentioned, because we're actually in a transition phase through to getting 3 built, we have got dual running costs. We've got lower metal recoveries because we've recovered metal over time. And I mentioned at the full year, we had a very strong second half last year, particularly because of metals and other one-off items. So once you've had a one-off item, it doesn't necessarily repeat, that means the following year, it will be down. So the fact that we've got higher running costs and lower one-offs is actually feeding into the second half. But it's exactly the same as what we said in the year-end. We said we'd actually dip before we actually came back. So you've got a decline trajectory through to '26, '27 and then recovery from '27, '28 forward as we get the new refinery up and running. Tristan Lamotte: And then -- I'm not sure if that's working. Yes. And then on exceptionals, just generally at a kind of group level, are you expecting that level to stay similar to H1 and H2? And does that come down into next year? Or what kind of trajectory are you seeing on that? Richard Pike: Yes. There's 2 real items Andre on non-underlying items. One is the costs associating with reducing overheads, i.e., losing people. And the other is the ongoing Clean Air footprint consolidation. So as we take lines out and take sites out, the cost of closure. Those costs you can see in the first half in terms of key categories, that will continue in the second half and continue into next year. And I indicated at the full year that if we're taking around about GBP 100 million of overhead out, that actually you'll be looking at a similar level of costs associated with that as well as Clean Air. So you'll see not exactly like-for-like, but you'll see that sort of overall level across the next couple of years. Louise Curran: I think the next question from Alex. Alexandro da Silva O'Hanlon: Congratulations on a strong first half. Alex O'Hanlon from Panmure Liberum. Just a couple of questions from me. The first is kind of on culture. Obviously, going through quite a big transition at the moment. And you pointed to the engagement score being like kind of upticking a little bit. Just kind of interested in kind of what you're doing to manage that culture during quite a big transition and how you are kind of confident that you can keep that high, that engagement score. Liam Condon: Yes. Thanks a lot, Alex. So we've actually spent a lot of time with leadership explaining we need people to be talking to people. When you've got this much change going on, what you don't want to be doing is communicating through slides and just webcast. We need line managers to be talking to their people to be listening to what their concerns are, taking them seriously and then working on an action plan to address those concerns. So very specifically, one of the elements we track is -- and we can see this from a people management point of view, has there been follow-up related to the engagement survey? Have your actions been -- have your concerns been taken seriously. And we can track literally across the board where it's working, where it's not working and where it's not working well, we then intervene with the line manager and give them support. And if they're not able to come along with the journey, then, of course, we have to take other consequences. But it's really about strong people leadership, listening to concerns, putting an action plan in place. so that people can see their issues are being dealt with and not some generic 40,000-foot kind of strategic stuff, but the issues that they're dealing with on the front line. So we place a lot of attention on that. I think that's the single biggest issue that we can do. And the second one would be everything related to safety because people can understand it's really important that everyone can go home safely to their families every day. And the amount of attention we put on that is quite exceptional. We dedicate a whole -- apart from the fact that every meeting starts with safety every time religiously, we dedicate an entire day every year where we shut down everything and just go through a whole raft of safety measures and trainings. And then we -- throughout the year, we'll have various elements around that as well. So I think it's just walking the talk really and showing people that we care and that with that, they should care too. And I think that's working. Alexandro da Silva O'Hanlon: Perfect. The second question was just on the GBP 2 billion of sales for Clean Air in '27, '28. Obviously, you've got kind of 90% of that in orders already, the same as at the full year. I think at the analyst call at the full year, you mentioned that there are tenders out that could even see you get up to 100%. So I'm just interested in how should we think about that number moving forward? Is it going to be kind of lumpy? Or should it kind of gradually tick up over the next couple of years? Liam Condon: Should the 90% go up to -- yes, yes. Yes, it -- I mean -- I think it's a good one to hand over to Anish just to give a bit of flavor on what kind of contracts we've been winning recently that are not yet in the 90%. So the 90% for sure, increases significantly going forward, but the quality of those wins, I think, is quite exceptional. Maybe, Anish, you can share just some examples of that. Anish Taneja: Yes, of course. Good morning, everyone. And I think it's a fantastic question. With me moving on, I can speak more openly, obviously. So there's one recommendation I want to give you when you look at the businesses. 90% of the GBP 2 billion already won is a great number. But to look at the quality behind it is absolutely crucial because when you look to the automotive environment today, not every tender has the same value in the future because you got to make sure that you win with the winners in the right markets. So let me give you an example with a brand that is clearly going to win in the next 10 years in South America, that's a better tender than maybe with a smaller brand in Europe because it just gives you more run rate, it gives you higher margins, it gives you a longer runway. So when we assess the quality of what we have won, we always look to how long is the contract in which market are we winning? What's the regulations there? How long will combustion engines be surviving in that market? And how is that OEM positioned to be a real winner. So that's the first thing. And then I can tell you the good situation that you have at GM right now is when you have won 90% already today, the total sales funnel is obviously above 100%. So theoretically, you could make it to even more than the GBP 2 billion. But obviously, you're not going to win everything in the funnel. But I can tell you, we are going to win some stuff in the funnel. For example, we have just received verbally the confirmation that we've won a huge LDG tender in Europe with a very big OEM, which is going to give us access to 20% of the hybrid market in Europe. That's going to be huge. So when that's confirmed in writing, I'm sure my colleagues, and it's my farewell present to Richard, will talk to you about that, and it's going to uplift that number. So that's how you have to see it. Louise Curran: We'll just check any more questions in the room. Just wait for the microphone. Thank you. Unknown Analyst: Just a quick question on the -- you mentioned the new contracts for data centers. It might be too early to share, but is there a rough value of those contracts you could share? And I just wondered if that's a new sort of start-up business, does it have any initial margin erosion impact? Or is that one you hit the ground running minutes? Liam Condon: Yes. So we're not sharing the financials now, but we will at full year simply because we want to have a bit more meat on the bones, to be very honest. Although this is a nascent business, it's using the core footprint of Clean Air. So there's no additional investment required in that regard. And this is not something that would be dilutive on the margin. So it's an area that we think is hyper attractive for us. But we'd simply like to have a bit more -- we'd like to show a fuller picture. And right now, it's more or less saying we're actually, we're winning contracts in this space. Multiyear means 5- to 10-year contracts. And what's kind of behind that from a financial point of view, we'll unpick further full year. Louise Curran: Any more questions in the room? So in which case, we'll move to the webcast. So sticking with PGMS, there's a question from Chetan Udeshi from JPMorgan. I think probably, Liam, you referenced the growing importance of critical metals. Are you seeing any change in customer behavior in terms of how they deal with PGM services? Is this business moving to a long-term take-or-pay contract? Can it reduce the lumpiness in earnings in this business? Liam Condon: Yes. We're both looking who's best to answer. It's a very -- maybe I'll start, Richard, and then you chime in. So de facto, we're not seeing -- and there's various moving parts when you think about PGMs. We're not seeing a significant change in customer behavior because these are precious metals. They've always been precious metals. It's just the focus on them has ramped up considerably. I think going forward, there's a keener awareness of where PGMs are actually sourced from. So for example, there is an ongoing discussion in the U.S., a very active live discussion that palladium being sourced from Russia should have significant tariffs on it, which is not the -- or should be sanctioned, which is not the case today. There is a body in the U.S. who has found that there has been some dumping going on there. And if that is the case and palladium is then sanctioned, Russian-sourced palladium is sanctioned in the U.S. that will have an impact in the market. It doesn't impact us because we have -- we do not source any palladium from Russia. That is not the case with all of our competitors. So there is a stronger focus on the source of PGMs going forward. The fact that recycled PGMs have close to zero carbon footprint is something that customers like. They just haven't been willing to pay for it previously. I think as carbon pricing ramps up going forward, that will become more of a topic as well. But the fact though, we don't get a premium because the product is recycled. It's a globally traded product. There's one price as opposed to a differentiation between a lower zero carbon source of PGMs and something where there's a much stronger carbon footprint. So overall, I think from a contractual point of view, we are having discussions and have been having discussions with customers about a fee-for-service type of a model as opposed to just taking a percentage of the value of whatever it is that we're recycling. If you move to a fee-for-service model, that would reduce volatility. That's always a commercial negotiation where there's -- it can go either way. Some customers want that type of a service, some don't. So we make it very much customer dependent, but that's the way we think about it. I don't know, Richard, if there's anything to add to that? Richard Pike: Just try not to replicate anything Liam said, but just for anybody who's less familiar with PGMS, the 3 bits of this business. There's a refining operation where we refine our customers' metal. So it's really, really important that they trust what we do that we take their metal and return as much PGM content as is possible. When I was at the PGM week in New York a couple of months ago, I saw 12 of our top 20 customers. That came out really strong. And obviously, we've been in this industry for 200 years. And the trust in JM, which is fundamentally important. It is -- we are a commodity refiner, so cost per unit is important, but trust in what we do is really important. And I think we stand out there. We have a products business. So we turn PGMs into products. That we do a whole variety of things for our customers. And actually, we're actually, I think, more inventive than others. Quite often, if we see things go away, we're quite often better at providing solutions than that keeps people coming back. And then we have a trading business where I mentioned both metal price and volatility is quite important. Liam talked a little bit about contractual situation. But if you look at the volatility, to Chetan's question, the volatility of returns is primarily about PGM prices, these commodities. So you can't fully get away from that because of commodity and prices will go up and down. What we can do is smooth things. And so as prices have been at 12-, 13-year highs recently, we have looked to lock in a bit more of next year's and the year after's pricing. But that's -- you can only smooth things. Taking a hedge is a gamble because at the end of the day, things can go up or down. So we can remove to some degree, some of the volatility, but you can't remove it entirely. What we can do is we can ensure that we've got consistent refining operations and actually ensure we deliver for our customers on time and deliver their promises. But actually, we've got our cost base in the right place to ensure that we're as competitive as anybody else, and then we manage our commercial situation where we smooth that volatility over time. And those are things that we're looking at in the underlying business model. Louise Curran: The next question, sticking with PGM Services is from Adrian Hammond from Standard Bank Securities. Could you please give some color on autocat recycling volumes? Are volumes still subdued? And how does this differ regionally? Richard Pike: Yes, they are still subdued at the end of the day, although the penetration of electric vehicles has slowed, it's still an increasing space. We have seen down. We haven't seen it come back yet. We do expect to see some degree of recovery there, but it's not feeding through in the market just yet. Liam Condon: Yes. And maybe to add to it, I mean, we had been expecting for some time that the U.S. would bounce back from a kind of recycling point of view on the autocat side. And it hasn't -- so far, it hasn't. And there was kind of -- what we were hearing anecdotally was with pricing where it was, there wasn't enough of an incentive to actually encourage more recycling. With prices where they are now, what we're hearing is the incentive has definitely increased to actually start recycling more. So we've got anecdotal evidence that things are starting to move in the U.S., but we'd like to see it in hard data before we would say it's real. Louise Curran: The next question is on Clean Air from Chetan Udeshi from JPMorgan. Have you seen any shift in Clean Air volume momentum in the current quarter? There were some concerns that there might have been some prebuild in the supply chain ahead of U.S. tariffs. Liam Condon: Do you want -- Anish, do you want to -- here you go. Anish Taneja: Very clear answer, no. So there has nothing been like that. Maybe as a little explanation, you know that we are winning our business, as Richard has described perfectly, very long before we actually produce, which is actually an opportunity for us and not a risk. We can talk about pricing excellence in that time with our customers. Lots of topics there where we can uplift the price. And then the second thing is as we are delivering to Cannes that supply chain is hold very tight. There's opportunities we have taken now on the working capital side. There's more opportunities there for GM in the future. So that's very, very good, organized, very good process and the risk of high inventory builds before certain effects, for example, summer breaks or factories or tariffs or anything has not happened. Louise Curran: Thanks, Anish. The next question now is around Catalyst Technologies from Ella Harvey at Lombard Odier. How does the weaker performance in the segment impact the sale? Liam Condon: Thanks, Ella. So as outlined, the conditions for the sale are related to regulatory approval and to the carve-out, both of which are very much on track. So the market performance is not a condition. Louise Curran: I think that's it in terms of webcast questions. So we'll just do a final check in the room. I think that's good. So thank you very much, everyone, in the room and for your attention on the webcast. And hopefully, we'll see as many of you as possible over the next couple of weeks or so as we do roadshows. Thank you very much. Richard Pike: Thanks a lot, everyone. Thank you.
Ije Nwokorie: Like I said, we've been busy, and I'm proud of what our people have been up to in the first half of the year. So let's get into it. I know you would have seen the statement this morning, so Giles and I will cover 3 things. I'll share a brief introduction, just frame a bit of what we're up to. And then Giles will pull out some of the key themes from our performance in the first half. And then I'll give you an update on the strategy that we introduced to you back in June. So I'm pleased to report, as we saw on the slide that we are on track with the execution of the strategy and are on track with our guidance for the year. I'll go into each one of the 4 levers later on, but I also want to be clear that we still have some challenges that we're addressing, particularly with boots and sandals, and with EMEA direct-to-consumer. Yet overall, we're doing what we said we would do, with good cash generation and cost control, driving good financial progress. And as I will keep telling you, I'm laser focused on execution and the work we've done to date gives me confidence that we will deliver our full year results as planned. Giles will go into more detail now on how we performed in the half. Giles Wilson: Thank you, Ije and good morning, everyone. I'm here today to talk through our first half results, and I'm pleased to report good progress in all our key metrics. But before I go into any detail, I felt it is important to share with you how we are making decisions and how we're running the business. We are focusing on making the right decisions for the long term while making sure we control our costs and our financials in the short term, as evidenced through our cost action plan last year and our significant reduction in our leverage position. This means we have FY '27 and beyond at the front of our minds. We're making those decisions and the actions we are taking. A really good example of this is in our first half year results, has seen been a focus on improving our full price sales and reducing markdown volume, especially in the periods outside more normal promotional events. Therefore, making markdown directly related to those promotional events or as a tactical way to reward existing consumers and drive new customer acquisition. This principle has also guided our approach to U.S. tariff actions and to make sure we make optimal decisions for FY '27 and beyond. We have worked closely with our wholesale and our supply chain partners in timing of those actions. So turning to our key financials. And as I introduced last year, I will focus on constant currency comparison as this reflects the true underlying performance of the business. Just before I go into any detail and to flag at the outset, as you know, at the year-end, we changed the definition of adjusting items to include impairment of financial assets, and the H1 FY '25 has therefore been represented accordingly. So turning to the financials. Our revenue performance shows a small growth year-on-year, up GBP 2.7 million to GBP 327.3 million and crucially, revenue quality was better as we focused on full price sales and a reduction in our markdown sales. The impact of better quality of revenue and focus on our costs can be seen in our profit lines, especially in operating profit which swings by GBP 6.5 million from a loss last year to a GBP 3.4 million profit this year. After accounting for interest, our profit before tax is still a loss in H1, but a significant improvement on H1 last year. And as I'll explain in more detail, this is after accounting for a tariff headwind and demand generation timing headwind as well. Our dividend is declared at 0.85p which, as a reminder, is a formularic for the half of being 1/3 of the prior year full dividend. Finally, I talked to you in June about the focus we've had on reducing net debt, and we've continued to strengthen the balance sheet in H1 with net bank debt down by GBP 33 million. As a reminder, our net bank debt tends to peak around now as we build the inventory ahead of the peak selling period. With our continued focus on profitability and the strengthening of the balance sheet, this sets us up for sustainable success in FY '27 and beyond. So turning to the revenue. This bridge sets out the movement in sales by region and channel year-on-year. Starting with Americas, we see the business now return to growth across both DTC and wholesale. Following our return to growth in DTC in H2 last year, that has continued in the first half of this year with particularly strong performance in our retail stores, offset by our planned reduction in markdown volume in our e-comm channel, delivering an overall GBP 4.8 million year-on-year increase in DTC. Following the focus on reducing inventory levels in our wholesale partners last year, we're now starting to see wholesale partner orders improving, delivering an increase of GBP 2.4 million and we're also seeing further confidence in the spring/summer order book, particularly amongst our larger wholesale customers. Turning to EMEA. As highlighted at the AGM's trading statement, EMEA across DTC has been more challenging. And that, together with our focus on reducing markdown volume saw a reduction year-on-year of GBP 5.9 million in DTC. However, this was generally much better quality revenue. Wholesale in EMEA, as explained at the full year, was stronger year-on-year, and that is together with a more normal wholesale shipments in H1 saw an increase in wholesale revenue. Finally, in APAC, DTC saw continued year-on-year growth with a particular standout performance in South Korea retail and full-price e-comm across the entire region. Again, like other regions, we saw significant reduction in markdown e-com in sales, especially in China and South Korea. And therefore, overall, a GBP 1.2 million increase in DTC and better quality revenue. The wholesale revenue is in line with our expectations with some small changes in shipment dates year-on-year. So overall, our regional and channel performance was in line with our expectations. Though we're disappointed in the overall DTC revenue in EMEA, this was partly due to our own decisions to reduce markdown volume and the well-publicized weak EMEA consumer environment. We are really pleased with the continued DTC growth in Americas, the overall performance in APAC and the overall better performance in our wholesale sales, delivering on our strategic objective to reduce reliance on markdown sales. As we set out in the statement this morning, our gross margin has improved year-on-year, and I felt it was worth explaining a little bit more in detail. As always, there is lots of moving parts in gross margin. However, what this chart shows is the consistent resilience of our gross margin rate. So a slight headwind from our channel mix was fully offset by the average selling price. The average selling price was a combination of much better full price sales, offset slightly with the strongest shoes performance where the average selling price is slightly less. We saw a strong COGS performance with freight saving negotiated by our supply chain teams being one of the biggest component. And it is also worth noting that includes the H1 U.S. tariff impact as well. And I should speak a little bit more about that on the next slide. So turning to underlying EBIT bridge. And as I set out on the first slide, we see adjusted EBIT turn from a loss -- turn a loss back into a profit. increasing by GBP 6.4 million to a GBP 3.4 million profit. And actually, if you add the 2 headwinds of tariffs, the fourth box and the timing of demand generation, the sixth box that is a figure increases to GBP 9 million profit in the period, a year-on-year growth of GBP 12 million. The slide sets out the key moving parts. GBP 5.3 million gross margin increase driven by GBP 5 million from strong average selling price and better cost of goods, particularly freight costs, GBP 3 million from the increase year-on-year in volume offset by a GBP 2.7 million of U.S. tariff costs. We have continued to tightly control our costs. Within the GBP 2 million benefit from non-demand generating OpEx is to benefit of the cost action plan last year, partly offset by inflation. The full impact of more -- year impacts of more stores being opened and paying you all retail bonuses as retail stores performed better. Demand generation OpEx drove a GBP 2.9 million increase driven by the timing of our key stories campaign being in September this year versus October last year. This will vary year-on-year depending on when the right time is to support key campaigns. Year-on-year benefits in depreciation and other items. And finally, GBP 3.1 million of adjusting items which includes the lease impairment reviews following the accounting policy change and the carryover adjusting items from prior year for incentives and our global technology center. Before I move on to the next slide, I just want to come back to tariffs. As we set out in our statement, the focus has been to mitigate the effects of FY '27 and beyond. And we are pleased to say the action we are taking will do that. Those actions are continued tight cost control, flexible product sourcing and targeted adjustment to our U.S. pricing policy. These have started and will now phase in through to the end of the financial year. We have worked these actions thoroughly, both internally and with our customers and suppliers. The intention has always been to think of the longer-term impacts and make sure the actions we take are with that in mind. The net effect of all that work is that we see about half the high single-digit millions tariff headwind in FY '26 being offset this year. And most importantly, the tariff impact for FY '27 and beyond being fully offset. I have cleverly left the page over there, I'm going to get it. It was an important page because I can't remember it. So it's actually a final slide. So finally, turning to cash flow and our net debt. I'm really pleased to continue to report our significant reduction year-on-year in net debt both in terms of net bank debt reducing by GBP 33 million to GBP 154 million and total debt, including leases, reducing by GBP 46 million to GBP 302 million. As a reminder, our business builds up the inventory levels in advance of peak and the September net debt position tends to be the highest in the year. As we go through the peak period, the net debt will start to reduce. It is worth noting that included in our half 1 results is around GBP 4 million of tariff costs in inventory and this will grow to near GBP 10 million at the year-end. The bridge sets out the cash flows from FY '25 year-end position. The first 4 blocks just show underlying operating cash flow -- outflow of GBP 44 million, made up of delivering GBP 37 million of cash inflow from EBITDA, being invested into working capital as we build stock levels and then the spend on lease payments of GBP 28 million and interest and tax payments of GBP 13 million. CapEx accounts for GBP 6 million and our dividends in the year of GBP 8.2 million. Finally, our net debt-to-EBITDA finished at 2.1x, well below our bank covenant of 3x and an improvement year-on-year. We will continue to see those leverage ratios improve as we head towards the year-end. Our guidance remains for net debt of a year of around GBP 200 million, including leases. So to summarize before I hand back to Ije, looking forward into the second half, we are pleased with our performance in the first half, setting ourselves well up for our key peak period. We continue to see positive performance in our U.S. DTC business, and our order books across the business for SS26 are looking healthy. So with that, I shall pass back to Ije. Ije Nwokorie: Thank you, Giles. So let me give you some color on how in the first half, we executed the strategy that we outlined in June. So you'll remember this slide. And after stabilizing the business last year, this is a year of pivoting the business towards the new strategy. The great news, by the way, that underpins this is that the brand is strong. The team is passionately committed, and we are already seeing results from our work. Importantly, the work we've done in this half has also set us up for the second half and particularly these big trading weeks that we have ahead of us in the next few weeks and provided a foundation for growth in the outer years. But we are in this period of pivoting the business. And what's that pivot about? That pivot is about moving from a channel-first mindset that was primarily about building out DTC to much more of a consumer mindset, giving people more ways and more reasons to buy more of our products and making sure the business is in a situation where any one market or channel or product or consumer segment presents an outsized risk to our success. We have a brand that resonates around the world, and it's a privileged traveling around the world and seeing consumers and partners. And our ambition, therefore, is to become the world's most desired premium footwear brand. As you can imagine, it's a motivated ambition and one that the entire team is united around. So in June, we shared our 4 levers for growth. And what are they? They are engaging more consumers, driving more purchase locations, curating market-right distribution and simplifying our operating model, so consumer, product, markets and organization. And we also gave you a set of FY '26 specific objectives in which we're going to use to make sure that we're on track on this and that we advise you to use to also keep an eye on what we're doing. We said in consumer, we would reduce reliance on discounted pairs. We said in product that we would drive those new product families that we've introduced to you, and I'll talk about it a bit later, Zebzag, Buzz, Lowell, they allow us to give the consumer a different way to think about the brand in different purchase locations. In markets, we guided that we would open with capital-light distribution in some new markets. And in organization, we said we will make concrete steps to simplify our operating model. So let me now share the progress we're making in each of these areas. And as you would expect, I'm going to start with the consumer. As I said in FY '26, we are focused on reducing the reliance on discounts and I'm pleased to say that we are making good progress on both wholesale, which we kind of paid particular attention to and DTC. Working closely with our American wholesale partners and under the leadership of Paul Zadoff, our new President in the Americas, we've achieved a good shift from discount in both in the current season, autumn 1 and '25, and in the order book, as we look forward to spring/summer '26. And as Giles said, we're really happy with that growth that we have in that order book in the Americas because that's the first time we've been able to say that in a while. And similarly, in our DTC, the shift is having a clear impact. DTC full price revenue is up 6% year-on-year. The mix of full price to clearance is up 5%. And we have a full 10% up in the percentage of new consumers coming to full price versus discounts. That's particularly important because if you remember, the objective is to attract new to engage more consumers and we're engaging them -- we'll engage more of them at that full price basis, really critical for us. And while our full price to, if you look at that graph on the right, while our full price to discount profile will go up and down in different times of the year. We will continue to make sure that we're offering the consumer the right thing at the right time. And we will continue to manage this as we go through the pivot. So for example, expect in the weeks ahead, we will participate in Black Friday and Cyber and we'll do some discount. We will reward the consumer with that. We will deal with seasonal product that we want to move quickly. But we will do that in very specific seasons and then return to that focus on full price. I would also say that our customer data platform is helping in this effort because it allows us to directly target consumers based on their buying behavior. So now, for instance, when we are targeting a consumer who is -- who has a high propensity to buy full price, we will not be targeting them with a discount -- with a seasonal discount message because we know that they are motivated by that full price offering, and I've got to say this is still -- and I'll talk a bit about CDP later on. This is early days of this work and a lot more to benefit from as we go forward. The push for full price, along with our focus on comforts, on craft, on quality is supporting overall momentum, and you can particularly see this in Americas DTC. America's retail revenue in the first half was up 15.7% driven by increased footfall. The consumer is coming in to really engage with that product we've been putting before them. In Americas e-commerce, while revenue is only marginally up full-price revenue is up 20%, offsetting a significant headwind as we've reduced and we knew we would get this as we reduced clearance revenue. So we'll share more on that reduction in discount revenue across channels, and our work to attract new wearers at full price when we report the full year in May. I do want to emphasize, particularly with the U.S. numbers that we are showing growth on weaker comps, and this is still work in progress. There was more work to do and significantly more growth to go after in that market. So that's consumer. Let's talk about products. On product, we said we will drive more wearing occasions and in this year that we will drive growth in those distinct family products, Zebzag, Lowell and Buzz. So as you saw in the statement, we have had a successful half with shoes. Pairs are up 20% in DTC and 33% overall. And a big part of this success has come from us being able to give the consumer different reasons and different ways to buy. Playing into those product families and the different wearing occasions and, of course, leveraging the individual customer profiles to give them what is really right for that individual. We talked to you at full year about our success with our more style-focused Buzz family. We're pleased that, that momentum has continued, that's that product to the left with the Buzz shoe being the best-performing new shoe of the half. Another product family that we haven't talked to you much about, but if you want to see it in real life, John is wearing a pair today, is the Lowell. The Lowell is more crafted and more elevated than the Buzz. And we introduced that just a year ago. We haven't really backed it with marketing and has already risen to be 1 of the top 5 shoes for us in EMEA. But let me just say, it's not just the new product families, our iconic 1461 Shoe has continued to perform well. In Asia, it is our best selling product. I'll share a bit more about the work we've done in South Korea and a little case study about how this product has done really well there. And maybe a product we don't speak about a lot, but one that's been on the line since 1992 is our Mary Jane and this is the #3 best-selling product in the Americas and a big part of the success we are seeing there. Let me make one important point. I said this at the full year, but this is important to keep making. This ability to give the consumer more choice, we are matching that with a reduction in SKUs. So this is not about the proliferation of SKUs. And in fact, in Autumn/Winter '25, what we're in right now, we have 45% less SKUs than we did in Autumn/Winter '23. This is about disciplined curation of choice for the consumer as opposed to proliferation of products used. We've talked a lot about the Adrian, and I think the Adrian Tassel Loafer and the success of shoes has really been driven a lot by Adrian as Giles mentioned earlier. This is a product that's been aligned since 1980. It is our second biggest selling product. So I present shoes to make the point that the brand is not just strong, it is relevant across more silhouettes than we really leveraged in the past, and consumer groups allow different -- knowing different consumers allows us to play the right product to the right consumer. And we're really focused on making sure that, that curated breadth is put to work for the brand. What I don't want you to think, though, is that boots are not important to us. Boots are important, and this is an area while we have work to do as they -- as we continue that decline in the half, we are committed to boots. And it's worth saying that decline has moderated and has been impacted by, as Giles said earlier, our planned reduction in discounting. Boots matter to us and the 1460 Black Smooth that everybody knows, remains our top selling product, and we're making progress in the category as a whole with an increased percentage in full price mix. That's really important to us year, and we're achieving that in boots as well. I'll also say we're pleased with the performance that we've had in some of those -- again, going back to the product families, some of the newer products that we've introduced to the line. Let me give you some examples here. The Kasey high boots was new to the line last year and is the best -- the third best-selling product in the line in DTC in the half. And so remember, the 1460 Black Smooth is the first, the Adrian Loafer and then it's the Kasey high. The Buzz Hi, the green one you see back there has been built on the success of the Buzz shoe that we've talked about and that we launched in February. The Buzz Hi was the best-selling new product at launch in EMEA DTC this year. And as part of our focus on comfort, this autumn, we introduced the Zebzag Laceless boots. Zebzag is a family that we've built around being lightweight and casual. We've done [ heels ]. We've done sandals. And now we've introduced a really comfort led easy on boot called the Zebzag boot, you probably -- especially if you're in London, you probably saw some activation around this. And while it's too early to quantify commercial success in this, we're really happy with how that's gone and how it's raised comfort as a topic for this brand. And then 2 weeks ago, we brought to market a new innovation that's built off the 1460 boots. [Presentation] Ije Nwokorie: The 1460 Rain Boots is the first fully waterproof Wellington boots, utilizing our signature heat-sealed construction, that's how the bottom is joined to the top. And our Air Cushion sole -- if you've got the right -- if you got a sample size, it's worth putting your feet in this if you haven't yet, it is built for comfort, and we are getting great feedback on that already. It really captures the essence of what Dr. Martens is about comfort, innovation, craftsmanship functionality without losing the bold attitude of DOCS that our consumers love. This is a whole new wear in occasion for the brand, a real proof point of our strategy of increasing wearing occasions. It's an easy sell for existing customers. They love that silhouette, they love, they understand what the brand is about, but it's also a compelling product for new wearers of the brand. It's been fun visiting our stores and talking to consumers about it, people who came with somebody else and I never knew you did this and all of a sudden, they're getting on their feet. We've used our customer data platform to customize marketing messages based on the customer profiles. Some people are built more for style. And so you pitch a style message and from some other people, it's comfort and function, and we're able to do that as well to those people. It ticks all those boxes. And we've brought it to life in a really immersive way. These are some pictures on the screen, for example, a takeover of our store in Brooklyn, which is all merchandised just for the rain. And the wealth of press and social media coverage on this has been absolutely stunning. So we're thrilled how the launch has gone. I expect those of you in festival season from the summer to be wearing a pair of these, and we'll keep updating you on our progress. So now we talked about consumer, we talked about product, let's talk about markets. And the market lever is really about making sure that in each market, we have the right distribution, working in partnership with wholesalers and distributors. To get the right product in front of the right consumer in the places that, that consumer naturally wants to buy. And in FY '26, we've told you we'll focus on opening capital-light models with our partners. And I'm pleased to share now the progress that we've made. Much of this has been announced, but it's worth just encapsulated on one place. In the first half, we've announced new distribution partnerships in LatAm and in the UAE. Latin America agreement is with Crosby, and they will drive our reach in Mexico, Argentina, Paraguay and Chile. And this will include both wholesale and mono-branded Dr. Marten stores run by them. We now have 2 mono-branded stores launched already with Buenos Aires opening in August and Santiago at the start of October. In the UAE, we've partnered with Beside, who will launch and then grow the brand's presence in UAE, initially through wholesale with mono-branded stores planned very soon. And excitingly products that are arriving with that partner just last week. And in the Philippines, where we already have a great partner, we are accelerating that expansion on the back of this strategy. They have already operated 2 stores but they've now opened a third store again in Manilla, that's actually the picture that is here. And there are more planned. I also want to say, even though we've talked about capital-light models, this is not just about the deployment of capital, it's also about working with experienced and trusted local partners who have experience with global brands and who have deep market expertise and operating know-how. Working with them ensures our brand shows up in the right way for those consumers, whilst they'll be in 100% DOCS. And these are the first agreements of many that we will announce in the quarters and years to come. And while that is largely about new markets, it's worth saying the same principle applies to our existing markets. In Italy, we have 14 direct-to-consumer stores and we've been making good headwinds in Italy since we started building that strategy up. Now we're expanding through a combination of, yes, our own DTC, but also these partner stores with the first franchise store opening in Pompei in October 2025 with a great local partner. And we're really pleased with how that's gone. And as you can see from that image, it's a really great Dr. Martens experience. We have more stores planned for the future. We're taking a similar approach in China where we've opened recently in the half, new stores in Chengdu, in Chongqing and in Hangzhou. So this is an exciting growth lever for us. And it's worth saying, these capital-light models are a good example of our ability to create value in partnership with great businesses around the world. As I shared in June, we're excited about the skill, commitment, resources that our partners bring to our brand, whether it's through franchise stores as shared or in deep marketing partnerships with our wholesale partners. The images here is just a spectrum of -- some of the wonderful activations that our partners put out when we launched the Zebzag Laceless boot that I mentioned earlier. I'd highlight Zalando in Germany who really took over the big hub and held the biggest event there to date. And [ La Rinascente ] in Italy, which included the takeover of a metro station in the Milan that you see in the bottom right corner there. These close partnerships, along with the work we've done with them over the years to rightsize inventory are some of the driving reasons behind healthy order books for Spring/Summer '26. And curating this market right distribution with our partners is key to value creation for everybody. And so a few things take up more of my time than this, and we'll keep you posted on how we keep going to it. And so finally, let me talk about the organizational layer, which is lever, which is really about simplifying how we operate and focusing squarely on consumer. And here, we are beginning to reap early benefits of systems that we probably talked to you about in a bit, but that we've now really focused on executing, implementing and embedding the organization in the half and getting our global technology center in India up and running. I'll start with the customer data platform. The customer data platform is making it easier for our marketing teams, really simplify our marketing and commercial teams to reach the right consumer with the right proposition. I think I've given a few examples of that already today. So the focus to date has been on optimizing the consumer journey. That's how the consumer navigates through from social to a site to find the product they are looking for, driving repeat purchases and making sure that we're efficient when we do a discount that we're not cannibalizing full-price sales. And then we've also used it for our product launches, really tailoring the market, such as in the rain boot example that I gave you earlier. So again, early days, part of our business, but you can see how that really simplifies the way our teams can deliver value to each individual consumer. Our supply and demand system, as we told you, went live in the summer as planned and is already delivering greater visibility and accuracy between demand signals on one hand and supply orders on the other hand, you can imagine what that does for the efficiency of the business. For instance, our teams have started utilizing statistical modeling of past sales database on this platform to identify patterns, trends and seasonality, which then are used to predict future demand really on a 2-year rolling basis, that's new capability that really simplifies the way we think about things that and operate. And then finally, while not due to be fully operational until FY '27, our global technology center and actually the image in the background is the global technology center in India, is now up and running. And by bringing engineering in-house, which is what this does for us. We have already become much quicker in delivery and optimized customer journeys, allowing teams, for example, our retail teams to recognize the consumer and offer a more tailored store experience, such as an in-store pickup or a promotion for that individual consumer. So this is a muscle that we will keep pulling how do we simplify the organization, how do we equip our teams to be -- to make it easier for them to really deliver to individual consumers. Because again, that's what the pivot is about being much more consumer first minded. So that's the work we've been doing and the results we're beginning to see. In consumer, we're driving more full price in both wholesale and DTC. In product, we're growing those product families and alongside the icons, they've given our consumers more reasons and more occasions to buy. In markets, we're working closely with partners, whether that's capital-light models or deep market and product partnerships with major wholesale partners. And in organization, we're using technology to simplify how we work and how we serve our consumers better. So to wrap up, let me use one specific market to illustrate how this strategy all comes together as you see you get a picture of it. South Korea is still a small market for us and a proof of how we can grow in new markets. It's also a critical market, South Korea, because as you probably know, it really influences cultural trends around the world. So how does our strategy playing out here? In consumer, we've grown full price with that strategy. We've grown full price 65%, and we're increasing that mix of revenue by 25% in the year -- in the half over half. In product, we've leaned into that market specific demand for the 1461, which is really where that product is in more demand than any other market in the world, and really allowed our team to push that, while also significantly build a new equity around the Lowell shoe. So we know what the -- if you like, the major product is, but we're also able to start creating affinity around a product behind that so that we're not at risk of just one product lastly. The Lowell, as we started doing that is up, up in 90% half one to half one as we've done that. We're building exciting partnerships like this one in the picture shown here, which is with [indiscernible], who built out a major 2-week installation for the 1461 Shoe. And Giles and I were privileged to be in South Korea in the middle of those 2 weeks, and it's just a stunning experience, delivered entirely by our partner. And finally, by simplifying around the consumer, really making the consumer at the top of mind, it's allowed the career team to be liberated and deliver what works for their market. while aligning 100% to our brand. These are great experiences of Dr. Martens, but they're right for the South Korea market. As a result, revenue in South Korea is up 30% year-on-year in the first half. This is a growth market for us, and we're excited to see how the customer focus is helping them connect with more wearers and the learnings we can take from there to apply to other markets. So I hope that gives you a good sense of the progress we're making. We're focused on executing on the levers of our growth. We're seeing early results. But this is work in progress, and there are still key areas to address. We've set ourselves up well to deliver the plans in the second half. And along with our partners, we feel good about our plans for these big trading weeks that are ahead of us. And I have to emphasize there is significant opportunity ahead. That opportunity, as you remember, comes through the headroom that we still have to grow. Just in the 15 -- in our 15 top markets, we are only 0.7% of $180 billion relevant market in just those 15 countries. And we're in many places where the brand is still attractive and desired. And we're going after that. You've already heard us about Mexico in UAE and other places, and in our existing markets as you've seen with the U.S. or South Korea, we're also going after opportunities to grow there. So these early results and the significant headroom give us confidence in our medium-term value creation thesis to grow profitably and faster than our peer set. The operational leverage that delivers high to mid-teens EBIT margin and the underpin -- and the continued underpin of strong cash generation. This will create significant returns for shareholders. And that's why Giles, the team and I are laser-focused on this execution of the strategy. There's a lot of work ahead, yes, but the brand has never been stronger or more relevant and the green shoots are promising. So we're going after it. Thank you. Ije Nwokorie: We will take questions now. We'll take questions in the room first. Please say your name and what organization you're from. And then we'll go to questions via the operator. I think I'm going to get John for us today. John Stevenson: John Stevenson of Peel Hunt. A couple of questions to get us going, please. On the product side, you mentioned sort of areas to focus on and mentioned sandals and boots. Can you talk about what the plans are for next year in terms of how you think you can address sandals and what sort of innovation or how we're going to develop that? Secondly, on EMEA, I don't know if we can have a bit of a sort of dive into the region in terms of trading. I mean, clearly, the U.K. has been challenging. Can you talk about sort of an overview of where the weakness in EMEA is coming from and what your thoughts are from here sort of going into the second half and a very, very quick one. What's the price change agreed for factory pricing for the year ahead? Ije Nwokorie: I will take the first 2, and I'll pass you the questions on pricing. Yes, it's interesting. I have for simplicity loved the boots and sandals together, but I want to be clear that there are 2 different problem statements. And I'm confident about our boots plan. We have more work to do in sandals. I think sandals is a place where we need to drive more innovation, and we really have that work to do ahead of us. And I think that will take us -- to be very honest with you, that will take us a couple of seasons to get that right. But the team are working on it. I told you around innovation that we're working on lightweight. We're working on really making sure that our sandals proposition stands on its own and isn't just on the back of other things. But we're not starting from a standing start. We've had sandals in the line since '80s. Some of our top selling products in the season have actually come from America, if I take an example, we have a sandal called Dunnet Flower, which even 2 weeks ago, was one of the top sellers in America in November, right? And so we have strong sandal offerings, so we have -- we know what works. We now have to do the work to build that out over the next 2, 3 seasons, but it's work in progress -- it's an area of focus. With EMEA, the slight evolution on our analysis since the first quarter is that the U.K. isn't particularly the challenge anymore. That really was the case in the April to June quarter. But since then, actually, we've seen traffic return to stores. And I would say that the EMEA challenge is an EMEA-wide challenge. Of course, there are variances from market to market, but it's really about a consumer who is out shopping, but being a lot more considered. A lot more browsing and research happening. And they're doing 2 things largely. They are either looking for a deal. And so the market is promotionally led, but as we all know, there's only -- there's a bottom that you get in the market will have to fight back from just being promotionally led. But actually, more interestingly, there is also a flight to quality. There's a bit of a trade down from luxury into premium into craft and quality. And there's a bit of a considered purchase, which means I'm not just buying anything, I'm buying, I'm making -- I'm treating this purchase as an investments. I might actually spend a bit more because I'm getting the quality. And we see that come through in our more expensive products. We are actually doing quite well. What is the weekend of bag at EUR 300 -- over EUR 300 or whether it's something like the Kasey boot, which is one of our more expensive boots. So this is a consumer who is considered. There's nothing wrong with that and a brand that has quality, has opportunities. And that's what we're going after. We can, of course, control broader macroeconomic issues and the ways in which the consumer thinks but we feel we have enough levers. We planned into the headwind on discounts. We're not going to over chase that. We'll participate where we need to participate. That will remain a headwind for the rest of the financial year, but we still think we have opportunities to make sure that we are competitive in the market. Giles Wilson: So your factory pricing, looking ahead, I mean, effectively, we don't guide specifically on factory pricing. I'm comfortable where the numbers are. There's nothing there. With the exception of tariffs, it's obviously a cost that we've given you views on. But overall, we have a good relationship with our suppliers, long-term relationships with our suppliers and actually some of the work that we've been doing specifically around tariffs has been working with them about where we source some of our American purchase orders from. So I think we don't normally guide on it, but there's nothing in there that I would be saying this particularly to pull out. Anne Critchlow: It's Anne Critchlow from Berenberg. I've got 2 questions, please. First of all, on the U.S. In terms of the perception of pricing power in the U.S., how confident are you that you can put through these price rises. Do you think they'll strengthen the brand? Or do you think you'll encounter some resistance? And then secondly, on EMEA, how confident are you that you can drive engagement and turn that sales trend around? And how important are the CDP capabilities within that? Ije Nwokorie: I will grab both of those, but add anything if there's anything I miss out. So as I shared, and we've traveled a lot together. We were in a Boston store early in the year. We're not seeing any resistance in America to our higher prices. In fact, we have some anecdotal evidence that the price position in some products -- some specific products might be on the low side, and we have opportunity. It's worth saying we haven't taken price in the market for 3 years, right? And so the market -- we have headroom to go to and still to remain competitive. But we will be surgical about this. This is not a blanket price raise. We will look at individual products. We will understand how their benchmark and understand how the consumer sees them and that's how we will apply pricing. So to your question, do you see any resistance? Never take the consumer for granted, but this is strengthening our premium position to have the right prices at the right... Giles Wilson: I think just worth also adding, we look at price -- those prices on a global basis. So we look about how does that feature in a product, not just in the U.S., but where does it turn up in other countries. So it's part of our pricing policy to look at this. And as Ije said, we haven't taken pricing for 3 years in the U.S. So there's actually -- there's a lot more detail that goes behind that work that goes in, and we're much more confident about where they come through. Ije Nwokorie: In EMEA, I think I'm going to make a similar statement but you never take the consumer for granted. We do think that less clearance will remain a headwind for the rest of the year, but we've planned for that. That's baked into our plans. That's not any new risk. We like the fact that the consumer is in the store. So that gives us the opportunity to make sure that we deliver that value that they're looking for because the footfall in the stores is absolutely fine. And online, we continue to make sure that we are using the CDP to your point, to really manage that experience so that consumer finds the thing, not just that they're looking for, but the thing that is right for them based on their profile. This is trade and work on. And so there are no ground strategies. It's really understanding each consumer. I really understand in each -- literally down to each individual store, but we've got great people in our stores who really know how to trade and we're giving them great product to work with. So we're confident that we'll hit our plans for [ India ]. Kate Calvert: Kate Calvert from Investec. Just 2 for me. First of all, just on the franchise model, apart from Italy, where else in Europe are you thinking of using this model? And are you thinking of using it in the U.S. And my second question on the U.S., you talked about the full year results about the opportunity to elevate the brand and work with more premium wholesale partners. Have you made any progress in autumn/winter on this? Or is this all to come sort of year and beyond? Ije Nwokorie: Yes. Good questions. I'll take both of them. I don't want to get ahead of myself on markets where we will do the franchise model. It's worth saying we have it -- it's a big part of our business in Japan, it's a big part of business in China, a significant part of our business in China and a significant part of our business in Italy. So we have those examples. We will look at it as we look at retail strategy going forward. So I don't want to open or close any markets to it, but those are the 3 places where we are active. And as we deliver on that and as we build that out, we'll share that information with you. We're really happy with what we've been able to do with Nordstrom in the last year and I'm not going to guide on their numbers, but we've had that premiumization and some of the product at the more expensive area, some of the work and the success we've had with the Adrian Loafer has been in partnership with Nordstrom. So that's a really -- that's an example of a premium brand where we've done that. We've also done some really great work just recently with Kit, which is out in the market and a kit is really that sort of that Pinnacle retailer and some of our more refined elevated product, something we call [ Regen ]. These are not huge volumes, but they really position the brand in that Pinnacle space. And so those are 2 examples, and Paul and the team are hard at work building that out. You've got a question there? Let's go. Same rules. Just tell us your name and where you're from and would love to hear your question. Operator: We'll take questions from Alison Lygo from Deutsche Bank. Alison Lygo: Two for me, please. First one is about the U.S. and the profitability there and the operating cost base. Margins in the U.S. has kind of reached flattish now in the first half and expect that to be positive in the second half with the seasonal weighting, but still very much dragging on the group. Just wondering what your sort of outlook for regional margins there is? What you think kind of can be done now? Is this just the case of kind of growing back into the cost base? And then the second one is really on the product that your wholesale partners are buying into. And so you talked about plans to get partners buying into a broader assortment. You've talked about a healthier order book. And I'm wondering if you could add a bit more color around that in terms of the range of products that wholesale partners are now buying into and really how the regions are kind of comparing in terms of whether one is more ahead of the others? Giles Wilson: Yes. So on U.S. margin, I think there's a couple of things we need to just pull apart for the first half. Firstly, obviously, the U.S. margin has got the U.S. tariffs in. So you will have that as a bit of a headwind in the half year and obviously, Ije rightly said the first half is obviously the smaller the half. You'll have noticed that Ije put up on the screen that we saw our retail stores grew 15-plus percent year-on-year. So we're seeing much better performance across our retail stores. And as we set ourselves up into peak, we feel much more confident there. And then thirdly, the growth in the wholesale, I think that's the other key part here. We've obviously had a couple of years where wholesale, particularly in the U.S., was where we came off. And we're sitting here much more confident about our summer spring -- sorry, spring summer even order book as we go forward. So I think it's a bit of both, in all honesty, it's about us growing back into some of the -- into the volume, particularly on the wholesale, getting better return from our retail stores as we're doing. But also, as you're well aware, we have been looking at our store network, and we have closed or provided for stores, and we are doing that. We've been quite clinical now about what each store needs to produce and have actually -- I think, at the half year or the full year, we did actually put a few stores as impaired. So we will expect to see that margin now begin to really improve and get back to the levels that you've seen in the past. Ije Nwokorie: And on the second question, Alison, which is a great question. Thank you. What we're seeing is our wholesale partners are buying into a broader range. But I want to be clear, what's the right range varies from wholesale partner to wholesale partners. What journeys once is going to be very different from Nordstrom ones, and it's going to be very different from -- it's not just once, what's right for their consumer. And so having really built up the strategy and particularly in the U.S., demonstrated that return to growth based on the strategy in DTC. Of course, the wholesale partners are now very interested in a broader range of products. But there isn't a particular regional split on that, that's going to be different from wholesale partner to wholesale partner based on who their consumer base is, who their buyer is, how they sell. But it's a broad spectrum across particularly -- we've seen a huge growth in shoes and the assortment of shoes and across those new range of products. So it's broader than it's been before. You've got those new product families in it. You've got a bit more shoes than in the past, but it's -- that's a general statement. It's going to vary from wholesale partner to wholesale partner. Operator: There are currently no further questions over the phone. And with this, I'd like to hand back over to Ije for closing remarks. Ije Nwokorie: Thank you all very much. I believe the statement is clear, and it's been a pleasure to share with you some of the highlights from the execution of the strategy. The statement remains the same. We're happy with progress to date but there's still work to be done. And when we look at the long-term opportunity, the headwinds in the market, the strength of the brand, the fundamental economics, we're really excited with how we're going to create value for our shareholders in the future. So thank you very much.
Operator: Ladies and gentlemen, thank you for standing by. Welcome to the Bank Hapoalim Third Quarter of 2025 Results Conference Call. For your convenience, this call will be accompanied by a PowerPoint presentation. May we suggest if you have not yet done so, that you access the presentation on the bank's website, www.bankhapoalim.com by clicking on Financial Information on the homepage and then click on the Third Quarter 2025 Report Presentation. [Operator Instructions] As a reminder, this conference is being recorded, November 20, 2025. With us on the line today are Mr. Ram Gev, CFO; Mr. Victor Bahar, Chief Economist; and Ms. Tamar Koblenz, Head of Investor Relations. I would like to remind everyone that forward-looking statements for the respected company's business, financial condition and results of its operations are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated. Such forward-looking statements include, but are not limited to, product demand, pricing, market acceptance, changing economic conditions, risk and product and technology development and the effect of the company's accounting policies as well as certain other risk factors, which are detailed from time to time in the company's filings with the various securities authorities. Mr. Gev, would you like to begin? Ram Gev: Good afternoon to you all, and thank you for joining us today. I'm happy to review the bank's 2025 third quarter results with the highest in the sector quarterly and cumulative net profit. Let's start with Slide 3. This morning, we reported a 16.1% return on equity for the 9 months with net profit of ILS 7.3 billion, both excluding ILS 380 million income from the insurance reimbursement, 8.1% credit growth year-to-date and a profit distribution of 50% of third quarter net profit through cash dividends and share buybacks. These metrics demonstrate that we continue to be well on track to meet our 2025 financial targets. In fact, we are currently exceeding the targets, resulted from higher-than-expected growth and a more favorable macro environment than the market forecasted at the time of the target publication. Not less important is the fact that these results were achieved while we continue to strengthen our balance sheet, build buffers and maintain the high quality of the credit book. The CET1 capital ratio is 12.05%. The allowance ratio is 1.74%. LCR is comfortably above target at 124% and the NPL ratio has declined further to 0.49%. On Slide 4, we see the development of profitability over time. On a quarterly basis, net profit was ILS 2.8 billion and return on equity is 17.6%. Excluding the aforementioned income from insurance, net profit was ILS 2.4 billion and return on equity is 15.2%. EPS came in at ILS 2.1 or ILS 1.81 on an adjusted basis. Next, let's talk about our credit book. Our credit portfolio increased 11.4% in the last 12 months, of which 8.1% since the beginning of the year and 2.2% in the last quarter. Growth was recorded across all segments and in various economic sectors. This is a reflection of our ability as a leading bank to translate the strength of the Israeli economy into growth in the bank's activity. Slide 7 presents our financing income. Income from regular financing activity grew moderately this quarter compared to the previous quarter due to the growth in activity, which was mitigated by the slightly lower CPI. Non-regular financing activities saw a decrease due to, among other things, to customer benefits granted in line with the Bank of Israel voluntary program, which took effect on April 1. In the third quarter, the expense for benefits recorded in financing income was higher than in the previous quarter due to the bank's initiative to grant its customers 2 shares of the bank as part of the benefit program. Our margins stayed strong and grew year-on-year. The financial margin for the first 9 months of 2025 increased to 2.77% versus 2.71% last year. In fact, Bank Hapoalim has the highest financial margin in the sector and is the only one to present growth in margins in 2025. On fees, the positive trend continues across all types of fees as our business activity continues to expand. The slight reduction in fees versus last quarter is attributed to onetime income from international credit card organizations booked in the second quarter. The significant growth in fees is well demonstrated in the 11.4% increase during the 9 months period. Moving to present our disciplined cost management. Operating and other expenses are lower versus all comparable periods. The growth in income, coupled with the decline in costs as a result of cost restrained efforts brought the cost/income ratio to a very low level of 30.6% for the quarter and 32.7% excluding the onetime income. The cost/income ratio for the 9 months period is impressive as well, 32.7% as reported and 33.4% adjusted. Moving on to discuss provision for credit losses and the quality of our book on Slide 10 and 11. Provision for credit losses amounted to ILS 347 million or 0.29% of our credit book, driven completely by the collective allowance and net automatic charge-offs. The increase in the collective allowance reflects our prudent approach and is due to the growth of the credit portfolio and the continued uncertainty in the economic environment. On credit quality metrics, on the left-hand side, we see the NPLs continue to grow, now at 0.49%, while the NPL coverage ratio continues to rise, now more than triple the NPLs as we continue to increase the collective allowance. On the right-hand side, the allowance to loan ratio remained high at 1.74%. Over 95% of the total allowance is collective. Our deposit base continued to grow 3.6% in the last 12 months. Retail deposits decreased in the last year, but still represent 54% of total deposits. Liquidity ratios, LCR and NSFR continue to be well above the minimum requirement. Now let's move to present our capital position, which continues to benefit from strong organic generation capabilities, 11.5% in the last 12 months and the CET1 capital ratio rose to 12.05%. I'm moving to Slide 14. Total distribution in the quarter continues to be 50% of net profit, 40% as dividend and 10% in share buybacks. Total profit distributed and declared is ILS 1.38 billion in respect of the third quarter, of which ILS 1.1 billion of cash dividend or ILS 0.84 per share. After successfully completing our previous ILS 1 billion share buyback, the Board approved a new plan for a similar amount starting today. Moving to Slide 15 for a brief update on Bit, our unique innovative asset. The number of active customers continues to rise, now reaching 3.45 million users with an average monthly P2P transactions volume of ILS 2.4 billion. Recently, we introduced an exciting new offering, the ability to create savings pockets within the app, allowing customers to deposit up to ILS 20,000 and benefit from 4% interest. Before we review the macroeconomic slides and sum up the call, the important reminder on our financial targets for 2025 and 2026 is on Slide 16. The key assumptions for these targets are detailed in the 2024 financial report. I'm moving to Slide 17 on the macroeconomic environment. We have seen a substantial increase in economic activity in the third quarter with GDP growing at an annualized rate of 12.4%. Private consumption, exports and investments all grew at a rapid pace, more than compensating for the trough caused by the war with Iran in the second quarter. Looking ahead, we still believe that growth will remain high in the coming year, driven primarily by an increase in investments in housing, the rehabilitation of frontier villages and infrastructure. As the war ended, the risk premium declined to levels that prevailed in the first half of 2023 and the shekel appreciated sharply. Inflation has decreased to a year-on-year rate of 2.5% and markets are now pricing less than 2% inflation over the next 12 months. Under these circumstances, we believe that interest rate cuts are imminent, even though medium- and long-term inflation concerns persist as the labor market remains tight and wage inflation is high. I'm moving to Slide 18 to summarize. We delivered strong 9 months results, well on track to meeting our financial targets. ROE of 17.6% in the third quarter or 15.2% adjusted for the income from insurance, cost/income ratio of 30.6% and 32.7% adjusted. Financing income and margins continue to be strong, driven by the growth in activity and assets rollover. The strong growth in credit was broad-based across segments and economic sectors. Credit quality continues to be strong with NPL ratio of only 0.49% and allowance to NPL ratio of 313%. Our capital is organically and substantially growing. This quarter, we declared a 50% profit distribution, including the first tranche of a new share buyback plan. With that said, let's open the call for your questions. Back to you, operator. Operator: [Operator Instructions] The first question is from Chris Reimer. Chris Reimer: Can you hear me okay? Operator: Yes, we can hear you. Chris Reimer: One on regulatory risk. There has been some headlines about increasing tax rate on banks and separately by the Finance Minister to add a potential tax for mortgages subsidation. Does the bank have any take on these ideas? Ram Gev: Yes. Chris, thank you for the question. We see from time to time some regulatory initiatives. Some of them are continuing to further legislation, but a lot of them are not continuing. We look and when we analyze them, part of them are pretty populistic. You mentioned the one about subsidizing mortgages, et cetera. Those are initiatives in fairly early stages. We are reviewing and monitoring it. But I think what's most important is the position of the Bank of Israel that post these suggestions. So I think the track record that show that populistic initiative didn't go further to actual laws, that's the important element. And we think it will be reasonable to assume it will be the same with that. Obviously, there are some other legislation that may continue and be in the form of law, but that's the reason why we are reviewing every, let's say, initiative. Chris Reimer: Got it. Got it. That's helpful to know. Considering -- just looking at operating expenses, considering your upcoming move of the headquarters, how should we be looking at expenses going into next year? Ram Gev: Okay. You mentioned our project on centralizing our headquarters. The project continues well. And actually, we are about to finalize the project and start moving about a year from now. So it mainly affect operating costs from 2027 and on. Another major effect that it will have is the ability to sell our current buildings, some of them in major central location and create some material capital gains. But that will be in 2027 and on as well. Operator: The next question is from Priya Rathod. Priya Rathod: Just 2 from me. So the first is on capital. I saw that you increased your internal capital target to 11%. Could you just give a bit more color on the reasoning behind increasing this? And did this have any influence on your decision to stick with the 50% payout ratio? Because obviously, we've seen this quarter that a couple of your peers have raised the payout ratio to 75%. So any color on that would be really useful. Secondly is on your coverage ratio. You're like in excess of 300%. What would you need to see or what hurdles would you need to overcome to potentially release some of those provisions going forward? Ram Gev: Priya, thank you for the questions. As you have seen, the entire banking sector actually has updated its internal capital targets upon approval of the third quarter financial statements. This follows a periodic dialogue that the supervisor of banks conduct with each of the banks. And this year, in addition to the usual consideration and an element of the current economic and geopolitical environment, which in the view of the Bank of Israel still contains a degree of uncertainty, this element was also taken into account. And in light of these factors as well as the surplus capital within the system, the banks have revised their internal targets. Bank Hapoalim's Board of Directors has decided, like you mentioned, to set the minimum internal capital target at 11%. This is the outcome of the ongoing dialogue with each bank, taking into consideration the specific characteristics and what I mentioned about the geopolitical uncertainty. Obviously, the Board of Directors, while deciding about the distribution took into account the internal target. And the Board of Directors decided that given the current surpluses, the desired capital buffers and our significant growth targets, maintaining a 50% distribution rate is the right approach going forward. So that's about capital distribution. About collective allowance, and you mentioned right, we have very high-quality loan portfolio. And it's reflected in all aspects, very low NPLs, very low write-offs level and nearly 0 for the quarter, for example, individual provision. And indeed, we have conservative approach, and we accumulated buffers during the war. And actually, this quarter as well, we continued building the buffers. So we have the highest buffers in the industry. You mentioned allowance to credit ratio, we have 1.74% ratio. It's 20 basis points above the second one in the industry. And the reason is very simple behind our approach. We are indeed in a ceasefire situation, and we are optimistic, very optimistic about the Israeli economy, but uncertainty is still there. And we think that it's too early to release or reverse the buffers like other banks did. And having those buffers allowing us to be best prepared in the sector for 2026 in each scenario. If the pessimistic scenario will happen, we are best immunized for that. And if the optimistic scenario will happen, then we are prepared for 2026 better than others as well. I think that the entry to 2026, everyone will have more information and more certainty about the stability of the ceasefire, about the stability of the lower level of risk in other fronts and the growth of the Israel economy. So we think that we will benefit from our approach. Operator: The next question, can you please give us some color on your call decision approach to the Tier seconds callable next year and how you plan to approach the refinancing local versus international markets? Ram Gev: Yes. Thank you for the question. As for the Tier 2 CoCo bonds dollar, obviously, we can't say now what we will do. But I think we can learn -- you can learn from our track record. Usually, we use this call option, and we understand the investor expectations and that you need very unique circumstances in order not to use this call option. But the best evidence for how we look at that is our track record. Operator: [Operator Instructions] The next question is a follow-up a question from Priya Rathod. Priya Rathod: Just a quick on your deposits. I saw this quarter that the deposits from private individuals fell year-on-year and also on a quarterly basis. What are the drivers behind that fall this quarter, please? Ram Gev: Okay. Thank you, Priya. You're talking about money market funds and change in deposits. This reflects customer awareness to different alternative to investments and to deposits. We are happy with the awareness of the customers, and this reflects the -- what they choose how to manage their funds. From our perspective, we have very good levels of liquidity, and we are balancing growth in that area with profitability. So the very high flexibility we have, for example, you can look at the funding rate from capital markets is relatively low for Bank Hapoalim. So we rely on deposits, and that's enabled us to be flexible, keep disciplined pricing and manage the growth. Operator: There are no further questions at this time. This concludes the Bank Hapoalim Third Quarter 2025 Results Conference Call. Thank you for your participation. You may go ahead and disconnect.
