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Operator: Ladies and gentlemen, thank you for standing by, and welcome to Kanzhun Limited third quarter 2025 financial results conference call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question and answer session. At this time, I would like to turn the conference over to Ms. Wenbei Wang, Head of Investor Relations. Please go ahead, ma'am. Wenbei Wang: Thank you, Operator. Good evening, and good morning, everyone. Welcome to our third quarter 2025 earnings conference call. Joining me today are our founder, chairman, and CEO, Mr. Jonathan Zhang, and our director and CFO, Mr. Fu Zhang. Before we start, we would like to remind you that today's discussion may contain forward-looking statements which are based on management's current expectations and observations that involve known and unknown risks, uncertainties, and other factors not under the company's control, which may cause actual results, performance, or achievements of the company to be materially different. The company cautions you not to place undue reliance on forward-looking statements and does not undertake any obligation to update this forward-looking information, except as required by law. During today's call, management will also discuss certain non-GAAP financial measures for comparison purposes only. For the definition of non-GAAP financial measures and a reconciliation of GAAP to non-GAAP financial results, please see the earnings release issued earlier today. In addition, a webcast replay of this conference call will be available on our website at ir.jipin.com. Now I will turn the call to Jonathan, our founder, chairman, and CEO. Jonathan Zhang: Hello, everyone. Thank you for joining our company's third quarter 2025 earnings conference call. On behalf of the company's employees, management team, and board of directors, I would like to extend our sincere gratitude to our users, investors, and friends who have continuously believed in and supported us. I will briefly walk through our key operational results and business progress this quarter, focusing on three areas. First, recovery in demand through a priority growth in our third quarter performance. Second, the evolving characteristics of recruitment demands across different dimensions. Third, progress in integrating AI into our products, technology, and overall business operations. Let's start with the financial performance. In the third quarter, we generated a total revenue of RMB 2,160,000,000, up 13.2% year on year, with growth accelerating from the previous quarter. Excluding share-based compensation expenses and other income, such as investment gains, our adjusted operating profit grew 949.3% year on year. Our GAAP net profit was RMB 2,718,000,000, up 67.2% year on year, with a net profit margin of 35.8%. Part of this improvement was attributable to a decrease in share-based compensation expenses, which was only RMB 220,000,000 this quarter, marking the third consecutive quarter of sequential declines and a year-on-year drop of 21%. The growth in the third quarter was driven by two key factors. The first and most important driver was continued user growth, supported by our increasing penetration and expanding market share. From January to October, we acquired over 40,000,000 newly verified users. In the third quarter, the average verified monthly active users, which is amazing on the bus ticketing app, reached 63.82 million. User activity is also strong. According to such data, our DAU to MAU ratio has been maintained at a high industry-leading level. The second driver was the rebound in enterprise-side demand, which also helped improve data on the monetization side. In the third quarter, the newly posted job positions increased 25% year on year, while both the number of recruiters posting new jobs and the average number of posts per recruiter grew steadily compared to the previous quarter and the same period last year. From July to September, the average number of daily active enterprise users grew at a faster pace sequentially than job seekers, marking the first time this has happened in three years. The supply-demand balance on our platform, meaning the ratio of enterprise users to job seekers, continued to improve. By September 30, the number of paid enterprise customers in the twelve months grew 13.3% year on year to 8.68 million. Throughout the quarter, the paying ratio among quarterly active users increased both year on year and quarter on quarter. The second agenda item focuses on a service entry point for current demand this quarter from multiple perspectives. From an industry perspective, blue-collar revenue growth continued to lead, with its revenue contribution reaching a record high in the third quarter. Manufacturing industries remain the most robust sector, topping the industry's revenue growth for five consecutive quarters. Taking this opportunity, I would like to do a brief review. Three years ago, the company's strategy for serving manufacturing job seekers and recruiters divided into three stages in terms of priority. The first stage is to improve the online job search environment for blue-collar workers. Between the passage of a solution for the same managed ticket or managed first and profit board second, we chose the second path. The second stage is to develop a user scale for that user base on the platform. And the third stage is to pursue commercial benefits on a reasonable scale. In 2022, we launched the Cont project to purify the job search environment for blue-collar workers, pursuing the authenticity of recruiters, job positions, and compensation, combating false information, and increasing their trust. Over the past three years, the process has been extremely challenging, and the results have gradually emerged. Meanwhile, transportation, logistics, warehousing, and the service industries also delivered solid overall performance. Among the white-collar sectors, industries such as artificial intelligence, Internet service, lifestyle service, new retail, and gaming are experiencing leading growth. One thing worth mentioning among the white-collar segment is that we have noticed a notable increase in participation from small and medium-sized enterprises in the white-collar industry, with paying user numbers growing quickly, while the average spending per customer remains stable, which is an offset to the trend of previous patterns. This, to a certain level, reflects the arrival of the white-collar entrepreneur ecosystem. From the perspective of compute-side demand, in Tier 1 cities is rebounding, Tier 2 cities remain stable, and the revenue contribution from Tier 3 and below cities continues to rise. Among enterprises of different sizes, medium-large enterprises, which means employers with between 500 to 999 employees, are growing the fastest, followed by small and micro enterprises, and then very large enterprises. The third agenda item reviews the progress we made since AI was integrated into the company's business from a product and technology perspective. On the Dosynchron service side, there are two things worth mentioning. First, after a period of continuous iteration, an AI job search assistant has been fully launched for all job seekers. Currently, it can recommend positions for users, answer questions, and also provide suggestions on how to optimize their resumes. In the third quarter, not only was the full rollout of this product achieved, but the number of interactions per user with this AI job search assistant also showed a significant quarter-on-quarter increase. We have also been continuously optimizing the AI interview coaching feature. In the third quarter, the number of job seekers who completed the mock interviews showed further improvement, and their activity level and conversion rate continued to improve compared to the previous quarter. On the recruiter service side, multiple AI products have been gradually launched to provide services. There are four aspects to mention. The AI communication assistance feature is being gradually integrated into existing commercial value-added products. As a result, the average mutual achievement conversion ratio of these products has increased by 7%. A product called AI Quick Hiring, after continuous optimization, is currently under phased rollout. Experiments show that this product not only helps the platform better understand recruiters' intentions but also allows for comparison among all job seekers on the platform, thereby improving matching accuracy. Currently, the reading rate among recruiters participating in the phased rollout campaign is steadily increasing. Third, we have extended the AI interview feature to a number of well-known customers from the contract recruitment side. For example, the AI interview can support multiple rounds of questions and customize interviewer profiles. This product has very strong appeal to students, leading to a high volume of applications in the short term, which is increasing significant pressure for recruiters during campus recruiting activities. The development of AI services has alleviated this pressure. Fourth, we are cautiously exploring AI-hosted recruitment services and AI-powered bulk placement solutions in diverse recruitment scenarios such as high-end white-collar and gold-collar positions, and blue-collar roles in the patroning and manufacturing industry. These initiatives are gradually generating benefits. Among all those enterprise-side AI services, we have been quite cautious to ensure we allow the job seekers to know whenever they are communicating with an AI service. They have the option to close the service. They have the button, and sometimes, someone might choose to close, but someone chooses to continue the communication, and we are continuously collecting related examples. We provide the option for job seekers whether they can communicate with AI or not to guarantee their interest. But, also, we are continuously observing with the intervention of AI what kind of impact it will have on mutual matching, not only on individual topics on a cultural perspective but also from a scalable double-side situation. We are continuing to update and track data. In the third quarter, we delivered high-quality growth with solid progress across user growth, commercialization, and AI technology implementation. In October, the company completed an annual dividend payment of approximately $18,000,000. Looking ahead, we will continue to focus on strengthening our core business ability. We will actively fulfill our commitment to shareholders. That concludes my part of the call. I will now turn it over to our CFO, Phil, for the review of our financials. Thank you. Phil Yu Zhang: Thanks, Jonathan. Hello, everyone. Now let me walk through the details of our financial results for 2025. In this quarter, we delivered high-quality and sustainable top-line and bottom-line growth. Our revenue reached RMB 2,200,000,000 this quarter, with growth accelerating to 13% year on year. The faster revenue growth this quarter was primarily driven by higher enterprise user growth as well as improved monetization levels due to the recovering hiring demand. Our commercialization strategy, grounded in ecological balance, enabled us to effectively and sustainably improve user payment ratios within a relatively better hiring environment. The growth in paid enterprise customers, which grew by 13% to 6,800,000 for the twelve months ended September 30, demonstrates our capability and potential to enhance monetization. Revenue from middle-sized and small-sized accounts showed continued growth momentum, with revenue contribution in this quarter up by 2.2 percentage points, while key accounts growth remained stable. As a result of the structural mix shifting, the overall ARPPU maintained stability. Moving to the cost side, total operating costs and expenses decreased by 7% year on year to RMB 1,500,000,000 in this quarter. Share-based compensation expenses dropped by 21% year on year and 6% quarter on quarter to RMB 216,000,000, shrinking for the third consecutive quarters in both absolute amount and percentage of revenue. Excluding share-based compensation expenses, adjusted income from operations grew by 49% to RMB 9,004,000,000, and our adjusted operating margin reached 41.8%, up by 10.1 percentage points year on year and relatively flat quarter on quarter. Cost of revenues decreased by 2% year on year to RMB 308,000,000 in this quarter, mainly due to the decrease in operational employee-related expenses as a result of improved operational efficiency as we continue to engage AI in our daily operations. Gross margin went up by 2.2 percentage points year on year and 0.4 percentage points quarter on quarter to 85.8%. Sales and marketing expenses decreased by 25% year on year to RMB 394,000,000 during this quarter. As we do not have sports events or marketing campaigns this year, even if we exclude the sports sponsorship costs, our adjusted sales and marketing expenses in this quarter decreased 15% year on year, while we still maintain robust user growth. This double confirms our sustainable increase in marketing efficiency due to our strong brand recognition and network effect. Our R&D expenses decreased by 12% year on year to RMB 408,000,000 in this quarter. Excluding share-based compensation expenses, our adjusted R&D expenses decreased by 8% year on year to RMB 331,000,000 in this quarter and have stayed relatively flat sequentially. Our G&A expenses increased by 28% to RMB 367,000,000 in this quarter, primarily due to a one-off impairment of intangible assets partially offset by a decrease in employee-related expenses. Excluding the impairment, our G&A expenses decreased both year on year and sequentially. Our interest and investment income in the quarter increased by 43% year on year to RMB 228,000,000, primarily due to partial disposal of an equity investment and the increased income from the Hong Kong dollar 2,200,000,000 Hong Kong share offering processed in early July. Our net income increased by 67% to RMB 775,000,000 in this quarter, with adjusted net income increased by 34% to RMB 992,000,000. Net margin improved by 11.6 percentage points year on year to 35.8%, while adjusted net margin reached 45.8%, up 77.2 percentage points year on year. Both of them have maintained sustainable improvement over the past six consecutive quarters. Net cash provided by operating activities reached RMB 1,200,000,000 in this quarter, up 45% year on year. As of September 30, 2025, we continue to maintain a strong cash position of RMB 19,200,000,000. Now for our business follow-up, for 2025, we expect our total revenue to continue the growth momentum and reach between RMB 2,050,000,000 and RMB 2,070,000,000, with a year-on-year increase of 12.4% to 13.5%. With that, concludes our prepared remarks. And now we would like to answer questions. Operator, please go ahead with the call. Operator: Thank you. We will now begin the question and answer session. Please press 11 on your telephone keypad to ask a question. Please wait for your name to be announced. To withdraw your question, please press 11 again. We will now take our first question from the line of Eddy Wong from Morgan Stanley. Please go ahead, Eddy. Eddy Wong: Thank you, management, for taking my question. I have two questions. First, what is the overall recruitment demand recently? We noticed that the unemployment rate in September and October is improving. Do you think this is mainly due to seasonal factors, or is the improving trend a leading indicator of macro recovery? What are the driving factors behind the accelerating growth in the third quarter? My second question is that as we are approaching the end of the year, what is your perception of the key account renewal willingness right now? Are there any noticeable trends in customer renewal rates or the renewal amount? Thank you. Jonathan Zhang: From our data perspective, the recruitment activities from enterprises indeed recovered in the third quarter. The growth rate of monthly active users on the enterprise side is faster compared to the job seeker side. Pressure from the job seeker side has been alleviated. If we recall back in 2021 and 2022, it was a little bit difficult for fresh graduates to find a job. In the opening, whichever was affecting or not happening as we expected, young people, especially young people, found it really difficult to find a job. This year, take July, for example, the fresh graduates' expression for job-seeking demand compared to the same period of last year declined by double digits. Meanwhile, from the enterprise side, the companies that have posted job openings for fresh graduates increased by double digits. From the situation on both ends, especially from the fresh graduate as an example, we quite clearly felt that the pressure which has been accumulating for several years was released a lot in the third quarter. In the third quarter, the ratio between job seekers and recruiters among active users improved compared to last year. The newly added user ratio also improved, and the third quarter is better than the third quarter of the previous year, which gives us continued confidence. So it is quite easy to understand that based on the improving change of supply and demand balance, we treat the recovery of the enterprise side and the improvement of the pay ratio as helping our overall business operation. The first quarter last year was a relatively low base, so from a cautious perspective, we also compared it to 2023 in the same period. It is worth mentioning that the recovery of the white-collar sector, for example, the newly added number of job postings for the white-collar profession in the first quarter, increased significantly compared to the second quarter and the previous three quarters. Based on all these observations and comparisons, I have the confidence to conclude in my prepared remarks that the improved hiring demand drove our third-quarter revenue growth. That is where my confidence comes from regarding the retention situation that you are concerned about. Phil Yu Zhang: So, Eddy, you know, companies renew their contracts individually at different points in time, not only at the year-end. Starting from the year, we have witnessed improving contract renewal rates, improving continuously. Particularly in the third quarter, for the first time in the past two years, the company-level net dollar retention rate started to bottom up. This signals a potential turning point from a previous downward trajectory. We believe this is driven primarily by improved company retention rates and higher renewal spending. We observed that this situation is not only at the key account customers but also at the small and medium-sized enterprises. Typically speaking, the company's renewal contract renewal situation improved sequentially and annually. This once again proved that the higher demand in the economy has been recovering healthily. And that is our answer to your question, Eddy. Operator, please move on to the next. Operator: Thank you. Our next question comes from Wei Xiong from UBS. Please go ahead. Wei Xiong: Thank you, management, for taking my question. Firstly, we observed that our company has continued outgrowing peers for the past few years. So if we look at the enterprise recruiting budget allocation, how much more share can we continue to gain over peers, and how do we sustain that above-peers growth going forward? Looking at next year, if the macro situation improves, will we continue to solidify our leadership, or is it possible to see higher competition pressure because the peers may step up investments? And secondly, on the margin side, given the high base this year, how do we think about the trend for our margin next year? What are the major investment areas, for example, in terms of sales marketing, do we think about the spending plan there? And previously, given the macro uncertainty, we said we want to prioritize profitability. So looking at next year, are we going to continue prioritizing that profitability or leaning towards investing a little bit for growth? Thank you for taking my question. Jonathan Zhang: I would like to start with our number of paid enterprise customers, which grew by 13.3% to 6,800,000 by the trailing twelve months. In fact, the majority, or maybe over 80% of these paid enterprise customers, are small and micro enterprises, which we use our own business model and go-to-market strategy developed over the years. By mentioning this, I would like to clarify two concepts. First, the majority of our main pay-based customers are developed on our own rather than gaining shares from our peers. The second concept is that there is data about China having over 40,000,000 small and medium-sized enterprises, and our entire enterprise cap number of paid enterprise customers is still a small percentage of that. That is why even in a relatively tight macro situation, we still have ample room to grow in terms of our market share. The logical conclusion is that when the market recovers and demand improves, we can achieve better revenue and business growth rates. But on a competitive landscape perspective, we need to admit that for the customers both we and our peers are serving, especially under economic pressure situations, clients normally tend to choose service providers who have better ROI and higher service ability, and we do have some advantages over that. Regarding profitability, which you are concerned about, the current profit margin you observed is actually a strategic selection from our company level. Last year, we decided that facing all of these uncertainties, we want to make sure that the only certainty is to guarantee profit, and this year, you have seen our very strong implementation capability and realized profit numbers. Essentially, this very strong margin profile actually reflects our effective double-sided network effect, further penetration into user mindset, and very efficient and smooth internal management and operation, all of which result in this high margin profile. As a result, I cannot predict if the profit margin for next year will continue to improve. Actually, we will not sacrifice our branding growth to achieve this profitability. So for next year, we still want to guarantee us to be with the 35,000,000 newly verified users. Our pursuit in better serving users and achieving higher revenue growth actually has higher priority compared to our pursuit of profitability. Our strategic level view on our profitability, and we hope you and our investors can better understand what profitability means to us. For your reference, and that is our answer to your question. Operator, please move on to the next. Operator: Thank you. Our next question comes from Timothy Zhao from Goldman Sachs. Please go ahead. Timothy Zhao: Thank you, management, for taking my question, and congrats on the solid results. Two questions from my side. First, as Jonathan just mentioned, we are going to explore more in the different verticals within the recruitment industry. Could management share more progress and updates on this? And what are the potential impacts on our services and monetization in the longer term? Secondly, on the AI-related question, we noticed that OpenAI recently announced its entry into the recruitment industry. Some other AI startups like Merkur have also been evolving their business models. Could management share your view on the competitive landscape between the traditional recruitment platforms and the general AI companies in the recruitment industry? Thank you. Jonathan Zhang: When we are trying to combine AI and human activities, we have some very interesting findings under our conjugate experiments. For example, when a customer is quite angry and cannot contain their temper while facing a customer service representative, they could be quite aggressive. But when the customer knows that the counterpart is AI, they normally take some very harsh words. So the beta complaint from the customer trained AI is, "You are very stupid AI." The second example is for our AI interview coaches product. A lot of job seekers who have used this service repeatedly to train their interview skills once and once again. But we found out that when the job seeker's second scoring is lower than the first one, they will stop this repeat. So you can see the number of interesting findings in our daily experiment. People can control their temper well when facing AI, and also people do not want to bother a real human coach very frequently, but they can do that with AI. All these findings are telling us that when we apply AI technology to a very old, very ancient people and job matching, superior and subordinate matching scenarios, we need to be very cautious while using the new technology. For more than two years, it is really exciting for a sampling model to be able to generate a killer-level application in our industry. Actually, we are not in a hurry, and it actually gave us more time to find a way to harness all this new development and technology. I just mentioned that in certain placement scenarios, both in blue-collar and white-collar recruitment, such as full-cycle hosting recruitment service or semi-cycle hosted recruitment service, we have been very actively trying out new services, but also quite cautiously. So far, we have some achievements, but still not in a stage to massively roll out this. We also noticed that some leading technology companies who have been empowered by AI have expressed their interest in entering the recruitment industry. The new technology combined with old and the questions possibly can generate revolution-level industry change. Like the mobile network and recommendation technology combined with the traditional recruitment demand that have generated faster too fast. This new generation of online recruitment model. Up to today, my thinking is that the combination of AI and recruitment service's key bottleneck is actually not computing power. Merkur, who has in the bottom professionals to do the tagging, actually shows the value of high-quality data. If high-quality data is very critical, then with the foster team, other peers within our industry actually have some certain level advantages. Just to leverage your question, I want to express some observations we noticed from our data operations. And that is all of our answer to your question, Timothy. Thank you. Operator: Thank you. Due to time constraints, that concludes today's question and answer session. At this time, I will turn the conference back to Wenbei Wang for any additional or closing remarks. Wenbei Wang: Thank you once again for joining us today. If you have any further questions, please contact us directly. Thank you. Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect your lines.
Operator: Ladies and gentlemen, thank you for standing by. Welcome to Elbit Systems' Third Quarter 2025 Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to hand over the call to Daniella Finn, Elbit Systems' VP, Investor Relations. Daniella, please go ahead. Daniella Finn: Thank you, Karen. Hello, everyone, and welcome to our third quarter 2025 earnings call. On the call with me today are Butzi Machlis, President and CEO of Elbit Systems; and Kobi Kagan, Corporate CFO. Before we begin, I would like to point out that the safe harbor statement in the company's press release issued earlier today also refers to the contents of this conference call. As usual, we will provide you with both GAAP financial data as well as certain supplemental non-GAAP information. We believe that this non-GAAP information provides additional detail to help understand the performance of the ongoing business. You can find all the detailed GAAP financial data as well as the non-GAAP information and the reconciliation in today's press release. Kobi will begin by providing a discussion of the financial results, followed by Butzi, who will talk about some of the significant developments during the quarter and beyond. We will then turn the call over to question-and-answer session. With that, I would like to now turn the call over to Kobi. Kobi, please go ahead. Yaacov Kagan: Thank you, Daniella. Hello, everyone, and thank you for joining us today. We are very pleased to announce another set of quarterly results with double-digit year-over-year growth in revenues, backlog and EPS. Quarterly free cash flow was solid at $101 million, underscoring our healthy cash generation. I will now highlight and discuss some of the key figures and trends in our financial results this quarter. Third quarter 2025 revenues were $1.922 billion, compared to $1.718 billion in the third quarter of 2024, a solid 12% growth in quarterly revenues year-over-year and 18% growth for the 9 months ended 30th September. In the third quarter of 2025, Europe contributed 28%; North America, 21%; Asia Pacific, 14%; and Israel was 33% of revenues. GAAP gross margin in the third quarter was 24.9% of revenues compared to 24% in the third quarter of 2024. The non-GAAP gross margin for the third quarter was 25.2% of revenues, compared to 24.4% in the third quarter of 2024. GAAP operating income for the third quarter was $171.4 million or 8.9% of revenues versus $125.8 million or 7.3% of revenues in the third quarter of 2024. Non-GAAP operating income was $186.7 million or 9.7% of revenues, compared with $140.7 million or 8.2% of revenues in the third quarter of last year. We are very pleased with this margin expansion trajectory. The operating expense breakdown in the third quarter was as follows: net R&D expense were $129.1 million or 6.7% of revenues, compared to $119.9 million or 7% of revenues in the third quarter of 2024. Elbit continues to invest in R&D to secure future profitable growth, which will maintain Elbit's position as the market leader in years to come. Marketing and selling expenses were $91 million or 4.7% of revenues versus $91.3 million or 5.3% in the third quarter of 2024. G&A expenses were $86.7 million or 4.5% of revenues, compared to $75.7 million or 4.4% of revenues in the third quarter of 2024. Financial expenses were $34.5 million in the third quarter, compared to $45 million in the third quarter of 2024. The decrease in financial expenses, net in the third quarter of 2025, was mainly due to a reduction in the average net debt. We recorded a tax expense of $11.4 million in the third quarter compared to $12.8 million in the third quarter of 2024. The effective tax rate in the third quarter of 2025 was 8.2% compared to 14.6% in the third quarter of 2024. The decrease in the effective tax rate for the third quarter of 2025, was mainly due to the increase in deferred tax assets. GAAP diluted EPS was $2.80 for the third quarter of 2025 compared to $1.77 in the third quarter of 2024. Our non-GAAP diluted EPS was $3.35 for the third quarter of 2025, compared to $2.21 in the third quarter of 2024. Quarterly segment revenue for the third quarter of 2025. Aerospace, third quarter revenues decreased by 3% year-over-year, mainly due to a decrease in Precision Guided Munition sales in Asia Pacific, partially offset by the increase in PGM sales in Israel and an increase in unmanned aerial system sales in Europe. Revenues for the 9 months were up 9%. C4I and Cyber, revenues increased by 14% year-over-year, mainly due to radio systems and command and control system sales in Europe. For the 9 months, revenue rose by 15%. ISTAR and EW, revenues increased by 5% in the third quarter of 2025, mainly due to Electro-Optic systems and Electronic Warfare systems sales in Israel and high-power laser sales in Israel. For the 9 months, revenue increased by 8%. Land revenue increased by 41% in the third quarter of 2025, due to ammunition and munition sales in Israel and in Europe. For the 9 months, revenues were up 44%. Elbit Systems of America, revenues decreased by 2% due to a decrease in Electronic systems and medical instrument sales, partially offset by the increase in Maritime and Warfighter system sales. For the 9 months, revenue rose 6%. The order backlog as of September 30, 2025, was $25.2 billion, $3.1 billion higher than the backlog at the end of the third quarter of 2024, and $1.4 billion higher than the backlog in the second quarter of 2025. The increase in backlog during the quarter came mainly from new European orders. Approximately 69% of the current backlog is derived from order outside of Israel. Approximately 38% of the current backlog is scheduled to be performed during the remainder of 2025 and during 2026. And the rest is scheduled for 2027 and beyond. Cash flow provided by operating activities in the 9 months ended September 30, 2025, was $461 million, as compared to $82.5 million in the 9 months ended September 30, 2024. The cash flow in the 9 months ended September 30, 2025, was affected mainly by the strong increase in net income. On the back of the continuous strength of the company's result the Board of Directors declared a dividend of $0.75 per share to be paid on January 5, 2026. I will now turn the call over to Mr. Machlis, Elbit's CEO. Butzi, please go ahead. Bezhalel Machlis: Thank you, Kobi. Hello, everyone, and thank you once again for joining us today. As Kobi just described, these results continued the growth and margin expansion trajectory, driven by strong demand for our solutions, particularly in Europe and Israel. Elbit's seventh consecutive quarter of double-digit growth further demonstrates our global leadership on the modern battleship. Our recently tested and proven solutions position us as the leading authority in our rapidly changing industry as defense budget continued to rise globally and our customers seek cutting-edge battle-proven system to secure and protect their population. Our portfolio of ever relevant technologies support our customers pursue of advanced warfighter solution across all domains. On the back of the strong results, I am proud that we continue to improve the translation of our revenue growth in both profit and cash flow. This is the fifth consecutive quarter where we delivered positive free cash flow and improved the company's cash conversion. Yesterday, we announced the signing of an international contract for a strategic solution for approximately USD 2.3 billion. This contract will be performed over a period of 8 years. I'm extremely pleased with this announcement of the largest contract in Elbit history, further testament to the superiority of our product and technologies. We will continue to equip our customers with advanced and relevant solutions. During the quarter, Elbit received another large contract to supply a European country with a range of our solutions totaling of USD 1.625 billion (sic) [ USD 1.635 billion ] to be delivered over the next 5 years. The contract includes long-range precision strike artillery-rocket systems and broad-spectrum of unmanned reconnaissance and loitering aerial combat systems, highly sophisticated ISTAR capabilities, including SIGINT, COMINT and electric warfare system. Enabled intelligence collections and processing system will also be delivered, along with advanced electro-optic, and night-vision system, combat vehicle upgrade, and protective systems. New orders also included contracts for our Hermes 900 drones, advanced airborne munitions for the IMOD and USD 260 million contract for DIRCM system to Airbus. Following the 12-day campaign against Iran, Elbit has seen growing interest in our solutions, mainly through not exclusively for the Hermes drones, EW system and training platforms. The Hermes platforms enable us to cross-sell products for other segments and offer our customers comprehensive solutions, since its first order in 2011, the Hermes 900 has been selected by over 20 customers worldwide. In August, we successfully launched the advanced JUPITER space camera, abroad the National Advanced Optical System satellite, supporting a wide span of earth observation mission, including military operations, environmental, monitoring and scientific research, developed by Elbit System ISTAR and EW, JUPITER is one of the world's most advanced space camera, featuring a very large aperture and exceptionally lightweight design. The camera is multispectral offering a combination of imaging channels. During the quarter, we expanded our operation in Europe, opening new facilities in Sweden and Germany to enhance our local delivery capabilities to ensure more secure, faster support to our customers. Being close to our customers is crucial for us, our enhanced presence in Europe strengthen our ability to deliver modern and reliable solutions at the pace required to ensure the unforced capability to defend Europe from its offenders. In June, we launched PAWS 2, a next-generation infrared missile warning system for fighter aircraft designed to enhance their survivability and operational effectiveness. The system detect wide range of threats regardless of seeker type and provides advanced protection for fighter jets, transport aircraft, and helicopter operating in complex high-threat environment. At DSEI, we unveiled Frontier, a cutting-edge wide-area persistent surveillance system, designed to address the inducing complexity and intensity of border protection challenges. Frontier autonomously operates multiple type of sensors to visually confirm and classify threats transmitting only the most relevant analyzed information to the appropriate forces. It leverage advanced artificial intelligence to optimize intelligence gathering and decision-making across land, air and maritime domains. All this notable achievement would not have been possible without our dedicated employees whose day and night, commitment to Elbit is truly unique. I would like to thank each and every one of our outstanding employees for their continued professionalism and dedication. And with that, I will be happy to answer your questions. Operator? Operator: [Operator Instructions] The first question is from Jordan Lyonnais of Bank of America. Jordan Lyonnais: So with the ceasefire now happening, how enduring are you guys thinking about the domestic demand? And if we do see a slowdown in the domestic bookings, how are we -- how should we think about the trade-off with margins as orders start to skew more towards international? Yaacov Kagan: Thank you, Jordan. So your question about the domestic demand, we can look at this quarter. We had an increase of $1.4 billion in our backlog, $200 million in Israel and $1.2 billion outside of Israel. We are looking at that as some kind of the nature of the growth of the backlog for the future. We are targeting around flattish backlog in Israel and growth outside of Israel, predominantly in Europe. That will be the growth area, which -- we see our funnel, we see our opportunities, and we see the demand that's coming out from Europe. And we think that this is the place that predominantly will provide the growth in the future in the backlog. Operator: The next question is from Seth Seifman from JPMorgan. Seth Seifman: I wanted to ask about when we think about the Aerospace business from here, and we saw the decline in the quarter. How should we think about the trajectory in that business going forward? I know you called out some decline in sales to Asia but also some drone orders during the quarter. So kind of where does that go from here? Bezhalel Machlis: It's Butzi. I believe that we will continue to see growth in this segment as well. We -- first, I would like to mention that our avionics is embedded on top of most of the Western platforms. It includes our helmet, but not only that, also quite a lot of other equipment from us is embedded in each -- in many, many platforms, all -- in many, many countries, not just in the U.S. So we enjoy from revenues coming from international sales of Boeing and Lockheed and other OEMs of all the platforms they bought. So I really feel that this -- I really believe that this market will continue to grow for us. And I would like also to mention UAVs. There is a huge demand for UAVs, for loitering munition. We have 20 international customers who bought till now, the Hermes 900 from us. And we provide not just a platform. We provide an integrated solution, which includes all our sensors and payloads from the company, and we have a very unique offering to our customers. And they see a growing market for UAVs or main UAVs, but also for small UAVs and for loitering munition, which are all under the Airborne segment. So I believe that this segment will continue to grow the company in Israel and mainly abroad. Yaacov Kagan: And Seth, this is Kobi to further add on Butzi's answer, we -- if you look at the 3 quarters over 3 quarters last year, Aerospace segment grew 9%. And we think that the relevant growth number for the Aerospace is a single-digit growth in revenues, because this segment is leaning predominantly on the U.S. budget with a lot of revenue coming from the U.S., which is a single-digit budget growth. And for that reason, that is the number that we think is relevant for this quarter -- for this segment. Seth Seifman: Okay. Excellent. Excellent. If I could add one follow-up question. Can you talk a little bit more about the opportunities that are emerging in directed energy. We've seen some of the progress on IRON BEAM. Are you seeing a lot of opportunities emerge for directed energy solutions outside of Israel as well? Bezhalel Machlis: Yes. The answer is yes. As you know, we are part of the Israeli program for ground high-power laser systems. The laser source is coming from us, and the first system should be deployed by the end of this year, the IRON BEAM system. And there's going to be -- I believe that next year, we'll see many more orders here in Israel for ground high-power lasers. Based on the success of Israel, there's a lot of interest in many other places for high-power lasers and for ground high-power laser system, and we are part of this solution. Here in Israel, we lead the airborne high-power laser system. It's still in the development phase. And actually -- and I believe that there is a very big potential for us, for the system. I think that high-power lasers in the air will be a game changer in the way countries are fighting against ones and against drones and against cruise missiles. And this is still under development, but also, it's only -- it's still in development, there is a lot of interest for that for many, many customers abroad. We are not developing just high-power lasers. We have other type of energy weapons, which are in a very advanced phase of development, which are -- some of them are confidential, but I can tell you that they are very unique. We really believe that this energy weapon activity is a very important growth engine for Elbit for the future. Operator: The next question is from Ellen Page of Jefferies. Ellen Page: Just the margin was very strong in the quarter on a year-over-year and sequential basis. Can you discuss the drivers of that? And was there any element of mix that supported profitability in the quarter? And how do we think about the progression of margins from here? Yaacov Kagan: Ellen, if you notice, there is a very strong expansion in margin this quarter, as you indicated, which comes as 0.9% improvement, a 1%, shy of 1% in the gross profitability of the company, an additional 0.5% on the operational expenses. So we are looking at a 1% expansion in the gross profitability and 1.5% expansion in the operational profitability. Those two are the fruits of improvement in our backlog profitability and for using a lot of operational excellence both investments and also processes that were inaugurated in the company, including using AI for different purposes of operational use. And that is driving our -- not just our operational profitability but also our gross profitability up. And this is the first quarter that we see this kind of expansion in both the gross profitability and the operational profitability. Including -- on top of that, we are also doing CapEx investments, which are yielding fruits. As we discussed many times in the past, the ERP system that is fully operational, the one ERP system that is fully operational in the company and also robots and cobots that we are also using now mainly in the ammunition and munition factories. And on top of that, if I can summarize everything, we can see that we have our advantages to the size, which with the increase in revenue, we are doing better conversion to profits. Ellen Page: Great. That's very helpful. And how do we think about the impact of less operational disruptions assuming the ceasefire hold. Is that an opportunity for another step up from here? Yaacov Kagan: So we see that -- we are very happy with the ceasefire, of course, and that is -- we prayed, everybody here prayed for that after 2 years of that -- this conflict. And we all hope that this quiet will be maintained here in Israel. And of course, in -- for the company, it allows us to regroup, people to come back for mobilization, and to get back to normal business which is, as you know, Elbit is mainly predominantly working outside of Israel, that this is our strength of doing around 70% of the business outside of Israel. It allows us to invest more in the business outside of Israel and to focus, of course, more about doing the ordinary business as we did before this 7th of October conflict. And of course, this is an opportunity for the company to receive more opportunities and more new business to strengthen our backlog. Operator: I'm passing the call to Daniella Finn. Please go ahead. Daniella Finn: Thank you, operator. We have a couple of questions from [indiscernible] from Excellence. [indiscernible], thank you very much for your questions today. The first one is, has there been any update to the company's profitability target for 2026, 10% operating profit following the expansion of the order backlog and the improvement in gross margins in the current quarter. Yaacov Kagan: Thank you, Daniella and [indiscernible]. We -- as you know, we're not giving specifically targets and providing guidance. Saying that, we will still maintain our internal targets to continue to improve our profitability. And this is, of course, a strong target in the company as well as the cash conversion, which is a very -- is the principal target in the company to continue the improvement in cash conversion in the company. Daniella Finn: Thank you, Kobi. And the second question from [indiscernible], how does Elbit plan to generate added value from the significant expansion in the U.S. DoD's budget. Specifically, is there a concrete plan to pursue an M&A transaction in the U.S. and/or to expand into verticals such as drone swarms or border protection applications? Bezhalel Machlis: Thank you, Daniella and [indiscernible]. The U.S. market is very strategic to Elbit. We see the U.S. as our home market. And we are -- I'm very pleased with our performance in the U.S. The last two positions we made, the night-vision activity and Sparton, the sonobuoys activity. Both of them are very successful, both of them are growing. And we certainly look for opportunities, for acquisitions in the U.S., we are exploring the market. I would like to say that in the past, we delivered a system to the CBP for border protection, and our system is deployed along the borders. And we are -- certainly, we believe that the current need for additional systems along the borders are very relevant to us, and we are planning to pursue it. And we have -- the rest of our activities in the U.S. are very successful as well. Our avionics activities are growing, and our Active Protection System is doing very well in the U.S. on top of the Bradley [ light ] tank, and we see -- we will continue to invest in the U.S. We will continue to recruit additional people, and we would like to expand our position in this very important market forward. Daniella Finn: Thank you, Butzi. Operator, if there are no more questions, we can wrap up. Operator: Before I ask Mr. Machlis to go ahead with his closing statement, I'd like to remind participants that a replay of this call will be available 2 hours after the conference ends. In the U.S., please call 1 (888) 782-4291. In Israel, please call (03) 925-5900; and internationally, please call (972) 3925-5900. A replay of the call will also be available at the company's website, www.elbitsystems.com. Mr. Machlis, would you like to make your concluding statement? Bezhalel Machlis: I would like to thank everyone on the call for joining us today and for your continued trust and support of Elbit. Have a good day and goodbye. Operator: Thank you. This concludes the Elbit Systems Ltd., Third Quarter 2025 Results Conference Call. Thank you for your participation. You may go ahead and disconnect.
Dalton Philips: Good morning, everybody, and thank you for joining Catherine and I for our FY '25 results presentation. It's great to be sharing a very set -- very strong set of results with you this morning. Our core business is in a great place with our commercial and operational excellence programs, combined with our cost efficiency efforts, providing the platform for us to reach a record level of profitability. I'll start with some key messages, then we'll cover our financials and an operating review, and we'll close out on our acquisition of Bakkavor. So let's start with some key headlines on Page 5. Firstly, we're really proud of what we feel is an exceptional year of delivery. Catherine will share more; however, I do want to highlight the strong performance that we've had against every one of our financial medium-term targets. In particular, we achieved a 15% ROIC, which is an increase of 350 basis points on FY '24. Secondly, we continue to deliver for our customers on 2 things that are incredibly important to them, service and innovation. And these are 2 of the key elements that give us a competitive advantage in the market. Thirdly, against a subdued backdrop, we've had strong manufactured volume growth of 2.5%, which is well ahead of the overall grocery market. And we continue to take advantage of a number of structural tailwinds, which we expect to continue through FY '26 and beyond. Fourthly, we're driving this positive momentum into FY '26 as we know there is a lot more opportunity to go after in our core business. Trading has started well, and we anticipate another year of profitable growth ahead. Finally, regarding the acquisition of Bakkavor, things are progressing to plan, both in terms of the external support for the deal with the positive Phase 1 decision from the CMA and our internal progress on planning for integration and synergy delivery. We crossed another key milestone this morning with the agreement to sell our Soup & Sauce business to the Compleat Food Group, a business we have a high amount of respect for and one where our Bristol colleagues will really thrive. This now paves the way for us to complete the Bakkavor transaction in early 2026, in line with our original time line. Turning to the next page, and I wanted to highlight the 5 areas that we see as key to sustaining our enduring competitive advantage in the market. We've really doubled down on these to create what we call a moat around our business, something that is highly valued by customers and extremely difficult to replicate. Firstly, our innovation engine. We launched 534 new products this year in partnership with our customers. That's over 10 products every single week. What makes us unique here is that our innovation teams are increasingly embedded within our customers, and we've built capabilities to support every stage of the innovation journey far beyond just recipe development. Secondly, our technical leadership. We believe we have best-in-class capabilities in the technical and food safety space where you can never compromise on quality. These high standards were recognized in our BRCGS audit performance this year. To give another example, we reduced product withdrawals by 60% year-on-year from an already very low base in FY '24. And this level of reliability is incredibly important to our customers. A third part of that moat is around complexity management. Our business is complex, manufacturing over 1,500 SKUs using more than 2,000 unique ingredients produced in 16 factories up and down the country, operating chilled, ambient and frozen supply chains, delivering it all directly to our customers' doors or through our direct-to-store distribution system. There's a lot of moving parts, and we take great pride in the fact that we do all this without missing a beat with over 99% service levels in FY '25. Fourthly, our infrastructure. This is a really well invested and fully integrated manufacturing network, which we continue to ensure remains world-class, fit for the future of next-gen automation and technology. And the final area in our approach is to efficiency. We really lean in on our cost base at every level of the business, driving a culture focused on delivering the best possible value for our customers. This is in part executed through our Greencore Operational Excellence program, which last year delivered a 4% increase in units per labor hour. Bringing these 5 elements together creates a business that is highly resilient, extremely hard to replicate and provides a strong platform for future growth, hence, why we call it our moat. As I now hand you over to Catherine, I'm confident in saying that our business is in a good place and with plenty more opportunities to go after. Catherine Gubbins: Thanks, Dalton. Good morning, everyone. I just want to echo Dalton's thanks to you all for joining us in person and on the call today. It has been an exceptional year for the group with strong performance across every financial metric. I'm very proud of our performance and the progress that we've made. And starting on Slide 8, I'm going to give you an overview of some of those key financial metrics for 2025. Starting with revenue, you can see that we delivered a strong revenue number of just under GBP 2 billion for the year, representing growth year-on-year of 7.7%, the components of which I will cover in more detail shortly. Adjusted operating profit is a key KPI for us. We said 2 years ago that we would return to pre-pandemic levels of profitability by 2026, and we're delighted to have exceeded that one year early. We delivered GBP 125.7 million, an increase of 28.9% year-on-year. And again, I'll speak to some of the individual elements of that improvement in a moment. On adjusted operating margin, we have grown margin by 110 basis points to 6.5%. This is still short of our medium-term target of being at 7% or above, but it's clearly really strong progress in the right direction. And we will look at some of the key drivers of that growth as we move through the deck. You can also see that we delivered strong cash flow for the year, and our leverage closed the year at 0.4x net debt to EBITDA. Most importantly, though, we're delighted to have delivered a return on invested capital of 15% in 2025, representing a 350 basis point increase versus the prior year. This was primarily driven by an increase in net operating profit after tax and also a slightly lower average invested capital base. Return on invested capital is our North Star metric and is the key lens through which we manage the business. If we move over to Slide 9, we have set out in a little bit more detail the breakdown of our revenue performance for the year. As mentioned, total revenue increased by 7.7%, 2.9% of which was driven by new business wins. Underlying volume and mix growth represented 2.8% and inflation and pricing impacts then drove the remaining 2%. The most significant contributor to the new business win-related growth was the ready meals contract that was onboarded in our Kiveton site in September 2024. There were also several other wins across our other categories in the first half of 2025, and these are being delivered in the network throughout Q3 and Q4. Our underlying volume and mix growth was supported by continuing strong demand for convenience food, continued product innovation and some favorable weather during the summer. We saw good growth in sandwich and sushi in particular, while performance in parts of the salad portfolio and ambient sauces was a bit more challenging. When analyzed by segment, our food to go category revenue increased to GBP 1.3 billion, representing a 7.5% increase on the previous year, while revenue associated with our other convenience category grew to GBP 609 million, an increase of 8.3% on the previous year. Some further detail on the composition of those categories has been included in the appendix. Just moving on then to Slide 10. You can see our adjusted operating margin increased to 6.5%, and I'll take you through some of the main drivers of that improvement. Volume growth and mix drove a positive impact of 0.4 percentage points, driven by some of the factors I've just taken you through. There was a negative inflationary impact of 2.5 percentage points. That represents about GBP 45 million worth of inflation in the year. And to give you a sense of the components of that, about 75% of that was related to labor inflation, with the remainder coming from materials and packaging inflation, which really started to increase from Q3, Q4 onwards. Pricing and inflation recovery drove a 1.7 percentage point impact. This was delivered through our pricing pass-through mechanisms and positive discussions with customers around labor pricing, in particular, during the year. Our ongoing operational excellence initiatives drove a positive impact of 1.1 percentage points, which partially offset inflation, as you can see, but also contributed to the operating profit growth. This encompasses our continued focus on driving efficiency across our manufacturing business, including direct labor optimization and waste reduction. Finally, a focus on managing our overheads and indirect costs drove an incremental saving of 0.4 percentage points. I have been very focused on our overhead cost base since joining, so it's good to see the contribution being driven by this work. In the current year, this was predominantly driven by indirect labor standardization, functional headcount challenges and other overhead savings. Just moving on then to Slide 11 and cash. For this financial year, we recorded a free cash inflow of GBP 120.5 million, a significant improvement on the prior year with a number of factors contributing to this outturn. There was a net working capital inflow of GBP 27.6 million, which was a significant improvement on the prior year. Again, at our Capital Markets Day, I would have referenced the increased focus we are putting on proactive working capital management across all the components. The impact here is driven by a broad focus on stock management, managing our debtors, creditors and other payables to optimize inflows and outflows. Maintenance CapEx for the period was GBP 29.6 million, which was an increase of GBP 3.4 million when compared with 2024. While not included in the definition of free cash flow, we also meaningfully increased our strategic capital expenditure, which I'll speak to you about in a little bit more detail shortly. Cash exceptional charges for the year were GBP 17.4 million and were comprised of spend on the Making Business Easier transformation program and also on the Bakkavor transaction. Just going quickly through some of the other items here. Interest and tax charges, GBP 25.7 million, down GBP 600,000 compared to last year as a result of lower interest cost and borrowing, offset by a slight increase in tax paid. I have previously referenced that our U.K. defined benefit scheme would achieve a fully funded position by the end of September 2025, meaning nearly GBP 10 million of annual pension contributions from the group would no longer be required. We do, however, now anticipate an increase in tax-related cash flows in 2026, which is likely to offset this. Finally, lease payments of GBP 15.5 million were broadly in line with last year and other movements here of GBP 11.2 million related to share-based payments and other noncash-related charges. Our free cash flow conversion was 66.5% for the last 12 months. We are happy to have delivered this in the context of our overall medium-term target of being at 55% and above, and we'll continue to focus on cash conversion going forward. Just moving on then to Slide 12 and touching on our capital allocation framework. I have previously noted that I will update on our capital allocation plans at our half year and full year results announcements. Our priority, as you can see here, continues to be ensuring funds are available to invest in organic growth through maintenance and strategic CapEx, an area, as I said, I'll expand on further in a moment. But just moving on to dividends. Last year, the group reinstated the payment of a dividend for the first time in 5 years and indicated that going forward, it will be a progressive dividend growing in line with earnings. Given the strong financial performance of the group for the year, the Board is recommending the payment of a dividend of 2.6p per share, an increase of 30% year-on-year. We have closed out the financial year with our leverage in a very strong position with net debt to EBITDA at 0.4x. And as I think about points 3 and 4 here, this puts us in a really strong position as we contemplate closing out on the Bakkavor transaction and focusing on deleveraging post completion. As a result of this transaction, we are not proposing any further return of capital to shareholders at this time. At this point, it will be premature to talk about the capital allocation framework for the combined group with any specificity. What I will say is the group's philosophy is to deploy capital to balance long-term growth and shareholder returns. We will do this through investing in driving operating profit growth, generating strong free cash flow and following a disciplined investment and capital allocation approach that ultimately drives returns for shareholders. Moving on then to Slide 13. I wanted to just take you through a little bit more detail on how we think about investment into the core business. As you can see here, our adjusted operating profit growth feeds strong cash flow generation, which we then prioritize for investment into the core business. This ultimately then enables delivery of above-target returns. Year-on-year, we have increased that capital investment by 34% with strategic investments increasing from GBP 6.2 million to GBP 13.8 million. And I just wanted to call out some of the areas that we have invested in. We've invested GBP 4 million to automate certain manual tasks. In this financial year, this included projects like packaging automation, automated sushi rolling and some vegetable slicing. We invested GBP 5 million capacity and capability expansion across the network with many of these projects now operational and some carrying into full year '26. We also invested GBP 4 million in sustainability investment to help drive our sustainability objectives while also driving benefit to the P&L. As we've indicated in the guidance in the appendix, we'd expect to step this investment up again in 2026, and we are guiding on investing GBP 50 million in that financial year. Alongside this spend, we're continuing to invest in our making business easier program, investing GBP 12 million over the past year through exceptional items and increasing this investment into 2026. Dalton is going to speak about progress in this area shortly. Just to finish off, you will remember that we set out our 5 medium-term financial targets at our Capital Markets Day. I'm really pleased that we have made strong progress against all of these targets in 2025. We have effectively met our returns on invested capital target, and we've continued to drive the business to further deliver on this metric. On revenue, we obviously outperformed versus this metric in the financial year with a key driver of that being a significant new business win. On margin, again, we made excellent progress versus our target of being at 7% or above, and we are confident that we have a pathway to get to that target. On cash conversion for the full year, we outperformed our target for the reasons I've highlighted, and our leverage is clearly below the indicated range, but this is a welcome positive as we look to complete on the back of our transaction. So in summary, we have had a very strong year. I will refer you to some further guidance we've set out in the appendix. I just want to thank you all for your attention this morning. And now I will hand you back to Dalton. Thank you. Dalton Philips: Thanks, Catherine. And let me now turn to the strategic and operating review. And on Page 16, you can see our strategic framework, which we launched at our CMD earlier this year. And there are 2 key pillars here: strengthen the core and grow and expand, underpinned by 5 enablers, which make up our Greencore way of winning. And following some years of stabilization and rebuilding, last year was about progressing both pillars in parallel, realizing opportunities within our core business while simultaneously building the platform for future growth. And you can see on Page 17 that a key element of our strong core is our performance versus the wider market. It's been a tough year in the U.K. grocery market with subdued volume growing at 0.7% against a backdrop of persistent high inflation and muted consumer confidence; however, our core categories where we typically hold the #1 or #2 position continue to perform well. For example, the market -- the sandwich market grew at 4% year-on-year. For example, us, we grew at 4% year-on-year. In absolute terms, we outperformed the market by 180 basis points, achieving 2.5% manufactured volume growth. And despite that difficult backdrop, there are some key tailwinds to support continued growth. Firstly, consumers' desire for convenience continues to rise with the large multiples opening 175 new convenience stores this year, and the number of convenience stores is forecast to rise by 2% next year. Secondly, premiumization remains an important growth driver in our key categories. For example, own label premium sandwiches grew 23% year-on-year. Finally, we're seeing a sustained trend of growth in eating in, which was up 1% versus last year against eating out, which was down 3%. As eating out becomes increasingly expensive and dine-in options improve in quality and variety, more and more consumers are seeing better value by staying at home. This is particularly important for us as we look to our combination with Bakkavor who have real depth in the food for later market. Turning to Page 18 and another key factor of our performance has been in our portfolio management. We're committed to driving returns in every part of our business with the goal that each category will, in time, cover its cost of capital. And we can point to some really good progress here. You know about our 15% ROIC figure, but I thought it worth sharing the building blocks which sit underneath it. Our focus in portfolio management zeroed in initially on our larger categories, so sandwiches, ready meals, ambient sauces and salads, which make up 85% of our revenue. We've made really good progress here, increasing ROIC across these categories by 400 basis points, therefore, keeping returns well above WACC. A good example is in our sandwich business, where we drove returns in 3 areas: Firstly, new business wins in the retail and coffee channels; secondly, margin accretive new product launches; and thirdly, operational excellence initiatives. And we've also driven ROIC in our smaller categories by circa 100 basis points, whilst this is in the right direction, we still have more to do so that every category covers its cost of capital. A good example here would be our sushi business with improvements again driven by, firstly, new business wins; secondly, diversifying our offering into poke bowls; and thirdly, execution of our automation road map. Moving to Page 19, and let me share the key enablers of our strategic framework, starting with great food. We launched 534 new products in partnership with our customers last year. That's over 100 more than in FY '24. This includes NPD, so entirely new-to-market concepts as well as what we call EPD, so existing product development to improve quality and taste profiles. We're now able to deliver this scale of innovation at speed faster than ever before, reacting quickly to trends and working with our customers to get new products on shelf fast. You can see a great example of exactly that on the top left of this page. Last week at the CMD, M&S talked about their partnership with us and the work we did together on the strawberry sando, which went viral, quickly becoming M&S' top-selling sandwich and selling over 1.2 million units within weeks of launching. This is a great example of the incremental impact that innovation can have. The other products that we've highlighted here on this page, Greggs, Mac & Cheese, Sainsbury's, Taste the Difference, Chicken and Nduja Wrap and Cox, marry Me Chicken Sandwich are other examples of the many products that had hugely positive consumer feedback. And on the right, you can see some of the benefits that innovation delivers, driving incremental growth, margin accretion through premiumization and improved quality. Moving to Page 20, and we wouldn't be able to deliver any of this without our strong partnerships with customers and suppliers. And here, you can see a few examples of the value that we've delivered through these partnerships. For example, we supported the launch of a first-to-market food on the move store with co-op. We created a bespoke offering of hot and cold products, testing out new concepts such as serve over counters, super premium ranges and time of day offers. We've also -- we're also servicing these stores via our direct-to-store distribution arm. This is a great opportunity to trial new concepts, which can then be rolled out into their main estate. Secondly, we used our category management and insights capabilities to support a customer with a full store transformation, advising them on space, product locations, flow and range. 30 weeks after the reset, volume in the store was up 22% with the number of shoppers up 18%. Thirdly, through an Innovation Day with one of our customers, we identified an opportunity to expand their premium sauce range into a new cuisine. The products went live 4 months later, growing the tier by 163% for that customer and allowing them to grow 1 percentage point of share in that sauce cuisine. Fourthly, an incredibly important part of our partnership model is the relationship that we have with our suppliers. We often speak about our customers wanting to do more with fewer strategic partnerships. Well, the same is true for us with our supplier community. We've reduced our total supplier base by 15% since FY '22 and strengthened our relationships with our key suppliers. This is an important driver in helping us manage complexity whilst in parallel ensuring that we have the best quality products in the supply chain with the right cost structure. There are -- these are just 4 of the hundreds of examples where every day, our teams are going above and beyond to build truly lasting partnerships. Moving on to delivery excellence on Page 21, and our Greencore operational excellence model continues to deliver strongly. We've spoken before about units per labor hour as a measure of productivity in our sites. And this has continued to build, up 4% from FY '24 and up a material 10% since FY '23. This progress has been underpinned by the delivery of over 700 -- or 701 individual operational excellence projects in the year with an average value delivered per project increasing by 37%. An example would be a line balancing exercise we ran in 7 of our sites, reducing bottlenecks and increasing units per labor hour by 10% in those sites. This project delivered GBP 750,000 of in-year savings. And we still have more to go after in the core business. So we've set up 2 new centers of excellence to target the next set of opportunities. Firstly, on next-gen automation, we've continued to progress select concepts. You can see in the photo an automated packing line, which we installed in our Spalding salad site, and we're now kicking off the first of a 5-year automation road map with 12 prioritized concepts in order to deliver at least 10% direct labor savings over time, a number you might remember we shared with you at the CMD. Our current focus is on recruiting the team with a head of automation now in place in order to move at pace to deliver the first prioritized concepts. Secondly, on group logistics, we've kicked off a project to optimize and standardize the way we do internal logistics across our sites. This includes inbound, outbound and warehousing costs. Like many areas of our operational excellence agenda, we can drive real benefits here from moving to one standardized way of doing things across the group. On Page 22, a key part of delivery excellence is our Making Business Easier technology transformation, a multiyear program driving consistency and simplicity into the business. The program is now in its second year and is making good progress. We've included some examples on this page of the kind of initiatives that we are driving across 2 dimensions: the quick wins, which are delivering early value and the multiyear transformational projects. To highlight a couple. Firstly, a quick win for us this year was the rollout of an automated invoice processing across all sites. This has reduced time to process, improved payment controls and reduced errors. In FY '26, we expect to process over 100,000 invoices automatically, which at that scale has significant benefits. We've also made good progress on our larger multiyear initiatives. You can see some examples of the types we're working on, on this page. None of them are rocket science. It's more about standardizing and modernizing some of our basic business processes after years of underinvestment. An example of this would be supply chain planning, where we've now selected a tech platform for a solution to streamline demand forecasting and production planning and scheduling and are rapidly moving into the delivery phase. Whilst we're still early on our journey, we're making good headway. Total program costs are still estimated to be up to GBP 80 million over 5 years, whilst investment in FY '26 will be circa GBP 20 million to GBP 25 million, which is reflective of the upfront phasing of the program spend. Moving to sustainable choices on Page 23, and we're pleased to hit our Scope 1 and Scope 2 carbon emissions and food waste reduction targets in FY '25, which is a particularly strong result in a year when we increased manufacture volumes by 2.5%. And looking further out, we've also begun development of our 2040 net zero transitional plans for 4 pilot lighthouse sites, which will form the basis for future group level climate transition plans. And whilst we've got good results in some sustainability areas, we did not meet our in-year target on water reduction. This is because of a couple of particularly high water using sites as the other sites have substantially decreased our water usage in year. However, we know there is more work to be done, and this remains a key focus for us. In the people space, one achievement I wanted to highlight is the reduction in our attrition rate down by 600 basis points from 24% to 19%. We need to keep great people and have them grow their careers with us. So this is a really strong result. We also made progress on our employee engagement score, hitting 84% in our last survey. And we were also proud to donate nearly 1 million meals with our charity partners during the year. Let's now switch gears on Page 24 to the second part of our strategic framework, grow and expand. And let me briefly set out why we're so excited by the combination with Bakkavor. From a strategic perspective, the deal will create a U.K. convenience food champion with strong relevance, reach and resilience. It will also unlock at least GBP 80 million in cost synergies and creates significant optionality on capital allocation. From a financial perspective, the deal will create material value for shareholders with an attractive returns and earnings profile, which you can see on the right-hand side of this page. Since May, we've made really good progress on the planning for integration and synergy delivery with a cross-functional team and a central integration management office now up and running with colleagues from both businesses. On Page 25, you can see an updated time line for the deal. Let me orientate you on where we are today and what comes next. We announced the recommended acquisition back in May, receiving strong support from both sets of shareholders at our respective AGMs. Following this, the CMA began a Phase I investigation into the deal, which they concluded at the end of last month. And we were really happy that they raised no competition concerns with regards to 99% of the revenues of the combined group, and this is in line with the strategic rationale of bringing together 2 complementary but not overlapping businesses. Competition concerns were identified in only one area, supply of own label chilled sauces, less than 1% revenue of the combined group. These sources are manufactured exclusively in our Bristol site. And over the past weeks, we have been working with [indiscernible] to come to a quick resolution, and we were delighted to announce this morning that we have a binding agreement to sell our Bristol site to the Compleat Food Group, and that's just 3 weeks after the CMA announced their Phase I decision. In terms of next steps from here, we've already secured agreement in principle for our proposed remedy from the CMA. So the final step is to secure formal CMA approval, which is expected to come before the end of the year. As such, we remain on track to close the deal in early 2026. On a personal note, whilst, of course, we're very sad that we have to sell our chilled sauces business, I know that the Compleat Food Group will be a great home for the Bristol team. And looking ahead, we're really excited to be welcoming back our colleagues to the combined group and for what we can deliver together for our customers, for our consumers, for our colleagues and of course, for shareholders. I'll wrap now with some closing thoughts on Page 26. And firstly, we're thrilled by the group's exceptional delivery and our progress against our medium-term financial targets. Secondly, we remain encouraged by the potential in our core business. We know there are so many more opportunities to go after that will drive returns. Thirdly, trading has started well, and we look forward to another year of profitable growth. And finally, we remain excited about the potential from our acquisition of Bakkavor and are delighted that the pathway is now cleared to completion in early 2026, which will allow us to get going on synergy delivery. So thank you again, as Catherine said, for coming here this morning. We really appreciate it. And now we'd both be delighted to take any questions or clarifications you might have. Mike, are you going to do the honours? We will start up front here. Patrick? Patrick Higgins: Patrick Higgins from Goodbody. Two questions, if that's okay. Maybe the first one for you, Dalton. Just in terms of, I guess, the wider kind of consumer backdrop, your slide on Page 17 outlines several key drivers around the food to go or your convenience business that should underpin that category's continued outperformance, whether it's convenience or premiumization. I guess my question is just more around the general U.K. consumer backdrop. Are you seeing any shifts in kind of consumer behavior or any kind of green shoots in terms of an improving or improving underlying or kind of broader consumer demand? Then my second question is possibly for you, Catherine, just around the cost outlook. What kind of inflation are you guys budgeting for the year ahead? And maybe just talk us through the various buckets with labor, raw materials. And then against that, how should we think about the various levers you guys have at your disposal to kind of offset and continue your kind of margin delivery, whether it's in terms of price pass-through or your kind of ongoing cost savings initiatives? Dalton Philips: Okay. Thanks, Patrick. Look, I'll take that first one then. Look, there's definitely a sense of uncertainty out there. Consumer confidence is still pretty negative. You saw the latest GFK -- it hasn't really improved at all. In fact, it's not in a great place. Having said that, if you think about our business, look, volumes have remained really strong. Q3, Q4 were terrific for us and growing very strongly ahead of the market. So look, we enter into this financial year with a real level of confidence. I thought Simon Roberts did a super job last week talking about a trend that we've seen for a number of years, but this is in the same basket, people trading up and down in the same basket. And I think that bodes well for the portfolio and the categories that we operate in. If you think about our categories, we're own brand. So that by default has huge value credentials. We typically tier our ranges, even think about the meal deal, there's 3 tiers now. There's even an ultra-premium meal deal, and they're offering fantastic value. And I think, look, there's a strong underpinning of tailwinds out there, the move on premiumization, very important for us, the move on convenience stores, very supportive to our underlying business. And then this what I highlighted in there, this dine-in versus dine out and the value that's been offered there. So I think those 3 sort of structural tailwinds and then obviously, you've got the population growth underpin gives us a level of confidence as we go into what is a fragile market. I mean we can't get away from that. So I think we're confident that despite the consumer backdrop, those tailwinds, Patrick will continue to drive the business forward. Catherine Gubbins: Thanks, Patrick. Yes, look, when we think about inflation, I know I referenced it when I was speaking earlier, for 2025, the inflation we experienced is about 2% to 3%, and that was broadly throughout the year caused by labor inflation, as you know, by about 6% in the year. And obviously, we had the national insurance increase on top of that. Q3, Q4, we saw significant price increases in the protein space. So that obviously fed through quite significantly. When we were thinking about 2026 then, I think we were anticipating inflation of about 3% to 4%, to be honest. And again, seeing that protein inflation continuing into this financial year. There's a little bit of uncertainty as to how long that will continue. Obviously, we have expectations around labor inflation, but we await, I suppose, any announcements in next week's budget to see where that lands. But I suppose 3% to 4%, but I suppose a little bit of uncertainty as to how that would play out. Obviously, it's still pretty early in the financial year. And I suppose I would just reiterate, as we called out in the presentation, we've been pretty good at offsetting that inflation, whether it's through engaging with our customers are deploying our cost initiatives. And I know that was your other question. When we think about managing our margin, we think about it in 3 areas. And I think we've spoken at length about those areas today, I suppose is how we engage with customers. Dalton spoke about that at length, our innovation, premiumization, delivering for customers and really using that to drive volume and accrete margin. Then obviously, there's how we approach the manufacturing network. Again, we give you a fair bit of detail around how our operational excellence initiatives have kind of evolved. So we're really now starting to look at next-gen automation to really tackle that kind of manual element of our business that still is ripe for automation. So I suppose that's kind of where we see ourselves pivoting in that space. And look, I referenced the focus we have really deployed last year and will do into the future around pretty significant cost base under gross profit and above operating profit. There is lot of indirect labor there and other overheads to just be kind of laser-focused on. Again, they're the kind of key areas that we see ourselves kind of continuing to leverage to drive margin going forward. Dalton Philips: Just keep moving down the... Gary Martin: Gary Martin here from Davy. Just a couple of questions from me. Just a follow-on to Patrick's question there just around the cost side of things. Just around conversations with retailers at the minute, I mean, how challenging is that after a year of reasonably high inflation, particularly with NIC charges, national living wage? Is it becoming trickier from your side? Or are there levers to pull from your perspective? And then maybe just a second question just around -- or even just a follow-on to my first question actually, just around the level of, we'll say, low-hanging fruit that are left from a self-help perspective. Is there still a lot that you can do from that side to offset any additional costs and then just a further question just around cash conversion this year, very strong, well above the 55% set the CMD. I'm just wondering how sticky that is. I know that there were some puts and takes with regards to pension coming down and cash tax coming up and all the rest of it, but it would be good to get a long-term view on that. Dalton Philips: Yes. Thanks, Gary. Look, maybe I'll start on the first 2, Catherine, and then you can sweep over anything I missed and pick up the cash conversion. Look, the retailers have been fighting hard for their consumers to ensure that they're as competitive as possible, and it's a challenging market out there. I don't think the level of conversations have changed. We're very transparent. I mean, typically, about 75% of our volume goes through some sort of transparent model. So that's really helped the conversations because it's very transparent to -- as the proteins move up or down, they're getting it in that month or the next month depending on the contract. So the conversations, I think, are at a similar level to before. The real focus is on innovation. It's not really on cost because you've got the transparency there. That's sort of table stakes. It's all around innovation. And there's a huge push on it. Everybody is trying to just get an edge. And I think we've been very successful with these Chinese walls that we put through our business that allows dedicated teams for specific customers to develop those ranges that I put out. I mean, actually, there's a mince pie wrap that went out yesterday for one of our large customers. We're always trying to do something slightly different. And I think if the innovation is there, Gary, the conversations are much more positive. Typically, where I would have more tense conversations is where there'll be a challenge, well, somebody else launched that, why haven't I got that? That's where the conversations are. It's not really in cost. That's not to minimize it. It's just to say that if you're not there on cost, you don't have a business. And that leads, I think, into your second point around is the much more low-hanging fruit. We think you've got to continually be driving this. And leaving to aside the Bakkavor opportunities that will come from that, there is still opportunities in OE. So capacity management, line balancing, overhead balancing, like there's a lot of work we've done there. We were doing something the other day in terms of indirect procurement. You would be shocked in the variety of pricing around Wellington boots. It would blow your mind, there are Wellington boots that have been purchased that are extremely expensive in our network. Now it's not people doing anything wrong, but they're needing to react to a situation. And you go -- when you standardize all of that, and I think when you're talking about Wellington Boots, you're kind of going, yes, there's still a lot of opportunity out there. It's a well-run business, but we are going to keep going after it. And then maybe we'll talk later about next-gen automation, like there is just such an opportunity there. Like if you think about the dexterity of the hand, what it can do today in assembly, you think about next-gen automation that we think is probably 24 to 36 months away where you're able to mimic the dexterity of the hand and be able to pick up because you can pick up anything with a robot, but to pick up a tomato, a slice tomato without bruising it or a piece of avocado is a whole different kettle of fish. And that sort of dexterity is coming through. You think of that next-gen automation into our food to go operation real opportunity. But Catherine, do you want to pick up on that... Catherine Gubbins: And look, just to pick up on that point as well. I think we're really starting to see this year the benefit of that operational excellence mindset across our manufacturing business. It's a real muscle that's just strengthened over the last period and it's kind of just an ongoing assessment of the manufacturing business just to see where the opportunities lie. So yes, look, just around cash conversion, absolutely, we had a strong performance this year. As I said, it was just really from proactive management across the cash portfolio, I suppose specifically focusing on working capital, obviously, impacted by improved revenues. and increased costs as well give us a little bit more opportunity around the year-end. Absolutely, you've called out the point around the pension contribution. And I suppose our improved profitability over the last few years means we've been consuming some of those tax losses, and we're now in a position where we potentially are looking at higher cash tax this year. But I suppose broadly speaking, we're still confident with the range we indicated at the Capital Markets Day that we will be ahead of that on a go-forward basis. Charles Hall: Charles Hall from Peel Hunt. First of all, well done, terrific year. Could I just ask about the other convenience sector that you had volume -- underlying volumes were down slightly. Can you just talk about the moving parts of the different businesses within that, how you compare against the market and what you see as the outlook for that segment of the business? Dalton Philips: Yes. Look, I think there are some areas where we've just had some deliberate business losses that we've seeded. I mean I can talk about salads, for example, there's been a number of contracts there that we've just said, not for us. In fact, they were more on the commodity side of prep veg that we just didn't want to go into and we wanted to move up the value chain. But overall, I think if you think about other convenience like that ready meals has been absolutely like a train. We're trying to, Charles, continue with this focus that we was very successful for us 3 years ago, which was resigning volume that wasn't profitable, and it worked very well. You'll remember, we gave up 10% of our volume. You've got to be careful that you don't slip into that, business is good, so we'll take this on the side. So we've tried to keep our shape there. And -- but in general, our share, I mean, I think I would say salads would be -- that would be the one area where it just didn't really quite work to the level we had hoped. The rest, I think we're confident from a share point of view. I don't know if you add on that... Charles Hall: And are you now through that business resignation process? Or is there still more to do? Dalton Philips: No, we're absolutely through it. But these contracts are often on 3- to 5-year cycles. So actually, we're now coming up to many of those contracts that 3 years ago, we were -- we took a strong stance those are starting to be recycled into the market. And we're just trying to be firm on this and not get ahead of ourselves. So there's nothing more now. You've seen the portfolio, the ROIC that we've been making huge progress and even sushi, which I know we talked about a couple of years ago, like it's absolutely flying at the moment. I mean there's more to do, obviously. So I think we're in a pretty good place on our portfolio. Charles Hall: And anything to say on new business wins? Dalton Philips: Had some good wins over the summer, which will carry through. It's about 100 basis points of volume that will annualize into this year. So I think that's a good underpin and you put that on top of what's going on with those structural tailwinds of premiumization, convenience stores, you wouldn't want to get ahead of yourself, but we're feeling confident. And I think as we look to Bakkavor, when we think about that ability to manage those portfolios, there'll be learnings that we can bring to them, and I'm sure they'll have learnings for us as well. Andrew Wade: Andy Wade from Jefferies. First one, just sort of looking at your 7% operating margin target. So on the one hand, we've got that where you're at 6.5% this year. But just sort of looking through how you're talking about the opportunity still. There's still fundamental stuff like line balancing and overhead balancing and procurement and so on. But then you've got the big projects to come as well, the automation, logistics, the tech side of things, which is going to be another 5 years. I'm just sort of trying to square up where we're nearly at 7% already and you've got so much in the pipeline. Am I overestimating how much is still to go? Or is that 7% looking very conservative? That's my first question. Dalton Philips: Look, I'm sure Catherine will have some views on -- Well, actually, do you want to go on that? Catherine Gubbins: Look, we have plenty, plenty to go after, plenty levers to pull, right? They're not all going to magically appear next year. We're obviously planning to deliver these initiatives over the next number of years, right? I think what we would say is 7% over the medium term, 7% or above is a target that we're happy. We are happy to stand behind at this point in time. Obviously, that's Greencore on a stand-alone basis. We're really looking forward to combining with Bakkavor and then seeing what that looks like. And obviously, we'll be back out to talk to you about how we feel from a margin perspective in the context of the enlarged group. But I think, Andy, the point you made is valid. We have -- I suppose we have plenty of things that we're going to go after to drive the margin. But as I said, it's just -- we need to knock it down, deliver them and wait for them to show up in the P&L. So I think we're happy with the 7% and above. Andrew Wade: Okay. Second one, sort of touching back on question Charles asked on the contract side of things. Can you just remind us, you had the big ready meal win in September '24, which is annualized through now. You had some wins in the first half, a bit of salad loss in the second half and a couple more that you've just recently won. Is that broadly the shape of it? Or is there any big ones I'm missing there? Dalton Philips: No, that's broadly the shape of it. Some -- a number of sandwich contracts that have come our way that were either expansion or new customers, but... Andrew Wade: That's the sort of 100 basis point-ish number you were talking about with Charles' question. Great. And then a little bit churlish given how good the results are, but the making business easier, we're talking about GBP 80 million over 5 years. Are we going to be taking all of that as exceptional? And I guess if it's going to be going on for quite a long time, why do we think that -- I mean, obviously, you run it by the accountants and stuff, but how does that qualify as exceptional given it over quite a long period? Catherine Gubbins: Yes. Look, I mean, it's a transformational spend. We've obviously given that a lot of consideration. We're into year 3 of that program now, and we're happy that it qualifies as an exceptional spend. Clive Black: Yes, Clive Black from Shore Capital. Three relatively general ones. Firstly, what's the plant utilization then in September '25, what spare capacity you've got? Secondly, maybe say a word on your coffee shop opportunity because that's been a mixed blessing for Greencore in the past. And then lastly, what sort of -- how would you classify your relationships with the movers and shakers in process engineering? Dalton Philips: In process engineering. Clive Black: Manufacturing engineering. Dalton Philips: So I'll rattle through that and Catherine, please, come in if you want. So plant utilization, we're about 85% at the moment. So we've got that 15%. We had it before. We sold some of that capacity, which is part of the 2.5% volume growth, and we've been squeezing more out. And I think the challenge into the ops team is I will always be at around 15%. Now at some point, the guys will say, you need to put down more bricks and mortar. But I think our challenge back in is we shouldn't need to put more bricks and mortar down. I'm talking as a stand-alone site, forget the Bakkavor opportunity because obviously, one is to get to 3 shifts. Okay? And at the moment, for example, wrap rolling, we haven't got any technology that can go faster than a human. So we wrap roll ourselves. But we don't think we're far away, I mean, far sort of 18 months away from being able to speed the wrap lineup and bang, you pick up more capacity. So what we say to the team is, let's keep it at 15 and keep eking it out. In terms of the coffee channel, good question given ISG. But I think like if you take something like Costa or Nero, I mean, Nero is a fantastic business as is Costa, very professionally run. In the Nero case, they give us the keys. We deliver at night. We deliver through our DTS operation. We deliver other products for them as well. In some cases, we're quasi-merchandising the shop for them. So I think it's a good channel. It's professionally run. And I think if we're disciplined in holding our shape, I see the opportunity there. And then the third in terms of process manufacturing, this is a really good question. So we've been typically dealing with the Militex of this world, so European, and we want to go out to China. In fact, the plan is to go out in Q1 to go out to China to start speaking to other OEMs, think with the Bakkavor behind us and we can say, look, we've got 40 plants here. I think we believe there could be a different conversation. But we're trying to pull kind of current leading-edge technology from the Militex, but we want to see as something next gen from other sectors Clive because we're not the only other people out there who are dealing with the hand dexterity issue, and we believe there must be technology out there. And like I can't tell you how many thousands of people we have on our lines that -- and we've talked about 10% of that could be a medium-term target and some might say that's not ambitious enough in terms of taking labor out. Catherine Gubbins: Nothing further for me, to be honest. Operator: [Operator Instructions] The next question comes from Karel Zoete from Kepler. Karel Zoete: I have 2 clarification questions. The first one is in relation to the transition costs in 2026 plus the integration cost. What would be a reasonable expectation for both aspects combined in '26? And the other thing is on operating margins. Did I understand correctly you expect them to expand into 2026? Catherine Gubbins: Yes. So look, I suppose if you think about cost of the transaction into next year, we have an estimate of our costs being about GBP 40 million. for the transaction. And obviously, we recognized GBP 11 million in exceptionals in full year '25 in respect of the transaction. I suppose moving on to margin, absolutely, Karel, I suppose our expectation, our plan, our aspiration is that we will improve the operating margin in 2026. I'm not sure if you want me to build on it anymore. I think we've spoken a bit today around how we're planning to approach that, obviously, within the confines of that overall operating margin target of 7% and above that we've set out over the medium term, I suppose we are on the journey to delivering that, yes. Dalton Philips: Okay. Well, we'll wrap it there. We really appreciate you coming in today, and thank you for your questions and support.