Operator: Thank you for standing by. Ladies and gentlemen, welcome to the Diana Shipping Inc. Conference Call on the Third Quarter 2025 Financial Results. We are joined by the company's Chief Executive Officer, Ms. Semiramis Paliou. At this time, all participants are in a listen-only mode, followed by a Q&A session. Please note that this conference is being recorded. We now turn the floor over to Ms. Semiramis Paliou. Please go ahead. Semiramis Paliou: Good morning, ladies and gentlemen, and welcome to Diana Shipping Inc. Third Quarter 2025 Financial Results Conference Call. I'm Semiramis Paliou, the CEO of the company, and it's my pleasure to present alongside our team, Mr. Anastasios C. Margaronis, Director and President, Mr. Ioannis G. Zafirakis, Director, Co-CFO, and Chief Strategy Officer, Mr. Dave Vander Linden, Director, and Ms. Maria Dede, Co-CFO. Before we begin, I'd like to remind everyone to review the forward-looking statement on Page four of the accompanying presentation. The dry bulk market posted a solid performance in Q3. Cake once again has performed especially towards the end of the quarter. Yet after a lackluster first half of the year, we finally saw some tailwinds in the Panamax Sector. The main reason for this was the fact that China imported no soybeans from the U.S. in September, which marked the first time since November 2018 that shipments fell to zero. This impact was somewhat offset by the fact that South American shipments surged from a year earlier, therefore increasing sun miles and providing upward pressure on the Panamax sector. Overall, bulk carrier markets picked up after a softer half 2025 due to a record September for Chinese imports, reaching 200 million metric tons. Subsequently, Q3 achieved record Chinese imports of nearly 580 million metric tons. The quarter also saw continuing war-related activity in both the Red Sea and the Black Sea. This situation remains volatile, and avoidance of the area is likely to continue. Because of the Capesize resilience and the improvement in the smaller sizes, we were able to secure several charters across all segments in the fleet at higher levels than previously and again at a considerable premium over the spot market. Turning to Slide five, let's review our company's snapshot as of today. Diana Shipping Inc., founded in 1972 and listed on the New York Stock Exchange since 2005, operates a fleet of 36 dry bulk vessels, one of which is mortgage-free. Our fleet has an average age of just under five years and a total deadweight capacity of approximately 4.1 million tons. We anticipate the delivery of two methanol dual-fuel newbuilding Kamsarmax dry bulk vessels at the end of 2027 and early 2028, respectively. Fleet utilization reached 99.5% for 2025, highlighting our effective vessel management strategy. As of September, we employed nine individuals at sea and ashore. Financially, our net debt stands at 54% of market value, supported by $140 million in cash reserves as of quarter-end and total secured revenues of approximately €150 million as of November 12. Moving on to slide six, let's go over the key highlights from the second quarter and recent developments. In June, continuing the renewal and modernization of our fleet, we announced the sale of motor vessel Selena for a purchase price of approximately $11.8 million before commissions. She was delivered to her new owners in July 2025. In September, we signed a term loan facility with the Bank of Greece, secured by five vessels, and drew down $55 million. In September, we released the company's 2024 ESG report, highlighting our ESG strategy and commitment to sustainable practice. You can find a copy of that on our website. As of September 29, 2025, we have acquired 14.9% of Genco Shipping and Trading Limited issued and outstanding common shares. As of November 12, 2025, we have secured $25.4 million of contracted revenues for 87% of the remaining ownership days of the year 2025 and have secured $118 million of contracted revenues for 50% of the ownership days of the year 2026. Finally, we are pleased to declare a quarterly cash dividend of $0.01 per common share with respect to 2025, totaling approximately $1.16 million. Maria Dede: Slide seven summarizes our recent chartering activity. Semiramis Paliou: From July 1, 2025, until November 12, 2025, we have secured time charters for 14 vessels. Six Ultramax vessels at an average daily rate of $13,800 for an average of 333 days. Maria Dede: For Panamax, Kamsarmax, and post- Semiramis Paliou: vessels at an average daily rate of $12,900 for an average of 331 days. And for Capes and Newcastle MAX vessels, at an average of $24,500 for an average of 380 days. Slide eight highlights our disciplined chartering strategy. We focus on staggered medium to long-term charters to avoid clustered maturities, ensuring earnings visibility and resilience against market downturns. This disciplined chartering strategy has secured €149 million in contracted revenues, resulting in an average time charter rate of $16,200 per day with an average contract duration of one year and 1.17 years. For the rest of 2025, only 13% of days remain unfixed. Now, I'll pass the floor to our Co-CFO, Maria Dede, for a more detailed financial analysis. Thanks, Semiramis. Good morning and welcome to our call. I will begin with an overview of our financial performance for the third quarter and the nine-month period ended September 30, 2025, followed by a discussion of our capital structure, breakeven analysis, and dividend. We start with the financial highlights for 2025. Time charter revenues were $51.9 million, slightly lower than €57.5 million in the same quarter last year. This decline reflects the sale of two vessels earlier this year and one vessel in September 2024. Adjusted EBITDA was $20.3 million compared to $23.7 million in the third quarter last year, consistent with the smaller fleet. Net income, however, nearly doubled to $7.2 million from $3.7 million in 2024. This was driven by lower expenses and the €10.6 million gain from the valuation of our investment in Genco, partly offset by a loss in Ocean. Diluted earnings per common share were €0.05, up from zero point in 2024. On the balance sheet, cash decreased to €133.9 million as of September 30, 2025, from $207.2 million as of December 31, 2024. This reduction reflects cash deployed in strategic investments during this nine-month period, including €103.5 million paid for the acquisition of 14.93% ownership interest in Genco, €23 million invested in share repurchases of our common stock, and $12 million invested in Greenwood and Ecogast, two of our equity method investments. Maria Dede: To strengthen liquidity, we sold two of our older vessels in the Semiramis Paliou: fleet, generating approximately $23 million and drew down €55 million under a new loan facility with National Bank Greece. By optimizing capital through vessel sales and the new loans, we strengthened liquidity while fine-tuning our fleet for efficiency. As a result, long-term debt increased slightly to €651.1 million as of September 30, 2025, from $637.5 million at year-end 2024. Operationally, this quarter was smooth with no surprises and with results reflecting the smaller phase. During the quarter, we operated an average of 36.2 vessels compared to 38.7 vessels in the same quarter last year following the sale of Houston in September 2024, Armenia in March, and Celina in July 2025. This reduction affected ownership available and operating days. Time charter equivalent averaged $15,178 a day, a 1% decrease compared to $15,103 per day in the third quarter last year due to softer charter rates. Fleet utilization remained strong at 99.4%. Special operating expense for the quarter decreased by 6% to $20 million compared to $21.2 million in the third quarter last year due to the smaller fleet size. On a per-share basis, daily operating expenses rose 1% to $6,014 compared to $5,906.04 last year, mainly due to higher crew costs. For the nine months ended September 30, 2025, Time Charter revenues dropped by 6% to $161.5 million from $171.1 million for the same period last year. Net income fell to €14.7 million compared to €3 million in the same period last year, an increase driven by non-operating gains compared to losses in the same period last year, and the absence of debt extinguishment losses seen in 2024. Time charter equivalent improved to $15,173 per day compared to $15,162 per day in the same period last year. Debt utilization remained high at 99.5%. Daily operating expenses for the nine-month period rose slightly to $5,941 compared to $5,910 for the same period last year, again due to higher crew costs. The average rate of our fleet is approximately twelve years. The next slide, you can see our debt structure and amortization schedule. We have maintained a disciplined approach to leverage. Our debt structure includes both fixed and variable rate instruments with projected loan balances declining steadily through 2032. Our $175 million senior unsecured bonds and other loan maturities coming due in '29 and beyond will be addressed well in advance to ensure liquidity stability and minimize refinancing rates. In the next slide, we compare our free cash flow breakeven to EBIT against estimated revenues for the remainder of 2025 and 2026. As of September 30, 2025, our cash flow breakeven rate stood at $16,800 per day. For the remainder of 2025, potential revenues include the estimated revenues for the unfixed days based on FSAA could reach $29.1 million at an estimated average time charter rate of $18,900 per day. For 2026, potential revenues could reach $224.7 million at an average time charter rate of $17,102 per day. While projected revenues for 2025 may not recover breakeven, the outlook for 2026 looks positive, supporting a return to cash flow profitability. This slide highlights dividend distributions. Since 2021, the company has consistently delivered quarterly dividends in both cash and shares. In line with this policy, we declared a dividend of 1% or $0.01 per share for 2025, bringing cumulative dividends spent since 2021 to $2.69 per common share. In summary, despite a small fleet, we delivered strong profitability, optimized our capital structure, and maintained high operational efficiency. Our liquidity actions and proactive debt management provide resilience and flexibility for future opportunities. I will now hand over to Anastasios C. Margaronis, who will provide an overview of the dry bulk market. Operator: Thank you, Maria, and welcome to the participants of this latest Anastasios C. Margaronis: quarterly earnings call of Diana Shipping Inc. Starting with the geopolitical and trade development in bulk shipments. The bulk carrier market has weathered well the continuous announcements of new tariffs as well as several changes in the U.S. tariff regime with its trading partners. As of November 18, the twelve-month time charter rate for a typical case without scrubbers stood at around $24,000 a day. The equivalent rate for the Kamsarmax was $15,600 per day. For the Ultramax, about $15,900 per day. All these rates were up on the levels we saw at the beginning of the year and from three months ago. On November 19, the BCI was $2,300.0636 and the Baltic Panamax Index at $18.95. In the meantime, the five PC route weighted time charter average for Capes stood at $30,154 per day, while the Panamax five TC route averaged rates stood at $17,057 per day. As a result, sentiment remains high and some newbuilding orders are already appearing across the size sector, most of them for ships with deliveries from 2028 onwards. As mentioned by Clarkson, the recently announced U.S.-China trade war truce includes the U.S. pledge to reduce tariffs on imports from China from 30% to 20%. The resumption of China's purchases of U.S. soybeans, the rollback of China's export restrictions on rare earth, and most notably the suspension for a year of the introduction of the USDR sport fees and the reciprocal port fees for some U.S.-linked vessels entering China. According to Comodo Research, the purchase of U.S. soybeans by China represents a supporting factor for midsized bulkers for the rest of the year and into 2026. Exports to China will be much stronger over the next few months, and this will be a very helpful tailwind for the dry bulk carrier market. This is according to Clarksons, even though China had earlier this year sourced soybeans for purchase to replace U.S. produce from Brazil, which involved a longer lading voyage than from the U.S. Lower volumes, though, were shipped, can be partly explained by the fact that China has been relying on the drawing down of elevated domestic stocks. In the next slide, we look at the macroeconomic development and consideration. Economies around the world are showing signs of relatively steady growth going forward. Latest growth forecasts provided by the IMF and the OECD predict growth in Chinese GDP at around 4.8% this year and 4.2% in 2026. The equivalent figures for India are 6.6% and 6.2%. For the U.S., 2% for this year and 2.1% for 2026. For the Euro area, 1.2% this year and about the same for next year. For the world, the figure stands at 3.2% for this year and 3.1% in 2026. Let's look at the main commodities now that are being shipped in bulk. Global steel production, according to Braemar, is down by 1.2% year to date at 1,373 million metric tons. This has been having its effect on demand for metallurgical coal and iron ore. Chinese steel product exports are increasing strongly by over 5% year on year so far, which could help partially explain the continued demand by China for iron ore. Braemar reports that it is heavy engineering and ambitious investment in energy and industrial parks driven by AI that will probably support steady demand in China going forward as opposed to traditional construction demand on real estate and infrastructure projects. So for iron ore, Clarksons predict a slight increase of about 1% per annum in total imports at 1,621 million tonnes for 2026. The C1-two iron ore project in Guinea has exports starting this month, and volumes are expected to build up from this year to '28. Long haul exports to China should support pan mild demand. However, Clarksons reminds us that uncertainty remains around how the iron ore market will absorb the new volume. Operator: Going forward. Anastasios C. Margaronis: For coal, we have coking coal shipments which are expected to remain more or less flat in 2026 and 2027, with support coming mainly from Indian demand as domestic coking coal reserves deplete and feed production keeps increasing. Thermal coal shipments are expected to go down by between 31% in 2026 and 2027, respectively. Coal imports to China have continued to go down about 10% so far this year, with demand being partially satisfied by imports from Mongolia and produce from domestic mines. Indian imports are projected to drop by 6% in 2025 due to increased domestic production. In the medium term, demand will pick up as new thermal energy capacity outpaces domestic mining output. For grain exports, according to 2% in 2025, and by about the same in 2026 to reach 566 million. Brazilian grain exports and increased soybean exports from the U.S. should keep supporting this trend hopefully well into 2027. As regards the minor bulk trade, according to Clarksons, these trades are expected to grow by about 4% this year and by a further 2% year on year in 2026 at €2,400 million every sum. Approximately similar growth rates are expected for 2027 depending on key macroeconomic trends and geopolitical tension. Maria Dede: Bauxite, cement, Anastasios C. Margaronis: seed products, and forest products are expected to be the main commodities shipped in large volumes going forward. Turning to the next slide. On talent supply. According to Clarksons, the bulk carrier fleet is forecast to grow by 3.1% this year and by 3.4% in 2026. For Capes, the projected tonnage increase is only 1.4% in 2025 and 2.2% in 2026. For Panamaxes, the fleet projected increase is 3.5% this year and 4.6% in 2026. According to Braemar, the bulk carrier fleet order book stands at 106.2 million deadweight tons, which represents 10.9% of the existing fleet. This total is made up of €37.8 million deadweight of Capes, which is about 9.3% of the fleet, 38.2 million deadweight of Panamax Kamsarmaxes, about 14.1% of the fleet, and €28.4 million deadweight in Handymaxes, which are about 11.2% of the fleet. For Capes, the order book is certainly manageable going forward, and so it is for Handymax. The Panamax fleet, where the order book is higher, includes, however, 467 ships based from 2005 and earlier. On the recycling side, according to Clarkson, the recycling market has been dominated for most of the year by low activity and cautious sentiment. Softening steel prices, particularly in India, have dampened the appetite for tonnage by major scrap buyers. The average price for a handysize bulkhead offered for demolition has dropped to around $400 per lifetime display. The forecast for dry bulk carrier demolition sales this year is about 4.6 million deadweight tons, for 5.3 million in 2026, and about $7 million in 2027 when various regulations and aging of large sections of the bulk carrier fleet take their toll. The average age of dry bulk demolition candidates has gone up from 25.2 years in 2015 to 29.3 years in '25. Turning to asset prices now. As Heartland Shipping Services pointed out, the combination of less ordering this year and more potential output at yards may have implied a crash in new building prices. This has not occurred. New building prices have softened during the last quarter by just 1%, and by between 34% year on year across the tariff with eight new buildings being voted at around $73 million. Capesize Max is at around $36.25 million, and Ultramax is for 2020 delivery at around $33.5 million. Secondhand bulk prices have crept up during the last quarter. The price of refinery has moved up by about 4% to $65 million, and Newcastle MAX at around $72 million, and Capesize MAXs of the same vintage have also gone up by 4% to €33 million, while Ultramax prices have increased to $32 million. Finally, let's look at the outlook for our industry. According to Clarkson, 2025 should prove to be a slightly softer year for bulk carrier earnings than 2024, with the fleet projected to grow by 3% and demand by not much more than 1%. But Clarksons also point out that dry bulk trends have firmed in recent months amid a rebound in the coal trade and strong iron ore, bauxite, and grain export volume. In a nutshell, dry bulk demand trends have firmed in recent months. Looking out to 2026, Clarkson's sees a base case outlook of another moderate year for bulk carrier earnings, possibly like 2025. Dry bulk trade is currently projected to grow by about 2% in ton miles, slightly below fleet growth of about 3%. Markets could be balanced with support from special surveys and falling vessel speed. The Capesize market is expected to outperform the smaller segment. Looking further ahead, projections are much less reliable, even though the supply-demand numbers for 2027 are similar to those in 2026. Factors such as Chinese demand trends, the impact of environmental policy, Red Sea danger zone development, and demolition trends will continue to influence the supply-demand balance going forward. During the last slide, Slide 18, we can have a quick look at factors which are, according to analysts, going to affect the market on the positive and the negative side. On the positive side, we have strong South American grain exports and increased soybean exports from the U.S. to China, we have a gradual resolution of reciprocal tariffs between the U.S. and its trading partners, Red Sea rerouting expected to continue for the rest of the year and well into 2026, strong steel product exports by China, and the commencement of iron ore shipments from Simandou in Guinea. On the negative side, though, we have worldwide lower steel production at Southside India, bulk carrier fleet growth outpacing demand for both this year and next, let's all indicate sector. Increase in wind, nuclear, and solar power production, particularly in China, anticipated long-term reduction in coal imports by China, positive failure in trade talks between the U.S. and the trading partners leading to higher tariffs and trade disruption. On this note, I will pass the call to our CEO, Semiramis Paliou, for some important takeaway points from this earnings call. Thank you. Semiramis Paliou: Thank you, Anastasios. And before concluding today's presentation, I'd like to highlight our ongoing ESG initiatives Diana Shipping Inc. is committed to promoting eco-friendly technologies and modernizing our fleet, transparently sharing emission data to ensure accountability, building on partnerships and collaborations to advance our sustainability goals, and developing an equitable, diverse, and inclusive program while continuously investing in our people. In summary, moving on to slide 20, Diana Shipping Inc. stands on a strong foundation built on over years of industry experience and twenty years on the New York Stock Exchange. It is a seasoned management team adept at addressing industry challenges, has a strong shareholder relationship and a disciplined strategic approach, a solid balance sheet with a strong cash position and a countercyclical mindset, and an ongoing fleet modernization effort, a focus on rewarding our shareholders when possible, and a strong ESG strategy. With that, thank you for joining us today. We now look forward to addressing your questions during the Q&A session. Operator: We will now begin the question and answer session. Then one if you're using a speakerphone. The first question comes from Christopher Barth with Arctic Securities. Please go ahead. Christopher Barth: Hello, good afternoon, and thank you for the presentation. How should we think about your quite significant stake in Genco now? Is there any Ioannis G. Zafirakis: sort of dialogue with the Board? You previously mentioned that the holding is of strategic character, but I mean, they tightened the poison pill with the 15% threshold now. So sort of how does that impact your thoughts on sort of further dialogue here? And if you are just sort of opting for a passive stake, would you consider a Board seat? Ioannis G. Zafirakis: Hi, Christopher. This is Ioannis Zafirakis speaking. As we have said in the past, our position in Genco has strategic value. Nevertheless, we are observing at the moment, and we are examining our various options on Ioannis G. Zafirakis: what we'll do Maria Dede: and how to do it. Ioannis G. Zafirakis: We are not in contact with the current management of Genco. And we are observing the development. Christopher Barth: Thank you very much, Ioannis. And just a second question for me, if that's okay. Can you just comment a bit around the recent development in Ocean Tau? Do you still have a holding there? And what's the percent if that's the case? Ioannis G. Zafirakis: Diana Shipping Inc.'s interest in Ocean Farm is very minimal after the latest raising of equity that they did, the one before the sovereign one. And it is certainly not material at this stage. So there is nothing to comment. Christopher Barth: Okay. Thank you very much. That's it from me. Operator: This concludes our question and answer session. I would like to turn the conference back over to Ms. Semiramis Paliou for any closing remarks. Semiramis Paliou: Thank you for joining us for Diana's third quarter 2025 financial results. We look forward to presenting to you again in the next quarter. Maria Dede: Thank you. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Marc Ronchetti: Good morning, and welcome to our Half Year '26 Results Presentation. I'm pleased to be here to present a really strong set of results for the 6-month period, results which clearly demonstrate the enduring strength of our sustainable growth model and most importantly, the exceptional talent and commitment of our teams across the group. And I'd like to start by thanking everyone at Halma for their individual contributions that enable us to deliver consistent growth and positive impact. Carole will provide more insight into our financial performance shortly. But first, let me start with the highlights. As I said, it's great to report another set of record half year results, and I'm really pleased to see these results underpinned by strong organic growth. And fantastic to see the strong performance across all three sectors in addition to the premium growth of our Photonics business. We've also delivered a very strong margin performance and continued high returns on capital, and this supporting further substantial investment in the significant opportunities we see for future growth. And these results put us on track to deliver our 23rd consecutive year of record profit. Delivery of this financial performance demonstrates the power of our sustainable growth model, a model which has supported strong compounding growth and returns over decades, and a model which when combined with the opportunities we see in our markets, underpins my confidence in our continued long-term success. The strength of our model lies in the way that each of the elements are interlinked, aligned and complement each other. Together, they remain critical to the delivery of our performance, both in the short and long term, a topic which I'll come back to later in the presentation. But first, let me hand you over to Carole for more details on our financial performance. Carole Cran: Thank you, Marc. And a very warm welcome to everyone on the call. I'll be taking you through some of the detail behind this excellent set of results. First, let me give you the highlights. For me, these results are a great demonstration of what the Halma model can deliver. First, strong growth. We reported headline revenue growth of 15% and EBIT grew 27%. Excluding a one-off benefit in E&A that we've already flagged in our trading update, revenue grew 14% and EBIT 23%. And we delivered an exceptionally strong first half margin of 22.3%, up 160 basis points. I'll give you more detail of the drivers of this increase in the sector reviews. A fantastic performance, and as you will see, driven by organic growth broadly spread across our sectors. At the same time, we've continued to make substantial strategic investments to support our future growth. We've invested GBP 300 million in the first half, including nearly GBP 60 million in R&D, around GBP 130 million in acquisitions, and over GBP 100 million in CapEx and working capital to support growth in a number of our companies. While this investment resulted in cash conversion being below our KPI at 79%, we expect it to be more in line with our 90% KPI at the full year. All in all, a substantial level of investment, reflecting the significant growth opportunities our companies see in their markets and our confidence in continuing to deliver strong growth and returns. The strength of our financial model means that we've been able to make these investments while maintaining a strong balance sheet and delivering high returns. Net debt to EBITDA is essentially unchanged since the year-end at just over 1x, and returns have increased significantly, up 190 basis points to 16.2%, a very strong performance. All of this supporting a further increase in our dividend, putting us on track to deliver our 47th year of dividend increases of 5% or more. Now let's look at our revenue growth in more detail. This slide bridges the year-on-year revenue growth of 15.2%. Organic revenue growth was very strong at 16.7%. This reflected healthy growth broadly spread across all three sectors and a continued benefit from premium growth in Photonics, which accounted for around half of the organic growth. Most of the growth was volume driven with price increases averaging between 1% and 2%. There was a modest contribution from acquisitions of 1.6%, reflecting the number of deals completed in the last year. This acquisition contribution was partly offset by the disposal of AAI, which we sold in July. As a reminder, AAI's revenue last year was approximately GBP 42 million, so there will be a larger effect in the second half. There was also a translational currency headwind of 3.2%, primarily due to the weaker U.S. dollar. Based on latest currency rates, we expect a similar headwind for the year as a whole. Finally, the one-off benefit was equivalent to 0.9% growth. Excluding this, reported revenue growth was strong at 14.3%. Let's now move from revenue to profit and margins. EBIT was up 22.8%, excluding the one-off and a very healthy 22.7% on an organic basis. This was ahead of revenue growth and reflects margin expansion across all three sectors. Acquisitions contributed 3.1%, again, ahead of revenue, reflecting the quality of the businesses we have bought, while disposals were also accretive to margins. The currency headwind was similar to revenue at 3.4% and the one-off benefit of 3.9% completes the bridge. Moving on to the sector commentaries, starting with Safety. It was great to see further momentum in Safety following 2 years of double-digit growth. On an organic basis, revenue grew 6%, led by strength in the Public Safety and Worker Safety subsectors. This was partly offset by a mixed performance in the other two subsectors given some specific end market trends and customer project delays, notably in the U.S. Profit grew 16%, reflecting a 280 basis point margin increase to 27%. This is a historic high for the sector and was driven by four main factors: the sector's continued revenue growth; favorable portfolio and product mix; strong operational delivery and benefits from accretive acquisitions; and disposals. Our safety companies continue to invest at a good level to support their future growth, with R&D spend increasing by 11% to 6.1% of revenue. Turning next to Environmental & Analysis. This slide shows E&A's performance excluding the one-off. There's a slide in the appendix, which shows performance including it. The sector delivered an exceptionally strong organic revenue and profit growth of 36% and 38%, respectively. And it's really pleasing to see this driven by growth across all subsectors. Strength in Water Analysis & Treatment was driven by water infrastructure demand in both the U.S. and U.K. A strong performance in Environmental Monitoring reflected growth in U.S. gas detection and gas management in Asia Pacific. And in Optical Analysis, we saw continued premium growth in Photonics, reflecting increased demand from our long-standing hyperscaler customer. The profit increase of 38% on an organic basis included a 90 basis point increase in margin to 23.6%, driven by growth in all subsectors and continued cost discipline. At the same time, it was pleasing to see a good level of investment with R&D up 7%. Adjusting for Photonics, where development is part of the revenue we earn, R&D for the sector is at a healthy level at over 6% of revenue. And finally, it was good to see a strong 4.3% contribution from acquisitions, including Brownline and Minicam's bolt-on Hathorn. Now let's turn to Healthcare, which delivered a stronger performance compared to last year, reflecting good execution against a background of steady recovery in health care markets. This was supported by improving customer confidence and demand for solutions, which improve our customers' efficiency given increasing health burdens and rising patient backlogs. This resulted in good levels of organic growth in both Therapeutic Solutions and Healthcare Assessment, which together account for over 90% of the sector's revenue. Therapeutic Solutions saw strong performance in a number of surgical and respiratory device companies, although this was partly offset by continued softness in eye health therapeutics in Europe. Growth in Healthcare Assessment was broad-based with most companies in the subsector delivering solid organic growth. Sector profit was 10% higher and on a reported basis, up 8% organically. Margin increased 50 basis points to 21.3%, reflecting benefits from stronger revenue growth and improved pricing and mix. Our health care companies remain well invested with R&D at 5.4% of sales. Finally, there was a good contribution from acquisitions, reflecting the quality of businesses we recently acquired such as Lamidey Noury. I'll now talk about our cash flow and the balance sheet and how we've allocated capital during the first 6 months. The cash-generative nature of our companies means that we've been able to make a substantial investment to support our future growth while maintaining a strong financial position. Our first capital allocation priority is organic investment to support our long-term growth, represented here by investment through R&D and CapEx of GBP 93 million. Our financial strength means that we have also been able to support a number of our companies in making strategic investments in working capital. This resulted in a larger-than-usual outflow of GBP 75 million. Together with higher CapEx investment, this was the driver behind our lower cash conversion in the half, and we expect it to drive a stronger position at the full year. Our second priority is continued value-enhancing acquisitions, where we invested a net GBP 148 million. And our third is a progressive return to shareholders through the dividend, with GBP 53 million returned in this first half. In total, we've invested over GBP 300 million in the half to support future growth, both organically and through acquisitions. And our leverage has remained almost unchanged at just over 1x net debt to EBITDA. So before I look at our financial KPIs, let me briefly describe the M&A investments we've made this half year. First, Brownline, which is a fantastic purpose-aligned acquisition, which extends our strength in the trenchless technology market. Its location services deliver pinpoint accuracy underground for operators of horizontal directional drilling equipment. This is increasingly vital as utilities and data providers look to improve resilience and safety by burying their pipelines and cables. At the same time, they also want to reduce the surface disruption of digging trenches while safely navigating increasingly congested underground spaces. Brownline's best-in-class technology and deep technical know-how make a great addition to Halma. Next, Nu Perspectives, a small but strategic acquisition for our eye health assessment company, Keeler, enhancing its capability in cryogenic technology. This reflects a broader trend across Halma of our companies using bolt-ons to expand into adjacent markets and deepen their presence in existing nations. We also remain disciplined in managing our portfolio. The disposal of AAI reflects our commitment to continually assess our portfolio for strategic fit and to ensure each company contributes to our long-term ambitions for growth and returns. Looking forward, I'm confident we'll make further progress in 2026. We have a healthy pipeline of acquisitions and a good mix of deals by size and type, both bolt-ons and stand-alone acquisitions. Now let's turn to our performance against our financial KPIs. It's clear that this half year represents a strong performance by any measure, driven by broad-based growth and strong returns across all three sectors, combined with premium growth from our Photonics business. We are substantially ahead of our targets for organic revenue and profit growth, and delivered margins and returns well into the upper quartile of our target ranges. And while acquisition profit and cash conversion were below our KPIs, this principally reflects the dynamics in this specific half year. Over the longer term, our performance is ahead of our targets. So all in all, a very pleasing half year, but one that I'm aware comes from an unusual combination of broad positive momentum in both revenue and margins across all three sectors. Taking a longer-term perspective, this half year provides another proof point of what the Halma model can deliver. And these KPIs frame our ambition to deliver strong and compounding growth and returns over the longer term and further extend our strong track record against our targets. Moving on to my last slide on full year guidance. The strength of our first half performance across our portfolio, together with our current expectations for the remainder of the year means we have upgraded our full year guidance for the second time this year. While our companies continue to experience varied conditions in their end markets and the economic and geopolitical environment remains uncertain, we've made a good start to the second half of the year. For the year as a whole, we now expect to deliver mid-teens percentage organic constant currency revenue growth, including a continued benefit from premium growth in Photonics and an adjusted EBIT margin of around 22%. I'll now hand you back to Marc. Marc Ronchetti: Thanks, Carole. Fantastic to see the excellent performance against our financial KPIs and the further upgrade in our full year guidance. In this section, I wanted to take a step back from the results themselves and provide insight into the role of our sustainable growth model in driving our continued success. It's a model which has always been key to our past success, including in the first half of this year, and it underpins our ability to deliver compounding growth and high returns over the long term. You'll recognize the core elements of our sustainable growth model. In June at our full year results, I looked back over the last 50 years and shared how our model has been tested and proven to be resilient in a wide range of environments. And this enabling us to continue to scale through many different geopolitical events, economic cycles, technological advancements and changing market dynamics. And while our model continues to evolve, its fundamental elements remain at its core. Today, I want to highlight how our model enables one of Halma's most important characteristics, our ability to combine a long-term view with short-term agility. At Halma, we're guided by our clear and ambitious purpose and powered by long-term growth drivers that underpin our markets. And this enables us to think in decades and take a long-term view for determining the talent and capabilities we need or for the organizational model required to scale and when we're choosing the markets and opportunities in which to invest. If I take our markets as an example, we invest in markets with resilient, often regulatory-driven growth drivers that extend over decades. And our disciplined approach targets niches with high barriers to entry, strong societal benefit and sustainable demand, markets and niches where we enable our customers to tackle some of the biggest challenges we face today, better health care for everyone, clean air, clean water and how to keep us safe in our cities and in the places where we work. All of these fundamental challenges, which are intensifying, supporting our growth and returns for decades and giving us the confidence to invest ahead of the opportunity that's in front of us. And thinking in decades also enables us to continuously scan the horizon to identify long-term trends and reshape our portfolio to align with those evolving markets and technologies. And at the same time, our decentralized model and the quality of our leaders means that we're able to seize new opportunities. Agility is embedded in Halma's DNA. It enables us to respond quickly to fast-changing challenges and opportunities without losing sight of our long-term goals. Our model puts our companies close to their customers and their end market. And this gives our entrepreneurial leaders who are not dependent on other parts of the organization, the freedom to innovate and adapt rapidly to changing market conditions. This means that while maintaining their core long-term focus, they can also look for opportunities to apply their deep technical expertise to those faster-growing end markets for a period of time. Let me just bring that to life. Crowcon is applying its gas detection expertise into battery energy storage, detecting hazardous gases to protect these systems that provide critical backup power for sectors like health care. Sentric is applying its industrial interlock technology to keep assets and people safe in the fast-growing data center space. And Alicat's proven ability to apply its flow and pressure control expertise to many different fast-growing end markets. Just a few examples of how our companies are always looking to capture emerging additional growth opportunities. And this combination of long-term thinking and short-term agility is a powerful combination. Let's look a little bit closer at how we can maintain our agility as we continue to scale. And this is why we insist on talented entrepreneurial leaders with the ambition to act quickly and to innovate. Our structure enables fast decision-making. And by having our companies close to our customers, they can anticipate and adapt their changing needs. And this focus on the long term alongside the importance of agility means that we're constantly balancing seemingly contradictory requirements at the group sector and the company level. At Halma, we see these as complementary. It's not either/or, we call it yes/and. It's embedded in our DNA and our sustainable growth model. It's part of our culture and a source of our strength. Our leaders have the autonomy to grow their business in the way that's right for them, and they are held accountable for delivering that growth. Our leaders are focused on delivering this year's results, and they're focused on where the growth is going to come from 5 years from now. Our companies have the agility and speed of SMEs, and they get the benefits of being part of a global group. And it's this ability to combine the long-term and short-term agility that enables us to capture those fast-growing emerging opportunities with pace and invest ahead for future growth. And it's this same approach that we're adopting through this period of premium growth in Photonics, a great example of everything that I've just said. When we first acquired the company in 2011, our long-term view recognize Photonics as an enabler of technologies across many end markets. We could also see how the company was showing exceptional agility in capturing growth opportunities by accessing new faster-growing markets, a consequence of great leaders and deep technical expertise. And one of these opportunities has led to a period of over 10 years of working closely with their hyperscaler customer. They're using their substantial application knowledge to support their customer with the development of a relatively small but critical component of a wider solution in data centers. Our model allows us to maximize the opportunity with the customer while remaining focused on the continued delivery of our group strategy of sustainable compounding growth and returns. And this outstanding delivery in the short term through excellent local execution allows us also to reinvest for the long term to enable future organic and acquisition growth. Investments in innovative R&D at our companies in building out our teams for scalability, in our M&A capability and in the addition of great value-added acquisitions such as Brownline. As we heard from Carole, Brownline, another great example of a fantastic acquisition underpinned by long-term growth drivers. Urbanization, the need for resilient infrastructure, including water, electrification and the rollout of fiber and data networks. And this combination of a long-term view and short-term agility is critical in the continued delivery of our strategy. Being invested in niche markets underpinned by long-term growth drivers and having that org model and culture that gives us the ability to operate with agility is a fantastic start point. However, it's our talent that is the enabler and the multiplier. We structure for growth and agility, but it requires leaders and a culture that can realize it. It's our entrepreneurial and ambitious leaders that maximize our potential. And the criticality and therefore, the focus on talent isn't new. It's been there since the beginning, embedded into Halma by our founders, David Barber and Mike Arthur. In fact, it remains such a critical element of our model that we brought together all our MDs and presidents for our Accelerate event last month. And we spent 2 days solely focused on how we, as a leadership team, can all become even better at spotting and developing talent to help maximize Halma's potential. A truly inspiring event and a demonstration of how our great individual leaders benefit from the power of our network. But don't take it from me, let's hear from some of our leaders on why talent is so important to their businesses. [Presentation] Marc Ronchetti: Some fantastic comments from our leaders in the video, illustrating just how important talent is at every level of our business, both Alex and Alan capturing why talent is critical to seizing those faster-growing opportunities. Robert picking up on the importance of accountability driving that ownership mentality, and Natalya on why we've been able to attract and retain fantastic talent and the ability for them to make an outsized impact at Halma. As you heard from the video, we create a culture where leaders can thrive. This is what enables us to keep scaling and maintain our culture as we grow. And it's why we continue to invest in our people and our capabilities to support our future growth. For example, we've grown our M&A teams, and we've added two new Divisional Chief Executive roles over the last year. Our DCEs are critical to our growth. They're responsible for acquiring new companies and then they chair those companies once they join the group. So the strengthening of both of these teams gives us greater capabilities to find more companies and the ability to continue scaling. We also continue to invest in our development programs and our graduate scheme, the Catalyst Program, both critical in enabling us to grow and develop our own future leaders, ensuring that we maintain our culture as we continue to scale. And it's really pleasing to see those investments bearing fruit. For example, we heard from Alan in the video, who's one of three company MDs that have come through our Catalyst Program. Also the continued strength of our organic growth, a direct result of our continuous investment in R&D and the acquisition of Brownline, a result of the targeted investment in setting up a dedicated E&A sector M&A team when we transitioned to our three sector structure 4 years ago. So bringing it all together, Carole described the strength of our performance in the first half of 2026, another record result delivered in varied markets. You've heard how this continued success is enabled by our sustainable growth model, a model which enables us to take a long-term view, staying focused on and investing in capability needs and structural growth drivers, and a model which gives us that agility to capture emerging opportunities and mitigate risks. It's a model amplified by the exceptional talent at Halma, accountable to deliver long-term sustainable growth and empowered to act with agility to capture those short-term opportunities. A model that continues to deliver consistent, sustainable and compounding growth and returns. And a model that underpins my confidence in our ability to continue to deliver for decades to come. And that's the end of the presentation. And now we have time for some questions. Marc Ronchetti: As ever, there's two ways that you can ask your questions. You can either raise your hand using the tool at the bottom of your screen, and I'll invite you to ask your question verbally, or you can type the question which Carole and I will read out and then answer. So Bruno, let's come to you first. Unknown Analyst: The first question is just on the strong growth seen in E&A this half. And it relates to -- I guess, the growth in Photonics was good to see. But what was more surprising for us actually was the very strong implied growth in E&A outside of Photonics, which we calculate to be roughly around 17% to 18% on an estimated organic basis. Could you maybe just speak to the drivers of that a little bit more? So why was gas detection so strong in the U.S. and gas management solutions so strong in APAC and also the water infrastructure market? Marc Ronchetti: Yes. Great. Thanks, Bruno. As you say, really pleasing to see that broad spread growth, not only in the E&A sector, but across the whole group. I think that really is the story of these results in this 6-month period. Picking up on the specifics of your question, again, really pleased to see growth across all subsectors within Environmental & Analysis. As you say, Optical Analysis, very strong with that exceptional growth from Photonics. Beyond that, spectroscopy was mixed. We saw some recovery in certain end markets around semiconductors, personal electronics and other OEM customers, but slightly weaker in areas such as biopharma. But again, no real read across there. It's a really small part and pretty specialist in terms of what we're doing. Within Water Analysis & Treatment, yes, great to see the strength of the performance in Water Analysis. That was driven really by water infrastructure demand in the U.S. and the U.K. We also saw a recovery in water testing and disinfection. So again, there's still a bit of uncertainty certainly in the U.K. as we transition through the AMP cycles, but good to see the recovery come back and that underpin of the demand. And then finally, to your point in Environmental Monitoring, strong across both Environmental Monitoring and gas detection and analysis. We've seen that really, as you say, notably in the U.S.A. There is a little bit here just in terms of the specific companies have got a few more projects in them. So there's a bit of phasing in terms of the number of the projects, but growth across all regions in gas analysis. So net-net, a really strong performance. Always worth just remembering within that, it is a 6-month period and some of those are a little bit more project-based. But strong underlying growth and also actually pretty unique to have all of the subsectors moving forward in the same 6-month period. But net-net, really pleased with the wider performance. Unknown Analyst: That's very clear. And I guess just a follow-up on Photonics. And I know you're limited in terms of what -- but I was wondering if you could help us understand the driver of acceleration in the half a little bit more. So more specifically, are volumes for Photonics simply scaling up with CapEx or investment like your customer? Or is it more complex than that and you're perhaps taking share of CapEx wallet at the same time? And then finally, maybe a little bit on how you expect this relationship to evolve in the coming years. Is the base case that you just, again, simply scale with investment at your customer? Or is it more complex than that? Is there a replacement angle that we should factor in or again, share gains in terms of customer wallet? Just some thoughts around that would be super useful. Marc Ronchetti: Yes, I'll sort of pick up on the specifics. But I think before I do that, I mean, there's no doubt going to be a few questions on Photonics. As I said at the outset there, I think the big message from today is the wider performance of the group, really pleased in terms of what we've delivered. I guess for me, we're now here executing what we said we were going to do sort of 6, 9, 12 months ago, and that is we're maximizing the opportunity in front of us. So a phenomenal job by the team in the company in terms of execution and really scaling what is complex manufacturing. We're then continuing to deliver a strong performance in the rest of the portfolio and then using this period of premium growth to reinvest for future growth. So really good to see that coming through. To your point then more specifically, we're going to get some questions on Photonics. So it's probably worth me just giving a few reminders, setting a bit of background and then coming back to your specific questions. Firstly, as a reminder. As you say, we have got customer confidentiality to work through here. So I'll be a little bit guarded. I think we have been increasing our disclosures, but we've got to be careful and adherent to the confidentiality. Again, as a reminder, a business we acquired back in 2011, around GBP 4 million of revenue at that point. And as I said in the presentation, we've recognize that Photonics had many use cases. We've recognized the quality of the team and the technical expertise. And our org design means that they've had the autonomy to look for those opportunities. And then within the business, and we've talked about it before, the drivers of success and their core characteristics are largely the same as many other companies, if not all the companies in the group. So they've got that agile and entrepreneurial talent, still the founders, in fact, in this instance. They're very close to the customer. In fact, it's an embedded relationship. We work closely with all parts of the team with the customer, including the R&D team, and that's a relationship that's been embedded for over 10 years. And as I say, we've got significant technical skills. We're solving a really complex problem, and it's highly complex manufacturing of what is a small but critical component. So a bit of a reminder there in terms of the background. I've talked to how we're managing it in the group. I guess taking a view at the wider market, which will feed in a little bit to your point in terms of how do you scale is it linked to CapEx. There's no doubt there's lots of commentary and a wide range of views across a number of topics in and around AI, in particular, whether that's valuations, economics of investment, timing and scale of investment. And there's no doubt there's a lot of investment going in and around and a lot of interest in and around AI. I guess we look through the short term there. And if you think about the adoption of AI, in particular, whether that's in our daily lives at home or at work through productivity, automation, innovation, all of that continues to happen. I think it's been referred to as transformative technology in the last week or so. And there's no doubt that we're aligned to that point around compute demand accelerating. So if you've got an underlying demand for compute, then underneath that, that shift is going to require infrastructure and investment. And that's where data warehouses come through. So again, I'm sure lots of different views as there are out there around the absolute scale and timing of that build-out. But fundamentally, as I say, there needs to be a foundation in an infrastructure. And I guess if you take a more specific focus on data centers, there's that real focus at the minute on speed, on latency and more and more now on efficiency and energy consumption. So it's likely that Photonics can play a role in solving some of those problems. So net-net, and we can talk about kind of short-term forecast and all of those things, regardless of absolute scale, regardless of precise timing, we still see that medium-term demand in terms of the operations. All of that said, we mustn't forget that it is a very dynamic market. Whether that's the technology, whether that's the demand cycles. And specifically, again, as a reminder, for our business, we are operating on that 10-year relationship. It's PO-based. We've got sort of 6, 12 months of visibility, but fundamentally, not a contract in place because of that embedded nature, because of the strength of the relationship. So a lot of information there, but hopefully, it just means that everyone on the call is in the same place. Coming back then to your specific questions. As you know, we've been working with the customer for over 10 years. It's iterative in terms of the innovation. We continue to innovate with them. And we grow with them, to your point. So their CapEx investment, what they're investing, we're investing with the customer. In terms of the potential for replacement and upgrade, absolutely, that remains potential in fast-moving innovation, fast-moving technology. We haven't seen that as yet. But clearly, as you take a much longer-term view, there is that opportunity potentially. But again, I'd just come back to that thought around the dynamism in the market, the shifts in technology, et cetera. But certainly, as we sit here today, I think the team are doing a fantastic job locally of executing. And I think the rest of the group are doing an excellent job in terms of continuing to deliver that long-term growth and compounding returns. Unknown Analyst: Very much appreciate it. Maybe just a final one on Safety and the very strong margin that we saw in the first half. And I appreciate that a 6-month window is narrow when it comes to assessing profit margins. But I guess, could you just help us a little bit more with unpacking just why the margin was so strong? Were there any mix elements or anything else that we should be aware of? And just a little bit around how we should be thinking about the trajectory of the safety margin from here? Carole Cran: Bruno, Carole here. I hope you're well. Yes, I mean, as you say, I mean, first and foremost, across all three sectors, a brilliant job in the 6 months and great execution across the piece. As you rightly point out, it is a 6-month period. And so we would never be suggesting that you take 6 months as sort of inferring longer-term trends. And I think it's worth saying as well, it is actually quite unique that we have all three sectors growing with margin progression in a 6-month period. To your specific point on Safety, I mean, as ever in these explanations, there's a number of factors and variables. I mean, as you know, Safety has come off the back of 2 years of double-digit growth. So there's continued momentum through the top line. There is a bit, as you alluded to around, product and portfolio mix in there. And I suppose as we look forward, taking those points. While Safety is well invested, the reality is that you don't grow at that rate without having to then step up your investment further to make sure that you can sustain that growth. So as we look forward into the second half and beyond that, that's our thought process. And as we've said many times before, we're not in the business of chasing the margins higher. It's more that combination of keeping the margin strong whilst keeping the top line moving, too. So a couple of small examples for Safety. You heard Marc talk about two new DCEs in the group. One of those is Safety. You've heard Marc reference investment in M&A. Again, that's the sort of thing that Funmi and the team are thinking about. So as you look forward, think about the need for that additional investment. And I think also worth saying and not something that we major on because it's not a big spend for us, but CapEx-wise, one of the bigger CapEx investments this year is in one of our biggest safety companies where because they've been growing strongly, they're needing to expand their facilities. So that same thought process and logic applies to some of our other safety companies, too. Marc Ronchetti: Thanks, Bruno. So just looking at the list. Jonathan, we'll come to you, Jonathan Hurn. Jonathan Hurn: First question is just coming back to Photonics, Marc and some of the comment or one of the comments you made there just in terms of the visibility. Obviously, you have visibility on the revenue, I think you alluded to through the second half of this year. Can you just talk about the revenue visibility into your next fiscal year? How much of it or how much visibility do you have on '27? And then also just maybe sort of following up on Photonics. Just in terms of the customer exposure, obviously, you've got one key hyperscaler customer. Have you made or are there any efforts within the Photonics business to widen that exposure, maybe get some more customers on board? Essentially, that's the first question. I know it's got certainly two parts. Marc Ronchetti: Carole, do you want to pick up on the first point, and then I'll do the strategy on customers? Carole Cran: Yes, absolutely. Jonathan, I mean you've heard us reference, if we just take half 2 '26 first in terms of the visibility on Photonics. So we've spoken about the premium in the first half being about 8 percentage points of the group growth, and we're expecting similar for the second half. I mean beyond that, you heard Marc obviously articulate and remind everyone the whole position with this customer and how dynamic the market is. And whilst we do get a forward view from the customer for the next 12 months, I think it's fair to say that we would -- we consider that to be directional. And so I suppose coming back to Marc's description clearly, we'll guide for the whole group next June. But the way that I would sort of encourage you to think about the Photonics opportunity at the moment is that we would envisage it being a tailwind going into FY '27. Marc Ronchetti: Thanks, Carole. And Jonathan, just picking up on that point around the customer. As you say, we've got that strong long-term relationship. At this moment in time, strategically, we think it's the right thing to continue with that relationship from a commercial viability perspective. As I say, it's more than just that transactional relationship, that embedded nature and insight from the R&D side, we believe, is a good place to be. That said, both within the individual company, but also the sector in the group, clearly, we're looking at other opportunities to diversify. The reality is with the team and the scaling up, I mean, that is just a phenomenal job in the amount of time that takes -- that's proving difficult locally, but they have set up separate teams, and they'll continue to look. And then as you've heard today, we're doing a great job at the E&A sector of wider areas to look out. We saw Brownline coming in, and then the wider group continuing to grow. So as I say, strategically, today, it's maintained, that customer relationship, but options are always open as we go forward, and we're looking for other opportunities. Jonathan Hurn: Great. Very clear. If I could just ask a second question, just on Healthcare, please. First part of it was just on Life Science. Obviously, a smaller part, probably sort of 10% of the division, but it's the one area that's struggling. Just your views there, when do you start to think that will recover? Do you think that's potentially going to come through in H2? And the second part was just on the margin really. Obviously, we're a long way from the peak in that. Can you just give us a feel for how you think that sort of margin develops for Healthcare going forward, please? Marc Ronchetti: Yes, I'll pick up the first point around Life Sciences. As you say, it is a relatively -- well, it is a small part of the group, relatively small part of the Healthcare portfolio. And particularly, what we're doing there is mainly around specialist pumps, valves and manifolds. We've seen a mixed performance. We've actually seen pretty strong growth in the U.K. and Mainland Europe and then offset by a decline in wider Asia Pacific. But again, it's difficult to read anything into that fundamentally. I wouldn't do a read across anywhere in terms of other businesses in this arena. The reality is, again, we're starting to see a recovery. We're starting to see a bit of confidence in customers. I think we're through the destocking, but we're not at the stage that I'd want to say we were back to normal levels of demand just yet. Carole, if you pick up on that? Carole Cran: Yes, sure. And then on the margin point, actually just picking up what Marc said there, Jonathan. So we're characterizing it as a continued recovery. And there's still some uncertainty clearly in some of the markets. So Steve Brown, our sector CEO and the team are doing a great job and in particular, in the more challenging period sort of last sort of couple of years or so have been quite measured in terms of investment, although not underinvesting. So I suppose in the mix of making sure that we're investing into the recovery and the growth, we would expect to see the margins continue to move forward back towards historic levels. But I think you should think of it as progressively getting towards that point. Marc Ronchetti: Thanks, Jonathan. Just looking at the list. So, if we now go to Christian. Christian Hinderaker: I want to start on Photonics, perhaps unsurprisingly. And apologies if this is a naive question, but you've mapped the macro. As we think about the actual product set, how do we think about useful life of what you sell? And is it a fair assumption to assume that effectively any of your sales are really greenfield data expansion rather than, say, upgrades in existing facilities? Marc Ronchetti: Yes. I've got to be a little bit careful here, Christian, in terms of the confidentiality. I'll just come back to the point that I made to -- I think it was Jonathan's question. At this moment in time, we believe that a lot of that demand is CapEx and build-out. But we do believe that haven't seen it yet, but just by natural instance of the pace of change and the increase in innovation, there may be a replacement cycle. But as I say, we're not seeing that yet, and this is a dynamic market. So I certainly wouldn't want to pin any future definite guidance on that at all. Christian Hinderaker: And maybe pivoting to the Safety business. I was interested in your regional growth commentary there, marginal growth in the U.S., which compared to good growth in the U.K. and it seems strongest growth in Mainland Europe. Curious what's driving that distinction. It seems to be a bit at odds with maybe broader macro trends. Carole Cran: Christian, Carole here. Yes, I mean, I think as you probably heard us say before, we don't particularly sort of focus on the explanations around the geographies. And you have heard us reference the particular strength in public sector and worker safety. So that's really what you're seeing coming through the geographies. So nothing that we would consider to be structural, I suppose. And yes, I mean, really sort of one of our bigger business, bigger safety businesses is doing particularly well, which is benefiting the European numbers. And then in the U.S., for example, we talk about the other two subsectors being a little bit softer in Infrastructure Safety and Fire Safety. Some of that is in the comps where there was a couple of bigger projects last year. So I suppose in the round and I guess the genesis of your question about whether there's something more structural by geography, then no, we're not seeing any discernible trends that would indicate that. Marc Ronchetti: Christian, I'd see you've got a written question. So maybe we just pick that one up as well. And if I just read that out to the Brownline acquisition sits among the top 3 deals by size over the last 20 years. Does this reflect an appetite to do more medium-sized acquisitions? Secondly, when we think about those M&A ambitions, does the increased concentration of sales from Photonics affect your preferences across the segments? So I guess if I just pick up the second part of that first, not necessarily. We're open for business across all of our sectors, all geographies. So it isn't that we're looking to avoid certain areas or double down in certain areas. We're looking for those opportunities much through the lens as we always do with that disciplined approach that we have to M&A. From a deal size perspective, I guess the reality is as we continue to grow, we do get a higher level of confidence in our ability to bring value to larger companies. So those businesses at the top end of our portfolio around sort of that GBP 30 million, GBP 40 million, GBP 50 million of EBIT, they're still growing at the same rate as the rest of the group. So we've got confidence that we can bring value to those businesses. All of that said, with our aspiration at 7.5% each year on M&A, take that on GBP 0.5 billion, we're looking to acquire GBP 40 million next year, double that in 5 years, double again. It's a long, long time before you have to do anything transformative. So I think we've got the opportunity, we've got the appetite. I think we've -- as we've seen before, we've got the opportunity to do even more bolt-ons as our companies get bigger by size and they use bolt-ons to deliver their own growth strategies. But at the same time, we've got that confidence to do bigger deals than maybe we have done historically. But I don't see it as a significant shift in strategy, it's much more aligned to us being clear on the value we bring and having confidence in those future cash flows. No worries. Thanks, Christian. So is there anyone else just on the call? Dylan, I can see you've got your hand up. Dylan, on mute maybe. Dylan Jones: Apologies for that. Can you hear me now? Marc Ronchetti: Yes, perfect. Dylan Jones: Just another follow-up on Photonics and obviously, being appreciative of the fact that you're limited somewhat to what you can say. But I'm just wondering if there -- along with product sales, there's also opportunities for service and maintenance sort of post sale, particularly with this hyperscaler sort of customer in the aftermarket that could potentially sort of help smooth the growth trajectory over time. Obviously, I understand that the market dynamics are incredibly favorable and they look favorable for the foreseeable future and perhaps getting a little bit or perhaps a little bit early to be thinking about this. But just sort of wondering what levers are within that Photonics business' control to sort of deliver a sort of steady return or normalized sort of growth rate in the longer time, sort of avoiding that sort of sharp drop off, if you will? Marc Ronchetti: Yes. I think, unfortunately, what we're talking about here, Dylan, is kind of hypothetical in what is a very dynamic market. I guess I would just come back to three points there to think through. One is just the embedded nature in the long-term relationship. Two is the real -- and I just cannot undercommunicate the real expertise that we have in our company in terms of the use of photonics and the application in solving the problems. And then finally, I think coming back to that point I made earlier, if you think about kind of the need for increased speed, the need for increased energy efficiency, there's quite a bit of commentary out there that Photonics potentially has a role to play. So you put those things together, and I think you come back with hypothetically, but I certainly wouldn't want to be sitting here today making a call for something 10, 15, 20 years out. Dylan Jones: No, I appreciate that. And one last question. I think you sort of guided for, obviously, the step-up in CapEx. You kind of alluded to there's a bit sort of going on in Safety, but also the sort of corporate cost line, I think you've guided to be just a little bit higher. Should we sort of think about that as the sort of recent investment in the M&A capabilities? Or is there some other investment going on in the sort of corporate cost line? Carole Cran: Dylan, I'll take those. Yes, and I'll pick up actually on your CapEx point as well, which is well made. Yes. So we've moved our CapEx guidance up by about GBP 5 million. So the majority of that actually relates to Brownline, which is obviously a good news story because it means that the prospects are good, and it's something that we envisaged in completing the deal. So that addresses the CapEx increase. And then on the central costs, they tend to run around 2% of revenue and the slight increase is a bit of a mixture of things actually, a little bit more into the central costs that support M&A. So for example, we support centrally the integration activity of new acquisitions and also more specialist areas around tax advice and those sorts of costs. And then the broader sort of theme of technology, also make sure that we're well invested in the center around areas like AI that Marc has obviously been talking about and what that can mean for us as a group, and also the ever-present investment that is required in things like cybersecurity. So hopefully, that gives you a flavor of what's driving those. Marc Ronchetti: Thanks, Carole. That nicely answered a written question from Rory as well. But Rory, put your hand up if it didn't cover it, but I think it did. So I think we've got time certainly for one more question. Bruno, is your hand up for a new question? Or is that a legacy of having the first question? You're on mute as well, I think. Unknown Analyst: Just a follow-up question really around reinvestment in the group. I was wondering how you think about reinvestment during a period of premium growth in one area and allocation across the portfolio of the group. So do areas outside of Photonics essentially disproportionately benefit during this period? And so does your confidence of strong growth in, say, Safety and Healthcare actually start to increase as you look towards the following years? Or is it that your investment plans remain largely unchanged regardless of where the premium growth is occurring? Marc Ronchetti: Yes. It's a good question. I think the philosophy, certainly from an R&D expenditure is it's largely unchanged. That's very much bottom up. We've never restricted capital to the individual business. It's our #1 capital allocation priority in terms of R&D spend. So that doesn't necessarily change. We're not saying no to businesses. There's an opportunity there to invest. I do think to the point that Carole just alluded to, there's a bit of investment that we can do in the M&A teams. There's a bit of investment that we can do in the sector teams. And of course, the other opportunity, as we've talked to many times, is the opportunity to accelerate M&A, which, again, you make those investments, we cannot lose the discipline. So I think net-net, absolutely, that's part of our strategy, how do we reinvest through this period of premium growth to give us that future compounding growth. But I don't think it is specifically to the point in R&D per se. It will be more around M&A and anything that we can do at the sector level because, as I say, the R&D is very much bottom up and open for everybody. Unknown Analyst: Got it. That's very clear. And just a small, I guess, clarification. When we speak around orders growing year-over-year and positive book-to-bill, does that hold for, I guess, Photonics and also outside of Photonics? Carole Cran: Yes, it does, Bruno. Marc Ronchetti: Excellent. Thanks, Bruno. And thank you all. I don't see any other written questions, and I don't see any hands up. So many thanks, and have a great morning, and we will speak to you soon.