Clay M. Whitson: The cadence driven by the cadence of revenue recognition on certain projects in our utilities and transportation markets. This will be particularly true in Q1. Despite the lower outlook for those markets in fiscal 2026, they are well positioned to rebound in fiscal 2027 and beyond. Our long-term expectation for organic revenue growth remains high single digit. While we are now a single operating segment, we would like to provide some detail regarding the size and relative contributions to revenues by our core markets. 25% of revenues utilities, transportation, education, and public administration are all roughly equally weighted. From a seasonality standpoint, software license sales and professional services represent the most variable line items to forecast and can distort seasonality in a given quarter. We currently expect our revenue distribution to approximate the following: Q1, 23%; Q2, 25.5%; Q3, 24.5%; Q4, 27%. I'll now turn the call over to Rick Stanford for updates on the M&A. Thank you, Geoff. Good morning, everyone. I'll briefly address M&A and then I'll hand the call off to Paul Christians. Rick Stanford: This past quarter has presented various opportunities to assess potential acquisition targets. Our interest in some of these companies remains strong and discussions are ongoing. Acquisition philosophy remains steady. We will pursue opportunities that align with our strategic goals while maintaining a disciplined approach to pricing. Additionally, each potential acquisition must fit well within our operational framework ensuring compatibility. We remain optimistic as our acquisition pipeline is constantly churning and continually filled with promising opportunities. Our primary focus remains on strengthening our public sector vertical where we see significant potential for growth and innovation. I'll now turn the call over to Paul Christians for final comments. Paul Christians: Thank you, Rick. i3 Verticals, Inc. is structured into five primary markets: Justice tech, transportation, public administration, education, and utilities. Because we intentionally structured our organization in a market-centric model to remain as close to the customer as possible, intra-market cross-selling naturally progressed into solution bundling. As solutions have evolved, some are applicable cross-market. Given that, leadership is actively identifying synergistic opportunities across markets further accelerating revenue and deepening customer engagements. Governments are prioritizing the modernization of legacy systems, enhanced user experience, and improved transparency for constituents. The combination of modernization needs and scope expansion creates a unique market opportunity for i3 Verticals, Inc. to address the gap by providing solutions that include ancillary modules such as payments and other revenue cycle activities, that may reduce costs of systems modernizations. Additionally, i3 Verticals, Inc. is positioned to address the needs of all sides of the state and local government agencies. Our solutions architecture and service delivery model allows us to scale from a single agency to an entire state system broadening our addressable market. Recently, i3 Verticals, Inc. announced the expansion of our partnership with the West Virginia Supreme Court to deliver the i3 Court One case management solution to the state's circuit, family, and magistrate courts. With the new contract, i3 Verticals, Inc. provides ancillary value-added services designed to maximize efficiency and offset project costs for West Virginia's unified judicial system. An expanded platform will empower citizens to gain greater access to aggregated public court data, while the revenue cycle management module will streamline financial processes and improve court's case disposition rates. We are experiencing a heightened awareness and demand for technology-forward platform solutions across the public sector. Platform offerings support decision-makers' ability to manage results versus managing assembly of multiple systems, vendors, and ongoing maintenance. Recent evidence of market platform orientation includes a higher number of RFPs, an increase in the scope of the solutions covered, unified data structure for analytics, and ongoing systems evolution and maintenance requirements. The shift from traditional licensing and capital expenditure models to SaaS introduces a new budgeting paradigm for government clients. One of our differentiators is that i3 Verticals, Inc. is organized both in solution bundling and delivery structure to scale implementation from a single agency to statewide deployment. To address evolving platform market trends, we bundle ancillary services to reduce upfront costs and deliver integrated, modular solutions that deliver modernization with extended scope and enable rapid rollout of additional modules. As referenced earlier, we're observing increased RFP activity alongside continued pipeline growth. This momentum in part reflects increased recognition of i3 Verticals, Inc. as a trusted platform provider and the enhanced market visibility achieved through our brand unification over the past year. This concludes my comments, Drew. At this time, we will open the call for Q&A please. Rick Stanford: We will now begin the question and answer session. The first question comes from John Kimbrough Davis with Raymond James. Please go ahead. Good morning, guys. Geoff, just wanted to dive into the '26 organic growth outlook. Our math is about 5%. I heard 8% to 10% recurring and professional services down. Is that a function of you're no longer selling those professional services or maybe you're not putting things like Manitoba in the guide because they're lumpy and you don't know if they can if they're going to hit or when they're going to hit. Just trying to get a sense for the level of conservatism and almost have and also how much you expect professional services to be down on a year-over-year basis? Clay M. Whitson: Yes. Thanks for the question, J.D. So it's absolutely true that we are leaning into recurring revenue any chance we get. When it comes to negotiations, the West Virginia deal we just did, or any opportunity where we can push and lean on the SaaS and defer over, you know, opt for the recurring sources instead of the professional services implementation sources and contract negotiations, we're absolutely doing that. At each turn. That being said, the professional services, we don't expect that to go away. We don't think that what we have clear line of sight on in 2026 is reflective of any kind of long-term trend necessarily. There's a number of things. The West Virginia deal, utilities pipeline, they look really strong on the professional services and implementation front. Further out. Just true that for 2026, we think that the cadence and timing of some of those things is going to be a little bit lighter. And so we expect to see that line drop off a little bit here. And it was strong in Q4, some of that was a little bit of pull forward, but most of it is kind of things that we just think that the actual performance obligation fulfillment, the cadence of when we get to rev rec on these is further back end of 2026 or slipping into 2027. John Kimbrough Davis: Okay. Thanks. And then I just wanted to drill down a little bit on that dollar I think you called out 104 for the year. How much of that was priced? And how should we think about kind of the pricing tailwind going forward? So we addressed this a little bit with the market but just to kinda recap some of these things. The company has been extremely conservative on price increases historically. And I'm going to say that we are isn't like a pendulum swing to the ops end of the spectrum at all. But we're much more bought in and have been, you know, working through the contracts and the expectations to make sure we kind of get to more of a 3% to 5% price increase range. On a consistent basis with our customers. We've kind of guided that you might expect if price increases were historically contributing one, all things that we think we're gonna get a great return on. You know, West Virginia is just one of kind of, you know, the sources where that's gonna kinda come from. We're really excited about that deal. The cost is I'd say it's relatively in line with where we thought it was going to be for Q4, but these are people who are going to be with us for the foreseeable future here. And that's going to that elevated cost is going to continue into the next fiscal year here. Okay. And then Greg, $85 million cash balance on the balance sheet. Here. How do we think about buyback versus M&A just remind us how much you have them on the buyback? It looks like this year can be a little bit of a transition year at least on the revenue front. Just how are you thinking about that? M&A versus buyback here? And remind us how much you guys have authorized left? Rick Stanford: We just regarding buybacks, and I'll let Greg hit M&A. But Hey. Buybacks, we just refreshed the approval to $50 million. Not a lot of activity in this current period. See obviously the detail in our 10-Ks. That's something that the emphasis is on being opportunistic. We'll do it when we think we get a good return. And we'll we're not going to chase it when we don't think that we're given. On the M&A, we've worked in our pipeline for thirteen years. And I think you'll see some activity sooner than later. We've done a couple of small ones that we'd really don't talk a lot about. And I think we'll still do those, but I think there'll be a couple of meaningful ones we get done in 'twenty six. John Kimbrough Davis: And Greg, when you say meaningful, more tuck in but announced deals that are big enough that you're going to announce them versus maybe some that are just immaterial and not even worth kind of press releasing or talking about? Rick Stanford: Exactly. But nothing transformative. Clay M. Whitson: Yeah. Nothing transforming. They're larger. We say our sweet spot is $2 million to $5 million of EBITDA and we pay 10 times. We could get a little bit above that, but nothing dramatically. John Kimbrough Davis: Okay. Appreciate it. Thanks, guys. This concludes our question and answer session. I would like to turn the conference back over to Greg Daily for any closing remarks. Rick Stanford: Thank you. We do appreciate your interest. We're here if you need to talk discuss. The Duke We do appreciate your support. Thank you. Have a good day. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Good day, and welcome to the Danaos Corporation conference call to discuss the financial results for the 3 months ended September 30, 2025. As a reminder, today's call is being recorded. Hosting the call today is Dr. John Koustas, Chief Executive Officer of Danaos Corporation; and Dr. Evangelos Chatzis, Chief Financial Officer of Danaos Corporation. Dr. Koustas and Mr. Chatzis will be making some introductory comments, and then we will open the call to a question-and-answer session. I would now like to turn the conference over to Mr. Evangelos Chatzis, Chief Financial Officer. Please go ahead, sir. Evangelos Chatzis: Thank you, operator, and good morning to everyone. Before we begin, I quickly want to remind everyone that management's remarks this morning may contain certain forward-looking statements and that actual results could differ materially from those projected today. These forward-looking statements are made as of today, and we undertake no obligation to update them. Factors that might affect future results are discussed in our filings with the SEC, and we encourage you to review these detailed safe harbor and risk factor disclosures. Please also note that where we feel appropriate, we will continue to refer to non-GAAP financial measures such as EBITDA, adjusted EBITDA, adjusted net income, time charter equivalent revenues and time charter equivalent dollars per day to evaluate our business. Reconciliations of non-GAAP financial measures to GAAP financial measures are included in our earnings release and accompanying materials. With that, let me now turn the call over to Dr. John Koustas, who will provide the broad overview of the quarter. John Coustas: Thank you, Evangelos. Good morning, and thank you all for joining today's call to discuss our results for the third quarter of 2025. As we enter the final months of the year, operating conditions remain broadly unchanged. The war in Ukraine continued with no end in sight. And while the conflict in the Middle East is in the process of resolution, transit through the Red Sea has not yet resumed and liners are waiting for more permanent signs of stability to restart the transit. The recent escalation in trade and tariff tensions between the United States and China enabled trade to resume unhindered while the redirection of Chinese exports to the EU and other countries kept trading and container traffic at an all-times high during the third quarter of the year. The charter market remains robust and the idle fleet remains at all-time low. Demand for midsized and larger vessels continues unabated, and we have secured new charters for vessels opening as far out as the beginning of 2028. Shipyard slots for 2028 deliveries are becoming scarce and newbuilding prices continue to rise. We have selectively extended our newbuilding program at below market prices, and we have already secured multiyear employment for these new orders. Following the IMO's 1-year postponement of its net zero framework, we expect conventional fuels to remain prevalent in the medium term, even long-term decarbonization trajectory is unchanged. In relation to our newbuilding program, we recently added six 1,800 TEU vessels to our order book with scheduled deliveries between 2027 and 2029 and have secured 10-year charters for 4 of these vessels with a contribution to our contracted revenue backlog of approximately $236 million. On the financing front, we recently completed a $500 million unsecured 7-year bond offering with a 6.85% coupon. This is one of the most competitively priced deals ever achieved in the shipping industry for an unsecured bond with such tenor and is a testament of our superior credit quality. We intend to use the proceeds to redeem our 2028 $300 million bond as well as prepay in full some smaller secured bank credit facilities. We have already arranged secured debt financing for the majority of our newbuilding program and our fortress balance sheet that has been solidified with the recent bond issuance considerably enhances our capacity to pursue accretive investment opportunities that can propel the growth of Danaos into the next level. Our solid performance has enabled us to continue to deliver strong profitable performance, enhance our contract backlog and fund investments to reduce the age of our fleet and further cement Danaos' leadership position in the container charter market. We also continue to opportunistically invest in the dry bulk Capesize market segment, where we expect outsized returns due to supply constraints and ton-mile demand increase. Finally, I'm pleased to announce that we are increasing our quarterly dividend to $0.90 per share, consistent with our policy of yearly increases, while also striving to continue to build long-term value for the benefit of our shareholders. With that, I'll hand the call over back to Evangelos, who will take you through the financials for the quarter. Evangelos Chatzis: Thank you, John, and good morning again to everyone, and thanks to all of you for joining this call. I will briefly review the results for the quarter, and we will then open up the call to Q&A. We are reporting adjusted EPS for the third quarter of 2025 of $6.75 per share or adjusted net income of $124.1 million compared to adjusted EPS of $6.5 per share or adjusted net income of $126.8 million for the third quarter of 2024. This $2.7 million decrease in adjusted net income between the 2 quarters is the combined result of a $6.1 million increase in total operating costs, mainly due to the increase in the average number of vessels in our fleet and a $2.5 million decrease in dividend income, partially offset by a $4.5 million increase in operating revenues, a $1 million decrease in equity loss on investments and a $0.4 million decrease in net finance expenses. As analyzed in our earnings release, the increase in our fleet produced $11.2 million of incremental operating revenues that was supplemented by an extra $1.8 million in higher operating revenues as a result of higher fleet utilization. Those were partially offset by a $4.3 million decrease in revenues of our Container segment as a result of lower contracted charter rates between the 2 periods and the $4.2 million lower noncash U.S. GAAP revenue recognition. Vessel operating expenses increased by $2.4 million to $52.3 million in the current quarter from $49.9 million in the third quarter of 2024, mainly as a result of the increase in the average number of vessels in our fleet, while our daily operating cost slightly increased to $6,927 per vessel per day for this quarter compared to $6,860 per vessel per day for the corresponding third quarter of 2024. Our operating costs continue to remain among the most competitive in the industry. G&A expenses increased by $1.6 million to $12.6 million in the current quarter compared to $11 million in the third quarter of 2024. Interest expense, excluding finance cost amortization, increased by $0.3 million to $7.7 million in the current quarter compared to $7.4 million in the third quarter of 2024. This increase is the combined result of a $0.9 million increase in interest expense due to an increase in our average indebtedness of $121 million between the 2 periods, and that was partially offset by a reduction in the cost of debt service by approximately 74 basis points, mainly as a result of a decrease in SOFR cost between the 2 periods. We also had a $0.6 million decrease in interest expense due to higher capitalized interest on vessels under construction between the 2 periods. At the same time, interest income came in at $3.8 million in the current quarter due to the increased average cash balances on our balance sheet, partially offset, of course, by declining interest rates. Adjusted EBITDA increased by 1.5% or $2.7 million to $181.6 million in the current quarter from $178.9 million in the third quarter of 2024 for reasons that have already been outlined earlier on this call. We encourage you to review our updated investor presentation that is posted on our website as well as subsequent events disclosures. Let me provide a few of the highlights. Since the date of our last earnings release, we have added $745 million to our contracted revenue backlog. As a result, our contracted charter backlog has considerably improved and now stands at $4.1 billion with a 4.3-year average charter duration, while contract coverage is already at 100% for this year, 95% for 2026 and at 71% for 2027 in terms of operating days, contracted operating days. Our investor presentation has analytical disclosure on our contracted charter book. As of September 30, 2025, our net debt stood at $165 million, and this translates to a net debt to adjusted EBITDA ratio of 0.23x, while 53 out of our 84 vessels are unencumbered and debt-free. This quarter, we have declared a dividend of $0.90 per share, which is an increase of approximately 6% versus the prior dividend. And we also continue to execute under our share repurchase program, and we currently have $86.4 million remaining authority to repurchase stock under our $300 million stock buyback program. Finally, as of the end of the third quarter of 2025, cash stood at $596 million, while total liquidity, including availability under our revolving credit facility and marketable securities stood at $971 million, giving us ample flexibility to pursue accretive capital deployment opportunities. With that, I would like to thank you for listening to this first part of our call. Operator, we are now ready to open the call to Q&A. Operator: [Operator Instructions] The first question comes from Omar Nokta with Jefferies. Omar Nokta: A couple of questions for me. Just a couple of questions, one on kind of the industry and then on Danaos specifically. Just first, on the container shipping chartering activity we've been seeing. It's been a bit of a bumpy year in terms of lower trade and tariffs and box freight rates have gotten lower and there's kind of growing charter perhaps of the Red Sea. Return, even though it's still very, very early and people are still cautious. But yet, despite all that, you're still seeing very high demand for charters on your existing ships. But then also despite you having said you wanted to step back from the newbuilding market, it's been kind of difficult given the contracts being awarded. I wanted to just kind of get your sense in terms of what do you think is driving all of this kind of -- I don't want to call it, say, a frenzy, but just a strong appetite on the part of liners looking for ships, whether it's what's on the water on a forward basis perhaps, but then also looking for brand-new ships that deliver in '28 and '29. Just kind of that high volume of activity, what do you think is driving that? And can we expect that to persist as we get into 2026? John Coustas: Well, Omar. It's difficult, let's say, to answer exactly what is happening. What we see is that there is -- there was this, let's say, problem with tariffs. But tariffs themselves have not changed the overall the world, let's say, production capacity. And China, I mean, during this period didn't stop producing. It's just that the goods were directed elsewhere. And what is really interesting this time is that we see the dynamism in the market happening outside of the, let's say, the usual Western areas, I mean, Europe and the U.S. The market is developing quite substantially all over the other -- the rest of the world. And that is why also demand for midsized ships has been so robust because that's really where the demand increase is coming. So yes, I cannot really say how strong 2026 is going to be. I mean, as far as we are concerned, practically, even for 2027, we are mostly fixed. It's difficult really to make any prediction. And you see we will, of course, have a better idea of where the market is heading after the canal is opening again, which we believe now that it will be maybe an event of the first half of '26, although in that kind of area, the disarmament of Hamas is not happening. And I think this is really the most crucial question to ensure that this conflict is over. Omar Nokta: Yes, definitely a lot of moving pieces, and it does sound like the trade has clearly gotten much more complex. And then maybe just kind of thinking about Danaos specifically and the investment in the Capesize vessel you bought, that's your 11th ship. This one comes after you had bought the original 10 back in '23. What's maybe triggered this investment? And then also why this age range? And should we expect more of these types of investments going forward? John Coustas: Yes. Of course, our idea was when we entered that kind of market to really grow it. I mean, as a percentage, let's say, of our fleet, not in terms of, let's say, ship numbers, but at least, let's say, in terms of investment in value, all this dry bulk investment is less than 5% of our overall assets. So it's still really nothing, I mean, practically. And we definitely want to increase it. For the time being in the newbuilding front, still these vessels do not make sense. So we're trying to expand selectively in the secondhand market and mainly trying to identify good quality vessels. Omar Nokta: Okay. And then final one, just on the share repurchase program. You have been since inception, I think, in '22, quite active with it. You're also active in the prior, say, 3 or so quarters. Not much was done. I don't think you bought any stock in the last quarter. What's behind that? And what can we expect going forward? Or what do you think about the buyback from here? John Coustas: We are continuing. We have not really stopped. It's just the pace has been kind of smaller. We still believe that our stock is greatly undervalued. And we are continuing at a smaller pace, but we have not stopped. Evangelos Chatzis: Yes, Omar, we are resuming the share buybacks in the past few weeks, and we're still at it. Omar Nokta: Okay, awesome. And also congrats on the bond issue last month. John Coustas: Thank you. Operator: [Operator Instructions] The next question comes from Climent Molins with Value Investor's Edge. Climent Molins: Following up on Omar's question on the Capesize acquisition and your commentary on maybe wanting to expand your direct exposure. Could you provide an update on how you view your investment in Star Bulk? And secondly, is there any appetite to maybe expand into other segments such as Panamaxes or Supramaxes? John Coustas: Well, as we said, we are happy with our investment in Star Bulk. We have actually increased that position last spring when we saw a dip in prices. We are continuing. We believe that there is room for appreciation. As far as the other segments, no, we are not looking into other segments at the time being. Climent Molins: That's helpful. And following up on the Capesize side of the fleet, could you provide some guidance on your Q4 fixtures to date? Evangelos Chatzis: We do not provide guidance as to charter fixtures for the running quarter. Climent Molins: I understand. Make sense. Operator: It appears we have no further questions at this time. I would like to turn the call back over to Dr. Koustas for any further comments or closing remarks. John Coustas: Thank you all for joining this conference call and your continued interest in our story. Look forward to hosting you on our next earnings call. Have a nice day. Operator: Thank you. This concludes today's teleconference. We would like to thank everyone for their participation. Have a wonderful afternoon.
Operator: Ladies and gentlemen, thank you for standing by. Welcome to Leumi's Third Quarter 2025 Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded, November 18, 2025. The presentation that we will be using is available on the IR section of the bank's website. I would like to remind everyone that forward-looking statements for respective company's business, financial condition and results of its operations are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated. Such forward-looking statements include, but are not limited to, product demand, pricing, market acceptance, changing economic conditions, risks in product and technology development and the effect of the company's accounting policies as well as certain other risk factors, which are detailed from time to time in the company's filing with the various securities authorities. I would now like to turn the call over to Ms. Hagit Argov, CFO and Head of Finance Division. Please go ahead. Hagit Argov: Good day, everyone. I'm very pleased to be here with you today and to present our strong third quarter 2025 financial results. So let's get started with Slide 3. First, some key takeaways. Bank Leumi continues to present high and stable results over many quarters. This quarter, ROE was 16.3% and net profit was ILS 2.7 billion. It is worth noting that if the excess capital were reduced to the bank's internal CET1 target of 10.6%, the ROE would stand at 19% in the third quarter. In addition, we continue to manage costs effectively while maintaining a strong efficiency ratio. Credit quality metrics further improved and they have been consistently among the best in the sector over a number of years. We continue to present significant excess capital and healthy liquidity ratios. Following the Bank of Israel approval to increase the payout ratio up to 75% of the net profit in the third quarter, Leumi announced a combined dividend and buyback of ILS 2 billion. So all in all, we delivered strong, consistent and high-quality performance. Let's take a quick look at Slide 4. Here, we can see our financial targets for 2025 and 2026 published as a strategic plan in our 2024 annual report. So far, Leumi is well on track to meet our financial targets. Before we dive into the details, let me start with a brief overview of the macroeconomic environment. For this, we move to Slide 5, which highlights the key macro indicators. In Q3, the economic indicators showed an expansion. The Bank of Israel estimates real GDP growth of 2.5% for 2025, mainly impacted by the implications of the military conflict against Iran and 4.7% GDP growth in 2026. The GDP growth is driven by domestic demand and fixed investment. In addition, export of high tech services, which is the key growth engine of the Israel economy has accelerated in recent months. And recently, inflation got back to the target range of Bank of Israel between 1% to 3%. In October 2025, a high-tech agreement with Hamas, including the return of the Israeli hostages was achieved. If fully implemented, this development would have positive implications for the Israeli economy and global sentiment. Moving to Slide 6, which provides a snapshot of our quarterly performance. I will let the numbers speak for themselves. As mentioned, net income for Q3 2025 was ILS 2.7 billion and ROE was 16.3%. The cost-to-income ratio was especially strong at 27%, down from 31.1% in Q3 2024. This was supported by higher income and lower costs, thanks to our advanced technology. Our cost-to-income ratio continues to lead the Israeli banking sector and is among the best globally. Credit loss expenses were 0.03% in Q3, reflecting, among other factors, a positive development in the geopolitical environment. Credit portfolio grew by 1.3% quarter-on-quarter, supported by continued demand, mainly from the corporate and mortgages segment. The book value per share of the bank increased by 2.7% in the quarter and is up 12.7% over the past 12 months to ILS 45. Quarterly earnings per share were up almost 20% year-on-year. Now let's drill down to some key numbers on Slide 7, which shows the breakdown of income and expenses. Net interest income decreased 1.6% year-on-year, mainly driven by a lower CPI compared with Q3 2024. Overall, finance income grew strongly by 10.5% year-on-year, supported by higher noninterest income, mainly from capital markets compared with the parallel quarter last year. Expenses declined, reflecting our tight cost control. As a result of the above, pre-provision net revenues increased year-on-year by 14.3%. In addition, as part of the Bank of Israel program to distribute benefits to customers that was launched in April 2025, Leumi continues to benefit its customers. This totaled ILS 172 million in the third quarter. A brief view of Slide 8 summarizes our 9 months 2025 results. As you can see, 9 months results followed a similar trend to those for the 3 months period in the previous slide. Another brief metric on Slide 9 highlights our fee. Fee income was partly affected by the benefits granted to customers in the Bank of Israel program. Excluding these benefits, fees grew strongly by 11.4% quarter-on-quarter, driven mainly by securities activity and credit growth. 9 months 2025 over 9 months 2024 displayed similar trend. On Slide 10, we clearly see the bank's continued improvement in our multiyear cost income ratio. Our cost income ratio continues to be strong at 27% in the third quarter and 28.6% in the 9 months. Turning to Slide 11. The development of credit loss expenses in Q3, which shows us that specific provisions reflect our high-quality credit portfolio with an income of ILS 74 million coming from net recoveries. That means collections minus provision increases. Collective provisions were lower than in the parallel quarter, reflecting an improvement in the macro environment in light of the positive development in the geopolitical situation. Overall, total credit loss expenses in the quarter were 0.03% of gross loans compared with 0.28% in Q3 2024 and maintain our coverage ratio. Slide 12 presents a significant metric. It is the high quality of our credit portfolio. Credit quality further improved in Q3 with troubled debt declining to 1.34% of gross loans. NPL was also at a low level of 0.41%. The coverage ratio, as I mentioned before, remains stable, while the rate of provisions to NPLs increased 3.3x. These parameters are among the lowest in the banking sector. Now we turn to Slide 13. This shows our strong credit growth. Credit growth over 9 months was in line with our targets and stood at 8.8% with a 1.3% rise in Q3. This was supported by the ongoing resilience of the economy with growth coming from corporates, including real estate, infrastructure, mortgages and middle market. The next slide, Slide 14, shows the bank's diversified deposit base. Total deposits were up 3.7% in 9 months 2025, while deposits from private individuals grew by 1.4%. Liquidity ratios remain robust with the LCR ratio at 128%. Let's now move on. Slide 15 shows our healthy capital and leverage ratios. The core Tier 1 ratio increased by 5 basis points in the quarter to 12.33% with the bank's capital buffer now standing at more than 2% or ILS 11 billion. The total capital ratio was stable at 14.87%, which is also well above the Bank of Israel minimum requirement of 13.5%. Going on to Slide 16, we see the bank's capital return. Because the limitation on the capital return was partly by the Bank of Israel, Leumi declared a total payout of ILS 2 billion, of which ILS 1.5 billion is a cash dividend and the rest is in buybacks. This represents 75% of the quarterly net profit and an annualized return of 8.2% at the current share price. In conclusion, we turn to Slide 17. Let me just summarize our presentation. The bank continues to present consistent and strong financial performance with high ROE even during macroeconomic and geopolitical uncertainty. We remain highly disciplined on costs, resulting in consistent efficiency improvement and the best cost-to-income ratio among Israeli banks and probably one of the best globally. Our technology transformation doesn't stop. Nearly 90% of our private customers carry out their activity through digital platforms. The bank's strong profitability and healthy capital buffer enable us to continue growing in our target segments and also allow us to share higher returns with shareholders through dividends and our buyback program. With that, I will now open the call for questions. Operator? Operator: [Operator Instructions] The first question, funding plans. Do you plan to come to the market in the near term to issue USD senior bonds or AT1s or Tier 2s? Hagit Argov: Okay. Thank you for the question. Regarding the senior, we constantly issue senior bonds depending on our liquidity ratio. And if it will be in U.S. dollar, it depends in the price and in the conditions. So we consider it when we issue. Regarding the Tier 2, let me point out that our total capital ratio is significantly above the requirement. So there is no specific need to refinance it in the near future. As for the bond seniors in the U.S. dollar with the call date in January 2026, the final decision will be during 2026, depends on our capital ratio. Operator: The next question, what are your refinancing plans for the Tier 2s callable in January 2026? Hagit Argov: The same question, I covered it in my answer. Operator: The next question, could you provide some color on the trajectory of net interest income and net interest margins as we approach the end of this year and look ahead to next year? Hagit Argov: Okay. So about this quarter, the NIM was affected mainly by the higher share of institutional in our deposit portfolio. These deposits carry lower margins. They are usually short term. So the current level of the NIM will not necessarily remain the same in the coming quarter. And of course, affected by the competition. About the future, we expected the Bank of Israel to announce an interest rate reduction. And according to our financial statements, a 1% decrease in interest rate would affect our results by around ILS 8 million, which is approximately 0.8% in ROE terms. So we believe that this will be the effect in our financial statement. Operator: The next question, I'd appreciate your perspective on the normalized cost of risk. There was a noticeable decline this quarter with COR at 9 bp for the first 9 months compared to 16 bp last year. Any insights on the drivers behind this change? And any guidance going forward would be very valuable. Hagit Argov: Okay. Thank you for the question. First of all, it is important to note that during the war, we accumulated a large excess provision due to concern about the geopolitical situation. Secondly, in this quarter, there is an improvement in the geopolitical situation. And as I mentioned in my presentation, in our credit quality parameters. And finally, our specific provision, we continue to record income from recovery, net recovery. It means we have more recoveries than write-offs. So consequently, total credit loss provisions were low, amounting to ILS 3 million. I want to mention that our NPL coverage is about 3x and is one of the highest in the system. And also, we maintain our coverage ratio, which means our provisions to our credit. So if I have to appreciate what will be in the future, it's, of course, depend on the geopolitical situation and our credit quality parameters. So if the situation will continue to improve and there will not be any deterioration. So I believe that it will be in the same level of provisions. Operator: The next question. A question on regulatory risk. There have been media headlines about an increased tax rate on the banks and separately by the Finance Minister to subsidize mortgage. Does the bank have any take on that? Hagit Argov: Actually, we heard about this plan at the same time as you did, and we don't have any further information. Such a process would require, of course, legislation. And yet, we don't see any official document. So if the issue develop further, we will be able to respond accordingly. Operator: The next question, how much more operating leverage is there? And how should we be looking at expenses going into next year? Hagit Argov: Okay. So as you know, Leumi has continued year after year to increase its income and decrease its expenses. Our motto has been doing more with less, and this is reflected in our financial parameters, in our cost-income ratio. We have achieved and we'll continue to do this mainly by advanced technology. By the way, to the best of my knowledge, it is the best of all the Israeli banks and probably in the world, and we are very proud of it. We continue our tight control of expenses, and we continue with our technology, and I believe we can maintain it at least in the same level. Operator: [Operator Instructions] There are no further questions at this time. This concludes Leumi's Third Quarter 2025 Results Conference Call. Thank you for your participation. You may go ahead and disconnect.
Operator: Thank you for standing by, and welcome to the James Hardie Fiscal Second Quarter 2026 Earnings Conference Call. [Operator Instructions] I would now like to hand the call over to Joe Ahlersmeyer, Vice President of Investor Relations. Please go ahead. Joe Ahlersmeyer: Thank you, operator, and thank you to everyone for joining today's call. I am joined today by Aaron Erter, Chief Executive Officer of James Hardie; and Jon Skelly, President of AZEK Residential. Before we begin the call, please note that during prepared remarks and Q&A, we may refer to non-GAAP financial measures and make forward-looking statements. You can refer to several related cautionary and other notes on Slide 2 for more information. Forward-looking statements made during today's conference call and in the earnings materials speak only as of the date of this presentation. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Accordingly, investors are cautioned not to place undue reliance on forward-looking statements. Also, unless otherwise indicated, our materials and comments refer to figures in U.S. dollars and any comparisons made are to the corresponding period in the prior fiscal year. And with that, I'm pleased to hand the call over to Aaron. Aaron Erter: Good morning, and thanks for joining us today. With me on today's call are Jon Skelly, President of our AZEK business; and Joe Ahlersmeyer, our Vice President of Investor Relations. Before we get into the second quarter results, I wanted to provide an update on some important developments for the company. Today, we announced the appointment of Nigel Stein as Chair of the James Hardie Board of Directors. Nigel's extensive Board experience, understanding of James Hardie and his leadership come at a transformative time as we focus on execution and long-term value creation for our shareholders. Our Board also announced the creation of an Integration and Performance Committee to support the successful integration of AZEK and the performance of the combined businesses. The committee will be chaired by Jesse Singh and will include Board members, Howard Heckes, Persio Lisboa and myself. I look forward to working with Nigel and the entire Board to advance our strategy and continue strengthening the company for the future. As you may have seen in our press release, Rachel Wilson will be leaving James Hardie to pursue other opportunities. Rachel has been a valued partner and an important part of our team during her tenure at James Hardie. I want to thank Rachel for her many contributions over the last 2 years. Finally, I'm very pleased to announce that Ryan Lada will join us as our new Chief Financial Officer. Ryan comes to us from Watts Water, where he recently served as CFO. Many of you know him from his prior role as CFO at AZEK. Ryan is a proven leader who brings strong operational and financial experience and a deep knowledge of the building products industry. He's the right person to partner with me in leading James Hardie in this next phase of growth. We have every confidence in a smooth CFO transition. We released our second quarter results yesterday, which were consistent with what we shared in our prerelease in early October. While we continue to navigate a dynamic market environment, we are actively focused on driving improved performance in our results. We have identified several opportunities to enhance how we operate today while positioning James Hardie to take full advantage of the favorable long-term fundamentals of the U.S. housing market. Our strategy remains grounded in profitable growth, disciplined execution and ongoing material conversion across our businesses from wood and inferior materials to composite alternatives and fiber cement. Before getting into the details of these initiatives, I wanted to address the changes we made to our outlook since we lowered our full year guidance in August. At the time, what we were hearing from our customers and what was evident in their ordering rates was more cautious positioning and the possibility of additional inventory tightening in the channel. The magnitude of the August guidance reduction was deliberate and based on the information we had at the time. Since then, we've seen conditions stabilize with recent customer conversations and data shared by customers showing a more stable market and normalized inventory levels. And based on that, we're modestly raising our full year guidance. We still expect the broader market to be challenging in the near term, and that view is embedded in our guidance range. The variability in our guidance this year has highlighted the need for greater consistency and discipline in our financial forecasting process. We know we can do better, and we've taken decisive action to strengthen execution, improve predictability and drive consistency in our results. We have been working with our customers and are now receiving more frequent granular data from them, giving us a clear view of inventory and market demand. These improvements, among others, will help us deliver more predictable results going forward. Our 2 largest segments: Siding & Trim and Deck, Rail & Accessories, position the company with 80% of our net sales from North America with a strong record of structural growth and substantial material conversion runway across both segments of the business. The balance of our net sales are generated in Australia and New Zealand, where we run a highly profitable fiber cement business and in Europe with an improving financial profile and an attractive fiber gypsum business. In North America, our partnership with large one-step dealers and our success converting homebuilders from vinyl to fiber cement have driven new construction to approximately 40% of our North America revenue, inclusive of AZEK with repair and remodel at approximately 60% of sales. Over time, we expect repair and remodel to grow faster given favorable structural fundamentals and deliberate focus to accelerate fiber cement penetration in that end market. In Siding & Trim, current conditions remain mixed, reflecting the category's higher exposure to new construction in the Southern states. From a channel inventory perspective, customers are appropriately positioned for this time of year relative to forward demand expectations. And while the new home market is still uncertain, demand trends have improved relative to our expectations in August. We now expect mid-single-digit organic net sales declines for the full year. We are focused on returning our Siding & Trim segment to growth in the future. A few examples of our growth plan in the segment include on-the-wall cost reduction pilots in Detroit, Pittsburgh, Indianapolis and the Ohio area are delivering early wins. In some cases, we've cut the relative cost gap versus vinyl by about 50%, thanks to improved material availability and new installation methods. Statement Essentials with Boise Cascade simplifies our ColorPlus lineup, about a 90% SKU reduction versus the full statement collection with products reliably stocked at dealers in pilot regions. This improves availability and reduces project delays, which directly helps contractors win more jobs. Intuitive Edge training and productivity programs are expanding. We're teaching contractors the Trim-Over method, which can improve productivity by about 35%. That means less time measuring, cutting and caulking. These steps make it simpler and more affordable for contractors to install our products and help attract new users to fiber cement. We plan to scale these efforts across major Midwest, Northeast and Mid-Atlantic markets in early calendar year 2026 and close partnership with Boise Cascade. Based on the early results, we see meaningful expansion potential in those regions. Beyond installation, we believe ColorPlus is a differentiated product with large opportunities in repair and remodel, especially in the Northeast and Midwest, where aging housing stock supports conversion from vinyl. We continue to invest in contractor conversion, and we're seeing strong performance in ColorPlus versus prime products with growing momentum among our sales team and dealer partners. Organic net sales in the legacy James Hardie North America fiber cement business declined 3% in the second quarter, driven mainly by lower volumes, partly offset by higher average sales price. Single-family exteriors volumes were down mid-single digits with interiors down low double digits and multifamily up mid-single digits. On a pro forma organic basis, AZEK Exteriors grew revenue, up 5% in the quarter and up 7% in the first half. In Siding & Trim, which reflects both our core James Hardie fiber cement business and AZEK Exteriors, adjusted EBITDA was $224 million in the second quarter, with adjusted EBITDA margin of 29.2%, down year-over-year, primarily due to approximately 400 basis points of margin decline in our North American fiber cement business, largely reflecting underutilization in our plants. We're not satisfied with our performance in the quarter, and we are taking action to improve future performance, including accelerating identified cost synergies from the AZEK combination, reducing variable costs in our plants and optimizing our manufacturing network to improve utilization. These steps are already underway and will drive meaningful margin improvement. Going forward, we expect utilization to improve and margin expansion as we move into fiscal 2027. For the full year, we now expect total raw material inflation in the organic business to run mid-single digits, better than the high single digits we expected earlier. Pricing is expected to offset cost inflation, while HOS or the Hardie Operating System will help dampen the impacts of underutilization. Now let's turn to Deck, Rail & Accessories. In Deck, Rail & Accessories, performance remains strong with mid-single-digit sell-through growth in a market that is down in the low single digits. TimberTech continues to outperform through our proven playbook focused on wood conversion, new product development, channel expansion and strong downstream execution. This business continues to demonstrate that we can deliver above-market growth and profitability through customer-focused execution. Demand in this segment remains solid, supported by a higher mix of repair and remodel work and a large presence in the North and Midwest regions. We delivered mid-single-digit sell-through growth in the quarter, again, outperforming the broader market by several hundred basis points. TimberTech continues to drive conversion by doing what it's always done well, consistent downstream execution, focusing on material conversion, deeper engagement with TimberTech Pros, expanding our channel presence with dealers and distributors and new product development. Over the last 12 months, TimberTech's brand awareness has increased by 7 points to its highest level since we began tracking this measure 5 years ago. New products are also adding momentum. The recently announced TimberTech Advantage Rail is a great example of how we continue to innovate and strengthen our position in outdoor living by launching products that provide the highest levels of quality, style and design while improving contractor productivity. Our quarterly survey of TimberTech Pros shows a stable market. Our contractors continue to report approximately 7 weeks of project backlog, consistent with both prior quarters and the same period last year. They also expect future market conditions to remain relatively stable, in line with recent quarters and the prior