Norman Choong: Okay. Good evening, ladies and gentlemen. Thanks for joining this call today of PT Bumi Resources 9 months 2025 Earnings Call. My name is Norman Choong, I'll be your operator today. So we're very honored to have this call being hosted by Pak Andrew Beckham, Chief Operating Officer of Bumi; and also Pak Christopher Fong, the Chief Corporate Affairs Officer of Bumi. So as usual, we will run through the operational stats of 3Q '25, then followed by question-and-answer session. Pak Andrew, I'll pass the floor to you. Andrew Beckham: Thank you, Norman. Good evening, good afternoon, good morning to everyone here. Let me go through the slides. Next slide, please. Okay, okay. Production for the 9 months 2025 was at 54.9 million tonnes, down slightly from 2024 of 57.3 million tonnes, mainly due to the heavy rain, especially in the third quarter at KPC. Prices, realized coal prices for 9 months decreased $60 -- to $60 versus $73 in 9 months 2024, in line with the global coal market. Production costs, overall production costs came down mainly due to lower unit costs at KPC, and I'll go on to more details in that, driven by the oil price and stripping ratio. Next slide, please. Our guidance remains at this 73 million tonnes, 75 million tonnes of sales. We're limited by production, which is under the RKAB, so we can't get more coal produced out of KPC, but we will be well set up for the first quarter because of that. Prices are between $59 and $61. It's possible that we beat that if the fourth quarter continues to move up a little as it is doing at the moment. Cost-wise, we're running around the lower end of our guidance at $42, and we've reduced our strip ratio slightly and fuel costs, as we've mentioned. Next slide, please. Global markets, international coal prices have been pretty flat, down towards the summer. And as usual, towards the winter in the Northern Hemisphere, you're seeing prices tick up a bit. There's a bit more demand now from October, November in China, and prices are just coming up. I think you'll see that continue up until halfway through December. And then it will go pretty flat as the Christmas holiday is coming. But we see a little bit of improvement in the prices at the moment. Next slide, please. The forward curve is running long term, still at $120, $122 in calendar '27. The GC NEWC referring to here. This is still up at $108, $109. And there's a lot of -- I think if the markets, global markets continue to perform, you'll see this $113 to $116 in calendar '26 a big possibility. Next slide, please. With regards to the operations overall, in our sales for 9 months with 54.5 million tonnes compared to 55.8 million tonnes, there's a slight drop of 2%. This is because we -- our strip ratio has come down. You can see at KPC, we're at 8.6 year-to-date versus 9.2 last year. That's because we have opened up mines. We have improved the -- now the mines will be in there in a more stable position. So you'll see that strip ratio being slightly down. It will continue slightly down next year, if all goes to plan. Coal mined is slightly -- is below because of the wet weather in the third quarter that we've had, and rain continues at both KPC and Arutmin at the moment. Prices wise, the FOB prices are down 20% at KPC, and down 8% at Arutmin. Arutmin's price has fallen less because it sells more domestic coal. And so therefore, there's a fixed price there of $70 benchmark, which takes it from that increase from that sort of global market fall plus the fact that we have a lot more of the 4,200 to 5,000 CV coal, which is -- has maintained its price better than the very high-grade coal. Next slide, please. Here, you can see the rainfall and KPC at the top has pretty much 5, 6 months, over on the red is the actual against the long-term averages. And for 5, 6 months, it's been -- there's been 5 months that have actually been above the long term, and over the last August, September and coming into October, we've been at higher levels, continues at the moment. Rainfall itself, Kalimantan and Arutmin has been less than the global trends and has stayed pretty stable all the way through. Next slide, please. As I said, overburden has come down because of the unfavorable weather, but also because of our strip ratio at KPC. You can see Arutmin is slightly down from last year. Coal mined is slightly down by about 3%, 4%, but that's because of the weather and KPC now restricting its production based on RKAB requirements. Next slide, please. Coal sales, almost the same, not far off. We've used up the inventory. We have quite a bit of inventory. We will see inventory levels come very low towards the end of the year as we maximize as much sales as possible. And we'll probably into the first quarter have a tight stockpile there. Arutmin has been here and is slightly up on last year in terms of sales. As I mentioned, stripping ratios are down at both KPC and Arutmin, and that's part of the mine plan, our long-term mine plans that we see into 2024, the prices -- the mines was open, and now we're seeing the benefit come through. Next slide, please. Production costs, we reduced our costs. As I said, because of the strip ratio and because of fuel oil prices coming down, I'll talk more about that later. Arutmin maintained its costs slightly down on last year. And FOB price, as we all know, has dropped about 18% overall, especially at KPC, has been a big drop. Next slide, please. Average selling prices, as I mentioned, you can see the big drop from the international prices of $82.8 down to $67.4. That's been a major trouble for us. And the fact that the HPB has been following slowly behind doesn't help when we try to do our royalty payments and tax payments are now covering -- are based on that HPB if it's higher than the realized price we got. So it makes it harder for us. In a rising market, we don't have that problem. Average selling prices overall were from $73.7 to $60.4. Next slide, please. This is the fuel. You see we're running at about 1.12, 1.13 in the last quarter at the moment. Remember, we're now using B40 solution, which is biofuels 40% and that's more expensive than pure diesel. And so therefore, we're paying probably about $0.05 to $0.10 a tonne -- $0.05 to $0.10 a liter more than any other normal operations or normal industry in Indonesia. So it's another penalty that we have to take into consideration. And if they go to B50, that will have an effect on our fuel costs. Next slide, please. Bumi's reporting, we were running -- if you look at the revenue, we're up on our revenues because of BRMS improvement, our gross profit has improved. However, our net profit has come down. The main reasons for that, if we look at the other income and expense, it's been the KPC earnings because of the drop in coal price and write-offs in BRMS, our subsidiary of one of its assets. And in the income tax and profit sharing when you compare to 2024, in 2024, there was a deferred tax adjustment, which gave it a benefit of about $60 million, $70 million, which benefited. So you saw an improvement in the profit last year. However, operational wise, we're in a very good position, just we need the prices to recover. Assets, liabilities are running, are pretty strong. We're still at current ratio of 1 and also equities higher at $2.8 billion. Next slide, please. This just gives you the consolidated numbers, as we've done before, just to highlight the size of the revenues of $3.5 million against $4.2 million. These are in the back of the financial statements, I think Note 41-- 42 or 43, if you ever need quarterly numbers. Carry on, please. And this just gives you the comparison between the 2, just so you understand, we're not -- the numbers are set, the bottom line is still the same, but it does have an effect on all our numbers. Next slide, please. So overall, when you look at consolidated revenues are down 17%, but we've managed to reduce costs as well. Thanks to fuel, but also thanks to the mining, bringing our strip ratios down. Our gross profit is down overall when you include KPC and our operating income is slightly down by 22%. Operating margins remain pretty -- not significant change. But we hope with coal prices ticking up over the next couple of months, we should see a good fourth quarter. Next slide, please. Bumi's financial highlight, as I said, the equity is slightly down overall year-to-date from December. And the last 12 months consolidated adjusted EBITDA is running at $277 million at the moment, slightly down on last -- on 2024 because of coal prices. Next slide. And this is just in quarter-by-quarter, how the start up. And you can see the EBITDA each quarter from this year, like Q1 '25 has gradually increased as formatting prices slightly rise. If prices continue to rise in Q4, we should see that slightly better as well. Next slide, please. Cash still remains strong at $314 million in total. Below are the breakdown of KPC. Note that we have the restricted fund, the CDA. Restricted fund is for payment of contractors at the end of the month or it gets paid the following month, the 1 or 2 days after the year closed. The mine closure deposits, you have there of $45,000 and $55 million -- over $100 million is for mine closure assuming we get our extensions, we' have to keep these in bonds in with the government, even though we have probably another 15 years of mine life to go. So it is quite frustrating, but that's the rules with the government. Next slide, please. ESG, would you like to? Christopher Fong: Yes. We're on track year by year, so to the 9 months compared to 2024. We have -- our CSR programs were at $3.5 million. We're on track to spend what has been targeted. Our environmental spend overall is on track, and we will end up spending somewhere in the vicinity of $76 million, and that covers reclamation, planting trees and protecting our environment. Also safety issues, gas emissions, et cetera. What we don't have in this document, which we're doing a lot of work on, we've talked about it previously, is the ESG work we're undertaking now in terms of setting standards and emission targets and reporting on them. Also related to issues such as the weather issues at KPC, we have implemented research in terms of predictive ESG to using our data from all our weather stations to determine better usage of working days and to increase production and also maintenance days. So that's a program that will be -- is ongoing. It started the last few months, and we'll be reporting on results from that as we move forward into the new year. But it is certainly positive in the work we're doing, undertaking on an ESG platform. Moving on. Yes. Andrew Beckham: Norman, that's about it. We won't go into the detail, but KPC details and Arutmin details are attached so that people have the breakdown of the key assets, the coal assets. But we're happy to open it up to questions and -- questions now. Norman Choong: Thank you, Pak Andrew. Thank you, Pak Chris. [Operator Instructions] Okay. I think audience needs some time to warm up. Let me kick it off first. But I wanted to check with you, what's your view on your 2026 coal production numbers because I understand that a lot of mining companies are in the process to submit RKAB for next year. That's my first question. Andrew Beckham: Yes. Yes, we all submitted. I think all our player base are in waiting for the government. I think they're having a big review on the total level of coal production they want. I know it was -- used to be about 800 million to 900 million, it came down to 750 million this year, but I understand they are looking at further reductions. To be honest, I don't know what the results of that are going to be. but we're waiting to hear from the government on our RKAB. Norman Choong: I see. The amount that you've submitted is the same as 2025, is it? Andrew Beckham: Slightly up. It will be slightly up because Arutmin will be probably raising its production. Norman Choong: Got it. You also had an EGM yesterday. Can you like run us through what was the key result from the EGM? Christopher Fong: Yes, I'm happy to do that. The EGM, the basis of the EGM was firstly, to address the resignations of the CIC directors. And so it was a formality in having the EGM recognizing their resignation. Also, there was a change in one other person. The CFO has been -- has moved to a new position outside the group. So those were the 2 main areas of -- and purpose of having the EGM. And also there was one appointment, which was myself as a Director. Norman Choong: Congratulations, Pak Chris. Do we have any questions from the floor? Let's see. Okay, otherwise, I'll follow up with my question. But from the news, it seems like Bumi Group is quite active in M&A recently. So we have this Wolfram acquisition and Laman Mining, right? So just wanted to understand, does it seems to be -- does it mean that there's a change of direction where Bumi now have more flexible in terms of doing asset acquisition? And how is the -- maybe in terms of the financial muscle side of things looks like? Christopher Fong: Well, look, there's no secret that this year has been -- is a year of transformation at Bumi. We announced to the market fairly early this year that we are going through a diversification strategy. I think the market has been fairly surprised in the speed that we've taken this on. And that was the first announcement of the asset in Australia, which is a copper and gold asset, Wolfram Limited. We now have 100% of that asset. It's in Northern Queensland in Australia. We visited that site recently, the President and Director and myself and a few other directors. It wasn't the first visit from Bumi, but it was certainly the first visit for myself. It's a fantastic asset. It's in care and maintenance. So it's a brownfield asset. It will be up and running very quickly. We initially targeted for June next year, although we're keeping to that, but we expect that this will be sped up, and we will announce that when we are ready to. It's, as I said, it's a very good asset. It has a lot of data, it has a lot of resources and it has processing on site. So we expect to have some very positive news as we move forward into the new year on that particular asset. Also on our website, we have announced another asset in Australia called Jubilee Metals. And that, there will be more information next month on that, but it is also a gold play. So that's the second asset in Australia that we have acquired. So as I said, there'll be further news on that in December. And also what you just mentioned, bauxite. So we've had some agreements on bauxite. They're going through a legal process. And as the market well knows that the bauxite industry is well established in Indonesia and there are some issues over export. So we -- as the market expects, there will be further announcements, what we do with bauxite and when we do it in the near future. So we can certainly move forward in a transition plan that I think has taken the market by surprise because we talked about it, but we actually are doing it. Norman Choong: Thank you, Pak Chris. Maybe to follow up on this one, right? So these 2 acquisitions, are they funded by internal cash or debt? And further related to in terms of debt funding, could you remind us, what is the current covenant in terms of debt and fund raising? Andrew Beckham: We've done the raising. We create some of the money through the bond program that we have, the rupiah bond program that we have. Rates are around 8.5% to 9%, depending on the tenure. Those have been the ones funded. We have no specific covenants other than the normal bond regulations in Indonesia. But we don't -- we're very confident with gold prices and copper prices where they are. We expect payback within 1 to 2 years on these projects. Norman Choong: Okay. We have questions from the box already. The first one is from [ Benjamin Michael. ] How big is the bauxite resources of Laman Mining? And how big is alumina smelter? Andrew Beckham: Laman Mining has, I think reserves of about 30 million tonnes, but potentially, that could increase with a little bit more. There's a discussion over one area and an agreement. If that agreement is found, that would probably increase it to 50 million tonnes. And what was the second question, sorry? Norman Choong: The alumina smelter, how big is the capacity? Andrew Beckham: That, we haven't gone into detail. We can't go into detail at the moment. We'll announce when that -- we get to that point. Norman Choong: Okay, sure. I hope that answered your questions, Benjamin. Christopher Fong: What we can say is that part of our diversification strategy is not just going into minerals away from thermal coal, but also into downstream processing. So as I mentioned before, we cannot export bauxite, and bauxite can't be exported from Indonesia. So naturally, there will be a downstream processing component to that, but we will announce that in due course. Norman Choong: Sure. Second question is coming from [ Alden Lam ]. Is Pak Ashok Mitra still in KBC as CEO? That's his first question. Andrew Beckham: No. No. He's not already in the group. He's outside that now. Norman Choong: Okay. His second question is, can you share your thoughts on the impact of B50 to the Bumi mining cost? Andrew Beckham: I can't give you a number at the moment. I haven't done the numbers, but I should expect another $0.05 to $0.10 per liter, it may well cost if the subsidy that used to be there by the government is still not there. Norman Choong: Got it. Andrew, I have a client who just texted me. Question is with regards to the 2 directors from CIC that has just resigned from the EGM, does it mean that CIC will totally exit from the business? What do you think about it? Andrew Beckham: We understand the China government has a policy of not being invested in thermal coal. Yes. And that's what we believe is the reason. And if you see in the public markets, they're selling down their shares in Bumi at the moment. So we assume that, that's the plan, that's why they resigned and their plan is to exit. I think this is their last thermal coal asset that CIC has. Norman Choong: Got it. Okay. A question from [ Yoga ]. Can you share production outlook for Wolfram and Jubilee Mining including annual production target and cash costs? Christopher Fong: For Wolfram Mining, on an annualized basis, commencing in June 2026, we're expecting 50,000 ounces at this stage. Although we won't be surprised if we commenced production prior to that date. Andrew Beckham: Yes. And I think Jubilee would do about 25,000 once it's in full production. Cost wise, we'll come back to you once the budgets are closed and finished. Norman Choong: Okay. Can I follow up on these two? What are the rough mine life that we should expect with this kind of production? Andrew Beckham: Well, with gold, it's always a case of you drill as you go over and place the years. There's long mine life in both of them based on the potential resources and reserves available. And we'll update as we go, but we have more than enough mine life to get our money back and a good return. Norman Choong: Got it. Benjamin has more questions. He's asking, who is replacing Pak Ashok following the end of his tenure? And any other potential M&A going forward? Andrew Beckham: Well, at the moment, I'm acting CFO as well. There's a discussion, a big discussion going on internally and once it's been resolved, then we'll make an announcement. Christopher Fong: And to the second question, which I'm happy to answer. It's also no secret of our expansion plans in terms of the transition model. And we're expecting in the next -- within 5 years to be an EBITDA basis, 50% in par with our coal. So therefore, naturally, we will be announcing further acquisitions as we move forward. And we expect that in the next 6 to 12 months. Andrew Beckham: Norman, we can see what you're writing. I don't know if that was... Norman Choong: So sorry. So sorry. I mean I have to write it down, right? So yes, so sorry. I forgot to off my screen. Christopher Fong: So what I'm saying is, yes, it's very clear that we're undertaking a very aggressive transformation and we have a very big unit who are focusing on assets, not just in Australia but also in Indonesia. So that has been reflected in some of the announcements that we've talked about today, and there certainly will be more coming. But we also don't discount that -- look, we're still in thermal coal. We are very focused on streamlining, sorry, excuse me, that production. And that -- and you would have seen those results today that was significant savings and cost savings we're seeing at the mine. And that will continue. So we're very much focused on thermal coal. But as we expand in this transition, you'll see more metals and you'll see more downstream processing assets come on board. Norman Choong: Okay. Anyone have more questions? Yes. It seems there's no more questions. Maybe let's wait for a little bit more. Yes, I think there's no more questions from everyone. Okay. So that concludes the earnings call today. Thank you, Pak Andrew. Thank you, Pak Chris, for doing this for us. As usual, if you have questions, you know you can reach out to them directly or you can reach out to me. Christopher Fong: Sorry, Norman. Can I just add that, look, apart from this transformation, there has been a significant restructuring at Bumi. We have a much larger, more -- larger Investor Relations department. And we're very transparent so we're very happy for engagement from anybody who has questions about the business. Andrew Beckham: And if you're not getting the updates from the company, please contact us here. Norman Choong: Sure thing. Thank you so much. Thanks, everyone. Andrew Beckham: Thanks, Norman. Christopher Fong: Thank you. Norman Choong: Thank you.
Operator: Good day, and thank you for standing by. Welcome to the Valneva 9 Months 2025 Financial Results Conference Call and Webcast. [Operator Instructions] Please note that today's conference is being recorded. I would now like to turn the conference over to your first speaker, Josh Drumm. Please go ahead. Joshua Drumm: Thank you. Hello, and thank you for joining us to discuss Valneva's financial results for the first 9 months of 2025 and corporate update. It's my pleasure to welcome you today. In addition to our press release and analyst presentation, you can find our consolidated financial results for the 9 months ended September 30, 2025, which were published earlier today, available within the Financial Reports section of our Investor website. I'm joined today by Valneva's CEO, Thomas Lingelbach; and our CFO, Peter Buhler, who will provide an overview and update of our business as well as our financial results. There will be an analyst Q&A session at the conclusion of the prepared remarks. Before we begin, I'd like to remind listeners that during this presentation, we will be making forward-looking statements, which are subject to certain risks and uncertainties that could cause actual results to differ materially from those expressed or implied by these forward-looking statements. You can find additional information about these risks and uncertainties in our periodic filings with the Securities and Exchange Commission and with the French Market Authority, which are listed on our company website. Please note that today's presentation includes information provided as of today, November 20, 2025, and Valneva undertakes no obligation to revise or update forward-looking statements, except as required by applicable securities laws. With that, it's my pleasure to introduce Thomas to begin today's presentation. Thomas Lingelbach: Thank you so much, Josh. Good day, everyone. Welcome to our 9 months call. So before we go into the business highlights, and also, Peter will provide a very detailed financial report, I would like to start off by providing a couple of key financial management highlights. Total revenues reached EUR 127 million at the 9-month time point, which is a substantial growth of almost 9% despite of some headwinds, be it from a geopolitical perspective, but also from an IXCHIQ perspective in particular. And we are very glad that we have been able to deliver on that growth year-to-date. We have also been able to significantly reduce our operating cash burn, which has been one of our key objectives in continuously improving efficiency of our operations. This resulted in a cash position of more than EUR 140 million, which includes also the net proceeds from different ATM transactions, Peter will further detail. And most importantly, we successfully completed our debt refinancing, which, of course, enhances substantially our financial flexibility, and we are very glad that we have found in Pharmakon a new partner to support Valneva in the years to come. Recapping a little bit on the first 9 months key business highlights. Around IXCHIQ, we responded to significant unmet medical needs on the La Réunion and Mayotte, the respective outbreaks. We also responded to a cholera outbreak in Mayotte by supplying doses of DUKORAL. And we again finalized the new IXIARO U.S. Department of Defense contract, all of that supporting our mission in targeting unmet medical needs. On the regulatory and commercial side of things, we secured additional marketing authorizations for IXCHIQ in the U.K. and Brazil, label extensions for adolescents, 12 years of age and older in Europe and Canada. And we announced an exclusive vaccine marketing and distribution agreement for Germany with CSL Seqirus replacing Bavarian Nordic by the end of this year for our established brands, and they already started distributing IXCHIQ in Germany. Of course, on the clinical side, it's all about Lyme right now, and we completed all vaccinations in the VALOR Phase III study according to plan. We also reported further positive safety and immunogenicity data following the third annual booster as part of our Phase III follow-up study, VLA15-221. On IXCHIQ, the vaccine profile got further substantiated with the antibody persistence data, now after 4 years, still showing the 95% 0 response rate after a single shot, which is the key differentiation for this life-attenuated single-shot vaccine. We further reported immune response in adolescents and positive pediatric safety and immunogenicity data. Last, but not least, we also reported positive Phase I results from our second-generation Zika vaccine candidate, VLA1601. Going a little bit into the details of the individual programs, I would like to start off with Lyme. We've been talking a lot about Lyme, and we will be talking a lot about Lyme. The Lyme continues representing a major unmet medical need, enhanced market opportunity, close to 0.5 million cases every year confirmed in the United States, probably now in Europe, the same order of magnitude. Also, there are limited reporting systems available. You remember that we have about 90 million U.S. citizens living in high-risk areas of Lyme disease, and in Europe, more than 200 million in those endemic regions. Most importantly, the health economical benefit for a potential vaccination against Lyme disease is considered extremely favorable. Why? Because you have very severe manifestations in connection with Lyme disease. 10% to 30% of people develop either carditis, neuroborreliosis or arthritis and 5% to 10% persistent symptoms even following treatment with respective antibiotics. By way of reminder around the Phase III study that is currently ongoing, Pfizer reconfirmed that they're going to submit regulatory applications in the U.S. and Europe in 2026. The VALOR study has been executed according to plan. And basically, Pfizer guided for readout in the first half of 2026. And the study, of course, is now going through its follow-up period since the official case counts ended at the end of October. Then, we run the normal process through case adjudications, further testing activities, database cleanings and all of that before the results will be announced in the first half of next year. Most importantly, the time point for which we expect the product to be launched hasn't changed. It is important for us and our Pfizer colleagues that the product can be launched in the autumn of 2027, well ahead of the 2028 tick season. It is important to get really people protected for the tick season 2028. As such, we are very, very much looking forward to the data, which hopefully are going to be positive, and hence, provide a pathway for a vaccine that could really address a huge unmet medical need. Turning to our highly differentiated, single-shot chikungunya vaccine, VLA1553 or IXCHIQ. Where are we at this point in time? Of course, we have, on the regulatory side, still the situation that the product is suspended in the United States. And we are still awaiting further information from FDA, which we haven't received at all at this moment in time. In all the other countries, we are working on the basis of updated Prescribing Information or SmPCs. And we are seeing that the product is being administered, and we are trying to focus substantially on the expansion into LMIC territories and are working with existing and hopefully future partners in this regard. The most imminent point now to consider in this program that is supported by CEPI are our post-marketing effectiveness studies, the Phase IVs, which are about to commence with an observational effectiveness study in Brazil with pragmatic randomized controlled effectiveness safety studies in adolescents and adults, including elderly in various endemic countries, and then, later, a prospective safety cohort study and surveillance in Brazil as well. Of course, I mentioned already, the label extensions and the report on the positive data, which we will further submit and hopefully be granted in the different product labels. We see clearly the product differentiation for IXCHIQ, which, of course, is super important for a potential outbreak disease and for people who are planning multiple trips into areas where there is a high risk of a potential outbreak. Shigella, you may recall that we in-licensed the vaccine through a partnership with LimmaTech, the program called S4V2, is the world's most clinically advanced tetravalent Shigella vaccine candidate. It addresses the 4 most common serotypes of the Shigella bacteria. The program reported earlier positive I/II clinical data in different age groups. In terms of medical need, Shigella represents second leading cause of fatal diarrhea. And here, especially in infants, below 5 years of age, the global market is expected on the one hand side in LMICs, in particular, the target population that I just mentioned, but also it represents significant opportunity for travelers and military. Given the overall medical need, and also, the diarrheal diseases to be seen in the context of antibiotic resistance, the Shigella development or vaccine development against Shigellosis has been identified as a priority by WHO. We have currently a couple of studies ongoing. We have the Phase II in infants, for which we expect results still this year. And we have the Phase IIb controlled human infection model study in adults, where we changed some of the data time points, the clinical design in order to extend the period of immunogenicity, where we had the opportunity to optimize dose and schedule. And we expect the pilot efficacy data next year with immunogenicity data coming in earlier upon success. And please remember that we have intentionally set up the clinical design and the clinical pathway in a way that the program is highly derisked from a capital allocation perspective. So based on positive data, based on our respective go decisions, we will assume full accountability for the program following those 2 studies, which are still sponsored by LimmaTech, yes, or just update on our operational business and R&D, in particular. I would like to hand over to Peter to provide you the financial report for the 9-month period. Peter Buhler: Thank you, Thomas. Product sales reached EUR 119.4 million compared to EUR 112 million in the 9 months of 2024, an increase of 6.2%. Foreign currency fluctuation had an adverse impact of EUR 1.3 million. IXIARO sales reached EUR 74.3 million, increasing 12.5% over prior year. The year-over-year growth was driven by sales to the U.S. Department of Defense as well as increased sales in some European countries. Foreign currency fluctuation adversely impacted IXIARO sales during the first 9 months by EUR 800,000. DUKORAL sales decreased from EUR 22.3 million in the first 9 months of 2024 to EUR 21.5 million in the same period of 2025. Sales were EUR 400,000, adversely impacted by foreign currency fluctuation, mainly resulting from a weakening Canadian dollar and also lower sales to our German partner, as we are transitioning from our current distributor to CSL Seqirus. IXCHIQ's sales reached EUR 7.6 million compared to EUR 1.8 million in the 9 months of 2024. While IXCHIQ sales included the supply of 40,000 doses to combat the major chikungunya outbreak on the French Island of La Réunion, the temporary restriction and U.S. license suspension significantly adversely impacted sales in the Travel segment, leading to an adjustment of our sales guidance. Third-party products decreased by 28.5% year-over-year to EUR 16.1 million. This decrease is a result of the anticipated discontinuation of certain third-party distribution agreements. As mentioned in our previous calls, we expect third-party product sales over time to account for less than 5% of total product sales. Now, moving on to the income statement. Total revenues reached EUR 127 million versus EUR 112.5 million in the first 9 months of 2024. The increase of 9% is driven by higher product sales and an increase in other revenues related to revenue recognition from partnerships. Looking at expenses, cost of goods and services for the 9 months of 2025 reached EUR 71.1 million compared to EUR 71.3 million during the same period last year. The gross margin on commercial products, excluding IXCHIQ, reached 57.2% in the first 6 months of 2025 compared to 48.6% in the prior year. The improvement in gross margin was driven by better manufacturing performance and favorable product mix. IXIARO gross margin reached 63.2% compared to 58.8% in the first 9 months of '24, and DUKORAL generated a gross margin of 52.3% compared to 34.8% in the prior year. Cost of goods related to IXCHIQ amount to EUR 8.6 million and include provisions to recognize lower IXCHIQ demand. Cost of goods also includes EUR 8.2 million of idle capacity costs. Research and development expense increased from EUR 48.6 million in the 9 months of 2024 to EUR 59.7 million in the same period of 2025. That increase is what is driven by costs related to the Shigella vaccine candidate following the R&D collaboration with LimmaTech Biologics and costs related to the IXCHIQ Phase IV post-marketing commitment. Marketing and distribution expense decreased from EUR 35.7 million in the prior year to EUR 28.6 million in the 9 months of 2025. The decrease is related to a planned reduction in advertising and promotion spend related to IXCHIQ following the launch in early 2024. G&A expense reached EUR 29.5 million in the first 9 months of 2025 compared to EUR 32.6 million in the same period of last year. This decrease is a result of a program to increase operational efficiency across the company that we ran at the end of 2024. In the 9 months of 2025, Valneva reported an operating loss of EUR 53.9 million compared to an operating profit of EUR 34.2 million in the prior year. Last year's operating profit was the result of a sale of a Priority Review Voucher for a total net proceed of EUR 90.8 million. Adjusted EBITDA in the first half of 2025 reached a negative EUR 37.7 million compared to a positive impact -- positive EBITDA of EUR 48.6 million, impacted by the sale of the PRV. Before moving to the outlook and guidance, a word on cash. As mentioned by Thomas at the beginning of the call, cash at September 30 was reported at EUR 143.5 million compared to EUR 168.4 million at the end of 2024. The cash at the end of September includes a total of 3 ATM transactions for a value of a total of EUR 26 million net of transaction costs. Cash used in operating activities was reported at EUR 28.4 million compared to EUR 76.7 million in the first 9 months of 2024. Now moving to Slide 19. We confirm our financial guidance for the fiscal year of 2025 with product sales of EUR 155 million to EUR 170 million and total revenues of EUR 165 million to EUR 180 million. We continue to project R&D expense of EUR 80 million to EUR 90 million, and the R&D expenses will partially be offset by grant funding and the anticipated R&D tax credit. As confirmed in the results at the end of September, we expect a significant lower use of cash in operations. Cash will remain a key focus in order to ensure sufficient runway to reach key inflection points. In the midterm, we expect continued growth in our product sales, focused and strategic investments into R&D and continued improvement in gross margin. We continue to expect Valneva to be sustainably profitable post successful approval and commercialization of the Lyme disease vaccine. With this, I hand the call back to Thomas. Thomas Lingelbach: Thank you so much, Peter. At this moment, I would like to turn to our key growth drivers for the remainder of the year, but also most importantly, beyond the end of 2025. We have built Valneva now on a very solid foundation. And Lyme is certainly going to be the single largest growth driver for the company in the years to come and the single largest near-term catalyst for the company and its shareholders, but also for people who may benefit from a vaccination against Lyme disease. The VLA15 success, which is hopefully expected in the first half of next year, may drive the company upon successful approval and commercialization into sustained profitability, driven by substantial milestones and later royalties starting in the latter part of 2027. Of course, for this year, and despite of having adjusted our guidance on product sales, we hope that we will be able to continue our growth trajectory for our established brands, IXIARO and DUKORAL. And we are working hard in gaining and regaining global traction on IXCHIQ, and in particular, leveraging LMIC opportunities and new territories where a product like IXCHIQ with its highly differentiated product profile could be perfectly suited. There is more that Valneva has to offer in its pipeline above and beyond Lyme. Also, Lyme is, of course, very, very dominant and rightly so. We are advancing a number of quite promising internal candidates. We are identifying new opportunities, be it in-house, be it also external potential partnering opportunities with the aim to really build a coherent R&D pipeline with an attractive next Phase III program upon successful VLA15 [ stroke ]/Lyme commercialization, making us really a leading vaccine biotech in the world. As such, we see substantial growth, substantial upside. And with that, I would like to hand back to the operator to take your questions. Operator: [Operator Instructions] We are now going to proceed with our first question. And the questions come from the line of Vamil Divan from Guggenheim Partners. Vamil Divan: So maybe just 2 questions. I could wait for the Lyme data, obviously, the big event coming. On IXCHIQ, you mentioned you're waiting to hear from the FDA. Is there any sort of timelines there? Any guidance on when you think you may hear or anything that the FDA is bound by in terms of when they need to respond by? And then, DUKORAL, you mentioned this quarter, there were a couple of factors, I think the currency and then the distributor shift in Germany. Wondering if you can quantify the impact of the second, especially? And just how you think about sort of -- you're talking about growth for that asset going forward? How you sort of see that recovering to growth? Thomas Lingelbach: Okay. So let me start off with the Lyme -- the IXCHIQ question and FDA. So unfortunately, the answer is there is no predefined process because a similar process, meaning a suspension in the same way that it was done for IXCHIQ without WebPAX, et cetera, has not been done to our knowledge before. So actually, there is no precedent. There is also currently not a procedure to our knowledge that needs to be followed from a timing perspective. And as such, we are hoping for a collaborative interaction with the FDA, which, of course, could not have happened due to the government lockdown for quite a while, but we certainly hope that we will be able to embark with the FDA into a dialogue still this year. I'll let Peter answer to your DUKORAL question. Peter Buhler: Yes. So I think I commented on the currency impact during the call. I think with regards to Germany, we have not disclosed the number, and we never disclose numbers on individual countries. What I would say is the third quarter of last year saw a particularly strong quarter for Germany. And basically, as we are now moving to our new distribution partner in Germany, there's just not purchases that are made by the existing one because they're using up, of course, the stock they have before we then will ship products to the new one. So that -- it's basically a technical delay. Now, to your question on looking forward, I mean, we have not yet provided, of course, guidance for 2026, but it's safe to assume that we will continue -- we will expect the continued growth of the DUKORAL brand. Operator: We are now going to proceed with our next question. And the questions come from the line of Maury Raycroft from Jefferies. Maurice Raycroft: Congrats on the progress. For the Lyme Phase III readout, Pfizer has to complete 3 months of safety follow-up after the end of the tick season in October, which implies to us that the readout could come as early as mid-1Q '26, just based on the additional time required for database lock and analysis. If the readout happens later into the second quarter of 2026, would that imply that analyses of the results are just taking longer? Or what are some of the reasons that could push the timing to later in the second quarter? Thomas Lingelbach: Maury, yes, good question. So basically, Pfizer are in control of this process. All I can say is we have seen that Pfizer are taking every single step in a very professional and at most accelerated way. At the same time, they will not take any regulatory risk understandably in the current environment. And therefore, I'm assuming that they will be as early as possible. I cannot see at this point in time any major delays compared to the timelines that you have just alluded to. And, of course, I think my colleagues mentioned this to you during the fireside chat. We are also hoping for as early as possible readout of the topline data. Maurice Raycroft: Got it. Okay. Makes sense. And maybe one other question just for the IXCHIQ VLA suspension. Can you comment on what you proposed in your response to FDA as a remedy? And are there some contingency options that you have to -- that you have in place that could get this back on track in the United States? Thomas Lingelbach: So basically, our response has solely been focused on the real medical evidence. Our response has been focusing on the individual case analysis and case assessments, both by Valneva as well as by others, including other regulatory agencies and has been focusing on our reiteration on a positive health economical benefit, so-called positive risk-benefit ratio as already articulated by CDC and others. And so basically, we have already a Phase IV program ongoing, as you know. And we have a more stringent pharmacovigilance review, ongoing since we saw the SAEs primarily in La Réunion. And this has been the cornerstones in our response and clarification vis-a-vis the FDA. Operator: We are now going to proceed with our next question. The next questions come from the line of Romy O'Connor from VLK. Romy O'Connor: Two, if I may. The first one, with this talk about possibility of VLA15, yes, being maybe earlier than expected, do you think you're going to be able to launch on time then for the 2027 tick season? And on IXCHIQ, I was just wondering how sales are expected to grow going forward from here and what the future drivers are? Thomas Lingelbach: Yes. So first of all, on the timeline for VLA15, so we have Pfizer reconfirmed the regulatory submission timeline for next year. The regulatory submission timeline next year is the very pivotal and important underlying hypothesis for launch in the latter part of 2027 because the program is under accelerated approval pathway, fast track, et cetera. So all of that is important in order to meet the timeline of a launch in the autumn of 2027 because remember, the vaccine needs 3 shots for priming, so this means if you want to have people protected for the Lyme season in 2028, you've got to start vaccinating at the latter part of 2027. Currently, all timelines communicated by Pfizer do support that notion and that timeline. With regards to the IXCHIQ situation, it's, of course, not an easy question to answer because we see -- we continue to see major growth opportunities for IXCHIQ in the travel sector, but also in the countries where the chik virus is endemic given that the single-shot live-attenuated approach has a particular importance for countries where you have recurrent outbreaks. And we are working with many different countries right now in potentially ensuring access of the vaccine in those territories. It's a bit too early to talk about the -- those territory expansion activities and what it will really mean in terms of commercial opportunities. We have 2 existing partners with Butantan for Brazil and South America and the Serum Institute of India for Asia, but there are more countries. There are more territories we are currently in dialogue with. And we are trying everything to accelerate market access in those countries. And how long it will really take to establish vaccination against chikungunya in the world of travel vaccinations has to be seen. I mean, its -- history has told us that it's not easy to predict growth trajectory for travel vaccines. And as such, I think we will hopefully be able to provide further guidance as part of our 2026 outlook in the earlier part of next year. Operator: [Operator Instructions] We are now going to proceed with our next question. And the questions come from the line of [ Theodora Robigl ] from Goldman Sachs. Unknown Analyst: Just one from me. So in today's release, you referred to uncertainty around private and public funding opportunities being a consideration and whether you take your Zika vaccine candidate forward. I was just wondering, is there any more detail you can share with us in terms of factors you're weighing up, some sort of level of funding you need to see to take the candidate forward? Any further details would be appreciated. Thomas Lingelbach: Yes. So we announced already that statement as part of our Zika release that we announced 2 weeks ago. And we only repeated it in today's earnings release. On the one hand side, we are super happy with the data that we have generated. We have shown very good immunogenicity data, and we have shown excellent safety data for a vaccine that would also target pregnant women, for example. At the same time, there is a significant uncertainty around the potential regulatory pathway to licensure because it's an outbreak disease, so a classical placebo-controlled efficacy study would probably not be deemed feasible. At the same time, there are major regulatory headwinds against accelerated approval pathways at this point in time. And the major, I would say, NGOs, but also public health agencies have deprioritized Zika given the epidemiological situation. As such, the return on investment for further development is not an obvious one. And certainly, in the absence of those clarifications, it would not be prudent to invest as Valneva stand-alone in this program going forward. At the same time, if there was a substantial funding provided by respective institutions, public, private, we would be very happy to do it in a similar way, as we developed our chikungunya vaccine, for example, with substantial support by CEPI. At this point in time, again, we keep the options open, but we count also on the understanding here that we need to be mindful of capital allocation and returns of investments even if there was an exciting product candidate or there is an exciting product candidate and certainly an interesting medical opportunity. Operator: [Operator Instructions] We have no further questions at this time. I will now hand back to you for closing remarks. Thomas Lingelbach: Yes. Thank you, everyone, for having taken time today. We are very thankful about your support. And again, we are looking forward to delivering on our expectations for the remainder of the year. And then, most importantly, to the next big and biggest catalyst for Valneva in its history with Lyme data coming in next year. Thanks so much, and have a good remainder of the day. Bye-bye.
Operator: Good morning, and welcome to Cadeler's Third Quarter 2025 Earnings Presentation. Presenting today are Mikkel Gleerup, Chief Executive Officer; and Peter Brogaard, Chief Financial Officer. Please be reminded that the presenters' remarks today will include forward-looking statements. Actual results may differ materially from those contemplated. The risks and uncertainties that could cause Cadeler's results to differ materially from today's forward-looking statements include those detailed in Cadeler's annual report on Form 20-F on file with the United States Securities and Exchange Commission. Any forward-looking statements made this morning are based on assumptions as of today, and Cadeler undertakes no obligation to update these statements as a result of new information or future events. This morning's presentation includes both IFRS and certain non-IFRS financial measures. A reconciliation of non-IFRS financial measures to the nearest IFRS equivalent is provided in Cadeler's annual report. The annual report and today's earnings presentation are available on Cadeler's website at cadeler.com/investor. We ask that you please hold all questions until the completion of the formal remarks. At which time, you will be given instructions for the question and answer session. As a reminder, this call is being recorded today. If you have any objections, please disconnect at this time. Mikkel Gleerup, you may begin. Mikkel Gleerup: Thank you very much, and welcome to this Q3 presentation from Cadeler. Thanks for everybody who's dialing in for listening to us today. With me today, I have Peter as normal, and Peter will take you through the financial section of the presentation. So just the standard disclaimer. And we can say that this quarter, the highlights of the third quarter of 2025, we can say that it has been financial performance in line with our expectations. We have, in this quarter, also signed the third full scope foundation T&I contract and also 2 turbine installation T&I contracts. We have delivered 3 of our 4 newbuilds scheduled for delivery in 2025 already. And we have the remaining newbuild, the Wind Mover on track for delivery, and she is delivering current expectation within the next couple of weeks. We have had very strong utilization in the third quarter. We have had 92% utilization. And we believe that, as we have always said that, that is a strong measure of our business, and we are working across the globe in both U.S., in Europe and in Asia. And we are continuing with very strong execution. We have the Wind Ally currently mobilizing for the Hornsea 3 foundation T&I project, and we have the Wind Keeper now here in Denmark at Fayard and also upgrading before she is embarking on her long-term contract with Vestas. In terms of commercial highlights of the third quarter 2025, the vessels have been working out there, and we are starting with the Wind Orca that has been performing work on the He Dreiht project for Vestas. The Wind Osprey has done an O&M campaign for Vestas and are now installing a wind turbine installation project on Baltic Power in Poland. Scylla has continued to work on Revolution Wind in the U.S. for Ørsted and Wind Zaratan completed an O&M campaign in Asia and are now getting ready for her next assignments in the next year. The Wind Peak is also continuing to install on the Sofia wind farm owned by RWE where we are working for Siemens Gamesa. Wind Maker is working on Greater Changhua in Asia for Ørsted. And Wind Pace have been executing an O&M campaign basically since she was delivered from the yard, and she's working for GE Vernova. The Wind Keeper, as I said, has arrived in Denmark on schedule and is currently undertaking a complex upgrade scope. And we do believe that we will see her on project in the first quarter next year. Wind Ally delivered 7 weeks ahead of schedule from the yard and sailed directly to the next mobilization port where she's mobilizing all her foundation mission equipment, getting her ready for the Hornsea 3 foundation installation project. Cadeler sits on a significant backlog across key markets, both in U.S. and Asia, but certainly also in Europe. And we have recently disclosed a very large foundation project with an undisclosed client for execution in 2029, which is something that we are very, very pleased with. I think it's a verification of the concept we are running on the foundation side where the biggest clients in our industry, they are coming to us for full T&I on foundation installation, both near term, midterm and also in the longer term. We will continue to work very, very diligently for more foundation work, but also for more WTG work. And as we do that, we will also continue to build Nexra, our O&M vehicle. And we expect that the backlog will continue to be strong across the years that we are sailing through now. The backlog has basically grown since we listed the business, and we are now standing today at a backlog of almost EUR 2.9 billion, where 78% of that has reached FID. We believe that, that is a quality sign that so much of our backlog has reached FID and also that we are continuing to grow the backlog. We have discussed before that we see 2027 and 2028 as years with slightly more competition for the projects and also an expected lower utilization degree on the fleet. But we are, of course, still working very, very hard to continue to get the best projects in these years so we can continue the journey with our fleet, with our company and our people. In terms of the newbuilds out there, we have Wind Mover that are delivering here in Q4 this year. This is the last delivery this year. And when this is delivered, we will have totally taken delivery of 5 vessels this year, including the Wind Keeper, which was an additional delivery this year that was unexpected at the beginning of the year. And it's very, very close to completion, has already completed the sea trials, and we are expecting, as I said before, to deliver the vessel in the next couple of weeks. The Wind Pace is on track. And she -- we expect that she will be floated out of the dry dock here in December 2025 and delivery is still planned for the third quarter 2026, but there are opportunities for us to potentially advance that should the market need that in 2026. On Wind Apex, we still look at the delivery in Q2 2027, and we are following the plan there exactly as on the other vessels. The Wind Keeper, as I said, has arrived at Fayard in Denmark, and we are on schedule. It is a big upgrade scope we are doing on the vessel, but we need to make sure that these vessels operate to catalyst standards from the beginning. We are working with one of our esteemed clients with Vestas, and we want to make sure that Vestas get a real Cadeler experience on the Wind Keeper from the beginning. The primary scope of the Wind Keeper will be O&M services, but with the crane she has and the leg length she has and the carrying capacity she has, she can also embark on installation scopes. For us, it's important that we make sure that we drive a lot of value out of this investment, and we believe that with what we have seen so far that, that is very, very much a strong opportunity for us and for our client in collaboration. At this point, I will hand over to Peter for the financial highlights in this quarter. Peter Hansen: Thank you very much, Mikkel. Yes, financial highlights for Q3. It was a very, very strong quarter that reflects high utilization and cost under control in comparison to last year, of course, we have 3 more vessels in operations, the 2 B Class vessels Wind Peak and Pace and Wind Maker. Revenue was EUR 154.3 million. Equity ratio is still with the more leveraged balance sheet with deliveries and drawdown on our facilities still very solid 47.3%, utilization very high at 92.2%, which is very, very good for the quarter. Market cap EUR 1.4 billion, approximately 3x the guided EBITDA for the year. EBITDA for the quarter, EUR 109.1 million. Cash flow from operation activities, EUR 214 million. And as Mikkel explained, a backlog record high at EUR 2.9 billion, 3 months daily average turnover is EUR 5.4 million. If we look at the P&L for Q3, yes, again, it really reflects that there are more vessels in operations, Wind Peak, Wind Pace, Wind Maker. And it is a picture that we have seen quarter-by-quarter with a very strong results once a vessel goes into operations, our financials take a step up revenue, EUR 154.2 million, and that is due to, of course, the high utilization, but also the additional vessels. Cost of sales under control, EUR 38,000 approximately for the quarter, a little bit up as compared to last year, but also 2 vessels in operations in the U.S. with a little bit of higher OpEx per day, but still below the EUR 14,000 mark per day. SG&A also up due to what we have been communicated for some time now that we are building the organization exactly to what we see now. We have more vessels in operation and also the upcoming foundation projects. EBITDA, as said, is EUR 109 million, which is more than double what we had last year. P&L for the 9 months from the 1st of Jan to 13th of September, it is more or less the same story. In addition to that, you can see that the OpEx for the year is EUR 34,000 per day, which is also reflecting that it is operation under control. As communicated around first half report, we also have received these termination fees for the termination of a long-term agreement on a postponed -- including on a postponed project Hornsea 4. Balance sheet, yes, reflecting the deliveries and we have taken so far this year, 3 new builds and the Wind Keeper. But as said, still equity ratio at a very comfortable level. This is a slide we have shown a couple of times. It really shows that we have sufficient funding to go through the remaining CapEx program we have with the Mover with 2 A Class vessels coming in, in Mover in Q4 '25 and Ace in '26 and Apex in '27. So we have quite a strong balance sheet and cash and liquidity available. And other story here is that we still see a lot of support from the banks. I think it's unchanged strong support we have seen throughout the last couple of years. Apex is not committed financing yet because it's delivered in '27. So we will start financing that one in '26 and have that in place approximately 1 year before delivery in order to not incur too much commitment fees on that one, but we see exactly the same strong support and interest from the banks also for the Apex. This is the financing overview. What is new here is that we had a Wind Keeper bridge facility that we took when we signed the agreement on the acquisition of Wind Keeper, and we have now a Wind Keeper syndicated facility in place to replace that. That was not done by end of Q3, but that is something that has happened subsequently. Full year outlook for '25. We maintain the outlook that we issued around first half year report after the termination of the long-term agreement. Of course, we are way along into the year, and there's not a lot of uncertainties and judgments left. However, we -- what can fluctuate here is how much of the T&I scope of -- on T3 that falls into '25, '26, '27, that is something that can move a little bit, but we maintain the guidance from half year before. Over to you, Mikkel. Mikkel Gleerup: Thank you, Peter. In terms of commercial outlook for the business, I think what we can say in terms of our view on the market, we get a lot of questions on this and rightfully so. We do see a recalibration. We still see strong momentum, especially in the inner years and in the outer years with a period in between where the momentum is weaker. And what do I mean by that? Let me first talk about the inner years. I think it's fair to say that at the moment, there are several projects out there that don't have an installation solution or an O&M solution at the moment, and they are still looking in the market. In '26 and also in '27, it is becoming increasingly difficult to get a solution and especially if that solution is a solution where it's the same vessel that does everything. Of course, if you're willing to piece meal it together, then you can find a solution still. But this is -- this will be the next step. I think '26, close to impossible at the moment. And in '27, it is becoming more and more something that you have to put together to deliver a full solution to clients. So we are seeing that in the middle year, so the second half of '27 and also in '28, that some of the projects there have been shifting to the right. And that means that there are lower-than-expected utilization in this period. But we are still seeing a significant outbuild in '29 and forward. And as we have just shown the market as well, we have signed a big contract for '29, and we see actually that some developers that would like to secure their capacity for this period, the '29, 2030, 2031 period sooner rather than later to not miss out on the capacity in those years. So -- of course, a lot is still pending on the auctions that are coming like auction round 7 and auction round 8. But we do see that also there is support from governments. In Denmark, for example, there have been support on 2 of the offshore projects to make them increasingly attractive to the market. And hence, we also do believe that there will be successful bidding in Denmark around the auction. We believe that it's fundamentally important to say also that even with the adjusted targets, we are still seeing a large outbuild of offshore wind in this decade. And from next decade, we do expect that the curve will increase in its steepness and more will be outbuilt as we come into that area. And as we say at the bottom here, we do expect a vessel undersupply towards the end of the decade and the beginning of the next decade. In terms of capacity and what we see in the market and what others are seeing in the market, we are seeing a different reality from whomever you ask. And we have tried to show here what the various consultants and analysts that are looking at the market. When they look at the worldwide market, excluding China, what are they saying that will be installed before 2031. And no matter what line you're taking here, there is a significant increase from where we are today and to where we will be when we are into the next decade. So I think that Cadeler's focus is to grab the right projects, the best projects and make sure that we are running on as high utilization profile on our vessels as possible. And I think that we -- with the plan that we have laid out also for the middle years, the '27, '28 years that we are on a mission now to close these years in as fast as possible with the best projects possible in these years. It is a fact that there are more competition in '28 than we expected due to missed auction rounds and due to projects being shifted to the right, but it doesn't mean that there's no opportunity. And I think that, that is the important message from us that is that there are opportunities, and we are fighting for those opportunities, and we will continue to do so. Europe will continue to be the leader in the outbuild, but we also do see APAC continuing outbuild and especially Korea is coming in that market in addition to what we have seen in Taiwan and in Japan. Recently, there has also been a European developer signing a development agreement in another Asian country, but we don't believe that, that will have an impact in this decade. We still have the largest fleet in the industry, and we believe that, that fleet and the flexibility, predictability and affordability that it gives our clients is something that they are having a preference for. We are still active in a wide range of tenders across all years out in the future, and we are fighting as hard as we can to make sure that we deliver the best value and the best projects to our investors. That is what we come to work for and what we are fighting for every day. But we do believe that the offering that we can offer to our clients has a value and also something that will drive value for us and our investors. We have also shown on this slide that the supply has gone down since we last addressed the investors in a group setting. The Maersk Offshore Wind vessel, the contract between Maersk and Seatrium was terminated. And hence, at the moment, we do not consider that vessel as being in supply in the market and hence, the supply has gone down. In terms of key investment highlights, as I already said, largest and most versatile and flexible fleet, this enables a lot of different things for our clients, both in terms of cost utilization, efficiency and project derisking. And we see that all of these matters are something that we are currently discussing with clients for current projects, for projects in the near, the mid and the long term. We are active in all of these time lines. We have a highly experienced team, and we have been conservative in how we have grown the team, and that is also why we are confident that we have the right-sized team for what we are seeing in front of us now. We have good relationship with clients and with contacts in general in the industry, and we believe that we are in a very, very good situation in terms of negotiating projects with our clients. We believe we have a resilient global platform. We believe that we are able to spread risk on more units and hence, that we are also both from an operational risk, but also from a, let's say, a market risk in a good position. And we do see also that the O&M market is something that is taking an increased share of the fleet in terms of either campaigns on turbines or ad hoc service work that is needed for main component replacements on the products already installed out in the market. We do see an undersupply of capable vessels, in particular, on foundations in 2029 and WTG vessels from 2030. And that is something we can already start to see now because we are basically bidding some of those projects already now, and we see, as I said, also, a very strong growth in the demand for O&M services. So all in all, with the reality of the middle years, the second half of '27 and '28, we believe that we are in a market that in the short term will be very, very strong and very, very busy where every single vessel day will be captured. Then we are coming into a period of more balanced work and more balanced utilization and then coming into a market again that is picking up in '29 with the projects we currently see out there. We have a strong track record in the capital markets, and we are backed by a record high order backlog of EUR 2.9 billion and we believe that, that order backlog provides a lot of earnings visibility. And as I read in some of the reports this morning that came out, more than EUR 700 million of that is in the next 12 months. So also in terms of what is covered for the next 12 months, we are also in a very, very good position. So I think from that point, very strong near term, slightly weaker middle term and then a pickup again in the longer term. That is what we have for you today. So from this point on, we are happy to take questions. Operator: [Operator Instructions] Our first question is from Martin Huseby Karlsen from DNB. Martin Karlsen: I think you did a pretty good job talking about 2028 being a transition year, but I'm curious to hear a little bit on your confidence level for '29 and '30 seeing higher volumes. Is that related specifically to some events out there? Or is it in general contingent upon more government and political support for offshore wind in Europe? Mikkel Gleerup: Yes. Thank you, Martin. Good question. I think the confidence level is primarily built on the number of projects we are bidding at the moment, but also how our clients are willing to commit to these bids if they can secure capacity. I think that for -- obviously, something like the U.K. round 7 auction, I know that the budget was for some in the market lower than what was expected. But I still believe that with the budget, a significant amount of projects can be approved. And for us, it's about being involved in the right projects, but also a general belief from the projects that are currently tendering in those years and willing to commit to those years, we form an overall view that we see and especially on '29 on foundations that there is or will be potentially a situation where not everybody can be served in that year. Martin Karlsen: Good. And then as a follow-up, in terms of positioning Cadeler for the next, call it, next couple of years in terms of backlog, '28 looks maybe to be a little bit challenging. But when you get into '29 and '30 and there is quite a lot of uncertainty in the industry as a whole, could you talk a little bit to how you perceive or get comments from clients with respect to your positioning, having a large fleet of vessels and also being able to do both foundations and turbine versus some of the single or 2 vessel companies out there? Mikkel Gleerup: Yes. I think that, that is something that is certainly valued highly by the clients that there is a degree of predictability and safety in the supply side because I think that even for a year like '28 where some developers, they have one project to execute, it is very, very important that, that project goes to plan. And I think that we see that -- and we also feel very much from the conversations we have with our clients that it is a lot around our ability to deliver, our ability to guarantee vessel and potentially backup vessels if something should go wrong, that matters more than anything else. We oftentimes get the question, how much do you discuss price with your clients? And I would actually still say that price is not the main thing that we are discussing with our clients, whereas it is true that there is, of course, more pressure in '28 because we are more fighting for fewer projects. So that's a natural function. But I think that there are realities on both sides of that. So I think, firstly, it depends a lot on which developer are we talking to. And secondly, also what kind of project is it that they want to execute. But particularly on the foundation side, it's a confidence in the delivery. And on the WTG side, it's also this whole, how can we back up around the turbine OEMs should they have problems, for example. So I think that those are things that we are discussing. Martin Karlsen: And you touched a little bit on it, my next question in your answer already. But in terms of pricing, there's been at least from the outside, pretty solid pricing for '26, '27 execution, then you announced recently work for '29, '30, which also seem to be at a good pricing. Can you kind of help us understand that in the context of '28 demand looking a little bit softer? Mikkel Gleerup: And I think again, it depends a lot where you're looking. If you're looking in Asia, I think that we are still seeing a tighter supply and demand balance even in '28 compared to rest of the world. But I would say in Europe, we are seeing that in '28, the prices are slightly more under pressure, and you need to be sharper in order to secure projects there. So in '28, I would argue that price is a matter because obviously, if you have a project in 2028, you also know that there are more companies that can do it for you than currently there are projects. And hence, that drives, if not a downward pressure on the prices, then at least a stabilization of prices at least. But I think that it is an overall evaluation criteria. It's -- as I've said before, it's hard to evaluate it on a daily rate basis. So I cannot tell you that it has gone down from this to this. But I think it's more for the overall view on the project, but it doesn't mean that it's not still something that is attractive for us to do. Operator: Our next question is from Jamie Franklin from Jefferies. Jamie Franklin: So firstly, just focusing on 4Q. You mentioned obviously that Hornsea 3 is probably the biggest variable in terms of where you end up within your full year guidance range. Could you maybe just give us a bit more color on the scope currently being worked on Hornsea 3? And then as you move into 2026, what is your kind of current expectation in terms of timing for first monopile installation, please? And then the second question is just for Peter. In terms of the cash flow for 4Q, can you give us any indication of what to expect in terms of working capital, a pretty decent inflow in 3Q? Should we expect that again in 4Q? And similarly, on CapEx, what are kind of the main components to expect in 4Q? Is it just a final installment of Wind Mover? Or are there going to be some Wind Keeper upgrade CapEx as well? Peter Hansen: Yes. If we take the last question first. Thank you, Jamie. CapEx Q4, that is, of course, the Mover. And then it's mission equipment on Wind Ally, I think. And then, of course, what is also coming every quarter is these capitalized borrowing costs. But on these 2, it will be around EUR 320 million so around that, but predominantly coming from the move of working capital. Of course, Q3 is a little bit of a special quarter for working capital because it goes down significantly due to that we have received the termination fees on long-term agreement cancellation that was sitting as an asset at the half year, end of June, and we received the money in Q3. So there was an inflow there. If you isolate that, it's pretty much the same picture we will see in Q4 as we have seen in Q3. We have modest growth in working capital or same level. That is what we see. What we are seeing on -- the transport and installation scope, we are doing in '26, that is, of course, the planning and engineering, but we're also starting on the transportation scope in Q4. So that is what we see the first monopile -- maybe you can answer that... Mikkel Gleerup: Yes. I can answer that, we are not allowed to tell you because it's Ørsted that is having that under their announcement criteria, so to speak. So we are not allowed to guide you towards when the first pile is in the water. What I can say is that we are absolutely on plan on Hornsea 3 and that we follow all our planned deliveries on target and on budget at this stage, which is very, very pleasing because, of course, at this stage, we have delivered many of the engineering scopes that we have been working on for years and years. And this includes the transportation frames for the secondary steel, the transportation frames for the piles, the mission equipment for the vessel and the vessel is mobilizing at the moment. At the same time, we are preparing 2 ports, the Port of Tyne for secondary steel where the Wind Orca will operate from and Tees work where the Wind Ally will work from loading out piles. So a lot of things are going on. And we consider at the moment that we are in full execution on Hornsea 3. But of course, the Ally will come in, in the first quarter next year and start preparing for installation of piles, but the exact dates and targets and all of that is not something we are allowed to discuss in the public domain. Operator: Our next question is from Daniel Haugland from ABG Sundal Collier. Daniel Vårdal Haugland: Good to see you and congrats on a good report. So I have a couple of questions. The first one is on the contract, the EUR 500 million contract you announced recently. Are you kind of able to give any indication of a rough kind of percentage split of how much is related to the T&I services and how much is the installation that is... Mikkel Gleerup: Unfortunately, we're not -- it forms part of an auction for the client, and hence, we are not allowed to divide it out any more than we are at this stage. We will do that whenever we pass certain milestones. But at this stage, we are not allowed to do that. Daniel Vårdal Haugland: Okay. That's okay. And then my second question is, given that you're now kind of ramping up revenues from foundations into 2026, will you start kind of a segment reporting, splitting out the 2 different ones at some point? Or will you kind of just continue on the way you've already been reporting? Peter Hansen: We have no plans to show segment reporting on that. Daniel Vårdal Haugland: Okay. And then on kind of the commercial outlook, I see that you're still expecting vessel undersupply towards the end of the decade. So I was wondering, could you maybe explain a little bit more on that, Mikkel, because as you said, demand looks to be shifting to the right. So are you expecting anything to happen on supply as well? Or are you just saying that demand will still grow enough in, say, 2029 and '30 to still create an undersupply? Mikkel Gleerup: Yes. As I said to Martin, when he asked the same question, I think that we are getting this confidence from the projects we are bidding and also the clients that are willing to put money where their mouth is, so to speak, on their projects. And that is for us a good indication that these projects are something that they are betting on at least and in terms of undersupply, I think we have said for a few quarters now that we think that most of the analysts they are getting the supply side wrong, both on the WTG and on the foundation installation and that too much is counted on the supply side. And I think that the future will show how that will work out. But as I think that has been said from our side before, whether or not there is an over or undersupply, we believe that the best assets in the industry drive so much efficiency on a project that it will always be the best solution to go with the best asset. So in terms of fall height, we believe that we are in a good position with the assets we have, not for every single project in the world, but for, let's say, a standard offshore wind project at utility scale, we believe that there is a strong benefit and a strong efficiency gain in taking the best asset for the project. So I think that it's a combination of these things that we, in general, think that most analysts get the supply side slightly wrong. And we think also that the clients are much more, let's say, active and committing to the years '29, 2030, 2031 and then what I said around fall height. Operator: Our next question is from Andreas [indiscernible] from SB1 Market. [Operator Instructions] Andreas, we are unable to hear you right now. Apologies. We seem to be having some technical difficulties. That is our final question for today. So if you -- we would like to hand back to Mikkel Gleerup for any closing remarks. Mikkel Gleerup: Yes. Thank you. Just wanted to say thanks for listening in to this quarterly presentation. We are looking forward to come back to you with the fourth quarter and the year presentation also with more details on the Hornsea 3 because at that point in time, we will have a lot of exciting stuff to show you. So -- yes. Wait out for that. It will be interesting. There's a lot of exciting things going on at the moment, and we're looking forward to also announce the delivery of the Wind Mover in the not-so-distant future. Thank you very much for listening in and reach out to us if there's any follow-up questions that is better handled on a one-to-one basis. Thank you.