year's outlook. Based on this and other data points, we expect both sell-through and net sales to grow low to mid-single digits on a full year basis in FY '26 for the post-close period, July 1 through March 31 compared to the same pre-acquisition period. We expect sequential growth from the December to March quarter, boosted by new product launches and expanded distribution ahead of the spring season. And we are anticipating our partners to carry a seasonally normal level of inventory through the balance of our fiscal year. The integration with AZEK remains on track. We've already aligned key functions like marketing and operations under single leadership. Most recently, we appointed Sam Toole as Chief Marketing Officer of James Hardie. Sam has done an outstanding job leading AZEK's marketing organization for the past 4 years. Under her leadership, we'll strengthen our marketing capabilities, deepen customer engagement and expand our reach across North America. On cost synergies, we've moved quickly on G&A opportunities while being deliberate in how we integrate manufacturing and commercial operations. With 6 months left in FY '26, we've already surpassed our first year cost synergy goal, and we're pushing hard toward our $125 million total cost synergy target. Dealer feedback has been very positive. Several key partners have already chosen to make AZEK their exclusive PVC trim brand, drawn by the combination with James Hardie and the strong loyalty contractors have to our combined portfolio. Our sales teams are leaning in, turning these opportunities into revenue and setting us up for faster growth ahead. Distributor feedback has also been positive. Last month, we announced a multiyear expansion with Boise Cascade in select markets. This agreement expands our strategic statement essentials offering and adds the TimberTech and AZEK exterior brands into our long-standing relationship with Boise. The strong feedback we are hearing across every level of the channel reinforces our confidence in delivering over $500 million of revenue synergies over the next 5 years from the AZEK combination. And it's important to note that this isn't coming from one group or one region. It's broad-based across our dealer network and the contractors and builders who use our leading brands every day. Through countless meetings over the past few months, we are seeing firsthand how the combined portfolio is resonating, how our teams are executing together in the field and how we can bring to bear the relative strengths of the 2 companies. Those early signals give us conviction in the value creation opportunity ahead. I will now turn it over to Joe to run through the financials. Joe? Joe Ahlersmeyer: Thanks, Aaron. Starting with consolidated results for the second quarter. Total net sales grew 34% to $1.3 billion, including $345 million of acquired AZEK sales. Organic sales declined 1%. Adjusted EBITDA was $330 million with a 25.5% adjusted EBITDA margin. Adjusted general corporate and unallocated R&D costs totaled $39 million in the quarter, benefiting from favorable stock-based compensation expense. During the second half, we anticipate around $50 million per quarter of general corporate and unallocated R&D costs. Corporate expense is where the majority of our $24 million P&L benefit from cost synergies resides for FY '26. Adjusted effective tax rate was 16.9%, reflecting our updated expectation for FY '26 of approximately 20%. Adjusted net interest was $68 million and weighted average diluted share count used for adjusted diluted EPS was 582 million. We anticipate these items will remain consistent throughout the third and fourth quarter. Adjusted net income was $154 million and adjusted diluted earnings per share was $0.26. Year-to-date free cash flow was $58 million, reflecting transaction and integration costs, partially offsetting strong cash generation and reduced capital spending. Turning to our Siding & Trim segment, which combines our North America Fiber Cement business with AZEK Exteriors. Net sales were up 10%, including $89 million from a full quarter of AZEK. AZEK Exteriors grew net sales 5% for the quarter and 7% for the first half on a pro forma basis. Siding & Trim organic net sales declined 3% in the quarter as lower volumes were partially offset by a 2% rise in ASP with solid single-family realization. Adjusted EBITDA was $224 million, with adjusted EBITDA margin of 29.2%, down 530 basis points year-over-year, including over 100 basis points of impact from $8 million of R&D costs previously expensed within corporate and now allocated to the segment. Excluding the impact of this allocation, adjusted EBITDA margin would have been approximately 30.2%, a decrease of around 430 basis points. The key drivers of the comparable change in margins were lower volumes, unfavorable absorption and raw material inflation. In the quarter, we experienced a $25 million underutilization impact, partially offset by $10 million in efficiency gains from the Hardie Operating System. We're addressing the margin decline aggressively through network optimization, cost synergies and structural efficiency improvements. These actions will position the business for margin recovery and stronger performance going forward. For Deck, Rail & Accessories, which includes AZEK's residential decking, railing and pergola lines led by TimberTech, net sales increased 6% on a pro forma basis and sell-through was up mid-single digits, consistent with performance in the first quarter. Adjusted EBITDA was $79 million, resulting in a 30.7% adjusted EBITDA margin. The Deck, Rail & Accessories margin outlook remains strong with upside from recycling initiatives, improved absorption at our Boise manufacturing location and the application of the Hardie Operating System across the manufacturing base. Our fiscal third quarter has historically been the smallest seasonal period for our Deck, Rail & Accessories business, and we anticipate a sequential step down in margins consistent with these historical patterns. Turning to Australia and New Zealand, formerly Asia Pacific Fiber Cement. Including the impact of winding down operations in the Philippines, net sales declined 10% or 8% in Australian dollars due to a 20% decline in volumes, partly offset by a 14% rise in ASP. Adjusted EBITDA was down 19% to $44 million, with adjusted EBITDA margin down 380 basis points to 32.7%. Excluding the impact of the Philippines, Australia and New Zealand net sales declined low single digits in Australian dollars with a low single-digit volume decline partially offset by modest ASP growth. Lower margins reflect softer volumes, R&D allocations and higher SG&A expense, including lease exit costs and added growth investments. And in Europe, net sales were up 18% or 11% in euros, driven by strong fiber gypsum volume and average net sales price consistent with the prior year. Adjusted EBITDA margin was up 80 basis points to 15.3%, helped by volume leverage, lower freight and paper costs and solid manufacturing efficiency. We're continuing to invest in sales and marketing in Europe to support higher-value product growth and drive long-term margin expansion. And with that, I'll turn it back to Aaron. Aaron Erter: Thanks, Joe. Turning to our full year outlook. For Siding & Trim, we expect continued challenges in our end markets to result in mid-single-digit organic sales declines in the second half, with Q3 net sales dollars below Q4 due to normal seasonality and the timing of our annual price increase. Based on updated planning assumptions, we are raising our Siding & Trim net sales guidance to $2.925 to $2.995 billion. And today, we are issuing Siding & Trim adjusted EBITDA guidance of $920 million to $955 million. At the midpoint, this implies a full year organic net sales decline of approximately 6% and an adjusted EBITDA margin of just over 31.5%. For Deck, Rail & Accessories, we are modestly increasing the low end of our net sales guidance to $780 million, with the high end remaining at $800 million for the post-close period of FY '26. This assumes sell-through up low to mid-single digits, consistent with recent quarters and above prior expectations, reflecting outdoor living tailwinds and continued material conversion. Based on these demand expectations, we expect Deck, Rail & Accessories adjusted EBITDA of $215 million to $225 million. For the total company, we now expect FY '26 adjusted EBITDA of $1.20 billion to $1.25. We're confident in our long-term cash generation. We expect it to accelerate as integration costs wind down and interest expense declines with debt paydown. Our capital expenditures outlook remains unchanged at approximately $400 million for FY '26, including $75 million for AZEK investments. Over the long term, we expect CapEx across our North American businesses to run around 6% to 7% of combined North America sales. We still expect to generate at least $200 million in free cash flow for the year. Net debt ended the quarter at $4.5 billion. Pro forma for the AZEK acquisition and the midpoint of our updated guidance, FY '26 net leverage stands at approximately 3.2x. We remain committed to getting our leverage under 2 turns within 2 years post close as we grow EBITDA, generate cash and pay down the debt. So to wrap things up, looking ahead, our priorities are clear: continue driving material conversion from wood and inferior materials to composite alternatives and fiber cement, sharpening execution across the business and delivering on synergy and deleveraging commitments. Only 4.5 months post-closing, we are more optimistic than ever on the opportunity in front of us and remain confident that our strategy, our team and our leading brands put us in a strong position to deliver consistent long-term value for our shareholders. With that, operator, please open the line for questions. Operator: [Operator Instructions] The first question today comes from Trevor Allinson with Wolfe Research. Trevor Allinson: First question is on some of the trends you're seeing in Siding & Trim, particularly with your builder customers in the South. I think last quarter, you mentioned about 1/3 of your reduced guidance was due to slower market conditions. Now it seems like perhaps your expectation is for market conditions to not be quite as bad as you were previously anticipating despite the builders continuing to reduce starts here. So can you just talk about from an end market perspective, what's different than what you previously expected? Perhaps any differences by geography worth noting that is supporting your outlook? Aaron Erter: Yes. Sure, Trevor. Thanks for the question. I think very simply, just to begin, the magnitude of that deterioration has been less severe than what we embedded in our guidance. I mean, for instance, the South, single-family new construction, for instance, the declines were less severe than the 20-plus percent declines that we previously embedded. But let me take this opportunity since you threw the question out there, just to give you a little bit of a lay of the landscape here as we think about new construction. Look, starts activity really remains challenging for most of the country. We've cited this before, and it continues, particularly Texas and the Southeast are really having the greatest impact, particularly given their relative size and how indexed we are to new construction in these areas. So Texas, for instance, we see builders continue to manage their inventory levels. Builder activity continues to slow with builders starting homes at a slower pace than they are selling homes. In the second quarter, we again saw double-digit volume declines in this market. The second quarter declines reflect an even softer market than 1Q, even as 1Q was more impacted by the channel inventory impacts. And we've seen continued weakness and deterioration in October with even stronger double-digit volume declines. If we shift over to Florida and Georgia, which is a big market for us as well, demand similarly remains challenging with the volumes down year-over-year in 2Q. Housing inventory, we do see some mix there. Housing inventory across key markets like Orlando and Jacksonville remains elevated and builders continue to manage their inventories. And then in areas, housing inventories have begun to approach normal such as Southwest Florida, we've seen some relief. So we're continuing to see more stable activity in areas like the Carolinas, a market where we're outperforming as we convert builders from vinyl to color. In the West, we expect starts to be down high single digits to low double digits for the year as builders across the Southwest and the Mountain States also slow their starts. And then if we look at areas like the Midwest, we continue to see more resilience in activity, particularly at what we would call the barbell ends of the market. So more affordably priced homes and then top of the market. So look, just to sum it up, generally speaking, new construction has softened -- continued to soften across our key regions. But as I started out and begin with, not as significantly as we factored in our previous guidance. But look, even with that said, we continually strive to figure out ways to continually bring value to our builder customers, to our dealer partners and try to outperform the market. Trevor Allinson: That's super helpful. And then switching to decking and railing. A peer of yours recently talked about seeing a more competitive environment. They're talking about an expectation for SG&A spend to ramp meaningfully here versus where it's trended in recent years. Are you also seeing market conditions become more competitive? And are you expecting marketing spend or rebates to be materially higher moving forward versus what you would have expected 6 or 8 months ago? Any color on the competitive dynamics within decking and railing would be helpful. Aaron Erter: Yes, Trevor. I think to start out, when we introduced this deal, one of the things that was interesting and similar with James Hardie and AZEK is how we went to market. And we focus on the entire customer value chain. We always say homeowner-focused, customer and contractor-driven. And I think you see that with what we've been doing with AZEK and we've been doing it for years. Look, our strategy with AZEK has been consistent and it's been working. And I don't see a need to change that. So as I said, we've been focused on downstream marketing. But look, I have Jon, who runs the business for us and has for years. He can give a little more color there. Jonathan Skelly: Yes. So Trevor, again, I think it's just pretty consistent execution of the playbook. And we haven't seen any reason why we need to alter that, right? So we've consistently communicated externally that we believe we can beat the market by 500-plus basis points of growth. And that's been our experience, and the recent quarter is another example of that outperformance. New product development, downstream sales and marketing, execution, channel expansion and just getting really sticky with our customer base. That's proven to be a successful formula for us. So we're just going to continue to execute that playbook, continue to take care of our customers and continue to take care of our people. If we keep doing that, we'll continue to outperform. Operator: The next question comes from Keith Hughes with Truist. Keith Hughes: Let me go back to the question. Building on the last question, you saw a couple of points of price, I believe, in the decking business. If you could talk more about price as we end the year and potentially to next year, as you said, the previous questioner said, the largest competitor has said a dynamic like there's going to be discounting in this market. What is your expectation for price for the next year or so? Aaron Erter: Yes. Keith, are you talking specifically of DR&A or fiber cement? Keith Hughes: Specifically decking. Aaron Erter: Yes. Yes. Look, I'll take that. And Jon, chime in here if you feel the need. Look, we've taken price. We've seen other competitors take price as well. And we'll continually remain consistent in our actions and our approach to price. We don't see that changing at all. Jonathan Skelly: Yes. I mean, Keith, nothing's changed versus what we've communicated to you over the last multiple years, right? I mean we believe we can continue to take inflationary pricing in the marketplace. That hasn't changed, and we continue to execute and realize the price. Keith Hughes: Okay. And let me switch to railing. What are your plans in the future for Railing? Are we seeing any new launches of different substrate materials? The question is around new introductions. Aaron Erter: Jon, do you want to talk to some of our new product introductions? We've had some exciting ones that just came out. Jonathan Skelly: Yes. So the most recent one we just talked about in the prepared remarks is Advantage Rail. And what that is, Keith, is consistent with our decking portfolio where we have good, better, best, premium, consider this a better/best offer in the composite category. And one of the things we've been doing over the last multiple years with rail is filling out the portfolio. So again, as we look for those continued shelf space gain opportunities, when we can walk into one of our dealer partners with a full portfolio, historically, our portfolio was much more driven around composite and aluminum. But now we have a complete portfolio. You've got entry-level, so your good category with a differentiated vinyl product. You've got a step up into the steel category, sort of that's better. And then the best of the premium is rounded out with our aluminum offer and with a few different versions of composite and then our most premium and PVC. So that really provides us with a great opportunity to help our dealer partners consolidate the number of rail types they have on offer with the full portfolio. And then they get the strength of the TimberTech brand and all the demand generation -- downstream demand generation we provide them behind that brand. So we think that's a really powerful opportunity for our customers. Aaron Erter: Keith, what's been interesting as we've learned -- as I've learned this business more and more and been out with our customers with Jon and the team. As Jon mentioned, it is a very fragmented category. You go into a dealer partner, you go to dealers and you see many different types of railing out there. So to Jon's point, we're trying to be able to bring the complete offering and be able to make it simpler for our dealer partners, make it simpler for the customer as well. And look, just like we did in fiber cement, if you sell a fiber cement job, you're going to sell the trim with it. It's the same thing. We sell a TimberTech decking job, we're going to sell the rail with it as well. That's a focus of ours. Operator: The next question comes from Lee Power with JPMorgan. Lee Power: Aaron, the organic strategy piece that you've kind of outlined again, there's obviously a few moving pieces there just around ColorPlus. Some of it goes to productivity, some of it goes to the price gap versus vinyl, some of it goes to the dealer and the contractor network. What do you think is the core reason that you have struggled probably in the Northeast with ColorPlus in the past. Is it one of those more than the others? Aaron Erter: Yes, Lee, good question. Look, I think if we look at our opportunity to grow the organic fiber cement business, it's a couple of things. If we look at the Northeast and we look at the Midwest, those are the areas from a repair and remodel standpoint that have the most opportunity because you have an aging housing stock out there. The big challenge for us or I should say, opportunity is how do we decrease the price differential versus inferior substrates. So vinyl, for instance. What we know is if our contractors are sitting at a kitchen table and trying to sell a James Hardie job, if we can get that price differential versus, say, vinyl, for instance, about 50% to a premium, we're going to win the majority of those jobs. So as we walk through the presentation and we talked about reducing on-the-wall cost, we firmly believe and are confident we have an answer to that. This has been one of the biggest combined R&D efforts, supply chain efforts and also working with our customer partners to bring this all together. And over the last year, we've had this pilot out there. And what we're seeing in this area where we're having the pilot, call it, the Central Northeast is we're seeing our ColorPlus volume up 17%. So that's giving us tremendous amount of confidence to wheel this out to more locations like the Midwest, to the Carolinas, to the Mid-Atlantic. And what's been critical, you saw the announcement with Boise. A lot of that has been focused on TimberTech and AZEK in some regions. But what's critical in that announcement is Boise partnering with us to get this extended statement collection out there to more areas of the country. So that allows us to really be able to accelerate our repair and remodel conversion out there. And look, we believe from a ColorPlus standpoint, the methods that we have, this Intuitive Edge program that we're going to be able to double our ColorPlus volume just with this program. So we're really excited about it. I know we've talked about it, but we're seeing it working, and we're going to have it be launched to a couple of different areas and continue to launch appropriate areas across the country as we get into the back half of our year. Lee Power: And then just a follow-up. You talked to trim attachment rates before. Can you just tell us where you are tracking now trim attachment rates in new housing and R&R and maybe how AZEK has helped that? Aaron Erter: Yes. Good question, Lee. Look, we continue to see progress in our trim attachment. And a lot of our agreements with our large homebuilders, which has been new over the last couple of years have included adding trim attachment as well. We see a tremendous amount of opportunity, just synergies in total, obviously, with AZEK, but areas of the country that are not utilizing fiber cement. So take, for instance, the Northeast, that's where we think we have opportunity to be able to bring AZEK in and VERSATEX as well. And look, I think what's been really encouraging as well as we brought this complete proposition to some of our large one-step dealers out there, they're excited about it, and they're adopting it. So we're seeing progress. Operator: The next question comes from Ryan Merkel with William Blair. Ryan Merkel: Nice job this quarter. My first question is on margins. It looks like guidance implies the second quarter EBITDA margins at the bottom for the year. Can you talk about what's driving the improvement in the second half and, particularly, because it looks like Siding volumes might be a little worse in the second half year-over-year? Aaron Erter: Yes. Ryan, good question. Look, we're continue to -- we're going to have soft volumes, we think, in the back half. I mentioned that in the beginning when we think about fiber cement. Even still, our guidance shows more modest margin compression on a year-over-year basis. I think it's important to contextualize that our second half expected margin performance would be more consistent with what you would expect with our cost structure and decremental profile. We've seen a lot of inflation headwinds continue from FY '25 that we flagged and have carried over. So there were impacts related to short-term under-absorption and variable costs that really weighed on the first half. But as we get into the second half, we expect to see more pronounced benefits from some of our cost initiatives, healthy price/mix benefits, some incremental benefits of cost synergies and really some potentially early improvements from the actions we're taking to really optimize our manufacturing network. So as I think about margins moving forward, we're not giving guidance, but I would expect if we continue to see the same type of volumes that the second half is going to be more representative of what we would see, if not a little better. Ryan Merkel: Got it. All right. That's helpful. And then just stepping back, Aaron, if I go back to the guidance cut in August, there were a lot of fears that fiber cement was losing share. It now seems like your exposure in the South and a cautious guide were really the key issues. So my question is, can you comment on how fiber cement is performing versus other materials in a market where affordability is a big issue? Are you taking share? Are you holding share? Aaron Erter: Yes. Good question. Look, as we look at share, I mean, certainly, we are not happy or satisfied with our performance. We need to be growing. Now with that said, and not using an excuse, but we do face some challenges with our exposure to new construction and certainly areas like the South. But I talked about some opportunities that we have moving forward. Lee had just asked me the question about the improvement on the wall cost. We think that's a game changer for us, and we expect to really accelerate that. I think the other thing is the momentum behind resilient materials is structural. So if we think about risks such as wildfires, sustainability goals, insurance reform, fiber cement really aligns perfectly with the trend to meet evolving building codes. There's the curb appeal. And then look, lastly, I would say, builders remain focused on what helps them sell more houses quicker. And we're finding that James Hardie homes do that. So as we think about over the longer term, we think we're well positioned. Operator: The next question comes from Tim Wojs with Baird. Timothy Wojs: I guess first, my question just on cost synergies. You raised kind of the exit rate on the run rate for fiscal '26. If you could just speak to kind of what you were able to attack on the cost synergy front earlier than you expected. And then as you think about kind of the $125 million cost synergy target, any kind of timing change there as you kind of attack the rest of the bucket? Aaron Erter: Yes. Tim, good question. Look, I think the key here is, we focus on G&A right away. So really, I think 85% of the target that we had for G&A, we've achieved. So the natural question is, are you going to think -- are you going to get these done earlier? Or are you going to raise the cost synergy target? What I'd like to do first is let's see these show up in the P&L for us and then be able to look at potentially doing that. But I'm very pleased with the focus and how the team is working on approaching these cost synergies. The other key is you don't want any disruption to your base business or disruption to your customers, and we have not seen that. So there's been a tremendous amount of focus from the team. Timothy Wojs: Okay. Okay. That's helpful. And then just kind of piggybacking on Ryan's question about margins, specifically in the Siding & Trim business. Is there anything internally that you're specifically doing to kind of limit some of the decrementals on volume? Because I mean it still is kind of a high single-digit volume decline, I think, implied in the back half of the year, but you're going to see much better incrementals. So is it the timing of raws? Is it some things you're doing on variable costs and things like that kind of manage it? Just some more color there, I think, would be a lot helpful. Aaron Erter: Yes. Certainly, we've had our cost inflation. But look, we always say we focus on what we can control. So we are taking actions. If you look at some of the things that we're doing in our manufacturing plants, we're managing shifts. We're working as best as we can to manage our variable costs. Also, we're looking at our footprint as well. And what are the right type of capacity levels we need at this time, that speaks to us working through the right amount of shifts to have. So there's a whole host of things. I still go back to areas like the Hardie operating system. That is key for us to manage our costs, whether that be from a procurement standpoint, whether that be from a formulation standpoint. So we're looking at that from a legacy Hardie standpoint, but also implementing that in the legacy AZEK business. So those are some of the things that we're doing, and we've already taken action on some of these already that we should see the benefits as we complete our Q3. Operator: The next question comes from Peter Steyn with Macquarie. Peter Steyn: Just you've mentioned one step, your one-step dealer network and relationships a number of times. Could you give us a little bit more of a sense of what you're experiencing in that space? Obviously, it's easy to see the Boise's and the like, but less so in the one step context, what reception you're getting, what impact it's having on the business and how you're thinking about the strategic positioning of your channel mix across the portfolio? Aaron Erter: Yes. Peter, maybe to start out, Boise, we have not listed as a synergy, meaning a commercial synergy. Synergy happens downstream. And so if we think about our distribution partners, it's really important and our strategy has always been at James Hardie, and it's been the same at AZEK is to make sure that we're teamed up with the best distribution partners that are going to service our customers. If we go to our one-step dealers, certainly, we have tremendous relationships with them. And call it day 2, we've talked to them and we spent a lot of time with them and bringing them what is the complete value proposition of the 2 companies combined. So again, I want to be able to demonstrate in the P&L and because of confidentiality reasons, we won't go into some of the early wins that we've had, but we have had early wins with some of our large one-step dealers, particularly in the areas of PVC trim. So they see the value in the complete offering. I think any time you ask, okay, why would they want to change? Why would they want to bring in a complete offering of what is the new James Hardie. It goes back to that demand creation. And Jon talked a little bit about the downstream marketing, the downstream focus. That really is us focused on our contractors and our ability to drive them through our dealers' branches. And we do that because outstanding product. We do that because of outstanding service, and we do that because of outstanding brands. The TimberTech brand is the #1 brand for the Pros and Decking. The James Hardie brand is the #1 brand in Siding. We have the #1 brand from a Trim standpoint. So that really is the value that we bring and why they would be interested in bringing in the complete offering. Peter Steyn: Yes. As a quick follow-on and a direct one at that, you mentioned continued strong performance in premium decking. How much has a varied channel mix relative to some of your peers got to do with some of the experience you're having in your business relative to peer commentaries? Aaron Erter: Yes. You know what, I'll let the expert here, Jon Skelly, take that one, Jon? Jonathan Skelly: Yes. So again, I think if you look back at the strategy and the execution that we talked about, continuing to deliver against shelf space gains and that channel expansion has been critical to our success. And so we're just continuing to execute against that playbook. I think historically, as we've talked about, we tend to be a more Pro leading business. And so a lot of our channel expansion and shelf gains have been coming at the Pro level. So the independent Pro channel is critical for us. And as Aaron articulated well, the one-step channel has also been good historically for TimberTech and AZEK, but obviously, roofing and siding focused one-step dealers. James Hardie has a stronger base of relationships there. And so we're able to have really powerful joint conversations with that channel. So that's been our strategy. We've been executing it. Again, our portfolio has been in decking experienced balanced growth. Again, our mix tends to lean more premium, but we are seeing growth across the portfolio, and we are seeing continued strength in the Pro channel. Operator: The next question comes from Phil Ng with Jefferies. Philip Ng: Congrats on the strong quarter. I mean, pretty encouraging in terms of the quarter and the outlook. Jon, it's a treat that we have you on this call. So I guess a question for you. When we look at marrying Hardie and AZEK, these 2 companies and businesses, how is perhaps the go-to-market strategy similar and different from your previous life at AZEK and the opportunities that could be different? I'm curious, what are some of the new levers in your toolkit now with a much larger entity, a larger portfolio? Are there things that you can offer that wasn't as obvious before, whether it's rebates, the ease of doing business, pricing? Just kind of help us think through some of those opportunities? And any noticeable shelf space wins you want to call out for '26, whether it's retail or the 2 steppers? Jonathan Skelly: Sure. Great to talk to you again, Phil. So first and foremost, what I've been most encouraged about is the shared culture across both businesses. So when you look at whether you're a TimberTech or AZEK seller or a James Hardie seller, just the focus downstream on driving contractor conversions and pull-through of the channel, it's just been terrific. So our teams have been working incredibly well together, and they've been doing a terrific job of sharing opportunities and trying to generate some quick wins out of the gate. So first and foremost, that's been really powerful. So on a combined basis, we believe we now have the largest sales team among any building products manufacturer, and that's critical to our growth and our synergy capture here in the future. If you think about what's the opportunity, the opportunity is we can completely service the entire exterior of the home now. So that is just a great strategic advantage, and we can go in and have conversations with customers about having leading brands in every exterior product category. So that's great for us and great for our team is that we are -- now have the opportunity to be more important to more customers. So whether that's the independent channel, the one-step channel or distribution partners, we have the broadest portfolio of market-leading brands, and that allows you to have really great conversations with customers about how we grow our businesses together on a combined basis. Philip Ng: Okay. Super. That's great color. And Aaron, I thought the comments around how you're looking to reduce the on-the-wall cost with some of these pilot programs and training was pretty encouraging. How should we think about that opportunity as you scale that up? Is it going to be a meaningful needle mover in fiscal '27? Or it's going to take a multiyear process? Is there any aspirational goal like in 3 years, we want this half of the branches that we sell to being rolled out or whatnot? Just give us some color in terms of aspirational targets in the next few years as you roll this... Aaron Erter: Yes. Phil, very simply, we are going to start scaling this up in the back half, which is now. So I mentioned the partnership that we have with Boise. So we believe the Mid-Atlantic, the Northeast, the Carolinas and the Midwest are all areas that are huge opportunities for us, particularly in repair and remodel. So we're going to be working with them to start reeling this out in this back half of the year. And look, I think as far as longer-term KPIs on this, the opportunity is tremendous. I'll save that for when we have Investor Day. But as I mentioned before, we think our ColorPlus volume, which is roughly, call it, 25% of what our fiber cement exterior volume is now, we believe we can double that through this initiative. So we're very encouraged by this. Like I said, this has been something that has been an on-purpose plan, and we put a lot of resources behind this over the last 1.5 years. It is something that has had many different parts of the organization combine and work to for this common goal. So hats off for the team -- to the team. Now we got to go execute it and scale it up in a much bigger way. Operator: The next question comes from Keith Chau with MST Marquee. Keith Chau: Aaron, I want to ask you a question, and I know it's been asked before, so this is a bit of a follow-up. But your quarterly assumptions for Siding & Trim from the third and the fourth quarter. So rather than looking at it versus last year, just looking at it sequentially. So I think the context you provided for the guidance is that end markets are soft, but more stable than expected. So against this backdrop, we would expect demand to improve on a seasonal basis in the fourth quarter, not only for the Hardie's legacy Siding business and AZEK Interiors -- sorry, Exteriors. And you also mentioned the 1 January price increase as well. So in combination with that and also raw materials moving favorably sequentially, I'm surprised you've guided to margins being down in the fourth quarter. I would have thought naturally that they should be higher. So is there anything going on between those 2 quarters that we should be aware of because it helps us inform us of the FY '27 entry run rate for margins? Aaron Erter: Yes. Keith, so here's what I'd say simply. We expect high single-digit declines in volume when we think of our Siding & Trim business as we get to the back half of the year. And then we expect roughly, call it, 3% price realization, so then you get to the mid-single digits. That's very simply the outlook. Joe, anything else you'd add? Joe Ahlersmeyer: Yes. And we know there's a lot of moving pieces between the acquisition and the allocation of the R&D. So just thinking about the organic NAFC business and stripping out the R&D impact, I think it's important to look at first half versus second half. The first half decrementals were over 80%. The second half decrementals in NAFC ex R&D are under 50%. So that's why when we think about the back half as a good baseline, we're really looking at the decrementals relative to the high single-digit decline in volume that Aaron mentioned. And Keith, to your point about what is the right run rate going forward. So adding back in the R&D because that is now how we allocate to the segment, we're implying 32% to 33% adjusted EBITDA margins in the back half for NAFC, and that's relatively consistent with AZEK Exteriors. So that's the way you think about it. Keith Chau: Okay. And then a follow-up just on these trials in the pilot plants and reducing on the wall cost. I know I'm kind of mixing our work streams here. But can you help us understand, Aaron, what the current revenue generation is from those pilot programs? Aaron Erter: Yes. So the way that we're looking at this right now is we have the Central Northeast. So we have a defined area, Keith. And we looked really over a 6-month period of time, what our increase from a ColorPlus volume standpoint. And we've seen that being close to 20% increase. So what we're really doing, a couple of things. We're shrinking the differential when we think about quoting versus, call it, a vinyl job. But also because of the price that we're seeing in the on-the-wall cost reductions we're seeing is contractors are able to go after price points of homes that they usually haven't been able to do so with. So meaning our total addressable market increases quite a bit as well. So not only are we excited about the differential and being able to shrink that premium versus, call it, vinyl, but it opens up an addressable market that's much larger for us. So that's very exciting. Operator: The last question today comes from Adam Baumgarten with Vertical Research. Adam Baumgarten: I guess just I assume you guys are still in AZEK doing the quarterly surveys that the company has talked about in the past. I know you talked about backlogs around 7 weeks, but any additional color on how your customers are thinking about calendar '26 at this point? Aaron Erter: Jon, go ahead. Jonathan Skelly: Yes. So again, what we highlighted in the prepared remarks around the surveys and what we're hearing is that it's consistent, right? So backlogs are consistent. Outlook is consistent. And then obviously, we get other data points as well. And what we've seen is, by and large, while repair and remodel is down, outdoor living is one of the more positive categories within repair and remodel. And then Temper-Tech has been performing the best within the category. Again, it's a really attractive market. It's driven by material conversion and it's driven by the consumers' desire to spend more time outdoors, right? So you have 2 kind of structural tailwinds here in terms of the desire for outdoor living. And then obviously, we continue to convert wood and other inferior materials into our products. And that is what's driving that stable outlook and that stable backlog for our contractors and our dealers. Aaron Erter: Yes. One thing I would just add to that is we talk so much about the best of both with AZEK and James Hardie. And what we've adopted as a total company are these dealer and contractor surveys, and we have that on the fiber cement side as well. So it helps us to get closer to our customer partners and get a viewpoint of the future as well. So very helpful. Okay. I think, we're -- sorry, Adam, you have a follow-up? Adam Baumgarten: Nope. All set. Aaron Erter: Okay. Very good. Hey, everyone. Thanks for the time. Look, I want to thank all the James Hardie team members for all their hard work and working to service our customers. Really, what I want to leave you with is, look, we have a handle on the business. And our fiber cement business, although we're not satisfied with our growth trajectory, we think we have a good plan and our business is healthy. We have a handle on the fiber cement margins. The actions are underway and coming, and you'll see that as we look at our margin profile. And our decking business has continued to remain highly attractive, and our AZEK business is performing very well. So with that, I'll leave you all. Thank you very much for the time. Operator: That does conclude our conference for today. Thank you for participating. You may now disconnect.
Operator: Ladies and gentlemen, thank you for standing by. Welcome to the Mizrahi Tefahot Bank Third Quarter 2025 Business Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded, November 18, 2025. With us on the line today are Mr. Adi Shachaf, CFO; and Mr. Menahem Aviv, Chief Accountant. We would like to draw your attention to Slide #1 of the financial statement for the third quarter 2025 presentation, which includes general comments regarding legal responsibility, including that the information contained in the presentation constitutes information from the bank's 2025 quarterly reports and/or immediate reports as well as the periodic quarterly and annual reports and/or immediate reports published by the bank in previous years. Accordingly, the information contained in the presentation is only partial, is not exhausted and does not include the full details regarding the bank and its operations or regarding the risk factors involved in its activity and certainly does not replace the information included in the periodic annual and/or quarterly or immediate reports published by the bank. In order to receive the full picture regarding the bank's 2025 quarterly and annual reports, the aforesaid reports should be pursued fully as published to the public. The bank's results in practice may be significantly different from those included in the forecasting information as a result of a large number of factors, including inter alia, changes in the domestic and global equity markets, macroeconomic changes, geopolitical changes, legislation and regulation changes and other changes that are not under the bank's control, which may lead to the estimations not realizing and/or to changes in the business plan. The forecasting information may change subject to risks and uncertainty due to being based on the management's estimations regarding future events, which include inter alia, global and local economic development forecast, particularly regarding the economic situation in the market, including the effect of macroeconomic and geopolitical conditions, expectations for changes and developments in the currency and equity markets; forecasts related to other various factors affecting exposure to financial risks, forecasts with respect to changes to borrowers' financial strength, public preferences, changes in legislation and provisions of regulators, competitors' behavior, the status of the bank's perception, technology developments and human resources developments. Mr. Shachaf, would you like to begin? Adi Shachaf: Thank you all, and welcome to the Mizrahi Tefahot Q3 2025 Analyst Call. As you all know, the last 2 years were very unusual for Israel. From the first day of the war, the bank has taken a pro-client approach trying to offer immediate relief to its clients beyond the mandatory relief plan of the Bank of Israel, and we're adapting the COVID experience and best practice to the current situation. As for the bank, it is much more boring, as you can see from the report on the results and without any material one-off. I think the most conspicuous item in this report is the very strong credit growth. This growth is across the board along most of the asset classes, including mortgages, corporate and middle market and is part of our strategic plan. Since life is not always linear. Many of the deals we are working on materialized in Q3. So it would be reasonable to assume that the work on [ toward ] closing and growth rate in Q4 would be lower. This growth should help us to create a nice starting point for 2026. We think that our credit metrics reflect a balanced credit portfolio with adequate risk management. You can see provisioning was relatively standard for this period. And then for the other items, please let me use this call to further highlight a couple of points. CPI contribution to financing revenues is traditionally high in Q3, and that was also the case this time. CPI contribution in Q4 is, of course, expected to be lower. The net profit and the return on equity reflects the strong balance sheet and the good efficiency ratio. Our cost-income ratio for the quarter is below 35% and in line with our strategic plan. On the expense side, you can see the continuation of 2024 being a notch down compared to 2023 levels. And as always, salaries are also affected from variable remuneration related to the bank's results. It is also very noticeable that the results have been reached despite the relative extra tax Israeli banks are paying in 2025 and despite the extensive Bank of Israel client relief outline. Our implementation of the outline is targeting more financing, interest paying or saving benefits to clients and less operational benefits, and one can easily estimate the impact of these 2 items on the results. Liquidity is very robust with high share of core deposits and capital ratios are in tandem with the profitability and growth. Demand for mortgages is healthy and we continue to follow our strategy to retain our market share in the market. We think that it is reasonable to assume that today's balance sheet growth will materialize in the coming quarters, and we do expect to see further responsible credit growth in the coming quarters. We will distribute 50% of Q3 profit to dividends. All in all, since we are following our boring yet effective path and accommodating to the new environment. Thank you very much for your attention. And with that, I leave you with the hands of Mr. Menahem Aviv, our Chief Accountant. Menahem Aviv: Thank you, Mr. Shachaf. Let's overview the main figures in the financial statements. The net profit in Q3 2025 reached ILS 1.483 billion. The net profit in the first 9 months of 2025 reached ILS 4.26 billion. The return on equity in Q3 reached 17.6% and in the first month of 2025 reached 17.2%. The equity amounted ILS 34 billion. The cost income ratio reached in Q3 2025, 34.2%. The financing revenues from current operations in Q3 reached ILS 2.822 billion. The total revenues in Q3 reached ILS 3.830 billion. Operating and other expenses totaled to ILS 1.310 billion. The ratio of provisions to loans in Q3 reached 0.04%, and the ratio of Tier 1 reached 10.14% and the total ratio reached 13.03% (sic) [ 13.04% ]. Adi Shachaf: I think we can go now to Q&A. Thank you, Mr. Aviv. Operator: [Operator Instructions] The first question is from Tavy Rosner of Barclays. Tavy Rosner: Just a couple of short questions, if I may. I saw the announcement from Bank of Israel earlier this week, allowing banks to distribute higher capital as long as it meets the capital requirements. What's your take about the announcement? Do you feel that there is room to distribute more? Or are you comfortable with the current level for the time being? Adi Shachaf: Thanks, Tavy. We're comfortable with the current level. As you can see, we use this capital for our growth and credit growth. And we think that, for example, in this quarter, a 50% dividend alongside a return on equity of 17.6% reflects the good mix and balance between these 2. And we think that we would keep on with our strategic plan and grow our credit, and we need this capital. Tavy Rosner: Got it. And then on the business side, on the mortgage aspect, do you feel any change in the competitive dynamics? Any other banks or institutions competing actively on prices? Or how should we think about mortgages in the near term? Adi Shachaf: We're not allowed to refer to prices, but we see a very competitive market on the mortgage arena for many, many quarters. Our strategy is to retain our market share, and we were able to do it despite the heavy competition. Tavy Rosner: Okay. Got that. And then just a housekeeping one. How should we think of expenses growth the next couple of quarters? Is it still like mid-single-digit type of growth? Or are you expecting to kind of lower it at some point? Adi Shachaf: So can you please repeat it, Tavy, I couldn't hear you. Tavy Rosner: Yes. Just about the expenses in general, salaries and so on. Should we expect mid-single-digit growth through the cycle as like a normal run rate? Adi Shachaf: Yes. Operator: There are no further questions at this time. This concludes the Mizrahi Tefahot Bank Ltd. Third Quarter 2025 Business Results Conference Call. Thank you for your participation. You may go ahead and disconnect.
Operator: Thank you for standing by and welcome to the iQIYI Third Quarter 2025 Earnings Conference Call. All participants are in a listen-only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question, you will need to press the star key followed by the number. I would now like to hand the conference over to Ms. Chang Yu. Please go ahead. Chang Yu: Hello, everyone, and thank you for joining iQIYI's Third Quarter 2025 Earnings Conference Call. The company's results were released earlier today and are available on the company's Investor Relations website at ir.iQIYI.com. The call today includes Mr. Lu Gong, founder, director, and CEO; Mr. Jun Wang, our CFO; Mr. Xiaobui Wang, our CCO, Chief Content Officer; Mr. Youqiao Duan, Senior Vice President of our membership business; Mr. Xianghua Yang, Senior Vice President of movies and overseas business; and Mr. Gang Wu, Senior Vice President of print advertising business. Mr. Gong will give a brief overview of the company's business operations and highlights, followed by Jun, who will go through the financials. After the prepared remarks, the management team will participate in the Q&A session. Before we proceed, please note that the discussion today will contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations. Potential risks and uncertainties include, but are not limited to, those outlined in our public filings with the SEC. iQIYI does not undertake any obligation to update any forward-looking statement, except as required under applicable law. I will now pass on to Mr. Gong. Please go ahead. Lu Gong: Hello, everyone. Thank you for joining us today. This summer, we captured the hearts of audiences with our original blockbuster drama, The Thriving Land. As we begin today's earnings call, I would like to share the journey of bringing this compelling story to life. The Thriving Land became a highlight of iQIYI, a highly acclaimed masterpiece theater collection renowned for its expertly crafted adaptation of famous novels. The Thriving Land tells a compelling tale of three families across two generations in rural China in the 1920s. When production began in Chengdu last September, there were questions and concerns. Can today's audience be drawn to a story set 100 years ago? However, we built this project with strong confidence backed by our years of experience in adapting literature to hit dramas like A Lifelong Journey to the Wonder and The Northward. It is our belief that great stories resonate universally. They transcend time, culture, and age, forging deep connections with viewers across regions and demographics. This ability to tell timeless stories is what sets long-form content apart from faster-paced, bite-sized entertainment. As we all now know, The Thriving Land became a major hit, exceeding the 10,000 mark on iQIYI's popularity index score and topping this year's Enlightened Data chart for PIV Daily market share. Its influence expanded far beyond our platform, making a meaningful impact on traditional TV and offline as well. It achieved the highest average rating per episode on CCTV's drama channel and boosted tourism in its filming location, acquiring the offline effect of The Northward and The Wonder. The success of The Thriving Land is no mere incident. It's built on a proven content methodology to create and amplify IP value through high-quality storytelling and advanced production technology. To connect with broad and diverse audiences and to develop our business model with IP as the core, from online to offline, from domestic markets to global audiences, our business model continues to evolve and scale. Today, our online operations are well-established, global expansion is accelerating, and our experience business is advancing our company. On top of that, we are embracing exciting opportunities enabled by a supportive regulatory environment and advancements in AI. These new regulatory policies lay a solid foundation for innovation and growth in the long-form video industry. At the same time, we are leveraging AI to transform how content is created and consumed. In July, we partnered with Google and ByteDance and launched a global AI short film competition aimed at discovering and nurturing talents who create short videos using AI technologies. We also collaborated with Academy Award-winning cinematographer Mr. Peter Pau on the program at AI Center, featuring AI-driven content. We aim to leverage iQIYI's professional production expertise to cultivate the next generation of operators pioneering innovative AI-driven content production methods and deliver compelling AI-powered storytelling that resonates with audiences. Now let's dive into the details of our business performance in Q3. Starting with content, which is a cornerstone of our business. Our goal is to engage audiences with diverse, beloved content that drives commercial success. For long-form dramas, we focus on top-notch stories with high commercial value. In the third quarter, we once again secured the top position in total viewership market share according to Enlightened Data. Our high-quality lineup included the nationwide hit, The Thriving Land, and our in-house custom detective serials, Coroner's Dilemma, which emerged as summer's dark horse with an active minority index score exceeding 10,000. Additionally, the science fiction series, Movies, earned strong acclaim for its innovative storytelling, reaching a peak popularity score of over 8,800. Moving to movies, we achieved major performance in original theatrical releases. The Shadow Edge grossed over RMB 1.2 billion, leading the box office and making a historic achievement for us. On our online movie platform, we retained the top viewership market share for fifteen consecutive quarters, driven by a diverse slate of 12 key titles. We launched an innovative revenue-sharing model in Q2 to maximize returns for films with limited box office opportunities. With new titles like A Cool Fish 2, this strategy is gaining traction in Q3, generating over RMB 17 million in revenue sharing model in two months. For variety shows, our focus on top-tier titles delivered strong results in both popularity and revenue. The King of Stand-Up Comedy Season 2, a flagship IP, generated impressive membership and advertising revenues. It achieved a high-tier popularity index of over 8,000 and dominated the channels with a leading market share according to Enlightened Data. Additionally, our newly launched observation show, Her Prime, sparked widespread discussions. To deepen audience engagement and elevate our variety show IP value, we introduced consumer products like collectible cards and co-branded merchandise collections, resulting in stronger audience loyalty. Turning to microdramas, they continue to enhance our content ecosystem, achieving double-digit sequential growth in average daily viewing time and daily subscription revenue in the third quarter. Microdramas also have attracted sponsorship from brand advertisers, with more partnerships anticipated in the future. This growth has been driven by our focus on premium content, enhanced original production capabilities, and an expanded library of free titles. Our microdrama content library now includes over 20,000 titles, with over half available for free. We have also established strong capabilities for consistently releasing original microdramas. Hits such as Feet of Three Lives, Nurturing the Night, and Immoral Paradigm resonate strongly with audiences. Additionally, we introduced a dedicated micro animation channel, Manju, and kicked off original production. Microanimation is an innovative format of short-form animation that has experienced rapid growth in the past year, following the success of microdrama and heavily leveraging AI technology. For animations, we continue to improve our original production capability. In the third quarter, over-the-top titles continue to enjoy strong viewership. Additionally, our highly regarded original production, Now Between Salary and the How Much You Re, returned with a second season, captivating loyal audiences and driving high engagement. Next, let me share our exciting slate of content for the first quarter. The diverse content pipeline includes Fitted Cars, In Short, It Go Up Four, and A Bit Low, Can Be Tension, Favorite Honor, Strange Tale of Tang Dynasty Three to Chang'an, Tang Talk, Road to Chang'an, Legend of the Magnet, Dash Meter, Speed, and the Strong and Silent Pipes from Utah. The movie pipeline includes all original theatrical films, theatrical releases, and original theatrical hits for online streaming. The first batch of original films under the Emerging Film Projects, under the licensed films such as Died to Rise 1921, The Legend of He Too, The Volunteers, Peace and Trust, and Nobody. Original variety shows include flagship IP, Blooming Journey 2, Yellow Sunhua, High Young Farmers, and a brand new IP, Wonder Together. The microdrama pipeline includes the first microdrama based on the highly popular IP, A Strange Tale of Tang Dynasty, titled Tang Dynasty Mysterious Python Conspiracy, Tom with Q Time, Q Time, Qi and Pi, as well as For Xingyu, In My Final Days, Samuel, You, Jenny, and The Saint Mark's Destiny. Children's content includes new animation, Ascendant of the Ninth Sun, Returning Dao Squad Season Four, and a new IP, Payment and a First Food Truck. Moving on to membership services, we aim to build a household name membership brand with broad market appeal, rectifying a vibrant content ecosystem and exceptional services. Membership service revenue recorded sequential growth in Q3, driven mainly by original hit dramas like The Thriving Land and The Coroner's Dilemma, as well as theatrical micro hit, NoJa Two. Beyond content, we are increasing our efforts to enhance membership services and deliver unmatched value. Our family-oriented membership plan stands out with inclusive products like the express package offering early access to shows, a valuable driver of new subscriptions and upgrades to this premium tier. The currency experience program in motor continues to boost engagement with meaningful revenue growth year over year. We have created stronger synergy between membership and advertising revenues by introducing branded rooms within the program. We are also integrating membership experiences with top IPs. This quarter, we launched IP-themed membership cards for Neutrol Two and Learning of Journey of Legend for Shanghai, giving fans a deeper connection to their favorite stories and characters. Connecting with our audience is at the heart of what we do. Our flagship July 17 iQIYI Membership Festival has become a signature fan appreciation event loaded with exclusive perks and irresistible subscription offers. We also strengthened membership value and loyalty through over 10 VIP-only gatherings, ranging from fan meetups to advanced screenings. We have elevated membership performance by focusing on operational optimization, aiming to boost membership value and encourage subscribers to stay with our service longer. This includes initiatives to promote longer-term plans and targeted promotions for specific audiences. Additionally, we expanded our bundled membership partnerships to 16 brands while broadening our sales channels across e-commerce and telecom platforms. Moving on to the advertising business, in the third quarter, brand ads recorded double-digit annual growth, mainly driven by premium variety shows like The King of Stand-Up Comedy Season 2 and hit dramas like The Journey of Legend and The Thriving Land. Our content-related ad solutions continue to gain traction, contributing over 60% of brand ad revenue. Key verticals such as food and beverage, internet services, e-commerce, beauty, and personal health all showed robust annual growth. We use AI to drive production innovation and advertising efficiency with features like creative bulleted charts and AI-generated materials, including animation-style visuals for innovative marketing solutions. As we enter Q4, we aim to capitalize on major advertising opportunities such as the Double Eleven Shopping Festival, Christmas, and the New Year campaign, and the new smartphone launch. Our focus will be on maximizing ad sales from premium variety shows, dramas, and drama-centered brands while further enhancing monetization on smart TVs. We will continue leveraging AI to improve brand advertising efficiency. For performance ads, we now have a healthier and more balanced advertiser portfolio with revenue dependent on community individual clients. By industry, internet services and education and training were standout contributors this quarter. Looking ahead, we will focus on capturing new budgets in the internet services sector, including tools, social platforms, and mini-games, while scaling up revenue in education and training, wellness management, and e-commerce. Additionally, we plan to expand our plan of performance and inventory and utilize AI to further enhance monetization efficiency. Moving on to technology and products, we continue to harness cutting-edge technologies to transform the entertainment experience, improve content production efficiency, and boost content value across our platform. On the content creation front, we are leveraging AI to transform storytelling. A notable example is our partnership with Academy Award-winning Mr. Peter Pau. Together, we will launch the Peter Pau iQIYI AI Center to pioneer the next generation of AI-driven talent development. The first titles are set to premiere soon, which we are very excited for. Additionally, we are using AI to produce high-quality original microanimation at much lower costs. Another unique example is the AI-powered iQuickReal connection, which now covers all major content categories. This feature utilizes a smart editing agent to automatically convert long-form videos into vertical short shots, which are then included in iQuickReal collections. iQuickReal collections offer users a real-time experience akin to that of microdramas. We are transforming user engagement with Touhou AI-powered personal assistant that provides personalized support, including video search recommendations and cloud insights. The latest update improved recommendations for microdramas and short-form videos alongside long-form content while also enhancing plot Q&A capabilities. Additionally, we introduced the binge-watching rankings, allowing users to track time spent on their favorite series and view their rankings. This feature has received highly positive feedback. In addition to enhancing AI applications, we are driving the industrialization of video production with cutting-edge workflow production. Our virtual production capability is now used for both in-house and external projects. This quarter, we launched an omnidirectional motion-simulating vehicle rig filming platform powered by our in-house developed iQIYI Stage virtual production system. The platform naturally enhances the efficiency of high-frequency VCOFIN shots. It delivers a streamlined, repeatable workflow and has already been utilized for virtual production in major theatrical productions. Moving on to business performance in regions outside of Mainland China, we maintained strong growth momentum in Q3, with membership revenue increasing by over 40% annually. Markets like Brazil, Spanish-speaking regions, Mexico, and Indonesia saw membership revenue more than double year over year. In this quarter, the average daily subscribers also reached an all-time high. The strong performance is supported by an exceptional content lineup. C-dramas, Chinese dramas, continue to gain popularity globally, with revenues growing double-digit both annually and sequentially. The Thai-dubbed version of Coroner's Diary set platform records for both viewing time and peak revenue within its language segment. It also topped iQIYI's popularity charts in 13 overseas markets. Meanwhile, our local content slate also exceeded expectations. King Jaro, the series, Yunhun Chongqing emerged as a phenomenon in Thai language content this year, generating the highest membership revenue among all Thai dramas on our platform and topping related rankings on Google and Twitter. Beyond long-form content, microdramas continue to build strong momentum overseas. Membership revenue from microdramas grew 114% sequentially by September. Microdramas ranked second only to long-form dramas across several core metrics, including membership revenue and viewing time. Moreover, multiple iQIYI original microdramas gained solid traction abroad. For example, How Dare You Young People has shown a strong long-tail effect three months post-launch. We are also expanding into locally produced microdramas. Multiple projects in English, Thai, Greek, and Indonesian are in production and targeted for launch this year. Looking ahead, we will continue to deliver high-quality content to international audiences, deepen partnerships with telecom operators and local partners, and leverage AI to drive user appreciation. Moving on to the experience business, we are focusing on two key areas: IP-based consumer products and offline experiences. We are leveraging our extensive and unique IP resources to build a more robust entertainment ecosystem. For IP-based consumer products, we have upgraded our business model from a licensing-only approach to a dual-track strategy, combining self-operated merchandise with licensing. Our self-operated portfolio has expanded beyond collectible cards into additional categories, supported by the establishment of in-house teams. IP licensing for the hit drama, The Journey of Legend, has partnered with over 30 licensees, setting a new record while expanding into multiple sectors, including e-commerce, FMCG, and beauty. In our offline entertainment experience business, we are pioneers in this emerging field. At the heart of this initiative are iQIYI Labs, which are designed to operate under an asset-light model. Two locations, Yangzhou and Kaifeng, are under development, with Yangzhou iQIYI Lab scheduled to open early next year. A third plant in Beijing has also been announced. By integrating technologies like AI and XR with our content IP, iQIYI Lab will provide interactive and scalable experiences that are faster to iterate and more efficient than traditional theme parks. This approach reduces space and capital requirements, with revenue expected to come mainly from ticket sales and other on-site spending. As 2025 draws to a close, we reflect on a year of rapid transformation driven by technological innovation and evolving business models. We are not merely adapting; we are advancing, fueled by our thriving overseas expansion, growing experience business, and ongoing AI investments. Breakthroughs in any of these areas could elevate us to new heights. Amid this change, our core remains the same: creating premium content IP supported by a proven commercial model. This foundation earns us the loyalty of hundreds of millions of users and the trust of industry partners. Moving forward, we will continue delivering quality content, fostering creativity with partners, and driving long-term value for shareholders. Now let me hand it over to Jun for the financials. Jun Wang: Thank you, Mr. Gong, and hello, everyone. Now let me walk you through the key numbers for the third quarter. The total revenue for the third quarter was RMB 6.7 billion, up 1% sequentially. The membership services revenue reached RMB 4.2 billion, up 3% sequentially, driven mainly by original blockbuster dramas and theatrical mega hits like Nezha 2 during the summer season. The online advertising revenue was RMB 1.2 billion, decreased by 2% sequentially as the performance in the second quarter benefited from a major advertising campaign. The company's distribution revenue reached RMB 644.5 million, up 48% sequentially. The increase was mainly driven by the strong distribution performance of the original theatrical movie invested by iQIYI, along with the growing transactions for drama. Other revenues were RMB 585 million, down 29% sequentially. Moving on to costs and expenses, the content cost was RMB 4 billion, up 7% sequentially, as we launched a more diverse selection of premium content during the peak summer season. The total operating expenses were RMB 1.3 billion, down 3% sequentially, benefiting from our disciplined expense management. Now turning to profits and cash balances, the non-GAAP operating loss was RMB 21.9 million. Non-GAAP operating loss margin was 0.3%. As of the end of the third quarter, we had cash, cash equivalents, restricted cash, short-term investments, and long-term restricted cash included in the prepayment and other assets totaling RMB 4.9 billion. At the quarter end, the company had a loan of USD 582.5 million to PAG, recorded under amounts due from related parties. For more detailed financial data, please refer to our press release on our IR website. Now we will open the floor for Q&A. Operator: If you wish to cancel your request, please press 2. If you are on a speakerphone, please pick up the handset to ask your question. For the benefit of all on the call, if you wish to ask your question to management in Chinese, please then translate your question into English. The first question comes from Zhiking Zhang from CICC. Please go ahead. Zhiking Zhang: Thank you, management, for taking my question. It has been three months since the new regulations were issued. Can management provide an update on the progress? Thank you. Xiaobui Wang: Thank you, Zhiking. We will invite our Content Officer, Mr. Xiaobui Wang, to answer this question. The core objective of the new policies is to promote the healthy development of the long-form video industry. The past two months since its implementation have observed positive progress in several areas, including the concurrent review of key dramas at a national and provisional administration, as well as the exploration of concurrent review of broadcasting for new content formats, such as download anthology drama, multi-season drama, multi-art drama, and pickup, as well as the optimization of co-review. Under the new policy environment, we are actively innovating in content production and broadcasting models. For example, we are exploring a brand new content format called online feature series and integrating it into our existing emerging film project collaboration framework. Through a revenue-sharing model with our partners, we aim to attract more creative talent and high-quality content, driving innovation and growth in the industry. Based on the current progress of implementation, it is clear that the new policies have sent positive signals to the industry. Some of our projects have already benefited from the policy support, allowing them to reach a ready-to-broadcast status more quickly. As productions proceed smoothly in the future, we will gradually see the broad benefits of the policy uptake. In the long term, the policies will drive the industry into a new growth phase, benefiting professionals across the board. Thank you. Operator: Thank you. Your next question comes from Vicky Wei from Citi. Please go ahead. Vicky Wei: Will management share some color about your outlook on the membership business? Youqiao Duan: Thank you, Vicky. We will invite our Senior Vice President of Membership Business, Mr. Youqiao Duan, to take this question. Since September, our membership business has shown nice growth momentum, driven by three main factors. First, the continual release of high-quality content. Second, the ongoing enhancement of member services and benefits. And third, the optimization of marketing and sales strategy, such as expanding bundled memberships and offering targeted discounts for teachers and students. The Silent Honor, which was released in September, broke demographic boundaries and captured the hearts of young audiences. Our female-oriented content, such as Faded Hearts and Sword and Beloved, along with the suspense theater titles like The Hunt and The Dead End, also gained wide popularity. The recently released Strange Tale of the Tang Dynasty Three to Chang'an, which is the third drama of the Strange Tales of the Tang Dynasty IP series, received widespread acclaim shortly after its premiere. With its popularity index on iQIYI surpassing 10,000, it became the second drama in the series to hit this milestone, making the Strange Tale of the Tang Dynasty iQIYI's first IP series to have two seasons exceeding the 10,000 popularity mark. The latest release in the series, building on the classic elements, introduced more innovative content, showcasing the strength of high-quality IP series development and successfully attracting and retaining a loyal audience base. At the same time, we have enhanced membership value and the perception of benefits through more refined operations. For example, offering more diverse subscription options, offering member-only IP merchandise, and also offline events tailored for premium members. We are confident in achieving sustainable growth in our membership business with the support of high-quality content and enhanced member benefits and services. Thank you. Operator: Thank you. Your next question comes from Felix Liu from UBS. Please go ahead. Felix Liu: Thank you, management, for taking my question. We noticed that Chinese culture industries have made good progress in the overseas markets lately. Can management share more progress on your overseas expansion and strategy? Thank you. Xianghua Yang: Thank you, Felix. We will invite our Senior Vice President of Overseas Business, Mr. Xianghua Yang, to take this question. Our overseas business has shown strong performance this year, with Q3 total revenue and membership revenue achieving the highest annual sequential growth in the past two years. We see that Chinese content serves as the cornerstone of our overseas content portfolio, and iQIYI has become the top choice for an increasing number of overseas users to watch Chinese language content. We continue to promote Chinese language content across various markets and have seen a significant increase in its influence in major overseas markets, effectively driving the growth in user base and membership numbers. In terms of local content, we have engaged in both licensing and original productions in Thailand, Malaysia, Indonesia, and Taiwan. Among these, Thailand has been our most successful market. This year, we launched several hit titles, such as the Thai drama King Jaro, the series, which set new records on our overseas platform in terms of both viewing hours and revenue for Thai content. With subtitles added, our original Thai dramas have been distributed in other markets, and revenue from our original Thai dramas in the US and other overseas markets has already surpassed that of Thailand's domestic market. We are pleased to see that Thai dramas have become the second globally recognized content category after C-dramas. Looking ahead, we plan to increase the perception of original Thai, Malaysian, and Indonesian dramas. At the beginning of the year, we mentioned that some of the newly developed markets, such as the Middle East, Spanish-speaking regions in Latin America, and Brazil, have maintained rapid growth throughout the year, with significant increases in membership revenue and subscriber numbers. In the future, we will continue to deliver high-quality content while leveraging AI technology to enhance content production and promotional efficiency. Currently, over 70% of promotional material for our overseas content is generated using AI, significantly boosting our market efficiency. Thank you. Operator: Thank you. Once again, if you wish to ask a question, please press 1 on your telephone. Your next question comes from Gigi Zhao from Guangdong Securities. Please go ahead. Gigi Zhao: Thank you. I will translate the question myself. The application of AI in the global film and television industry has been advancing in increasing depth. Can management share strategy insights and future plans pertaining to AI adoption in content production and business layout? Thank you. Lu Gong: Thank you, Gigi. We will have our CEO, Mr. Lu Gong, take this question. For AI technology, it provides a very promising outlook for iQIYI. To take an analogy, in the past two decades, the internet provided the video industry an opportunity and advantage to surpass traditional linear TV. We think currently, with the large language models for AI, it provides a similar opportunity for iQIYI. In the past few years, AI technology has deeply integrated into our operations, helping us achieve goals in three key areas. The first is to increase our operational efficiency. We use AI for marketing materials, for example, automatically generating posters and promotional marketing materials. We also use it for overseas content translation, which is much cheaper and faster compared to human labor. The second point is AI boosts monetization capabilities as it can efficiently produce advertising creative materials, and we can use it to optimize our placement algorithms, improving targeting accuracy and conversion rates. The third point is AI empowers us for content production. We use AI to support our internal production capabilities. For example, we have a screenplay workshop in iQIYI, which significantly enhances evaluation and creation capabilities for novels and scripts. We also have an image workshop feature, which effectively supports early-stage creative development by providing concept posters, storyboard generations, and character design. The fourth point is we use AI to build out basic user features. Based on AI, we built out the Toutdoor World, Toutdoor, and iJump features, all of which improve the viewing experience. The above-mentioned four points are already used in our operations, and we will keep refining and upgrading them, hoping to bring more benefits. Going forward, we will focus on three major areas. The first is iQIYI's intelligent production system, which was previously reserved for internal use. We will gradually open up core functions for our close partners, helping them leverage AI to enhance their production capabilities. The second point is we will continue promoting the use of AI in the market and industry. For example, we launched initiatives such as the AI short film creation competition, as mentioned earlier in the opening remarks, and partnered with Academy Award winner Peter Pau to roll out the AI theater. The main purpose of these initiatives is to discover and nurture AIGC creative talent through collaborations and market promotions, fostering an innovation-driven content ecosystem. Last but not least, our focus will be on collaborating with our partners and utilizing our current AI technologies to explore large-scale applications of AIGC in areas like microanimations, animations, educational content, documentaries, etc. Hopefully, AI will become a core engine of content creation. This is the first stage, and going forward, the bigger picture will be to utilize AIGC in our long-form video content, such as dramas and films. We estimate that in the next one to two years, or maybe three years, but no more than five years, AI will bring dramatic change to our industry and the video content creation industry. Currently, we have been investing heavily in AIGC and AI technology applications, and this is one of the core areas of investment for the company right now. Hopefully, going forward, we can utilize AI to create more creative content and change the content landscape. Thank you. Operator: Thank you. That concludes our question and answer session. I will now hand back to management for closing remarks. Chang Yu: Thank you, everyone, for participating in the call today. If you have further questions, do not hesitate to contact us. See you next quarter. Thank you. Bye-bye. Operator: Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.
Operator: Good morning, and welcome to the Gladstone Capital Corporation Fourth Quarter 2025 Earnings Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. David Gladstone, Chairman of Gladstone Capital Corporation. Please go ahead, sir. David Gladstone: Thank you, Melissa. This is David Gladstone, Chairman, and this is our earnings conference call for Gladstone Capital Corporation for the quarter and fiscal year ending September 30, 2025. Thank you all for calling in. We are always happy to talk to you, our shareholders and analysts, and we welcome the opportunity to provide updates on our company. And now we will hear from Catherine Gerkis. She is Director of Investor Relations and ESG, to provide a brief disclosure regarding certain regulatory matters. Melissa? Operator: Good morning. Today's call includes forward-looking statements, which are based on estimates, assumptions, and projections. There are no guarantees of future performance, and actual results may differ materially from those expressed or implied in these statements due to various uncertainties, including the risk factors set forth in our SEC filings, which you can find on the Investors page of our website, gladstonecapital.com. We assume no obligation to update any of these statements unless required by law. Please visit our website for a copy of our Form 10-Ks and earnings press release for more detailed information. You can also sign up for our email notification service and find information on how to contact our Investor Relations department. Now, I will turn the call over to Gladstone Capital's President, Bob Marcotte. Bob Marcotte: Good morning and thank you all for dialing in. I'll cover the highlights for the quarter and the fiscal year-end and conclude with some comments on our near-term outlook for the company. Beginning with our last quarter results, fundings last quarter totaled $126.6 million and included five new private equity-sponsored investments in a variety of industry sectors, much of which we previewed in our last call. Exits and prepayments declined relative to the past couple of quarters to $23.5 million, so net originations were a healthy $103.1 million. Interest income for the period rose 14% to $23.8 million with a 16.2% increase in average earning assets and a 30 basis point decline in the weighted average portfolio yield to 12.5% for the quarter. Interest and financing costs increased $1.4 million on higher average bank borrowings, and net management fees increased $0.5 million as incentive fee credits declined. So net investment income for the period came in at $11.4 million. Net realized losses were $6.3 million for the quarter, which relates to the exit of FES Resources, a legacy oil and gas services investment. However, on balance, the portfolio appreciation offset the depreciation for the quarter, and for the TTM period, our ROE came in at 11.9%. With respect to the portfolio, the portfolio turnover for the period did not have a material impact on our investment mix as the new originations were predominantly first lien debt, which rose to 72% of the fair value of the portfolio, and total debt holdings came in at 90% of the portfolio at fair value. As of the end of the quarter, we had three non-earning debt investments with a cost basis of $28.8 million or $13 million at fair value, which is 1.7% of our debt investments. In addition, PIK income increased for the quarter to $2 million or 8.4% of interest income as much of the increase was generated by two recent investments which included supplemental PIK above the underlying 10% cash interest yield on those assets. Since the end of the quarter, originations have largely paced with repayments, and we continue to work through a healthy pipeline of deals going into our traditionally strong fourth quarter. In reflecting on our recently concluded fiscal 2025 and the outlook for the next quarter or two, I'd like to leave you with the following. Fiscal 2025 was a huge challenge for us. As we overcame the spike in repayments and liquidity events, which totaled $352 million, we were able to source and close 15 new investments representing $397 million of originations, which contributed to the $63 million increase in fair value of our investment portfolio for the year. The combination of the depth of the deal origination opportunities in the lower middle market, the experience of our origination team, and the utility of our BDC private credit model to deliver attractive financing solutions to the private equity market all contributed to these record results. In addition to recycling the wave of investment exits, we significantly expanded our private equity sponsor relationships, and as the lead lender in most of our deals, we are well-positioned to increase our investments as these new PE platforms look to drive growth in equity appreciation through acquisition or expansion. At present, we are continuing to see a healthy flow of attractive investment opportunities and remain cautiously optimistic that the lower middle market will remain relatively insulated from spread erosion, leverage escalation, and financing terms erosion experienced in the larger middle market. As we ended the quarter with a conservative leverage position with net debt at a modest 2.5% of NAV, having refunded our 2026 debt maturity shortly after the end of the quarter with the $149 million convertible issue. As part of the debt recapitalization, we also called our $57 million 7.5% 2028 notes and increased our floating rate bank borrowings to capitalize on the projected decline in short-term rates, which will also serve to reduce our unused facility costs going forward. Pro forma for these refinancing activities, our line of credit borrowings availability is approximately $130 million, more than enough to support our near-term investment activities. Now I'd like to turn the call over to Nicole Schaltenbrand, Gladstone Capital's CFO, to provide some details on the Fund's financial results for the quarter and year-end. Nicole Schaltenbrand: Thanks, Bob. Good morning. During September, total interest income rose $2.9 million or 14% to $23.8 million as the average earning assets rose $104.8 million or 16.2% while the weighted average yield on our interest-bearing portfolio declined 30 basis points to 12.5% for the period. Total investment income was $23.9 million on the higher interest-earning assets as fee income declined $600,000 from last quarter. Total expenses rose $2.1 million or 20.5% versus the prior quarter as interest expenses rose $1.4 million with increased bank borrowings and net management fees rose on the reduction of incentive fee credit. Net investment income for the quarter rose to $11.4 million or $0.52 per share. The net increase in net assets resulting from operations was $14 million or $0.63 per share for the quarter ended September 30, as impacted by the realized and unrealized valuation depreciation covered by Bob earlier. Moving over to the balance sheet. As of September 30, total assets rose to $908 million consisting of $859 million in investments at fair value, and $49 million in cash and other assets. Liabilities rose $100 million quarter over quarter to $406 million as of September 30 with the completion of the $149.5 million 5.5% convertible note issue in September, which was used to pay down our LOC borrowings and increased temporary cash investments which were subsequently used to call and repay our $150 million of 5.2 notes due January 2026 and our $57 million of 7.75 notes due in 2028. The remaining balance of our liabilities consists primarily of $50 million 3.75 notes due May 2027 and $19.4 million of preferred stock. As of September 30, net assets rose $7.6 million to $482 million from the prior quarter end with the sale of approximately 263,000 shares under our ATM program, netting approximately $7 million for the quarter. NAV per share rose from $21.25 to $21.34 as of September 30. Our gross leverage as of September 30 rose to 84.3% of net assets. After the end of the quarter, we have funded the $272.7 million note retirements with cash on hand and approximately $157 million of closing rate bank borrowings to better match our floating rate assets. With respect to distributions, monthly distributions for November and December will be $0.15 per common share, which is an annual run rate of $1.8 per share. The Board will meet in January to determine the monthly distribution to common stockholders for the following quarter. At the current distribution run rate for our common stock and with the common stock price at about $18.77 per share yesterday, the distribution run rate is now producing a yield of about 9.6%. And now I'll turn it back to David to conclude. David Gladstone: Well, thank you, Bob, Nicole, Catherine, you all did a great job in updating our stockholders and the analysts who follow us. And the recent performance is really strong. In summary, the team maintained their underwriting leverage and also the investment totals of $396 million for the year, almost $400 million. So the company has a very strong balance sheet today. We've refinanced any debt that's coming due in the future, and so we're in good shape today. We've maintained ample bank lines of credit and capacity to support the healthy pipeline of new deals that we have to continue to support the asset growth and shareholders' dividends. And for anyone keeping score, the Glad team delivered a stellar 16.75% return on equity for the last five years. That puts them right near the top and certainly ahead of the top peer group in developing returns for their shareholders. In summary, Gladstone continues to stick with the strategy of investing in growth-oriented lower middle market businesses with good management. Many of these investments are in support of mid-sized private equity funds that are looking for experienced partners to support the acquisition and growth companies they invest in. This gives us an opportunity to make attractive interest by paying loans and small equity investments and pay strong distributions to our stockholders. Now operator, would you please come on and tell people how they can call in and ask questions? Operator: Thank you. Our first question comes from the line of Eric Zwick with Lucid Capital Markets. Please proceed with your question. Eric Zwick: Thank you. Good morning, everyone. Good morning. Wanted to start with a question on the pipeline. You obviously had a very nice quarter of originations in the most recently reported quarter. And I know you mentioned 2025, you've significantly expanded the number of PE sponsor relationships. Just curious if you could give us an update on where the pipeline stands today in terms of size and maybe also the mix of new versus add-on opportunities? Bob Marcotte: Sure. Fourth quarter is always pretty strong. I will say that we've definitely seen some of the newer assets that we put on with follow-on acquisition opportunities, some of which have already closed and some of which are pending. So we're definitely seeing that effect through the portfolio. On the potential deals, at any given time, we're probably tracking an order of magnitude, $100 million of potential volume. Obviously, those are going to fall out in a variety of different ways. But we feel like somewhere in the range of 10 deals, $100 million of near-term volume that's going to be more than ample to clear any repayments that we might see and continue to grow. I think if you go back to our traditional history, we've been able to grow the assets somewhere in the range of 25 to 50 over the course of a year. I think we increased a little more than that last year. I think we would expect it to be a little bit more than that this year because we've had such a turn. We turned 42% of the portfolio from last September. So you would expect the rollover rate in 2026 to be lower, which I think positions us well to have a net add of assets because of the maturity of the existing assets. I would say one more point. We tend to see a barbell of transactions coming through. One, the transactions that are add-ons for existing deals, those are companies that are getting larger. They might be in the $10 million, $15 million, $20 million EBITDA range. Those deals will be bigger. The new deals where we're starting new originations, those tend to be smaller deals. They're first-time transitions from family or privately held businesses to private equity. They tend to start smaller and then grow. So a $10 million to $20 million deal on the initial side will then become a $20 million to $30 million deal on the second bite at the growth profile for that business. So that's a little bit more than you probably asked for, but that's what's going on right now. Eric Zwick: No, that's great color. Thank you. And then switching gears to the decline quarter over quarter and the portfolio yield. Curious how much of that was reflective of lower base rates working through the portfolio versus potentially maybe new originations coming on at lower yields, although I think you mentioned that you're not seeing maybe a whole lot of spread compression at this point on newer deals, maybe I misheard that. Bob Marcotte: Most of that was the base rate, which I think came down from in the four-thirty range and probably ended the quarter closer to 3.9. So most of the move was underlying base rates. If you just isolate what we closed on the quarter, the metrics on the margin were well north of seven, and the leverage was pretty attractive, but even if we were at 7.5% using round numbers on four, that increase would probably put you at an 11.5% yield, which compares to the 12.8% that we were at the end of last quarter. So while our spreads are very attractive, the overall impact on our combined portfolio yield, the new definitely brought it down a bit as well. Eric Zwick: Thank you. And one last one if I could. Just looking through the SOI notice WBXL, which is on non-accrual, had a slight improvement in the valuation. So just curious kind of what you're seeing there, some improved operational performance, and if that expectation might continue to trend in a positive direction. Bob Marcotte: I think they're up to eighteen straight months of sales increases and profitability increases. They are currently EBITDA positive and continuing to grow. We've been through both sales and operating cost restructurings. They are not to a point where we are ready to turn it on and make it an earning asset. But we're feeling very strong about where the business has gone and the consistency and sustainability of the underlying brand in that business. Eric Zwick: Good news. Thanks for taking my questions this morning. Bob Marcotte: Sure. Next question. Operator: Thank you. Our next question comes from the line of Christopher Nolan with Ladenburg Thalmann. Please proceed with your question. Christopher Nolan: Given where the stock price is and your low leverage, any consideration of doing material share repurchases? Bob Marcotte: Relative to where we're performing, I'm certainly tempted. I think the last time we brought that up, we were probably trading at a thirty-ish percent discount. It was a number of years ago. We're definitely getting in the range where that's going to be a discussion. And then, given following up on the comments earlier talking about new private equity partnerships, should we expect accelerating portfolio growth in fiscal 2026? Bob Marcotte: I guess if you extend the comments I made earlier, I think the answer is probably yes. If we have lower turnover in the underlying portfolio, we broaden the relationships, our origination bucket originations went from $178 million to $400 million. I think we could probably outrun a modest repayment stream. So I think we are in that position. I think the question following on your last one, at some point, another equity is going to become an issue for us. So buying an equity when we have the opportunity to continue to expand profitably will be the crux of the discussion around that until the stock recognizes that we have that earnings power and the opportunity it's going to be a challenge to chew up the equity through buying back the shares. Christopher Nolan: Final question. For the fiscal first quarter, the quarterly dividend has been reduced to $0.45. The dividend is not yielding that high on NAV. It's like nine and change as a percentage. I was thinking beyond that. Yes, 9.6% as I think Nicole outlined. Yes. And I get it, lower base rates, but you're maintaining investment spreads and leverage is low and so forth like that. What's sort of thinking behind the reduction of the dividend? Didn't look like it was imperative, but I may be missing something. Bob Marcotte: Well, I think we were trying to be responsible. And I think as you look out over the course of the next year, I think we have about $650 million at year-end of floating rate assets. About $150 million of floating rate debt. I think any further compressions in rates are going to become a challenge for us as well as everyone else. We did very well to substitute and work through our refinancing activities to essentially a neutral cost of capital and maintaining our financial flexibility and maturity profile. I think the challenge is a 100 basis point decline is going to pressure us as well as everyone else. And how do we absorb that? Well, we'll absorb it through if you would note in our financials, we paid an awful lot of commitment fees on our line of credit that we didn't use. So we probably are going to reduce that by virtue of what we've done. We also had a very light quarter from a fee load perspective, I expect those fees to increase. And the combination of those as well as some of the dividend reduction, I think, puts us in a much more healthy position to maintain the current dividend. I don't feel that we're under any particular pressure at this point. It was just really more of setting expectations going into 2026. Given the rates are already beginning to decline. Christopher Nolan: Great. And final question on the dividend. Is it sort of switching to more of a base dividend plus a supplement type of structure going forward? Or is you're just thinking just pay $0.45 going forward? Bob Marcotte: I think we could certainly see a supplemental on a go-forward basis. We've provided two supplementals in the last year for some of our capital gains. And the other thing to your earlier point about the yield, I think while the current cash yield is at that range, I think we've also on an ROE basis cleared that by a wide margin on some of our equity gains. And I would expect that to be a material part of those supplementals on a go-forward basis. So while the current cash yield may be sub-ten, the overall yield on equity with NAV growth has been almost, I think as David outlined, 16.7% over the last five years. So we wanted to be in a position to invest in the right deals and achieve the overall return for our shareholders. That's why we made the change in the dividend. Christopher Nolan: Got it. Thank you. Bob Marcotte: Okay. Next question. Operator: Thank you. Before we take the next question, our next question comes from the line of Robert James Dodd with Raymond James. Please proceed with your question. Robert James Dodd: Hi, guys. On the outlook for next year, Bob, I mean, congratulations, you did grow over a very high level of portfolio churn over the last twelve months. But still, 60% of the portfolio didn't turn over. So I mean, the lower middle market does seem to be healthy. There's a lot of activity going on, which obviously is what drove that turnover. What do you think the risks are that elevated repayment activity continues going into 2026? Because to your point, I mean, the 42% that you already turned over, that's probably not going to turn over again. But there is still more than half the portfolio that didn't. I mean, could you still see extremely high levels in the following twelve months? Bob Marcotte: Robert, that's a question I would say that the maturity of the investments and where the private equity are in achieving their appreciation plan and maturity is a big one. As I described earlier, most of the smaller deals will take several years to professionalize and scale. So a number of the ones that we would have recently funded are in that situation. I would say that we were somewhat opportunistic and were able in the course of the last couple of quarters to land some very attractive deals as the market was a bit dislocated post-Liberation Day. So we could see some of those larger exposures turnover. But net-net, I think we're in a position where we will continue to grow even if those larger transactions in the other 60% do turn. But I do think the question really boils down to are the private equities selling their companies as rapidly as they have in the past? And I think the generic answer is no. I think that the hold periods are extended. The maturity and appreciation plans have not necessarily been fully achieved. So we still see some stickiness to the underlying portfolio, but I'm not terribly worried about our ability to outpace it having survived 2025. Robert James Dodd: Okay. Fair enough. Then one more if I can. On credit, I mean, obviously, no new non-accruals this quarter. WBXL seems to be improving. I mean, are there any cracks developing anywhere in the portfolio or themes that you're seeing that you're incrementally concerned about? Because it certainly doesn't seem to be showing up anywhere from a credit perspective. Bob Marcotte: Well, Robert, I think as you understand our strategy, we sit on the boards and observe what's going on in these businesses. And I can't tell you that there aren't issues inside those businesses. But when you go in under relatively low leverage and you see it at the vantage point that we see at the Board level, it becomes a lot more manageable. Right? It doesn't ripen into the situation where the report sixty or ninety days post quarter end and liquidities are getting tight. So we are in a position to take action sooner. Now there are certainly some assets that we are focused on, and there's likely to be equity infusions on the part of the sponsors, or they may be in the market to be sold. But I think we are still in a very safe position. So even if we end up waiving a covenant or so, to give them the breathing room to go to market and sell the business, our leverage position is still well covered by the enterprise value. So I guess there's two questions there. Do we believe there are businesses that are having challenges? Yes, there are a couple. But do we believe that there's an exposure on an LTV basis? No, there isn't. I don't feel that we are exposed on any of our positions that aren't otherwise in those non-earning assets. Robert James Dodd: Got it. Thank you and congratulations on the performance over the last year. Bob Marcotte: Thanks for calling in. Operator: Thank you. Ladies and gentlemen, there are no other questions at this time. I'll turn the floor back to Mr. Gladstone for any final comments. David Gladstone: Well, thank you all for being with us for another quarter and ending another year so successfully. And we hope we can even do that in the next quarter. But thank you all for calling in. That's the end of this call. Operator: Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.