Helen Gordon: So good morning, everyone, and welcome to Grainger's full-year results. Once again, we have delivered an excellent performance as we continue to deliver strong growth in our earnings, in our income and in our margin with high occupancy and a Grainger product, which continues to deliver for customers and shareholders. So the agenda this morning is that I will take you through the highlights, Rob will take you through the financial results, including our compelling growth to come and our conversion to REIT status. And then, I'll go through our investment case, the strength of our market and give you a quick insight into one of our new openings. And I will explain how we're well positioned for the changes to renting that are due to come in from next May and how we are driving shareholder value. We'll then have time for Q&A with members of the senior leadership team. So I'm pleased to tell you that Grainger is now the U.K.'s leading residential REIT. It feels quite good to say that. We are a build-to-rent investor operator with a sector-leading portfolio of high-quality homes in the best location. Our fully integrated operational platform, enhanced by technology, is capable of scaling. And this operational platform gives us a real competitive advantage in a sector with high customer interface and where operational excellence is a barrier to entry. Our investment case of a real estate asset class that delivers inflation linking returns is proven. As you can see here, consistently tracking wage growth and as is our proven strategy, we continue to deliver earnings growth to our shareholders and great homes to our customers. So looking at our earnings growth, we continue to target GBP 60 million of earnings in full year '26 and GBP 72 million by full year '29 and that's a 50% growth from full year '24. There are 2 simple reasons. We have sustainable rental growth outlook, and we have strong underlying fundamentals. And our strong earnings growth will be delivered after absorbing higher interest rates. We're expecting rental growth to continue at 3% to 3.5%. And we have a resilient customer base to support this. We have strong underlying market fundamentals with regulatory certainty and no rent controls and growing demand and constrained supply. We're reducing debt, which Rob will cover later, and we have topline growth, and we are improving margin. So turning now to the highlights of our results. We've delivered another outstanding performance. Our net rental income is up 12%. Our like-for-like rental growth is up 3.6%, and we've delivered 12% earnings growth and 10% dividend growth. And our NTA, our asset value, has remained resilient at 298p per share. We continue to deliver operational excellence. We've delivered high occupancy at 98.1%, and we've secured strong customer retention at 61%. And we have good customer affordability. On average, our customers are paying 28% of their income on rent, which is below the market average. And we are delivering a sector-leading gross to net at 25%. That's a 75% rental margin. So overall, an excellent set of financial and operational results. We continue to optimize our portfolio through sales of older or non-core assets and our investment in our new products. We have recycled GBP 1.9 billion of assets since the start of our strategy, and we've sold GBP 640 million since September '22. We've been selling in line with valuations and proving the accuracy of valuations. And importantly, we have over GBP 900 million in non-core assets to fund our future growth and our deleveraging. We are a highly cash-generative business with over GBP 200 million in operational cash flows each year. And as we recycle out of this low-yielding non-core assets, we secure attractive income accretion. We have a very clear capital allocation strategy. We are always focused on maximizing returns for shareholders. Our current priority is to fund our committed pipeline of GBP 343 million, and there's just GBP 130 million remaining to invest. And it is this committed pipeline, which will deliver our earnings growth to GBP 72 million by full year '29, a 35% increase from today. And as a reminder, a 50% increase from full year '24. Then, we are deleveraging in line with plan. Our debt is fixed at low rates to full year '29. So this deleveraging will support our earnings growth and ensure an optimal capital structure. And as we continue to recycle, we can look at stabilized acquisitions, and we have also our secured and highly attractive, forward-funded and direct development opportunities. So we have further opportunities in our planning and legals pipeline. We have all these opportunities for future growth. And of course, we will assess these against other opportunities to return capital to shareholders. We have a capital allocation strategy delivering for shareholders in the short, in the medium and in the long term. So turning to our portfolio and pipeline, GBP 3.5 billion, that's over 11,000 homes. And our portfolio of regulated tenancies is just over GBP 0.5 billion, and our future pipeline is GBP 1.3 billion. Our committed pipeline is immediate. Of the GBP 343 million, there was only GBP 130 million to invest. And indeed, last week, we completed on 374 homes in Bristol, one of our strongest cities and with more homes being delivered in our pipeline in London and Guildford. We have a highly attractive secured pipeline for further growth, including our strategic JVs, and we have a portfolio of sites going through the planning process. So we have optionality for the future. And we have clear visibility on our earnings growth and our EBITDA margin expansion. Our growth story is compelling. Yes, this is my favorite side. We've delivered extraordinary growth over the last 10 years. We've been consistent in our delivery, growing our net rental income on average 14% per annum. Our EPRA earnings have grown dramatically through the development of our platform and the efficiency it delivers. Our EBITDA margin has improved from 19% to 56%, with more to come. So this momentum is continuing with strong growth in our income, in our earnings and with further EBITDA margin expansion. So in summary, we've delivered a strong performance. Our operational highlights are our conversion to a REIT, 98.1% occupancy achieved, robust rental growth secured at 3.6%. And now, we have the Renters' Rights Bill passed. We have real clarity on our future regulatory environment and no rent controls. We've delivered a strong financial performance, a 12% growth in our net rental income, 12% earnings growth and a strong sales performance and a 10% dividend increase. We have a very clear focus on how to drive returns for our shareholders. We're focused on maintaining occupancy and rental growth. We're focused on delivering strong compounding earnings growth. We're focused on cost efficiency and reducing net debt, and of course, continuing to deliver high-quality homes and great customer service. And I'll now hand over to Rob to take you through the detail. Robert Hudson: Thank you, Helen, and good morning, everybody. Today, I'm going to run through the financial performance for the year and outline the very strong earnings growth that we have to come. FY '25 has been another period of excellent growth, demonstrating Grainger's resilience and our market-leading position. We've continued to deliver a strong operational performance with like-for-like rental growth of 3.6% and occupancy at 98%. Overall, total net rents continued their strong growth, up 12%. This resulted in strong earnings growth with EPRA earnings up 12%, and we're still targeting our GBP 60 million guidance for the coming year and a 35% increase to GBP 72 million by FY '29. Adjusted earnings were broadly flat at GBP 91 million, as the sales profits from our reducing regulated tenancy business are replaced with rental income from our pipeline. Our dividend per share increased by 10% to 8.3p, and EPRA NTA was resilient in the period at 298p. Now, looking at the income statements in more detail. Our overall like-for-like rental growth was strong at 3.6%. Stabilized gross to net was again flat at 25%, demonstrating our ongoing focus on cost efficiency. Overhead costs were up 4% in the year, in line with wage inflation. And looking forward, we're targeting GBP 2 million of cost savings with a GBP 1 million benefit in FY '26. So overall, this will mean that overheads will not grow for the next 2 years. Interest costs increased largely due to lower levels of capitalized interest and a slightly higher average interest rate during the year. EPRA earnings continued their strong growth trajectory, up 12%. And as a reminder, now, we're a REIT, this will be our key earnings metric going forward. As expected, sales profits were lower at GBP 37 million, in line with the reduction in the regulated portfolio size, and our sales are performing well and in line with book. Other adjustments include derivative valuation movements and a fire safety provision, which reflects a revision of cost estimates. Now, looking at the moving parts of our 12% increase in our net rent for the period. Strong occupancy and like-for-like rental growth of 3.6% contributed GBP 2 million. And this was driven by strong performances in both PRS at 3.4%, which is stabilizing back at long-run averages of 3% to 3.5% and our regulated portfolio of 6.6%. The strong lease-up performance of our recent pipeline deliveries has contributed an additional GBP 18 million of net rent. Our asset recycling program offset this growth by GBP 6 million. Looking forward, we'd expect rental growth to continue in line with the long-term average of 3% to 3.5% in FY '26. With the occupational markets back to normalized levels, we expect to see some seasonality in rental growth return with half 2 stronger than half 1 growth. This chart shows the key movements in NTA over the course of the year. Our EPRA NTA was maintained at 298p per share. Net rents and fees added 18p, with overheads and finance costs offsetting this by 11p. Overall, our portfolio valuation for the period was up 0.7%. And the PRS portfolio saw 1.1% valuation growth with ERV growth of 3.2% and a modest outward yield shift on some assets. Valuations on the regs portfolio were down 0.6%, demonstrating their resilience, and further details of the valuation can be seen on Page 45 in the appendices of this presentation. Now, turning to net debt. Net debt was broadly flat during the year at GBP 1.46 billion, in line with our plans. Operational cash flows remained strong with GBP 205 million generated and with disposals contributing GBP 169 million net of fees. The investments in our build-to-rent portfolio has now started to moderate, as we work our way through the committed pipeline, and there was GBP 133 million invested during the year, with a further GBP 130 million spent on the pipeline, and the majority of that being in FY '26. In line with our previously discussed capital allocation strategy, we'll continue to generate sales at current levels. These proceeds will be used to fund the committed pipeline and then go towards lowering leverage by GBP 300 million to GBP 350 million. Going forward, we, therefore, expect net debt to remain broadly flat for the coming year before starting to delever from FY '27. And our balance sheet remains in great shape. Both net debt at GBP 1.46 billion and LTV at 38% were broadly flat over the year, in line with our plans. We maintained strong liquidity and a robust hedging profile with rates fixed in the mid-3% range. As previously highlighted, we plan to reduce our net debt by GBP 300 million to GBP 350 million over the next 4 years, as we continue to sell through our lower-yielding non-core assets. We regard this as very deliverable given our continued strong performance on sales. This will see our net debt, it's around GBP 1.1 billion, and that will equate to around an 8x net debt-to-EBITDA and an LTV of 30%, which we see as the right capital structure in this current interest rate environment. As net debt is brought down over the medium term, this will help mitigate the impact of rising finance costs, as our low rate hedging rolls off, and that ensures continued strong earnings growth. REIT status has been a long-term ambition since the start of our strategy, and I'm pleased to say we successfully converted to a REIT back in September. The benefits to the business of being a REIT are substantial, as we no longer have to pay corporation tax on the profits of our build-to-rent business. And in the first year of FY '26 alone, this is expected to generate GBP 15 million of savings with this increasing as we deliver further growth. We see the resilient growth that our residential business delivers is arguably the perfect fit for the REIT structure with no impact on our business model or our strategy. And we're firmly committed to delivering a strong progressive dividend. Now, we're a REIT, our dividend policy will be to distribute at least 80% of EPRA earnings. In FY '26 and FY '27, we'll have a reg profits top up. Beyond that, we'd expect the dividend to be fully covered by our EPRA earnings. This will see a mid-single-digit growth over the next 4 years, as we absorb the full impact of interest rate increases. As a reminder, beyond the higher interest rate headwind, we're a business that will deliver strong organic earnings and dividend growth of around 5%, simply as a result of our 3% to 3.5% rental growth and operating leverage, and that's even without any further growth in scale. It's been a strong year of earnings growth in FY '25, but there is a lot more to come. The lease-up of our recent deliveries as well as the remaining committed pipeline will deliver an additional GBP 24 million of rent over the next 4 years. As a reminder, this pipeline only requires a further GBP 130 million of CapEx to deliver. This strong top line growth will ensure we continue to deliver very strong earnings growth, and we're targeting EPRA earnings guidance of GBP 60 million next year and a 50% increase in 5 years from FY '24 to GBP 72 million in FY '29. We see this growth as exceptionally strong, particularly as it's delivered through a period in which we'll absorb the full rebasing of our interest cost to market levels, which we currently assume to be 5.5%. The bridge on this slide breaks down the key drivers, including the benefits of like-for-like rental growth assumed at 3% to 3.5%. The yield pickup from recycling out of our lower-yielding reg's assets into our build-to-rent portfolio, scale efficiencies with EBITDA margins growing to over 60% and the mitigating impacts of reducing debt on higher interest rates. This growth is locked in with upside from delivery of further pipeline schemes or stabilized acquisitions. So to summarize, we've continued to deliver a very strong operational performance with rental income increasing by 12% and EPRA earnings also up by 12%. This growth is being delivered from a position of real financial strength. Our liquidity and our balance sheet are strong, giving us the flexibility through disposals to reduce our debt by GBP 300 million to GBP 350 million over the medium term, as we reinvest into our committed pipeline. We maintain our EPRA earnings guidance of GBP 60 million by FY '26 and GBP 72 million by FY '29 from the delivery of just our committed pipeline alone, whilst also fully absorbing the headwind of higher interest rates. This earnings growth is a major component of our medium-term total returns target of 8%, which we see as a low volatility return and which remains unchanged, assuming constant yields. And at the current share price, this would equate to a 12% return. With that, I'll now hand you back to Helen. Helen Gordon: Thank you, Rob. In this section, I'm going to go through the 5 fundamentals of our investment case, and then, look at the performance of one of our new openings and also the Renters' Rights Act and our shareholder value creation model. Our investment case is compelling. We invest in a low-risk, low-volatility asset class with resilient and proven growth. We're in a market with exceptional fundamentals of housing supply shortages and growing demand. Our customer base is strong with a positive outlook for rental growth. And we now have certainty around our regulation following Royal Assent of the Renters' Rights Act. We have a sector-leading operational platform supported by technology, and this gives us great data and insights, and I'll now look at each of these in a little more detail. So residential is a low-risk investment with sustainable growth. Yes, it's lower yielding than some asset classes, but that is because it's lower risk. It has consistent year-on-year rental growth, and it has delivered above inflation rental growth. And residential rents and capital values have outperformed commercial real estate. This is underpinned by a supply shortage of homes. Our market fundamentals are strong, a shortage of supply and a growing population. We have in this country an estimated shortage of 4.3 million homes. And of the 5.6 million private rental homes, still only 2.5% are owned by professional build-to-rent landlords. Private landlords continue to exit the market, reducing supply, and fewer homes are being built. Recent revisions of the household growth show a 10% increase in household in the 10 years to 2032 and rental demand is set to grow by 20% in the 10 years to 2031. The structural supply and demand imbalance that underpins our sector has never been more acute. Our customer base is strong. On average, a Grainger customer earns around GBP 38,000 per annum. And the average Grainger household income is GBP 62,000 per annum. Our core demographic is in the 20 to 48 range, which tends to see the fastest earnings growth. Our customer base is very diverse. And as a reminder, we cap our student numbers. This diverse customer base and healthy affordability gives us confidence on future rental growth and occupancy. Now, last month, the Renters' Rights Bill achieved Royal Assent. This means we now have certainty on the regulatory outlook, and importantly, it rules out rent control. We contributed our insights to government throughout the process. The act is designed to raise standards, and we at Grainger are already delivering high standards. The proposed standards are consistent with our business model and our operational platform. And our customer-centric approach is embedded in Grainger's business. So the 5 key changes here are the abolition of no fault evictions, annual market rent reviews, pet-friendly policies, open-ended tenancies and decent home standards. And these align with our business model or current practices. The changes in our processes to comply with the act are already well advanced. We know the main measures will be introduced from the 1st of May 2026, and we're ready. So importantly, we now have certainty that rent controls do not form part of this important act. The final piece of our compelling investment case is our operational platform and how we deliver operational excellence. We've grown our offer supported by technology, and this gives us great insights into what our customers want. In our operational excellence, we have moved from instinct to insight. We use AI-driven sentiment analysis to inform our operations. And the data tells us what's important to our customers and what they want from a home. Now, this strengthens both our leasing and our customer retention. Our intuitive customer app as well as our friendly on-site residence team drive our excellent engagement and performance scores, and we sit ahead of many big brands in customer satisfaction and Net Promoter Scores. Building trust is no small feat for a landlord. Now turning to a recent case study, our latest opening in London is Seraphina at Fortunes Dock and it's opposite Canning Town transport interchange. Now, our commitment to this scheme was some time ago. However, even with outward yield movement, rental growth has more than compensated. It's a high-quality scheme, and it was delivered into our best letting season, which is late summer. And we allowed 12 months to lease up in our underwriting. But the lease up here in the first couple of months takes it to 88% let. Rental growth is ahead of underwriting, and the scheme forms part of 3 buildings: Argo, which was launched in 2017; Nautilus, which was launched in 2023; and Seraphina. And whilst there is a slight rental difference, our cluster strategy delivers consistent service. What I'm so proud of is that the rent differential between Argo and Seraphina is only GBP 60 a month. And that is evidence of the low depreciation and resilience of our product. Unlike other real estate asset classes, residential has lower depreciation and greater resilience. As a reminder, Argo is 8 years old, all refresh costs have gone through the gross to net, showing its resilience and lack of depreciation. Residential investment run well offers a true net yield. Grainger's shareholder value creation model is simple and clear. We're investing in high-quality rental homes in great locations with strong demand, and this investment is low risk. We have inflation linking rental growth and the efficiency of a sector-leading operational platform. We are expanding our EBITDA margin, and we have strong growth opportunities secured for now and the future. Our growth is funded. We have demonstrated our track record of disposals. We have a strong balance sheet, and we are lowering leverage. So what this means is that this proven model is built to deliver shareholders' excellent risk-adjusted returns. Thank you. I now invite you to ask questions, and I'll be joined by Rob Hudson, our Chief Financial Officer; Mike Keaveney, our Director of Land and Development; and Eliza Pattinson, our Director of Operations and Asset Management; and other senior leaders in the room. So anyone listening in, you can submit questions through the webcast, but we're going to take questions in the room first. Helen Gordon: Chris, I've got my notepad because I know it will be a 3-parter. Christopher Millington: I've learned the lesson there. Chris Millington at Deutsche. First one I'd like to ask is about this deleveraging and kind of how the strategy is working. So if we don't -- let's say, we don't get such a ramp-up in finance costs going forward, would you still look to delever to that extent? Or should we think it more you're managing the finance cost within the mix of earnings? I'll stop there and go again in a minute. Robert Hudson: Yes, I think we'd always retain some level of flexibility, Chris. So if indeed, the outlook improves and interest rates start to fall a bit, we've modeled on current forward curves of 5.5%, then we'd obviously always aim to have a little bit of flexibility because we are thinking principally around preserving strong earnings growth in the business. Christopher Millington: Very clear. Assuming your assumptions on the 5.5% are correct in the GBP 300 million, can you just talk about what capacity you've got to invest? What -- how should we think about the secured pipeline coming through and beyond and maybe stabilized acquisitions which you mentioned? Helen Gordon: Yes. So you saw the slide, Chris, which actually had over GBP 900 million of capacity. And obviously, that sort of will grow over time. The main components of that are our regulated tenancy portfolio that we're working through strategic land portfolio and other older, non-core assets. So even with deleveraging, completing the pipeline because of our strong operational cash flow, we've got capacity to do our secured pipeline. Christopher Millington: And when do you think we should start seeing that get committed to? Helen Gordon: I think, as I mentioned, we'd look at that commitment in relation to all other options within the portfolios that deleveraging and also the investments in our existing pipeline. But obviously, as the Seraphina example shows, we make a commitment a couple of years out. Christopher Millington: And then I just wanted to explore the valuation backdrop. Perhaps just a little bit of detail as to kind of what assets, regions drove the slight outward yield shift? And just what you're hearing from the value as in what you feel about the outlook for yields? Helen Gordon: Yes. I mean, the interesting thing is how strong the investment market has been maintained for residential assets. We've seen some significant transactions. It was a few outward yield movements on some of our more regional portfolio, but it was literally 10 basis points outward yield movement there. And there were a couple of asset-specific movements. But overall, yields have been stable for the last couple of years, if you look at the valuers' charts. Eleanor Frew: Eleanor Frew from Barclays. So occupancy levels are high, rental growth slowing a little. Can you talk about how you're thinking about balancing the 2 moving forwards? You're likely to prioritize keeping occupancy. And then maybe any comment on incentives used over the year and any planned? Helen Gordon: Yes. Great question. I would -- that occupancy figure is exceptional at 98.1%. We model our business on a lower occupancy. What I always say is important is getting real estate income producing. It's probably one of the most important things you can do. That's sort of rather than keeping occupancy to drive topline rental growth. The new lets' figure that you saw in the numbers reflected the fact that in order -- because we got some late deliveries, if you like, into the year, we wanted to make sure that we went into the winter season with a really high level of occupancy. And so we did offer some incentives. So that blended rental growth just recognizes some small incentives that we made there, but occupancy and rental growth is something that the senior leadership team look at every single Monday morning in a lot of detail. So it's a really careful balance, and I think that anyone that's not looking at both might miss the picture. Eleanor Frew: Great. Then, we understand the market participants that students are increasingly turning to BTR instead of PBSA. Is that something you've seen? And have you seen any pressure on your cap? Helen Gordon: Students have obviously liked build-to-rent for a very long time. Our business model is to build long-term communities, which are most resilient, and therefore, have higher retention rate since students obviously churn more readily. So we've kept our buildings to make sure that students are only a small proportion and that means that we don't get that big summer churn when they finish their courses. But there's another reason for it as well, which is just that mix of young professionals and students doesn't always mix too many parties, I think. But we have -- there are certain cities where obviously, we've come under pressure to let more to students, and it's just really keeping very, very disciplined in order to ensure that we keep that balance of the community and prevent a high level of churn. Thomas Musson: It's Tom Musson at Berenberg. You just mentioned on rent growth for the year ahead, I think to expect some sort of normal seasonality and growth higher in the second half. Can you just remind me what sort of dispersion is in terms of rent growth first half versus the second half? Helen Gordon: I'm going to ask Rob to answer this in more detail in a moment. But one of the things I would say is that we've had quite an unusual market for the last few years. So -- this company is over 100 years old, and we always know that our best leasing season is the sort of late summer into the autumn. What happened during the pandemic and post pandemic is that, that changed with the way that the market went into fluctuation. And now, we're actually seeing it return to normal. But Rob, why don't you give some more detail on that? Robert Hudson: Yes, absolutely. So the first point is we continue to guide for our long run rate of 3% to 3.5% for the year ahead. And that's because we're sitting with very healthy levels of affordability at 28%, which has been constant at that level for quite some time. And, of course, the fundamentals of demand and supply with supply shrinking and demand remaining strong. So, as Helen said, the market obviously has been quite exceptional for the past few years coming out of COVID. But we could expect something in the order of anything up to 100 basis points spread between the first and the second half, but still very much guiding towards the long run rate for the year ahead. Thomas Musson: I just had a second one. You mentioned Bristol launched last week. Can you say -- I don't know if you have any early insight into how that's going? Any early demand there? Any chance that can be a successful lease-up as Seraphina? Helen Gordon: We haven't actually launched it yet, but we -- there's a good buildup, and it sits within a really good cluster. And so we've got good insight into it being a very, very strong rental city and good sort of indication of demand. Eliza, do you want to say anything on that? Eliza Pattinson: Yes. I guess, just going back to seasonality, we've done extremely well in all of our lease-ups in Bristol, but we are launching this building into the low seasonality of lettings. So we'll be doing prelaunches, pre-lets, and we have got good interest at the moment. Helen Gordon: Neil? Neil Green: Neil Green from JPMorgan. Just one, please. There were some initiatives announced in London, I think, last month around speeding up housebuilding activity, focus on the affordable element, but interested to get your take on whether you think this is the catalyst and also whether there's changed anything for Grainger when it comes to the future pipeline, please? Helen Gordon: Yes. I'm going to turn to Mike to talk about this because he's pulled all over the guidance on it. But -- I mean, I think it's a really strong signal of how difficult people are finding it to actually build in London. And just to give you an idea, I think the stat that was out was -- new homes delivered in May was 19. That's total new homes. So you can imagine they do need to stimulate housebuilding in London, but Mike, why don't you talk about the detail? Michael Keaveney: Sure. Thanks, Helen. So what was announced really were emergency measures around the fast track process for getting consents. And obviously, they dropped the amount of affordable housing that they expect from sites and also within that announced grant levels for the affordable housing. But it's really a signal that the GLA are listening to the fact that the housebuilding sector in London is under pressure from a viability perspective. And it's still going to be consulted through in the next 6 weeks or so. But I think it's a really welcome step that they realize, and it's not just build-to-rent, obviously, it's the house builders generally, that their viability models are struggling. And the right lever is affordable housing and grant. And so we welcome that. Helen Gordon: Alastair? Alastair Stewart: Alastair Stewart from Progressive. A couple of questions related to that. Recently, have you -- I know you -- your performance with the building safety regulator has been better than most. But what's your reading of the overall [Audio Gap]. Michael Keaveney: Definitely made a difference, and the big difference is engagement. So now developers in that process have someone they can speak to and talk about the process they're going through. And that's made a massive difference, I'd say. We recently achieved Gateway 2 approval with our partner in Guildford, and that was delivered in 22 weeks, which is much closer to the 12 weeks they originally started with. So we do see -- again, they are listening. They are trying to solve the problem and solve the problem without compromising safety. So yes, the direction of travel is good for that. In terms of the second question, the principle behind that is that there will be a dearth -- there's a backlog of residential development that needs to be -- that will get released through Gateway 2, and suddenly, it will all arrive at once. I think the emergency measures tell you something about that likelihood. The reality is you have Gateway 2 as a barrier, which is now being traversed. But after that, you have a viability issue on certain schemes around London, mainly with the house builders. So I -- and you'll see that the RPs are pulling back from development. So we don't see a massive increase in house building driving inflation. We see a steady progression of house building. Helen Gordon: James? James Carswell: James Carswell from Peel Hunt. Maybe a slight follow on from Chris's question. But just in terms of credit spreads and margins, it feels like they've probably come in looking at what some of the other REITs have done recently. I mean, where do you think -- if you were refinancing today, I appreciate you're not, where do you think your kind of marginal credit spread would be? Robert Hudson: Yes. So based on our internal forecast and current rates, the all-in rate would be around 5.5%. So I think it's obviously true to say as obviously gilt yields have moved, then we've seen a country movement on credit spreads, but the all-in remains around 5.5%. James Carswell: And then maybe just in terms of bigger picture, I mean, funding the kind of the next, I guess, phase of Grainger in terms of opportunities you're seeing, acquisitions, yes, how should we think about funding those? Because the non-core assets are kind of being used for the current pipeline and deleveraging. And is now a good time to maybe think about third-party capital? Is that under consideration? Helen Gordon: We do look at third party, and the Board discuss it, the pros and cons of doing that. But James, we've got a lot of capacity and a big pipeline to go at that we can actually fund ourselves. And so it's obviously -- but we talk to partners all the time. And if there is a right opportunity. And, of course, we do have a joint venture with TfL on our strategic joint venture. So we are known as being good partners. So I wouldn't rule it out. But -- I mean, the great thing is we have clear visibility on how we can fund that secured pipeline. Any other questions? Kurt, you are going to fire some from the webcast. Kurt Mueller: There are a few that have come in online. The first is from John Vuong, Van Lanschot Kempen. The #2 key positive drivers for NPS is the quality of the property. But at the same time, you mentioned that your assets have low depreciation and require minimal CapEx. How can you reconcile these 2 statements? Helen Gordon: It's because we're constantly on top of them, and meaning, that we're refreshing all the time, and we're doing that through the 25% gross to net. So it's very different from, say, our European counterparts that do put their refresh costs -- capitalize their refresh costs. And just as a reminder to John, the majority of our portfolio has been built since 2017. So it is actually a very, very new portfolio. And when we designed it in our specification, we looked very, very carefully at the long-term use of finishes, which is why we invest in high-quality finishes to make sure it doesn't deteriorate as quickly. Kurt Mueller: Next question is from Andres Toome of Green Street. What is the impact to yield on cost for schemes benefiting from lower affordability housing quota and the community infrastructure levy in London? We partly answered that, I think, before. And do you see any opportunities emerging from these changes? Helen Gordon: Yes. So -- I mean, most of our schemes have been through the planning process. But, Mike, why don't you answer this? Michael Keaveney: Yes. I think what lies behind the question is whether lower affordable housing and say, increased grant and that kind of combination would lead to greater returns, which is not quite the point of what the emergency measures are trying to do. The emergency measures are trying to bring back viability to housebuilders so that they make their returns. If you created a scenario where super normal returns were delivered through that, they would pull back. And so really, the benefit is that the housebuilders, the general housebuilders should be able to hit their viability returns, not make supernormal profits. Kurt Mueller: One final question from online. Dr. Francis Jardine, I believe, a private shareholder. "I have investments in over 20 REITs, who pay quarterly dividends, does the Board of Grainger intend to consider paying quarterly dividends going forward? Doing so is only a question of managing cash flow". Helen Gordon: We pay -- obviously, we pay half yearly dividends, as a reminder. I will make sure that the Board discussed it at the next meeting. Kurt Mueller: That's it from online. Helen Gordon: Any other questions in the room? Chris, another one? Christopher Millington: It's as I was getting through to the appendix on the presentation. But I notice now we've got London and Southeast net initial yields, quite tight versus the rest of the country, actually, a little bit below where you're holding in the Southwest. I think it's 4.3%, place 4.1%. What do you think of the relative attractiveness of London now you've seen that sort of convergence? Helen Gordon: Yes. I think it comes from the fundamentals of our sector, which is you've got a shortage of supply across the whole country. So you've got occupancy, and therefore, sort of they have converged the biggest -- I haven't put it in this year, but it is in the appendices. It is my chart where I show where is the best rental city. And the best rental city for obvious reasons is London. So I would argue -- I have to be careful, I think, we've got the values in the room, but I would argue that the London yields are too cautious. For most of my career, London yields have been significantly lower than where they sit today. No more questions. Thank you very much for getting up early and coming and joining us this morning. Any other questions, we will be around for a little while before I think another property company comes in here. So thank you.
Friederike Thyssen: Good morning, and welcome to NFON's Third Quarter and 9 Months 2025 Earnings Call. Thank you for taking the time to join us today. My name is Friederike Thyssen, Vice President, Investor Relations and Sustainability at NFON, and I'll be your host for this session, which we are holding together with NuWays. Today's presentation will be led by our management team: Andreas Wesselmann, our CEO; and Alexander Beck, our CFO. They will take you through the key operationals, the strategic and financial development of the first 9 months 2025. As usual, we published our quarterly financial statement and our full investor presentation earlier this morning. You can find both, as well as the corporate news, on our NFON website under Investor Relations. The presentation will follow a clear structure. We'll start with the business highlights, then move on to the financial review, our outlook and guidance. And finally, we start the Q&A session. Please note that questions can only be asked live during the Q&A at the end of the presentation. [Operator Instructions] Thank you for understanding, and thank you in advance for your contribution. And now I will hand over to Andreas Wesselmann to start the presentation. Over to you, Andreas. Andreas Wesselmann: Yes. Thank you, Friederike. It's a pleasure to be here today for my first quarterly call as CEO of NFON. Many of you know me from my previous role as CTO, where I was already deeply involved in defining the NFON Next 2027 strategy. And as a consequence, stepping into the CEO role doesn't mean changing direction, but rather expanding the perspective, bringing strategy, product technology and market even closer together to turn the ideas into tangible results faster and more consistently. So my focus is clear. We want to accelerate NFON's transformation as an innovative growth company, driven by customer value and operational excellence and leveraging the latest AI technology. The course we have set with NFON Next 2027 is the right one. And our task now is to execute it with speed and discipline. And with that, I'm happy to introduce my colleague and our new CFO, Alexander Beck. Rather than me describing his background, I think he can do that best himself. Alexander? Alexander Beck: Yes. Thank you, Andreas. Also from my side, I'm very happy to join today's call for the first time as part of the NFON team. In the first 7 weeks since I have joined, I have had the chance to get to know people, products and the culture of the company. And what impressed me most is the energy and the commitment across the organization. This is really a genuine drive to move things forward together. A few words about myself. I bring around 20 years of international experience across several sectors like retail, like fast-moving consumer goods like software and also technology. In previous roles, I have led and developed finance organizations and supported businesses during phases of international expansion, growth, profitable growth and also transformational restructuring. From a financial perspective, I see NFON in a solid position. Profitability has been restored. Cash flow is positive and our financial base is stable. The strategy is clear, well communicated and is being consistently implemented across the company. What I particularly value is how strongly the teams identify with our strategic priorities and how focused the execution is. At the same time, we are aware of the challenges. Revenue growth has been slower than we would like and the commercialization of new products take time. But the direction is right and the fundamentals are strong. So overall, I'm very pleased to be here and I see a company that combines the right mindset, the right technology and the right talent to build sustainable value in the years ahead. With this, for the moment, back to you, Andreas. Andreas Wesselmann: Yes. Thank you, Alexander. Now let's take a closer look at the key highlights of the last month. So the last month showed tangible progress and growing momentum. We strengthened our market presence, we refined our brand positioning and further shaped NFON's perception as an innovative leader in intelligent communication. Let's start with Bits & Pretzels, one of Europe's leading founders' festival where NFON participated for the first time. We presented the company with a clear, technology-driven identity that reflects who we are today, an innovative growth company, combining communication expertise with AI-driven intelligence. More than 250 people joined our expert sessions and over 90 tech leaders took part in our CIO Summit talk, where we explored and explained how AI can make communication more human, efficient and secure. Another highlight was our executive dinner in Munich, held under the theme, From Europe with Intelligence. This event brought together decision-makers from business, technology and media to discuss how AI is reshaping communication and leadership. It also marked the live debut of Nia FrontDesk, our newest AI solution, which was received with strong interest and very positive feedback from customers, partners and analysts. It captured exactly what NFON stands for, turning innovation into real-world value. And finally, we received strong industry recognition. NFON was named Manufacturer of the Year and our EVP AI & Innovation, Jana Richter, was recognized as IT Woman of the Year. These awards underline our credibility as a European AI-driven technology company, one that combines innovation with responsibility, diversity and technical excellence. Altogether, these milestones show that we are executing our strategy with focus and consistency. Under NFON Next 2027, we are positioning NFON as an innovative growth company that drives AI-powered business communication from Europe for Europe, combining innovation, customer value and efficiency. And this brings us directly to one of the most exciting examples of this development. The NFON intelligent assistant, Nia FrontDesk. Nia FrontDesk is a practical intelligent assistant for reception and service areas that help organizations manage incoming calls, messages, visitor interactions, et cetera, more efficiently. The solution automates routine tasks such as call routing, scheduling and information requests, while always allowing a seamless handover to human colleagues with personal contact, if it's needed. What makes Nia FrontDesk stand out is its combination of NFON's communication platform with conversational AI. It's fully integrated, is GDPR-compliant and built on European infrastructure, which is an increasingly important differentiator for many of our customers who value digital sovereignty and data protection. The first reactions from partners and customers have been very positive. We see particular interest from sectors such as health care, education and public administration, areas with high service intensity and recurring communication needs. These organizations face increasing pressure to improve efficiency, while maintaining personal service quality, and Nia FrontDesk exactly addresses this. Its ease of use and measurable time savings help improve service availability and customer experience, delivering a clear return on investment. From a business perspective, Nia FrontDesk expands our portfolio beyond traditional voice services. It opens new cross and upselling opportunities within our installed base and helps us to enter new customer segments, particularly in sectors with high service intensity. Nia FrontDesk is about customer satisfaction and increased productivity. It's about making communication smarter, more human and more efficient. It shows how innovation, when done right, can improve customer experience, employee satisfaction and business performance. For us, Nia FrontDesk is more than a product launch. It's a proof point of our innovation strategy. And over the coming quarters, we will continue to expand the AI solution portfolio as we go, always focused on real customer benefit and profitable growth. To walk you through the details of our Q3 financial performance, I'll hand over to Alexander. Alexander Beck: Yes. Thank you, Andreas. So let's turn to the key financial figures for the first 9 months of 2025. In this period, we achieved a solid top line growth and stable profitability despite a continued cautious market environment and investment climate, particularly among small and medium-sized enterprises. Our total revenue increased by 2.7% to EUR 66 million, while adjusted EBITDA amounted to EUR 8.7 million, 3.5% below the prior year level. This performance shows that we are able to maintain profitability while continuing to invest in our strategic priorities, including AI and product innovation, including partner enablement and also sales effectiveness. At the same time, we remain realistic about the challenges. Revenue growth in the core SME business has been slower than anticipated, reflecting both uncertainty and extended decision cycles. The commercialization of new products also takes time, which is normal at this stage. Overall, the fundamentals are solid. Our cash position remains strong, and our strategy is clear. I'm confident that NFON has the right mindset, the right technology and the right team to translate these foundations into sustainable growth. Let's now take a closer look to the developments behind these figures in the following slides. In the first 9 months of 2025, NFON delivered moderate top line growth. The total revenue of EUR 66 million. This development was mainly supported by the continued strong performance of botario, which contributed positively through its project businesses. Our recurring revenues, the backbone of our business, rose by 1.9% to EUR 61.8 million, maintaining a high share of 93.6% of total revenues. Nonrecurring revenues developed even stronger, up by 15.3% to EUR 4.2 million, mainly driven by project implementation and again, service revenues from botario. At the same time, our seat base declined slightly by 2.6% to 648,000, reflecting a still cautious investment sentiment in our core markets. Despite this, our blended ARPU remained stable, increased slightly to EUR 9.92, supported by price adjustments and consistent customer usage levels. Overall, this combination underlines a resilient recurring revenue model and the stabilizing effect of portfolio diversification through botario. Turning to our profitability and cost structure. Material expenses declined by 6.3% to EUR 9.1 million, primarily due to lower hardware volumes and a more favorable cost mix. As a result of this, our gross profit increased by 4.3% to EUR 56.9 million. The material cost ratio improved to 13.8% versus 15.1% the year before, supported by a higher share of margin accretive project revenues. At the same time, our operating expenses rose moderately by 4.1% to EUR 22 million, mainly reflecting higher marketing activities, partner commissions and advisory costs are related to strategic initiatives. Overall, the adjusted OpEx ratio remained broadly stable at 33%, demonstrating our ongoing focus on cost discipline and operational efficiency, but also investing into strategic areas. Personnel expenses. Personnel expenses increased by 9.9% to EUR 28.2 million. This development primarily reflects the integration of botario and targeted staffing in product development, sales and AI-driven innovations. The average number of employees rose to 427 compared to 415 in the prior year. We made adjustments of EUR 0.9 million, mainly related to restructuring costs in management, sales and marketing. After these adjustments, personnel expenses were in line with expectations, consistent with our strategy to strengthen capabilities for innovation and customer value creation. In terms of profitability, EBITDA decreased slightly to EUR 7.7 million. After adjustments, EBITDA amounted to EUR 8.7 million, down 3.5% from EUR 9.1 million the year before. This decline was expected and reflects planned operating expense investments in personnel and infrastructure to support our AI-related initiatives and the ongoing execution of our strategy, NFON Next 2027. Adjustments totaled EUR 1.1 million, primarily related to restructuring measures and IT harmonization. As a result, the adjusted EBITDA margin came in at 3.2%, maintaining a solid profitability level while ensuring we continue to invest in our future growth. Looking at the cash flow and liquidity. Operating cash flow came in at EUR 4.9 million compared with EUR 5.1 million in the year before. This slight decline mainly reflects timing effects in receivables and provisions. Investing cash flow amounted to minus EUR 4.7 million, driven by higher capitalized development costs and earn-out payments of EUR 1.9 million related to the botario acquisition. Financing cash flow stood at minus EUR 1.7 million compared with plus EUR 4.8 million a year ago as the prior year period included loan inflows to finance the acquisition. At the end of September, this cash and cash equivalents totaled EUR 11.4 million, and this underlines our solid liquidity position and provide sufficient flexibility to fund both day-to-day operations and our ongoing strategic initiatives under NFON Next 2027. As already shown in the half year results, this slide summarizes the broader market environment and our key strategic priorities. It continues to provide the right framework for navigating the current conditions, steering NFON towards sustainable growth. But the macroeconomic environment remains challenging. Inflation, geopolitical uncertainty and budget caution, particularly among SMEs, continue to weigh on investment decisions and prolonged sales cycles, especially in communication infrastructure and digital transformation projects. At the same time, AI-driven innovation is reshaping the market. Many companies are still assessing how AI can be embedded into their operations. This extends decision-making, but also creates key opportunities. Across Europe, stricter compliance standards and the growing debate on data sovereignty continue to drive demand for secure GDPR-compliant solutions. NFON's position as an independent European provider with development, hosting and infrastructure entirely in Europe remains a key differentiator. Building on this foundation, we are executing the measures introduced earlier this year, which directly support our strategic priorities. And these are improving operational efficiency, strengthening the channel enablement, maintaining a market growth focus and driving profitability. We are seeing early signs that our initiatives are taking hold, also the momentum is developing more slowly than we would like. As we progress through the fourth quarter, our focus remains on disciplined execution, cost control and efficiency gains, while continuing also to invest selectively in growth areas such as agentic AI. So let's turn to the next slide for the details. As a part of our regular forecast update, we have reviewed our full year expectations based on the performance in the first 9 months. Given the continued investment restraint in part of the market and revenue trend that remained below expectations in Q3, we have slightly adjusted our guidance for the full year. We now expect total revenue to grow between 1% and 2.5% and adjusted EBITDA to range between EUR 11.5 million and EUR 12.5 million. This outlook already takes into account the ongoing macroeconomic caution, extended decision-making cycles among SMEs and the delayed recovery in investment activity in our core markets. At the same time, the measures implemented earlier this year, particularly pricing, cost control channel enablement, are delivering the expected effects and continue to support our profitability. Our midterm ambition for 2027 remains unchanged. Overall, we focus on innovation and efficiency, keeping our financial discipline strong so that growth remains healthy and sustainable. And with this, I will hand back to Friederike to open the Q&A session. Friederike Thyssen: Yes. Thank you very much, Alexander and also Andreas for the presentation and the detailed insight. We will now open the line for questions. [Operator Instructions] So we're now looking forward for your questions. First line in row is John Karidis. John Karidis: So it's John Karidis from Deutsche Bank. I know this has been a very tough quarter for NFON. And because of this, I wonder if you would be happy to tell us how many seats you ended the period with -- in Germany specifically? I know that in the first half, the seat loss was roughly split equally between Germany and the U.K. But I'd be sort of very interested in the number in Germany. And any other additional color you can give us, please, about the areas where you saw the most pressure? Alexander Beck: Thank you very much, John. Yes. So the seat growth, you're right. We lost seats in the first -- in Q3. Our total seat base declined slightly by 2.6%, around total 648,000 compared to 665,000 in the prior year period. So this was mainly the result of a lower order intake compared with last year, while our churn rate is also important, remains stable at 0.5% [ hard ] churn per month, the same level of quarter 3 2024. The stable churn aligns the high quality our products and services have and the resilience of our recurring revenue base in a challenging environment. However, growth in new seats came in below expectations, that's right and below last year's increase, reflecting both the more cautious investment climate and the expanding decision making cycles. The German numbers, I do not have exactly here, but I can tell you roughly, in Germany, we have around about 470,000 seats. And in U.K., we are about 73,000 seats. Friederike Thyssen: Okay. Next in line, Stéphane. Stéphane Beyazian: I've got 2, 3 questions, if that's possible. The first one would be, can you tell us a little more on how many more staff do you plan to hire and when you think you will start to see some stabilization on your staff costs? The second one is a follow-up on the number of clients. I was just wondering whether you are also seeing, let's say, do you think overall, it's a market, as you suggest, or also perhaps some competition that is more aggressive in cloud telephony? And I was just curious to know if there are any names of competitors you would highlight as being very pushy right now in the market? And finally, as a third question, if I may. Do you think now that it's quite likely that 2026, we should also see, let's say, the impact that we've seen in the third quarter carrying over into 2026 and therefore, potentially revenues and EBITDA could be down in 2026? Andreas Wesselmann: Thanks a lot, Stéphane, for your questions. Let me try to answer them in one shot and then after that, please let me know if some questions remain open. So the first question was about the hiring. There you can see along the numbers that we also adopted our growth in personnel expenses by the reduced top line so that we always stay in the same quote, and this is the same planning as we go forward. For the number of clients, maybe I'll just give the example of Nia FrontDesk that I outlined and why I think that's so important is -- the first time that we really combined the botario AI platform with our core voice platform in a very tight and integrated fashion. And just to share some numbers there with you, for the first 4 weeks after the launch, we see it as essentially our fastest-growing adoption of all products that we saw in the last years. So we already have a mid-double-digit number of sold licenses here, and we have very, very positive feedback. So that's, for us, the confirmation of our portfolio. And why is that important also looking forward? Because it shows that we have different revenue streams going forward that we are going to materialize. So one is that these capabilities integrated in our business, telephony, which we call AI Essentials or FrontDesk, help us to up and cross-sell existing customers and it makes our existing offering more attractive. That's one thing. On the other hand side, we see that these voicebots and the agentic AI capabilities, so to speak, get more from the botario side of the portfolio also help us in combined up and cross-sell in the contact center business, and that the botario portfolio offers us access to new customers and partners also in enterprise AI projects. So having that said, we are confident that in '26, we will get back to a growth strategy because in addition to the products, there are 2 other things I would like to mention. We also introduced in October a new way how we can sell easily with a new modular license model, we sometimes internally refer to as T-shirt sizes. This makes it easier to sell. Think of that as a kind of a self-service, and it's immediately available for deployment and getting it running. And the other important part is that we support our partners also in their transformation. So to enable them on the existing solutions, also expand to new partners and expand our solution portfolio with the existing and new partners. And therefore, also our partner program, Nexus, which we will unveil in more breadth and depth in January next year, will support us to have that. Overall, and your question was also about how we see the market. We see the market that the core cloud telephony market is essentially more or less stagnating. Why is that the case? If you take a look, for example, at some numbers in Germany, we had in August, the highest number of companies that needed to file insolvency in the last 10 years. If you take a look at the overall economic numbers, Germany and Austria, for example, unfortunately, they rank lowest within Europe, which is plus -- 85-plus percentage points of our business, as you know. And there is another thing that you should not underestimate. So this whole AI disruption, as I framed it, causes also some additional uncertainties, which causes a delay in decisions. We do not see that it's a question if you go with us in the solutions or not, it's a question of when do you do that, and you just need some more room to discuss with the partners and explain. So that's maybe -- overall, I hope that answered your question. Stéphane Beyazian: It does. If I may just to follow up a little bit and apologies for taking a bit of time here. I was just wondering if you think that adoption of AI could also, in a way, reduce a little bit demand from some of your clients as they may be replacing some of their staff? I'm thinking of call centers, for instance also, and reducing the number of seats potentially. Andreas Wesselmann: We see it the other way around. We see it as a strengthening. We see that from the tightly integrated AI capabilities. For example, in the cloud telephony, it makes the offering more attractive. So there, we have possibilities to increase the ARPU and to expand the number of seats that we have. That is one dimension. And we see great and interesting effects in cross-selling opportunities of the contact center solution and the agentic voicebots we have in the botario solution, which we can then sell to the same customer. So we see it more not as taking away from existing business, but accelerating and strengthening the different pillars of our solutions portfolio. Friederike Thyssen: Okay. Next line, [ Maximillian Pasco ]. We can't hear you. Now we can hear you. Unknown Analyst: Sorry for that. I have a 2-part question. Do you anticipate a normalization in customer investment patterns, potentially supported by your progress in AI? And as a result, could you -- could this provide greater visibility for 2026? Andreas Wesselmann: Yes. Maybe I'll start with that. So your first part of the question was about the investment normalization. This is certainly a trend that we see. We see a delay. And as I said before, we do not see that people decide against an investment. So in that sense, taking the first insights in the fourth quarter and looking forward, we see an investment normalization in the course of the year '26 despite the not so easy overall economic conditions. And exactly what '26 will mean, we will unveil at the beginning of the year when we then have the forecast for the year '26. Friederike Thyssen: Does that answer your question, [ Maximillian ]? Unknown Analyst: Yes. Friederike Thyssen: Next in line, Ross Jobber. Rosslyn Jobber: Can you hear me okay? Friederike Thyssen: Yes. Rosslyn Jobber: Perfect. I'm interested in the trends over the next year or 2 in some of the costs, which at the moment are high, but which hopefully are going to fall, things like consulting costs, IT harmonization costs and also capitalized development costs. Can you say a little bit more about where you would expect those to go over the next 1, 2, 3 years? Alexander Beck: Yes. Ross, thanks for your question. So in general, we are cautious when we talk about cost development. On the other side, we also want to invest into our strategic areas. You mentioned right now, a couple of them like consultancy costs, like other costs, we already tried now in Q3 and Q4 to bring these costs down. But on the other side, we are also going to -- as I said before, we are also going to invest into growth areas. So for next year, -- we are, in the moment, we are in the process to put our budget together and to finish the planning and we will communicate this at the beginning of next year. But overall, I think I can already say -- yes, we will continue our path. We try to eliminate costs, which are not necessary any longer. We try to gain efficiencies, especially in the things you mentioned. And on the other side, we try to invest as much as we need, as much as we can, as much as we want in order to grow in our strategic growing areas. So this is overall, the part for the next years. I hope this -- this is not very precise for the next 3 years, Ross, but I hope this gives you at least the color of where we want to go. Friederike Thyssen: Okay. I see Stéphane is still raising the hand? Stéphane Beyazian: Sorry, I'm all right. Friederike Thyssen: Yes, no probs. But Ross, you can unmute yourself. Rosslyn Jobber: Yes. Sorry, I got more questions. I just wanted to make way for others. Can you say whether or not the AI functionality is changing the procurement process amongst customers? I mean you've talked about uncertainty based on the macroeconomic environment and how maybe it's taking longer for customers to decide whether to buy. Does the fact that you're adding a lot of kind of enhanced customer experience change the sort of people who are getting involved in that procurement decision at your clients? Is that also a factor or not? Andreas Wesselmann: Yes. Thanks, Ross, for asking the question. Let me maybe start with -- we have one part of the solution that if you want to buy a click integrates with existing business telephony. And that's important because we want that the same people that currently administer and are responsible for the existing solutions with a very seamless path can activate them. So in the example of the Nia FrontDesk that I outlined, you can imagine that you go to the administration part you are used to. And then you just choose, I want this front desk capability, I want this as a language. And this is the content it should be based on and then you go. And this is really important because especially the SME customers can simply not afford to invest, take time in AI projects or consultancies or hire people themselves. So this, I think we are in a unique position by tightly integrating that for the existing market. If you go to the other segment of our offer, if I talk about enterprise AI projects and large customers and large partners, this is then a different approach, and you also meet different buying centers. And there, the telephony is not the leading capability, but the leading capability is on how you optimize your customer service, how you automate your processes, how do you integrate in the existing business processes and then offer a solution that can cover, if you want, the breadth from voicebots via contact centers to then the underlying cloud telephony. So that maybe gives you an overview about how we currently see the variety of the go-to-market activities. Rosslyn Jobber: Great. And can I just check one statistic? Did you -- am I right in thinking you said that churn for the 9 months is unchanged from a year ago at 0.5%? Did I hear that correctly? Unknown Executive: Yes, Ross. That's right. Friederike Thyssen: Okay. No further questions so far. Stéphane, go ahead. Stéphane Beyazian: There are no more questions. Let me ask just a follow-up. I was just wondering whether you're already seeing let's say, in the fourth quarter, a little bit better commercial momentum or if you think that those impacts will continue into Q4 on your customer base? Andreas Wesselmann: Yes. Thanks, Stéphane, for asking that question as well. Let me maybe get back to the Nia FrontDesk example which we launched at the mid of October. So there, as I outlined, we see already very fast-growing adoption in licenses, et cetera, which makes us very positive. But the reality is also that based on our recurring revenue model, this only has minor impact on the fourth quarter and then the total numbers. Why? Also we came to the conclusion as we outlined today. But that makes us confident looking forward to '26 and beyond that we start with a good foundation in those years and laid the foundation in this year for accelerated growth in the next year. Details to be shared in the first quarter next year. Friederike Thyssen: Good. So then no further questions. Let me ask a little -- last time. Are there any final questions from your side? So please raise your hand. If this is not the case, -- and it seems not to be the case. Thank you, again, for your time, for your interest and also from my side. And now I'll hand back to Andreas for a short closing statement. Andreas, back to you. Andreas Wesselmann: Yes. Thanks, Friederike. A big thank you from my side to all of you joining the first earnings call in that combination with Alexander and myself, thanks for asking questions -- and the very constructive and right questions and already looking forward to talking to you soon. Have a nice day. Thank you.
Operator: Good day, and welcome to the last Elastic N.V. Second Quarter Fiscal 2026 Earnings Results Conference Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Eric Prengel, GVP of Finance. Please go ahead. Eric Prengel: Thank you. Good afternoon, and thank you for joining us on today's conference call to discuss Elastic N.V.'s second quarter fiscal 2026 financial results. On the call, we have Ashutosh Kulkarni, Chief Executive Officer, and Navam Welihinda, Chief Financial Officer. Following their prepared remarks, we will take questions. Our press release was issued today after the close of market and is posted on our website. Slides that are supplemental to the call can also be found on the Elastic Investor Relations website at ir.elastic.co. Our discussion will include forward-looking statements which may include predictions, estimates, and our expectations regarding demand for our products and solutions, and our future revenue and other information. These forward-looking statements are based on factors currently known to us, speak only as of the date of this call, and are subject to risks and uncertainties that could cause actual results to differ materially. We disclaim any obligation to update or revise these forward-looking statements unless required by law. Please refer to the risks and uncertainties included in the press release that we issued earlier today, included in the slides posted on the Investor Relations website, and those more fully described in our filings with the Securities and Exchange Commission. We will also discuss certain non-GAAP financial measures. Disclosures regarding non-GAAP measures, including reconciliations with the most comparable GAAP measures, can be found in the press release and slides. Unless specifically noted otherwise, all results and comparisons are on a fiscal year-over-year basis. The webcast replay of this call will be available on our company website under the Investor Relations link. Our third quarter fiscal 2026 quiet period begins at the close of business on Friday, January 16, 2026. We will be participating in Barclays Global Technology Conference on December 10 and the Needham Growth Conference on January 14. With that, I'll turn it over to Ashutosh Kulkarni. Ashutosh Kulkarni: Thank you, Eric, and thank you everyone for joining us on today's call. Q2 was an outstanding quarter for Elastic N.V., driven by robust growth across the company with AI positively impacting all areas of our business. We beat the high end of our guidance across all metrics, delivering revenue growth of 16% and a non-GAAP operating margin of 16.5%. Our team drove strong execution, achieving sales-led subscription revenue growth of 18% with strength in both Elastic Cloud and our self-managed offerings. We also increased the number of customers spending over $100,000 with us to more than 1,600 at quarter end. The importance of data, especially unstructured data, is growing at an unprecedented rate as enterprises continue to expand their use of AI. The Elastic platform, with its ability to sift through and find relevant insights in terabytes of structured and unstructured data in real-time, is uniquely suited to address the need for context in this age of AI. This ability is driving the acceleration and adoption of the Elastic platform by organizations for their search, AI, observability, and security needs. In Q2, we secured significant customer commitments across all solution areas. We maintained strong momentum in Search and AI while also seeing an uptick in platform consolidation for security and observability, with an increasing number of customers migrating from legacy products to our platform. These factors led to an acceleration in the number of large deals we were able to secure this quarter. In Q2, we signed over 30 commitments valued over $1,000,000 in annual commitment value, with five representing over $10,000,000 in total contract value. Of these five deals, two were greater than $20,000,000, a new record this quarter. In Q1 2025, we strategically realigned our sales team to focus capacity on our highest value opportunities. This quarter marked the fifth consecutive quarter of disciplined sales execution, demonstrating our continued commitment to driving enhanced performance and consistency across the field. These increasingly larger commitments are exemplified by an 8-figure new logo deal where Elastic Security was chosen by one of the largest chemical manufacturers in the world. The company initiated a competitive search to replace its fragmented security tools and simplify its IT infrastructure, seeking an XDR platform that could deliver advanced threat protection and a 35% increase in operational efficiency. Elastic prevailed against multiple competitors. We demonstrated superior capabilities by detecting threats overlooked by all other solutions. The customer chose Elastic due to the proven effectiveness of our technology, our open ecosystem, and ability to scale across their global operations. With the customer now progressing towards an AI-driven SOC, we believe our AI features will enable them to realize even more ambitious efficiency targets. Building on our momentum in security, our leadership in next-gen SIEM led to a $26,000,000 commitment with CISA, the U.S. Federal agency responsible for safeguarding critical civilian infrastructure. CISA selected Elastic Security on Elastic Cloud for a unified SIM as a service offering that will help to secure U.S. Federal civilian agencies. This program will standardize security data collection, enabling real-time threat detection and rapid incident response across agencies, while leveraging our standards-based, highly efficient platform to significantly reduce costs associated with data access and retention. We architected our next-gen SIEM solution knowing that security is fundamentally a data problem, one our Search AI platform is uniquely suited to solve. Capabilities like attack discovery, eSQL, and cross-cluster search help analysts investigate incidents and correlate events across environments without manually aggregating data or switching contexts, accelerating detection, response, and forensic analysis. Our ability to overcome complex data challenges by unlocking the value of unstructured data is directly linked to our continuing success in generative AI. In Q2, we saw strong demand for our platform as an increasing number of customers adopted Elastic for developing semantic search and agentic applications. Our deep expertise in managing unstructured data, combined with our clear product differentiation and context engineering leadership, positions Elastic as the natural choice for building Gen AI applications. This has led to widespread adoption and successful deal closures across numerous industries, addressing a wide variety of use cases. For example, a global financial institution operating in over 100 countries expanded its use of Elasticsearch in a 7-figure deal. This customer leverages the full Elastic platform in a self-managed environment for hundreds of use cases. Their search capabilities continue to grow as they centralize unstructured data to power insights for customer and employee-facing applications. Previously, they attempted to leverage a hyperscaler's Copilot product, but it did not surface sufficient relevant results. Now they are using Elasticsearch as their context engineering platform paired with an LLM for their internal AI applications. Elastic's ability to ensure accurate context and relevance has improved their results, and they are preparing to move the application into production. Our leadership in context engineering and relevance is translating directly into significant Gen AI customer adoption. In Q2, new customer commitments with Gen AI continue to grow. We signed four Gen AI deals that included new business of greater than $1,000,000 in annual contract value. We now have over 2,450 customers on Elastic Cloud using us for Gen AI use cases, with over 370 of these amongst our cohort of customers spending $100,000 or more with us annually, representing nearly a quarter of our greater than $100,000 ACV customer cohort leveraging Elastic for Gen AI use cases. In another Gen AI win from Q2, a global supply chain software provider expanded its use of Elasticsearch in an 8-figure deal to leverage our AI and vector search features in an embedded fashion in their key products. The customer is now also expanding the use of our platform to support future agentic use cases. We are seeing customers expand their use of Elasticsearch to develop their own agentic workflows, and to further empower enterprises in adopting AI agents, we've recently introduced AgentBuilder. This new product builds on the Elastic Inference service and provides an out-of-the-box conversational experience, allowing users to interact directly with any data in Elasticsearch and extends our technology into a new frontier beyond the vector database. It embodies a truly relevance-centric approach rooted in context engineering, by enabling users to explore their data and assemble the necessary tools for quickly building AI agents with robust workflow capabilities. AgentBuilder dramatically simplifies the entire operational life cycle of agents, including their development, configuration, execution, customization, and observability, all directly within Elasticsearch. This powerful capability strengthens our moat of broader Gen AI differentiation, which is also helping us land deals in observability and security, as customers grow with Elastic because of our AI features. An increase in AI-based security threats fueled the large expansion deal with one of the world's leading investment management companies. They are deploying our AI capabilities to proactively combat evolving attacks. This customer expanded its use of Elastic Security to enhance runtime protection with integrated AI, a critical need for securing applications. Default LLM security controls alone were insufficient. The customer required a security solution capable of evolving with their unique requirements. Elastic's Automation First architecture provided them the ability to rapidly evolve to keep up with ever-changing security challenges. As bad actors grow in sophistication, leveraging Elastic's attack discovery and AI assistant allows their SOC to scale their capabilities and proactively address issues. We are seeing similar success in adoption of our platform capabilities across our observability solution. In one observability win from the quarter, a leading U.S. Municipal technology and innovation agency signed a 7-figure expansion deal for Elastic Observability. The agency is tasked with providing infrastructure as a service to all municipality offices. They launched a new project to unify the city's data in a first-class data environment to modernize operations and decision-making. They chose Elastic Observability as the foundational technology due to our flexibility, open architecture, and ability to deliver cost savings at scale through features like searchable snapshots. The agency is now leveraging our AI assistant, which helps them remediate and triage issues, reducing their reliance on external consultant services. Building on foundational components for working with observability data, we introduced Streams this quarter. Streams is an agentic AI solution that simplifies working with logs to help SRE teams rapidly understand the why behind an issue for faster resolution. Streams can automatically organize logs, find meaning and problems in logs by applying AI and the power of Elasticsearch to this unstructured, messy log data. In Q2, we introduced a steady set of new AI capabilities, including a number of features that improve our performance as a vector database. We introduced a managed inference service natively through Elastic Cloud. Inference at scale is incredibly important for vector search, semantic search, and GenAI workflows, and we provide our customers with an API-based inference service using NVIDIA GPUs with our vector database for low latency, high throughput inference. We also continue to improve our vector database performance with new functionality, including the release of Disk BBQ. Disk BBQ is a new disk-friendly vector similarity search algorithm that delivers more efficient vector search at scale than traditional industry-standard search techniques used in many other vector databases. And finally, we announced our acquisition of GINA AI. GINA AI has developed leading frontier-class multilingual and multimodal embedding and re-ranker models, helping businesses and developers build powerful search applications. As enterprises build AI agents and develop software in new ways, defining context and grounding LLMs remains essential. This is why we have invested for years in developing our own embedding models, re-ranker models, data chunking strategies, and more. GINA AI extends and accelerates this strategy. These advancements in AI and vector search are not isolated. They are integral to our overarching strategy of delivering a powerful and flexible platform. This commitment to innovation extends across our diverse deployment options, ensuring our customers can leverage the full potential of Elastic regardless of their preferred architecture, Elastic Cloud or self-managed. We continue to innovate, making our platform more capable across both cloud and self-managed deployment profiles. As part of this, we made AutoOps available for the first time to our self-managed customers. AutoOps simplifies cluster management through a cloud-powered service that processes telemetry for real-time issue detection and resolution, all while ensuring the underlying customer data remains within the self-managed deployment. It is these organic innovations and strategic acquisitions that give us the confidence to be the leading data retrieval and context engineering platform for the AI era. Just last week, IDC recognized Elastic as a leader in multiple Marketscape reports, including in the Worldwide Observability Platforms report and in the Worldwide General Purpose Knowledge Discovery for Search report. In the general-purpose knowledge discovery report, we had the strongest position of any vendor in the analysis. We are proud of this recognition, which affirms our unique ability to deliver a unified platform that solves the most complex data and AI challenges. In closing, our market opportunity is stronger than ever, driven by robust growth, clear GenAI leadership, and a unique platform built for this moment. Our foundational investments in search uniquely position Elastic to deliver AI to enterprises everywhere. I would like to thank our customers, our partners, and our shareholders for their continued trust and confidence in Elastic, and to our employees, thank you for your tireless spirit of innovation. And now, I'll turn it over to Navam to go through our financial results in more detail. Navam Welihinda: Thank you, Ashutosh Kulkarni. Good afternoon, everyone. As you may recall, we raised our guidance for the quarter during Analyst Day on October 9, and I'm pleased to report that we exceeded both the top line and profitability of that improved guidance. We saw continued broad-based demand and notable strength in commitments across all geos, supported by healthy consumption trends. As Gen AI adoption and platform consolidation continue to be top priorities for enterprises, we are seeing sustained momentum in demand for our platform, reflected in the continued customer momentum and expansion in our sales pipeline during the quarter. Our total revenue in the second quarter was $423,000,000, representing growth of 16% as reported and 15% on a constant currency basis. Our sales-led subscription revenue in the second quarter was $349,000,000, growing 18% as reported and 17% on a constant currency basis. This strong performance reflects the strategic advantages of the Elasticsearch AI platform in addressing critical consolidation and generative AI use cases. Our current remaining performance obligation, or CRPO, which is a portion of RPO that we expect to recognize as revenue over the next twelve months, remains solid. At the end of Q2, CRPO was approximately $971,000,000 and grew 17% as reported and 15% in constant currency over Q2 of the prior year. Our top-line metrics were driven by strong consumption, deal momentum, and traction with greater than 100 ks ACV customers, all three drivers supported by Gen AI tailwind. First, the primary driver of revenue was healthy consumption across solution areas. We saw steady consumption growth throughout the quarter, fueled by a strong demand environment, driven by solid organic consumption growth from existing customers as well as revenue from new customers. Second, deal momentum during the quarter was significant. As Ashutosh Kulkarni referenced, we saw an uptick in consolidation and Gen AI use cases, which led to overall strength in large deals. We closed over 30 commitments greater than $1,000,000 in annual contract value, with five of them representing greater than $10,000,000 in total contract value, and two of those greater than $20,000,000 in total contract value. The strength of this can be seen through RPO, which grew 19% in the quarter as reported and 17% in constant currency. Our deal momentum occurred globally in both enterprise and public sector segments. Despite the U.S. Government shutdown in October, the team closed a notable win with CISA, as Ashutosh Kulkarni noted earlier. In the second quarter, deal momentum continued and supported our expansion of enterprise accounts and high propensity commercial accounts. During the quarter, our greater than 100,000 annual contract value customer count grew approximately 13%, representing approximately 180 net new customers over the past four quarters. Quarter over quarter, we added approximately 50 net new customers, and we continue to see strong expansion from our existing customer base. GenAI is proving to be a powerful catalyst for customer expansion, with 23% of our greater than 100,000 cohort now utilizing Elastic for GenAI use cases, an increase from 17% just one year ago. We see significant headroom for customers to initiate their Gen AI journey and scale into a 100 ks annual contract value cohort. Even with our existing 100 ks plus Gen AI customers, adoption is in its early stages. Now, turning to second quarter margins and profitability, I will discuss all measures on a non-GAAP basis. Our commitment to balancing growth with disciplined spending translated to robust operating leverage and strong bottom-line results. We continue to focus on costs and efficiency in our business. We delivered subscription gross margins of 82%, total gross margins of 78%, and an operating margin of 16.5%. Our disciplined approach to costs, combined with increasing revenue, underpins our strong profitability and free cash flow generation. Regarding cash flow, adjusted free cash flow was approximately $6,000,000 in Q2, representing a margin of 6%. The second quarter is typically a seasonally low free cash flow margin quarter for us, and we manage and view adjusted free cash flow on a full-year basis. For fiscal 2026, we expect to sustain the level of adjusted free cash flow margin that we achieved in fiscal 2025. In October, during our Analyst Day, we announced a $500,000,000 share repurchase program as part of our capital allocation framework. I am pleased to say that we are already underway on our program and began returning capital to shareholders during Q2. During the quarter, we returned approximately $114,000,000 in cash to shareholders. This represents purchases of approximately 1,400,000 shares at an average price per share of $84.45. As I mentioned at our Financial Analyst Day, we expect to use more than 50% of our $500,000,000 authorized amount in fiscal 2026. Now for the outlook for the third quarter and the remainder of fiscal 2026. Starting this quarter, we will begin providing guidance for sales-led subscription revenue. As we detailed during our recent Analyst Day, and in the past two quarters, sales-led subscription revenue is a key metric for measuring our success with larger strategic and enterprise accounts and high propensity commercial accounts. Sales-led subscription revenue is the fundamental driver of our financial framework, and we incentivize our sales team to meet customers where they are, in cloud or in self-managed departments. The momentum we are building in this quarter is evident. Our sales pipeline is very healthy; it has grown throughout the year. Given the strength of our business, we are raising our full fiscal year 2026 revenue guidance. For 2026, we expect total revenue in the range of $437,000,000 to $439,000,000, representing 15% growth at the midpoint or 13% in constant currency growth at the midpoint. We expect sales-led subscription revenue in the range of $364,000,000 to $366,000,000, representing 17% growth at the midpoint or 16% in constant currency growth at the midpoint. We expect non-GAAP operating margin to be approximately 17.5%. We expect non-GAAP diluted earnings per share in the range of $0.63 to $0.65, using between 108,000,000 and 109,000,000 diluted weighted average ordinary shares outstanding. For fiscal 2026, we are raising our total revenue, which improves our expected non-GAAP diluted EPS. We expect total revenue in the range of $1,715,000,000 to $1,721,000,000, representing approximately 16% growth at the midpoint or 15% constant currency growth at the midpoint. We expect sales-led subscription revenue in the range of $1,417,000,000 to $1,423,000,000, representing 18% growth at the midpoint or 17% in constant currency growth at the midpoint. We expect non-GAAP operating margin for the full fiscal 2026 to be approximately 16.25%. We expect non-GAAP diluted earnings per share in the range of $2.40 to $2.46, using between 108,000,000 and 110,000,000 diluted weighted average ordinary shares outstanding. The diluted weighted average shares outstanding reflect only share buybacks completed as of October 31, 2025. In summary, I am pleased with our second quarter results. We remain on track with our execution this fiscal year and on track to achieve the medium-term sales-led subscription revenue target growth rate we laid out during our financial Analyst Day. Elastic stands uniquely positioned as we bring relevance to unstructured data and allow enterprises to transform data into value. Our opportunity continues to grow. With that, I'll open it up for Q&A. Operator: Thank you. We will now begin the question and answer session. The first question comes from Matthew George Hedberg with RBC Capital Markets. Please go ahead. Matthew George Hedberg: Great. Thanks for taking my question, guys. Ashutosh Kulkarni, I want to start with you. I assume you're seeing strong consumption trends from your AI native customer base, but I'm curious if you could talk about the performance of your non-AI native customers. Are they seeing an increase or an acceleration in consumption due to sort of an increased AI focus within that customer base? Ashutosh Kulkarni: Yes, that's a great question. And yes, we are seeing that it's not just the AI native cohort, but we are seeing strong consumption across the board. Even in our traditional businesses, not just in search, but also in observability and security. Part of this is also that we are winning more and more commitments like I talked about in my prepared remarks. This was a remarkable quarter in terms of the number of commitments that we were able to secure, large commitments where customers are consolidating onto our platform for security, for observability. The five deals that we mentioned that were all greater than $10,000,000 in total contract value are all significant. I would expect that as deals like those, as customers start to consume, we are going to start to see the benefit of that in our cloud revenue and our total revenue. Just to bring everybody's attention to the fact that when we think about our business, we think about both cloud and self-managed. That's the reason why sales-led subscription revenue is such an important metric, and it came in at 18% this year. So very happy about it. Continuing to drive the momentum, consumption is strong, commitments are strong, we feel really good about the rest of the year. Matthew George Hedberg: That's really good to hear. And then maybe for Navam Welihinda, just a follow-up. All of your reported growth metrics were strong, including both CRPO and RPO, all kind of growing in the mid-teens or better. I'm curious though, billings isn't a key for you guys, but it did lag some of those focus metrics. Wondering if you could talk a little bit about why that was the case? Thanks. Navam Welihinda: Yes. Thanks for the question, Matt. And I agree with you, Q2 to us was a great quarter. We saw strength across the business, and what matters to us is commitments and consumption. Both commitments and consumption were strong. You noted correctly, CRPO grew 17% in Q2 compared to 16% last year. Also, RPO grew 19%, and that was because of the strength of the multi-year commitments that we laid out. Overall, the commitment side of the business was very, very strong. Now, as it pertains to your specific question on the year-over-year compare, going into the quarter, we expected variability in the second quarter for a few reasons. One of the main reasons is seasonality. You have to keep in mind that last year was anomalous because of a weaker Q1 commitments that we saw. So the billings distribution, the revenue distribution in last year throughout the year was just atypical. You can't over-index on the quarterly seasonality this year. As a matter of fact, when you think about sort of the ACV, which doesn't have the crosscurrents of billings, the ACV growth this year to date is stronger than what it was last year to date. Right? And that's a great sign. Then the second point I want to make was you all know there was a government shutdown that impacted our third month of the quarter, impacted everybody.