Daniel Yuan: Hello, ladies and gentlemen. Welcome to Futu Holdings Limited Third Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. After management's prepared remarks, there will be a question and answer session. Today's conference call is being recorded. If you have any objections, you may disconnect at this time. I would now like to turn the conference over to your host for today's conference call, Daniel Yuan, Chief of Staff to CEO, Head of Strategy and IR at Futu Holdings Limited. Please go ahead, sir. Daniel Yuan: Thanks, operator. And thank you for joining us today to discuss our third quarter 2025 earnings results. Joining me on the call today are Mr. Leaf Li, Chairman and Chief Executive Officer, Arthur Chen, Chief Financial Officer, and Robin Xu, Senior Vice President. As a reminder, today's call may include forward-looking statements, which represent the company's belief regarding future events, which by their nature are not certain and are outside of the company's control. Forward-looking statements involve inherent risks and uncertainties. We caution you that a number of important factors could cause actual results to differ materially from those contained in any forward-looking statement. For more information about the potential risks and uncertainties, please refer to the company's filings with the SEC, including its annual report. With that, I will now turn the call over to Leaf. Leaf will make his comments in Chinese, and I will translate. Thank you all for joining our earnings call today. We concluded the third quarter with 3,130,000 funded accounts, marking a 43% year-over-year and 9% quarter-over-quarter increase. During the quarter, we acquired 254,000 net new funded accounts, up 65% from a year ago and 25% sequentially. We are encouraged to see accelerated client acquisition in all markets. In the third quarter, Hong Kong posted the highest quarterly net client app since 2021 and remained the largest contributor to new funded accounts among all markets for four straight quarters. We effectively sparked and captured clients' trading interests amid a quarter of strong equity market performance and busy IPO schedules. With a new IPO framework, retail investors in Hong Kong increasingly consolidate their brokerage accounts to increase their chances of getting out CEO allocation. And they tend to pick a trusted platform with the best overall user experience as their main brokerage account. In Singapore, new funded accounts again posted steady sequential growth. We led our peers in DAUs by an even wider margin, further solidifying our position as the number one retail broker in Singapore. Following seven quarters of rapid expansion in Malaysia since launch, we still see a huge runway for future client growth as equity ownership continues to go up. In the third quarter, we further strengthened product localization by launching Versa Derivative and SGX Futures. An upgraded AI tool to support Malay language and local stock analysis. Our annual flagship offline investor event, MoveFest, was held in Singapore in July and in Malaysia in October, altogether attracting over 28,000 investors to sign up and further elevating our brand image in the region. Thanks to our growing brand recognition and product experience, our US business delivered another quarter of high-quality growth. We achieved a high double-digit sequential increase in new funded accounts. We also observed another quarter of more active derivatives trading activity, as both the number of option traders and option contracts traded recorded double-digit sequential growth. As of quarter-end, total client assets reached HKD 1.24 trillion, up 79% year-over-year and 27% quarter-over-quarter. The growth was driven by another quarter of robust net asset inflow, while the appreciation in client stock holdings also contributed meaningfully to the overall asset expansion this quarter. Average client assets logged double-digit sequential increases and hit new highs in every market. Bullish sentiment on Hong Kong and US equities prompted more leveraged positions. The buoyant Hong Kong IPO market also boosted financing demand. As a result, margin financing and securities lending balance climbed 23% quarter-over-quarter to HKD 63.1 billion. Total trading volume rose 105% year-over-year and 9% quarter-over-quarter to HKD 3.9 trillion on the back of favorable market dynamics and upbeat investor sentiment. Elevated trading velocity and technology names lifted overall Hong Kong stock trading volume by 43% sequentially to HKD 1.19 trillion, which accounted for 31% of total trading volume, the highest percentage since 2023. US stock trading volume remained elevated at HKD 2.6 trillion, as many technology and crypto names posted new highs. Trading volume surged 161% sequentially, driven by a 90% quarter-over-quarter increase in crypto asset balance and accelerated trading velocity. Ethereum trading volume quadrupled during the quarter, overtaking Bitcoin as the most popular coin on our platform. In Hong Kong, the launch of Solana for retail investors was well received. Solana contributed meaningfully to the growth of crypto turnover this quarter. We believe that as we continue to broaden coin selection, strengthen product capabilities, and deepen investor education, there is significant potential to further drive crypto trading penetration among our client base. For the period-end, wealth management assets rose 8% sequentially to HKD 175.6 billion. During the quarter, clients increasingly allocated to fixed income funds, alongside the sustained inflow into money market funds. To better serve the bespoke needs of professional investors, we introduced a self-service request for quote function to structure products, whereby clients can customize products based on their desired parameters, access and compare quotes from a number of issuers, and execute trades seamlessly without human intervention. We leverage technology to remove friction in the client experience while driving operating efficiency. We ended the quarter with 561 IPO distribution and IR clients, up 22% year-over-year. We continue to play a leading role in facilitating retail participation in the heated Hong Kong IPO market. In the third quarter, 12 IPOs each attracted over HKD 100 billion in subscription amount on our platform. We served as joint book runners for multiple well-known listings, including those of Cherry Automobile Group and Lens Technology. Notably, in the Putong Group IPO, we assumed the role of overall coordinators for the first time, underscoring the advancement of our enterprise service capabilities. Next, I would like to invite our CFO, Arthur, to discuss our financial performance. Thank you, Leaf and Daniel. Arthur Chen: Please allow me to walk you through our financial performance in the third quarter. All the numbers are in Hong Kong dollars unless otherwise noted. Total revenue was HKD 6.4 billion, up 86% from HKD 3.4 billion in 2024. Brokerage commission and handling charge income was HKD 2.9 billion, up 91% year-over-year and 13% quarter-over-quarter, both primarily driven by higher trading volume. The change in planned commission rate was mostly technical in nature. The blended commission rate declined year-over-year as clients traded higher-priced US options compared to a year-ago quarter, while the quarter-over-quarter increase implied the commission rate was due to sequentially stronger trading activities in low-priced US stock and options. Interest income was HKD 3 billion, up 79% year-over-year and 33% quarter-over-quarter. The year-over-year increase was driven by higher interest income from security borrowing in the lending business, margin financing, and bank deposits. The quarter-over-quarter increase was driven by higher interest income from security borrowing and the lending business as well as higher margin financing interest income. Other income was HKD 441 million, up 111% year-over-year and flat quarter-over-quarter. The year-over-year increase was primarily attributable to higher currency exchange service income, fund distribution service income, and IPO subscription service charge income. Our total cost was HKD 780 million, an increase of 25% from HKD 625 million in 2024. Brokerage commission and handling charter expenses were HKD 161 million, up 97% year-over-year and flat quarter-over-quarter. Both the year-over-year and the quarter-over-year increase was roughly in line with the change of our brokerage commission and handling charging income. Interest expenses were HKD 474 million, up 17% year-over-year and 25% quarter-over-quarter. Both the year-over-year and the quarter-over-quarter increase was mainly due to higher interest expenses associated with our security borrowing and lending business, as well as high margin financing interest expenses. Processing and servicing costs were HKD 146 million, up 12% year-over-year and 10% quarter-over-quarter. The year-over-year increase was largely due to higher market information and data fees. The quarter-over-quarter increase was mainly driven by higher marketing information and data fees, as well as higher product service fees. As a result, our total gross profit was HKD 5.6 billion, an increase of 100% from HKD 2.8 billion in 2024. Gross margin was 87.8% as compared to 81.8% in 2024. Operating expenses were up 57% year-over-year and 31% quarter-over-quarter to HKD 1.7 billion. R&D expenses were HKD 574 million, a 49% year-over-year and 30% quarter-over-quarter. The year-over-year and the quarter-over-quarter increase was mainly driven by our greater investment in crypto and AI capabilities. Selling and marketing expenses were HKD 586 million, up 86% year-over-year and 36% quarter-over-quarter. Both the year-over-year and the quarter-over-quarter increase was mainly attributable to higher new fund accounts. G&A expenses were HKD 535 million, up 40% year-over-year and 26% quarter-over-quarter. Both the year-over-year and the quarter-over-quarter increase was primarily due to an increase in general and administrative headcount. As a result, income from operations increased 127% year-over-year and 17% quarter-over-quarter to HKD 3.9 billion. Operating margin increased to 61.3% from 50.4% in 2024, mostly due to strong top-line growth and operating leverage. Our net income increased by 143% year-over-year and 25% quarter-over-quarter to HKD 3.2 billion. Net income margin expanded to 50.1% in the third quarter as compared to 38.4% in the same quarter last year. Our effective tax rate for the quarter was 16.7%. That concludes our prepared remarks. We now would like to open the call to questions. Operator, please go ahead. Operator: Once again, we will take our first question. The question comes from the line of Cindy Wang from China Renaissance. Please go ahead. Your line is open. Cindy Wang: Thanks for taking my call, and congrats on the very great result in Q3. I have two questions here. First, client assets performed very strong in Q3. Could you break down by mark-to-market gains and net asset inflows? And what is the current run rate for net asset inflows and client assets in Q4? Second, customer acquisition cost in Q3 was higher than Q2, but still lower than your early full-year guidance. So given the stock market pullback order today, what's the recent customer acquisition trend, and what do you expect the customer acquisition cost in Q4? Thank you. Arthur Chen: For the first question, regarding the asset movement, around one-third comes from the net client's asset inflow, and the remaining two-thirds come from the mark-to-market fluctuations. In the fourth quarter to date, actually, the mark-to-market implication was negative. But on the flip side, the asset inflows we see the momentum remains very robust. There is no slowdown compared with the second quarter or the third quarters. In the third quarter, regarding the client acquisition, the average cap in the third quarter is around HKD 2,300, slightly up on a quarter-over-quarter basis. But on the absolute levels, it still remains below our full-year target range of HKD 2,500 to HKD 3,000. In the fourth quarter to date, what I witnessed is that both the client acquisition momentum and also client acquisition cost remain quite healthy. So overall speaking, I feel more optimistic regarding our over-year client acquisition cost versus our objective at the beginning of this year. Thank you. Operator: We will take our next question. Your next question comes from the line of Peter Zhang from JPMorgan. Please go ahead. Your line is open. Peter Zhang: Thank you for giving me the opportunity to ask a question. This is Peter Zhang from JPMorgan. We have two questions. The first question is related to interest income. We saw the third quarter interest income record very strong sequential growth. We would like to understand what's the driving forces behind the strong momentum. Can you help us to break down the interest income into the key items, such as the interest income from the client idle cash, from margin financing business, and from the security lending? We also noticed that the security borrowings' contribution to interest income has been very strong in the second and third quarters. We want to understand, is this purely due to the market, or is there something Futu Holdings Limited has been doing at the content level to lead to the strong growth? Our second question is related to the crypto business. We wish to understand what's the latest crypto business contribution to your revenue in the third quarter. And looking ahead, what will be the driving forces for the crypto business to expand? For example, is this mostly due to the expansion of the token offering on your platform, or are there other potential business opportunities like derivatives that may have some upside to your crypto business? Thank you. Arthur Chen: Regarding the breakdown of the interest income in the third quarter, we have two different results arising from the interest income. Number one is from the client's idle cash. The second is from the margin financing, and the third is the security borrowing and lending. Actually, in the third quarter, the percentage for these resources is quite even. Regarding the security borrowing and lending business, we see a very strong momentum in the second quarter and the third quarter. But mainly, the driving force was from the market itself. In particular, there will be more utilization for certain hard-to-borrow stocks in the third quarter. Thank you. Daniel Yuan: Peter, this is Daniel. I'll take your second question on our crypto business. First of all, I'm going to give you a breakdown of the exponential growth we saw in the third quarter, and then I'll discuss the outlook for this business. The strong crypto growth was quite broad-based across the three markets that we currently offer crypto trading. In Hong Kong, for example, our client's crypto AUM and crypto trading volume both reported triple-digit sequential growth. As we mentioned in our opening remarks, Solana was very popular among our retail clients, which is the new coin launched in the third quarter. In Singapore, we also saw triple-digit growth in trading volume and continuously growing penetration among our funded accounts. In the US, we launched a number of new functions, including market orders and added 10 new coins, which really helped drive crypto AUM and volume. So far, as we've seen in the third quarter, there's a lot of volatility in the crypto market, but we've seen that a lot of our clients really took advantage of that volatility. In October, for example, we've seen the crypto volume continue to grow high double-digit month-over-month and hit a new high for monthly volume and the continuous uptake in crypto penetration. These are all very encouraging signs. But still, crypto contributed a very small percentage to Futu Holdings Limited's current revenue. But we think there is a long runway for growth in terms of driving crypto penetration on our client base and driving crypto revenue. In terms of some of the factors and catalysts that are going to help with that revenue growth, I agree with a lot of the things you mentioned just now, like a broadening of token offering will be quite helpful and will be a direct beneficiary of that. Of course, derivatives with higher take rates are going to help with monetization. But a lot of these developments will be contingent on regulatory approvals. In the long term, we're quite optimistic about the growth of this business. We understand that a lot of these new businesses don't really grow in a linear fashion. Peter Zhang: Thank you. I have a follow-up on the interest income part of the question. We wish to understand what's the fourth-quarter trend on interest income, particularly for your security borrowing business. Do you see the momentum continue in the fourth quarter? Thank you. Arthur Chen: Regarding your question about the interest income trend, we do not have the high-frequency data set for the interest income, particularly regarding the security borrowing business. But I'm very happy to give you an update during our fourth-quarter result. Thank you. Operator: We will take our next question. Your next question comes from the line of Emma Xu from Bank of America Securities. Please go ahead. Your line is open. Emma Xu: I have two questions. The first one is about the sensitivity analysis to the Fed rate cut, and the second one is about your R&D and G&A costs. They increased notably quarter-over-quarter and year-over-year. You mentioned earlier for the R&D expense it's mainly related to crypto and AI capacity investment. And for G&A, for G&A staff increase, could you tell us what's your target or your plan for investment in these areas? Arthur Chen: Regarding the interest income sensitivities from the Fed, as we give the market some estimation for every 25 basis point cut by the Fed rate, our monthly pretax profit will be negatively impacted by around HKD 37 million. But having said that, the rate definitely will have a lot of positive factors such as trading velocity increase and also more clients' asset inflows, which will partially offset, if not fully offset, this potential negative implication from the rate cut. Regarding the second question, for the quarter-over-quarter increase on the R&D and G&A expenses, for the G&A expenses, we do have some front-loading costs in the preparation of certain new markets we may open in the next two years. Secondly, we have invested a lot on the crypto side, especially on the system, in the preparation of certain license applications, not only including Hong Kong but also in other markets. Regarding the AIs, we will further optimize our AI capabilities, especially for the external part. There will be further optimization for our AI agent for our clients. Internally, we will further utilize our AI capabilities to streamline our business process and enhance our operating efficiency. Thank you. Operator: We will take our next question. Your next question comes from the line of Yu Fan from CICC. Please go ahead. Your line is open. Yu Fan: Thanks for taking my question. Congratulations on the outstanding results achieved this quarter. This is from CICC. I have two questions here. The first question, we see the strong customer growth this quarter. So with the regional breakdown of the existing and also the net new paying client? And the second question is regarding the US market. Would you please share more color on the market strategy, and what's our competitive advantage compared to other peers in this market? Thank you. Arthur Chen: For the breakdown of the new fund accounts in the third quarter, Hong Kong and Malaysia collectively contribute around 50% of total new fund accounts. In the third quarter, except for certain new markets or small markets we entered recently, such as Canada and New Zealand, the remaining markets' contributions are in the range of 5% to 15% for the third quarter. As of the end of the third quarter, the Greater China clients contribute around 46% of the group's account fund accounts, and the remaining overseas markets contribute 54% of total accounts. Thank you. Daniel Yuan: Hi, Yu Fan. This is Daniel. I'll take your second question on our US business. As you mentioned, we saw very strong momentum in terms of new client accounts and also in terms of engagement of our existing clients, with the number of options traders and options contracts traded both logging double-digit sequential growth. I think that really thanks to our increasing brand influence. If you've been to New York recently, you'll see that we've launched another large-scale branding campaign in New York City in the heart of New York City. Another important factor is, obviously, we have a very superior product experience for our target clients. The US is probably the most competitive market in the world, but also unequivocally the largest brokerage market out there, which means that there's going to be diversified client needs to be satisfied by different players. We think that our product is built for the active traders, and those are the clients we want to serve, and we'll continue to optimize our product experience for that client focus. Operator: Thank you. We will take our next question. Your next question comes from the line of Charles Zhou from UBS. Please go ahead. Your line is open. Charles Zhou: Good morning. This is Charles Zhou from UBS. First of all, congratulations on your very good results. It's also a strong beat to the market consensus. I have two questions. My first question is about the Air Star Bank. Could you please share what investment have you made since Futu Holdings Limited acquired a 44% equity stake in Air Star Bank, I think, last June? And also, how do you see the Air Star Bank's strategic role within Futu Holdings Limited's business in terms of short-term, medium-term, and long-term perspectives? My second question is regarding the regional mix of the client AUM net inflow. Can you maybe just give us a little bit more color about the breakdown of the regional mix? Say, for example, does Hong Kong still account for over 70%? And also, are we seeing a rising share from high net worth clients in the third quarter? Thank you. Arthur Chen: Regarding the breakdown of the net asset inflow by regions, actually, we see the percentage contributed by Hong Kong slightly decrease on a quarter-over-quarter basis, mainly due to certain overseas markets such as Singapore and Malaysia also recording very strong asset inflows. So proportion-wise, Hong Kong's percentage contribution was down a little bit. Regarding the client's cohort, we do see more and more high net worth clients' contributions in Hong Kong. We think this kind of trend will remain in the next coming quarters. We think we have very meaningful potential in terms of further upgrading our client's quality in Hong Kong through wealth management, etc. Thank you. Daniel Yuan: Hi, Charles. This is Daniel. I'll take your first question on Air Star Bank. First of all, to give you an update on our investment, during the third quarter, upon regulatory approval and the discussion between the shareholders, we have increased our stake in Air Star Bank to 68.4%, thereby becoming the controlling shareholder of Air Star Bank. In the short term, we'll continue to focus on improving the customer experience, enriching products and capabilities. We believe that there are a lot of integration opportunities between the banking business and the brokerage. In the long term, we believe that the banking business can help Futu Holdings Limited increase client stickiness and improve client's wallet share. It will enable clients to complete fund deposits, investments, lending, and consumption. We can satisfy all these various financial needs within Futu Holdings Limited's ecosystem, and we can continue to enhance our clients' perception of Futu Holdings Limited as a one-stop financial services platform. So far, Futu Holdings Limited is the only online brokerage platform in Hong Kong that has integrated digital banking capabilities, and we believe that the scarcity of that license and the diversity of products and services we can offer under this license will continue to widen our competitive moat. After this round of capital injection, Air Star Bank will be consolidated into Futu Holdings Limited's financial statements. In the next two to three years, we'll still be in investment mode for Air Star Bank, but we believe that as Futu Holdings Limited's client quality improves across various markets, and as more markets become profitable and play out that operating leverage, the drag from Air Star Bank's loss to Futu Holdings Limited's overall P&L will be limited. After the capital injection, Futu Holdings Limited and Xiaomi Group will continue to work very closely and take advantage of each other's resources in their respective ecosystems to operate this bank together. Thank you. Operator: We will take our next question. Your next question comes from the line of Chiyao Huang from Morgan Stanley. Please go ahead. Your line is open. Chiyao Huang: I have two questions. One is about the product pipeline from crypto and tokenization in the next one or two quarters. And then maybe a bit longer term, what kind of value proposition do we try to achieve on tokenization for our clients? The second question is about whether management has any plan on M&A in the space to accelerate capability building? What kind of capability in crypto are we looking to build in the near term? Thank you. Arthur Chen: Regarding your two questions about crypto, number one for the new product pipelines and also tokenization, we do have a lot of preparations and internal discussions, even some layout of certain product connections. But as you can understand, tokenization is a very new concept to the market nowadays and subject to different regulatory regimes and examinations. So it is very difficult for us to lay out a very clear roadmap for the product launch given that a lot of factors will be regulatory dependent. Regarding M&A in the crypto side, definitely, we are very open in these directions given that crypto is a very strategic and important consideration in our business direction down the road. So definitely, we will keep these options open. Thank you. Operator: We will take our next question. Your next question comes from the line of Leon Key from CLSA. Please go ahead. Your line is open. Leon Key: This is Leon Key from CLSA. I have two questions today. Firstly, we are very glad to see that Hong Kong for the fourth consecutive quarter has led new client additions. I'm just interested in the client profile of our newly acquired clients in Hong Kong for the past quarter and actually for the past four quarters in general, given Hong Kong's equity market started to become quite active since around four quarters ago. If there are any meaningful differences in terms of these new customers in Hong Kong in terms of per average AUM, ages, trading velocity, the products they are buying, if there are any notable differences for these new clients compared to our existing Hong Kong customers, most of which were acquired during probably the bull market a few years ago. So that's the first question on Hong Kong new customer profile. The second question, I'm interested in the gross margin trend in markets outside Hong Kong. We're very pleasantly surprised to see gross margin disclosed in the third quarter was very strong. Given we also have very good AUM growth in markets like Singapore and a lot of new clients in Malaysia, I presume the economy of scale is kicking in very rapidly. If possible, if management can share with us some gross margin trends in Singapore and Malaysia, where are the margins in these markets standing now? Daniel Yuan: Leon, thank you for these two questions. This is Daniel. I'll take these two questions. First of all, regarding our Hong Kong business, in fact, in the third quarter, we have seen a continued upward trajectory in average client assets of our new clients. That coupled with the continuous net asset inflow, very robust net inflow from our existing clients led to a double-digit sequential growth in average client assets in Hong Kong. I think that is representative of what happened in the past couple of quarters as we continue to enhance our brand image. I think we can continue to attract more and more high-quality clients, and there will be more clients that are inclined to do one-stop asset allocation within Futu Holdings Limited's platform. In terms of these clients' behavior, trading behavior specifically, I think that's very much market-driven. As you know, in terms of our total trading volume in the past year or so, it's mostly US stocks. But in Q3 this year, as the Hong Kong equities market outperformed, a lot of our clients quickly flocked to Hong Kong equities and engaged quite actively. So I think this is very much driven by the performance and the relative outperformance of different equity markets. We think this is more cyclical than structural in terms of clients' trading behavior. To your second question, yes, we think that the online brokerage business inherently has huge operating leverage. But on the gross margin level, it's been very healthy across all of our markets because it mostly relates to trading and margin products, all of which have very high margins. The operating leverage mostly kicks in from the operating expenses. As we continue to scale in a lot of these international markets, we have seen a very rapid expansion in operating leverage. Maybe to give you some numbers on our Singapore business, for a couple of consecutive months, we have seen the operating margin in our Singapore business consistently top 60%, and it's still expanding. I think that really speaks to the strong operating leverage in our business model. Leon Key: Thanks a lot, Daniel. Very helpful. Operator: Thank you. This concludes today's question and answer session. I'll now hand the call back to Daniel Yuan for closing remarks. Daniel Yuan: That concludes our call today. On behalf of the Futu Holdings Limited management team, I'd like to thank you for joining us today. If you have any further questions, please do not hesitate to contact me or any of our investor relations representatives. Thank you, and goodbye. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Ladies and gentlemen, thank you for standing by. Welcome to Canaan Inc. Third Quarter 2025 Earnings Conference Call. At this time, all participants are in listen-only mode. After management's prepared remarks, we will have a question and answer session. Please note that this event is being recorded. Now I'd like to hand the conference over to your speaker today, Gwyn Lauber, Investor Relations for the company. Please go ahead, Gwyn. Gwyn Lauber: Thank you, operator. Hello, everyone, and welcome to our earnings conference call. Joining us today are Chairman and CEO, Nangeng Zhang, and our CFO, James Jin Cheng. Leo Wang, Vice President of Capital Markets and Corporate Development, and Kevin Darryl Dede, Senior IR Manager, will also be available during the question and answer session. Our CEO will start the call by providing an overview of the company and performance highlights for the quarter. Our CFO will then provide details on the company's operating and financial results for the period before we open up the call for your questions. Before we begin, I would like to refer you to our safe harbor statement in our earnings press release. Today's call will include forward-looking statements. These statements include, but are not limited to, our outlook for the company and statements that estimate or project future operating results and the performance of the company. These statements speak only as of today, and the company assumes no obligation to revise any forward-looking statements that may be made in today's press release, call, or webcast except as required by law. These statements do not guarantee future performance and are subject to risks, uncertainties, and assumptions. Please refer to the press release and the risk factors and documents we file with the Securities and Exchange Commission, including our most recent annual report on Form 20-F, for information on risks, uncertainties, and assumptions that may cause actual results to differ materially from those set forth in such statements. In addition, during today's call, we will discuss both GAAP financial measures and certain non-GAAP financial measures, which we believe are useful as supplemental measures of the company's performance. These non-GAAP measures should be considered in addition to, and not as a substitute for, or in isolation from, GAAP results. You can find additional disclosures regarding these non-GAAP measures, including reconciliations with comparable GAAP results, in our earnings press release, which is posted on the company's website. With that, I will now turn the call over to our Chairman and CEO, Nangeng Zhang. Please go ahead. Nangeng Zhang: Thank you, Gwyn. Hello, everyone. This is Nangeng Zhang, CEO of Canaan Inc. Welcome to our earnings call. Together with our CFO, James Jin Cheng, we are calling from our Singapore headquarters to discuss our Q3 2025 business results. Let me start with an overview. During the third quarter, the global macro environment remained highly uncertain. In particular, the US Reserve's reciprocal tariff policy increased mining costs in North America. However, we also saw the resilience of the North American market. Once there was a bit more clarity, demand started to recover clearly during this quarter. Bitcoin prices increased from approximately $107,000 at the end of June to about $114,000 at the end of September. This shows a rapid increase in total global hash rate, which rose from 846 exahash per second at the end of Q2 to 1,041 exahash per second at the end of Q3. Accompanied by a significant rise in mining difficulty, with growing energy competition globally, the mining industry is facing higher operational challenges. Despite the complex external environment, we delivered results that exceeded expectations. Total revenue for the quarter exceeded $150 million, up 50.2% quarter over quarter and 104.4% year over year, and beat our guidance range of $125 million to $145 million. Gross profit reached $16.6 million, much higher than the $9.3 million reported in Q2. This improvement in revenue and gross profit reflects our rapid response to market demand and ongoing optimization of global mining operations. Supported by strong sales and revenue momentum, our cash balance at the end of the quarter increased to $119 million, representing an 80.9% sequential increase. Nangeng Zhang: In mining machine sales, we delivered a record high of 10 exahash per second of computing power in Q3, up 55.6% sequentially and 37.7% year over year. Our average selling price increased 33.8% year over year, to $11.8 per terahash. Despite a slight rise in cost per terahash due to changes in international trade policies during this quarter, we achieved a product gross margin of approximately 17%. We continue to serve strong hash rate demand in Asia and also captured the recurring demand in North America. Notably, during this quarter, we secured large orders from well-known customers in the region, including Bitfury, Cipher, CleanSpark, and Luxor. In early October, we signed a purchase agreement for over 50,000 A15 Pro models with a US-based miner client. This highlights the growing recognition of our product performance, quality, and service by North American institutional customers. In the consumer-grade mining machine market, our Avalon Home series continues to lead in this emerging space. In addition to regular marketing and promotional activities, we have also included the home series in our open-source code program. We are actively growing our user and developer community and expanding our brand influence. At the same time, we are exploring new applications of the home series in smart home scenarios. Currently, we are developing software to make our products compatible with Matter, the mainstream protocol standard for smart home devices. In terms of consumer-grade product sales, we delivered 14,000 units of the Avalon Home series in Q3, generating over $12 million in revenue, a sequential increase of 115.3%. The AvalonQ model was the top performer this quarter. By supporting scale sales through channel partners, the home series achieved nearly $4 million in gross profit, with a solid gross margin of around 33%. Overall, our total product revenue reached $118.6 million, with gross profit close to $20 million in Q3. The Avalon Home series contributed 10.3% of total product revenue and about 20% of product gross profit. Based on what we are seeing, competition in the consumer mining market remains relatively healthy. We plan to maintain solid gross margins with the launch of new products and expanding channel coverage to drive scale. Turning to mining operations, despite a notable increase in mining difficulty during this quarter, our disciplined execution allowed us to steadily enhance hash rate development, utilization, and overall mining efficiency. As a result, we generated another quarterly record of $30.55 million in mining revenue while maintaining competitive power costs. In the third quarter, we added approximately 1 exahash per second of new deployed capacity in North America, bringing our total deployed hash rate to 9.3 exahash per second by the end of the quarter, with approximately 7.8 exahash per second energized. We mined 267 BTC during this quarter, which further contributed to our crypto asset balance. Our Bitcoin holding reached an all-time high of 1,582 BTC by the end of the quarter, providing solid support for our balance sheet. We are also actively exploring innovative mining projects. This quarter, we partnered with Solana to deploy machines at a 20-megawatt wind power mining facility in Texas. In Canada, we worked with a local energy infrastructure partner on a pilot project that converts stranded natural gas into computing power. We also supplied mining equipment for projects designed to support local grid stability. These projects mark our first step into the energy infrastructure space, bringing with them the utilization of stranded energy. Our long-term vision is to integrate high-density, interoperable Bitcoin mining loads with energy-intensive AI and HPC workloads, building a future where computing and energy infrastructure grow together. We are entering an era in which AI software and data centers will profoundly shape daily life. At the same time, we believe that public awareness and demand for sustainable energy will continue to grow. Throughout Canaan's history, we have held a consistent belief that technology should make society more efficient. Today, we are seeing that vision become materialized. We have unique advantages in this transformation, with more than a decade of developing technologies that make chips and systems more energy-efficient. We are now extending these capabilities to both home use and the traditional energy sector. Energy operators can use our computing systems to balance the grid, improve transmission efficiency, and generate new revenue. On the consumer side, utilizing excess heat from home mining is only the beginning. Over time, we envision this concept expanding into broader home computing applications. For R&D, we continue to innovate and upgrade our products. In October, we officially launched our next-generation Avalon A16 series. The Avalon A16 XP model delivers 300 terahash per second of hash rate per unit with an industry-leading power efficiency of $12.8 per terahash. This marks the first time our Avalon miner has reached the 300 terahash level, clearly showcasing our strong leadership in Bitcoin ASIC design. We see improvements to production and supply chain. Our global delivery system is now more flexible and resilient. Today, we have manufacturing capabilities laid out in Mainland China, Malaysia, and the US, working seamlessly together to support delivery and after-sales service for consumers worldwide. While enhancing our product and supply chain capabilities, we have also sharpened our focus on core operations. Starting this quarter, we realigned our R&D team around projects that offer clear revenue visibility and strategic value. We have also streamlined headcount to support this focus. In addition to organizational and cost optimizations, we are also allocating additional resources to expand our business footprint. We have established a dedicated consumer product team to optimize product quality and accelerate product iteration. Additionally, we are also allocating more resources to our hash rate finance and energy infrastructure initiatives. We see new power-related opportunities in many regions, from home users and small businesses to power utilities. In Europe and Asia, customers are exploring ASIC-based grid balancing applications. In North America, stranded energy opportunities continue to grow, with similar projects emerging globally, including in the Middle East. In our digital assets treasury management, we continue to execute our flexible strategy. At the end of the third quarter, we held 1,582 Bitcoins and 2,830 Ethereum. In early November, during a market pullback, we strategically acquired an additional 100 Bitcoins as part of our crypto asset management strategy, further enhancing our asset allocation and potential liquidity. To sum up, Q3 was a highly strategic quarter in Canaan's development journey. We achieved strong revenue growth and improved gross profit while also optimizing our business structure and organization. At the same time, we made encouraging progress in several new areas. Looking ahead, we are fully focused on driving Q4 sales, fulfilling large customer orders, and converting preorders for our new A16 series. At the same time, we are accelerating the deployment of newly signed mining projects to further expand our mining hash rate. We are closely monitoring the impact of US tariff policy, macro liquidity conditions, and potential changes in global mining and energy regulations. Taking all of these factors together, we remain cautiously optimistic for the fourth quarter and expect total revenue to be in the range of $175 million to $205 million. This outlook is based on current market and operating conditions, and actual results may vary with policy uncertainties and market volatility. This concludes my prepared remarks. Thank you, everyone. Now I will hand it over to our CFO, James Jin Cheng. Please, James. James Jin Cheng: Thank you, Nangeng. Good day, everyone. This is James Jin Cheng, CFO of Canaan Inc. I'm very glad to share our Q3 financial results with you. Even today, we are witnessing Bitcoin price under big pressure. As Nangeng stated at the start of the call, the macroeconomic environment in Q3 was highly uncertain. Reciprocal tariff policies from the United States added mining costs in North America. Global network hash rate growth continuously outpaced Bitcoin's price appreciation. This all led to increased mining difficulty and intensified operational challenges across the industry. Despite market volatility, we delivered strong results this quarter. Our revenue exceeded our own expectations. Our gross profit showed consistent growth, with the average selling price climbing again, and our reserves of cash and digital assets increased significantly in our ending balance sheet of September. Let me give a quick summary of our financial performance. First, we delivered a total revenue reaching $150.5 million, exceeding our guidance and representing a 104% year-over-year increase. This was primarily driven by growth in our product sales of $118.6 million, surpassing the $100 million milestone for the first time in the past three years. This growth was achieved while we set a new record of 10 exahash of quarterly computing power sold, and the average selling price continued rising to $11.8 per terahash per second, a new high for the past two years. After a very quiet Q2, our clients from the United States started actively placing sizable and repeating orders for the A15 series. Sales of North American customers contributed 31% of our total revenue in Q3. We are happy to witness the strong demand recovery of the North American market. Also, our sales of Avalon Home series generated $12.2 million in revenue during the quarter, representing a 115% quarter-over-quarter increase. This is the first time Avalon Home products have contributed over 10% of total product revenue since the launch just over a year ago. As Nangeng said, we are cultivating the consumer market and establishing our leadership position in the newly defined house mining category. Second, our mining business also delivered another record result this quarter. Mining revenue reached $30.6 million, an all-time high and a 241% year-over-year increase. We mined 267 Bitcoins during the quarter, representing 82% year-over-year growth. During the quarter, we deployed over 8,000 mining machines across our projects in the United States and other countries, expanding our total deployed hash rate by 14% from 8.15 exahash per second at the end of Q2 to 9.3 exahash per second at the end of Q3. Our installed computing power in the United States also grew by 20%, from 3.66 exahash per second at the end of Q2 to 4.4 exahash per second at the end of Q3. We also strategically closed our mining operations in Kazakhstan and initiated a small-scale project in Malaysia. James Jin Cheng: Next, our profitability continued to improve this quarter. Gross profit reached $16.6 million, up 78.6% quarter over quarter, marking a significant turnaround from a gross loss of $21.5 million in the same period last year. Product gross margin reached 17% this quarter. Both gross profit and margin continued their growth in Q3, extending the upward trajectory and reinforcing the positive trend. Our Avalon Home series generated nearly $4 million in gross profit with a gross margin of approximately 33%. The Avalon Home series accounted for around 10.3% of product revenue, and it contributed 20% of the product's gross profit. The home series has already become a stable revenue pillar and a recognized gross profit contributor. Last but not least, our total cryptocurrency treasury reached approximately 1,582 Bitcoins and 2,830 Ethereum, with an estimated market value of approximately $189 million at the end of Q3. Our unrealized total gain was approximately $87 million, reflecting the appreciation in value of the digital assets accumulated from mining and other operations. As of October 31, our total Bitcoin treasury increased to 1,610 as previously disclosed in our monthly report. In early November, we further strengthened our digital asset portfolio by purchasing another 100 Bitcoin. Turning to expenses, our operating expenses totaled approximately $40.5 million. We recorded $1.5 million in one-time expenses relating to the operational efficiency initiative, including organizational optimization, travel control measures, and other related items. In addition, we recorded $1.2 million in impairment related to mining machines deployed in Kazakhstan. By the end of Q3, the price of Bitcoin increased to around $113,000 versus around $107,000 at the end of Q2. The price of Ethereum increased to around $4,100 at the end of Q3 versus around $2,500 at the end of Q2. This price appreciation resulted in an aggregate unrealized fair value gain of $5.7 million on our digital asset holdings. A non-cash change in fair value of preferred shares impacted our Q3 bottom line by $9.5 million. This included a $5.4 million impact from the Series A-1 preferred shares, which were fully converted during the quarter, and another $4 million from Series A preferred shares, which were fully converted in early October. To provide a clearer view of our underlying operational performance, we have excluded the impact of this accounting treatment from our non-GAAP measures. With all preferred shares now fully converted, we expect Q4 to include a final impact related to the change in fair value of these instruments. Benefiting from strong top-line growth, improved margins, and firm cost discipline, we delivered a positive adjusted EBITDA of $2.8 million in Q3. Our net loss per ADS narrowed to just 5¢ versus 27¢ in the same period last year, demonstrating continued momentum toward profitability. Turning to our balance sheet and cash flow, we generated a net cash inflow of $53 million in Q3. This was driven by $189 million in sales collections, the highest quarterly level in the past two years, and supplemented by approximately $10 million in export VAT refunds. These inflows fully covered the quarter's major cash outflows, including $56 million in wafer prepayments and $90 million for production and operations. As a result, our cash balance increased to $119 million at quarter-end. Now moving to our contract liability, the balance of contract advances reached nearly $87 million as of this quarter-end, with over 85% contributed by North American clients. As of the end of Q3, we recorded account receivables of $7 million, all from customers using Bitcoins as collateral for installment payments. We will continuously evaluate market demand and adopt corresponding credit policies with caution. Now turning to our recent fundraising, in early November, we closed a strategic investment totaling $72 million with three top-tier institutional investors: Brevan Howard, Galaxy Digital, and Wace Asset Management. The proceeds are intended to fund the acquisition and deployment of North American data center sites, as well as the expansion of our Bitcoin mining machine production capacity. In late October, we renewed the ATM program to broaden banking relationships and enhance our financial flexibility for future growth initiatives. Following the renewal, we sold approximately 4.8 million ADSs, raising gross proceeds of about $7.8 million. As previously reported in the monthly report, we have decided to pause further sales under the ATM for the remainder of 2025. As of the date of the earnings, we have cumulatively repurchased approximately 5.1 million ADSs for approximately $3.4 million under our share repurchase program. In the future, we plan to execute on our repurchase plan as market conditions allow us. Moving forward, as our CEO just mentioned, strategically, we will continue our technology-driven efforts with the goal of improving the efficiency of society. These efforts include the development of energy-efficient chips, similar to what we did in the past decade. This includes an extension of our energy operations, which leverages computing technologies. Also, on the consumer side, these efforts include Bitcoin computing and heat reuse. To better utilize our resources, we set up additional internal controls to oversee the operation of our business. These priorities are of strategic importance and will help to provide us with additional revenue visibility. We will increase the expansion of our consumer products and energy operations, but at the same time, streamline existing R&D and administration cost structures. In cash flow management, we will continue to invest in R&D on new products and wafers in the supply chain, and we will also seek opportunities that will increase our energy operations around the world, as well as help our digital assets treasury to accumulate more digital assets on our balance sheet. All this will happen in a very dynamic environment. We remain cautiously optimistic as we execute on our strategy while focusing on protecting and increasing our shareholder value. We expect revenue for the fourth quarter to be in the range of $175 million to $205 million. This forecast reflects current market conditions, and actual results may vary given policy uncertainties and market volatility. This concludes our prepared remarks. We are now open for questions. Operator: Thank you. We will now begin the question and answer session. As a courtesy to other investors and analysts who may wish to ask a question, please limit yourself to one question and one follow-up. If you have any additional questions after the Q&A session, the Investor Relations team will be available after the call. For the benefit of all participants on today's call, if you wish to ask your question to management in Chinese, please immediately repeat your questions in English. To ask a question, please press 11 and wait for your name to be announced. One moment for the first question. Your first question comes from the line of Mike Grondahl from Northland. Please go ahead. Mike Grondahl: Hey, guys. On the 50,000 machine order for the A15 Pros, can you talk a little bit about delivery timing there and gross margin on those sales? Nangeng Zhang: Hi. Good morning. Yeah. You know, this order for more than 50,000 A15 Pro units is one of our most important deals this year. So under the contract, we expect to complete all deliveries by the end of 2025. So far, we have shipped a part of the orders and are progressing in the remaining production and logistics after that. Yeah. You know, given the size and the tight timeline of this order, and the fact that Q4 is generally a peak period for supply chain logistics, cost chains, our production and operations team are working at full strength to ensure on-time delivery while maintaining product quality. And, also, you know, at the same time, we are expecting deliveries for other customers in parallel to avoid any impact on our long-term other long-term partners. This is a key test of our delivery management capabilities. It's a really hard job. Yeah. So for the gross margin, yes, we have a positive gross margin. Yeah. But maybe I cannot have the exact numbers. Yes. We have close one. Mike Grondahl: Yep. Got it. And then just maybe a follow-up. Your home mining sales have done really well lately. What are the margins on that business line versus the industrial mining equipment? Nangeng Zhang: I think, you know, for our home series, in Q3, we get 33% of gross margin. And by the end of this year, I think we should maintain above 30% gross margin. It is significantly higher than industrial miners. Yeah. Yeah. Definitely. I think the competition. Yeah. Yeah. Right. So yeah, so for I think for the home miners' roadmap, we are planning to launch several new products over the next twelve months. And, you know, further compete about 2C, you know, the 2C product portfolio always consumer products need a refresh every year. So we need to refresh almost all existing models in the coming year. So but but still for 2026, our most important KPI for the home series is still to go mainstream and break out of the crypto niche. So please give us some more time. Yeah. Thank you. Mike Grondahl: Got it. Okay. Thank you. Nangeng Zhang: Thank you, Mike. Operator: Thank you for the questions. One moment for the next question. Next question comes from the line of Nick Giles from B. Riley. Please go ahead. Henry Hurl: Thank you, operator, and good morning or good evening, everyone. This is Henry Hurl on for Nick Giles. So for my first question, when is the earliest you guys could ship your new A16 models and at what scale? And what are your expectations on price and margin respectively? Thanks. Nangeng Zhang: Yeah. The A16 series was officially launched in October. And now we are at the first batch of sample production, and yeah, and we finished the testing stage. According to our plan, we will start shipping samples to selected customers by the end of this month for their testing and evaluation. Yeah. This is consistent with our launch strategy. And we expect to begin our volume shipments in 2026. And yeah, and then we will adjust the production and the delivery pace dynamically based on the presale and the customer feedback. For pricing, you know, we will adhere to market-driven principles, taking into account supply demand, competitive dynamics, and customer mix. So at first, I think our new flagship product A16 delivers major performance. The Avalon A16 XP can offer over 300 terahash at $12.8 per hash, which is really industry-leading. So I think it will provide higher returns per unit. And, also, we can share these benefits with our customers. Yeah. So about I think our margins based on the current wafer material and manufacturing cost? The per terahash cost for A16 is under control. And we've seen our expectations and also the yield is acceptable. So I think the product's pricing power will help us to offset some cost pressures. Sure. You know, the A16 cost per test is higher than A15. So yeah. So let's see. Thank you. Henry Hurl: Yeah. And then for my follow-up, I wanted to get your guys' thoughts on the fact that several public Bitcoin miners have been very vocal about winding down their mining operations in the medium term and then at the same time supply of ASIC appears to be increasing. So what do you guys think the market impact will be? And then how is Canaan responding to this trend? Nangeng Zhang: Yeah. For I think for this question, yes, we observed that some listed miners maybe they are facing balance sheet pressure, share price performance issues, and a desire to pivot toward AI HPC have publicly stated their intention to reduce Bitcoin mining over the medium term. Yeah. But from my perspective, yeah, firstly, I think the slowdown, you know, I don't think the global hash rate will slow down this year in the near term. And, also, the HPC AI HPC deployments still need some time. By our investigation, into the energy market in the US, the AI HPC applications need high-quality energy electricity. And high quality always means higher cost. So I think fundamentally, in the next one to two years, the mining power is suitable for mining. It's not in competition with the energy used for AI HPC. It's not the same electricity. So I know our customers, including ourselves, are thinking about how to build mining