Operator: Ladies and gentlemen, my name is Colby, and I will be your conference operator today. At this time, I would like to welcome you to the Veeva Systems Inc. Fiscal 2026 Third Quarter Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to withdraw your question at any time, simply press star, one again. I'd now like to turn the call over to Gunnar Hansen of Investor Relations. Please go ahead. Gunnar Hansen: Good afternoon. Welcome to Veeva Systems Inc.'s fiscal 2026 third quarter earnings conference call for the quarter ended October 31, 2025. As a reminder, we posted prepared remarks on Veeva's Investor Relations website just after 1 PM Pacific today. We hope you have had a chance to read them before the call. Today's call will be used primarily for Q&A. With me today for Q&A are Peter Gassner, our Chief Executive Officer, Paul Shawah, EVP Strategy, and Brian Van Wagener, our Chief Financial Officer. During this call, we may make forward-looking statements regarding trends or strategies and the anticipated performance of the business, including guidance regarding future financial results. These forward-looking statements will be based on our current views and expectations and are subject to various risks and uncertainties. Our actual results may differ materially. Please refer to the risks listed in our earnings release and the risk factors included in our most recent filing on Form 10-Q. Forward-looking statements made during the call are being made as of today, November 20, 2025, based on the facts available to us today. If this call is replayed or viewed after today, the information presented during the call may not contain current or accurate information. Veeva Systems Inc. disclaims any obligation to update or revise any forward-looking statements. We may discuss our guidance on today's call, but we will not provide any further guidance or updates on our performance during the quarter unless we do so in a public forum. On the call, we may also discuss our non-GAAP metrics that we believe aid in the understanding of our financial results. A reconciliation to comparable GAAP metrics can be found in today's earnings release and in the supplemental investor presentation, both of which are available on our website. With that, thank you for joining us, and I'll turn the call over to Peter. Peter Gassner: Thank you, Gunnar, and welcome everyone to the call. We had an excellent Q3 with strength across the business and results above our guidance. Total revenue in the quarter was $811 million, and non-GAAP operating income was $365 million. Veeva AI is a major initiative for Veeva Systems Inc., and we are making excellent progress. We think Veeva AI can be significant for customers, the industry, and Veeva Systems Inc. We are also executing well and delivering significant innovation across all product areas, including Vault CRM, Crossix, clinical, and safety. We'll now open up the call to your questions. Operator: Thank you. We will now begin the question and answer session. Your first question comes from the line of Saket Kalia with Barclays. Your line is open. Saket Kalia: Okay, great. Hey guys, thanks for taking my questions here. And appreciate the prepared remarks that were posted. Brian, maybe I'd love to start with you and maybe just hit one of the points in the prepared remarks kind of head-on. Where I think we said that 14 of 14 top 20 customers are expected to migrate to Vault CRM, and so six are potentially opting for other solutions. Now there's clearly the potential for a win back, as we said, but maybe the first question is, how do you sort of think about the size of the revenue that might be at risk from those six customers on the CRM side? And how do you think about the timeline of that potentially, you know, kind of transitioning? Brian Van Wagener: Saket, I'm not going to size it, and there is potential for a win back as you said, but maybe taking a step back, CRM is about 20% of total revenue today, down from about 25% two years ago. And that's because other product areas have been growing. In the shorter term, these are multiyear projects that we understand will take a long time to execute. But no impact is expected this year and likely nothing material for next year either. Longer term, we don't expect any impact on our 2030 goals. It's a diverse business, and that means there's a lot of paths to get there, and we're still on track. Saket Kalia: Got it. Got it. That's super helpful, actually. Peter, maybe for you, on the other side of the business, I'd love to talk about R&D a little bit with you. Of course, one of your competitors talked about winning back a top 20 on the EDC side. I was wondering just since we're all together, can you just talk about that? And maybe just comment on kind of the state of the union in that EDC market in terms of the competitive landscape and your pipeline for further market share gains? Peter Gassner: Yeah. We did have one customer that said they were gonna go back to their previous provider. Now they're still a broad clinical customer for us, and even in the EDC area. So we'll just have to see how that goes. That's not a trend I see. I think we're still trending very well in clinical, and we have a number of opportunities in the pipeline for EDC both with large sponsors and with CROs because most customers are looking for an integrated solution across clinical operations and clinical data because it just makes sense. That's how you drive efficiency, and efficiency is the name of the game. This particular customer has more of an integrated architecture of their own. For example, they have a custom CTMS solution and a variety of other things. So at this point, it was a sort of a more a decision that was something that we don't see repeating in other places. Now, and also the thing that I'm very excited about is our innovation in clinical, our generation innovation in clinical that we have in the kitchen. That will help the life sciences companies bridge between sponsors and all the way out into clinical research sites. And also really help in patient recruiting over time. So the future is very bright in clinical. This one, honestly, a bit of an aberration. Operator: Your next question comes from the line of Joe Vruwink with Baird. Your line is open. Joe Vruwink: Great. Thanks for taking my questions. I wanted to dig a bit more into the CRM topic. Obviously, attrition carries an implication on revenue over time, but I sit here today, and I think commercial subscription revenues have been raised by about $60 million year to date. And then every Vault CRM customer you're retaining now has the opportunity to add service center and marketing automation and Veeva AI. So how should we think about all of that netting together? And, I mean, is it the case where, ultimately, you're netting out and there's an increment here? I think the market is focusing on kind of a lost value to Saket's question, but how to think about the offsets in the equation over the next five years? Peter Gassner: Yeah. Hey, Joe. So, you're absolutely right. I think there's been a lot of focus on, you know, what there is to lose. I think there's a lot of potential in what we've created, the innovation that we delivered. In some of the areas that you mentioned, like service center and marketing and patient CRM and some of the new products. But then also in AI. So, yes, each customer that we retain, we have the potential to sell a lot of these products and new innovations. And I expect that over time, those customers will adopt more broadly the CRM suite, all the add-ons that are part of that. We're starting to see some of that happen already with some of the customers who've committed to Vault CRM starting to add additional products on. So that's really good. I think we'll also have the potential to win some of these customers. We've talked about that in detail. So, yeah, I feel good about the upside as much as there is some potential attrition from some of the customers that we've got and decided to do something different. Joe Vruwink: Yeah. And this is Peter. I'll just add in. We've focused on the top 20 because that's how we do some things when we talk to the 400 customers. So it's pretty distributed in what we do. So our CRM business is very healthy, our win rate and our conversion rate is very, very strong and stronger in the smaller market because not the smaller customers, they don't have this appetite for a custom build. It's just not the risk they want to take or what they want to do, and they get a lot of other products to Veeva. Also, on a side note, while we did have 20 of the top 20 customers, 20 of the top 20 were our customers in some fashion for CRM. Two of them were mainly IQVIA customers. So, you know, that's not to say that we're not gonna gain some new customers here. Right? And that can be significant as well. Bottom line is what you should take away is, during the business is healthy, and it is an important part of Veeva Systems Inc., but it's not the major, it's not the largest part of Veeva Systems Inc. anymore. That's for sure. Joe Vruwink: Okay. That's great color. Thank you both. Maybe one on Veeva AI. You know, you had a few summits within the last quarter. I think you've also been making rounds on forums gathering feedback from your customers. I guess what stood out to you both in terms of, I'll say, reception, but then also maybe any pushback or things where you walk away and you have more, you know, you need to work on, you know, coming out of this initial experience with AI? Peter Gassner: Well, I think our customers are, you know, they're looking for practical solutions now. Right? They're looking for solutions that can add value, you know, rapidly sort of getting out of this experimentation phase. And they want to use partners where partners can help them. They want to use Microsoft where Microsoft can help them. They want to use Entropic where Entropic can help them. And they know where Veeva Systems Inc. can help them is helping to automate industry-specific applications with AI. That deep domain knowledge and the business process consulting around it. So how do you enable insight generation in CRM through your field team by the use of compliant free text? Okay. That's a very specific thing. How do you dramatically increase the efficiency of safety case processing for adverse events? Okay. That's very specific. So that's what they're looking to us for, and that's what we deliver. That's what we specialize in. In terms of what they would like, they're, you know, just like everybody else. We can, you know, can this be robust and proven and working tomorrow? You know, for all cases. And so they just want us to go faster, but there's really rampant alignment on directions. Veeva Systems Inc. is setting out to do exactly what they want Veeva Systems Inc. to do. We just have to get there. And the customers also have to be able to adopt and do that change management work. Which is, that's not easy either. That's not gonna happen overnight. That's one of our advantages is we have a great business consulting team. So we have that integrated together. Our product team, our selling team, and our business consulting team deliver AI value. That's gonna be more holistic than others, and that's how you're gonna have to do it in industry-specific solutions. The customers are not gonna want to knit together consulting over here and software over there and AI over here. They're not gonna want to do that over the long term. Operator: Your next question comes from the line of Brian Peterson with Raymond James. Your line is open. Brian Peterson: Thanks for taking the question. Peter, maybe a follow-up to your last answer. But as we think about AI and how that will impact your products going forward, do you think that we'll see more of a monetization in terms of commercial where we've already kind of seen some of that today, maybe more broadly in software? But I'm curious, what do you think that opportunity could be in R&D where it seems to be more of an opportunity of innovation? Any color on how to think about that opportunity from AI? Peter Gassner: I think it'll be not exactly, but broadly, you know, even across the board. So, with some areas, a bit more than others. Safety, I think it's a big opportunity to reduce the amount of labor needed also in certain areas of the clinical. In commercial, it's more about insight generation and market advantage. And in terms of, you know, faster insights. In regulatory, it's, again, it's about speed. So the value is probably similar across all areas, but the way it's gonna be implemented is differently. So I'm just gonna focus on insight and agility. Some is gonna focus on, hey, humans don't need to do that particular work anymore. Brian Peterson: Got it. And maybe, Paul, a follow-up for you. I think there's been some debate broadly on AI and how that may impact sales reps or like how efficient sales reps could be. Like, as you talk to some of your customers, like, how are they thinking about the size of their sales force with the implementation of AI? Like what do you think that looks like going forward? Thanks, guys. Paul Shawah: I mean, we have seen some of the reductions that have played out over the past couple of years that we have talked about. We've kind of predicted roughly about 10%. It ended up being a little bit less than that. The way to think about it is the customers that they're calling on, the HCPs, the number of doctors hasn't fundamentally changed. You still need people. You need a base level of sales reps to build those relationships, cover those doctors, deliver the information, the service that they need. So I think the industry is cautious and thoughtful about making significant changes or adjustments. So I think there is a lot of potential for productivity gains and effectiveness gains, but I think it will likely be stable. At least for the next couple of years. We're not hearing of any, you know, AI-related reductions. It's more related to specific, you know, ramping up for launches or ramping down because of a pipeline challenge. But I think that's normal course of business. Operator: Your next question comes from the line of Alexey Bogalis with JPMorgan. Your line is open. Alexey Bogalis: Hello, everyone. Thank you for letting me ask a question. Peter, I have my first question. Maybe I appreciate the comments you made in prepared remarks that you have not observed material change to customer buying behaviors, but could you double click on the demand environment and financial health of the pharma end market? Peter Gassner: Right. Yeah. So the industry overall is pretty healthy. We've had a bit of chaos in the environment with tariffs and other things and certainly conflict, but the industry has gotten, I guess, used to that. And so I'm seeing no changes in the end market. Then the science is still rapidly evolving. Right? So there are many, many uncured diseases that are seriously affecting people's quality of life. You know. And, you know, the death of a child or a young parent. Right? That happens. And the industry is working hard to be able to cure some of those things. And there's demand for that. So I'm pretty optimistic about the industry overall, and pretty steady right now. Alexey Bogalis: Thank you, Peter. And a very quick follow-up on the comments. First, congrats with another commitment for Vault CRM. So you suggested that you're looking to win another four out of the remaining six undecided. Do you have any verbal indications from those clients already? Peter Gassner: No. I, you know, I wouldn't get—we'll probably let you know when we've been notified. We'll let you know in general, but we won't get into the, you know, fine-tune of that. Okay. You know, we have some things that we think and we have some things that we think we think, but, you know, we won't get any more fine-grained than that. Operator: Your next question comes from the line of Ken Wong with Oppenheimer. Your line is open. Ken Wong: Thanks for taking my question. This first one for Paul. Crossix again called out as a pocket of strength. Any way to help put a little context around it? Was that consistent with Q2? Just starting to normalize, level off? How should we think about the kind of the Crossix dynamic? Paul Shawah: Yeah. It was in line with our expectations. You've seen nice outperformance of Crossix in the first couple of quarters of the year, and we expected that to continue to play out. The measurement business is very stable. And we've continued to perform well there. And then audiences, which can be a little bit more variable, has also delivered really nicely. So yes, Crossix continues to be a nice growth driver. And we expect it to be that. Although there may be some variability, we expect that to be a nice driver over the next several years. Ken Wong: Perfect. And then Brian, 115 customers live on Vault CRM, including, you know, I think some top twenties, kind of in the motions. How should we think about when you might see some gross margin tailwind as you start to work off of the Salesforce royalties? What's the right time frame for something like that? Brian Van Wagener: There are some puts and takes in the short to midterm there, Ken. So you recall that in the next couple of years, as we have other customers going through their migration, there are some customers where we have both the Veeva CRM on Salesforce royalties and the AWS hosting costs. So we'll see some customers rolling off, some that have a mix. So I would say a modest headwind actually over the next year or two. But pretty immaterial in the grand scheme of things. You can see that the gross margins on subscriptions were essentially stable, slightly up year over year. So not a significant impact over the next couple of years, and then it starts to roll off a few years from now. Operator: Your next question comes from Stan Berenshteyn with Wells Fargo Securities LLC. Your line is open. Stan Berenshteyn: Yes, hi. Thanks for taking my questions. Well, first, a follow-up on Crossix. I'm just curious, given the regulatory focus on direct-to-consumer advertising, have you seen any changes in where audience targeting is happening on the platforms? Is it changing at all? Peter Gassner: Yeah. Stan, I would say—and I can take that one for her. I think the thing that when I was listening about Crossix to know is that digital overall, digital marketing spending is going up. Both in consumer and in HCP because there's better digital avenues to reach people. And you're seeing that with things like open evidence and proximity's new AI offering. Right? So there's increasing effective use of that channel. And then with Crossix specifically, what's going on is as that channel gets more important, measurement and audiences and optimization get more and more important. That's one thing. And Crossix is becoming more of a standard. So there's really a compounding effect of the excellence that we're developing in Crossix. You know, Crossix will be, you know, that's gonna be a well-growing business for us. You know, you should think of that as a well-growing business for the foreseeable future. You know, three, four, five years type of thing. This is—we put some serious innovation in Crossix over the past years. We've invested heavily in the data network. Because that's a data network that we share with Compass. Compass and Crossix share that data network. So it's—they're just becoming more important, not less important. The other—you'll see maybe regulations around consumer TV ads. But overall, digital is growing. It's a very effective means to meet people, and you need to measure and optimize that. And that's what Crossix does. Stan Berenshteyn: Very helpful. Thank you. And maybe a quick follow-up on your sales pipeline. I'm curious, a couple of comments here. First, I think historically, Peter, you called out safety and regulatory as potentially having a little bit less of a predictable sales cycle, maybe a bit longer than usual. Any changes there from customers in the sales pipeline on those products? And then maybe related to this, I'm just curious are you seeing anything coming from the IQVIA partnership? Any clients potentially coming through that pipeline? Thanks. Peter Gassner: Yeah. For safety and regulatory, especially in the large companies. Those are usually long sales cycles. Customers know they're making ten-year decisions plus. So these are very serious ones. So I don't see any change there. We have a lot of momentum in the safety area. That's one thing I would say. And then the AI and safety can kind of be a game changer as well. So that might drive a little faster adoption there. And in terms of IQVIA, it's been great having that partnership. So, you know, revenue impact takes a while to see on these partnerships. But the positive customer experience is really heartening. I think it's, you know, giving IQVIA the current a little spring in their step, this partnership with Veeva Systems Inc. is certainly giving Veeva Systems Inc. a spring in our step. This partnership with IQVIA is a very positive macro-level trend for the business, especially on the commercial side. Two big macro-level positive trends for us on the commercial side, or three, are this increasing investment in digital and AI. You see Crossix taking advantage of that, and you'll see other things from Veeva Systems Inc. over time. Right? Where a lot of our revenue and our future things will come as it relates to digital. The IQVIA partnership, making the interop more easier. That will help our data business. That will help our software business. And then the freedom that we're getting to develop our solutions without having to worry about the Salesforce platform and the limitations. All of these things are really gonna be unleashing us on the commercial side. And then for IQVIA on the clinical side, that's been great too. Just more customer confidence in Veeva Systems Inc. and IQVIA can bring solutions to our joint customers. Operator: Your next question comes from the line of Dylan Becker with William Blair. Your line is open. Dylan Becker: Hey, gentlemen. I appreciate it. Maybe, Peter, starting with you too, if we kind of think about the service strength you entered at this as it relates to business consulting, but maybe the need for change management that you're seeing and kind of the strong services outlook, how that or how you maybe think about the implications of that maybe driving more kind of wall-to-wall broad-based platform in the future, the role that business consulting can play in driving kind of the broader platform momentum over time, whether that's commercial or R&D? Peter Gassner: Yeah. If you look at Veeva Systems Inc. at a very high level, you know, where we started, pharmaceutical CRM. Built on salesforce.com. Myself, and my neighbor in our front yard. You know, my, you know, our front yard, which we joined. So there's two people and one product. Right? We have 7,000 people and a lot of products. The way—and now we have software that basically reports directly to me. We have the data business. Reports to me. We have a consulting business. And that consulting business reports to me. So that's how we're building the industry cloud for life sciences. These three working together, which is a lot of skills we have and capabilities we have to have in Veeva Systems Inc. We have to be an excellent consulting company. We have to be an excellent data company. We have to be an excellent software company. And we have to manage the interplay of those three things. But that's what our customers want. They would rather have Veeva Systems Inc. be the general contractor and fit this together. Sometimes I would talk to customers and I would say, well, if Veeva Systems Inc. has 100 things, the nice thing is you might buy one thing today, but you can be assured that that one thing five years from now will fit into all the other Veeva Systems Inc. things that you have. Versus if you buy 100 things from 100 different vendors, those 100 things are moving in 100 different directions, and you'll be replacing pieces and parts forever. So that's what we're bringing, a more comprehensive solution across data software and the consulting, the operating models. So that fits together for life sciences. I guess that's why I think sometimes people underestimate what we'll end up doing for life sciences. It's a pretty significant thing, and it's not anything that any other vendor has ever tried to do for an industry so far. So that's why we're pretty excited about what we're doing. Dylan Becker: Certainly. That makes sense. And maybe you just got teased, this, and so I'd be remiss if I didn't kind of double click on the momentum and safety. I know you called out another top 20 customer, and I think another top 20 go live there alongside the fact that it's maybe the opportunity that's most ripe for labor disruption, I guess. I know these are still long-term decisions, but how do you think about kind of the innovation you're delivering to the safety space and how met with receptivity from a decisioning perspective as you have kind of more of these proof points and validation points at market? Thank you. Peter Gassner: I think safety is really excited about our architecture and how we're doing not only the core safety processing, but the AI that sits on top of that. And the analytics go along with it, the analytical application. So people think that's good. People are very hesitant to change their safety systems. It's such a core system, and it's been so complex. So we're still in the early customer phase of that. I'm hopeful that in, you know, we'll get into the middle majority phase here in a couple of years, and then we'll have the late adopter phase. I'm just very optimistic on it. But gosh, people don't change these things very, very fast. They just don't. Because it's such a critical area, and there's not a lot of push from above the safety teams. Because it's such a critical area, and they've got it. So, you know, we just have to wait for the right time, and then every project has to be successful on that. That's really what we're focused on. It's probably surprising. It would be surprising to many people how complex a global drug safety system is. When you're coordinating with all the health authorities around the world, all the constantly changing regulations. I mean, just to give you an example, there's a lot of special functionality for vaccines. That you need and over-the-counter medicines, you know, each therapeutic area has its own things, and each country has its own thing. So it's complex. We spent, I guess, it's getting close to, what, eight years or so building this thing now. So, that's a real competitive moat. Operator: Your next question comes from Tyler Radke with Citi. Your line is open. Tyler Radke: Yes. Thank you very much for taking the question. Peter, just going back to the top CRM, 20 customers there. You referenced that this was, like, kind of a unique customer kind of one-off example. I was wondering if you could just sort of elaborate on it. Is this something specific to their negotiations or discounts that they'd be getting with another vendor? If you could just sort of talk through that and then maybe the time frame on when you think you could win them back. Peter Gassner: Yeah. I think, you know, when we say customers, specific situations in a very large, there will be individual people, and there'll be dynamics in between people. And there'll be how those people feel and where their cultural alignment is. You know? Sometimes logic is only part of it. So that's what I was referring to. There's no particular pattern there. It's just customer-specific, you know, humans. Right? And some, like, would just say, I just want to try something new. Right? I just want to try something new. We may think that's logical or not logical. Right? Some people want to go with something that's proven. And some people would just want to try something new. So you got all those kinds of dynamics going on. Then in terms of the win backs, you know, you never know when that happens. Usually, it comes with, honestly, executive turnover. Right? An executive turnover. Somebody has a different idea. Also, it can come sometimes, you know, vendor not delivering. You know, the current solution not delivering or project failure, and then it can come in a hurry. It might come in one year. It might come in ten years. You know? But in general, these will be more of a custom build type of thing with Salesforce. And those, you know, on the outside, those could have a ten-year lifespan. But they might only have a one-year lifespan. So just have to see how that goes. I do have a lot of confidence that the building is really—it hasn't proven to be the way forward for most things over the years. And so that's what gives me a lot of comfort. But, again, I don't want to over-index on that. We're just talking about these top twenties for transparency. Our CRM business is very healthy. You know, we're winning some top twenties that we didn't have. We're losing some that we had, and we may win them back. But overall, you know, the business is good. Tyler Radke: Yeah. And for sure, over 100 customers live is a good proof point. Maybe, Brian, just on the margin side, it looks like hiring ticked up again a little bit this quarter relative to kind of the trends we saw last year. Help us just understand, you know, where those heads are focused and then anything you would call out in terms of how to think about margin expansion into next year? Brian Van Wagener: Yes, absolutely. So the two main areas that we're hiring are in our product and then in our services team. You heard us speak to some of the services hiring coming out of Q2 with the large class for our college development program. So we're continuing to invest in the services business, both core professional services and business consulting, continuing to invest in the product. And there was some impact on the services margin in particular in this quarter. But we're really pleased with the overall performance of the business. And as those new hires start to ramp and build the projects, that will wind itself down over time. Operator: Your next question comes from the line of Charles Rhyee with TD Cowen. Your line is open. Charles Rhyee: Yeah. Thanks for taking the question. Peter, obviously, we're continuing to, you know, get these wins in Development Cloud. We started start-up and study training. For these clients, you know, I guess in Development Cloud, among the top 20 biopharma, what's the average number of these Development Cloud products do they have on average? And where would you see as the tipping point? Because if I recall a couple of years back, you know, there's an announcement that Merck was gonna move to sort of a full deep environment over time. Just to get a sense of what you would consider someone being sort of a full Veeva on the development on the R&D side? Like, what does that look like? Peter Gassner: Yeah. And as it relates to Merck, there was a strategic partnership we announced. There was not really that they would use Veeva Systems Inc. everywhere, but a strategic partnership that we announced. Now, in terms of Development Cloud, I, you know, I don't have any particular figures to share with you in terms of percentages or number of applications. It depends on the area. So in the ETMF area, we actually have 20 out of the top 20. Now that have selected us. That's really important. We can use that standardization to drive AI and industry standardization and help the industry and help the regulators. That's, you know, that's going on there. And then newer areas such as RTSM for the randomization and trial supplies management. We don't have any top 20 that has selected us for an enterprise standard yet. Or an ECOA, you know, nobody yet because those are quite new and safety, just a few. So it just depends. We have a lot of, you know, we have definitely more opportunities to go in Development Cloud than we've consumed now. So surprisingly, it's still in the early days of Development Cloud for two reasons. One is these are super important systems that take time. You can't change them out all at once. You put them in most of them, and you keep them for fifteen years. The other is we're adding more applications. So RTSM is new. ECOA is new. The whole area of quality control limbs is brand new. We just had our first early adopter in the top 20 for two manufacturing sites. So it's a lot more to do. I guess it's still early, surprisingly. These things take time. Charles Rhyee: That's helpful. Thank you. And just a follow-up there. Someone had asked earlier about, you know, one of your competitors kind of won back an EDC client, but, you know, what does the overall competitive landscape look like currently? Because it seems like one of your other main competitors in development in R&D seems to be focused a little bit elsewhere in healthcare. Just curious how you're seeing the overall competitive landscape kind of shaping up currently. Thanks. Peter Gassner: Yeah. We certainly have competitors in each area. You know, there's competitors specific to randomization and trial supply management. There's competitors specific to regulatory and clinical operations and EDC. But we don't really have a competitor that's trying to do an overall Development Cloud like we're doing. So I feel like we just have to execute really well, excellence in each area, concentrate on our integrations, and leverage our account partnership. So we have to compete with ourselves. To push ourselves for excellence, for humbleness, for great hiring. The advantage that we have is we have a core platform that's used across all these applications. So we can really invest in the platform. And there's commonality in the platform. And we have first-mover advantage. We had this idea back in early 2012. And, you know, and so you have a lot of core capabilities around it. If you are a competition as ourselves, we have to execute and continue to improve and stay humble. Operator: Ladies and gentlemen, due to time allotted for questions, please ask to limit yourself to one question. Thank you. Next question comes from the line of Craig Hettenbach with Morgan Stanley. Your line is open. Craig Hettenbach: Yes. Thank you. On Crossix, before the acceleration this year, I think the business has grown roughly kind of low to mid-teens. You talked about some of the drivers that are driving growth above that. Do you think in the next couple of years it reverts back to kind of that mid-teens level? Or do you think some of these drivers can kind of sustain stronger growth in the next few years? Brian Van Wagener: Hey, Craig. This is Brian. Overall, we are really pleased with the progress of Crossix. Growth has been very healthy there for the full year to date. It's a large market with a long runway for growth. Both in the measurement business and in the Audiences business. We're not going to break out a specific long-range growth rate for each to grow, and it's executing very well right now. Product area, but we think there's still plenty of room for that business. Operator: Your next question comes from the line of David Hynes with Canaccord Genuity. Your line is open. David Hynes: Hey, guys. Thank you for taking the question. Paul, maybe you could talk a little bit about how you're balancing go-to-market initiatives on the commercial side of the business and maybe how you see it evolving over time. I mean, obviously, Crossix is doing really well. I have to think CRM migration is kind of front and center of your mind right now, especially as kind of these last top twenties make their decision. You tempered expectations around cross-sell during this migration period, but you have a ton of new products. Right? Service center, campaign manager, patient CRM. Like, when do you lean in on those products a little bit more with the top 20? And just maybe talk about kind of how you balance all this and see it evolving over time. Paul Shawah: Yeah. David, it's a good question. And maybe higher level, we have dedicated teams in each of these areas. Dedicated strategy teams and product teams, and they're all focused on their different areas. So they're able to move, advance the product forward, advance customer discussions forward. In some cases, there's dedicated sales teams. So it's not, you know, we don't necessarily have to kind of just focus on one thing and not focus on something else. We're able to kind of focus in multiple areas. But you're correct. Right? The migration thing is the transition of customers over to Vault CRM. That is creating, in some cases, it's slowing things down. In other cases, it's actually creating opportunities for us. We're seeing as customers are making that decision, they're looking at their data. And maybe it's time that we switch out our customer reference data because Veeva Systems Inc. has better data in this area or their master data management with network and Nitro are now becoming opportunities. As they're going through the migration, they're thinking about, they're thinking more broadly. Because there are more pieces of trying to get to broader efficiencies, and they're able to get there as they adopt commercial cloud. We're able to focus in multiple areas. It does create openings for us to continue to expand in each of these areas. And, as you heard, there's kind of some stable businesses, and there are other areas that are growing a little bit faster. We're going to continue to drive and push in each area. Because we can add a lot of value when they put all these pieces together. Operator: Your next question comes from the line of Andrew DeGasperi with BNP Paribas. Your line is open. Andrew DeGasperi: Thanks for taking my question. Wanted to ask the top 20 CRM question. Different way. Particular, how it relates to your 2030 targets. I know you mentioned that it doesn't impact your capability to reach it. I was just wondering why is that the case? Is it because you either the sort of low expectations is mostly tied to a very small number of clients that have decided to go a different way, like one or two? Or is it a factor of you have these other Vault CRM customers that are smaller, the 100 plus that you've listed that could be also contributing and offsetting some of that potential weakness you would see in that business? Brian Van Wagener: Andrew, this is Brian. I'll take this one. When stepping back, there are a few things, some of which you touched on. One is that the top 20 is certainly not the entirety of the CRM. And you heard Peter speak to the fact that the overall business is very healthy. Got enterprise customers, SMB customers. We still expect to win. The vast majority of customers are to retain that. We will have the opportunity to win some of these customers back, and we think that's likely to come through. Then the third and probably the biggest one is that this is a diverse business. It's not only a CRM business. CRM Suite is about 20% of total revenue today. So the other 80% is continuing to perform really well. It's growing well. There were always multiple paths to 2030. And so when we step back and look at the progress that we're making, we feel very good about the progress and how we're tracking out to the 2030 goals. Peter Gassner: Yeah. That way to think about it is the commercial is a part of the business. Right? Our total addressable market and clinical is even a bit bigger than that. And then there's quality and safety and manufacturing and other things. And then inside of the commercial, the CRM suite is a part of that. It's certainly not the majority of it. It's the minority of the commercial area. And we have to see how things, you know, play out. It's not unforeseen that Crossix can be as big as the whole CRM suite by 2030 as well. Right? That's, you know, it's a good business, the CRM, and it's a strong business for us, but the CRM suite itself and the number of field ops and things, that's not a growing business. That's kind of a stable business. That's where Veeva Systems Inc. started, but it's not our determinant at all for 2030. Operator: Your next question comes from Jeff Garro with Stephens. Your line is open. Jeff Garro: Yes, good afternoon. Thanks for taking the question. Want to ask about the comments in the prepared remarks on the Quality Cloud opportunity expanding. Is that expansion by reaching new customer types or more of a reference to product expansion? Just any further remarks on specific drivers of your success in quality and with labs and CDMOs would be helpful. Thanks. Peter Gassner: Yeah. I'll take that one. This is Peter. It's, yeah. Quality is one of these areas where we can reach a lot of customers, a lot of different customers. CDMOs, you know, other regulated, highly regulated services, industries that are close to life sciences. Our success has been we have three main core products all on a common platform. We have the quality documentation, which is used mainly in test. Manufacturing for Engineering Europe. Standard operating procedures and your changes around that, your quality management system for, you know, deviations and kappas, etcetera, and your GXP training. Your validated training environment. So we're the only vendor that has all three all in a common platform. So that's what's really driving a lot of the growth. In addition, we have some new products there, batch release and computer systems validation. And we're very excited about LINZ. We announced that early customer in LEMS, the laboratory information management that's used to test the medicine as it's being manufactured. And that's a growth area because there's, you know, new manufacturing plants being built. Because of a variety of reasons, let alone, you know, political reasons, etcetera. So new manufacturing plants being built, and the medicine and the manufacturing of these medicines is becoming more expensive and more complicated. And there are two main solutions used out in that area, and they're both, you know, on-premise hosted solutions that are not modern. Critically important, but not modern. So we have a real greenfield opportunity there. If you look at life sciences, they will generally, they will research and find a molecule. They will run clinical trials. They will commercialize the product. But along the way, before they put that medicine even in the first human, they have to manufacture it. First in a small volume, and then in a large volume. And so that manufacturing area is critically important. You're manufacturing something that's gonna be either ingested by a human or put right into their bloodstream. So it's super important how you do that. So that's a great growing area for us. Quality in the manufacturing space. Operator: Your next question comes from Jailendra Singh with Truist Securities. Your line is open. Jailendra Singh: Thank you and thanks for taking my questions. I want to follow-up on the MAX environment question earlier. You did note in the prepared remarks that the guidance raise is driven by improved visibility into Q4. Can you elaborate on that? Is it stronger renewal activity, up momentum, or new logo wins? And related to that, we have seen some good clarity for the pharma industry in recent months with all the discussion with the administration. Do you get a sense based on your conversation that we could see a potential up in client buying trends in the coming year or so? Brian Van Wagener: Hey, Jailendra, this is Brian. I'll take this one. So, I think really good execution coming out of Q3. We had some earlier timing of deal closure than we expected that contributed to some of the outperformance in the quarter and the raise in Q4 and therefore for the full year. Overall, I think broad strength across the business. On the commercial side, we saw Crossix continue to perform well, but also the SMB commercial side had stronger performance in the other areas of our commercial business. Strong performance in R&D, which tends to be more predictable, but we saw strong performance in R&D. And then strong performance as well in our services business and really across professional services and business consulting. So we're very pleased with the momentum coming out of Q3 and what we see coming into the quarter. I think beyond that, we'll factor that into our guidance for next year, which we'll release following the fourth quarter here. But feeling good about the execution of the business as we enter the final quarter of the year. Operator: Your next question comes from Steven Valiquette with Mizuho Securities. Your line is open. Steven Valiquette: Thanks for taking the question. So I guess for me, my primary question was also going to be on your comments about the unique customer-specific factors driving a few less of the Vault CRM wins. See you talked about that already. But really my quick follow-up question is, since it sounds like it really is truly scattered across these customer-specific factors, are there any learnings for Veeva Systems Inc. from all of this, either on, you know, Vault, CRM, product design or on pricing or it even not really change anything going forward? On the go-to-market strategies just in the back of all those? Thanks. Peter Gassner: It's a good question on the learnings. Yeah. We did, you know, look through that. No. I think, there's, you know, we did things the way we wanted to do things with customer success in mind, and we've gotten our top twenties live. And, you know, I guess we thought more customers would, you know, 90% of customers maybe would put weight on that, and some customers didn't. They just, you know, it's they just wanted to try something new. So no particular learning. I would say there's a lot of enthusiasm around the Veeva Systems Inc. team, product and services team because, you know, it's kind of distracting to try to resell all those top 20 customers all at once, right, in a very short period time, and you're competing with a product that doesn't really exist yet and a lot of promises and things like that. That's kind of distracting a little bit, but we're largely through that. So now, you know, we used to have 18 out of the top 20. Now we're maybe gonna have 14 or so. And now it's back to business as usual and really focusing on those customer success. But with a difference. Now we are entering the age of AI. You know, probabilistic computing. To really drive and change what a CRM system can do. So that's giving people a lot of excitement. This, you know, the Vault CRM of '26 and '27 and '28, that's not gonna be, like, the CRM of 2022 and 2023. So that's where the real excitement is. Operator: Your next question comes from Gabriela Borges with Goldman Sachs. Your line is open. Gabriela Borges: Hi, good afternoon. Thank you. For Paul and Peter, I wanted to get your thoughts on the risk that the CRM market becomes more competitive over time. For example, could the large competitor that has six out of the top 20, could they use that as a beachhead to expand their presence with time with the road map that will improve over time? Or, for example, the 14 that have committed to Veeva Systems Inc., could they be thinking about the structure of the ecosystem changing? So for example, a year from now or three years from now, could they consider competition? So maybe just give us a little bit of a sense of your conviction on long term and how Veeva Systems Inc. can continue to have the dominant position that it has in the event that the competitive environment does change more structurally on the commercial side. Thank you. Paul Shawah: Yeah. So, as we think about other areas in commercial, there are generally separate decisions from CRM. You know, the people who make decisions around Vault CRM are generally different than commercial content and Crossix data cloud. We've actually done something unique, and we've connected all of those pieces together. One of the reasons we moved to Vault CRM is to make it feel more like Development Cloud. So when you buy into Veeva Systems Inc., you have these really mission-critical areas. Crossix. You're seeing how important that is. Commercial content, that we have all plumbed up together. So we create a lot of value. So I think the customers that do decide to buy into Vault and Veeva Systems Inc. will get additional value. The synergy of having everything on a common platform where they know everything is just gonna work together. We've made a long-term commitment to life sciences. I think what we're seeing Salesforce is, you know, kind of just entering. They have a very new product in the CRM space. They don't have everything that we've talked about. All of the other software products, commercial content, Crossix business, all of the data assets, what Peter has talked about earlier with business consulting. So we're building just something that's fundamentally very different than what Salesforce is trying to do. I think that's a very significant competitive advantage for us, and I think that's why we feel really confident about our long-term market position. Because, one, we're gonna have a better CRM and a CRM suite area, but it's all gonna be connected together. And building the industry cloud, bringing all of those pieces together. So feel good about the competitive position. I'm happy with where it's shaking out. Obviously, you love to win every customer. But we're executing well, really across all the commercial. Operator: Your next question comes from Tucker Rumors with Jefferies. Your line is open. Tucker Rumors: Hi. Thanks for taking my question. So my question revolves around the development of AI agents in the clinical suite. I just want to get a sense of how soon you think you could develop some clinical AI agent, for example, you can give, and how can Veeva Systems Inc. monetize that in the future? Thank you. Peter Gassner: Yeah. We have, we've published our road map around our agents. We're gonna have agents in literally all of our software applications as we get through 2026. We started this year. We'll have them in commercial. And CRM and commercial content. Next year, in roughly the first quarter, April, it'll be in safety and quality. And then through the end of the year, we'll have agents in clinical operations. And then, by the end of the year, clinical data management. We think it's one of those potentially transformative areas in clinicals. It's our largest single opportunity, the clinical business. There's a lot of potential to just streamline a lot of core processes, ePMF, you know, when you just intake a document and scanning through that, making sense of that with an agent, as an example. Just replacing core human labor with agents. So a lot of potential for productivity. That's just one example, but I think we see that pretty consistently across the broader clinical area. So super excited about AI because we've actually accelerated our agent road map. And we'll have it in, like I said, virtually every application area as we get through 2026. Operator: Your next question comes from the line of David Larsen with BTIG. Your line is open. David Larsen: Hi. Just going back to these top 20 biopharma clients. Can you maybe—I just have a tough time believing, like, with your R&D capabilities, if you have 20 of the top 20 on your electronic trial master file platform, that's where all of the R&D flows out of. Like, did these four already sign with Salesforce? Did they just sort of verbally tell you they're gonna go with Salesforce? How sort of final are those decisions? And then we keep saying, may win them back. Like, how would that work? Is there a trial period they have with Salesforce? Thanks very much. Peter Gassner: I'll take that one. So in terms of the—this is around the CRM product. Right? We announced the Salesforce ones that particularly around our CRM product. And, if I just reiterate, that's about 20% of our business today. Two years ago, it was about 25% of it. We're not gonna give a direction of what percentage of our business it would be in 2030, but you could, you know, that's gonna be significantly less than 20%. So it's a minor part of our business that's nothing to do with our clinical business. Right? Nothing to do with our clinical business. And then in terms of the win back, how does that work? Well, you know, when you roll out a pharmaceutical CRM system, you'll do it by region, and might have a failure in one of those implementations. So you might say, well, okay. I'm not gonna use Salesforce in that other region. I'll go over to Veeva Systems Inc. Or you might have a failure in your first region, and you're gonna say, well, I'll cancel that overall. Or you might have an executive change. And they might have a different idea of what they want to do. But, also, you might run with that system, sort of a more of a custom build system for three years, five years, seven years, and then you feel like, okay. That's run at the end of the life. We have a custom system, and the industry has moved on. And we want to move back onto a more industry-standard system. Because with Salesforce, very open platforms, so the IT team sometimes can build exactly what they want. And the system integrators kind of feed into that as well. So you end up with a very custom system. So it's not—this top 20 things had nothing to do with the bulk of our business, clinical. And the win backs happen over time. As they naturally would. Operator: Your next question comes from Sean Dodge with BMO Capital Markets. Your line is open. Sean Dodge: Maybe just on the Veeva basics. Offering you rolled out, was about, I think, a little over a year back. You had a release a few weeks ago that there are about 100 clients that have selected that. I guess just wondering how we should think about sizing the longer-run opportunity for Veeva Systems Inc. in that part of the end market. Obviously, R&D budgets for small biotech are small, on the other hand, are a lot of them. So just maybe kind of thinking about does that have the potential to be a real needle mover for Veeva Systems Inc. at some point here soon? Peter Gassner: It's a very important thing for Veeva Systems Inc. because it helps the smaller end of the life sciences industry. And that's critical. So, for example, it's a very important thing in the clinical side for our larger. Because when they need to evaluate an acquisition, and that acquisition is using Veeva Basics in the clinical area. They're gonna be much more organized and much easier to automate. So Vault Basics helps the Veeva Basics helps the industry grow overall. That's gonna help Veeva Systems Inc. In terms of how significant it can be, it's not gonna be the significant part of our revenue driver. It's, you know, it's a part of the overall ecosystem. We have 100 customers now. It's—I don't know where that ends up. But it's not impossible that we have a thousand customers on basics over time of the different offerings. So, you know, it's a great business and more than anything, it's the right thing to do. Giving a professional solution to these small biotechs that in the unlikely event that their business really takes off and their molecule really takes off, and they're gonna be the next Pfizer. Okay. They don't have to change systems. They can just graduate from basics right in place and get enterprise Veeva Systems Inc. So super excited about the innovation that's happening in Veeva basics. Operator: Thank you. No further questions in queue, I'd like to turn the conference back over to the CEO, Peter Gassner, for closing remarks. Peter Gassner: Thank you, everyone, for joining the call today, and thank you to our customers for your continued partnership and to the Veeva Systems Inc. team for your outstanding work in the quarter. Thank you. Operator: This concludes today's conference call. You may now disconnect.