AI-ready mining facilities for the future. But at this stage, deploying more ASIC Bitcoin miners is still the best way to allocate energy today and generate revenues from this date, not waiting for another one or two or three years. So I think still the things are hard to foresee for the long term. So we focus on yeah. So because there's no answer for three or five years later, so now we are focused on cooperating with our partners to fulfill their requirements. Also, we are trying to find more energy resources in the US and building our own mining sites today. And maybe we should have potential possibilities to transfer to the AI infrastructure in the future. This is what I personally observed in the past maybe six months. Thank you. Henry Hurl: Great. Thank you, and continued best of luck. Nangeng Zhang: Thank you for your questions. Operator: Thank you. Our next question comes from the line of Kevin Cassidy from Rosenblatt Securities. Please go ahead. Kevin Cassidy: Thank you, and congratulations on the strong results. And your guidance for $190 million for the fourth quarter is impressive. Do you have orders also scheduled out into the first quarter? I guess, what kind of visibility are your customers giving you? James Jin Cheng: Thank you, Kevin. I think Q4 is a peak quarter in terms of seasonality. And we provided the guidance in a very optimistic way. And, also, we have already collected some of the orders. We try our best to deliver in Q4. Looks to me, Q1 traditionally is the low season because there is a New Year and the Chinese New Year together. In the Western part of the world and the Eastern part of the world, both having all kinds of holidays and the global logistics supply chain is not in the normal shape. So I don't personally see another peak time for Q1. I think the revenue could go down a little bit. But we will try our best to deliver Q4 first and then we predict Q1 later when we have a clear understanding of the demand. Also, recently, the Bitcoin price is not in a good shape. So it's under turbulence. And some of the customers, they tend to be more cautious and hesitate to make their decisions immediately. That will also have a kind of impact on Q1 orders. So we will try to make a flexible supply. Anyway, currently, I think the demand is still higher than supply. We're just focusing on Q4 delivery first. And then let's see how it goes in Q1. Maybe we can balance between the demands of the sales and also the self-mining side. If we do have some inventory, we can allocate to self-mining in the United States. That will also be a long-term strategic goal for us. Yeah. I think that's my 2¢, Kevin. Kevin Cassidy: Thank you, James. Very good detail. Thanks. And maybe you did note that there's a rebound in demand in the US. Is the US market, which is less sensitive to the price of Bitcoin? James Jin Cheng: Sorry. Come again. You mean Oh, okay. Yeah. Just you had mentioned that with the price of Bitcoin being down in the just very recent times last few days, and you'd mentioned that would be sensitive to the demand for mining machines. And I was just wondering if you know, the rebound we've seen in the US that you I think you said it was 31% of revenue in the third quarter. Whether that continues, even with, you know, I guess, is it less sensitive in North America to prices of Bitcoin versus the rest of the world? James Jin Cheng: Yeah. Kevin, looks to me, in my observation, North America is now the leading area for the global mining industry. The whole total hash rate in North America is some percentage between 35 to 40% globally. And there are, you know, around 20 listed companies in North America doing mining. They are kind of institutional players. They are more professional in building up the sites, the electricity facilities, and eventually becoming mining sites. So they have their schedule. It's not easy for them to stop their own schedule even when Bitcoin price has some short-term turbulence. For them, they look at, you know, long-term goals. That's why they are not very price sensitive in a very short-term time. But we observed the tariff did have a kind of impact on their cost structure. That increased their mining cost. That means some of the miners, especially the smaller ones, even if they are sitting in the United States, with the, you know, consistent policy advantage, they could still withdraw from Bitcoin mining to other, you know, activities. They may, you know, want to change their miner's purchase plan in Q4. So I should say US customers are the most important customers for us, and we observed their worries in the short term. But we also respect their long-term strategic goals, and we try our best to support strategic goals to get realized. So that's something we do together with them. Nangeng Zhang: Yeah. Yeah. And, also, I think for looking at this year, especially fully, the market initially expected the demand would flow rapidly into North America. However, changes in tariff policy led to a significant contraction in North American demand from late Q1 to Q2. And at that time, I think everyone was very, very nervous. But hash rate demand ramped up quickly and partly offset the weakness in North America. And in Q3 and Q4, North American customers showed very strong resilience. Together, we adapted to the new trade environment, and the demand there has recovered quickly since late Q3. In effect, for the potential already delivered in Q4, North America has again accounted for more than 50%. So, you know, Bitcoin price volatility is constant. Sharp moves over a few days or weeks do cause some customer shifts, especially small customers, to pause and reassess. But over multi-year time frames, I think the impact on underlying demand trends is limited. And I highly disagree with, like, running a business by country numbers day by day. So this is my personal opinion. Thank you. Kevin Cassidy: Okay. Thank you very much. Thank you for the Thank you. Operator: Thank you. Our next question comes from the line of Michael Donovan from Compass Point. Please go ahead. Michael Donovan: Thank you, operator. Hi, Nangeng and James. So how much inventory do you have left for the A15 series? And then for Q4 guidance, what mix do you expect between A15 orders and preorders for A16s? James Jin Cheng: Thank you for the question, Michael. I think our inventory in Q3 is like $200 million, including some of the raw materials, like wafers, like, you know, other components. And it mainly reflects the strong demand in Q4, and you have already known when we got the big order around 50,000 units to the United States. So we have to prepare the inventory. Other than that, if we digest the inventory in Q4, I don't think our inventory level will be that high. In Q1, we will see a lower inventory level for A15. And that's because we are expecting the uncertainties of the market demand in Q1. And for A16, I think it's mainly like Q3 to be the mass delivery. I think the early delivery could be late Q2. But in the transition, we will continue to produce A15 and make it better and better. I think that's the plan. Did I answer your question, Michael? Michael Donovan: No. You did, James. I appreciate that. And then I guess for my next question, can you expand a bit more on the pilot projects that you have, the 2.5 megawatts in Alberta, Canada, and 4.5 megawatts in Japan? What are the growth opportunities in those two countries? James Jin Cheng: Yeah. Nangeng Zhang: I think we are running several similar pilot projects globally. Actually, this includes Japan, Canada, the US, and as well as some small projects ongoing in Europe and other Asian countries. Since these are pilots, our primary goal is to validate the technology and the business model rather than maximize early-stage financial returns. Yes. Thanks to the use of stranded gas and energy, the power cost for these pilot projects is relatively low, and the project-level gross margins are decent. But, you know, like most mining operations, meaningful economic benefits ultimately require scale. But based on the current results, we believe that these pilots all have the potential for scale-up. It is very important to remember that power and gas infrastructure are very traditional, long-cycle industries. Building trust and proving out a new model takes time and patience. Our strategy is to run the pilots in a stable way, cement the partnerships, and then we'll pass on to larger megawatt levels at the right time. For example, the Canada stranded gas project has a very high possibility to scale up to 20 megawatts in the middle of next year. And, also, we can do more, like I just mentioned, the AI-ready site mining farms in the US with our partner, Luxor. So yeah. So I think still there's a please give us some time. Yeah. Michael Donovan: Thank you. James Jin Cheng: Thank you. Operator: Thank you for your questions. One moment for the last question. Our last question comes from the line of Kevin Dede of HCW. Please go ahead. Kevin Dede: Gentlemen, thanks very much for having me on the call. Appreciate it. Nangeng, I'm wondering about your self-mining objectives. Can you refresh us on where you plan to take self-mining in particular? Ethiopia, which remains the largest contributor of your exahash. We're hearing that power tariff rates have increased there, and we're wondering how you might rethink hash deployment. Nangeng Zhang: Thank you. And I think for our strategy, you know, now in the short term, there's some pullback in Bitcoin price. And many people are asking the question about our strategy of mining. Yeah. I think in the near term, over maybe a few months, our attention will be on delivering large miner orders, which does slow the pace at which we add our self-mining hash rate. Please remember there are still other customers. We cannot lose our long-term partners at this time. So because of the lack of machines, at the same time, we are actively developing more power sources, including potential greenfield sites. These projects have longer construction cycles but relatively controllable cash outlays, and they offer better long-term value and operational flexibility. The gas-to-compute pilots in Canada and the 20-megawatt data center projects in Texas with Solana are only examples. For what we see in the market, I think there are indeed more attractively priced mining assets now. The pullback for Bitcoin price gives us benefits to get more energy resources, especially in the US. Yeah. So I think our security projects with solid resources, but short-term funding pressure. So this offers us better entry points. We are continuously screening special entities and their strict return and risk control. And we aim to expand our self-mining footprint in a more prudent, value-attractive way. So in short, I think we are still keeping the expansion in the US, and we are moving to more fundamental sites like the energy infrastructure. And long term. Yeah. And the big order and Bitcoin pullback give us time to redirect our direction to find a better way to expand in the US. Kevin Dede: James, I was wondering if you could offer a little more color on the $56 million wafer purchase and the $90 million in processing. Would that include pretty much everything that you need for the A15 and A16 XP, at least as you see orders initially? And how much of it do you think translates to the Avalon Home series? James Jin Cheng: Well, Kevin, I don't think $56 million is all the wafer supply we can get for Q1. It's actually some payments that happen to be in the phase of payments just in Q3. So the $56 million is some prepayments, also some, you know, some closed payments for the previous contract. And I think in Q4, we'll pay more. It's just a kind of pacing difference. And for the home series, I think currently, it's wintertime. We observed that the demand from North America is actually getting stronger compared to Q3 and Q2. It seems like we will allocate more chips to the home series. But, of course, we don't want to, you know, generate a lot of inventory. We will still produce according to the orders. But to be very honest, currently, we have already noticed the home series will occupy a higher percentage in Q4. And while the total revenue is so big, so we are expecting the sales for Q4 of the home series. And actually, a lot of buyers, a lot of consumers, they posted on their social media talking about Avalon Q. They like it because it's quiet, and it can generate Bitcoins. And, you know, using the same kind of energy, they in the past, they buy a heater can do. So, actually, we can feel the passion from the consumers asking more for the supply side. That's why when we do allocate the chips, I think internally, we have some discussions and sometimes even very fierce competition between the consumer sector and the sector. But, of course, Nangeng will try his best to balance different product lines and different categories to try to satisfy most of the customers and consumers. Nangeng Zhang: Yeah. And, also, you know, currently, the macro environment is indeed very complex and changing very fast. And especially for the semiconductor sector. You know, like, the DRAMs price has maybe doubled in the past few months. It's only, you know, it indicates the tightness of the global capacity for the semiconductor industry. So, currently, I think we had, you know, the demand because the demand for the vast chip growth, especially for the AI-related applications and many other stuff. The foundry capacity today is very tightened, and also the price is trending up significantly. I think this could impact both our manufacturing cost and the mining CapEx. And this but this is it was the whole industry, not only us. That said, well, we cannot share the exact figures. But we have already secured meaningful wafer allocation for next year at favorable pricing and payment terms. Thanks to our strong relationships with our key suppliers, the volume is built on very cautious numbers, but this will I think this will definitely give us a good cost position heading into 2026. Yeah. This is my 2¢. Thank you. Kevin Dede: James, if you didn't touch on the $90 million processing. Can you just give us a feel for that and what the implications are for future cash use? James Jin Cheng: $90 million. I think it says too much. Yeah. I think you mean the $72 million we raised from the strategic investors and also $7.8 million from the ATM program. I think putting this together is, like, $80 million. Yeah. Yeah. Kevin Dede: Okay. No. I thought that when you were discussing cash use in the third quarter, you mentioned $90 million. I apologize. I probably have the number wrong, but James Jin Cheng: Oh, yeah. You mean the operational and the supply chain together? The expenses. Right. Okay. I think that outflow is for some payments of the, you know, supply chain, like components. Like all kinds of production and logistics to shift the components from here and there. You know, a lot of things including some of the expenses related to that. I think that's a major part of the supply chain expenses. And, also, I think there is the, you know, R&D, G&A, and also sales and marketing fees inside this. I think the run rate is still, like, $28 to $29 million. Even the P&L shows it's like $40 million, but then that includes a lot of non-cash items like share-related salaries. But the rest goes to, like, $28 to $29 million for the normal operation. And, also, we have, you know, expenses related to the operation like travel, like marketing, especially for the consumer product. We start to have some marketing try in Q3. But not much expenses. But that is something we try to do in the transition from a pure machine company to a kind of operational company with energy and also with the consumer product. We will also increase our marketing expenses in the future. I don't know if I answered your question. Kevin Dede: Yeah. Yeah. Just one more little nuance. I'm just wondering if those payments include prepayments for supply chains, you know, securing supply chain components through, you know, through December and then into March? James Jin Cheng: That's wonderful, Kevin. Usually, we only do prepayment for wafers. Most of the components, we usually get the components first. And then we pay them a little bit later in different kinds of terms. For example, like, fifteen days, thirty days, something like that. It's usually not the month payment. Kevin Dede: Well, congratulations on that 50,000 unit order. Congratulations on the sharp pop in revenue and gross margin. Thank you very much for taking my questions. James Jin Cheng: Thank you, Kevin. Nangeng Zhang: Thank you. Operator: As there are no further questions now, I would like to turn the call back over to the company for any closing remarks. Nangeng Zhang: Thank you once again for joining us today. If you have further questions, please feel free to reach out to us, and we look forward to speaking with you throughout the quarter. Thanks. Operator: Thank you. That does conclude today's conference call. Thank you, everyone, for attending. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the Beneficient Second Quarter Fiscal 2026 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Dan Callahan, Director of Communications. Please go ahead. Dan Callahan: Good morning, everyone. And thank you for joining us on Beneficient's Fiscal Second Quarter 2026 Conference Call and Webcast. In addition to the call and webcast, we issued a results press release last Friday that was posted at Shareholders section of our website at shareholders.trustben.com. Today's webcast as the operator indicated, is being recorded, and a replay will be available on the company's website. On today's call, management's prepared remarks may contain forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ from those discussed today. Actual results and future events could materially differ from those discussed in these forward-looking statements because of factors described in our earnings press release and the Risk Factors section of our Form 10-K and in subsequent filings we make with the Securities and Exchange Commission. Forward-looking statements represent management's current estimates and Beneficient assumes no obligation to update any forward-looking statements in the future. Today's call also contains certain non-GAAP financial measures. Please refer to our earnings press release, which is available on our website for important disclosures regarding such measures, including reconciliations to the most comparable GAAP financial measures. At this time, I am pleased to introduce James Silk, the interim CEO for Beneficient. He was appointed to that position by the Board in July of this year. Mr. Silk previously served as Executive Vice President and Chief Legal Officer for Beneficient from January 2020 until May 2024. During that time, he was integral to the development of the company's corporate structure, the completion of the company's business combination transaction and the navigation of the complex legal issues associated with running the company's business. Additionally, Mr. Silk oversaw the company's operations, underwriting risks and legal groups. After James completes his remarks, Greg Ezell, Chief Financial Officer, will provide some financial highlights. I'll now hand the call over to James. James Silk: Well, a lot has happened over the past 6 months, has faced some challenges. The of Beneficient's business and our market opportunity remains strong. When I talked to the Board about returning, this was back in July, it was clear they were united and committed to Ben, which is important to me. And since my return, management, myself and others have been focused on stabilizing the company, getting the company to a place we can execute on our mission to provide liquidity, primary capital customers in the alternative asset market. It's our core business. And I'm committed to that mission and has been energizing to lead the chart during this transition period As it relates to recent developments, as we previously disclosed, in June, we separated from our former Chairman and CEO, Brad Heppner. That occurred just before our annual report was filed. That separation occurred after the company identified credible evidence that Mr. Heppner had committed fraud against the company. Also, as previously disclosed, Mr. Heppner was recently indicted and now faces multiple criminal charges. The company is considering all available options related to Mr. Heppner's conduct, including counterclaims and litigation against Mr. Heppner. The company also intends to vigorously pursue claims regarding the validity of over $100 million of debt poorly owed to an entity related to Mr. Heppner. Overall, while unpleasant, we believe this is an opportunity for the company to move past Mr. Heppner, both reputationally and substantively and ultimately better position the company to execute going forward. Another important recent development concerns the previously disclosed agreement to settle all claims pending in the lawsuits related to GWG against the company, its subsidiaries in each of their current and former directors and officers. That settlement has been approved by the GWG Busy Court. The district court for the northern history of Texas has granted the motion for preliminary approval of that settlement and the hearing on final approval of that settlement has been set for January of 2026. So important progress on that front. Importantly, the settlement is within insurance limits and requires no out-of-pocket payments by the company. I would also note that the claims against Mr. Heppner's entities are not included in that settlement. The company has also worked to regain compliance with NASDAQ listing rules. As previously disclosed, the company was not in compliance with the NASDAQ periodic reporting requirement with our filings being bladed primarily due to the timing of the developments surrounding Mr. Heppner's reputation. Now as of the first quarter 10-Q filing a few weeks ago, we're now back in line with our periodic reporting. And in fact, thanks to our incredibly dedicated accounting team, we filed a 10-K and 2 10-Qs in just over 6 weeks. So much credit to that team. We've also regained compliance with the market value of listed securities requirement with two. Finally, the company continues to take steps to regain compliance with NASDAQ good price requirements. More specifically, we anticipate holding a special meeting on December 1, 2025, to seek shareholder approval of a reverse stock split of its common stock. Bottom line in terms of NASDAQ compliance is that we worked on a plan of compliance. We presented that plan to the NASDAQ panel, and we've been executing on that plan. Importantly, as part of that plan to regain compliance with NASDAQ's continued listing requirements and what I would view is a strong show of confidence in the company's future. Tom Hicks, our Board Chair, converted approximately $53 million of our preferred units in the company's subsidiary into the company's Class A common shares. In connection with that conversion, we agreed not to sell the shares until October 1, 2028, to 3 years. We've also agreed to forego any potential appreciation of the converted shares during that lockup period. And we also agreed during that lockup period to vote those shares with the Board's recommendation for all matters other than the election of directors. We believe this transaction aligns our interest with those of our common shareholders and reinforce leadership's confidence in the company's mission in the future. Final note on developments, we also continue to focus on our relates to Kansas, we are committed to Kansas. We appreciate Kansas, and we'll continue to work to deliver on our obligation to Kansas and its communities. So far, I focused on recent development -- to that end, we've cut costs and operating expenses, which Greg will discuss further. We've also reduced our legitimate third-party debt from $27 million in January to under $4 million as of today. We are also streamlining operations and plan to roll out simpler ways to provide liquidity and capital to customers. We're also exploring adjacent markets where our solutions may work with minimal extra cost, for example, we're reviewing our existing tools and tech and are looking for ways to put them to use. Operator: Ladies and gentlemen, please stand by your conference. We'll resume momentarily. Dan Callahan: We're just having a little bit of technical difficulty with James' line. So you bear with us, we'll be back with James in just a few moments. In the meantime, Greg, why don't we have you run through the financials, and then we'll pick up with James when we're able to get him back on the line. I apologize to everybody for this. Gregory Ezell: That sounds good, Dan. Yes, we'll turn our results now our attention now to the quarterly results and financial position as of September 30, 2025. First, I'll start with a few highlights from the quarter. We reported investments with a fair value of $244 million. These investments serve as collateral for Ben liquidity's net loan portfolio of $223 million. Revenues were a negative $2.8 million and $15.4 million for the second quarter and year-to-date periods in fiscal 2026 as compared to a positive $8.6 million and $18.6 million in the prior year. GAAP revenues principally reflect mark-to-market adjustments on the investments that serve as collateral to Ben's loan portfolio, which for the current fiscal year also includes adjustments to fair value for investments that we have deemed probable of being sold at an amount less than the most recently reported GP value. These arise specific to our asset sales initiatives that we have previously disclosed. Operating expenses were $15.1 million in the second quarter of fiscal 2026, as compared to $22.3 million in the same period for fiscal 2025. On a year-to-date basis, operating expenses for fiscal 2026 were $95.1 million, which included the accrual of a loss contingency of $62.8 million and additional interest expense on the loss contingency accrual of $1.7 million, as compared to negative $12.0 million for the prior quarter, which included the release of a loss contingency accrual of $55.0 million and a noncash goodwill impairment of $3.7 million. Excluding the noncash goodwill impairment and the accrual or release of a loss contingency, including post-judgment interest in each period as applicable, operating expenses were $13.4 million in the second quarter of fiscal 2026 as compared to $22.0 million in the same period for fiscal 2025. With these same exclusions on a year-to-date basis, operating expense for fiscal 2026 was $30.6 million as compared to $39.3 million in the prior year. Reported GAAP net loss attributable to Ben's common shareholders for the current quarter was $3.6 million and $68.7 million for the current year-to-date period. Primarily reflecting negative mark-to-market adjustments on investments as part of the asset sales initiative and the accrual of the loss contingency including post-judgment interest impacting both the current quarter and the year-to-date period for fiscal 2026. During the current fiscal year, we have completed asset sales or equity redemptions of certain investments held by the customer ExAlt Trust, which has resulted in an aggregate of $46.4 million in gross proceeds on a year-to-date basis through the filing date of our Form 10-Q last Friday. These proceeds have been used to pay down certain debt and provide working capital. Next, we'll move on to our primary business segments. In liquidity, which generates interest revenue for supplying liquidity off the balance sheet and Ben custody, which produces fee revenue for the use of the platform and trust services. As typical, I will be focusing my discussion on these business segments, as it's their operations along with corporate and other that accrues to Ben's equity holders. During the second quarter of fiscal 2026, Ben's liquidity recognized $8.5 million of interest income, a decrease of 3.8% from the quarter ended June 30, 2025, primarily due to a higher percentage of loans being placed on nonaccrual status, partially offset by the effects of compounding interest on the remaining loans. Ben liquidity recognized $17.3 million of interest income for the 6 months ended September 30, 2025, down 24.1% compared to the prior year period. Primarily due to lower loans net of the allowance for credit loss resulting from higher levels of nonaccrual loans and loan prepayments, partially offset by new loans originated during the period. Operating loss for the fiscal second quarter was $0.8 million, an improvement from an operating loss of $6 million for the second quarter -- or for the quarter ended June 30, 2025. The increase in operating performance was due to lower intersegment credit losses in the current fiscal period as compared to the quarter ended June 30, 2025, due in part because of the disposition of certain investments during the period, which generated loan repayments at Ben liquidity sooner than had been estimated in prior period calculation of the intersegment credit losses. Operating loss was $6.8 million for the 6 months ended September 30, 2025, declining from operating income of $2.4 million in the prior year period. This decrease is partially a result of lower revenues period-over-period, plus an increase in the intersegment credit losses in the current fiscal year as compared to the same period in the prior year. Moving on to bank custody. NAV alternative assets and other securities held in custody was $271.4 million as of September 30, 2025, compared to $338.2 million as of March 31, 2025. The decrease was driven by disposition of certain alternative assets, distributions and unrealized losses on existing assets, principally related to the disposition of assets as part of our asset sales initiative and adjustments to NAV based on updated information reported from the fund's investment sponsor or manager during the period, offset by $11.8 million of new originations. Revenues applicable to Ben custody were $3.1 million for the fiscal second quarter, compared to $4.2 million for the quarter ended June 30, 2025. The decrease was the result of the lower NAV of alternative assets and other securities held in custody at the beginning of the period when such fees are calculated, along with certain upfront intersegment fees, that are amortized into revenue over time being fully recognized in a prior period. In custody revenues were $7.3 million for the 6 months ended September 30, 2025, down 32.5% compared to the prior year period, primarily due to lower NAV alternative assets and other securities held in custody, along with certain upfront intersegment fees that are amortized into revenues over time being fully recognized in a prior year period. Operating income for the second fiscal quarter decreased to $2.3 million from $3.1 million for the quarter ended June 30, 2025. The decrease was primarily due to the decline in revenues applicable to this operating segment as described earlier, and employee and professional service expenses, offset by slightly lower segment operating expenses. Operating income was $5.4 million for the 6 months ended September 30, 2025, compared to operating income of $5.6 million in the prior year period. While revenues declined in the current year period as compared to the same period in the prior year, operating expenses declined by a similar amount, primarily due to noncash goodwill impairment in the prior year period of $3.4 million. No such impairment was recorded in the current year period. Adjusted operating income for the 6 months ended September 30, 2025, was $5.4 million compared to adjusted operating income of $9.0 million in the prior year period, with the decrease in adjusted operating income primarily due to lower revenue related to lower NAV of alternative assets, offset by slightly higher operating expenses during the current year fiscal period. As of September 30, 2025, the company had cash and cash equivalents of $4.9 million and total debt of $104.0 million. Distributions received from alternative assets and other securities held in custody totaled $7.8 million and proceeds received from asset sales totaled $37.2 million for the 6 months ended September 30, 2025. This concludes my prepared remarks on the financials. Dan Callahan: Well, we're going to throw it to James, who is back and up and running. James, we'll ask, you were talking about the conversion. James Silk: All right. Can you guys -- Dan, can you hear me? Dan Callahan: Yes. James Silk: Okay. Well, this is exciting, obviously. While we're doing it live, this is not recorded unless this is one of the more creative ways to demonstrate live performance. Moving back to the conversion. So as part of our plant to regain compliance with the NASDAQ continued listing requirements, Tom Hicks, our Board Chair and myself, converted $53 million of our preferred units into the company's Class A common shares. In connection with that conversion, we agreed not to sell the shares until October 1, 2028, so 3 years. We've also agreed to forgo any potential appreciation in the value of the converted shares during the lockup period. Finally, also agreed to vote those shares with the Board's recommendation for all matters other than in the election of the directors. We believe this transaction aligns our interest with our common shareholders and reinforces leadership's confidence in the company's mission and future. I also want to point out -- I also want to highlight that we continue to focus in our relationship with Kansas. In short, we're committed to Kansas. We appreciate Kansas, and we'll continue to work to deliver on our obligations to Kansas and its communities. But that's the recent developments, but we realize the next steps are crucial on the success of our business plan and strategy. To that end, we've cut costs and operating expenses, which Greg outlined. We've also reduced our legitimate third-party debt from $27 million in January to under $4 million as of today. We're also streamlining operations and plan to roll out simpler ways to provide liquidity and capital to customers. We're also exploring adjacent markets where our solutions may work with minimal extra cost, for example, we are reviewing our existing tools and tech and are looking for new ways to put them to use. Put simply, we're working towards making beneficial leaner, more flexible and easier for our target market to understand and do business with. By carrying out these steps, we believe we'll be better positioned to seize new opportunities. The market for early liquidity services is large and growing. A Jefferies study in July found that private market secondaries accelerated and reached a 6-month record in the first half of this year. Global transaction volumes reached $103 billion. That's a 51% increase from $68 billion in the first half of 2024. Accordingly, we believe investors and alternative assets need liquidity and other services, and we have the solutions to meet those needs. I'll close by simply saying that I'm very excited about our future, and I'm glad to be back helping management and the employees on our positive path forward. With that, I'll turn it back over to Dan to close out and take any questions. Dan Callahan: Yes. Operator, we're available for questions. Operator: [Operator Instructions] Our first question comes from the line of Michael Kim with Small-Cap Research. Michael Kim: First, James, I understand the core value propositions of the company remain intact. But just curious how your strategic vision might differ a bit and what your priorities are going forward, particularly as it relates to reaccelerating origination volumes? James Silk: Thank you, Michael. That's a very good question. I think management going forward will be focused on implementing the business model in our core space, which is the sort of high net worth or ultra-high net worth market, focusing on transactions in that $5 million to $25 million range that has been sort of a core part of our early model. I think the difference would be that the -- previously, there's been a focus on perhaps larger transactions, more foundational. And I think our approach will be more approaching with more of an incremental approach in terms of the size of the transactions. Michael Kim: Thank you, Michael. Got it. Makes sense. Okay. And then maybe as you have discussions with some of these high net worth investors, have you gotten a sense that maybe prospective customers might be taking a bit of a pause in terms of allocation decisions, just given sort of market volatility and as you work through sort of the management transition? And then related to that, any update on timing as it relates to naming a permanent CEO? James Silk: So a couple of questions there. In terms of dealing with our customer base, I think the need for liquidity and sort of taking timing, think the need is there. Obviously, I think the market wants to see us stabilize before we begin to move forward, which is what we're doing, and quite frankly, what I believe we've done and positions ourselves to move forward. In terms of my role as the interim CEO, we continue to -- we continue to evaluate sort of this transition period. And I'm sure the Board will be communicating in short order in terms of its approach in terms of the permanent CEO position. But the focus right now has been on stabilizing. We're now shifting more to optimizing our model. As I mentioned before, we're simplifying our approach to our products. And I think that will be the point at which we'll have a -- for further developments in that regard. Michael Kim: Got it. And then maybe just one question for Greg. I appreciate some of the incremental color around on the expense side. But as we look forward, just curious to get your perspective on sort of further opportunities to rationalize the cost base, particularly as it relates to sort of corporate and other expenses. Gregory Ezell: Yes, good question, Michael. I mean, we continually evaluate all of our vendors and ways to be more efficient. I think we've -- as you've seen over time, we really ratcheted those kind of base expenses down. There are some additional opportunities there that we evaluate, but I think there'll be more modest and incremental reductions versus some of the more drastic changes that we've seen comparing the last 6 months in terms of cost reductions. Operator: Our next question comes from the line of Brendan McCarthy with Sidoti & Company. Brendan Michael McCarthy: Great. Just wanted to have a -- start off on the balance sheet. I think in the press release, you mentioned there was roughly $104 million in debt on the balance sheet. Can you provide color on, I guess, kind of the breakdown of that debt? Is all of that stemming from the credit agreement with BCH? And how can we kind of think about the debt going forward? Gregory Ezell: Yes, it's a good question. I'll take that. It's Greg. So on our balance sheet as of September 30, $104 million, about -- about $8 million of that was related to our -- we call it the HICS credit facility called HHBDH in the footnotes. The rest of that is primarily related to the HCLP loans and the HCLP loans, as a reminder, are the notes with Brad related Brad Heppner-related entities that we're investigating the validity of those amounts at this time. James Silk: And Greg, it's worth noting -- sorry, just to follow up on that, right, the HIC/TCV loan is now -- the balance of that is below $4 million. And as Greg noted, the HCLP loan is the Brad Heppner-related debt, which we intend to challenge and has obviously been the centerpiece of the criminal indictment against Mr. Heppner. So we will pursue all remedies as it relates to that debt. Brendan Michael McCarthy: Understood. I appreciate that. And I think there was talk about really exploring adjacent markets, perhaps ways to simplify the operating model. How can investors really think about what that ultimately means looking ahead for Beneficient? James Silk: Sure. From the standpoint of simplifying the model, it's both the cost and transparency process. The current product, the way things are designed, results in a fair number of internal entities that increases some costs and complications on our side. So we're simplifying that from an internal standpoint. And then from a transparency standpoint, the -- the goal is to develop products where the revenues and the cash flows from those products and from those services flow more cleanly into the -- basically into the public company in a way that shareholders can understand easier and also designed to basically provide more value to the common shareholders by going through a little bit of a cleaner approach. In terms of the adjacent markets, the company has developed over time, a fair amount of technology for its internal purposes, including AI-generated tools that help in both portfolio management, as well as data extraction. And that has been a -- these have been internal tools, and we're looking now to externalize some of those, either directly through technology or together with some of the trust related services that we can provide. Brendan Michael McCarthy: Got it. That's helpful. That makes sense. Has there been a conversation with end market customers just related to potentially outsourcing that technology? Or is that still more... James Silk: Yes, we're having some conversations, nothing to report. But yes, we are exploring both the market receptiveness, as well as ways to refine what we have internally and make it more outward facing and so those are part of discussions that we're having. Brendan Michael McCarthy: Great. That's good to hear. And last question for me just on the core liquidity business. Is most of the pipeline still more focused in the PCP channel? Or is there other interest in the general kind of broad liquidity transaction area? Right now, it's the channel has -- reflects sort of where we were, I'd say, 3, 4 months ago, just given the focus on stabilizing, getting ourselves current on our filings, resolving the NASDAQ compliance matters and obviously moving forward off of Mr. Heppner. So -- the pipeline is -- or rather the deal flow is probably more leaning towards the PCP, but that's a -- we are sort of moving forward, as you've gotten into this current on our filings, we're sort of reopening the process. So that will evolve, I think, over the sort of the near medium term. Operator: I'm currently showing no further questions at this time. I would now like to turn the call back over to Dan Callahan for closing remarks. Dan Callahan: Thank you, everybody, for joining us and bearing with us through our technical difficulties. If you want to listen to the replay, it will be available on the Shareholders section of trustben.com. Thanks again for joining us this morning, and have a great rest of your day. Operator: This concludes today's conference. Thank you for your participation. You may now disconnect.
Toby Courtauld: Amazingly, we're a bit early. We could start, Rich? Yes. Okay. Well, in which case, welcome, everybody. Thank you very much for joining us for our interim results presentation. It's great to see you all, and we really appreciate the time that you give us. So thank you for coming along. Now, first of all, I'm going to start by summarizing some of the key messages that we'll be giving you over the next 30 or so minutes. And essentially, we have carried on where we left off at the year-end, successfully executing on our growth strategy. You'll hear about our strong operational performance so far this year, delivering some excellent leasing, well ahead of target and leading us to reiterate our rental value growth guidance. We've made further accretive acquisitions and significant sales ahead of book value, and our developers have created more premium spaces, timed to deliver into a market that is starved of such quality, meaning that we are well set to deliver both strong income and value growth. So to help us tell this story, we have a full agenda as ever for you this morning. I'll start with a reminder of how we're delivering on our very clear strategy before giving you an update on our market opportunity. I'll then run through our successful 6 months of acquisitions, sales and developments before Nick looks at our exciting fully managed growth and our results. And I'll then wrap up with our outlook before opening the floor to you for Q&A. As ever, we have the full executive committee team here to help answer any questions you have. Plus, we also have our newly promoted Rebecca Bradley as Customer Experience Director; and Simon Rowley, as Flex Workspaces Director, and congratulations to them on their appointment. But before we get into all of that, first of all, can I just say as this is probably Nick's last session before past is new. I just wanted to pay tribute to him, to thank him for his exemplary leadership across multiple facets of life at GPE. He's been a great partner to me and I know to many of you and to all of our colleagues at GPE over the past 14 years. And I know you will join me in wishing him well. Nick, thank you. So let's start then with our strategy. And to do so, I want to remind you of our investment case, essentially the 6 fundamental pillars upon which our strategy is built, and you can see them here. And in approaching each, it's always been about doing what we said we would do. First, prime central London. It's the largest city economy in Europe, it's outperforming the U.K. overall, and it has decent forecast jobs growth. And so we have been and will continue to be focused on 100% prime locations only. Second, we create and manage premium luxury offices across our HQ and our Flex products. It's where the richest theme of customer demand exists and our strong leasing and rents rising supports our position with space under offer today materially ahead of ERV. And as I'll show you later, even after substantial growth, they're still affordable, especially given the price inelastic nature of many premium customers. Third, contracyclical capital allocation. You'll recognize the chart at the top raising capital, the green circles and buying when markets are cheap, as was the case in 2009 through '13 and again last year, developing into the inevitable supply crunch before selling completed business plans as markets recover and then returning excess capital to shareholders, shown by the pink circles. We bought well, GBP 390 million, including CapEx since our rights issue last year. We're developing some of the best space in town covering 36% of our book, and we have rotated towards sales, as we said we would, more than GBP 290 million sold so far this year, 1.7% above book value and including 1 Newman Street, the largest single asset sale in the West End year-to-date. Fourth, driving innovation, leading the market in the creation of sustainable spaces and in our customer experience offer. We've delivered a world first in our circular economy activities at 30 Duke Street and our award-winning CX team is helping grow our unique Flex offer towards our 1 million square foot target, and all of this activity always with a strong balance sheet and within an LTV range of 10% to 35%. So far this year, we've delivered a record financing, maintaining high liquidity and have kept LTV low at 28%. And sixth, strong EPS and NTA growth, and we're on target to deliver a 10% plus return on equity over the medium term with more than 3x earnings per share growth. So then, with a strong strategy and supportive fundamentals, we've had another successful period of delivering on our promises. So let's then have a quick look at our half year results and our outperformance despite the challenging U.K. economic and political backdrop. Now, as you can see on the chart on the right, our excellent leasing continues, GBP 37.6 million in 6 months, the same as in the whole of last year, 7% ahead of ERV, leasing faster than underwrite and with strong appeal to AI-led customers now up to 23% of fully managed spaces. And we have a further GBP 10.3 million under offer today, a very strong 31% ahead of ERV. Our rental values were up 2.6%, with prime offices up 3.3%, bringing the total to 6.8% over the last 12 months. Our vacancy rate remains within our target range at 6.9%. Our customer retention rate remains high at 76%, well ahead of target, and we've made an attractive acquisition at a discount and sold at a premium, more on these deals later. Now, all of this activity has helped us deliver healthy financial results for the period, pro forma rent roll up 29% with our average office rents up almost 10% over the last 12 months. Our valuation was up 1.5% over the first half with developments up 6.1%, delivering NTA growth of 2% and earnings growth of almost 85%, still with low LTV at 28%. And as we think about what next, we have created a fantastic platform for further growth. Income growth of some 64% by FY '27 or more than 140% in the medium term, led by Flex. Big development surpluses of circa GBP 300 million to come with potential for upside from there. We'll buy more, we'll sell more and all supported by a London economy that continues to deliver GDP growth ahead of the U.K. overall. So significant growth to come. Now, talking of London, let's have a look at our markets. And in short, we expect supportive leasing conditions to continue with best rents to rise further despite the challenging macro backdrop. Now, why do we think this? In short, because supply and demand conditions in London are both supportive and much stronger than the U.K. picture overall. First, demand for space is strong, driven by jobs growth. As you can see in the blue bars on the right, today, there are 500,000 more jobs in London than there were at the time of the Brexit vote in 2016. Oxford Economics expect the number to continue rising by some 200,000 between now and 2030, equating to roughly 20 million square feet of new demand. Second, take-up remains robust with 5.1 million square feet signed in half 1, ahead of the 10-year average. And third, active demand, that's companies looking for space right now, is still way ahead of the long run average, dominated by banking, finance and digital sectors with the latter responsible for some 40% of U.K. GDP growth with AI-led businesses creating jobs in London today. And history shows us that 2/3 of them will only lease prime space. Plus, contrary to many commentators' perception, way more companies today are looking to expand their space take than contracted, 55% versus 14%. Plus, these companies are going to struggle to find that space. They will run into a supply drop that is extreme and shows no signs of abating anytime soon. Bottom left, we've updated our forecasts, the deliveries shown by the purple bars are very low. And we know that new starts are at lows not seen since 2010. And we think that commentators continue to overestimate deliveries and CBRE's forecast, as shown here by the pink diamonds. Now, either way, if you divide the long-run average take-up of 4.6 million feet per annum into the amount being delivered, we think, we will need to build 84% more every year than is currently planned to meet this demand. That's as higher shortfall as we can remember. And it's not as though customers have much choice from existing space. The current Grade A vacancy rate in the core West End is only 0.3%. And so as a result, we think further rental growth is coming, focused on prime spaces and continuing the theme of the chart bottom right, highlighting the very clear bifurcation between the best and the rest that we have seen since 2023. And remember, overall, rents in London remain affordable. In both the city and the West End, they are still only 5% to 8% of the average London business's salary cost. So conditions then that most definitely play to our strengths with our 100% core prime locations, 94% near in Elizabeth line station. So then, turning to our investment markets, and we think that there is good evidence to back up our view of 6 months ago that they are now recovering, albeit slowly. Capital values are rising, up 6% in nominal terms since our capital raise last year, shown on the right, driven by rental growth and tight investment supply. Prime yields shown bottom left, are now either stable or mildly falling. Investment volumes are also up by 63% in H1 '25 compared to last year, and many more larger lots are now trading, as you can see, bottom right and the green bars with 19 deals of over GBP 100 million already traded so far in '25, up from 11 last year with a further 8 currently under offer. Plus, institutions are buying again, accounting for only 2 of the larger deals done last year, but 10 so far this year, or more than 50%. And with equity demand up since May to GBP 23.5 billion, the multiple of demand to supply at 4.8x remains steady and relatively supportive to pricing. And so we'll continue using these improving conditions to take more selective acquisitions and sales, crystallizing surpluses, and more on this in a minute. So to sum up then with our market outlook, which supports strongly our strategy, the rents, whilst business confidence has weakened since May, healthy demand and a dearth of prime supply has helped us deliver rental value growth in our forecast range that we set out at our finals, as highlighted at the bottom, and so we maintain our expectations for this year overall of growth between 4% and 7%, driven by prime offices, up 6% to 10%. Looking at yields, whilst the political backdrop has probably weakened since May, we think improvements in investor confidence and likely lower interest rates could push prime yields in further, especially where rental growth is a real prospect. So given that, let's turn then and look at our investing and developing activities so far this year. And you'll remember this slide from May, and it shows our successful deployment of the capital that we raised last year. We've added to the 4 deals we told you about back then with the purchase of The Gable, shown on the far right. So that's 5 opportunities acquired since May '24, all in line with our disciplined criteria, all in the West End for a total of GBP 180 million or GBP 390 million, including CapEx and at only GBP 770 per foot and a whopping 57% discount to replacement cost. Three of our fully managed conversions, 2 offer major HQ repositioning and each with attractive stabilized yields and ungeared IRRs. From here, more acquisitions, we have 2 deals in negotiation or under offer, all in the West End and more sales to build on the GBP 290 million completed so far this year with a further GBP 150 million to GBP 200 million in the near term, and GBP 650 million to GBP 700 million identified for the medium term. So plenty of opportunity with more to come. So turning then to look at some of the detail and starting with the acquisition of The Gable, shown in yellow on the map. And it sits in an area of London we know inside out and next to The Courtyard, which we bought last year. We paid GBP 18 million, or only GBP 409 a foot, some 77% beneath replacement cost and with a current running yield of 6.4% until July '26. We have 2 possible business plans here. First, a conversion to Flex. We're in design and talking to the planners, and the economics are attractive with a near 7% yield, but this does rely on vacant possession. And if the government-based customer renews their lease, we'll maintain our low-risk running yield of at least 6.4% and probably hold for a future Flex conversion. Now, since we saw you last, we've also sold our completed and let development 1 Newman Street to a U.K. institution shown at the bottom of the map. We received GBP 250 million, priced off a 4.48% yield, more than GBP 2,000 a foot and 1.8% ahead of book value. So a good sale of this completed business plan and showing both there is liquidity at scale and strong prices for the best assets and reaffirming our long-held commitment to actively recycling capital into the next opportunities for us to drive growth. So talking of growth, let's have a look then at our development program, and taken together, we now have 11 schemes with 3 on-site HQ projects, already 71% pre-let, and 3 further Flex schemes on site. Across our 4 pipeline HQ schemes, we achieved 2 new planning consents in the past few months. And with The Gable purchased, we now have more than 1 million square feet in the program covering 36% of our book by area and delivering into the deep supply shortage that I referenced earlier. So looking then at our On-site HQ schemes, progress has indeed been good. At 2 AS, we're on time to finish in Q1 next year, although the surplus to come has reduced as the valuer has adjusted the cap rate up by 15 basis points. At 30 Duke Street, we signed our pre-let with CD&R, 6.5% ahead of ERV and nearly 12% ahead of the underwrite. As a result, we've captured some significant surplus, but there's more to come as we deliver our expected profit on cost of almost 40%. At Minerva, shown on bottom left, we are on time to finish in Q1 '27, and although costs are up since May, reducing the forecast profit to circa 15%, we are under offer on about 40% of the space at a substantial premium to ERV, which would drive our returns materially higher. Taken together, total area is up 66%. ERV is 174% higher, 99% of the CapEx to come is fixed, and we have GBP 65 million of surplus to come of current rents and current yields. They are all prime with exemplary sustainability credentials and have strong pre-letting potential for the remainder with, therefore, healthy upside to capture. For the next phase of our HQ program, we have 4 fantastic schemes, each timed to deliver into the supply drought with 3 in the West End, next to the Elizabeth line, and 1 next to London Bridge Station. At Soho Square, we're starting imminently, and strip out has begun. At Whittington, we've just