Tony Dammicci: Welcome everyone to the MDB Capital Holdings' Third Quarter 2025 Update Conference Call. Thanks so much for joining us today. [Operator Instructions] Before we begin, the formal presentation, I'd like to remind everyone of several important things. Today's conference call is being recorded. [Operator Instructions] Please remember that statements made on this call and webcast may contain provisions, estimates or other information that might be considered forward looking. While these forward-looking statements represent our current judgment on what the future holds, they're subject to risks and uncertainties that could cause actual results to differ materially. You're cautioned not to place undue reliance on these forward-looking statements, which reflect our opinions only as of the date of this presentation. Also, please be aware that we're not obligating ourselves to revise or publicly release results of any revision to these forward-looking statements in light of new information or future events. Throughout today's discussion, we'll attempt to present some important factors relating to our business that may affect our predictions. You should also review our most recent Form 10-Q for a more complete discussion on these and other risks, particularly under the heading Risk Factors. A press release detailing these results, which crossed the wire this afternoon is available in the Investor Relations section of our website, mdb.com. A replay of this call will also be available later on mdb.com. Your host today is Chris Marlett, Chief Executive Officer and Co-Founder of MDB Capital Holdings. He'll be joined later by George Brandon, MDB President and Head of Community Development. Chris will lead an update on the Third Quarter ending September 30, 2025. At this time, I'd like to turn the call over to Chris Marlett. Christopher Marlett: Thanks, Tony. Well, welcome, everyone. Thanks for joining today. I saw it was a pretty crazy day in the market. And so it's been a really interesting period in time to navigate these markets. And I just want to thank all of you that have been supporting us and getting behind us, and we've had a really good last few months as our platform takes shape and as our pipeline builds. And so we're very enthusiastic despite all of the backdrop of uncertainty. So well, one of the things I wanted to do today was talk a little -- do a little bit of a different approach to try and help to explain what we do at MDB, why we create value or how we create value and why we went public because I want to remind everybody that we did this for a very specific reason. And there was a big why, if you will, why we went public. But I also want to recognize that so many of you that have believed in us have lived through the stock really going down. And while the stock is down, we've lived through so many different markets before. And sometimes, when you call me where I talk to some of our shareholders, they think that I'm not too worried about things. One, I'm not super worried, but I don't like the stock being down either. So we really are in this together. But I want to also reiterate that we're not changing what we do just because the market's down. What we've done for a long time has worked, and we think it's going to work again despite the fact that times are changing. There's a lot -- fewer small public companies out there. The small public company market has not been really great. And so we're just as excited as we've ever been, even though things are not unbelievable with our stock at this point. So the last, I would say, 2 years has been very challenging because we've had this great historical success, but it's certainly not reflected in the stock today. We've had 28 years of launching big ideas. And we've had really it's an incredible record that really no other firm has really matched. We've never failed at doing an IPO. There's been times that were super tough to get them done. There's good times, there's bad times, but we've been -- we've -- 100% of them we've ever tried, we've done. And amazingly, of all of our IPOs, 100% of them have traded at 2x the IPO price at some point post IPO. So that means that these companies got public. They did well. They had a chance to raise money. They don't all win forever, but we did what we were supposed to do was really launch these companies that have big potential. And so many of them have reached real significance as far as valuation. And I want to remind everybody that we've published sort of a historical perspective of those companies we've launched in the public markets. So we can remind everybody that this can work. And I think that what's wondering -- what's I think lingering in everyone's mind is the whole concept of, is public venture dead? And I think that I'm super excited because I think we're in sort of a whole new beginning for public venture. And I couldn't be more excited about what we have ahead. And again, reminding everybody why we went public. We really -- for 28 years, we only launched what was at 17 companies, so about one company every 18 months. And it was really -- I think a lot of you saw was sort of a founder-led operation led by me and our team. But quite frankly, people look to me for whether or not they should buy or sell something. And that was not something I look forward to, and I really felt like our results have proven themselves and it could be scaled. But we were really constrained by operational bandwidth. So the funding that we did for the IPO was really to put in a team to be able to scale this operation. And so it's been a proven model, but the big question has been, can we scale. And we really -- our goal is to get to 3 to 5 launches per year, which enables people to build a public venture portfolio because buying one company here or there is not really a strategy. It's just -- we're kind of deal salesmen as opposed to helping people to really build a diversified portfolio in public venture. And by doing that, we can bring our impact and our process to more and more companies. So I think the mission is always to build this operational framework, to make this sustainable and a long-term business that survives beyond the initial founders of MDB. And so that is our mission. We're sticking to it. And I think we're making great progress that I think will become very evident very soon. So simply what we've done, and I've talked to this in the past, is really we curate by looking through thousands of ideas. It does take looking through thousands of ideas to find ones that have that asymmetric profile that we believe is so important. And the reason why we've been able to do what we've done historically, you can't just episodically stumble across things. You have to really get out there and our team has done a great job of getting out there and looking through thousands of ideas. I know a lot of you that bring ideas to us get a bit disappointed sometimes because there's such a small percentage of the things that we actually end up getting behind, but we say just keep bringing them sooner or later, you're going to get better at finding one, and we really appreciate all of the companies that are brought to us by our community. It really is an important part of it. And I would tell you that a very high percentage of the things we do are actually brought to us by our community as opposed to us going out and finding them. Then we position them for success, and that's really the hard work, once we curate them, which is equally hard, but positioning them for success and being able to live in the public markets is really where the platform is really been built. And I'll talk to more of that later in the presentation. But I don't think that, that's really apparent to most shareholders today. I don't think that they really understand what we've built and why we have something that really nobody else has. And then, of course, launching them is the things that you see, which is really when they're ready to go public and trade in the public market. So what for the new people in the community that don't really know public venture. It's really this explosive growth potential of venture stage companies and bringing that public market liquidity and transparency that we now call public venture. We used to have an old tagline that we're bringing back, which I think is really something that we forgot about and really is important to understand what the value that we think that we bring in MDB is that we really see value others don't. Most of these opportunities would not be opportunities to any other firm. And I think that our ability to create value from those is really completely unique and not something that these entrepreneurs and inventors can just find anywhere. So it's this -- it's really this transformative magic of transforming these early-stage big ideas into investable public companies with $1 billion-plus potential. And I think that we've really thought about what it is that we do that adds value so that people understand how we actually earn these equity positions or are able to make this a business. When things come to us, they typically are really exciting, big ideas, but they're really underdeveloped without a clear commercial path. And they don't have an IP strategy or a protective moat around them that's completed. And it's kind of a bit unfocused because it's still early, but can be developed. And as a result, they have limited access to growth capital. And after we're done and they're ready for launch, they really have a clear mission as a new category leader, not to say that it doesn't pivot after they're public. It doesn't mean that it's 100% fully baked as a company, but they're really going to be a leader in a particular technology or business category. And they have a comprehensive IP strategy in a protective moat that we're experts now at making happen. And they really are differentiated and they're public ready for the public markets. And so these companies trade and are valued in the public markets as evidenced by our track record. And when they walked in our door, they really didn't have that capability. So I think that, that's what's exciting about what we do and how we create value for shareholders. And talk a little bit about what were -- that underpinning or that foundation for that is really this these integrated components that stand underneath this whole strategy. And I think that when we first went public, we didn't do a good job of communicating. I think a lot of people really believed that we were operating multiple businesses when really -- it's really one business to support this sort of launch of these public venture companies, stage companies. And it's really the foundation that enables us to provide this value that really nobody else can because there's really no PE firm or VC or underwriter that's built to do what we can do. There's -- we are completely unique, and I would say that, that leadership is clear in this category because just like the companies we're launching, this category of public venture there's -- we don't really believe we have any real competition. And so when you look at all of the services, and again, the -- I'll let you guys read this at a later date, but really, all of the things that we do, you do not find at an underwriter or a VC. And ultimately, why I think this is going to be super important. It's not just the companies that we find in academia that might have a great new technology that we have to formulate into a company, but it's also companies that are more developed like you would see with Buda Juice that we'll be soon during the IPO for, where we really help them to really go public, I mean, and be a leader because quite frankly, they can't just walk into an underwriter, and we provide all these services that enable them to get to that public offering much faster. And so we say 2 to 3x faster, that's hard to really quantify. That's just sort of what we believe. But we can take something like Buda Juice from a very early-stage company that didn't think they can go public. And in 6 to 9 months, really get it ready for going public and have it be super well in demand as a result of positioning it correctly. And so I think that's a big part of what we do. The other part of it is that a lot of times these companies are told it's going to cost you $2 million to go public. And that's just not our reality. We have -- whether it's law firms, accounting firms, et cetera, we have the resources to be able to take these companies public for their total all-in cost for going public outside of underwriting fees is usually less than $0.5 million, which is not something that most people or most entrepreneurs fully understand I think that they -- again, there's big misconceptions about what it costs to go public and et cetera. So to remind you how we create value, it's a combination of the fees and equity that is how the shareholders of MDB make money. And so when we transform these companies, there's some companies like in eXoZymes, which we cofounded effectively with the inventors from UCLA, we have to really work hard to position that company and develop that company from putting together the whole team, the strategy, the IP, et cetera, and that's a very time-intensive process. And those companies, we have more equity in a lot of cases, in the case of eXoZymes, we put also $5 million in capital into the company. Other companies like Buda Juice that you'll see, we'll have underwriters warrants and we'll have underwriting fees. And that -- we don't have as big underwriting -- of equity position, but we also didn't spend as much time, effort and capital to get behind it. It was a very different type of situation. But in all cases, with every company that we end up launching into the public markets, we will have an equity component because we want to bet alongside of our investors. We want to make sure that we're completely aligned with investors at all time and we're never going to be a fee-for-service -- traditional fee-for-service shop because we add too much value with this platform to just charge an underwriting fee like many underwriters. So I know there's a lot of confusion in the marketplace with that because everyone is a little bit different. But it's really just a function of how much time and effort it is to do it. And most importantly, it's making sure that we curate something for our investor community that works. That's always the way we think is, it's, number one, it's got to work, and number two, we have to be compensated fairly for what we're doing. And it's what I love about what we're doing now is that we have a lot of flexibility about the big ideas we can launch. But again, what always stays the same is our category-leading companies, whether it's a technology category or a business category like what we're doing with Buda Juice. So our goal from an operating perspective, and I've talked to you before, we have about $10 million in operating expenses, which is really -- in effect, our operating platform is really seed capital for the companies we're starting and launching because we're investing our time and effort to really position these companies for leadership, and that's really an investment in these companies. And I don't think, again, I don't believe that that's well understood. Even some of our biggest investors they say, well, geez, why do you guys get such a big equity position in some of these things. I said because we're providing the value. And I think that a lot of our co-founders and what have you, if you talk to the co-founders, a lot of these companies, I think that every one of these companies that we've launched and have taken public, I'm not so sure they could have gotten public without us. I'm not sure that they would have been public without us. And so I think that, that's where that transformation on the value creation is so evident. So scale is the issue for us. Obviously, the big difficult lift here is operationally how do we take one every 18 months to get to 3 to 5 year. Well, I really don't believe that the curation is our choke point. What we're seeing as far as opportunities are concerned, we have now a very deep pipeline of opportunities. So I'm not really worried about finding enough opportunities. In fact, even though we are going to be doing more companies, I believe that every one of the ones we launch going forward have a better probability of success than the ones we've done historically. And that's a big statement, and I really believe it comes from the fact that we are now -- we've broadened our team to be able to curate more and effectively analyze more, but I also believe we're just better at picking because we've made every mistake in the book. We've created dysfunctional boards, management teams. We've picked the wrong business strategies. We've picked companies that were -- that went public too early. We've -- like I said, we've made every mistake in the book historically, and I can tell you the one thing that we're all acutely aware of is we don't want to make those mistakes over again. The other major -- so the biggest part -- there's 2 -- really 2 big things that really dictate how many of these we can launch on an annual basis. One is our process because it's really standing up those companies and getting them ready to go public, everything from developing their business and IP strategy, but also getting the narrative and getting the team right, those are hard to do. And that's where the community is so important and we want to broaden our community because the bigger our community is, the bigger the influences, the easier it is to put these companies together. We want to be able to lean on our community more to help us find CEOs, board members potential joint venture partners for these companies. And so that community is critical to that process. But also the community is important from the perspective of really investing in these companies. And I think that in good times, it's much easier. We found sometimes in good times, we send an e-mail and we've got 3x over demand for an IPO. In bad times, you call your friends and they cringe when they see the color ID, right? So it's very cyclical depending upon the markets. But we've managed to continue to grow that community and work on that because we know that the more the people are exposed to public venture relative to all the things they can invest in that it just makes sense. And so we just have to continue to build it. George is doing a great job in the team and Tony and all the rest of the guys that are part of the whole community team. They're doing a great job. And every day, we're out there making new friends and it's really quite fun and we're seeing great progress on that front. So I think that's becoming evident as we're seeing the pace really pick up. And I think that we're excited because for the first time really in our history, we're going to be closing -- well, highly likely to be closing. We've received all the funds for Paulex and we'll be announcing the closing on that here shortly. And then Buda Juice, we expect to be priced here in the next couple of weeks, hopefully, if the SEC can hurry up and get back to work and get those comments in. So it will be the first time we've ever done 2 company launches in one quarter. So I'm pretty excited about that. But not just that, we've got a number of other companies in the pipeline, and I think we've got a very active calendar going into next year. So I think that there's 4 to 5 companies in late-stage negotiations. So I really believe we have a shot at making that 3 to 5 launches next year. I'm pretty excited about that. I also think the Microcap is going to make a major recurrence. I'm making a market call here because it's been such a horrible last few years for Microcap. But I'm making a market call that the transparency and liquidity that exists in the public markets is going to become a cool thing again. It was funny. I got a call from a very old friend in Indonesia, a very wealthy guy that has businesses in Indonesia. And he called me up and he said, Chris, I want to go to NASDAQ. And I said, well, why do you want to go to NASDAQ? And he goes, well, he goes in Indonesia, he goes, if I take my company public, I'll trade 10x earnings. He goes on NASDAQ I'll trade 40x earnings. And I was like that's pretty profound. Well, I think that, that's what you're seeing start to have happen is there are so few companies on NASDAQ now, these small companies that have any kind of revenue and earnings that are in the Microcap space are very highly demand. There's very few companies left in the U.S., ironically. So many of them are going to private equity route, the VC route, the PE route. And now you can talk to all the family offices and what have you. Nobody wants to allocate to that sector. But where can they get price transparency, liquidity, et cetera, it's public markets. And so I'm a huge believer that we're probably on the doorstep of really this taking off in a major way and I couldn't be more excited about being in the business at this time. So the third quarter financial update is pretty straightforward. Our goals, as I mentioned, are really to offset our operating expenses with financings. So we've used about $5.9 million for the first 3 quarters. We'll have a fair bit of revenue in the fourth quarter that will send that in the other direction for the balance of the year. And so I expect that we'll have a good fourth quarter, and we'll start to see that we're -- our OpEx are starting to get covered by the number of finances we're doing. In addition, more importantly, we're going to have important equity positions in Paulex Bio and Buda Juice that really give us, all of our shareholders' big equity upside going forward. And as always, we're trying to be very cautious with our OpEx and making sure that every dollar counts. And the team has done a great job. There's been -- the team has really dug in, working hard. I mean everybody on the team is been committed, and it's been a tough slog guys. It's been really tough, but we have a great group of people all across the organization. Everybody is really -- I couldn't be more pleased with everyone's commitment, and we have an unbelievable team as many of you know. And I think that we have significant equity holdings that are really unrecognized in our stock price, which I'll talk about in a little bit. So when you look about -- look at our stock being undervalued, if you take the eXoZymes position, the HeartBeam position and our cash, the market value is significantly higher than the market value of our stock right now. And that comes from, I think, people just being worried that, in fact, maybe public venture is dead, maybe MDB lost their touch and they can't figure it out how to navigate through this market, what have you. It's a commentary that I'm not proud of, but having lived through lots of cycles, I know that it can change and be on the other side of the equation, and we can be trading at a premium to our equity value. So I don't take it personally, but it does hurt because I know a lot of you bought the stock at higher prices. And we're trying to rectify that as fast as possible. And I can tell you the team has dug in to make sure that, that happens. But some things that aren't valued in the stock prices is really patent, which were we've made the decision to spin it out, and I'm super excited about having the first -- potentially, the first public law firm in the United States, and it couldn't be in a better sector, which is patent law, which is a federal practice. We'll talk a little more about it in the future, but I do believe that is an undervalued asset that's not valued at all on our balance sheet right now. And the other thing is we've been contacted by a number of people that want to be in the clearing business or associated with the clearing firm. And so I think there's a lot of potential value in our clearing platform as we move it forward. And so those are 2 assets that I think have significant value that can even be -- we can realize some real significant value. But I want to talk -- touch on a couple of the companies that many of you own stock in and of course, MDB owns a lot of stock in, which is eXoZymes and HeartBeam. I couldn't be more proud of the accomplishments that those companies are making, albeit not necessarily 100% recognized in their stock prices, but eXoZymes is making unbelievable progress and their platform is really going to be transformative. And really, you're going to see this, I believe, in the very near future. that we're going to see a new paradigm in pharmaceutical development enabled by their synthetic biology platform. And you're going to see that in paradigm-changing companies that will get spun out of eXoZymes and we're hoping to -- that gets sort of unveiled here very shortly. It's been a long time coming, but I think we're very close to making that happen. And HeartBeam, it's been a tough road to get through the FDA. But hopefully, we're right on the verge of FDA approval and it's -- it really is a life-changing opportunity in health care in the sense that now you're going to basically have a virtual cardiologist in your pocket at all times. If people carry this around, they're going to be able to get a 12-lead ECG to their doctor or to a cardiologist instantly. What does that mean? That could save millions of lives, millions of lives. And it's never been done before. And I think that hopefully, this FDA approval gets through and we get this product launch because it's a game changer. And both these companies I'm super proud of and I'm super proud of our team for helping get these companies launched. It really is an exciting time, even though it's been a tough market. These are game-changing companies that we couldn't be more proud of. So just to reiterate, we closed 3 to 5 deals a year. We really cover our operating expenses. And then as you can see, the equity that we earn in a company that we cofounded with Francisco Leon, and Miguel, we own a significant part of that. We really helped put together the license at Mount Sinai, and it's been a lot of hard work, but I really want to thank all of our investors that believed in us to get behind the launch of what could be a really game-changing company. So it was a long time coming. But again, it was the fortitude of our team and the belief from our investors that are making that launch possible. And I want to thank everybody that participated in. So really in summing up, I think that I want to remind everybody, we really have, in my mind, the only real public venture platform. And we have such a unique team of people. We have such a unique process that I believe is going to give life to lots of meaningful companies. And by being a shareholder, Obviously, in tough markets, it doesn't really matter that you have access to the deals. A lot of people have access to the deals. But in a better market, like I think is coming along, as a shareholder, you're going to have preferred access to each one of these opportunities to invest in. That's, I believe, an important reason to own MDB. And again, our proven execution historically, and I think our momentum is a great reason to start thinking about owning the stock if you don't own the stock already. And we have a lot of hidden value. Our economics are scaling as we get more companies through the pipeline. And I think we really have a moat around our business. They're just, I think, we are in a class unto ourselves in what we do. And so I think that, that gets recognized by companies looking to go public or looking to be positioned as a market leader. And I think that the timing couldn't be better to be a shareholder. I think that hopefully, we're seeing some shifts in the marketplace and people coming back into public venture. So as Tony said, our model has proven, the machine is scaling and the window is opening. So with that, I want to thank everybody and open it up for questions. Tony Dammicci: [Operator Instructions] And at this point, I'd like to welcome George Brandon, MDB's President and Head of Community, who will facilitate the Q&A session. So George, welcome and take it away. George Brandon: Okay. Chris, first question you're going to get it on every conference call. Can you give a little bit of your philosophy on when shareholders could expect to see a dividend, a little of your philosophy on eXoZymes. Obviously, that's performing really well. When would you think we would -- there would be a distribution? What's your philosophy there? Christopher Marlett: Yes, philosophy is we want to see that the company is out and really there's a developed market for the stock. And we don't want a dividend to get in the way of the development of the company. And so right now, the volume is pretty low in eXoZymes and what have you. And I think it's really just a matter of once the company's business model and execution is really clear. There's a broader market for the stock. It would make sense to do a distribution. And so I can't make any predictions, but I think our philosophy is to make those distributions when the company is broader ownership and more trading volume. George Brandon: So a question to follow up on that. If -- as Obviously, eXoZymes is going to be raising money. However, they're going to do that, whether it's a spinout or a new technology. Do we expect MDB, do our shareholders expect to retain the same percentage of ownership as they raise funds? Or how do you see that working out? Christopher Marlett: No, any time you buy a public venture company, they're going to need to raise more capital. and we as shareholders are going to be diluted. Obviously, the better the company does, the less dilution that we suffer. But yes, there's always dilution as companies raise more money and -- but we always work to make sure it's as little as possible. George Brandon: Let's move over to HeartBeam. Look, we're hoping, as they've said on their conference call, they expect to get FDA approval you can look at their balance sheets, how much cash to have. How do you see that playing out, and what do you see MDB's role in and around that? We certainly have right of reverse refusal on funding, just a question on that. Christopher Marlett: No. Listen, I think I think that the philosophy of the Board of the companies has been -- we have to be able to tell people what's going to happen with the FDA before we do raise more money. And I think that, obviously, the FDA is dragged out a little bit longer. But I think we're hopefully at the finish line here. And after you take the uncertainty of FDA approval will be the first 12 lead, first carrying your pocket 12-lead device ever approved by the FDA, which people understandably are skeptical that, that would happen. And so I think, hopefully, that happens. And then I think we take that off the table. And now it's just makes it a lot easier for an investor to make a decision whether they want to invest or not. George Brandon: Got it. Look, we did a whole slide on kind of why I think the stock is where it's at and what's in the portfolio. But the question is, hey, look, we talk about creating value. For those that did the IPO at 12, we're down here in 340 or so. What's your thought on why we're trading where we're at. And I know this is just -- you don't have a crystal ball. You can't see into the hearts of those who own your shares. What's you're kind of -- doing this for a long time, what -- if you were to summarize that -- those reasons, what would they be? Christopher Marlett: Well, I think that the #1 reason is the market for Microcap has been pretty bad. There haven't been -- hasn't been a great space. That's probably the #1 reason. Number 2 reason is that people are -- because of that, people are saying, well, does MDB lost it? Do they have the ability to pick good stuff anymore. Do they matter anymore? And that's a totally legitimate thing. I think the other part of it is now we're getting into -- you're tax selling and people can sell stock and offset their NVIDIA gains with their MDB losses, right? And so I think there's bound to be some tax loss selling. And I think it's -- every one of these companies that we quasi modeled ourselves after at some -- they went -- they would trade from big discounts to big premiums depending upon how people felt about the company at the time. So one of the great companies in the public venture launch business was Safeguard Scientifics back in the '90s, and they would go from trading at a discount to trading at a premium of their liquidation value pretty regularly. And that's just -- it's kind of like a holding, sometimes you get a holding company discount, sometimes you get a holding company premium just purely based on how people feel about you at the time. George Brandon: Yes. Here's a question on -- you made comments on you're bullish on the Microcap market. Certainly, I'm out there. I was at a conference with Keiretsu yesterday in Philadelphia. A number of the companies basically pushed back ongoing public early as the expenses of that. You talked about it a little bit more. Can you give a little bit more color of what makes you think that, that the cost of being public, whether accounting and legal, regulatory, is trending in a way that's positive for more listings. Christopher Marlett: Well, I think that it all comes down to how they're valued in the market. So right now, the companies that are profitable and growing in the Microcap sector are trading at big valuations. They're trading at last time we looked 1.15 PEG ratio. So if they're growing at 35%, they're going to be -- or 30%, they're going to be trading at 35 or so times earnings. And that's higher than what private equity firms are going to pay or and so it just makes sense for them to go public to raise additional capital and -- or if shareholders need liquidity or what have you. So we see it as that -- and there's very few of them out there when we did the screen of companies making a $1 million or more, growing at more than 10% and under $300 million in market value there was 34 companies. If you screen for foreign companies, we just did a foreign screen, and we had like 4,000 companies that fit that. And that's why a lot of these companies are going to want to come to NASDAQ. And they are you're going to see I think a delusion of these companies coming to NASDAQ. And I think we also have an opportunity to find some leaders in foreign markets that want to come public in the U.S. The other aspect of it is what's happened in the private equity, private debt and VC markets has been really amazing to watch. If you look at VC activity today, the big VCs, what are they doing? They're funding these big unicorn AI companies, they're putting in $100 million at a $5 billion valuation. And they're not doing anything like -- they're not putting $3 million or $4 million in a promising medical device or a biotech company right now. And even the ones the big VCs that are still doing the life sciences, they're writing $100 million checks for these opportunities, which we think is just crazy because we don't think that writing a $100 million check for an early-stage company makes a lot of sense. And I think that that's shown in the performance of these funds. And so I think that the investors are not going to be funding these funds much more, whether it be private equity, private debt, what have you, these things, we're now seeing in the private debt market. Companies that they had their debt marked at par. And next day, it's 0. And if you have publicly-traded debt today, you get marked every day. And I think that investors don't want -- they want the transparency and liquidity. I'm in these -- I'm in one of these men's kind of networking groups where we talk about investments. And if you were -- in these groups 2 years ago, they were all talking about these private equity deals we're getting into, I can get you into it, what have you. I can tell you right now, they're not talking about it at all, and you've been going to the Angel conferences and nobody wants to put money in private deals anymore. So I think that -- I think we're going to see a dilution of companies who want to go public. And it's just -- we couldn't be better positioned. George Brandon: So little -- look, I think a little confusion in our history has been big ideas, mostly deep tech. We're still looking at deep tech and doing deep tech technology, big ideas. But the comment here or the question is, but yet our next big idea is a juice company. And one of your questions are, are fruit juices popular now. Can you delineate a little bit. We've got the venture side, we're competing against venture using public venture. But then against private equity to take the best and the brightest from private equity, such as Buda because Buda had a bid from private equity, and we're taking that deal. Can you kind of delineate deep tech versus some of these private equity deals? Christopher Marlett: To be 100% transparent. I mean Buda was a friend -- the CEO is a friend, and he was telling me the story about his company. And we were paying out and sort of pulled together, and he's telling me about it, and he's considering you in private equity. And I said ratio, I think you're a leader of a new beverage category, right? Fresh juice is in less than 5% of markets in America for a reason, you're going to be able to bring this fresh juice to every supermarket in America. I said that's a new category. And anybody that's had pasteurized juice versus fresh juice knows the difference, right? And so it's a category leader, number one, if it's not a category leader, we are not taking it public. That's number one. It will never -- it's usually a technology category. Then you marry the management expertise at the Board level and at the investor level at Buda, these guys created fresh. There's a moat. There's a moat around it, right? These guys know how to do it. You're not going to see PepsiCo go into this business anytime soon. If they're going to go into it, they're probably going to go in it because they buy someone like Buda. So the guys that pioneered fresh, which is now going to be a monster category because anything that's not fresh you can buy from Amazon now. So the reality is that we're launching a category leader with a moat around it in our mind, okay? It's not an actual note like we have with IP with all of our deep tech companies. But there's going to be companies like that, that we can launch that belong in a public venture portfolio, somebody was real funny. There was another -- I won't name the name of the company, but there's another company going public in the, let's call it, the food category that is doing $200 million in revenue. It's backed by private equity type folks, but it's losing a lot of money, right? And it's going public at $1 billion valuation. It's big, right? And so we have a small company, no one thought, geez, these small companies shouldn't go public, but it's profitable. If it's profitable when it's small, just think what happens when it's big. It's like when it gets big, it's going to be even more profitable. And so it's an extraordinary business opportunity. And again, that's what we do is we curate these extraordinary leaders, and that's what our team is doing a great job of doing. George Brandon: Yes. So these profitable companies, this question doesn't apply to it. But can you just give kind of a back of the envelope, when you do a big idea and what you've done in the past, how long it typically takes those companies after they've IPO-ed to establish themselves economically. What have we seeing? Christopher Marlett: Again, I encourage everyone to read the paper that kind of gives a back story on all the companies we've launched historically. But some of them developed very quickly. The stocks do very well quickly, depending upon if it's the -- it captures people's imagination right out of the chute. Some of them take longer. And it's just -- it's really tough to say. And a lot of the things we're doing in biotech, the valuation metrics have nothing to do with revenue. It's all around clinical development. And in some cases, it's revenue that will drive the valuation. But again, it's just -- it's the asymmetric returns that we're looking for. And I think we're old enough. You and I have been doing this for what, 40 years now. So we know when we see it. And we're -- we know what has asymmetric return potential, and we focus in on it. George Brandon: I'm not so sure I know when I see it, which is why I'm asking the question, so I can't answer. So, can you give us some clarity on the PatentVest spinout? What timing one -- best as you can tell, what's the potential over time revenue-wise? And what kind of market value do you think we can see? And how has that been now going to look to shareholders? Christopher Marlett: I'm not going to make any predictions on market value, but I think it could be -- other than to say that it could be seriously substantial. And here's why. So currently, the practice of law, there is not a lawyer you will meet in any practice of law. That isn't completely concerned about how AI is going to have an impact on their business. I can tell you that everything we do from drafting contracts to getting advice now is happening realtime with AI. And I can tell you that law firms are going to have a big, big dent in their revenue line from AI. So when you think about the disruption that's going to occur and how the practice of law is going to change, it is going to be a massive disruption. And I don't think anybody really disagrees with that. The interesting part about what we did, either we were smart or we were lucky is by believing that the ABS program in Arizona might be a great way for nonlawyers to be in the practice of law to align our interest with the clients and specifically focus on IP law because IP law is -- IP prosecution about a $25 billion a year business. that has not been a great business for the major law firms. But it's a $25 billion of your business that is a federal practice. So whether it's litigation or patent prosecution, it's a federal practice. Why is that important? It's because the -- a lot of the states and the lawyers in these other states don't want to lose business to an ABS law firm. But because it's a federal practice, you can -- anyone can practice patent law in any state. So the reality is, is when you look at what ABS represents as an opportunity, when you marry AI and the ABS platform patent law is by far the best business to be in if you're going to be in Arizona with these ABS law firms. And in fact, now you've got people like KPMG and other major consulting firms figuring out, hey, we need to start an Arizona law firm. I can tell you that -- and then now you marry AI with this and our ability to take PatentVest and put Agentic technology or large language models on top of our existing patent data, we have the ability to provide unparalleled support for those, I call them in imprimatur attorneys. So now if you're an attorney that wins in the court room, you're an attorney that really knows patent strategy, you now have the ability to do what you do even better, more efficiently, more importantly, efficiently. So you could see a patent litigation, a patent litigation that would normally cost $10 million to get to trial costs $5 million if managed properly. What does that do? It completely changes the economics around litigation. It also changes the economics of whether a firm can take something on contingency or not and align their interest with their clients. That's a game changer. We are going to be at the forefront of that, and we're going to be a leader in making that happen in the field of IP law. And that's what's so exciting. And we're having discussions with, I would call it, these imprimatur lawyers that -- where they see the ability to partner with PatentVest or join PatentVest to basically participate in the disruption of patent law. And so it's a big, big deal. George Brandon: Look, we got about 5 minutes here. And the questions are piling up. I'm not going to be able to get to all of them, but I'll try to answer them privately, if I can. I guess one of the questions here does MDB need more robust investor relations efforts to address enterprise stock given the value of eXoZymes and beat and the other positions in our portfolio. And... Christopher Marlett: Yes. I would tell you, yes is the answer, but it's not -- I think it's upon us to go tell the story more. So we've been heads down. We're not -- we don't have a very deep organization, people-wise, we're very efficient. And we've been really focused on just launching new companies and really keeping our heads down in a really difficult environment. And to some extent, I feel like you're pushing on a string when people don't want to buy Microcap stocks anyways. But I think that, yes, we need to get out and tell the story more broadly. We went to our first Microcap Conference, the LD conference -- LD Micro Conference. It was great. I went and saw people I haven't seen in 20 years. Unfortunately, the people buying Microcaps the average age was older than me. And so I think that a new generation of investors are going to start to get involved hopefully in this space. And I think that it was great. I got up and gave a presentation. We have, what, 20 one-on-one meetings, George and I did. It was great to talk to people, and I think we need to do more of that. Selectively, I do spend most of my time working with these companies to get them launched. But we do need to spend more time out talking to people. And Investor Relations, what I've found is have a great business, communicate it well and communicate it often. We're trying to do a better job of communicating it well. We're doing a better job of making it a good business. It's been a great business historically. It's been a really bad business the last few years, and communicating it often, we're working on so... George Brandon: So we've got about 3 minutes here, Chris. But a question -- I get it a lot out there on really eXoZyme, we really thought that we would have a few deals in the bag here. And where we're at right now, and I know you feel very comfortable with the management there and where they're going and the opportunities. Can you talk a little bit about when you kind of, one, why you think it's taken longer than what we had originally anticipated? What was kind of the shift there? And two, why do you think it's -- we got a bright future ahead? Christopher Marlett: I think it was a pivot that probably wasn't communicated as clearly as it could have been. And the pivot was you're out talking to people that want to make new molecules in pharma and other businesses. And they can give you a fee-for-service business where they'll pay you some amount of money to get started and you can spend a lot of time talking to them. If you look at the other Symbio companies and provided services or enzymatic people like Codexis and others, the business models were pretty challenged. And we came to the conclusion that we can make molecules that other people can't. So is it a better business model to launch new companies based upon that? Or is it a better business model to do fee-for-service and try and get license fees from other people. And we decided it's better to launch companies that have a ton of value. So we have 2 platforms that we think we can launch out of eXoZymes that have $1 billion market value potential. So in other words, every company that we launch out of MDB we believe, has $1 billion market cap potential. We have 2 more that we can launch out of eXoZymes that we believe have that, that are massively game-changing. And so there was a pivot. What does that mean? Now it's get those companies stood up and then those companies will go and do license agreements and partnering after they've developed a bit more. And I think that that's been the shift that hasn't been communicated. But I think Michael is doing a great job and the team at eXoZymes is doing a great job of positioning the company for success. I think it's going to become fairly apparent, fairly soon. George Brandon: Actually, I don't know if people are aware, but our former partner Lou Basenese did a great interview with Michael last week. I think it came out a couple of days ago. It really kind of goes through that what you just described in 30 minutes. I think they did a pretty good job explaining it. So that's an asymmetrical upside on those 2, whether it's cannabinoids or NCT. That's -- you're about ready -- we're closing in the process of just closing and announcing in Paulex. Can you talk about -- this last the question, we're out of time after this, Chris, but elevator pitch, why is that asymmetrical? What do you like about it? How much we're going to own of it? What's the game plan going forward? Christopher Marlett: It's super simple. This pathway that has been focused on by the folks at Mount Sinai and others, which basically takes breaks off of being able to produce beta cells is -- we've got a drug that we believe is the best drug for this pathway to enable beta cell production. It's quite frankly, if you can reinvigorate beta cell production and produce insulin. It's the biggest thing going. So the asymmetric upside is -- it's super straightforward. It's a $40 million post-money valuation after Phase Ib, which should be about a year, we start producing beta cells in patients. I'd be shocked if -- it's got to be a multibillion-dollar valuation. So while it is a bit risky, the upside -- you get paid with the upside. And I mean, it's significant. And we've got an unbelievable team. These are the guys that made prevention worth $2.9 billion in the sale, and we get to partner with them again. And I'm not saying that this is going to be the only drug. We might have another drug come into the pipeline, but these are the kind of guys that can execute clinically. One, they've got great pickers. They have the ability to pick something great. And number two, they have the ability to execute, get it through trials and get it to success. So we're super excited to be partnered with Francisco and Miguel. We think that they're superstars and we own a nice chunk of this company. I think it's going to be 6 million or 7 million shares. So I don't know if... George Brandon: What's the timeline on it, Chris, how long we got to wait to figure it out? Christopher Marlett: I think don't quote me exactly, but it's -- we'll be in the clinic next year, and we'll start to get clinical results pretty quickly. George Brandon: Well, with that, that's the last question. I didn't get to all of my, tried to reply specifically if you didn't hear the answer to your question, hopefully, there's a reply in your Q&A. Appreciate all the questions, very great questions. And I'm going to throw it over to you, Chris, to close it. And Tony, you can take it from there. Christopher Marlett: All right, everyone. Well, thanks again for hanging in there. It's been a great time. The team has done a great job at MDB, we're slugging it out to make this a big success. So we're excited for the future. And we want to thank you for being here and hanging in there and being part of the community. So thanks again. Tony Dammicci: And thank you, everybody, for attending today's presentation. This will conclude today's conference call.
Nicholas Wiles: Good morning, everyone, and welcome to our interim results presentation this morning. We're going to adopt our usual format, starting with me giving an overview of our performance in the first half. Rob can then cover the financials, followed by an update on the delivery of our key growth projects and then a first half business review. Rob is going to update on our progress in working with Nile, on our long-term organizational framework. And then finally, an update on our outlook and the Q&A. And with that, turning really to the first half and an overview of actually our first half. And I think despite an uncertain market background, the performance of our underlying business has remained in line with our expectations. We've continued to grow our PayPoint core estate with new business in key areas such as housing, local authorities, government departments, FMC brand campaigns and in Love2shop business. I think progress has been good. We've accelerated growth in our digital payments platform. We've taken further actions to strengthen our card processing platform and its capabilities. And in parcels, we've strengthened further our key carrier relationships, all of which is very much consistent with the long-term objectives we set out for the business earlier this year. In the first half, we have encountered 2 specific challenges, which have impacted performance. Firstly, the financial terms of our new commercial contract with InPost Yodel have had a greater impact than we'd anticipated and with the additional volumes we would expect to come through not yet materializing, and that's rather been compounded by what's now the well-publicized disruption to parcel volumes and service in our network from the InPost Yodel internal network and operational harmonization plans. It's taken some good work and collaboration between the 2 businesses but it does now feel that we're through the worst of the operational disruption and we expect our volumes to recover through the course of November, which, as you know, is really a key trading period for the business. Secondly, in OBConnect, the first half of this year has seen slower growth than we had anticipated and some consolidation after a strong performance last year. I think this is largely due to the overall opportunities we'd hope to see from the verification of pay opportunity and uptake in Europe being rather disappointing with the team, I think, doing a really good job in response by pivoting the new business pipeline and opportunities to other areas alongside what we're doing in terms of discussions already underway with several jurisdictions and corporates to replicate the success of GetVerified in New Zealand. And while the OBConnect business will not grow at the rate we expected in the current year, I think it's fair to say the foundations and capabilities of this business remains strong and our growth in the second half will still be stronger than the performance we saw in the second half of last year. So I think overall, our confidence in the opportunities that OBConnect brings to our business is undiminished. Its technology platform and capabilities remain important to our long-term digital ambitions as a business. More positively, we've made significant progress in the first half in the successful delivery of several major projects, which are key to our long-term growth. We've launched bank local services with Lloyds Banking Group and with the expectation of further banks to join this service in the coming months. We've launched Royal Mail Shop and branding across the Collect+ network following the strategic investments in Collect+ by Royal Mail. And we've accelerated the Love2shop partnership with InComm Payments. Each of these projects required detailed planning and execution, and now the focus is very much shifting from the rollout to the actions required to accelerate consumer adoption. Turning now to our summary of the financial performance of the business. Overall, as I said already, a resilient performance across the key financial metrics. And by division, net growth in each business with the exception of Love2shop, where the impact of the anticipated changes we've made to our accounting treatment have resulted in some changes to the timing of revenue recognition on the expiry of cards which has resulted in a greater weighting to profit recognition in the second half. In terms of our growth plans, we should not let the specific challenges we've experienced in the first half deflect the business from the long-term growth plans we announced earlier this year. Delivering GBP 100 million underlying EBITDA remains a key financial milestone for the business. And while we're making meaningful progress towards this target in the current year, it is going to take a little longer to achieve. It was always an ambitious target to be delivering it in this financial year but it remains a key milestone for the business. We still believe a combination of our business mix today and the delivery of our key growth projects will deliver consistent net revenue growth in the range of 5% to 8%. And in the meantime, we're developing an organizational structure for the long term to support this accelerated growth. And maximizing returns to shareholders through strong and consistent earnings and cash generation. For the current year, we're on track to deliver more than GBP 90 million to shareholders through a combination of ordinary and special dividends and share buybacks. I'll now hand over to Rob, who will take you through the numbers. Rob Harding: Thank you, Nick, and good morning, everyone. I'll start with the key financial highlights. Net revenue of GBP 84.7 million is marginally up versus the prior half 1. There's a revenue breakdown on the following slide, which shows PayPoint segment revenues are up 2.9% but this is dampened by Love2shop revenues down 9.6%. As Nick said, this is timing in nature, and we fully expect this position to unwind in the second half to give year-on-year growth for the Love2shop segment. Underlying profit before tax of GBP 25.7 million is down 4.5% that being a combination of flat revenue plus a 2.3% increase in overall costs. And I'll cover the cost deltas in a few slides. Reported profit before tax of GBP 19.9 million is after GBP 5.8 million of deductions to underlying numbers, including GBP 2.6 million of amortization of acquired intangibles and GBP 3.2 million of exceptional items, of which GBP 2.6 million relates to legal costs in respect of claims against PayPoint and the remainder is reorganizational costs. Underlying EBITDA of GBP 37.3 million is broadly flat versus the prior half with GBP 1.2 million of lower profits being partly dampened by higher depreciation and amortization. On earnings per share, diluted underlying EPS of 26.7p is 2.6% down versus the prior half. And finally, on this slide, net debt is down 3.2% to GBP 84 million for the first half. And again, I'll cover this in more detail shortly. This slide breaks down the net revenue into a little bit more detail. As I mentioned previously, PayPoint segment revenue is up 2.9%, with e-commerce revenues of GBP 8.6 million, providing growth of 7.5%, and that's driven by transactional volumes increasing 20% to GBP 74.3 million. Payments and banking revenue grew 4.4%, and that's driven by the inclusion of GBP 1.9 million of revenue from OBConnect. And in shopping, growth in service fees of 8.4% to GBP 11.6 million was largely dampened by cards, which is a combination of both lower process volume and sites impacting revenue and ATMs revenue down, reflecting a reduced demand for cash across the economy. For Love2shop, 12 months ago, I explained the half 1 numbers included revenue brought forward from half 2 into half 1, and this was following changes to expiry dates on some of our products. For this year, we've made further changes to the expiry date of some of our products but these changes will benefit the second half year. And therefore, this revenue drop is all timing in nature. Overall, with billings growth of 4.6%, up versus the prior half 1, we expect year-on-year revenue growth for the full year. This slide is really a graphical view of the revenue growth I highlighted on the previous slide and how this revenue growth contributes to underlying profit. So from left to right on this chart, shopping revenue is up GBP 200,000, e-commerce revenues up GBP 600,000, payments and banking GBP 1.1 million and Love2shop revenues down GBP 1.8 million, which I've said is timing in nature. I'll cover costs on the following slide but these have increased GBP 1.3 million half-on-half. And therefore, on the right-hand side of this slide, these movements result in an overall profit of GBP 25.7 million. On costs, this slide breaks down the GBP 1.3 million increase that I mentioned, most notably is the inclusion of OBConnect costs of GBP 1.8 million following the majority stake we took in this business in the second half of last year. We've also seen additional depreciation and amortization of GBP 500,000 and GBP 500,000 in respect of financing costs. Offsetting these costs is a GBP 1.5 million reduction in people and overheads, which is the continuation of strong cost control discipline across the group. So these factors result in a GBP 1.3 million increase in costs of GBP 59 million. Next on cash generation. We had a GBP 24.2 million of cash generation from operating activities in the half which is down GBP 4.3 million versus the prior half of GBP 30.7 million, and that delta is primarily working capital in nature. Further down the cash flow statement, we have tax of GBP 4.6 million, CapEx of GBP 10.9 million, which has increased by GBP 1.5 million half-on-half as we continue to invest in systems' modernization, a GBP 10.4 million payment in respect of the legal settlement, a one-off payment to the pension scheme of GBP 1.5 million. And then we have the GBP 43.5 million cash in from the part disposal of Collect+, along with a GBP 13 million outflow for shares bought back in half 1 and GBP 13.9 million in respect of dividends. This gave an overall reduction to net debt of GBP 13.4 million for the period to GBP 84 million. Very briefly on balance sheet. Net assets for the group of GBP 102 million are GBP 4.7 million higher than the March year-end position. And the key drivers of the swings are obviously half 1 earnings of GBP 14.9 million, the proceeds of GBP 34.1 million net following the ID investment in Collect+. And we've actually used these proceeds to subsequently distribute a special dividend of 50p per share, and that resulted in GBP 34.5 million going out in the second half of this year. Alongside that, the 12 for 13 share consolidation reduced our share capital by circa 5.3 million shares. Other key balance sheet movements are the dividends paid of GBP 13.9 million and the share buyback of GBP 30 million. And similar to the prior half on the share buyback for accounting purposes, we've provided for the full GBP 30 million commitment in these balance sheet numbers. Lastly, before I pass back to Nick, on the left-hand side of this slide, we continue to invest in the business to drive future revenue streams and improve operational resilience and efficiency. We've increased the interim dividend by 2.1% to 19.8p, while targeting a cover of over 2x and along with the buyback targeting leverage ratio of 1.2 to 1.5x. For this financial year, the business is on course to generate over GBP 90 million of shareholder returns through a combination of the ordinary dividend, the special dividend and the GBP 30 million share buyback. On the right of this slide, we expect net debt to increase in the second half, driven by those ordinary and special dividends and the share buyback, plus up to GBP 25 million in respect of CapEx for the full year. And with the second half spend, we fully expect to stay within the target leverage ratio of 1.2 to 1.5x. I'll now pass you back to Nick. Nicholas Wiles: Rob, thank you. And now really turning to the progress in the delivery of our key growth projects in the first half. I think as a business, the standout achievement of the first half has been the launch of multiple projects, both enhance our consumer proposition and establish important partnerships that strengthen the long-term prospects for the business. Firstly, as I said, we've launched PayPoint BankLocal into our retailer network, enabling cash deposit or withdrawal with Lloyds Banking Group, the first of our high street banking partners. Secondly, we've launched Royal Mail Shops and a strategic investment into Collect+. And finally, we've taken further steps to accelerate our partnership between Love2shop and InComm Payments for the merchandising of the Love2shop gift card across multiple retail channels. Turning now in a bit more detail to each of these. On successful launch of BankLocal service in August, I think, was a major achievement for the business, involving a group-wide collaboration. Lloyds Banking Group are the first high street bank to use this service, enabling their customers through our network to deposit cash via both app and card. In terms of success to date, we've seen a rapid adoption of this service from Lloyds Banking customers with the strength of our network delivering genuine convenience for cash banking services. Consumer and press feedback has been positive. And as we've seen with other of our services, as the pattern of transactions becomes established, we see strong demand for the service outside traditional opening hours and a weekend. And in terms of what next, I think following the strong start and early adoption, our focus is now very much on further developing our cash banking services in the second half with the next phase of work focused on driving consumer awareness through a variety of channels, accelerating our SME banking solution and those plans [ succeedly ] can launch in Q2 of next year and engage further with other high street banks for our range of cash deposit solutions. Overall, we expect to make significant progress in the rollout of our cash banking services over the next 12 months. Turning now to Collect+. The investment by Royal Mail into Collect+ announced at the end of September was a really important strategic step in our partnership with Royal Mail. The partnership strengthens the positioning of Collect+ as the leading out-of-home network and will enable the future expansion of further Royal Mail services into the network. It will enable further investment in both our consumer service proposition and our retailer network support as the partnership adds to our existing carrier relationships as part of a carrier-agnostic network. The launch of Royal Mail Shop in the Collect+ network reflects our confidence in the strength of the Royal Mail brand and the opportunity to enable for consumers a broader Royal Mail services, including postage as well as collect, send and return parcels throughout a growing portion of the Collect+ network. The rollout of Royal Mail Shops is now really gathering pace with 3,000 stores already branded Royal Mail Shop, which, as I said already, enables a wider range of over-the-counter postal services, including stamps. And by the end of our financial year, this number would have increased to at least 8,000 sites. To support this, there is an extensive consumer marketing campaign already underway with more planned over peak and into 2026 as we increase consumer awareness, drive more footfall and volume into the network. And as we look into the second half, as I said already, it's important to ensure that we have at least 8,000 sites branded and live for the full Royal Mail over-the-counter service by our year-end. We need to be taking the necessary steps, again, as I said already, to increase consumer awareness and uptake of these services. and we do launch our self-service kiosk in the first quarter of next year. And I think this is a really important time to accelerate the pace of our partnership with Royal Mail and to accelerate the consumer adoption of these services through the Collect+/Royal Mail Shop network. And now turning to our continued progress with InComm. Our partnership with InComm established just over a year ago, has been a really important step in us delivering a strong new sales channel, enabling the sale of Love2shop physical gift cards through the major high street retailers. Sales through this channel have continued to grow strongly ahead of the peak sales period in the run-up to Christmas, and we benefited from a combination of growing consumer recognition of the brand and increasing availability of our cards through these additional high street retailers. We've also seen the benefit of further rolling out the Love2shop card into our PayPoint retailer network with growth through this channel from our refreshed merchandising now up by more than 50% during the course of this year. I think with the next stage of this multichannel approach being the launch of the Love2shop Digital Mastercard in the early part of next year, enabling spend via digital wallet in-store and online, the further expansion into more high street retailer gift card malls in 2026 and more gift pegs in each of these malls and also the launch of MBL brands such as Greggs into the InComm Payment mall itself. I think we can really see this partnership is now building strong momentum which is combining the merchandising expertise and distribution channels and the reach of InComm with an outstanding multi-redemption gift card product and product innovation from Love2shop. Now turning to our business review. And firstly, in shopping, we've seen continued growth in the first half in each of our product estates with the exception of the Handepay card estate and have shown growth and some solid financial performances from the underlying business areas. We've seen continued service fee growth. And while card merchanting net revenue and process value are marginally down, I don't think this fairly reflects the continued work to strengthen the operational foundation of this business. The improvements to the quality of our card proposition and the increased focus on profitability per merchant. We also saw another strong performance from our partnership with YouLend with funding advances up by over 50% in the period. In our FMCG activities, we continue to work with a growing number of consumer brands with 16 campaigns delivered in the first half, a strong pipeline of opportunities for the remainder of this year. And in our ATM business, after a challenging period, we're seeing early signs of our recovery plan delivering results as we better manage the ATM estate and use our data to optimize individual site performance. In e-commerce, overall, a positive half for Collect+ with both net revenue and parcel transactions showing growth in terms of really all the key call-outs. As I described earlier, we launched the first phase of Royal Mail Shop, branding into the network and enabled over-the-counter Royal Mail services in over 2,000 locations. And as I described earlier, we have encountered some operational challenges from the internal harmonization of InPost and Yodel which in the period has impacted both volumes and service in the second quarter. We think the action we've taken in partnership with InPost has now stabilized this and we expect volumes to recover during the key peak period. More broadly, we continue to work hard across the wider carrier portfolio to maximize volume and performance with each carrier and support consumer adoption of out-of-home as we continue to grow the Collect+ estate. In Payments and banking, the key theme in this business has been the continued growth in our digital and open banking activities. And with the growth we are now seeing, we expect to arrive at a point soon whereby digital revenue will exceed revenues from our cash payment channels. Specific highlights from the first half have been several important new business wins, particularly in housing from a strong and well-balanced overall new business pipeline, good work to strengthen further our relationships with our existing clients with a number of upselling initiatives and several important client wins for our open banking activities. Our first half digital revenue does include a latent contribution from our majority-owned OBConnect platform. And finally, in Love2shop, as Robert said already, the adoption of a more prudent accounting treatment in terms of the timing of revenue recognition from the expiry of cards which we announced, I think, at the time of the acquisition, has resulted in a timing impact to the headline performance of the business which will be unwound in the second half of the year. Operationally, the business continues to perform well. I've already described the progress in our partnership with InComm [Audio Gap] position for our peak trading period. In Park Christmas Savings, we expect to deliver a flat performance for the year after some good work through the year to support our agents and strengthen the saver proposition as we already turn our focus to the 2026 savings campaign. And in MBL, we've had an outstanding first half with a doubling of process value, which reflects the growing reach of this business and its brand partners. And with this, I'll now hand over to Rob to give you an update on our organizational framework project. Rob Harding: Thanks, Nick. In our FY '25 results, we announced a key target was establishing a framework to deliver greater automation and agility. We've now recently completed Phase 2 of this project, supported by now an independent consultant to identify how we can drive this automation agility across 3 key processes: onboarding, customer support, and billings & settlement. The outcomes from this phase are a clear articulation of the target future state for each of these 3 processes, including key outcomes for each, which you can see from this slide. For example, for customer support, we're driving customer self-service capability in response to high-volume, low-value calls. Additionally, for each process, we've set out the benefits from moving to the target future state with financial benefits such as an additional revenue or lower costs and other benefits, for example, improved customer service levels or satisfaction levels. Preliminary estimates have identified at least GBP 2 million of operational profit upside from moving to the desired future state with a potential to grow this figure further through the next phase of work. And this includes identifying technical solutions and external providers to support the shift to the target state, along with the costs associated with this transition. We expect this next phase of work to be completed in advance of our full year results announcing June '26, followed by implementation commencing early in FY '27. I'll now pass you back over to Nick to cover our outlook. Nicholas Wiles: Thanks, Rob. So turning to our outlook for the year. After a resilient first half performance and despite the impact of the 2 specific challenges that I've already described, the Board remains confident in both delivering further progress in the current year and achieving our medium-term financial goals. We're executing our key projects well, and we do expect these to have a meaningful impact on our long-term performance. In a number of areas, our focus has already shifted to coordinating plans to support the accelerated consumer adoption of these projects, and there's more to come in this area. Look, the current trading environment is not an easy one. Consumer confidence is weak and household budgets remain tight. However, as we enter our most important seasonal trading period for a number of our businesses, we are confident in the plans we've made to execute well and our early signs continue to be encouraging. We remain confident in the growth opportunities we have as a business and that we have a strong platform from which to deliver continued strong returns for shareholders. As we said already in the current year, we're on course to generate returns to shareholders of over GBP 90 million. through a combination of our ordinary dividend, special dividend and share buyback program. And today, we've announced -- declared an interim dividend of 19.8p, which is an increase of 2.1%, and which is consistent with our dividend policy. And with that, we're very happy to answer questions. Operator: [Operator Instructions] The first question comes from Michael Donnelly from Investec. Michael Donnelly: Can you hear me okay? Nicholas Wiles: Yes. Michael Donnelly: A couple for me, please. First of all, can you tell us a little bit more about what Nile are likely to be doing in the next phase. So that's what the expected costs. You've disclosed the costs in the first half, which is really useful. But the cost of benefits and the cost savings that are likely to come through from their work in '27, '28? And then secondly, thanks for the update on RM and IDS. Is it possible to talk a bit more granularly about the trajectory of RM volumes since the IDS investment? Or should we be modeling -- maybe forget second half this year and model a ramp-up more into '26 rather than seeing the benefits -- the volume benefits of the investment come through in the second half? Nicholas Wiles: Yes. Thanks, Michael. Rob, why don't you tackle Nile first, that would be helpful. Rob Harding: Yes. No, as I said, where we are today for each of those 3 key processes that I mentioned on the call, we've got a clear view of what the desired end state looks like and the benefits, and we've talked about 2 million plus worth of opportunities in terms of upside there. The next phase is really about going through the kind of selection process, external suppliers, vendors, et cetera, that will support that shift to that desired future state and the costs associated with that transition. And as a part of that, obviously, we'll be making sure that the business case stacks up, so we make sure that the size of the prize is obviously exceeding the investment required. So really, Michael, the next phase of this is all about identifying external providers technology to help us to move that desired future state and making sure the business case stacks up. And that will take us probably to the end of this financial year, and therefore, we should be getting ready to execute and implement in early of next year. But we're still going through that kind of selection of suppliers and business case development at this stage. Nicholas Wiles: And then just on the second of your questions, Mike. I mean I think the starting point for the Royal Mail investment, which I think we were clear about when we made the announcement on the 30th of September was that a combination of the special dividend, share consolidation and the ramp-up of volume would result actually in the transaction as a whole being earnings enhancing. But I think specific to your point around the ramp-up of volume, I think as we said already, we're growing the network and the rebranding of the network as quickly as we can. We're working really hard with Royal Mail to move as much volume into the network as quickly as possible. We're seeing that ramp-up take shape, particularly since the autumn. And I think the peak period is an important time to see that move further. But these things do take time. And I think we'll see a much more meaningful contribution from the Royal Mail volume when we get into the next financial year. So I think your core sort of premise that we will see a more meaningful impact from Royal Mail volume in the Collect+/Royal Mail Shop network next year. But I mean, the ramp-up is clearly meaningful, not least given the size of Royal Mail in terms of a carrier in the U.K. parcels market. Operator: The next question comes from Joe Brent from Panmure Liberum. Joe Brent: Three questions, if I may. Firstly, there's obviously lots to talk about, but I don't think you mentioned Lloyds Cardnet. Could you give us an update there? Secondly, in e-commerce, could you remind us where we are with the Chinese e-tailers? And thirdly, just following up on Michael's point on automation. It feels like the GBP 2 million will start to impact in FY '27, is that right? And could you maybe give us some indication of the scale of future savings there? Nicholas Wiles: Rob, do you want to start with the automation point, that would be great. Rob Harding: Yes. I think we said that we've got line of sight to at least GBP 2 million here. And I think the question becomes how quickly can we execute and what's the cost to execute. And I think really looking at the full year to give that clear view, I mean, I am hoping to accelerate as much of that benefit as possible in FY '27, [indiscernible] et cetera, we can't pinpoint with accuracy. So I think probably give us until the full year results to get real clarity in terms of if we're going to drop some benefits in, let's be really clear once we've gone through that selection process with external providers, the vendor solutions and gone through that business case development. But I say I'm anxious to accelerate, get any quick wins as possible into FY '27 and drive costs down. Joe Brent: Would the cost of that be treated as non-underlying or be taken above the line? Rob Harding: Yes. We've taken those to exceptionals. So within the kind of restructuring that I mentioned in the exceptionals for the first half, we had about GBP 500,000, GBP 600,000. So that's where we'll be treating the costs going forward. Nicholas Wiles: Cards business, I think, look, we've seen a small fall in the total size of the estate. And I don't think there's a particular reason for that. I think, look, it remains a competitive market. I think our card proposition, and I include Lloyd's Cardnet alongside the EVO proposition as part of that, I think it's stronger than it's ever been. And I think it's really competitive now in the marketplace. I think that our emphasis is increasingly switching from the number of retailers and the number of underlying merchants that we have to actually the quality of that business and importantly actually sort of the revenue that it generates. The acquiring business in the first half was down year-on-year by about 8% in terms of processed volume. And I think that reflects a combination of things, including, I think, a tough retail environment, particularly for our convenience sector. And I think that's probably been our weakest sector actually across our card book, and that's probably where it's been most competitive. I think as we look into the second half, I think we're expecting certainly our sales performance in the second half to improve. I think we've got a really strong proposition, as I said on the street. Our telesales team are performing very well. Our field team are certainly performing well. And I think we've had a number of new additions, new processes there, which I think will really deliver in the second half. So I feel quietly confident that we will continue to make progress in what clearly as we know very well, is a very competitive market. But ultimately, we need higher levels of consumer spend, and we haven't seen that in our estate in the first half. On the Chinese, look, it's a great question. And I think that the Chinese have been relatively slow to create out-of-home choice at the customer checkout for customers using the Chinese marketplaces. They have adopted the out-of-home for returns but we haven't seen them sort of adopt out-of-home at the pace that, for example, we've seen Vinted adopt out-of-home for their principal fulfillment for their own marketplace. We continue to work with the Chinese. And by that, I mean, sort of Shein, TikTok, Temu and ultimately, it's all down to price. And their conversations we're having directly with our carrier partners because we all want to work to move volume from to-door into the out-of-home network channels, whether that's working with InPost to get the choice of locker and PUDO or that's working with Royal Mail to offer the choice of actually the Royal Mail Shops. So I think there's more work to do there. There's clearly a major opportunity because cross-border volume is going to be increasingly important to us, but we haven't yet seen that adoption in the consumer checkout in the way that we need. And that's going to be an opportunity for us into the next year. Operator: Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Nick Wiles for any closing remarks. Nicholas Wiles: Look, thank you. Thank you very much, everybody, for joining us this morning. As I say, it's been a robust performance in the first half, some major opportunities to unfold during the second half, and we look forward to updating you later in the year. So thank you. Have a good day.
Operator: Good day and welcome to Youdao Third Quarter 2025 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Jeffrey Wang, Investor Relations Director of Youdao. Please go ahead. Jeffrey Wang: Thank you, operator. Please note the discussion today will contain forward-looking statements to the future performance of the company, which are intended to qualify for the safe harbor from liability as established by the U.S. Private Securities Litigation Reform Act. Such statements are not guarantees of the future performance and are subject to certain risks and uncertainties, assumptions and other factors, some of these risks are beyond the company's control and could cause actual results to differ materially from those mentioned in today's press release and this discussion. A general discussion of the risk factors that could affect Youdao's business and financial results is included in certain company filings with the U.S. Securities and Exchange Commission. The company does not undertake any obligation to update these forward-looking information, except as required by law. During today's call, management will also discuss certain non-GAAP financial measures for comparison purpose only. For the definitions of non-GAAP financial measures and reconciliations of GAAP to non-GAAP financial results, please see the 2025 third quarter financial results release issued earlier today. As a reminder, this conference is being recorded. A webcast replay of this conference call will also be available on Youdao's corporate website at ir.youdao.com. Joining us today on the call from Youdao's senior management are Dr. Feng Zhou, our Chief Executive Officer; Mr. Lei Jin, our President; Mr. Peng Su, our Senior VP; and Mr. Wayne Li, our VP of Finance. I will now turn the call over to Dr. Zhou to review some of our recent highlights and strategic direction. Feng Zhou: Thank you, Jeffrey. Thank you all for participating in today's call. Before we begin, I would like to remind everyone that all numbers are based on renminbi, unless otherwise stated. In the third quarter, our strategically prioritized businesses Youdao Lingshi and online marketing services delivered a strong momentum, supporting our long-term growth trajectory. Net revenues reached RMB 1.6 billion, up 3.6% year-over-year. Operating profit was RMB 28.3 million, a decline of 73.7% year-over-year, primarily due to 2 factors. First, following the significant operating profit improvement in the first half of the year, we increased investments in Youdao Lingshi our online marketing services in Q3 to accelerate medium to long-term expansion. Second, we faced a high comparison base from the same period last year due to a one-off impact from the STEAM courses. Our restructuring of the Learning Services segment is now complete. For the first 9 months of the year, Operating profit reached RMB 161.1 million, representing a substantial 149.2% year-over-year increase and highlighting the meaningful progress we have made in enhancing our profitability. Notably, we have now achieved operating profit for 5 consecutive quarters, first in our history. From a cash flow perspective, operating cash outflow for the quarter was RMB 58.6 million, an improvement of 31.4% year-over-year. Next, I will delve into the major developments across our businesses. Revenues from the Learning Services segment were RMB 643.1 million, down 16.2% year-over-year. Reflecting our disciplined and strategic approach to customer acquisition as we focus on growing the Lingshi business. Within the Learning Services segment, net revenues from digital content services were RMB 425.9 million during the quarter. And our achievements in digital learning have gained international recognition Youdao was included in the 2026 GSV 150, a list that highlights the world's most transformational growth companies in digital learning and workforce skills, selected from more than 3,000 global companies. Turning to Youdao Lingshi, one of our key strategic businesses. We made solid progress during the quarter by diversifying its customer acquisition channels. Lingshi accelerated achieved over 40% year-over-year growth in gross billings. More recently, retention rate has exceeded 75%, up from over 70% in the fourth quarter of last year. In addition, as part of our broader commitment to cultivate innovative talent, we collaborated with the Yau Mathematical Sciences Center at Tsinghua University, [Foreign Language] providing technical support to a platform designed to identify and support mathematically gifted students. The system is currently being piloted in top-tier schools, with a national rollout planned following further refinements. In terms of our programming courses, we introduced an AI tutor for live programming classes in the third quarter, featuring a life-like avatar and supporting both text and voice interactions. The AI tutor helps answer students' questions in real time, significantly enhancing the overall learning experience. With ongoing product upgrades, gross billings for our programming courses increased by more than 30% year-over-year in Q3. Additionally, we continued our deep collaboration with the China Computer Federation, CCF and are honored to have become a golden partner. On the apps side, total sales of our AI-driven subscription services reached a new record of approximately RMB 100 million in the third quarter representing over 40% year-over-year growth. We launched our Confucius 3 translation model, which supports real-time bidirectional translation across 38 languages and offers advanced multi-model capabilities. Despite its compact parameter size, Confucius 3 translation delivers translation quality that surpasses some larger general purpose models. In August, our Confucius 3 series LLM was among the first to receive the highest level Trusted AI Education Large Language Model certification from the China Academy of Information and Communications technology. Regarding product development, we introduced a major upgrade to our flagship Youdao Dictionary app, Youdao Dictionary 11, delivering a truly AI native experience that has been met with widespread user acclaim. A key highlight is the fully redesigned AI simultaneous interpretation feature, powered by industry-leading noise reduction technology and our proprietary turn detection algorithm. It achieves top-tier voice translation accuracy with exceptionally low latency. The feature also received a one-click summarization of translated content and automatically generates mind maps, significantly improving user efficiency across both learning and work scenarios. These enhancements have been well received, driving over 200% year-over-year growth in sales of the AI simultaneous interpretation feature during the third quarter. To date, more than 20 million users have engaged with this capability. We have launched a new AI audio and video translation product, Youdao Anydub. In the third quarter, to automate multi-lingual production of content such as TV shows, marketing videos and more. It leverages our proprietary adaptive voice cloning technology to learn a speaker's local characteristics and generate natural fluent and emotionally rich dubbing. The system delivers optimal translation results by holistically considering key factors, including voice, speaker identity and even video scene transitions. To produce dubbing that is more accurate, contextually aligned and precisely suited the creators intended purpose. Turning to our online marketing services segment. Growth accelerated in the third quarter. Net revenues reached RMB 739.7 million, a new record and an increase of 51.1% year-over-year. The strong performance was primarily driven by increased demand from the NetEase Group and overseas markets, which was driven by our continued investments in AI technology. Gross margin for the segment was 25.4% in Q3, moderated roughly 10 percentage points year-over-year, but largely stable sequentially. Remaining within our long-term target range of 25% to 35%. We continue to rapidly expand our new client base during the quarter to support future growth. Advertising revenues from the gaming industry mainly contributed from NetEase grew by over 50% year-over-year. We assisted NetEase games with a growing number of programmatic advertising and influencer marketing campaigns. For example, in promoting the blockbuster title Where Winds Meet. We executed a comprehensive integrated marketing strategy that generated over 500 million video views and more than 21.4 million live streaming exposures. Looking ahead, we plan to further deepen our collaboration with the NetEase Group and other game clients to unlock additional synergies. Our overseas advertising business also delivered strong momentum with revenues growing by more than 100% year-over-year. We are pleased that our BYD WonderLife Global Influencers Co-Creation campaign received the Brands & Creators award at the YouTube Works Awards China. Looking ahead, we plan to further deepen our collaboration with Google and with global advertisers to better support Chinese companies in expanding their global presence. We continue to drive improved advertising performance by our AI Ad Placement Optimizer. It is an end-to-end AI-powered agentic solution covering demand analysis, strategy formulation, data analytics and innovative optimization. In addition, I am thrilled to share that we will launch AI Ad Placement Optimizer Version 2 by the end of this year. Please stay tuned. Moving to our Smart Devices segment. Net revenues were RMB 245.8 million during the quarter, down 22.1% year-over-year. This reflects our strategic decision to exercise greater discipline in marketing expenditures. Focusing on strengthening the segment's operational health, as a result, we saw year-over-year improvement in the segment fundamentals during the third quarter. Product-wise, we launched a new tutoring pen, Youdao Space X which offers precise scanning for long-form and multi-graphic prompts. AI-powered video explanations for academic problems and an AI-based mistake ledger. These features empower students to learn and review subjects more effectively and efficiently. Our dictionary pen and tutoring pens were also featured at the World AI conference receiving strong exposure to new audiences and coverage from multiple media outlets. Looking ahead, we will continue executing on our AI strategy. With a focus on deepening the application of and innovating with our large language model Confucius. Across both our learning and advertising businesses to consistently create value for our customers. Financially, we will maintain the suppling operations and remain confident in achieving the full year targets set at the beginning of the year, including robust year-over-year operating profit growth and reaching annual operational cash flow breakeven for the first time. With that, I will hand over to Su Peng for a deeper dive into our financial results. Thank you. Peng Su: Thank you, Dr. Zhou, and hello, everyone. Today, I will be presenting some financial highlights from the third quarter of 2025. We encourage you to read through our press release issued earlier today for further details. For third quarter total net revenue of RMB 1.6 billion or USD 228.8 million, representing a 3.6% increase from the same period of 2024. Net revenue from our learning services were RMB 643.1 million or USD 90.3 million, representing a 16.2% decrease from the same period of 2024. So the year-over-year decrease was primarily attributable to our decision to take a disciplined, strategic approach to customer acquisitions, which places a greater emphasis to a high ROI, return on investment engagements. We believe this strategy has enhanced the overall resilience and operational efficiency of our business despite the short-term revenue decline. Net revenue from our smart devices were RMB 245.8 million or USD 34.5 million, representing a 22.1% decrease from the same period of 2024. Our net revenue from our online marketing services were RMB 739.7 million, or USD 103.9 million, representing a 51.1% increase from the same period of 2024. The year-over-year increase was primarily driven by the increased demand from the NetEase Group and overseas markets, which was driven by our continued investment in AI technology. For the third quarter, our total gross profit was RMB 687.9 million or USD 96.6 million, representing a 12.9% decrease from the same period of 2024. Gross margin for learning services was 58.5% versus the quarter of 2025 compared with 62.1% for the same period of 2024. Gross margin for smart devices was 50.3% for the third quarter of 2025 compared with 42.8% for the same period of 2024. Gross margin for online marketing services was 25.4% for the third quarter 2025 compared with 36.3% for the same period of 2024. For the third quarter, we reduced our total operating expense to RMB 659.6 million or USD 92.7 million compared with RMB 682.2 million for the same period of the last year. Looking at our expenses in more detail. Sales and marketing expense declined to RMB 487.7 million, compared with RMB 519.6 million in the third quarter of 2024. Research and developing expense were RMB 127.8 million compared with RMB 119.6 million in the quarter of 2024. Our operating income margin was 1.7% in the third quarter of 2025 compared with 6.8% for the same period of last year. For the third quarter of 2025, our net income attributable to ordinary shareholders was RMB 0.1 million or USD near to 0 compared with RMB 86.3 million for the same period of last year. Non-GAAP net income attributable to the ordinary shareholders for the third quarter was RMB 9.2 million or USD 1.3 million compared with RMB 88.7 million for the same period of last year. Basic and diluted net income per ADS attributable to ordinary shareholders for the third quarter of 2025 was near 0. Non-GAAP basic net income per ADS attributable to the ordinary shareholders for the third quarter was RMB 0.08 or USD 0.01. Our net cash used in the operating activity was RMB 58.6 million or USD 8.2 million for the third quarter. Looking at our balance sheet as of September 30, 2025 our contract liabilities, which mainly consists of the deferred revenue generated from our learning services were RMB 751.1 million or USD 105.5 million compared with [RMB 961 million] as of December 31, 2024. At the end of the period, our cash, cash equivalents, current and non-current restricted cash and short-term investment totaled RMB 557.7 million or USD 78.3 million. This concludes our prepared remarks. Thank you for your attention. We will now like to open to your questions. Operator, please go ahead. Operator: [Operator Instructions] First question is from Brian Gong, Citi. Brian Gong: A very quick question for our strategies ahead. So our online marketing services are growing rapidly kind of showing a different trend versus learning services. From a strategic perspective, the online market services become more important than learning services in the future? Feng Zhou: Brian, so right now, we are experiencing higher growth for ads compared with learning services. In the long term, we actually see great opportunities on both areas. So let me explain that for you. So the strong expansion of our marketing services over the past 3 years have been mostly driven by First, our advanced ad tech and AI capabilities, then customers trained to transition from traditional ads to performance ads and finally, opportunity of overseas ads. Since the advertising revenue first exceeded RMB 200 million in the single quarter in Q4 2022. It has reached a record high of over RMB $700 million this quarter, so representing a year-over-year increase of more than 50%. So as we've discussed several times on this call, we believe our advertising business is still in the early days. The application of generative AI and agentic AI in online advertising is only just beginning. We see 2025 as the first when generative and agentic AI will be put to work on ads at scale. So we launched our Youdao Magic Box ad creative platform in Q1 and our AI Ad Placement Optimizer and add automation agents in Q2. These AI-driven improvements in delivering the ads have strengthened the customer satisfaction already, which in turn encourages advertisers to allocate larger budgets to our platform accelerating our growth from customer expansion perspective. We continue to see substantial opportunities across online games, e-commerce, overseas, online games, overseas electronics and through our deepening collaboration with partners such as Google and TikTok. So with all these reasons, we believe these will all drive strong revenue growth for the coming years, hopefully. So on the other side, we also see very good growth opportunities in our learning services business. This part of our business, as you probably know, has undergone quite significant changes over the past 2 years, largely because we actually believe there is tremendous long-term potential in to see AI-driven online services. So AI is a decade-long growth trajectory and capturing it require us to build and scale truly AI native services and application, and that's what we've been doing. So on AI-driven subscription services, so this part, we began sharing our progress since last year, and the trajectory is very promising. So total sales of AI-driven subscription services amounted to approximately RMB 50 million in the first quarter of last year, if you remember. So it took us only 6 quarters to double that figure, reaching approximately RMB 100 million this quarter. So we are actively developing new features, applications and agents to support future expansion. A lot of agents are running inside our companies to improve our business efficiency. So we see ample product optimization opportunities ahead and expect the growth to continue. In the Digital Content segment, the learning content. We have fully completed the restructuring and have sharpened our focus on the Lingshi business. In Q3, Youdao Lingshi delivered over 40% year-over-year growth in gross billings and demonstrated strong user stickiness and retention rate exceeds 75%. So adding all that up, in the near term, we expect -- actually, we expect net revenues from the entire learning services segment to return to year-over-year growth. So in summary, we remain firmly committed to driving growth across both our learning and advertising businesses. By continuing to serve our customers better and also leveraging AI technologies better. Yes. Operator: Next question is from Linda Huang, Macquarie. Linda Huang: Can you hear me? Feng Zhou: Yes. Yes. We can hear you. Linda Huang: So my question is regarding for the online advertisement, because since the second quarter this year, we noticed that the gross margin below -- I think, below 30%, maybe around like 25%. So I just want to know that, does the manager have any plan or like a time line, we can return back to the above 30%? And what will we need to do to make sure that the margin can recover? So that's for online marketing. Feng Zhou: I'll answer this briefly before Jin Lei provides more details. We always operated with a long-term view and aim to increase the value we create for advertisers. We think that's most important. So in Q3, we saw strong opportunities to grow the customer base. So we chose to engage and onboard more customers, and that is reflected in the revenue growth. You can see very, very quick revenue growth. On the flip side of that, we are -- so we basically gave up some short-term gross margin as new customers are less profitable, and sometimes even we operate at a loss for a particular important customers. So that is actually also true, I believe, for the learning side of the business, I just wanted to mention in Q3. So we invested in hiring more personnel for expanding audience through across business in Q3 also for future growth. So we believe this kind of investments are very good investments, and we have a solid and profitable unit economics. We ensure we have that. And we think investments like these are going to translate to growth and profitability in the coming quarters. Lei Jin: This is Jin Lei. Regarding the gross margin of our online marketing services business, the major parts are adopting the performance-based advertising pricing model and the gross method of revenue recognition, which necessitate balance between delivering value to our clients and sustain our own healthy long-term development. Against this backdrop, we consider gross margin within the range from 25% to 35% to be a reasonable target. Our current objective is to drive an improvement in gross margin, which we aim to achieve through several key initiatives. But we plan to broaden the application of the Magic Box creative production platform throughout the [AD] creation process. Compared to menu creation production, Magic Box reduced production cost by approximately 70%, while improving production efficiency. By leveraging our end-to-end data chain to identify and analyze high-performing creatives, we can scale the application, better serve our clients and enhance overall delivery efficiency. Second, we will continue to optimize and upgrade our data management platform, DMP and the programmatic delivery system. This includes expanding data dimensions and mining underlying data characteristics to improve audience and traffic insights. Those enhancements will enable more systematic and process the identification of targeted audiences leading to higher advertising delivery efficient effectiveness. Third, we will capitalize our robust AI capabilities to further integrate the AI-driven creative production with the advertising delivery process by closely linking those functions with the data capabilities of our DMP, we aim to establish an automatic closed-loop system that boosts overall operational efficiency of our online marketing services. Operator: Next question is from Brenda Zhao, CICC. Liping Zhao: My question is also related to the profit margin because we see the operating profit experienced a year-over-year decline in the third quarter, what is the potential for rebound to year-over-year growth in fourth quarter? Peng Su: Thank you, Brenda. This is upon. I will handle the question first. And I think at the beginning of this year, we set the 2 full year financial goals. The first is to achieve the rapid year-over-year improvement in operating profit. And secondly, to achieve the breakeven in full year operating cash flow. And if you see the performance of the Youdao in the half of this year, especially in the operating profit in this year, in the first half of 2025, I mean, it's much better than that in the last year, same time, improving from the RMB 40 million loss to the RMB 130 million gain. So I think that provides more flexibility for us to make more investments in the second quarter of the 2025. We stepped in the investment in the Youdao Lingshi in advertising the customer acquisition. We are maintaining the profitability. And also, we start to spend marketing dollars to acquire potential clients for the advertisement business. And from the third quarter as the Dr. Zhou mentioned before in our earnings call and Youdao Lingshi deliver over 40% year-over-year GMV growth and increased retention rate to the 75% -- over the 75%. And also, and we achieved about revenue of the advertisement growth over 50% in the Q3 in the 2025 and also the new clients account for over 30% of the total clients. So I think that will create a great momentum and fundamentals for our business in the Q4 and next year. And for our fourth quarter's priorities. And the same time, I just tried to explain in more details regarding the one-off impacts of our we call the learning service business and in the Dr. Zhou mentioned before. And in the last year, STEAM courses still account for the meaningful percentage of our revenue from our learning services. And at same time since summer, we shrink a lot significantly for the investment and in the -- for the STEAM Courses for the customer acquisitions. But still deliver significant revenues in the Q3. That definitely have impact of our profitability in the last year. That means the kind of the high base in that we mentioned before. So I think that is one-off impact only for this year. So our fourth quarter's priority is to secure the rapid operating profit improvement from the full year perspective online at the start of the year. In the meantime, we will continue to invest in our core business, Youdao Lingshi AI apps and as well as the online marketing services as we access the macro environment and our growth opportunities. Through this focused approach, we aim to deliver greater values to expanding user base. Our medium- to long-term focus is on executing on AI native strategy, excelling the deployment of our large language model computers in learning and advertising scenarios. Central to these efforts is enhancing our sustained profitability. We are also constantly evaluating the quality of our user services. Since its launching 3 years ago, our AI interactive services of Youdao Lingshi has integrated AI across the multi scenarios, including the users' learning assessments, personalized learning path recommendation, QA sessions, assignment granting and as well as the college application consulting. This has enhanced the learning efficiency and outcome for users, gathering best positive feedback as the highest gross margin business within our Learning Services segment and following the recent restructuring of this segments, Youdao Lingshi expect to account for the growth growing share of segment revenue. This in turn expect to continue to improve the profitability of the learning services segment in the long run. Regarding the online marketing services, as noted previously, AI contributed to enhanced the delivery and operational efficiency in area, including the ad creative production, data mining, programmatic delivery and also attribution analysis. These advancements deliver in midterm and long-term profitability improvement of the segments. I think I hope that answers your question? Liping Zhao: That's very helpful. Operator: Next question is from Bo Zhan, Huatai. Bo Zhan: My question is, given the cumulative net operating cash outflow recorded in the first 3 quarters, should we expect any change to the full year breakeven target? Yongwei Li: Thank you for the questions. This is Wayne. Our team has great importance on the performance of our operating cash flow. And we already got remarkable improvements in optimizing our operating cash flow performance in recent years. For 2025, we set a target to achieve full years cash flow breakeven, and we remain very confident to achieve this target. At the same time, I would like to emphasize that reaching the breakeven point is only a near-term milestone. Our long-term objectives definitely is to deliver even healthy performance in operating cash flow through profitability enhancement, disciplined credit management and optimize working capital practice. As you mentioned, for the first 9 months this year, cumulative net operating cash flow amounted to RMB 129 million. However, it reflects over [40%] significant improvement on a year-over-year basis. In addition, our quarter cash flow performance helped obvious seasonal features, which are driven by certain seasonal factors. For example, Q1 is typically annual bonus payment period due to the Lunar New Year. And Q3 is traditionally peak user acquisition period. During which operating cash flow typically registered net outflow due to the marketing investment. In contrast, Q2 and Q4 are retention-driven seasons and generally demonstrated stronger cash flow performance. So we expect the fourth quarter usually generates a good operating cash inflow. To provide context, as you know, we achieve an operating cash inflow of RMB 158 million in Q4 last year. As previously highlighted, our restructuring in learning services have been completed. Youdao Lingshi particularly has demand robust retention momentum in Q4. Maintaining a retention rate above 75%. Additionally, another prepaid service, our AI-driven subscription services, Q3 sales from this business has accelerated growth to over 40% year-over-year, which also positively support our cash flow position. On the other hand, the expansion of our advertising business potentially brings certain collection dynamics, which potentially slow down the cash inflow from our customers. For example, online marketing services typically provide a certain [collection] to our premium clients. Through results from the 3 quarters, we are satisfied for the performance of our cash collections and the [collection] well managed. Taking into account the distinct seasonality of our operations, the significant year-over-year cash flow improvement in the first 3 quarters and the potential strong retention performance of from Youdao Lingshi in Q4, we maintain the confidence in achieving our full year operating cash flow breakeven target. Thank you. Operator: That concludes our question-and-answer session. I would like to turn the conference back over to management for any additional or closing remarks. Jeffrey Wang: Thank you once again for joining us today. If you have any further questions, please feel free to contact us at Youdao directly or reach out to Piacente Financial Communications in China or the U.S. Have a nice day. Operator: Ladies and gentlemen thank you for joining. The conference is now over. You may disconnect your telephones.
Agata Wiktorow-Sobczuk: Good afternoon, ladies and gentlemen. Welcome to the earnings call for the third quarter of 2025 of Polsat Plus Group. Can we please move on to the next slide. We will begin with the presentation of our results delivered by Andrzej Abramczuk, President of the Management Board; Maciej Stec, Vice President for Strategy; and Katarzyna Ostap-Tomann, Chief Financial Officer and ESG Officer. [Operator Instructions] With that, let's move on to the presentation. Andrzej, the floor is yours. Andrzej Abramczuk: Good afternoon, ladies and gentlemen, and welcome on the conference regard of the results for the third quarter of 2025. Thank you for joining us today. Here is our agenda. First, I will share the key highlights of the quarter. Next, we will review operating and financial results in detail. Finally, we will summarize and move to the Q&A session. Let's begin with the key highlights for the quarter. Let's start from the telco segment. In the B2C and B2B service segment, our new multiplay offer is performing above expectations. Since its launch in June, 11% of our customer base has already migrated to this offer. Additionally, bundles with the 3 or more services are gaining strong momentum, sales have nearly tripled. Average revenue per user also showed consistent growth, up 4% year-on-year. Turning to the Media segment. This was an exceptional quarter for the sport. We broadcast the Volleyball Nations League and the World Championship, and we strengthened our portfolio with premium rights, including Formula 1, Bundesliga, UEFA Conference League and European League. This investment strengthened our position and driven audience engagement. However, the concentration of major sport events in the one quarter results in the visible increase in content cost. Looking ahead, we secured exclusive right in Poland for WTA tour tennis from 2027 until 2031, a great addition to our support offering. In the Green Energy segment, we are coming to an end to develop investments. The Drzezewo wind farm has been completed and the commercial launch is planned for early 2026. Also, in the third quarter, we carried out our major maintenance on one of biomass unit. The energy market remains challenging with low energy price. Let's take a quick look at the number. In the third quarter, revenue was PLN 3.4 billion and EBITDA amount PLN 766 million. ARPU per B2C customer exceeded PLN 80, up 4%. Our multiplay customer base surpassed 3 million and continue to grow, supported by the success of our multiplay strategy. Like I said, our reach programming and sport offer are very popular with the viewers. And in the third quarter, audience share rose to 22.7%, up 1 percentage point. Green energy production reached 237 gigawatts and was lower year-on-year due to the scheduled maintenance of the biomass unit. Overall, this quarter delivered solid operating performance, especially in B2C, B2B and media, but at the same time, we faced certain challenges. Let's now to the more detailed review of our operating results. Maciej, over to you. Maciej Stec: Thank you, Andrzej. I'm pleased to share the operating results from each of our business segments. I'll begin with the Media segment, focusing on both television and online performance. Could we move to the next slide, please? In the third quarter of 2025, our viewership figures and position in the advertising market remains strong. Polsat, our main channel, was the market leader with a 7.3% audience share, while our thematic channels collectively reached 15.5%. Altogether, TV Polsat Group achieved a total audience share of 22.7%, marking a 1 percentage point increase compared to last year. The TV advertising and sponsorship market in Poland was slightly softer in the third quarter, declining by 2.6% year-on-year. The reason behind this is that last year, there were major sporting events that took place in Europe, the Olympic Games in Paris and the UEFA Euro championships in Germany. Our advertising revenue followed a similar trend. However, in real terms, this was only PLN 8 million lower than in Q3 2024. As a result, our market share remained stable at 27.6% in Q3. Let's move to the next slide, please. Given the seasonal nature of the media business, it's important to assess our results over a longer period. Over the first 9 months of 2025, we delivered strong audience figures. Our group's total audience share rose to 22.4% year-on-year with our main channel Polsat accounting for 7.4% and our thematic channels contributing 15.1%. These achievements are in line with our long-term strategy. Turning to the advertising market for the first 3 quarters of 2025, the sectors performed as we had anticipated with growth rates in the low single digits. We outperformed the market, increasing our advertising revenue by 1.7% to PLN 981 million, which resulted in a market share of 28.2% for the 9-month period. Let's move on to the next slide. We consistently maintain a very strong position in the Polish online media market according to media panel data. In the third quarter, Polsat-Interia Group was the clear leader among Internet publishers in Poland, achieving the highest average monthly number of users, 20.5 million and a total of 2 billion page views during the quarter. What's important, Polsat-Interia Group is also a market leader in the mobile category, holding the top spot for 3 consecutive months in Q3 of 2025. These results demonstrate the strength and stability of our digital platforms, and we will continue to strengthen our position in the online media segment. Can I get the next slide, please? Our autumn programming schedule delivered strong results, combining popular entertainment formats with major sports events. Flagship shows such as Dancing with the Stars, newly acquired format of Millionaires, Your New Home, Your Face Sounds Familiar, attracted large audiences, while premium sports broadcast further strengthened our position. This quarter, we broadcast several exceptional sporting events. Notably, we earned matches of the Volleyball Nations League, including 12 games held in Poland, where our national team won the competition. We also covered the men's and women's Volleyball World Championships in the Philippines in August, September, where our men's team won the Bronze Medal. These Volleyball events are a vital part of our programming, supporting viewership and confirming our leadership in sports broadcasting. However, they also led to higher one-off content costs during the third quarter. Additionally, we have recently expanded our sports rights portfolio, acquiring rights to major events such as Formula 1, Bundesliga and the UEFA Conference and Europa Leagues. These investments contributed to higher content costs, especially when compared to last year when our cost base was lower as we no longer held the rights to the UEFA Champions League. Overall, as a result of these initiatives, our audience share rose to 22.7%, confirming the effectiveness of our programming strategy and the strength of our diversified content portfolio. However, this quarter's results were affected by increased content costs. Next slide, please. Let's now look at the B2C and B2B services segment and its performance in Q3 2025. Next slide, please. We continue to see strong performance in our multiplay offering, supported by the new offer introduced in June 2025. As Andrzej has already highlighted, customer interest in our new multiplay packages is very high, and we are successfully moving customers to this offer. At the end of the third quarter, more than 3 million customers were using our multiplay services, representing 53% of our total customer base. Over the past year, we grew the multiplay base by 41,000 customers, again, thanks to the continued effective upselling of our services. Our multiplay customers account to 11 million RGUs and increased over 1.1 million year-on-year. This growth was also driven by the new multiplay offering and strong demand for bundles consisting of 3 and more services. Importantly, churn remains low at 7.4%, which reflects the strength of our multiplay strategy and the value it brings to our customers. Let's move to the next slide, please. Our strong multiplay performance is closely linked to the overall growth of our contract services portfolio. In the third quarter, we delivered more than 13.3 million contract services, representing a 2% increase compared to the previous year. Mobile telephony continued to be a key driver of growth with 195,000 more services provided than last year. We also observed as a key driver, demand for Internet services, adding 207,000 mobile and fixed connections year-on-year. The pay TV base continues to face pressure, but this is partly offset by the growing adoption of IPTV and OTT solutions, which help us maintain a competitive position in the pay TV segment. Next slide, please. As a result of our consistent long-term execution of the multiplay strategy, we continue to see growth in ARPU per B2C customer. In the third quarter, ARPU increased by 4% year-on-year and reached PLN 80.3. This progress was driven by solid sales of mobile and Internet services as well as the consistent execution of our multiplay approach. I would like to highlight that for the first time, our average revenue per customer has exceeded PLN 80. This is a clear evidence of the effectiveness of our strategy. We are also observing a constant rise in the number of services used by each customer with an average of 2.36 RGUs per customers at the end of the third quarter. This result demonstrates our successful upselling and bundling efforts. As Andrzej mentioned earlier, sales of packages with 3 or more services have almost tripled since we introduced the new multiplay offer in June. This not only shows strong customer interest in our new offer, but also proves that there is further potential to increase the saturation of our customer base with additional services in the future. Let's move to the next slide, please. In the prepaid segment, we maintain a high stable base of 2.41 million services despite operating in a highly competitive and challenging market environment, which I underline quarter-by-quarter. ARPU in this segment increased by 3.4% year-on-year, reaching PLN 18.4. This growth was supported in part by the launch of new and attractive pay TV packages on Polsat Box Go, Polsat Lovers, Premium and Premium Sport priced at PLN 20, PLN 30 and PLN 50, respectively. Each package builds on the previous one, offering flexible access to up to 180 TV channels, including 24 premium sports channels, a wide range of exclusive sports broadcast and a rich VOD library. I'm confident that this new offering, together with our continued efforts to increase the value of prepaid customers will help us further grow prepaid ARPU even in the face of the market challenges. Next slide, please. In the B2B segment, we continue to maintain a stable customer base of around 68,000. I would like to underline that the B2B market is very demanding, and we operate in a highly competitive environment. Our main objective in this area as in all other segments is to increase customer value. ARPU per B2B customer increased by 2.1% year-on-year, reaching almost PLN 1,550 per month. This growth demonstrates our commitment to providing high-quality services tailored to the specific needs of our clients and to building strong long-term relationships with our business customers, which ensures continued resilience in this segment. Next slide, please. Let us now turn our attention to the Green Energy business. The next slide, please. In the Green Energy segment, production in the third quarter was 21% lower year-on-year, amounting to 237 gigawatt hours. This decrease was mainly due to scheduled major maintenance on one of our biomass units, which continued throughout the quarter and significantly reduced output. Such maintenance is routine, occurring every 8, 10 years with the other units expected to undergo similar work in around 5 years. Despite this temporary reduction, total green energy generation for the first 9 months of the year increased by 15% year-on-year, reaching 830 gigawatt hours. This growth was driven by the expansion of our wind energy capacity and our largest wind farm, Drzezewo has now been completed and is currently generating energy as part of its technical commissioning. It's worth mentioning that energy production in the first 9 months of 2025 was noticeably affected by weaker weather conditions. Nevertheless, wind energy continued to be the main driver of growth. Production from wind sources increased by 56% year-on-year in the third quarter and by 73% for the 9-month period, reflecting the positive impact of our new capacity. Can I have the next slide, please? EBITDA in the Green Energy segment amounted to PLN 175 million for the first 9 months of 2025, representing a 14% decrease year-on-year. In the third quarter, EBITDA stood at PLN 52 million, 37% lower than the previous year. This decline was primarily the result of scheduled major maintenance work on the biomass unit, which significantly reduced production during the quarter. And the comparison to last year is impacted also by an exceptionally strong base driven by higher contracted prices and more favorable supply terms for biomass energy. Ongoing low market energy prices also continued to affect profitability. The completion of the Drzezewo wind farm doubled our installed wind capacity to 289 megawatts. With this project, we have reached our target capacity in wind energy, combined with stable energy prices going forward, this positions us to strengthen EBITDA in the coming period. This milestone marks the final stage of our investment program in renewables. Ladies and gentlemen, before I hand over to Kacha, I would like to very briefly summarize our operating performance across segments in the past quarter. In Q3 2025, our Media segment achieved excellent viewership results with a 22.4% audience share in 9 months of 2025. We maintained a strong position in the advertising market with a 28.2% market share and ad revenue growing by 1.7%. The third quarter, the financial results of the Media segment was affected by higher one-off content costs due to new sports rights and major volleyball events. In the B2C and B2B services segment, multiplay continues to drive growth. Over 3 million customers now use multiplay services and ARPU per B2C customer exceeded PLN 80 for the first time. The commercial momentum of our multiplay offer is very good, supporting our operating results in the coming quarters. Prepaid and B2B segments remain resilient with growing ARPU supported by attractive offers and tailored solutions. In green energy, we completed the Drzezewo wind farm, reaching our target wind capacity and finalizing our renewable investment pipeline. The operating and financial results of this segment were heavily impacted this quarter by the renovation of the biomass unit, which is a one-off event. I expect that going forward, EBITDA will improve on the back of higher wind capacity, providing that energy price remain at least stable. Still, I would like to signal that reaching our strategic EBITDA goal in 2026 is going to be challenging, and I would rather anticipate a result in approximate PLN 400 million next year. That said, please remember that our renewable energy projects are long-term, 30 years investment, and this is how they should be analyzed. Kacha, please, come on, the floor is yours. Katarzyna Ostap-Tomann: Thank you. Good afternoon, everyone. Can I have the next slide, please? Before moving to a detailed discussion of financial results, I want to emphasize what Andrzej and Maciej have already mentioned. In the third quarter, we faced several one-off events. In the Media segment, we had higher costs from the new sports rights and major volleyball events. In the Green Energy segment, we carried out a major overhaul of one of our biomass units. These factors had a clear impact on our Q3 results. Revenue declined by 4.1% to PLN 3.4 billion. Adjusted EBITDA reached PLN 766 million, primarily impacted by higher content costs this quarter. We closed the quarter with a net profit of PLN 57 million. Free cash flow for the last 12 months adjusted for green energy investments was PLN 860 million at the end of Q3. I would like to signal that in the full year 2025, Free cash flow may be around PLN 600 million to PLN 700 million. Net debt-to-EBITDA stood at 3.54x, slightly lower than at the end of 2024. However, I expect this ratio to rise in Q4 or Q1 2026 due to the upcoming payment for the renewal of the 900 megahertz frequency reservation pending the regulator's decision. Can I have the next slide, please? Here, you can see a detailed breakdown of revenue and EBITDA by segment. Revenue was significantly impacted by lower results in the Green Energy segment, driven by several factors. First, we recorded lower energy sales due to weaker market prices, reduced production volumes caused by the biomass unit maintenance and a strong comparative base in Q3 2024 when we had exceptionally favorable biomass energy contracts. Second, there were no revenues from hydrogen bus deliveries in this quarter as these are scheduled for Q4. Revenue from buses is recognized on the same principle as in the real estate at the time of delivery to the customer. These revenues will fluctuate depending on the delivery schedule. In the B2C and B2B services segment, the main reason for the revenue decline was weaker equipment sales. This reflects a general market trend as customers replace phones less frequently, which reduces overall device sales. Turning to EBITDA. The impact of content cost in the Media segment is clear. This quarter includes cost of new sports rights, which Maciej presented in detail and significant costs related to global prestigious volleyball events, which were compared against at a very low base last year when Champions League costs were no longer present. I want to stress that a large part of these costs related to volleyball events are one-off and will not repeat in the coming quarters. EBITDA in B2C and B2B services was affected by lower margins on equipment sales and higher costs, including network and employee-related expenses influenced by last year's inflation and increases in the minimum wage. Maciej has already discussed the reason for the EBITDA decline in the Green Energy segment. Next slide, please. Our adjusted free cash flow after interest and development CapEx in the Green Energy segment was PLN 860 million over the last 12 months, which I consider a very good result. Interest costs remain a key factor that puts pressure on free cash flow. We are already seeing savings on interest costs due to the interest rate cuts, but please remember that these reductions are reflected in our results with some delay and will continue to lower our debt servicing costs in 2026. I also want to highlight telco frequency reservation payments. PLN 645 million relates to the renewal of the 2,600 megahertz band in Q4 last year and the 700 megahertz block. We are still waiting for the regulators' decision on the terms for extending the 900 megahertz reservation. After that, we do not expect further renewals for several years. Finally, development CapEx in green energy is gradually declining as we are now at the final stage of these investments. Next slide, please. On this slide, we show the breakdown of capital expenditures by business segment. In the TMT area, which includes both B2C and B2B services and the Media segment, we operate under a CapEx-lite model. The CapEx to revenue ratio stood at 8% in both the third quarter and 9 months of 2025. CapEx in this segment mainly relates to Netia's fixed network and IT. As mentioned earlier, development CapEx in the Green Energy segment is almost completed. In Q3, CapEx in this segment was PLN 113 million and PLN 420 million for the first 9 months. I still expect elevated spending in Q4 due to the settlement for the execution of the Drzezewo wind farm, after which our development investments are essentially over. Can we go to the next slide, please? My final slide, as usual, covers the group's debt. As mentioned earlier, net debt-to-EBITDA ratio, excluding project financing, was 3.54x, including all group debt together with investment loans for renewable energy projects, the ratio was 4.03x. The debt structure and maturity profile remain unchanged. In Q1 2026, we resumed scheduled principal repayments on the term loan maturing in 2028. The bonds mature in 2030. Please note the weighted average interest cost, 7.3% based on the repo and the balance sheet date. This rate is steadily declining with interest rate cuts. Recall please that at the end of 2024, we reported 8.3% and this will have a positive impact on our free cash flow going forward. That's all from me today. It was a challenging quarter financially, but I want to emphasize that much of the pressure came from one-off factors that will not repeat in the coming quarters. Thank you for your attention. And now I hand over to Andrzej. Andrzej Abramczuk: Thank you, Kacha and Maciej. Our results to the third quarter in line with our expectations and were under impact of the several one-off events. Firstly, the Media segment was higher costs related to the sports right and secondly, in the green energy, scheduled maintenance of biomass unit reduced production. On the positive side, our new multiplay offer continue to perform very well. It supports ARPU growth and will driven retail revenue in the coming period. We also had a strong start at the autumn programming schedule, combined with robust sport offering, this delivered excellent viewership has strengthened our position in the advertising market. Finally, we completed the Drzezewo wind farm, this doubled our installed wind capacity and marked the end of capital-intensive investment phase in renewable energy. This brings us to the end of the presentation, and we will now take your questions. Thank you. Agata Wiktorow-Sobczuk: Thank you very much. We have a couple of questions that you have posted in the Q&A panel. So thank you for those questions. And I will read them as they were posted. The first 2 comes from Nora from Erste. I have 2 questions, please. Could you please elaborate on the technical costs? Will these continue to rise after the third quarter of 2025 due to network rollout expenses? If so, approximately until when? Katarzyna Ostap-Tomann: As far as the technical costs are concerned, it's not only the rollout cost, rollout expense that we have there. We also have wholesale network access, which is -- which we use for our fixed line in Plus. So this is -- basically, these are the 2 components of the rising rollout cost -- the rising technical costs. As far as rollout is concerned, it will rise during 2026, definitely because we are expanding our 5G network. Agata Wiktorow-Sobczuk: And second question, what is your expectation for EBITDA in 2026? Do you expect positive year-on-year dynamics in retail? Katarzyna Ostap-Tomann: As far as EBITDA for 2026 is concerned, we are finishing at the moment our budget. So I won't be able to give you the specific details of what we expect for the consolidated EBITDA. We'll do everything that we can to have positive dynamics in the TMT segment. Agata Wiktorow-Sobczuk: The next question comes from Bojan from ODDO BHF. Could you please provide a bit more details on your additional financing you've taken during the third quarter, type of debt volume, interest rate tenure? Katarzyna Ostap-Tomann: So we're talking of the financing of Drzezewo wind farm, which was completed in August. It was a term loan with the consortium of 3 Polish financial institutions. It was PLN 874 million plus revolving loan of PLN 56 million and a small amount for recuring VAT. It's taken for 15 years at a variable rate. Agata Wiktorow-Sobczuk: Three questions from Ali from HSBC. Can you talk about the multiplay additions? How much of this is new customers versus the existing subscriber base? And can you comment on the margin dilution impact from multiplay and how you offset or think about this? Maciej Stec: Okay. When we talk about multiplay additions, in fact, it doesn't matter because it's included in our ARPU, which we report because you have dilution inside and growth also inside. So our ARPU in third quarter of 2025 increased by 4%. And first time, it was more than PLN 80. When you take a look at our new offering, it's more concentrated on total check per subscriber because in our new offering, you choose 2 services out of 4 basic services and you pay PLN 80. Then you add another service for PLN 30. So in fact, it's a very simple offering, which builds the ARPU and you can easily upgrade your offering. So first check is PLN 80. Next check is PLN 110. For 4 services, it's PLN 140. That's what we mentioned in the presentation. With new offering, we observed that we have more contracts done for 3 and more services. And in fact, it's 3 and 4 services. We observed in our offering -- in our data now that we triple such a transaction. So in fact, it's included in our ARPU, so you can develop your model according our ARPU easily. Agata Wiktorow-Sobczuk: If energy prices were to remain at current low levels, what kind of EBITDA would the division generate in '26, '27 versus previous expectation, PLN 500 million. Katarzyna Ostap-Tomann: It would be more or less PLN 400 million with the current prices. Agata Wiktorow-Sobczuk: Margins in B2B and B2C continue to be challenging, revenues decline and inflationary cost growth. Could you give us any color on how you expect that to evolve over the next couple of years? Katarzyna Ostap-Tomann: As far as the B2B and B2C margins for the foreseeable period are concerned, they are obviously challenging. But as Board of Directors, we do everything in our capacity in order to maintain the margins for the foreseeable future. Maciej Stec: And that's what I presented in the B2C and B2B segment. When you take a look at the offering, so 53% of our base has 2 or more services. It means that 47% has only 1 service, which is important. So we can -- we have space here just to grow. But the second is more important when you take a look at saturation of RGUs per our multiplay subscribers is only 2.36 in the third quarter of 2025. In basic offering, we have 4 services and additional services, we have 3 or 4 more. So in total, we have 6 to 8 services just to sell to the households. So there is very big space and very big potential just to grow, especially with this new offering, which I explained previously, it was like that first, you pay PLN 80, PLN 110, PLN 140, PLN 170, PLN 200. So you can operate for the whole family and even your friends. So this is very easy just to upgrade our offering and you can choose your services in a flexible way. Agata Wiktorow-Sobczuk: A follow-up from Nora. One more question, please. Does the reduction in recurring EBITDA in the Green Energy segment to PLN 400 million in 2026 also apply to subsequent years? Katarzyna Ostap-Tomann: Look, it depends on the cost of energy. Actually, I'm sorry to say that I'm not a fortune teller to tell what the prices of energy will be in the subsequent years. The only thing I can tell you if the prices will maintain the level from today, I estimate future EBITDA is PLN 400 million. This is pure mathematics. Maciej Stec: Yes. And this is for 2026 because we have outlook for 2026 because now we are contracting 2026 now. 2027 will be contracted on the base of next year energy pricing, and this is important how it operates. So you need to understand there is a delay with our revenues in this segment. Agata Wiktorow-Sobczuk: And a question from [indiscernible]. Should we expect adjusted EBITDA to decline in the fourth quarter of 2025? What level of free cash flow should we expect in 2026? Katarzyna Ostap-Tomann: As far as EBITDA is concerned for the whole 2025, the comparable EBITDA will be a bit lower than 2024. So that's more or less my estimation. As far as the free cash flow is concerned, it really depends on the working capital and mainly this depends on the cost of capital. So for 2026 at the moment, I won't be able to give you an estimate. Agata Wiktorow-Sobczuk: And a follow-up from Bojan. Could you please give us a bit more clarity on workforce costs till the year-end and also implications for 2026? Katarzyna Ostap-Tomann: In 2025, we have suffered an increase in workforce costs. This was partly to -- mainly this was due to the factors that we do not control. The increase on the minimum wage, that's the first thing. The other thing is still the press of inflation or impact of inflation on the workforce cost. So basically, what we expect in 2026 is lowering -- I mean, not lowering workforce cost, but lowering the increase. So the impact will not be so high in 2026 because we see both inflation and the press on the wages a bit lessening right now in the fourth quarter. Agata Wiktorow-Sobczuk: That was the last question that we have. So thank you from my side for joining, and I will pass over to Andrzej. Andrzej Abramczuk: Thank you, Agata. Thank you, Kacha and Maciej. Ladies and gentlemen, thank you very much for the participation in our quarterly conference. And let's see when we presented our yearly results. Thank you. Katarzyna Ostap-Tomann: Thank you. Maciej Stec: Thank you very much. Bye.
Operator: Good afternoon, ladies and gentlemen. I would like to welcome everyone to the Gap Inc. Third Quarter 2025 Earnings Conference Call. [Operator Instructions] I would now like to introduce your host, Whitney Notaro, Head of Investor Relations. Whitney Notaro: Good afternoon, everyone. Welcome to Gap Inc.'s Third Quarter Fiscal 2025 Earnings Conference Call. Before we begin, I'd like to remind you that the information made available on this conference call contains forward-looking statements that are subject to risks that could cause our actual results to be materially different. For information on factors that could cause our actual results to differ materially from any forward-looking statements, please refer to the cautionary statements contained in our latest earnings release, the risk factors described in the company's annual report on Form 10-K filed with the Securities and Exchange Commission on March 18, 2025, quarterly reports on Form 10-Q filed with the Securities and Exchange Commission on May 30, 2025, and August 29, 2025, and other filings with the Securities and Exchange Commission, all of which are available on gapinc.com. These forward-looking statements are based on information as of today, November 20, 2025, and we assume no obligation to publicly update or revise our forward-looking statements. Our latest earnings release and the accompanying materials available on gapinc.com also include descriptions and reconciliations of financial measures not consistent with generally accepted accounting principles. All market share data referenced today will be from Circana's U.S. Apparel consumer service for the 12 months ending October 2025, unless otherwise stated. Joining me on the call today are Chief Executive Officer, Richard Dickson; and Chief Financial Officer, Katrina O'Connell. With that, I'll turn the call over to Richard. Richard Dickson: Thanks, Whitney, and good afternoon, everyone. We are very pleased to report third quarter results for Gap Inc. that exceeded our expectations across multiple measures, including net sales, gross margin and operating margin. We've done this by executing our strategic priorities with precision and consistency. The reinvigoration of our iconic brands continues to gain strength. Our playbook rooted in purpose, powered by creativity and executed with excellence is working. And it's bringing consistency to how we operate and clarity to how we win. The momentum in the business is clear from product design to storytelling, from store execution to digital engagement. The result is a company that's becoming more agile and performing with increasing confidence. On today's call, as usual, I'll provide an update on our third quarter performance and progress in the context of our 4 strategic priorities. Then Katrina will walk you through our detailed financial results and our financial outlook, after which we will open the call for questions. Let's start with financial and operational rigor. Gap Inc. comparable sales were up 5% versus last year, the highest quarterly comp in over 4 years. We were pleased to see our 3 largest brands, Old Navy, Gap and Banana Republic, posting strong positive comps in the third quarter, demonstrating the resilience of our portfolio despite a challenging quarter for Athleta. We delivered operating margin of 8.5%, which benefited from growth in AUR as customers responded well to our brand offerings. We continue to strengthen our balance sheet, ending the quarter with strong cash balances of approximately $2.5 billion. Turning to our next strategic priority, driving relevance and revenue by executing on our brand reinvigoration playbook. This playbook when applied with relentless repetition creates a powerful flywheel, which has resulted in 7 consecutive quarters of comp growth for our portfolio. Our largest brand, Old Navy, had an incredibly strong quarter, reflecting the brand's strength, consistency and continued momentum. Comparable sales were up 6% with the brand consistently gaining market share over the last 2 years. Customers responded to the compelling value proposition, resulting in healthy growth in average unit retail and notably across all income cohorts, which is encouraging despite widely reported macroeconomic pressure on the low-income consumer. Old Navy's consistent performance is being delivered by trend-right products, our strategic pursuit of category leadership and compelling storytelling. The quarter began with a robust back-to-school season, reinforcing its leadership position in kids and baby in the U.S. denim posted its highest third quarter volume in years with growth across the family. Women's and girls' showed particular strength driven by trend-right styles like barrel, wide leg and baggie fits. Active delivered impressive double-digit growth in the quarter with strength across the family. This demonstrates the strong customer response to the brand's distinctive value proposition in the active market and innovation, including new franchises like Bounce fleece. Today, Old Navy is the #5 active apparel brand in the U.S. and the #4 brand in the women's active space. As we begin to drive more growth through strategic partnerships that amplify our brand relevance, our latest Disney collaboration kicked off the holiday season with our Jingle Jammies collection, which is exceeding our expectations, driving excitement across the family and fueling strong performance in the broader sleep category. Another great example is our first designer collaboration with American Design Legend, Anna Sui. The collection brought high-fashion design to a broader audience, staying true to Old Navy's democratic and accessible brand promise. The campaign featured rising Gen Z artist, PinkPantheress and resonated across platforms. In September, we announced plans for a strategic expansion into the beauty category with a phased launch starting with Old Navy. As one of the fastest-growing, most resilient retail categories in the U.S. and customer insights that reinforce strong interest in the category, we see a clear and meaningful opportunity to grow in beauty. We recently expanded Old Navy's Beauty collection in 150 stores with select stores offering dedicated shop-in-shops and Beauty Associates. We intend to use this pilot to inform a thoughtful scaling strategy that will take us from seeding in 2026 to accelerating growth in the years that follow. Old Navy's third quarter performance reflects the strength of the team's work, which is clearly resonating. This brand continues to delight consumers and consistently deliver positive comps while reinforcing Old Navy's position as a brand that defines value, style and accessibility in American fashion. This gives us confidence as we move into Q4 and beyond. Now let's turn to Gap. Gap delivered another standout quarter, reinforcing the reliability of its execution and the compounded strength of our namesake brand. Comparable sales were up 7% on top of 3% comp last year, marking the eighth consecutive quarter of positive comps with growth in average unit retail, consideration, organic impressions and new customers, a clear signal that Gap's momentum is real, repeatable and resonating. The quarter was fueled by broad-based strength in denim, the centerpiece of our viral campaign, Better in Denim, featuring global group, Katseye. This campaign demonstrated the power of the playbook in action, featuring trend-right product, amplified by culturally relevant storytelling. With more than 8 billion impressions and 500 million views, Better in Denim culminated in a global cultural takeover and has become one of the brand's most successful campaigns to date, generating significant traffic and double-digit growth in denim. The results speak for themselves. Gap continues to accelerate, attracting a younger, highly engaged consumer, particularly Gen Z, who is discovering us while reinforcing loyalty with our core consumer. As Gap brand equity and relevance continues to build, the iconic Gap Arch logo hoodie is a great example of the brand reclaiming its place in the cultural conversation. During the quarter, we marked the 30th anniversary of the Gap hoodie with our first-ever Hoodie Day. It was a moment that energized our teams, drove connection with consumers and contributed to the notable strength in Fleece during the quarter. Our recent collaboration with Sandy Liang was another highlight, delivering strong results and continuing to position Gap as a platform for creative partnerships that drive relevance and new customer acquisition. For holiday, the brand is leaning into CashSoft, where you'll see continued innovation with extensions into new silhouettes, on-trend sets and vibrant colorways. Earlier this month, we launched our highly anticipated Give Your Gift Holiday campaign, a continuation of our effort to bridge the gap across generations through music, creativity and culture, featuring emerging artist, Sienna Spiro. Gap's execution of the playbook has been fantastic, and it's been exciting to see the brand building on their success quarter after quarter while continuing to drive distinction and relevance. It's a brand that knows who it is, where it's going and how to win, and we're looking forward to carrying that momentum into the holiday season. At Banana Republic, we continue to make steady progress. The work to strengthen its positioning, leaning into its heritage is paying off. Comparable sales were up 4% in the quarter, reflecting meaningful traction as the brand's reinvigoration takes hold. Growth was driven by continued progress in the harmonization between men's and women's. Men's elevated fashion designs featuring distinctive textures and fabrications continue to perform well. And we've seen notable improvement in women's as fit and product refinement are resonating, particularly in dresses and wovens. Building on the success of the brand's prior campaigns, the response to Banana Republic's fall campaign with David Corenswet was strong, breaking brand engagement records and fueling growth while expanding cultural reach and resonance. For the holiday season, Banana Republic is leaning into its distinctive position as the modern explorer brand. Our new campaign shot in the stunning landscape of Ireland, captures this essence well with our beautiful product featured in our travel-oriented storytelling brought to life through dynamic destination-rich content. This approach is driving stronger brand affinity and proving to be highly impactful with our customers. Overall, Banana Republic's third quarter results reflect meaningful progress and continued momentum. I'm optimistic the brand is well positioned as we head into the holiday season. Shifting to Athleta. Maggie Gauger, Brand President, has begun to make an impact in her first 90 days. She's taking quick and thoughtful action to begin to reorient the brand. This includes reorganizing the talent structure to align with her vision. The team is doing the right work, acting with speed and urgency to drive progress, but this reset will take time. Our focus is on positioning Athleta for long-term success and returning it to its rightful place as a premium aspirational brand. The brand is at the beginning of its reinvigoration journey. We aren't chasing quick fixes. We are taking a deliberate approach to position the brand for the long term. We're confident that the consistent application of our brand reinvigoration playbook anchored in purpose and heritage will guide Athleta forward. This is about returning to what made the brand great to begin with while reestablishing our clear and distinctive position in the active market. We're encouraged by the steps Maggie and the team have already taken, and we look forward to the continued impact of their leadership as Athleta's reinvigoration takes shape. As we head into the holiday season, our supply chain continues to power strategic advantages. The scale of our global network across sourcing, logistics and fulfillment gives us the flexibility and resilience to operate with confidence. Our long-standing vendor partnerships and diversified sourcing footprint are enabling us to move with speed and deliver newness at the pace of demand. We've introduced new automation and AI capabilities across our omni fulfillment network from robotic unloaders to advanced storage and retrieval systems, which have increased productivity by nearly 30% compared to just a few years ago. This enables us to meet peak demand with greater speed, agility and precision. With a fleet of about 2,500 stores globally and the largest specialty apparel e-commerce business in the U.S., we're positioned to serve our customers wherever and however they choose to shop this holiday season. Across Gap Inc., our teams are inspired and energized by the work we're doing, and you can feel it. The work we're doing together to drive the business continues to ignite real energy inside the company, creating a culture that's united, motivated and focused on execution. This is the culture that is carrying us into the holiday season, where our collective focus is clear: win with the consumer, deliver with excellence and keep building on the progress we've made together. In the fourth quarter, we remain focused on executing with excellence. Our Q3 and quarter-to-date performance positions us well for the holiday selling season and gives us the confidence to update our full year outlook, increasing net sales growth to the high end of our prior range and raising our operating margin. We look forward to finishing the year strong and creating a clear runway to the next phase of our transformation as we move into 2026, building momentum. I'll now turn the call to Katrina for a closer look at our financials. Katrina O'Connell: Thank you, Richard, and thanks, everyone, for joining us this afternoon. We delivered exceptional third quarter results, surpassing our expectations across multiple key metrics. Our strategy is working, growing brand relevance combined with operational and financial discipline drove our highest quarterly comparable sales performance in over 4 years, up 5%. We saw strong performance across the back-to-school and early holiday periods, underscoring the increasing resonance of our brands with consumers. With the playbook now in its second year, we're beginning to see a flywheel of growth take hold at Old Navy and Gap, with Banana Republic gaining traction. We exceeded our gross margin expectations with strong flow-through to our operating margin in the quarter, driven by rigor in the fundamentals. Average unit retail or AUR grew again this quarter, reflecting our compelling product offering and the disciplined execution across our teams. Our brand momentum, combined with our strategic supply chain actions, enabled a significant portion of the tariff impact on our margins to be mitigated. With the strength of our third quarter results and our quarter-to-date performance in mind, we are raising our full year 2025 gross margin and operating margin outlook with full year 2025 net sales growth now expected to be at the high end of our prior guidance range. I'll take you through the details of our outlook shortly. We are entering the final stages of fixing the fundamentals. Consistent progress on our strategic priorities has strengthened our position as we move into 2026, where we will focus on building momentum and creating new growth opportunities. Now turning to third quarter results. Net sales of $3.9 billion were up 3% year-over-year, exceeding our expectations with comparable sales up 5%. By brand, starting with Old Navy, net sales were $2.3 billion, up 5% versus last year, with comparable sales up 6%. It's exciting to see the brand winning in strategic categories like denim, active and kids and baby, supported by strong execution of culturally relevant marketing and partnerships. Turning to Gap brand. Net sales of $951 million were up 6% versus last year and comparable sales were up 7%. Relentless consistent execution of the reinvigoration playbook is fueling sustained momentum for the brand, clearly reflected in the Better in Denim campaign. Banana Republic net sales of $464 million were down 1% year-over-year with comparable sales up 4%. Our foundational work on the brand from elevated product to culturally relevant storytelling is resonating with consumers and drove the second consecutive quarter of solid performance. Athleta net sales of $257 million, decreased 11% versus last year and comparable sales were down 11%. We're focused on applying the playbook with rigor, beginning with the fundamentals as we work to reset the brand for the long term. And while we're eager for results, we are executing a phased plan that will take time. Let's continue to the balance of the P&L. Gross margin of 42.4% declined 30 basis points from last year, but exceeded our expectations. As anticipated, tariffs pressured overall margin levels. However, lower discounting resulted in increased AUR growth driven by the consumers' response to our relevant product and storytelling. Compared to last year, merchandise margins were down 70 basis points due to the estimated 190 basis point impact of tariffs. This implies roughly 120 basis points of underlying margin expansion. ROD leveraged 40 basis points in the quarter. SG&A increased to $1.3 billion, primarily due to the quarterly timing of incentive compensation and continued strategic investments. SG&A as a percentage of net sales was 33.9%, de-leveraging 50 basis points versus last year. Third quarter operating margin of 8.5% was down 80 basis points compared to last year, which includes an estimated 190 basis points of tariff impact. This implies roughly 110 basis points of underlying margin expansion. Earnings per share in the quarter were $0.62, a decrease of 14% versus last year's earnings per share of $0.72, primarily due to the impact of tariffs. Now turning to the balance sheet and cash flow. End of quarter inventory levels were up 5% year-over-year, primarily attributable to higher costs due to tariffs. Our disciplined inventory management resulted in slightly negative unit inventories, and we believe we ended the quarter with the right inventory composition. We continue to be rigorous in our approach to inventory for the balance of the year. As we shared on our second quarter call, we've tightened the way we purchase unit inventory to ensure maximum flexibility for various demand scenarios and to enable us to be more responsive to consumer demand. We expect to operate in line with our inventory principle of unit purchases positioned below sales. The last 2 years have been about fixing the fundamentals, which includes strengthening the balance sheet. We ended Q3 with cash, cash equivalents and short-term investments of $2.5 billion, an increase of 13% from last year. Net cash from operating activities was $607 million year-to-date, and our free cash flow of $280 million year-to-date demonstrates the rigor we have put into managing the business. Capital expenditures were $327 million year-to-date. With regard to returning cash to shareholders, in the third quarter, we paid $62 million to shareholders in the form of dividends, and the Board recently approved a fourth quarter dividend of $0.165 per share. Year-to-date, we have repurchased 7 million shares for approximately $152 million, achieving our goal of offsetting dilution. And while we've achieved our goal, as always, we remain opportunistic. Now turning to our outlook for fiscal 2025. I am pleased with the strength of our Q3 results and solid quarter-to-date performance, which are giving us the confidence to update our fiscal 2025 outlook. We've been operating against a dynamic backdrop for the last few years, and we're expecting the same for the fourth quarter. Our outlook assumes a relatively consistent macroeconomic environment, but acknowledges the potential for increasing uncertainties related to consumer behavior and global economic and geopolitical conditions. As a result, we continue to take a balanced view with our guidance and remain focused on controlling the controllables. Starting with full year 2025 net sales, we are increasing our outlook to the high end of our prior guidance range and now expect net sales growth of 1.7% to 2% year-over-year. Our outlook assumes ongoing strength at Old Navy, Gap and Banana Republic and a longer recovery at Athleta. Moving to gross margin. With our strong Q3 performance, we are raising our full year gross margin outlook. We now expect deleverage of about 50 basis points year-over-year, driven by an unchanged estimated annual net tariff impact of approximately 100 to 110 basis points. Excluding the impact of tariffs, this would imply underlying gross margin expansion of approximately 50 to 60 basis points versus last year. Turning to SG&A. We continue to expect SG&A to leverage slightly for the full year. As discussed on last quarter's call, we are driving continuous improvement in the cost structure of the company this year as we rigorously drive $150 million in cost savings in our core operations through efficiency and effectiveness. We remain committed to reinvesting a portion of the $150 million into future growth projects, including beauty and accessories as we pursue the long-term success of the company. A portion of these savings will also offset continued inflation. Now I'll turn to fiscal 2025 operating margin. We now expect an operating margin of about 7.2% for the full year, an increase from our prior guidance range of 6.7% to 7%. This continues to include the estimated net tariff impact of approximately 100 to 110 basis points. Excluding the impact of tariffs, this would imply meaningful underlying operating margin expansion of 80 to 90 basis points versus last year. Our income tax rate outlook for the year has increased to approximately 28% and primarily reflects the impact of changes in the amount and mix of our geographic earnings. This increase of 1 point versus our prior outlook of 27% represents an approximate $0.03 headwind to EPS. Looking to 2026, as we shared on our second quarter call, we do not expect the annualization of tariffs in 2026 to cause further operating income declines. And we now expect the majority of the mitigation to come from adjustments to our sourcing, manufacturing and assortments with the balance driven by targeted pricing. We continue to be mindful of price elasticity and remain focused on maintaining the overall value proposition for our customers. And while pricing is a lever to manage AUR, it's one of many we've been using to manage margin over time. Other levers include assortment mix, full price sell-through, promotions and inventory management. Our third quarter AUR performance and the momentum of our brands gives me confidence that our AUR growth plans are achievable. There will be a timing dynamic to the tariff impact on gross margin in 2026. We estimate a Q1 net tariff impact similar to Q4, followed by meaningful benefits from our mitigation efforts in Q2. The back half of 2026 should turn to a tailwind as our actions build, and we lap most of this year's tariff impact. In closing, our Q3 results reflect strong execution of our reinvigoration playbook, driving consistency and growth across our largest brands. Continued cost discipline is enabling reinvestment in strategic growth opportunities, while our scale and supply chain strength support ongoing tariff mitigation. When we perform with excellence, it builds confidence. Confidence fuels execution. Execution drives growth. This flywheel is the engine of our momentum. As we look to deliver this holiday season, we remain focused on operational excellence and advancing our ambition to become a high-performing company that delivers sustainable, profitable growth and long-term value for our shareholders. I'd like to thank the team for their commitment to excellence and delivering results in support of our transformation journey. With that, we'll open up the line for questions. Operator? Operator: [Operator Instructions] And our first question comes from the line of Alex Straton with Morgan Stanley. Alexandra Straton: Great. Congrats on a nice quarter. Maybe for Richard or Katrina, can you just dig in a little bit more on what drove such a strong comp acceleration at the Gap banner? And also how you think about sustainable comp level for that business over time? And then maybe for Katrina, just what surprised the upside versus your initial expectations on gross margin? Curious if tariffs played a role and how you think about steady state on that line item from here? Richard Dickson: Alex, thank you. First off, I think it's clear our strategy is working, and it is showing up in the momentum that we're seeing in our results. All 3 of our largest brands exceeding expectations, Navy up 6%, Banana Republic up 4% and Gap delivered another standout quarter with a strong comp of 7% and that's on top of 3% last year, and it represents the eighth consecutive quarter of positive comps for us. This consistency is setting new records for the brand, and it's reinforcing our confidence in its long-term growth trajectory, driven by compelling product assortments, partnerships and marketing have really resulted in growth across all income cohorts. We have seen more high-income consumers choosing Gap. And we really do believe that with the strong competitive position that we've taken between premium and value and the fact that we're bridging the generation gap, it's a really exciting time to see Gap continuing to accelerate. We have been attracting a younger, highly engaged consumer, particularly with Gen Z as they discover the brand. And it's reinforcing loyalty with our core consumer. So the performance in the quarter, which, as you know, was fueled by our broad-based strength in denim, the centerpiece of our viral campaign, Better in Denim featuring the global group Katseye, did incredibly well. I mean we generated more than 8 billion impressions. I think we had over 500 million views. It was the denim story everybody wanted to be part of. We increased our ranking in the denim category. Gap is now the #6 adult denim brand in the U.S., up from 8 last year. Collaborations are continuing to drive relevance and revenue with our latest collaboration this quarter with Sandy Liang, which was incredibly successful, again, attracting new younger customers to the brand. And it's exciting to see the brand just continuing to build on their success quarter after quarter, and we're looking forward to carrying that momentum into the holiday season and beyond. Katrina O'Connell: As it relates to -- sorry, I'm going to finish up, Alex, for you on gross margin. So for gross margin in the quarter, we did exceed our expectations in gross margin by over 100 basis points, and that was actually driven by an in-line expectation as it relates to tariffs. So tariffs of 190 basis points were as expected. But the out-performance in the quarter really came from standout performance, particularly at Old Navy and Gap and better-than-expected AURs as consumers really responded to our product and storytelling, which enabled us to have lower discounting in the quarter. Operator: And our next question comes from the line of Bob Drbul with BTIG. Robert Drbul: I was just wondering if you could expand a bit more on AUR trends, how you're managing AUR trends? And I guess just the growth plans that you've spoken about as you look forward maybe Q4, but even into '26. Richard Dickson: Thanks, Bob. We approach pricing as we always have. I mean we consider all the various inputs while maintaining our overall value proposition for consumers. And in Q3, as our brands continue to gain more relevance and the rigor that we put around inventory management, as that becomes more foundational, we are increasing our price elasticity, and we've been driving higher sell-through at full price. We did take select pricing in Q3 in select categories, denim, which saw double-digit growth and the strength of our execution is really resonating with customers, and we saw growth, as I mentioned, across all income cohorts. The sales were driven by both units and AUR. We had overall AUR improving versus last year. We saw particularly strength in Old Navy and Gap with customers that were really responding well to our style, the quality and the value, which we continue to advance. Banana Republic AURs also were strong. This is resulting in less discounting, better regular price sell-through, and it's giving us confidence that we can continue to drive AUR growth as we enter the fourth quarter. Operator: And our next question comes from the line of Matthew Boss with JPMorgan. Matthew Boss: Congrats on a really nice quarter. So Richard, could you speak to drivers of the top line inflection that you saw at Old Navy this quarter? Any change in momentum, early holiday? And relative to the consistency that you've now clearly shown at the Gap concept, I guess, how do you see Old Navy differentiated as it relates to the market share opportunity for that brand? And then, Katrina, just given actions that you've taken to the cost structure, how best to think about annual operating income dollar growth if low single-digit top line was the baseline multiyear moving forward? Richard Dickson: Matthew, thank you for the question, and thrilled to talk about Old Navy. We had an incredibly strong quarter, comps up were 6% with the brand consistently gaining market share over the last 2 years. It is the #1 specialty apparel brand in the U.S. And the performance this quarter really speaks to the brand's strength, consistency and continued momentum. Customers are responding to what Old Navy does best. We give great style at great value. We saw healthy growth across all income cohorts in AUR, it was driven by trend-right product, which, again, was amplified by compelling creative and better storytelling for our brands. We've been winning in the categories that we've been strategically pursuing with intent. And we've shared those along the way. Kids and baby, denim and active have all been driving the momentum. Active in particular, was a standout in the quarter. We delivered double-digit growth. And I believe it's underscoring the power of our value proposition and innovation. Differentiation as it relates to the market share opportunities that we see, we look at partnerships, Disney's partnership with us. We just presented Jingle Jammies, which was an incredible presentation across the family. It exceeded expectations. We just also introduced Anna Sui's collaboration with us, which was particularly meaningful as the first designer collaboration where we're bringing high fashion to a broader audience. All of this, while we're just beginning to expand the brand into Beauty, which, of course, is early days, but we see incredibly high potential opportunity for Old Navy for that category and the broader portfolio over time. So look, I'm thrilled with Old Navy's consistency in the quarter performance. And I actually am particularly excited about our holiday offering at giftable price points, and we are ready to execute with excellence. Katrina O'Connell: And then, Matt, as it relates to your other question, I would say, as you called out, we've done a lot of restructuring over the last few years. And then this year, we previewed that we're saving about $150 million in our cost structure. We are reinvesting a portion of that into future growth opportunities because we want to be able to seed this next phase, which we're saying is building momentum that we hope over time leads to accelerated growth. So balancing the savings with what we think are important investments for the long term. What I would say is this year, the operating margin that we've guided to of about 7.2% is really only modest deleverage compared to last year, and that's while absorbing 100 to 110 basis points of operating -- excuse me, of tariff impact, which does show the way we are managing the business with rigor, both through cost and margin improvements. As we look forward, we've also said that in 2026, we don't expect the annualization of tariffs to cause further operating income declines as we work hard to mitigate those costs. Once tariffs are fully reflected in the base, we do believe the consistency in our core, combined with top line benefit related to the high potential growth opportunities that we're seeding in '26 should provide sales growth that benefits operating income over time. So more to come on what that algorithm turns out to be, but we feel good about the work we've been doing, and we're certainly pleased with our results. Operator: Our next question comes from the line of Brooke Roach with Goldman Sachs. Brooke Roach: Richard, how do you feel about the store fleet today across brands and banners? Are there any investments that need to be made to fuel the momentum from a shopping experience perspective? And what does that mean regarding store fleet transformation, whether that's remodels or changes in store count as you look ahead into 2026? Richard Dickson: Brooke, thanks for that question. Stores are a really important way for customers to experience our brand. I mean they bring our product, storytelling and service to life in a way that digital just can't. With a company operating a fleet of about 2,500 stores, we are always optimizing our retail footprint. We're closing underperforming stores. We're repositioning some locations that are more relevant to our customers, and we evaluate new store openings. As you know, over the last several years, we've closed about 350 stores that were unprofitable. Last year, we closed about 56 stores across our portfolio. We expect to close approximately another 35 in fiscal '25 with the majority of those closures being specific to Banana Republic. I believe we're at a pivotal point right now where the fleet is really well positioned, and we've been testing new formats and experiences. Gap Flatiron in New York has been functioning for about a year with great learnings that we've started to expand across our Gap fleet with denim shops, new refresh shop here in San Francisco and a variety of others that are on plan. Banana Republic, specifically in SoHo and other locations that we've been refreshing with some great results and of course, Old Navy and Athleta up at [ bat. ] We continue to evaluate these tests and their performance and are getting more and more confidence in the revenue and relevance and the strong returns that they've been driving. We've begun to invest rationally and selectively in the areas that we think will drive the return that we're looking for. And we will continue to keep everybody posted as we look to the combination of repositioning our stores, refreshing must-win stores and again, looking to start to open up new stores where it makes sense strategically. Operator: And our next question comes from the line of Adrienne Yih with Barclays. Adrienne Yih-Tennant: Congratulations. Great to see the progress at the right time. Richard, my question for you is sort of a little bit higher level since you've come, there's such a focus on product and marketing, like the combination of the flywheel effect of those. How is the appointment of design and creative, specifically Zac Posen changed the complexion of creative thinking throughout the organization? And then the marketing piece of it, how has that kind of -- how does that complement kind of the product and creating that flywheel? Richard Dickson: Thank you, Adrienne, for the question. First off, let's just mention Zac. He's been an incredible addition to our leadership team. It's been almost 2 years ago now that he's joined and has brought significant impact on many creative aspects, I would say, both inside the company and beyond. Our objective collectively with Zac and by elevating the creative conversation across our brands, highlighting design and product as an incredibly important attribute to all of our brands has been working. I mean we've been culturally creating moments, curated moments where our brands and our products have taken center stage, not only to some extent on the runway, but on Main Street. And we're attracting talent as well to our portfolio that might not have considered a place like Gap Inc. or our brands prior. When we talk about marketing, which I also am pleased to talk about, we know marketing is a much more complex function today than it was in the past. And as you know, we've been working really hard at driving new narratives that put our brands back into the cultural conversation, and it's our job to be everywhere that our consumer is with the right creative messaging. I think it's obvious we're performing while we transform. We're driving digital dialogue messages with social media as the #1 platform for our consumers. Influencer content is among the most common product discovery methods amongst Gen Z and millennials, which we've been performing incredibly well with. We actually recently launched a cross-brand content creator and social media advocacy program last month, which you might have seen. We now also have a presence on TikTok as a shop and many more. And these methodologies are proving really impactful, but they also require higher quality accelerated amounts of creative. And lastly, we can't help but mention again, Katseye is a great example of that. I mean 8 billion impressions, 500 million views. This was a true cultural takeover. And I think it's another proof point in our playbook, and we believe we've got the means and the experiences and the brands to continue to be more effective and be more efficient in our spend as we've proven this methodology is working, and it will continue to propel us into the future. Operator: And our next question comes from the line of Dana Telsey with Telsey Group. Dana Telsey: Congratulations on the nice progress. Katrina, one for you, one for Richard. As you think about the tariff mitigation strategies, which seem to be effective, the pricing adjustments have seemed to become less and less. Is that the right impression? And how you're thinking about pricing going forward? And then, Richard, the acceleration in store sales is impressive. In your view of the consumer overall, how are you thinking about the consumer? Does it differ by brand, lower and higher income customer, whether it's Gen Z, millennial or baby boomer, how do you think the current feeling is in the attitudes towards merchandising? How do you think of consumer demand? Richard Dickson: Dana, thanks for the question. I think I'm going to jump in here and take consumer first, and then Katrina can follow up with tariff mitigation answers. First, I think it's really important to share, we're seeing consistency and strength in our customer behavior. As I mentioned, we're really proud that we're winning with all income cohorts. And you could see it with the strong differentiation within our portfolio. Together, we see equal growth across low, middle and high. And it's evidenced by our 2 largest brands, Old Navy and Gap. Now there is external data that points to, of course, the macro pressure on the low-income consumer, but our customers are finding our price value, our product, our styles. It's breaking through the competitive landscape, and we're winning. We're also doing this Dana, with less discounting. We've got better regular price sell-through, increased AUR, which is really indicating that our product is resonating. I think you could see it when you go into our stores, we're just telling better merchant-driven stories, and it is supported by incredibly relevant marketing. We're also excited to see that the high-income consumer is discovering our fashion, quality and value. And we think that is also being driven by the relevant narrative that we've been creating in the marketplace. So when I step back and I look at our portfolio competitively, I think our portfolio appeals to a wide range of consumers. It gives us greater flexibility in today's environment. When we look at our portfolio today versus even a few years ago, we are a much stronger portfolio of brands today. We're resonating with consumers. And it's our job on a day-to-day basis to create great product with great style and quality, exceptional value. And I think we will prevail in any marketplace if we stay consistent and true to that narrative. Over to you, Katrina, on tariffs. Katrina O'Connell: Sure. So as it relates to tariffs, we did do a slight amount of pricing in the quarter, but we really honestly, Dana, approach pricing as we always do. We look at all the various inputs really with an eye to maintaining the overall value proposition for our consumers. So we did take select pricing in select categories. I think denim is a really good example at Gap, where given the strength, we were able to take slight pricing and see double-digit growth in sales in spite of that. The strength of our execution, as Richard said, really is resonating with our consumers. And as Richard said, we saw sales come from both units and AUR in the quarter. I would say the bigger driver of the outperformance in the quarter and what we're seeing is less discounting and better regular price sell-through. And I think as Richard said earlier, that really gives us the confidence that we can keep driving AUR growth as we enter the holiday season. Operator: And our next question comes from the line of Lorraine Hutchinson with Bank of America. Lorraine Maikis: Just switching gears to Athleta for a minute. How do you feel about the level and content of the inventory there? And do you have a time line for when you think that sales could begin to stabilize? Richard Dickson: Lorraine, thank you for that question. We're not hiding from Athleta. It's a very important brand in our portfolio. We have been disappointed in the trend. But Maggie, our Brand President, has hit the ground running in her first 90 days, and she's balancing near-term priorities with, of course, the longer-term reinvigoration objectives that we have for the brand. As I mentioned, she's been building her leadership team to align with her vision, and she is truly setting the foundation for the brand's next chapter. A lot of work happening, editing the assortment, studying the consumer, evaluating our retail footprint and, of course, the overall customer experience. This is a reset year for Athleta, and our focus is going to be on positioning the brand for long-term success and returning it to a rightful place as a premium purpose-driven aspirational brand. We do believe Maggie and the team are taking the right steps, and we remain confident that Athleta will emerge as a brand that really does matter even more to women through product, trend and storytelling. We understand there's a lot of work to do, but we believe we've got the right leader in place to do it, and we look forward to continuing to update you as more news unfolds. Katrina O'Connell: And maybe what I'd add, Lorraine, on inventory is as we assessed Athleta in second quarter, given sort of the trend in the business, we did make some choices to lower inventory levels overall. And so we have aligned inventory for Athleta to this lower sales trend as we head in -- for Q3 and as we head into Q4. So we feel good about the levels and quality of inventory at Athleta, and we'll remain pretty prudent as it relates to Athleta until we start to see the product and the marketing get back to where we would expect it to be for this brand. Operator: And our next question comes from the line of Paul Lejuez with Citigroup. Paul Lejuez: Just to go back to the unit comments. Curious which brands you saw the greatest increases in units? And then I'm also curious on the inventory versus unit gap that you mentioned, what will that look like at the end of the year, the finish up fourth quarter and then into the first half of '26? Katrina O'Connell: Paul, I'm going to take the first one, but we had a lot of trouble hearing your second question. So apologies on that one. We're going to ask you to repeat it. As it relates to units, we were really pleased to see that as our brands are gaining relevance, combined with the rigor that we're putting into the business that we're seeing our elasticity improve, and we're getting higher sell-throughs at regular price. When we look at the units in the quarter, I would say units were aligned with where we see outperformance in the business, particularly at Old Navy and Gap, and we also saw AURs there as well. But I'm going to ask you to repeat again the second part because we couldn't hear you. Paul Lejuez: Sure. Sorry, Katrina. So the inventory dollars versus unit gap that you spoke of this quarter, curious what that looks like at the end of 4Q and then in the first half of next year. Katrina O'Connell: Oh, thanks. Sorry about that. So we continue to keep our units below sales as we try to keep within our principles of keeping inventory tight. We want to keep maximum flexibility so that we can respond in season to various demand scenarios. and be responsive to consumer demand. So as we think about end of quarter inventory, I would expect it to be similar to how we just ended Q3. Operator: And our next question comes from the line of Corey Tarlowe with Jefferies. Corey Tarlowe: Richard, I wanted to ask about the power of partnerships. And the reason being is I don't think that there's a retailer in the mall today that has done more partnerships in the time span that you've been at Gap to expand the aperture for the brand and to build, as you say, relevance in revenue. And I was curious about what you think strategically this means for the business ahead. And then the follow-up to this is how have the consumers responded to these improvements in the brand in the way that you've been able to say, remove promos on categories like denim at Gap? Richard Dickson: Okay. Corey, thank you for the question. First off, I think it has been a credit to the brands and teams that have followed the methodology that we shared with our playbook. And as part of the playbook and when we look at cultural relevance, collaborations help a brand drive relevance. It broadens its customer base and continues the drumbeat between its larger partnerships and releases. So it keeps topical in the context of the amount that we do and the timing that we do, do them. Now you have to really be authentic. It's not just a collaboration. It's a well-thought-out strategic partnership. To date, Gap brand, as you mentioned, we've launched over 13 collaborations. It continues to drive enormous excitement and attract new audiences to us. And they're very precise, and they need to be. They need to be win-win. And most importantly, they need to be authentic to the consumer. The collaborations that we've been doing, as I mentioned, are attracting new generations to Gap, but it's also, at the same time, reinforcing the brand to those who love us for years. This is, to some extent, a balance of art and science. The latest collaboration this quarter with Gap brand with Sandy Liang in the third quarter, it drove incredible engagement and overall basket. You asked about consumers responding in relation to it and how it affects our business. I mean more than 25% of the customers who shop these collaborations were new to Gap. And of those who shop the collaborations, 20% shop beyond the collab. So we see the attraction that these collaborations when done right, are generating for the brand. And then we -- by offering and showing other product, we're now establishing broader, bigger house files and more exciting relationships with our consumers. We just launched the Anna Sui collection with Old Navy, which is the first designer collaboration in Old Navy, incredible success, similar engagement, a really well thought out precise partnership, and we believe a sign of things to come. So again, laddering up. It's great credit to the teams across the brands for driving the playbook, executing it with excellence and really creating win-win collaborations for the consumer and our business. Operator: And our final question comes from the line of Michael Binetti with Evercore ISI. Unknown Analyst: It's [ Carson ] on for Michael. Katrina, probably a question for you. I appreciate the color on the wraparound effect of tariffs into 2026. But if we set tariffs aside, you had really nice underlying gross margin expansion in third quarter. The guidance implies pretty similar for fourth quarter. How much of that underlying expansion is from AUR versus other drivers? Because I think I've heard several times today, confidence in the AUR plan. So if that's a leading driver, is it safe to carry those impacts over into the next few quarters? Katrina O'Connell: Thanks for the question. So the way I would answer that is our margin strength in Q3 came from a combination of favorability in commodities, aided by some supply chain leverage that we got as well as strength in AUR. As we look to Q4, what you'll see is that the tariff impact to Q4 is similar to what we just experienced in Q3. And we're also still seeing the commodity benefits. But in Q4, we're trying to sort of stay balanced in our outlook. And so right now, what we have in is roughly similar promotions year-over-year so that we have room to compete in any environment. And so we'll obviously aspire to do better, but the upside that we saw in AUR from Q3 is not currently assumed in Q4. Operator: And ladies and gentlemen, that concludes our question-and-answer session. I will now turn the conference back over to Mr. Richard Dickson for closing remarks. Richard Dickson: Thank you, operator. This was an exceptional quarter, and I'm really proud of this talented team that continues to deliver quarter after quarter. As we look to finish the year strong, our team is fired up and our focus is clear: continue to execute with excellence and win with the customer this holiday. Thank you for joining us today. For those of you who celebrate wishing you a happy Thanksgiving, and we look forward to seeing you in our stores this holiday season. Thanks all. Operator: And ladies and gentlemen, this concludes today's call, and we thank you for your participation. You may now disconnect.
Agata Wiktorow-Sobczuk: Good afternoon, ladies and gentlemen. Welcome to the earnings call for the third quarter of 2025 of Polsat Plus Group. Can we please move on to the next slide. We will begin with the presentation of our results delivered by Andrzej Abramczuk, President of the Management Board; Maciej Stec, Vice President for Strategy; and Katarzyna Ostap-Tomann, Chief Financial Officer and ESG Officer. [Operator Instructions] With that, let's move on to the presentation. Andrzej, the floor is yours. Andrzej Abramczuk: Good afternoon, ladies and gentlemen, and welcome on the conference regard of the results for the third quarter of 2025. Thank you for joining us today. Here is our agenda. First, I will share the key highlights of the quarter. Next, we will review operating and financial results in detail. Finally, we will summarize and move to the Q&A session. Let's begin with the key highlights for the quarter. Let's start from the telco segment. In the B2C and B2B service segment, our new multiplay offer is performing above expectations. Since its launch in June, 11% of our customer base has already migrated to this offer. Additionally, bundles with the 3 or more services are gaining strong momentum, sales have nearly tripled. Average revenue per user also showed consistent growth, up 4% year-on-year. Turning to the Media segment. This was an exceptional quarter for the sport. We broadcast the Volleyball Nations League and the World Championship, and we strengthened our portfolio with premium rights, including Formula 1, Bundesliga, UEFA Conference League and European League. This investment strengthened our position and driven audience engagement. However, the concentration of major sport events in the one quarter results in the visible increase in content cost. Looking ahead, we secured exclusive right in Poland for WTA tour tennis from 2027 until 2031, a great addition to our support offering. In the Green Energy segment, we are coming to an end to develop investments. The Drzezewo wind farm has been completed and the commercial launch is planned for early 2026. Also, in the third quarter, we carried out our major maintenance on one of biomass unit. The energy market remains challenging with low energy price. Let's take a quick look at the number. In the third quarter, revenue was PLN 3.4 billion and EBITDA amount PLN 766 million. ARPU per B2C customer exceeded PLN 80, up 4%. Our multiplay customer base surpassed 3 million and continue to grow, supported by the success of our multiplay strategy. Like I said, our reach programming and sport offer are very popular with the viewers. And in the third quarter, audience share rose to 22.7%, up 1 percentage point. Green energy production reached 237 gigawatts and was lower year-on-year due to the scheduled maintenance of the biomass unit. Overall, this quarter delivered solid operating performance, especially in B2C, B2B and media, but at the same time, we faced certain challenges. Let's now to the more detailed review of our operating results. Maciej, over to you. Maciej Stec: Thank you, Andrzej. I'm pleased to share the operating results from each of our business segments. I'll begin with the Media segment, focusing on both television and online performance. Could we move to the next slide, please? In the third quarter of 2025, our viewership figures and position in the advertising market remains strong. Polsat, our main channel, was the market leader with a 7.3% audience share, while our thematic channels collectively reached 15.5%. Altogether, TV Polsat Group achieved a total audience share of 22.7%, marking a 1 percentage point increase compared to last year. The TV advertising and sponsorship market in Poland was slightly softer in the third quarter, declining by 2.6% year-on-year. The reason behind this is that last year, there were major sporting events that took place in Europe, the Olympic Games in Paris and the UEFA Euro championships in Germany. Our advertising revenue followed a similar trend. However, in real terms, this was only PLN 8 million lower than in Q3 2024. As a result, our market share remained stable at 27.6% in Q3. Let's move to the next slide, please. Given the seasonal nature of the media business, it's important to assess our results over a longer period. Over the first 9 months of 2025, we delivered strong audience figures. Our group's total audience share rose to 22.4% year-on-year with our main channel Polsat accounting for 7.4% and our thematic channels contributing 15.1%. These achievements are in line with our long-term strategy. Turning to the advertising market for the first 3 quarters of 2025, the sectors performed as we had anticipated with growth rates in the low single digits. We outperformed the market, increasing our advertising revenue by 1.7% to PLN 981 million, which resulted in a market share of 28.2% for the 9-month period. Let's move on to the next slide. We consistently maintain a very strong position in the Polish online media market according to media panel data. In the third quarter, Polsat-Interia Group was the clear leader among Internet publishers in Poland, achieving the highest average monthly number of users, 20.5 million and a total of 2 billion page views during the quarter. What's important, Polsat-Interia Group is also a market leader in the mobile category, holding the top spot for 3 consecutive months in Q3 of 2025. These results demonstrate the strength and stability of our digital platforms, and we will continue to strengthen our position in the online media segment. Can I get the next slide, please? Our autumn programming schedule delivered strong results, combining popular entertainment formats with major sports events. Flagship shows such as Dancing with the Stars, newly acquired format of Millionaires, Your New Home, Your Face Sounds Familiar, attracted large audiences, while premium sports broadcast further strengthened our position. This quarter, we broadcast several exceptional sporting events. Notably, we earned matches of the Volleyball Nations League, including 12 games held in Poland, where our national team won the competition. We also covered the men's and women's Volleyball World Championships in the Philippines in August, September, where our men's team won the Bronze Medal. These Volleyball events are a vital part of our programming, supporting viewership and confirming our leadership in sports broadcasting. However, they also led to higher one-off content costs during the third quarter. Additionally, we have recently expanded our sports rights portfolio, acquiring rights to major events such as Formula 1, Bundesliga and the UEFA Conference and Europa Leagues. These investments contributed to higher content costs, especially when compared to last year when our cost base was lower as we no longer held the rights to the UEFA Champions League. Overall, as a result of these initiatives, our audience share rose to 22.7%, confirming the effectiveness of our programming strategy and the strength of our diversified content portfolio. However, this quarter's results were affected by increased content costs. Next slide, please. Let's now look at the B2C and B2B services segment and its performance in Q3 2025. Next slide, please. We continue to see strong performance in our multiplay offering, supported by the new offer introduced in June 2025. As Andrzej has already highlighted, customer interest in our new multiplay packages is very high, and we are successfully moving customers to this offer. At the end of the third quarter, more than 3 million customers were using our multiplay services, representing 53% of our total customer base. Over the past year, we grew the multiplay base by 41,000 customers, again, thanks to the continued effective upselling of our services. Our multiplay customers account to 11 million RGUs and increased over 1.1 million year-on-year. This growth was also driven by the new multiplay offering and strong demand for bundles consisting of 3 and more services. Importantly, churn remains low at 7.4%, which reflects the strength of our multiplay strategy and the value it brings to our customers. Let's move to the next slide, please. Our strong multiplay performance is closely linked to the overall growth of our contract services portfolio. In the third quarter, we delivered more than 13.3 million contract services, representing a 2% increase compared to the previous year. Mobile telephony continued to be a key driver of growth with 195,000 more services provided than last year. We also observed as a key driver, demand for Internet services, adding 207,000 mobile and fixed connections year-on-year. The pay TV base continues to face pressure, but this is partly offset by the growing adoption of IPTV and OTT solutions, which help us maintain a competitive position in the pay TV segment. Next slide, please. As a result of our consistent long-term execution of the multiplay strategy, we continue to see growth in ARPU per B2C customer. In the third quarter, ARPU increased by 4% year-on-year and reached PLN 80.3. This progress was driven by solid sales of mobile and Internet services as well as the consistent execution of our multiplay approach. I would like to highlight that for the first time, our average revenue per customer has exceeded PLN 80. This is a clear evidence of the effectiveness of our strategy. We are also observing a constant rise in the number of services used by each customer with an average of 2.36 RGUs per customers at the end of the third quarter. This result demonstrates our successful upselling and bundling efforts. As Andrzej mentioned earlier, sales of packages with 3 or more services have almost tripled since we introduced the new multiplay offer in June. This not only shows strong customer interest in our new offer, but also proves that there is further potential to increase the saturation of our customer base with additional services in the future. Let's move to the next slide, please. In the prepaid segment, we maintain a high stable base of 2.41 million services despite operating in a highly competitive and challenging market environment, which I underline quarter-by-quarter. ARPU in this segment increased by 3.4% year-on-year, reaching PLN 18.4. This growth was supported in part by the launch of new and attractive pay TV packages on Polsat Box Go, Polsat Lovers, Premium and Premium Sport priced at PLN 20, PLN 30 and PLN 50, respectively. Each package builds on the previous one, offering flexible access to up to 180 TV channels, including 24 premium sports channels, a wide range of exclusive sports broadcast and a rich VOD library. I'm confident that this new offering, together with our continued efforts to increase the value of prepaid customers will help us further grow prepaid ARPU even in the face of the market challenges. Next slide, please. In the B2B segment, we continue to maintain a stable customer base of around 68,000. I would like to underline that the B2B market is very demanding, and we operate in a highly competitive environment. Our main objective in this area as in all other segments is to increase customer value. ARPU per B2B customer increased by 2.1% year-on-year, reaching almost PLN 1,550 per month. This growth demonstrates our commitment to providing high-quality services tailored to the specific needs of our clients and to building strong long-term relationships with our business customers, which ensures continued resilience in this segment. Next slide, please. Let us now turn our attention to the Green Energy business. The next slide, please. In the Green Energy segment, production in the third quarter was 21% lower year-on-year, amounting to 237 gigawatt hours. This decrease was mainly due to scheduled major maintenance on one of our biomass units, which continued throughout the quarter and significantly reduced output. Such maintenance is routine, occurring every 8, 10 years with the other units expected to undergo similar work in around 5 years. Despite this temporary reduction, total green energy generation for the first 9 months of the year increased by 15% year-on-year, reaching 830 gigawatt hours. This growth was driven by the expansion of our wind energy capacity and our largest wind farm, Drzezewo has now been completed and is currently generating energy as part of its technical commissioning. It's worth mentioning that energy production in the first 9 months of 2025 was noticeably affected by weaker weather conditions. Nevertheless, wind energy continued to be the main driver of growth. Production from wind sources increased by 56% year-on-year in the third quarter and by 73% for the 9-month period, reflecting the positive impact of our new capacity. Can I have the next slide, please? EBITDA in the Green Energy segment amounted to PLN 175 million for the first 9 months of 2025, representing a 14% decrease year-on-year. In the third quarter, EBITDA stood at PLN 52 million, 37% lower than the previous year. This decline was primarily the result of scheduled major maintenance work on the biomass unit, which significantly reduced production during the quarter. And the comparison to last year is impacted also by an exceptionally strong base driven by higher contracted prices and more favorable supply terms for biomass energy. Ongoing low market energy prices also continued to affect profitability. The completion of the Drzezewo wind farm doubled our installed wind capacity to 289 megawatts. With this project, we have reached our target capacity in wind energy, combined with stable energy prices going forward, this positions us to strengthen EBITDA in the coming period. This milestone marks the final stage of our investment program in renewables. Ladies and gentlemen, before I hand over to Kacha, I would like to very briefly summarize our operating performance across segments in the past quarter. In Q3 2025, our Media segment achieved excellent viewership results with a 22.4% audience share in 9 months of 2025. We maintained a strong position in the advertising market with a 28.2% market share and ad revenue growing by 1.7%. The third quarter, the financial results of the Media segment was affected by higher one-off content costs due to new sports rights and major volleyball events. In the B2C and B2B services segment, multiplay continues to drive growth. Over 3 million customers now use multiplay services and ARPU per B2C customer exceeded PLN 80 for the first time. The commercial momentum of our multiplay offer is very good, supporting our operating results in the coming quarters. Prepaid and B2B segments remain resilient with growing ARPU supported by attractive offers and tailored solutions. In green energy, we completed the Drzezewo wind farm, reaching our target wind capacity and finalizing our renewable investment pipeline. The operating and financial results of this segment were heavily impacted this quarter by the renovation of the biomass unit, which is a one-off event. I expect that going forward, EBITDA will improve on the back of higher wind capacity, providing that energy price remain at least stable. Still, I would like to signal that reaching our strategic EBITDA goal in 2026 is going to be challenging, and I would rather anticipate a result in approximate PLN 400 million next year. That said, please remember that our renewable energy projects are long-term, 30 years investment, and this is how they should be analyzed. Kacha, please, come on, the floor is yours. Katarzyna Ostap-Tomann: Thank you. Good afternoon, everyone. Can I have the next slide, please? Before moving to a detailed discussion of financial results, I want to emphasize what Andrzej and Maciej have already mentioned. In the third quarter, we faced several one-off events. In the Media segment, we had higher costs from the new sports rights and major volleyball events. In the Green Energy segment, we carried out a major overhaul of one of our biomass units. These factors had a clear impact on our Q3 results. Revenue declined by 4.1% to PLN 3.4 billion. Adjusted EBITDA reached PLN 766 million, primarily impacted by higher content costs this quarter. We closed the quarter with a net profit of PLN 57 million. Free cash flow for the last 12 months adjusted for green energy investments was PLN 860 million at the end of Q3. I would like to signal that in the full year 2025, Free cash flow may be around PLN 600 million to PLN 700 million. Net debt-to-EBITDA stood at 3.54x, slightly lower than at the end of 2024. However, I expect this ratio to rise in Q4 or Q1 2026 due to the upcoming payment for the renewal of the 900 megahertz frequency reservation pending the regulator's decision. Can I have the next slide, please? Here, you can see a detailed breakdown of revenue and EBITDA by segment. Revenue was significantly impacted by lower results in the Green Energy segment, driven by several factors. First, we recorded lower energy sales due to weaker market prices, reduced production volumes caused by the biomass unit maintenance and a strong comparative base in Q3 2024 when we had exceptionally favorable biomass energy contracts. Second, there were no revenues from hydrogen bus deliveries in this quarter as these are scheduled for Q4. Revenue from buses is recognized on the same principle as in the real estate at the time of delivery to the customer. These revenues will fluctuate depending on the delivery schedule. In the B2C and B2B services segment, the main reason for the revenue decline was weaker equipment sales. This reflects a general market trend as customers replace phones less frequently, which reduces overall device sales. Turning to EBITDA. The impact of content cost in the Media segment is clear. This quarter includes cost of new sports rights, which Maciej presented in detail and significant costs related to global prestigious volleyball events, which were compared against at a very low base last year when Champions League costs were no longer present. I want to stress that a large part of these costs related to volleyball events are one-off and will not repeat in the coming quarters. EBITDA in B2C and B2B services was affected by lower margins on equipment sales and higher costs, including network and employee-related expenses influenced by last year's inflation and increases in the minimum wage. Maciej has already discussed the reason for the EBITDA decline in the Green Energy segment. Next slide, please. Our adjusted free cash flow after interest and development CapEx in the Green Energy segment was PLN 860 million over the last 12 months, which I consider a very good result. Interest costs remain a key factor that puts pressure on free cash flow. We are already seeing savings on interest costs due to the interest rate cuts, but please remember that these reductions are reflected in our results with some delay and will continue to lower our debt servicing costs in 2026. I also want to highlight telco frequency reservation payments. PLN 645 million relates to the renewal of the 2,600 megahertz band in Q4 last year and the 700 megahertz block. We are still waiting for the regulators' decision on the terms for extending the 900 megahertz reservation. After that, we do not expect further renewals for several years. Finally, development CapEx in green energy is gradually declining as we are now at the final stage of these investments. Next slide, please. On this slide, we show the breakdown of capital expenditures by business segment. In the TMT area, which includes both B2C and B2B services and the Media segment, we operate under a CapEx-lite model. The CapEx to revenue ratio stood at 8% in both the third quarter and 9 months of 2025. CapEx in this segment mainly relates to Netia's fixed network and IT. As mentioned earlier, development CapEx in the Green Energy segment is almost completed. In Q3, CapEx in this segment was PLN 113 million and PLN 420 million for the first 9 months. I still expect elevated spending in Q4 due to the settlement for the execution of the Drzezewo wind farm, after which our development investments are essentially over. Can we go to the next slide, please? My final slide, as usual, covers the group's debt. As mentioned earlier, net debt-to-EBITDA ratio, excluding project financing, was 3.54x, including all group debt together with investment loans for renewable energy projects, the ratio was 4.03x. The debt structure and maturity profile remain unchanged. In Q1 2026, we resumed scheduled principal repayments on the term loan maturing in 2028. The bonds mature in 2030. Please note the weighted average interest cost, 7.3% based on the repo and the balance sheet date. This rate is steadily declining with interest rate cuts. Recall please that at the end of 2024, we reported 8.3% and this will have a positive impact on our free cash flow going forward. That's all from me today. It was a challenging quarter financially, but I want to emphasize that much of the pressure came from one-off factors that will not repeat in the coming quarters. Thank you for your attention. And now I hand over to Andrzej. Andrzej Abramczuk: Thank you, Kacha and Maciej. Our results to the third quarter in line with our expectations and were under impact of the several one-off events. Firstly, the Media segment was higher costs related to the sports right and secondly, in the green energy, scheduled maintenance of biomass unit reduced production. On the positive side, our new multiplay offer continue to perform very well. It supports ARPU growth and will driven retail revenue in the coming period. We also had a strong start at the autumn programming schedule, combined with robust sport offering, this delivered excellent viewership has strengthened our position in the advertising market. Finally, we completed the Drzezewo wind farm, this doubled our installed wind capacity and marked the end of capital-intensive investment phase in renewable energy. This brings us to the end of the presentation, and we will now take your questions. Thank you. Agata Wiktorow-Sobczuk: Thank you very much. We have a couple of questions that you have posted in the Q&A panel. So thank you for those questions. And I will read them as they were posted. The first 2 comes from Nora from Erste. I have 2 questions, please. Could you please elaborate on the technical costs? Will these continue to rise after the third quarter of 2025 due to network rollout expenses? If so, approximately until when? Katarzyna Ostap-Tomann: As far as the technical costs are concerned, it's not only the rollout cost, rollout expense that we have there. We also have wholesale network access, which is -- which we use for our fixed line in Plus. So this is -- basically, these are the 2 components of the rising rollout cost -- the rising technical costs. As far as rollout is concerned, it will rise during 2026, definitely because we are expanding our 5G network. Agata Wiktorow-Sobczuk: And second question, what is your expectation for EBITDA in 2026? Do you expect positive year-on-year dynamics in retail? Katarzyna Ostap-Tomann: As far as EBITDA for 2026 is concerned, we are finishing at the moment our budget. So I won't be able to give you the specific details of what we expect for the consolidated EBITDA. We'll do everything that we can to have positive dynamics in the TMT segment. Agata Wiktorow-Sobczuk: The next question comes from Bojan from ODDO BHF. Could you please provide a bit more details on your additional financing you've taken during the third quarter, type of debt volume, interest rate tenure? Katarzyna Ostap-Tomann: So we're talking of the financing of Drzezewo wind farm, which was completed in August. It was a term loan with the consortium of 3 Polish financial institutions. It was PLN 874 million plus revolving loan of PLN 56 million and a small amount for recuring VAT. It's taken for 15 years at a variable rate. Agata Wiktorow-Sobczuk: Three questions from Ali from HSBC. Can you talk about the multiplay additions? How much of this is new customers versus the existing subscriber base? And can you comment on the margin dilution impact from multiplay and how you offset or think about this? Maciej Stec: Okay. When we talk about multiplay additions, in fact, it doesn't matter because it's included in our ARPU, which we report because you have dilution inside and growth also inside. So our ARPU in third quarter of 2025 increased by 4%. And first time, it was more than PLN 80. When you take a look at our new offering, it's more concentrated on total check per subscriber because in our new offering, you choose 2 services out of 4 basic services and you pay PLN 80. Then you add another service for PLN 30. So in fact, it's a very simple offering, which builds the ARPU and you can easily upgrade your offering. So first check is PLN 80. Next check is PLN 110. For 4 services, it's PLN 140. That's what we mentioned in the presentation. With new offering, we observed that we have more contracts done for 3 and more services. And in fact, it's 3 and 4 services. We observed in our offering -- in our data now that we triple such a transaction. So in fact, it's included in our ARPU, so you can develop your model according our ARPU easily. Agata Wiktorow-Sobczuk: If energy prices were to remain at current low levels, what kind of EBITDA would the division generate in '26, '27 versus previous expectation, PLN 500 million. Katarzyna Ostap-Tomann: It would be more or less PLN 400 million with the current prices. Agata Wiktorow-Sobczuk: Margins in B2B and B2C continue to be challenging, revenues decline and inflationary cost growth. Could you give us any color on how you expect that to evolve over the next couple of years? Katarzyna Ostap-Tomann: As far as the B2B and B2C margins for the foreseeable period are concerned, they are obviously challenging. But as Board of Directors, we do everything in our capacity in order to maintain the margins for the foreseeable future. Maciej Stec: And that's what I presented in the B2C and B2B segment. When you take a look at the offering, so 53% of our base has 2 or more services. It means that 47% has only 1 service, which is important. So we can -- we have space here just to grow. But the second is more important when you take a look at saturation of RGUs per our multiplay subscribers is only 2.36 in the third quarter of 2025. In basic offering, we have 4 services and additional services, we have 3 or 4 more. So in total, we have 6 to 8 services just to sell to the households. So there is very big space and very big potential just to grow, especially with this new offering, which I explained previously, it was like that first, you pay PLN 80, PLN 110, PLN 140, PLN 170, PLN 200. So you can operate for the whole family and even your friends. So this is very easy just to upgrade our offering and you can choose your services in a flexible way. Agata Wiktorow-Sobczuk: A follow-up from Nora. One more question, please. Does the reduction in recurring EBITDA in the Green Energy segment to PLN 400 million in 2026 also apply to subsequent years? Katarzyna Ostap-Tomann: Look, it depends on the cost of energy. Actually, I'm sorry to say that I'm not a fortune teller to tell what the prices of energy will be in the subsequent years. The only thing I can tell you if the prices will maintain the level from today, I estimate future EBITDA is PLN 400 million. This is pure mathematics. Maciej Stec: Yes. And this is for 2026 because we have outlook for 2026 because now we are contracting 2026 now. 2027 will be contracted on the base of next year energy pricing, and this is important how it operates. So you need to understand there is a delay with our revenues in this segment. Agata Wiktorow-Sobczuk: And a question from [indiscernible]. Should we expect adjusted EBITDA to decline in the fourth quarter of 2025? What level of free cash flow should we expect in 2026? Katarzyna Ostap-Tomann: As far as EBITDA is concerned for the whole 2025, the comparable EBITDA will be a bit lower than 2024. So that's more or less my estimation. As far as the free cash flow is concerned, it really depends on the working capital and mainly this depends on the cost of capital. So for 2026 at the moment, I won't be able to give you an estimate. Agata Wiktorow-Sobczuk: And a follow-up from Bojan. Could you please give us a bit more clarity on workforce costs till the year-end and also implications for 2026? Katarzyna Ostap-Tomann: In 2025, we have suffered an increase in workforce costs. This was partly to -- mainly this was due to the factors that we do not control. The increase on the minimum wage, that's the first thing. The other thing is still the press of inflation or impact of inflation on the workforce cost. So basically, what we expect in 2026 is lowering -- I mean, not lowering workforce cost, but lowering the increase. So the impact will not be so high in 2026 because we see both inflation and the press on the wages a bit lessening right now in the fourth quarter. Agata Wiktorow-Sobczuk: That was the last question that we have. So thank you from my side for joining, and I will pass over to Andrzej. Andrzej Abramczuk: Thank you, Agata. Thank you, Kacha and Maciej. Ladies and gentlemen, thank you very much for the participation in our quarterly conference. And let's see when we presented our yearly results. Thank you. Katarzyna Ostap-Tomann: Thank you. Maciej Stec: Thank you very much. Bye.
Nicholas Wiles: Good morning, everyone, and welcome to our interim results presentation this morning. We're going to adopt our usual format, starting with me giving an overview of our performance in the first half. Rob can then cover the financials, followed by an update on the delivery of our key growth projects and then a first half business review. Rob is going to update on our progress in working with Nile, on our long-term organizational framework. And then finally, an update on our outlook and the Q&A. And with that, turning really to the first half and an overview of actually our first half. And I think despite an uncertain market background, the performance of our underlying business has remained in line with our expectations. We've continued to grow our PayPoint core estate with new business in key areas such as housing, local authorities, government departments, FMC brand campaigns and in Love2shop business. I think progress has been good. We've accelerated growth in our digital payments platform. We've taken further actions to strengthen our card processing platform and its capabilities. And in parcels, we've strengthened further our key carrier relationships, all of which is very much consistent with the long-term objectives we set out for the business earlier this year. In the first half, we have encountered 2 specific challenges, which have impacted performance. Firstly, the financial terms of our new commercial contract with InPost Yodel have had a greater impact than we'd anticipated and with the additional volumes we would expect to come through not yet materializing, and that's rather been compounded by what's now the well-publicized disruption to parcel volumes and service in our network from the InPost Yodel internal network and operational harmonization plans. It's taken some good work and collaboration between the 2 businesses but it does now feel that we're through the worst of the operational disruption and we expect our volumes to recover through the course of November, which, as you know, is really a key trading period for the business. Secondly, in OBConnect, the first half of this year has seen slower growth than we had anticipated and some consolidation after a strong performance last year. I think this is largely due to the overall opportunities we'd hope to see from the verification of pay opportunity and uptake in Europe being rather disappointing with the team, I think, doing a really good job in response by pivoting the new business pipeline and opportunities to other areas alongside what we're doing in terms of discussions already underway with several jurisdictions and corporates to replicate the success of GetVerified in New Zealand. And while the OBConnect business will not grow at the rate we expected in the current year, I think it's fair to say the foundations and capabilities of this business remains strong and our growth in the second half will still be stronger than the performance we saw in the second half of last year. So I think overall, our confidence in the opportunities that OBConnect brings to our business is undiminished. Its technology platform and capabilities remain important to our long-term digital ambitions as a business. More positively, we've made significant progress in the first half in the successful delivery of several major projects, which are key to our long-term growth. We've launched bank local services with Lloyds Banking Group and with the expectation of further banks to join this service in the coming months. We've launched Royal Mail Shop and branding across the Collect+ network following the strategic investments in Collect+ by Royal Mail. And we've accelerated the Love2shop partnership with InComm Payments. Each of these projects required detailed planning and execution, and now the focus is very much shifting from the rollout to the actions required to accelerate consumer adoption. Turning now to our summary of the financial performance of the business. Overall, as I said already, a resilient performance across the key financial metrics. And by division, net growth in each business with the exception of Love2shop, where the impact of the anticipated changes we've made to our accounting treatment have resulted in some changes to the timing of revenue recognition on the expiry of cards which has resulted in a greater weighting to profit recognition in the second half. In terms of our growth plans, we should not let the specific challenges we've experienced in the first half deflect the business from the long-term growth plans we announced earlier this year. Delivering GBP 100 million underlying EBITDA remains a key financial milestone for the business. And while we're making meaningful progress towards this target in the current year, it is going to take a little longer to achieve. It was always an ambitious target to be delivering it in this financial year but it remains a key milestone for the business. We still believe a combination of our business mix today and the delivery of our key growth projects will deliver consistent net revenue growth in the range of 5% to 8%. And in the meantime, we're developing an organizational structure for the long term to support this accelerated growth. And maximizing returns to shareholders through strong and consistent earnings and cash generation. For the current year, we're on track to deliver more than GBP 90 million to shareholders through a combination of ordinary and special dividends and share buybacks. I'll now hand over to Rob, who will take you through the numbers. Rob Harding: Thank you, Nick, and good morning, everyone. I'll start with the key financial highlights. Net revenue of GBP 84.7 million is marginally up versus the prior half 1. There's a revenue breakdown on the following slide, which shows PayPoint segment revenues are up 2.9% but this is dampened by Love2shop revenues down 9.6%. As Nick said, this is timing in nature, and we fully expect this position to unwind in the second half to give year-on-year growth for the Love2shop segment. Underlying profit before tax of GBP 25.7 million is down 4.5% that being a combination of flat revenue plus a 2.3% increase in overall costs. And I'll cover the cost deltas in a few slides. Reported profit before tax of GBP 19.9 million is after GBP 5.8 million of deductions to underlying numbers, including GBP 2.6 million of amortization of acquired intangibles and GBP 3.2 million of exceptional items, of which GBP 2.6 million relates to legal costs in respect of claims against PayPoint and the remainder is reorganizational costs. Underlying EBITDA of GBP 37.3 million is broadly flat versus the prior half with GBP 1.2 million of lower profits being partly dampened by higher depreciation and amortization. On earnings per share, diluted underlying EPS of 26.7p is 2.6% down versus the prior half. And finally, on this slide, net debt is down 3.2% to GBP 84 million for the first half. And again, I'll cover this in more detail shortly. This slide breaks down the net revenue into a little bit more detail. As I mentioned previously, PayPoint segment revenue is up 2.9%, with e-commerce revenues of GBP 8.6 million, providing growth of 7.5%, and that's driven by transactional volumes increasing 20% to GBP 74.3 million. Payments and banking revenue grew 4.4%, and that's driven by the inclusion of GBP 1.9 million of revenue from OBConnect. And in shopping, growth in service fees of 8.4% to GBP 11.6 million was largely dampened by cards, which is a combination of both lower process volume and sites impacting revenue and ATMs revenue down, reflecting a reduced demand for cash across the economy. For Love2shop, 12 months ago, I explained the half 1 numbers included revenue brought forward from half 2 into half 1, and this was following changes to expiry dates on some of our products. For this year, we've made further changes to the expiry date of some of our products but these changes will benefit the second half year. And therefore, this revenue drop is all timing in nature. Overall, with billings growth of 4.6%, up versus the prior half 1, we expect year-on-year revenue growth for the full year. This slide is really a graphical view of the revenue growth I highlighted on the previous slide and how this revenue growth contributes to underlying profit. So from left to right on this chart, shopping revenue is up GBP 200,000, e-commerce revenues up GBP 600,000, payments and banking GBP 1.1 million and Love2shop revenues down GBP 1.8 million, which I've said is timing in nature. I'll cover costs on the following slide but these have increased GBP 1.3 million half-on-half. And therefore, on the right-hand side of this slide, these movements result in an overall profit of GBP 25.7 million. On costs, this slide breaks down the GBP 1.3 million increase that I mentioned, most notably is the inclusion of OBConnect costs of GBP 1.8 million following the majority stake we took in this business in the second half of last year. We've also seen additional depreciation and amortization of GBP 500,000 and GBP 500,000 in respect of financing costs. Offsetting these costs is a GBP 1.5 million reduction in people and overheads, which is the continuation of strong cost control discipline across the group. So these factors result in a GBP 1.3 million increase in costs of GBP 59 million. Next on cash generation. We had a GBP 24.2 million of cash generation from operating activities in the half which is down GBP 4.3 million versus the prior half of GBP 30.7 million, and that delta is primarily working capital in nature. Further down the cash flow statement, we have tax of GBP 4.6 million, CapEx of GBP 10.9 million, which has increased by GBP 1.5 million half-on-half as we continue to invest in systems' modernization, a GBP 10.4 million payment in respect of the legal settlement, a one-off payment to the pension scheme of GBP 1.5 million. And then we have the GBP 43.5 million cash in from the part disposal of Collect+, along with a GBP 13 million outflow for shares bought back in half 1 and GBP 13.9 million in respect of dividends. This gave an overall reduction to net debt of GBP 13.4 million for the period to GBP 84 million. Very briefly on balance sheet. Net assets for the group of GBP 102 million are GBP 4.7 million higher than the March year-end position. And the key drivers of the swings are obviously half 1 earnings of GBP 14.9 million, the proceeds of GBP 34.1 million net following the ID investment in Collect+. And we've actually used these proceeds to subsequently distribute a special dividend of 50p per share, and that resulted in GBP 34.5 million going out in the second half of this year. Alongside that, the 12 for 13 share consolidation reduced our share capital by circa 5.3 million shares. Other key balance sheet movements are the dividends paid of GBP 13.9 million and the share buyback of GBP 30 million. And similar to the prior half on the share buyback for accounting purposes, we've provided for the full GBP 30 million commitment in these balance sheet numbers. Lastly, before I pass back to Nick, on the left-hand side of this slide, we continue to invest in the business to drive future revenue streams and improve operational resilience and efficiency. We've increased the interim dividend by 2.1% to 19.8p, while targeting a cover of over 2x and along with the buyback targeting leverage ratio of 1.2 to 1.5x. For this financial year, the business is on course to generate over GBP 90 million of shareholder returns through a combination of the ordinary dividend, the special dividend and the GBP 30 million share buyback. On the right of this slide, we expect net debt to increase in the second half, driven by those ordinary and special dividends and the share buyback, plus up to GBP 25 million in respect of CapEx for the full year. And with the second half spend, we fully expect to stay within the target leverage ratio of 1.2 to 1.5x. I'll now pass you back to Nick. Nicholas Wiles: Rob, thank you. And now really turning to the progress in the delivery of our key growth projects in the first half. I think as a business, the standout achievement of the first half has been the launch of multiple projects, both enhance our consumer proposition and establish important partnerships that strengthen the long-term prospects for the business. Firstly, as I said, we've launched PayPoint BankLocal into our retailer network, enabling cash deposit or withdrawal with Lloyds Banking Group, the first of our high street banking partners. Secondly, we've launched Royal Mail Shops and a strategic investment into Collect+. And finally, we've taken further steps to accelerate our partnership between Love2shop and InComm Payments for the merchandising of the Love2shop gift card across multiple retail channels. Turning now in a bit more detail to each of these. On successful launch of BankLocal service in August, I think, was a major achievement for the business, involving a group-wide collaboration. Lloyds Banking Group are the first high street bank to use this service, enabling their customers through our network to deposit cash via both app and card. In terms of success to date, we've seen a rapid adoption of this service from Lloyds Banking customers with the strength of our network delivering genuine convenience for cash banking services. Consumer and press feedback has been positive. And as we've seen with other of our services, as the pattern of transactions becomes established, we see strong demand for the service outside traditional opening hours and a weekend. And in terms of what next, I think following the strong start and early adoption, our focus is now very much on further developing our cash banking services in the second half with the next phase of work focused on driving consumer awareness through a variety of channels, accelerating our SME banking solution and those plans [ succeedly ] can launch in Q2 of next year and engage further with other high street banks for our range of cash deposit solutions. Overall, we expect to make significant progress in the rollout of our cash banking services over the next 12 months. Turning now to Collect+. The investment by Royal Mail into Collect+ announced at the end of September was a really important strategic step in our partnership with Royal Mail. The partnership strengthens the positioning of Collect+ as the leading out-of-home network and will enable the future expansion of further Royal Mail services into the network. It will enable further investment in both our consumer service proposition and our retailer network support as the partnership adds to our existing carrier relationships as part of a carrier-agnostic network. The launch of Royal Mail Shop in the Collect+ network reflects our confidence in the strength of the Royal Mail brand and the opportunity to enable for consumers a broader Royal Mail services, including postage as well as collect, send and return parcels throughout a growing portion of the Collect+ network. The rollout of Royal Mail Shops is now really gathering pace with 3,000 stores already branded Royal Mail Shop, which, as I said already, enables a wider range of over-the-counter postal services, including stamps. And by the end of our financial year, this number would have increased to at least 8,000 sites. To support this, there is an extensive consumer marketing campaign already underway with more planned over peak and into 2026 as we increase consumer awareness, drive more footfall and volume into the network. And as we look into the second half, as I said already, it's important to ensure that we have at least 8,000 sites branded and live for the full Royal Mail over-the-counter service by our year-end. We need to be taking the necessary steps, again, as I said already, to increase consumer awareness and uptake of these services. and we do launch our self-service kiosk in the first quarter of next year. And I think this is a really important time to accelerate the pace of our partnership with Royal Mail and to accelerate the consumer adoption of these services through the Collect+/Royal Mail Shop network. And now turning to our continued progress with InComm. Our partnership with InComm established just over a year ago, has been a really important step in us delivering a strong new sales channel, enabling the sale of Love2shop physical gift cards through the major high street retailers. Sales through this channel have continued to grow strongly ahead of the peak sales period in the run-up to Christmas, and we benefited from a combination of growing consumer recognition of the brand and increasing availability of our cards through these additional high street retailers. We've also seen the benefit of further rolling out the Love2shop card into our PayPoint retailer network with growth through this channel from our refreshed merchandising now up by more than 50% during the course of this year. I think with the next stage of this multichannel approach being the launch of the Love2shop Digital Mastercard in the early part of next year, enabling spend via digital wallet in-store and online, the further expansion into more high street retailer gift card malls in 2026 and more gift pegs in each of these malls and also the launch of MBL brands such as Greggs into the InComm Payment mall itself. I think we can really see this partnership is now building strong momentum which is combining the merchandising expertise and distribution channels and the reach of InComm with an outstanding multi-redemption gift card product and product innovation from Love2shop. Now turning to our business review. And firstly, in shopping, we've seen continued growth in the first half in each of our product estates with the exception of the Handepay card estate and have shown growth and some solid financial performances from the underlying business areas. We've seen continued service fee growth. And while card merchanting net revenue and process value are marginally down, I don't think this fairly reflects the continued work to strengthen the operational foundation of this business. The improvements to the quality of our card proposition and the increased focus on profitability per merchant. We also saw another strong performance from our partnership with YouLend with funding advances up by over 50% in the period. In our FMCG activities, we continue to work with a growing number of consumer brands with 16 campaigns delivered in the first half, a strong pipeline of opportunities for the remainder of this year. And in our ATM business, after a challenging period, we're seeing early signs of our recovery plan delivering results as we better manage the ATM estate and use our data to optimize individual site performance. In e-commerce, overall, a positive half for Collect+ with both net revenue and parcel transactions showing growth in terms of really all the key call-outs. As I described earlier, we launched the first phase of Royal Mail Shop, branding into the network and enabled over-the-counter Royal Mail services in over 2,000 locations. And as I described earlier, we have encountered some operational challenges from the internal harmonization of InPost and Yodel which in the period has impacted both volumes and service in the second quarter. We think the action we've taken in partnership with InPost has now stabilized this and we expect volumes to recover during the key peak period. More broadly, we continue to work hard across the wider carrier portfolio to maximize volume and performance with each carrier and support consumer adoption of out-of-home as we continue to grow the Collect+ estate. In Payments and banking, the key theme in this business has been the continued growth in our digital and open banking activities. And with the growth we are now seeing, we expect to arrive at a point soon whereby digital revenue will exceed revenues from our cash payment channels. Specific highlights from the first half have been several important new business wins, particularly in housing from a strong and well-balanced overall new business pipeline, good work to strengthen further our relationships with our existing clients with a number of upselling initiatives and several important client wins for our open banking activities. Our first half digital revenue does include a latent contribution from our majority-owned OBConnect platform. And finally, in Love2shop, as Robert said already, the adoption of a more prudent accounting treatment in terms of the timing of revenue recognition from the expiry of cards which we announced, I think, at the time of the acquisition, has resulted in a timing impact to the headline performance of the business which will be unwound in the second half of the year. Operationally, the business continues to perform well. I've already described the progress in our partnership with InComm [Audio Gap] position for our peak trading period. In Park Christmas Savings, we expect to deliver a flat performance for the year after some good work through the year to support our agents and strengthen the saver proposition as we already turn our focus to the 2026 savings campaign. And in MBL, we've had an outstanding first half with a doubling of process value, which reflects the growing reach of this business and its brand partners. And with this, I'll now hand over to Rob to give you an update on our organizational framework project. Rob Harding: Thanks, Nick. In our FY '25 results, we announced a key target was establishing a framework to deliver greater automation and agility. We've now recently completed Phase 2 of this project, supported by now an independent consultant to identify how we can drive this automation agility across 3 key processes: onboarding, customer support, and billings & settlement. The outcomes from this phase are a clear articulation of the target future state for each of these 3 processes, including key outcomes for each, which you can see from this slide. For example, for customer support, we're driving customer self-service capability in response to high-volume, low-value calls. Additionally, for each process, we've set out the benefits from moving to the target future state with financial benefits such as an additional revenue or lower costs and other benefits, for example, improved customer service levels or satisfaction levels. Preliminary estimates have identified at least GBP 2 million of operational profit upside from moving to the desired future state with a potential to grow this figure further through the next phase of work. And this includes identifying technical solutions and external providers to support the shift to the target state, along with the costs associated with this transition. We expect this next phase of work to be completed in advance of our full year results announcing June '26, followed by implementation commencing early in FY '27. I'll now pass you back over to Nick to cover our outlook. Nicholas Wiles: Thanks, Rob. So turning to our outlook for the year. After a resilient first half performance and despite the impact of the 2 specific challenges that I've already described, the Board remains confident in both delivering further progress in the current year and achieving our medium-term financial goals. We're executing our key projects well, and we do expect these to have a meaningful impact on our long-term performance. In a number of areas, our focus has already shifted to coordinating plans to support the accelerated consumer adoption of these projects, and there's more to come in this area. Look, the current trading environment is not an easy one. Consumer confidence is weak and household budgets remain tight. However, as we enter our most important seasonal trading period for a number of our businesses, we are confident in the plans we've made to execute well and our early signs continue to be encouraging. We remain confident in the growth opportunities we have as a business and that we have a strong platform from which to deliver continued strong returns for shareholders. As we said already in the current year, we're on course to generate returns to shareholders of over GBP 90 million. through a combination of our ordinary dividend, special dividend and share buyback program. And today, we've announced -- declared an interim dividend of 19.8p, which is an increase of 2.1%, and which is consistent with our dividend policy. And with that, we're very happy to answer questions. Operator: [Operator Instructions] The first question comes from Michael Donnelly from Investec. Michael Donnelly: Can you hear me okay? Nicholas Wiles: Yes. Michael Donnelly: A couple for me, please. First of all, can you tell us a little bit more about what Nile are likely to be doing in the next phase. So that's what the expected costs. You've disclosed the costs in the first half, which is really useful. But the cost of benefits and the cost savings that are likely to come through from their work in '27, '28? And then secondly, thanks for the update on RM and IDS. Is it possible to talk a bit more granularly about the trajectory of RM volumes since the IDS investment? Or should we be modeling -- maybe forget second half this year and model a ramp-up more into '26 rather than seeing the benefits -- the volume benefits of the investment come through in the second half? Nicholas Wiles: Yes. Thanks, Michael. Rob, why don't you tackle Nile first, that would be helpful. Rob Harding: Yes. No, as I said, where we are today for each of those 3 key processes that I mentioned on the call, we've got a clear view of what the desired end state looks like and the benefits, and we've talked about 2 million plus worth of opportunities in terms of upside there. The next phase is really about going through the kind of selection process, external suppliers, vendors, et cetera, that will support that shift to that desired future state and the costs associated with that transition. And as a part of that, obviously, we'll be making sure that the business case stacks up, so we make sure that the size of the prize is obviously exceeding the investment required. So really, Michael, the next phase of this is all about identifying external providers technology to help us to move that desired future state and making sure the business case stacks up. And that will take us probably to the end of this financial year, and therefore, we should be getting ready to execute and implement in early of next year. But we're still going through that kind of selection of suppliers and business case development at this stage. Nicholas Wiles: And then just on the second of your questions, Mike. I mean I think the starting point for the Royal Mail investment, which I think we were clear about when we made the announcement on the 30th of September was that a combination of the special dividend, share consolidation and the ramp-up of volume would result actually in the transaction as a whole being earnings enhancing. But I think specific to your point around the ramp-up of volume, I think as we said already, we're growing the network and the rebranding of the network as quickly as we can. We're working really hard with Royal Mail to move as much volume into the network as quickly as possible. We're seeing that ramp-up take shape, particularly since the autumn. And I think the peak period is an important time to see that move further. But these things do take time. And I think we'll see a much more meaningful contribution from the Royal Mail volume when we get into the next financial year. So I think your core sort of premise that we will see a more meaningful impact from Royal Mail volume in the Collect+/Royal Mail Shop network next year. But I mean, the ramp-up is clearly meaningful, not least given the size of Royal Mail in terms of a carrier in the U.K. parcels market. Operator: The next question comes from Joe Brent from Panmure Liberum. Joe Brent: Three questions, if I may. Firstly, there's obviously lots to talk about, but I don't think you mentioned Lloyds Cardnet. Could you give us an update there? Secondly, in e-commerce, could you remind us where we are with the Chinese e-tailers? And thirdly, just following up on Michael's point on automation. It feels like the GBP 2 million will start to impact in FY '27, is that right? And could you maybe give us some indication of the scale of future savings there? Nicholas Wiles: Rob, do you want to start with the automation point, that would be great. Rob Harding: Yes. I think we said that we've got line of sight to at least GBP 2 million here. And I think the question becomes how quickly can we execute and what's the cost to execute. And I think really looking at the full year to give that clear view, I mean, I am hoping to accelerate as much of that benefit as possible in FY '27, [indiscernible] et cetera, we can't pinpoint with accuracy. So I think probably give us until the full year results to get real clarity in terms of if we're going to drop some benefits in, let's be really clear once we've gone through that selection process with external providers, the vendor solutions and gone through that business case development. But I say I'm anxious to accelerate, get any quick wins as possible into FY '27 and drive costs down. Joe Brent: Would the cost of that be treated as non-underlying or be taken above the line? Rob Harding: Yes. We've taken those to exceptionals. So within the kind of restructuring that I mentioned in the exceptionals for the first half, we had about GBP 500,000, GBP 600,000. So that's where we'll be treating the costs going forward. Nicholas Wiles: Cards business, I think, look, we've seen a small fall in the total size of the estate. And I don't think there's a particular reason for that. I think, look, it remains a competitive market. I think our card proposition, and I include Lloyd's Cardnet alongside the EVO proposition as part of that, I think it's stronger than it's ever been. And I think it's really competitive now in the marketplace. I think that our emphasis is increasingly switching from the number of retailers and the number of underlying merchants that we have to actually the quality of that business and importantly actually sort of the revenue that it generates. The acquiring business in the first half was down year-on-year by about 8% in terms of processed volume. And I think that reflects a combination of things, including, I think, a tough retail environment, particularly for our convenience sector. And I think that's probably been our weakest sector actually across our card book, and that's probably where it's been most competitive. I think as we look into the second half, I think we're expecting certainly our sales performance in the second half to improve. I think we've got a really strong proposition, as I said on the street. Our telesales team are performing very well. Our field team are certainly performing well. And I think we've had a number of new additions, new processes there, which I think will really deliver in the second half. So I feel quietly confident that we will continue to make progress in what clearly as we know very well, is a very competitive market. But ultimately, we need higher levels of consumer spend, and we haven't seen that in our estate in the first half. On the Chinese, look, it's a great question. And I think that the Chinese have been relatively slow to create out-of-home choice at the customer checkout for customers using the Chinese marketplaces. They have adopted the out-of-home for returns but we haven't seen them sort of adopt out-of-home at the pace that, for example, we've seen Vinted adopt out-of-home for their principal fulfillment for their own marketplace. We continue to work with the Chinese. And by that, I mean, sort of Shein, TikTok, Temu and ultimately, it's all down to price. And their conversations we're having directly with our carrier partners because we all want to work to move volume from to-door into the out-of-home network channels, whether that's working with InPost to get the choice of locker and PUDO or that's working with Royal Mail to offer the choice of actually the Royal Mail Shops. So I think there's more work to do there. There's clearly a major opportunity because cross-border volume is going to be increasingly important to us, but we haven't yet seen that adoption in the consumer checkout in the way that we need. And that's going to be an opportunity for us into the next year. Operator: Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Nick Wiles for any closing remarks. Nicholas Wiles: Look, thank you. Thank you very much, everybody, for joining us this morning. As I say, it's been a robust performance in the first half, some major opportunities to unfold during the second half, and we look forward to updating you later in the year. So thank you. Have a good day.
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