received consent for our rooftop pavilion, and we're on site with proprietary works for this major refurbishment. We've also finally achieved planning at St. Thomas Yard on the South Bank for an exceptional 184,000 square foot park refurb, part newbuild project, but will be significantly more profitable than our original tower proposals, and we'll be starting here in Q3 next year. And finally, back in the West End, our Chapel Place project is in design with planning discussions ongoing for a submission next summer. So, big area and ERV gains and targeting a healthy minimum profit level all next to major transport hubs and all with strong upside potential. Now, of course, we also have multiple growth opportunities across the rest of our portfolio, too. You'll remember this portfolio stack. I've talked about our HQ developments at the top, and in the middle, sits our active portfolio management assets, representing 50% of the book, and in many ways, the engine room of the business. They are full of opportunity for us to grow rents and values, for example, on-floor refurbishments and their subsequent leasing to generate some GBP 47 million of income, capturing reversions of almost GBP 14 million, restructuring and regearing our interests and prepping assets for major repositioning. And this presents us with real upside. Their valuation is undemanding at just over GBP 1,000 a foot, but with limited CapEx needed. And all of them are in prime locations. And, of course, they include our Flex assets covering some 29% of our total book and where the growth potential is significant, as you'll hear from Nick in a minute. And shown in yellow is the stabilized proportion of the portfolio, where we will rotate out of completed business plans at high capital values per foot, potentially releasing more than GBP 800 million of capital to employ for much higher returns towards the top of the stack. So lots then to do for us as we execute our plan to deliver the substantial growth available to us, on which topic and probably for the last time over to Nick to dig into our Flex options. Nick Sanderson: Thank you, Toby. Good morning, everyone. I certainly didn't need these when I started 14 years ago, nor was I talking about our unique and well-established fully managed growth strategy, where we are successfully delivering premium hassle-free spaces for our customers. Our leasing volumes continue to grow with more than a deal a week over the last 12 months, representing nearly 90% of all our sub-5,000 square foot office lettings. Rents are growing strongly, too, with these deals securing rents of GBP 37 million, and as shown in purple, regularly achieving more than GBP 250 a foot. As you can see top right, this is driving outsized performance, well ahead of our targets. We're generating strong absolute returns with an average yield on cost of 6.5% and service margin of 35%. And relative to ready to fit, we delivered a 103% rent beat and a 61% 10-year cash flow beat, and we've secured good lease duration, too, at just under 3 years. Our fully managed spaces are today generating GBP 50 million of annualized rent, and we're currently managing GBP 25 million of OpEx and other costs across the categories shown in the green bar. So with a gross to net of 50%, our annualized NOI is GBP 25 million or GBP 107 a foot. Once we factor in CapEx, along with fully managed specific corporate overheads, this results in an annualized net cash return, averaging GBP 80 a foot or 40% higher than the ready-to-fit net rent. So much higher net cash returns than on a traditional basis, and the customer base dominated by corporates, not SMEs. Our retention rate is strong at 75%, well ahead of our 50% underwrite, as our award-winning customer experience team delivers outstanding customer satisfaction. The most common driver for customer nonrenewal is needing more space than we can currently provide, as we experienced with our largest departure to date, a fast-growing unicorn status AI business, who we'd already moved twice within our portfolio. Pleasingly, we were able to relet their space within a month at a higher passing rent to Vanta, another high-growth company, with AI-led businesses now representing 23% of our fully managed customers. And our recently completed schemes are leasing quickly, too. In the heart of Soho, Wardour Street is 100% let within 2 months of launch, including 2 pre-let floors. We've secured average rents per foot of GBP 279 with more than 1/4 of the space let above GBP 300 together, driving a valuation uplift of 10% in the half. Our customers include those we've relocated from adjacent GPE fully managed space, an occupier of a GPE developed HQ building on Broadwick Street as well as a new customer who decided to double their space take within a month of moving in. And over at Piccadilly, which launched last month, 35% of the space is already let or under offer at an average rent of GBP 296 a foot, although we're breaking through GBP 400 on a smaller space. So with an 11% beat to ERV and healthy interest in the balance of the building, the prospects look strong. So, having more than tripled NOI over the last 2 years and our leasing velocity ahead of target, there's plenty more growth to come from today's GBP 25 million. We'll generate GBP 7 million of additional NOI, as we finish leasing up the recent completions. Our 3 on-site schemes, all in the West End, will deliver a further GBP 12 million with our pipeline schemes expected to add another GBP 15 million, taking our fully managed NOI to GBP 59 million, so an organic growth uplift of 2.4x. And as we execute more acquisitions, total NOI would increase to around GBP 90 million if we grow Flex of 1 million square feet. And with more than GBP 19 million of additional service profit, shown in blue, we'll be creating additional value of more than GBP 200 million or more than GBP 200 per foot. So lots more income and value growth to come on top of the strong outperformance we're already delivering with fully managed ERV growth and valuation growth of 11% over the last 12 months. Now a few comments on our overall performance in the half year. We delivered like-for-like value growth of 1.5%, as the best continues to outperform and EPRA NTA rose 2% to 504p per share. As expected and in line with consensus, EPRA EPS increased 70% to 3.9p, and we're paying an interim dividend of 2.9p. Our consistent financial strength saw EPRA LTV falling to 28.2%, and available liquidity rising to more than GBP 450 million, as we transition to a net seller and secured our largest ever bank facility. Overall, we generated positive TAR of 3% and 7.5%, respectively, over the last 6 and 12 months, delivering prime spaces against the backdrop of ERV growth with more to come as we continue to execute our growth strategy. Our opportunity-rich GBP 3.1 billion portfolio is 83% in offices, where we experienced the strongest value growth of 1.8% and ERV growth of 2.7%, with retail ERVs up 1.9% in the half year and fully managed rents up 3.5%. And with an overall valuation uplift of 1.5%, developments delivered the strongest performance, up 6.1%, with GBP 30 million of surpluses captured in the half year valuation. Yields were broadly stable with our portfolio equivalent yield today at 5.5% and our reversionary yield at 6.7%, higher still at 8.7% on a share price implied basis. Finally, the best continues to relatively outperform at both an ERV growth level in purple and by evaluation shown in green. In particular, our West End properties, representing nearly 3/4 of the portfolio, again, outperformed with capital growth of 2.9%. And as we continue to allocate capital to drive value growth, our almost GBP 700 million CapEx program is predominantly in the West End, combining GBP 290 million to complete our 6 on-site schemes shown in black with approximately GBP 400 million for pipeline schemes in gray. You'll find the usual scheme-by-scheme detail in the appendices. With a total GDV of GBP 1.8 billion, we'll deliver further surpluses of more than GBP 300 million based on conservative 10% cumulative rental growth. And you can see by the solid line, more than GBP 125 million should come through within the next 18 months based on profit release at scheme PC although our pre-letting activities typically accelerate these, plus there's serious upside potential with further rental growth and some mild prime yield compression taking the surpluses to more than GBP 500 million or 130p per share. On the right, our investing and leasing activities will clearly change the portfolio composition, with stabilized properties shown in yellow, growing from 19% to 55%, all else equal. However, our recycling activities will evolve the portfolio mix further with prospective sales of around GBP 800 million in the next few years, meaning active portfolio management properties, shown in blue, will, again, dominate with Flex also representing around 40% of the office portfolio. In reality, our sales will likely be higher still, given our disciplined capital management, as they were in the last cycle with more than GBP 3 billion of disposals. Plus, I imagine there'll be some acquisitions, too, to replenish the GPE development hopper. Now, we'll also be driving more income growth. Like-for-like rental income was up 5% over the last 12 months, whilst rent roll was up almost 30%, standing at the GBP 127 million today following the sale of Newman Street. Over the next 18 months, this builds by more than GBP 80 million or 64% and rises to around GBP 30 million in the medium term, an uplift of 142%, including the market rental growth we expect to capture. Of course, some of this uplift will be tempered through sales of stabilized properties, but there's still lots of growth to go for, and we reiterate our guidance for a threefold increase in EPRA EPS over the medium term. Nearer term, we expect EPRA EPS to roughly double to around 10p by FY '27, as we lease up our on-site development and refurb program with more growth to come as we deliver our pipeline and capture market rental growth. Once we factor in finance and other costs to deliver this growth, along with our likely earnings accretive sales, we anticipate annual EPRA EPS of 15 to 20p in around 4 years' time. As a result, we expect a stable dividend for FY '26 with potential DPS growth thereafter. Whilst continuing to invest for growth, we've maintained our financial strength and capacity, including through proactive management of our debt profile. We've recently issued a new 5-year GBP 525 million ESG-linked RCF, allowing us to redeem an early '27 maturing facility and repay a higher-margin term loan. We've also extended the maturity of our smaller RCF, and Moody's reaffirmed our Baa2 credit rating. When combined with our successful sales activity, LTV today is 28%, as we continue to operate within our 10% to 35% through the cycle target range. Interest cover is strong at 15x, with more than GBP 450 million of liquidity, and we have extended our average debt maturity to almost 6 years, whilst our weighted average interest rate remains in the 4s. Looking ahead, as the bar chart shows, we expect LTV to remain above the midpoint of our through-the-cycle range as we invest for growth in a rising market. But remember, a couple of big sales can really move the needle and give us significant incremental acquisition capacity. So wrapping up with a positive financial outlook, we expect to deliver further property value and NTA growth in the second half and beyond, based on current market outlook and our active business plans. H2 EPS will likely be broadly in line with H1, and the capture of our organic rental growth opportunity will drive significant income and EPRA EPS growth moving forward with an expected threefold EPS increase supporting our progressive dividend policy. Our through-the-cycle LTV range and disciplined capital management will be maintained. And through the capture of attractive prime rental growth and the delivery of our development-led growth strategy, we expect FY '26 TAR to at least match FY '25 as GPE moves towards delivering a 10% plus annual return on equity. And of course, shareholder returns would be higher still should the share price discount narrow. So I'll certainly be holding on to my GPE shares. And whilst I'm not leaving just yet, as Toby said, this will likely be my last set of GPE results. It's, of course, been a privilege to have been part of such an awesome GPE team. And I'm also proud of my contribution to both the strategic evolution of the business and its very special culture. But I'm also departing happy in the knowledge that GPE is in great shape with an exciting growth strategy to deliver for shareholders and customers alike, and as I look around the room with slightly blurry glasses and massive thanks to all of you for your support, your challenge, and most importantly, your good humor and camaraderie. And given this is the 29th time that I've run through this presentation, I think it merits a very special thanks to both Stevie and to Rich and their teams for the uniquely special work that they put into putting this presentation together. Not only do I know that footnote 13 on Page 99 will be accurate, I know that it will be accurate to at least 1 decimal place. So a massive thanks to you guys for leaving Toby and I do the easy work of tapping the ball over the line. And as I hand back to you, Toby, I must say it's certainly been fun. You're a good man, a great colleague, and there are many things I will miss at GPE, including your exceptional taste in wine. Over to Toby for the wrap up. Toby Courtauld: But not I should add at this time of day. Thank you, Nick. Very good. Okay. So let's wrap up then with our outlook. And in short, it's all about delivering more growth, as we continue doing what we said we would do. We think that our market opportunity is strengthening. London remains Europe's Business Capital, will outperform the U.K. economically and will generate jobs growth, driving healthy demand for space that will collide with a supply drought, meaning rents are and will continue to rise with the best buildings materially outperforming the rest. As a result, office values are rising, the invest market continues its recovery with prime yield compression a real possibility. Meanwhile, we are focused fully on executing our growth strategy, first, capturing significant income growth of more than 140% in the medium term. Second, delivering development surpluses of between GBP 180 million and GBP 520 million, just from our existing program, some GBP 130 per share. Third, more acquisitions. And fourth, significant further sales of more than GBP 800 million and always operating only in prime Central London, majority West End, 94% near an Elizabeth line station. So all in all then, GPE is well set. Our operational infrastructure is in place and is delivering, and our deeply experienced team, bound together by our collegiate culture, along with our strong balance sheet will help us generate an attractive return on equity, even more so for shareholders should our share price continue its re-rating to properly reflect the group's exciting prospects. So GPE is in great shape with all to play for, and we can look forward to capturing our strong potential over the next few years. Now I know some of you will have questions, maybe even for Nick, last chance. We'll have some microphones running around the room. As I say, we've got the team, home team to help answer any of those questions that you may have. Toby Courtauld: Who would like to raise something? Any hands? Yes, here at the front. Good morning, Tom. Thomas Musson: Yes, I guess I'll ask the question to Nick. You -- it's Tom Musson from Berenberg by the way. You talked about the big growth potential in the business, and I think a tripling of EPS probably stands alone in the sector in terms of the growth outlook. If you can achieve that, there's lots of development surplus to come that will drive NAV growth. Fully managed is a big part of that. Nick, I think you've led the charge on. So given the growth prospects, why is now the right time for you to move on from the business? And then, I had a couple of follow-ups on a couple of the numbers if that's all right afterwards. Nick Sanderson: Sure. Well, I joined GPE 14 years ago. I thought I'd be here for 5 years, and I've been here for 14 years, and I absolutely love -- I love GPE. Equally, hopefully, as we've articulated, not just in this presentation, but in all the presentations that lead up to this, there is a very clear strategy in place. There is very clear and strong team in place. I love the sector. I'm just looking for something a little bit different. I think I was talking to one of our advisers, who works at a similar business to Savills. His comment was, "You love it because it's very similar to what you're doing now, but it's very different". And so I'm moving to a business that like GPE absolutely loves real estate. Unlike GPE, only Central London, I'm moving to a global business, moving from a team of 150,000 to 42,000. And I'm very much -- whilst GPE, I'm confident in the EPS growth that it will deliver, Savills is absolutely an EPS business rather than the balance sheet business. So something to keep you energized. But as I said, I will remain very invested in GPE, both financially, but also emotionally. If you asked any question, I'll be delighted to leave it at that. Thomas Musson: I did have just a couple on the numbers. The fully managed services income, net of fully managed services expenses, has just moved from being slightly profitable last year to slightly loss making this year. Can you just help explain that dynamic there? Is that just a reflection of growth? And then the second one was I think I saw that there was a material, sort of, GBP 3 million reduction in other property expenses in the EPRA P&L from GBP 4.1 million down to GBP 1 million. What was driving that? Toby Courtauld: Nick, do you want to try the first one? Nick Sanderson: Yes. Tom, you were referring to what's actually in the P&L? Yes. I mean, look -- so one of the things that we've done this year within our own targets, so as to you know, we are now incentivized specifically around delivering NOI returns in the P&L. At the moment, they are still lumpy because not -- they're not particularly reflecting a significant amount of the income that, yes, we're generating. But it also -- we tend to take a hit upfront for the agent fees that we're -- broker's fees that we're incurring in putting the customers in place. So I think you'd expect to see the P&L reported NOI will be a little bit volatile as we go through the lease-up of the space. I would hope that over time, those margins improve because the cost of customer acquisition will reduce if we don't have a cost of customer acquisition, i.e., we keep customer retention rate high. And that's why I think you should expect to see over time an even bigger focus, particularly on the fully managed side around customer retention. And as I think I alluded to in the presentation, the single biggest cause for us losing customers out of fully managed is we don't have enough space for them. So that is not the only reason, but it's one of the reasons why we are looking to grow this part of the footprint. On the -- I'm looking Stevie here on the property cost, my guess is probably on empty rates will have been lower over this period. Anything else material to cover? Toby Courtauld: Nothing materially. This is largely due to empty rates, but we can get into the weeds offline. Callum Marley: Yes. Callum Marley from Kolytics. Two questions, one on vacancy and one on artificial intelligence. Is the new vacancy range that you've set of, 6% to 7.5% a new target for this period? And then how do you explain the divergence relative to your close peer who has a vacancy of about half that? Toby Courtauld: Yes. Thanks, Callum. So if you think -- can we just go back to the contracyclical chart right upfront, please, Rich, you do not want your portfolio full when everybody else has put their cranes away, okay? You want to be contracyclical in the delivery of space when everybody else has run for cover, especially when there is an 84% shortage of demand against supplies. So we actively want our vacancy rate up. So right at the beginning, I talked about being countercyclical in our approach, and that's exactly what we're doing here. We're developing into a serious shortage of supply. And we've now got CEOs from large financial institutions around the world saying London does not have enough space. We've got companies looking 6 years ahead to try and forward purchase space. We pre-let most of our H2 developments, as you saw with CD&R during this year. And you will have heard this morning that we're under offer on a good chunk of the space down at Minerva. So you want to have vacancy at this point in the cycle, especially with rents rising. 6% to 7.5%, we're in the range, the single biggest vacancy that we've got at the -- in the portfolio at the minute, we've just finished, which is our Piccadilly Holdings, where we've just completed the repositioning of that building for fully managed. That's leasing up pretty well. Simon, I'll come to you in a second, just for a bit of color on that lease-up. But again, great locations, great buildings, rents rising, it's now that you want vacancy. So I would think we would be failing if our vacancy was 0, okay? I want vacancy. So with that point made, just talk a little bit about the color on how that's going and maybe just what we experienced in the core markets and maybe draw the distinct between the peripheral markets. Simon Rowley: Yes. So Callum, we've -- we completed 170 in September, which was about a month after Wardour Street and some people might have thought, well, why has Wardour Street let faster than 170? One of the principal reasons for that is that Wardour Street was a building that was really easy to understand through construction. So if anyone attended our Capital Markets Day back in February, one of the things I said at the time was that I thought we would pre-let some of Wardour Street. It wasn't in our underwrite. We don't tend to underwrite pre-lets and fully managed. But we did manage to pre-let 2 floors in there because it was easy to understand. Conversely, 170 Piccadilly finished a month later. There are 13 units in that building. It's a heavy intervention as mentioned earlier. It's a Grade 2 listed building. And so it's a much harder building to understand. Nevertheless, once completed, it looks absolutely fantastic. And there are a number of you in the room who have seen it. And that, in turn, has driven some absolutely incredible ERV beats. As you can see, moving through GBP 400 per square foot on some of this building was definitely not in our underwrite. But an average ERV of 296 so far for the deals that we've done, 35% of the building let are under offer, we are really, really confident with the rest of that building. And we are more certain than ever that core locations, prime core locations are where we would like our space to be. There are examples around the market of fully managed space being released in areas where, frankly, the price of a cup of coffee that we make is the same irrespective of where you are in London. We want our fully managed buildings to be in these core locations, these clusters. We are building a much better portfolio of clusters of buildings and that has allowed us to move companies such as, we mentioned, Wunderkind earlier, but others around the portfolio, that is helping that retention rate. Nick mentioned that, that is a big focus for the business. We have, in just this part of this year, done a really good job retaining customers, that's about 70% of the retention rate that we have managed to create. It does not involve broker fees. So as Nick mentioned, the cost of doing that business is far less for us. So it's a really important area. That's why the clusters work. The clusters will also work for reducing some of our operational costs as we are able to transfer some of the cost of our customer experience team across a wider portfolio. So I'm really excited. I mean, we've been doing this for about 5 years now. Looking forward to some of the projects that we have got on site, and the team that we've created really gives us a lot of confidence. Toby Courtauld: Brilliant. Thank you, Simon. AI. Callum Marley: Yes. Second question, stating that entry-level positions in white collar jobs are potentially being displaced by AI. How do you think about that long term, the different scenarios to your job's growth figures that you publish in which AI adoption materially changes, hiring needs, and then, ultimately the impact on office? Toby Courtauld: Yes, a really important question, one that we could spend all week talking about, so we won't do that. But just to give you a couple of thoughts to take away. And Marc, I'll come to you in a second, if you wouldn't mind, just expanding a bit on the sorts of companies you've seen in the market today in that space. I mean, one view, in fact, we asked AI, what AI thought about white collar jobs in London. And it started with an analysis of white collar jobs globally. And one version of AI said to us that it thought 90-odd million white collar jobs would be essentially disintermediated by AI. But 185 million would be created globally. Now, they won't all come to London, unfortunately, but it is an interesting debate as to exactly where they do go. And our experience would suggest that, by and large, they're going to places with talent, with infrastructure, with magnetism, with great buildings, clearly part of the equation, with universities that are world leading in some of these topics, and it's for that reason that places in and around California and some of the Eastern seaboard in the U.S. and the golden triangle around London are performing relatively well. It's why 23% of our customer base in fully managed is AI led. They're not AI businesses, but they have AI in the description as a heavy part of what they're all about. So I actually think there is an opposite side to this coin that you should take, which is that you should consider it as an opportunity. You should consider this as something that great commerce centers, like London, are going to capture more of the opportunity than most other locations. Just in terms of demand, what are we actually seeing right now from businesses in that tangentially related? Marc Wilder: Yes. So as an overview, active demand is about GBP 12.4 million, which is 26% up on this time last year. And of that, TMT is around 15%. And of that, about 12% is AI-focused companies and 88% is non-AI. Now, if you look, Toby has obviously mentioned about the dominance of London in terms of its tech ecosystem, the deepwater talent, world-class universities and that regulatory environment. There are currently 382 companies that are being founded in H2 in London with more than 50 people employed. So it is really quite a mature market. And if you look at AI as a catalyst for demand, there's currently around 0.5 million square feet today of well-established companies and some of the names that are out there that are either under offer, regearing on a short term, either have searches or in negotiation. Names such as OpenAI, obviously, ChatGPT, they are currently under offer on 100,000 square feet. You've got Databricks who are looking for 100,000 square feet and rumored to be in negotiation. Anthropic, who are behind Claude, 50,000 square feet. Palantir, who we know very well, next door to Soho Square, regearing on a short term because they can't find what they need. And we're obviously hopeful that we may have further conversations with them next door. Synthesia which is obviously the AI company that Nick referred to without referring by name, but we took them at 1,500 -- sorry, yes, 1,500 square feet in Dufour's. They grew 3x with us and then have moved to a managed facility of 21,000 square feet. So there's quite a lot of names that are out there. And the other thing I would also say in terms of is it a net promoter or a detractor in terms of jobs, if you look at the case study for San Francisco, currently, in 2025, there are 5.6 million square feet occupied by AI companies. That's moved up from 2.7 million in 2021. And if you look at the prospective job numbers, which is around 50,000 new jobs accretive, then that could lead to about 16 million square feet of new jobs of -- sorry, new requirements up to 2030. So that averages out at about 2.7 million square feet per annum through to 2030. So we believe, if you look at what's going on in London, what is -- what we're seeing in San Francisco, we think that the prospects are positive rather than negative for us. Toby Courtauld: Not complacent, mind you. And we would always make sure that we are realistic when coming to market with spaces, but we've got some good interest in businesses in that line of work. Okay. Where else can we go? Yes, Neil, right at the back. We'll need a microphone, please. Thank you. Neil Green: Neil Green from JPMorgan. Just one question. Given the progress you've already made on disposals and quite sizable pipeline of disposals that you're earmarking, how do you think about leverage and potentially even excess capital down the line should acquisition opportunities become harder to find, please? Toby Courtauld: Yes. Good question. Thank you, Neil. So we have a long track record, as you know, of -- thanks, Rich, of returning when we have not been able to find a more productive use for the capital post-sale. So you can see that from the pink circles in the middle there, and we gave back probably GBP 600 million to shareholders, having raised GBP 300 million at the beginning of the cycle last time around. This time around, we've already raised the GBP 300 million, and let's see what happens. But the same mantra applies. We will give back where it is excess to our needs and we can't make an attractive return for shareholders on it. Last time around, it was interesting, a number of shareholders said, "Well, why don't you hold on to it because you might be able to use it, and we don't really want it back". And we said, well, it's frankly, that's your problem, not ours. Our problem is whether we can use it accretively or not. And if we can't, you are going to get it back. And we did share buybacks. We did a capital restructuring and a capital return. So we've done all variations of it. And we would do them again if we were not able to find enough accretive opportunities to reemploy that capital post-sales. Scale is one reason I hear people arguing for not giving back capital, that is not relevant to us. Return on capital employed is the thing you should look at, and we will not simply hold capital for the sake of feeling a bit bigger if you can't use it productively. So shareholders should know that we will give it back if it's excess. If we don't give it back, it's because we felt we've found a great series of opportunities to employ it for an accretive return. Yes, Max. Maxwell Nimmo: Max Nimmo at Deutsche Numis. Maybe just kind of follow-up question to Neil on that capital recycling point. And talking about kind of liquidity at the larger end of the market, and if you can't sell some of those assets, are there other assets you can kind of pull in and out? And perhaps a theme that we're seeing a little bit at the moment is this sort of disposals below book value, which I think it hasn't really been a problem for you guys so far, but just some of your views on that well. Toby Courtauld: Okay. If you wouldn't mind coming in Dan in a second on how you're seeing the landscape playing out from here, but first up, Max, again, good question, what I think the correlation, I think, you need to be clear about is between sales ability, getting that deal done and quality of asset, right? And quality isn't just the way it looks. It's where it is, who's in it, what the rental position looks like, what its transport interchange, the hub near it looks like, the public realm immediately around it. There I say, even it's feng shui, right? So this whole idea of the way that building sits and feels matters. Now we've just sold the largest single asset trade in the West End. So we have not encountered a problem with scale, and it was ahead of book value. So that tells you that our values are broadly getting right what the market is willing to pay for an asset as they should. As we go from here, one thing that is very clear is that Hanover Square is in that list of stabilized assets, 2 Aldermanbury, both buildings where we've essentially will have delivered our business plan. We've got some rent reviews to do, as you know, in Hanover, before we consider that. And Wells & More is currently in the market. So these are quite big assets, especially to AS and Hanover So we'll be testing the outer envelope, I think, of scale when we get there, but we're not there at the minute. So the evolution of the market will be interesting to see. We will not be overly concerned about hitting book value, okay? We will be principally concerned about the forward IRR from the price on offer. And if we do not think that, that is sufficiently accretive to shareholders, the opportunity cost is much more powerful. We'll take the money. But given the quality, and I said before, I think Hanover Square is one of the best buildings in Europe, therefore, the world, and I mean that. It's an unbelievably good asset. And Wells & More is out there testing the market at the minute, and 2 AS will be a 20-year lease to Clifford Chance. So of a rent, which was struck in 2021, '22, there or thereabouts. So probably reversionary. So these are great quality assets, and I think they will do well. Dan, just in terms of market dynamic. Dan Nicholson: Thank you. And so, I think, at the moment, the market dynamics are such that we've seen lot sizes start to go up. I think, the Newman Street asset we sold a few weeks back, that was the biggest asset in the single asset deal in the West End through this part of the cycle, and so for several years. So it really sets a marker. And I think the -- you're starting to see -- so not only a lot sizes, you're starting to see new investors in the market as well. So against that backdrop, the volumes are up to, I think it was, 63%. On the top left there is the stat that we've quoted. So not only are you selling bigger assets, there's more institutions in the market who are typical buyers of the mature finished product that we've got -- stabilized product that we get at the end of our recycling process. So I think the landscape for sales is very good and definitely improving. So Newman Street set a new benchmark, the likes of Hanover and 2 AS, which again are a step up in scale. And as the market evolves, those larger lot sizes, they will become digestible by the market. And if you look at -- Rich, I think it's Page 4, if you just look at our cyclical part of the chart that we always look. This is where we want to be buying, these pieces here, and that's why we've been conducting such an intensive acquisition strategy over the last 18 months, 5 done, 1 under offer, hopefully done by Christmas, no pressure, Alexa. So that's -- we are buying exactly the right time. And then also, you'll -- so we -- and we're selling those mature, stabilized assets as that part of the market. And we talked about it 6 months ago, different parts of the market get hot at a different time. At the moment, those core assets become attractive because those institutions are coming back in, like the stabilized assets. The value-add part of that curve has been hot for a while. But obviously, we don't want to be selling into that. That's a product we want to be buying. So have we been going into the market and buying value-add assets in competition with a bunch of other people? Not really. Most of the stuff that we've been doing has been off market. So if you look at the map of the acquisitions that we've done, 2 or 3 have come from the city of London, and those have been one-on-one interactions, not in processes. So we're seeing that our acquisitions are playing to the curve there. Our disposals are playing to that part of the market that's warming up, and the general landscape is improving such that over the next 12 months, the larger assets such as 2 AS and Hanover will become liquid at the right times. Toby Courtauld: Rich, can you just jump to Slide 6? Because one of the things you might be thinking is selling at that point on the curve isn't necessarily the right answer. The reason, there's a complicated bifurcation going on between the best and the rest, right? If you are slightly off pitch or there's something wrong with your building, you're going to struggle to sell it, which is a sort of stuff that Dan has described we've been buying. But if you look bottom right, the reason we're now willing to sell some of the buildings we are is because we have seen this bifurcation run riot through rent. And those prime rents have really grown. And it's that differential that is now allowing us to sell prime assets at really strong numbers that I don't think was the case even 12 months ago. And that change is quite dramatic. Dan Nicholson: And it says institutions with a low cost of capital who are buying. And our forward look on those doesn't hit our cost of capital, but it's fine for those buyers. Toby Courtauld: Yes. Thank you, Dan. Thank you, Max. Any more for any more. We are just past the hour. Yes, we've got a couple over here. Yes. Zach? Zachary Gauge: This is Zachary Gauge from UBS. A couple of questions related to returns, and then, hopefully quite straightforward one just on EPRA earnings. But firstly, you seem quite bullish on near-term yield compression. I'm just wondering how you reconcile that with the valuers moving out the yield on Aldermanbury Square by 15 basis points. And I'm sure you have seen the latest MSCI data for the London office market in West End turning negative in October and flat ERVs for the last 2 months in the West End. And sort of following on from that, looking at your 10%-plus ROE medium-term target, can you give any more color on when you expect that to be realized? And I think at the end of FY '25, you guided to more growth to come, and now, it sounds a little bit like this year is in line with last year as opposed to necessarily growing from there. And then the straightforward question was, is the tax credit you received included in the EPRA earnings number? Toby Courtauld: Fabulous question, Zach. I mean, you say I sound a bit more bullish. You sound a bit more bearish, and we will get you to the right place at some point over the next few years. But putting that aside for a second, Nick, if you could deal with the second one, and maybe the third, and then, Stevie, you want to deal with it. So on the yield point, well, funny enough, the further they move the yields out, the more bullish we're going to get on compression, especially in an environment where yields are going to be -- and we know they're driven by interest rates, and in an environment where interest rates are likely to come in. And -- I mean, I think the issue with that is scale. It's just -- it's a big building. It's going to be GBP 400-ish million, there or thereabouts, and that is a rare part of the market. So that's my challenge for the team when we come to selling that one. But more broadly, we are bullish on prime product. I mean, we -- for reasons Dan has just described. We think that really good assets in really good locations are gold. They are irreplaceable, by and large, and we're not talking about the peripheral central London markets. We're talking about core 100% prime, which is where we're focused. And that's why, if anything, we have concentrated even more over the last 5 years than you would have seen us. I'm not sure we'd buy Whitechapel again, put it that way, unless it was unbelievably cheap. It was quite cheap at the time. But I think as those peripheral markets get less relatively attractive to the prospective customer base, we get less interested from an acquisitions perspective on them, but if you are in the core, I've said it before, it's incredibly powerful. We think we'll sell very well because we're leasing very well. So that's the first point. On the second one. Nick Sanderson: Rich, you give 54. Look, we were clear that the aspiration around the 10% plus TAR was one for the medium term. We set out the breakdown of that in the appendices. We said at the beginning of this year that we expected this year's TAR to be in line or ahead of where we were last year. We've maintained that. I think it's fair to say it will be my successor who stands up here talks about a 10% TAR rather than me, but I think that is something the -- looking at our own business plans, we look like we're set to deliver in FY '27-'28. In terms of the tax credit, yes, it is in EPRA earnings in accordance with the guidance. That being said, we are not anticipating it has a material impact on the overall numbers. We still stand by the guidance that we gave on EPRA earnings at the beginning of the year irrespective of that credit. It's a one-off we don't expect to repeat it. But in accordance with EPRA guidance, you include it. Zachary Gauge: Maybe just a follow-up here, if I can. I think everyone largely understands that the prime versus secondary debate, but how much of your portfolio is prime versus secondary? Because presumably, you have a prime guidance and an ERV guidance, so it must be some form of blend of the 2? Toby Courtauld: Well, what -- in an ideal world, at this point in the cycle, thinking contracyclically, in an ideal world, what you want is raw material that is in some way needing attention in prime locations, okay? That is, to me, the holy grail. And so what you can see in GPE is some -- if we can go to the capital stack, please, Rich, some buildings in yellow, which are reaching the end of their GPE life because we've done things -- all of the things we can to them and their prospective numbers are not good enough for us, back to Dan's point about there'll be some institutions out there with a lower cost of capital than us will be happier holders than us. But the majority of your book, in other words, the blue and above, needs to be prime location buildings that you can improve. And then you have a business that's really interesting. If you're simply stuff full of all the yellows, right, and this idea that you just collect, income-producing assets that are yellow, you are a proxy to market moves. You are nothing more than a beta story, right? If you want to be an alpha story that's creating something of value, you go above the yellow and you focus on things that you can do things, too, to generate rent growth, net area again, higher quality buildings in great locations. And that's the underlying, which is why we started this presentation with 100% prime Central London. So if you look at -- I think you could probably argue that Whitechapel is the only building in our book, which would not qualify in the 100% prime Central London. That's the only one. The rest of them are, and the rest of them will be improved over time, and we will transmission, will basically capture growth in the blue section, turn it into a yellow tradable asset and out shall go. That's been our model for as long as I can remember. And it feels -- if you go back to slide -- the cycle one, please, Rich, it feels much more alive today than it did in that really difficult period post Brexit, all the way through COVID, where, frankly, markets we felt should have corrected and didn't because the monetary response was so aggressive. And it took inflation, which was the consequence of -- and QE unwind for capital values to come off sufficient for us to get interested again. And so we're back into a really dynamic cycle, which feels like a good place to be. On that note, I think I'm going to draw proceedings to a close. I think we've given plenty of time for Q&A. Thank you very much. Just to wrap up for me then, this story today is all about our excellent leasing, which is all about our excellent positioning and our financial strength, looking forward with a lot to do over the second half to your point, but a lot to do over the next few years, and I'm very excited about that. As I hope you are. Thank you all for coming.
Operator: Good day, and thank you for standing by. Welcome to the T1 Energy Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Jeffrey Spittel, Executive Vice President, Investor Relations and Corporate Development. Please go ahead. Jeffrey Spittel: Good morning, and welcome to T1 Energy's Third Quarter 2025 Earnings Conference Call. With me today on the call are Dan Barcelo, our Chief Executive Officer and Chairman of the Board; Evan Calio, our Chief Financial Officer; Jaime Gualy, our Chief Operating Officer; and Otto Erster Bergesen, our SVP of Project Development. During today's call, management may make forward-looking statements about our business. These forward-looking statements involve significant risks and uncertainties that could cause actual results to differ materially from expectations. Most of these factors are outside T1's control and are difficult to predict. Additional information about risk factors that could materially affect our business is available in our annual report on Form 10-K filed with the Securities and Exchange Commission and our other filings made with the SEC, all of which are available on the Investor Relations section of our website. With that, I'll turn the call over to Dan. Daniel Barcelo: Thanks, Jeff, and welcome, everyone, to our third quarter earnings call. Let's turn to Slide 4, please. Many of you may be new to the T1 story this quarter, so we'll begin today with a brief look at our current position in the U.S. solar market. With 5 gigawatts of annual capacity at G1_Dallas, T1 is the largest American manufacturer of silicon-based solar modules, and we are the second largest American-owned solar module producer in the U.S., but we're just getting started. As we'll discuss on today's call, we are advancing our plan to start construction of the first 2.1 gigawatt phase of our U.S. solar cell fab, G2_Austin, before year-end. G2 is the centerpiece of our strategy to build the first end-to-end domestic polysilicon solar supply chain in the U.S. This strategy is intended to competitively differentiate T1 and to align the company with the growth dynamics in U.S. power markets. Now let's move to Slide 5 for a closer look at the big picture developments, which underpin our strategy. Today's theme is powering America. With U.S. electricity demand growing faster than it has in decades, we are positioning T1 as a homegrown enabler of 3 increasingly evident macro trends: accelerating U.S. AI development, onshoring of advanced American manufacturing and strengthening American energy security. These 3 trends are the thematic pillars of T1's investors' case. Energy is key to unlocking the future of AI. New data centers now routinely require gigawatts of electricity, and they are growing exponentially more compute and energy intensive. Energy has emerged as the leading checkpoint for AI growth. The U.S. has the natural resources and talent to debottleneck the AI equation, and T1 plans to contribute by bringing the capability to produce leading-edge solar technology at scale domestically. T1 intends to power American AI by investing in American advanced manufacturing. The reshoring of manufacturing is another trend that is driving electricity demand growth and presenting T1 with the opportunity to strengthen critical U.S. energy supply chains. We have ramped up domestic PV module production in G1_Dallas. We are advancing towards the expected start of construction at G2_Austin, our U.S. solar cell fab, and we are expanding our U.S. supply chain through our recently announced partnerships with Hemlock/Corning, Nextpower and Talon PV. We have entered an era when control of digital intelligence and AI infrastructure will determine the fate of nations. This underscores the strategic value of domestic energy capacity, and we believe T1's plan to build a domestic PV solar supply chain will contribute to U.S. energy security. In addition, standing up a domestic end-to-end polysilicon supply chain should strengthen our national ability to produce semiconductors, advanced materials and grid and space technologies, all of which involve common inputs and production processes. Turning to Slide 6. Let's drill down into the AI power theme. If the U.S. is to maintain its lead in AI, we need more electrons and we need them now. Leaders from the technology industry have suggested the U.S. must double the 2024 pace of electricity additions to 100 gigawatts per year to close the widening electron chasm between AI-driven demand and power availability. At T1, we are proponents of U.S. energy abundance, and we endorse the strategic merits of adding new natural gas and nuclear power capacity to our grid, but those technologies can only play a limited role in the near term due to swollen order backlogs, permitting red tape and construction cycle times for new generation facilities. Solar, coupled with battery storage, is the obvious choice to bridge this gap as a rapidly deployable resource at scale. The dawn of the AI age is a company-making opportunity for T1. We have available capacity at G1_Dallas, where we recently eclipsed the daily production record equating to an annualized rate of 5.2 gigawatts. As we look to 2026 and beyond, our plans to integrate upstream of G1 will position T1 as the first company that can offer hyperscalers and their partners a high domestic content, polysilicon-based TOPCon solar module. Now let's move to Slide 7 for an update on T1's business. Shortly after we announced our preliminary third quarter results in October, we closed 2 successful equity capital markets transactions. T1 raised $72 million in gross proceeds from a registered direct common equity offering with high-quality new and existing institutional equity investors. And as previously disclosed, T1 entered a $100 million commitment for the issuance of preferred and common stock to certain funds and accounts managed by Encompass Capital Advisors, LLC in connection with T1's acquisition of Trina Solar's U.S. manufacturing assets. Last month, T1 elected to make the second and final draw of $50 million pursuant to this $100 million commitment. This infusion of equity capital positions T1 to begin the first phase of construction at G2_Austin during the fourth quarter of 2025. Although we initially intended to focus on raising debt prior to an equity tranche to partially fund the first phase of construction at G2_Austin, these 2 transactions enable us to raise capital at attractive terms while we engage with prospective debt investors and advance the traditional project financing. The additional trading liquidity from a higher share count and market capitalization also provides opportunities for us to add new shareholders who were previously unable to trade in our stock. At T1, we are focused on shareholder value and as equity owners ourselves, we are highly sensitive to dilution. So we'll continue to use equity judiciously to fund growth CapEx while we optimize our capital stack. Our capital formation progress positions us to add G2 to our expanding domestic polysilicon solar supply chain, which now encompasses a growing network of American partners. In August, we announced an expanded polysilicon supply agreement to include production of American-made solar wafers with Hemlock/Corning. And in October, we signed a framework agreement with Nextpower for the provision of domestic steel frames, and we made a strategic minority equity investment in Talon PV LLC, which is building a U.S. solar cell fab in Texas. These partnerships are foundational to T1's mission to build the first integrated American polysilicon solar supply chain. Our expanding partnership network and the domestication of our supply chain are also key elements of T1's policy playbook. As we highlighted on the second quarter call, our team continues to advance the de-FEOCing process to maintain T1's eligibility for Section 45X tax credits in 2026 and beyond due to requirements in the OBBB. Moreover, our commitment to invest in advanced American manufacturing and critical domestic energy supply chains are consistent with some of the administration's top priorities. Turning to operations. We continue to ramp production and sales during the third quarter at G1_Dallas, our state-of-the-art solar module facility. During the fourth quarter, we expect to generate significantly higher sales and EBITDA as we ship modules under previously booked merchant sales agreements and as we sell down inventory to customers who are clearing out 45X eligible modules before year-end. As a result, our 2025 EBITDA guidance of $25 million to $50 million is unchanged. While we build our business in the U.S., we continue to advance our goal to generate value from our legacy European assets, which are attracting interest for repurposed data center applications. We look forward to providing updates on this initiative as warranted by our progress. As we do on each quarterly earnings call, we have a rotating guest speaker from T1's management team to expand on an important topic. Since this quarter's theme is Powering America, I'd like to introduce our SVP of Project Development, Otto Erster Bergesen, to provide an update on G2_Austin, which will be the centerpiece of T1's domestic supply chain and where we are approaching the start of construction. Otto? Otto Erster Bergesen: Thank you, Dan. Let's turn to Slide 8. After months of work, we have a great design developed and Tier 1 partners contracted to help us move ahead with G2_Austin. We are ready to enter full execution shortly. We're pursuing a 2-phased approach to reach more than 5 gigawatts of capacity of solar cell manufacturing. Phase 1 will be a 2.1 gigawatt fab, which we plan to follow with a 3.2 gigawatt Phase 2. If offtake level permits, we can expand the second phase. The basis of design is Trina Solar's more than 100 gigawatts of solar cell fabs in general and their 5-gigawatt state-of-the-art Huai’'an fab in particular. We have customized this design together with JFE Engineering in China and later with SSOE as our U.S. engineering firm. We have been working very closely with Trina, JFE, SSOE and other companies over the past 10 months to leverage their project and operational experience while securing U.S. compliance and tailoring to U.S. conditions. Yates Construction has been selected as our general contractor. We have worked with Yates since May to provide preconstruction services, focusing on constructability and engagement of global and local subcontractors. Laplace has been selected as our EPC turnkey partner for the production line equipment. In August, we began working with Laplace on detailed design and preparations for equipment manufacturing. Laplace was a first mover on TOPCon and has extensive experience in the TOPCon space. They have been part of solar cell fabs for more than 400 gigawatts of capacity. T1 has great confidence in their ability to deliver top quality and to achieve according to their performance guarantee under the contract. The past few months, we've been working closely with Laplace and Yates to engage critical subcontractors to identify and address long lead items. We are pleased to report that the project has been very well received in the market and that we are currently contracting with subs to support the project schedule. For example, we have secured a very beneficial mill roll contract that enabled us to start erecting steel in March 2026. We have also secured favorable terms on long-lead electrical equipment like switchgears, generators and transformers. Finally, we have built a strong team, combining Tier 1 partners with a solid in-house project management and engineering team. If you take one thing from our portion of today's presentation, I want it to be that we have a world-class team with the experience and technical expertise to execute the G2_Austin project successfully, and we look forward to breaking ground before year-end. With that, I'll turn it back over to Dan. Daniel Barcelo: Thanks, Otto. Let's turn to Slide 9. While we move towards the expected start of construction at G2, production and sales continue to ramp at G1, our state-of-the-art U.S. module facility. We have produced more than 2.2 gigawatts of modules year-to-date, and we are on track to meet our unchanged 2025 production plan of 2.6 to 3 gigawatts. And in October, we achieved a daily production record of 14.4 megawatts, which equates to an annualized run rate of 5.2 gigawatts. In less than 1 year, the T1 operations team has brought G1 from the start of production to a daily run rate that exceeds nameplate capacity, which speaks to the talent and dedication of our people. During the third quarter, T1 generated record net sales of about $210 million, and we expect sales to continue growing meaningfully in the fourth quarter as we start deliveries of previously booked merchant sales and we liquidate finished goods inventory that is eligible for 45X credits before year-end. This near-term sales pipeline and our continued operational progress underpin our unchanged 2025 EBITDA guidance of $25 million to $50 million. As we look forward to 2026, our supply chain team is focused on sourcing non-FEOC cells to G1 during the bridge year to the anticipated start of production at G2 in Q4 2026. We have already identified a meaningful supply of these cells for next year, which will be the primary driver of G1 production and sales before G2 is up and running. And now I'll turn the call over to Evan to walk you through the financials. Evan Calio: Thank you, Dan. Let's move to Slide 10 for a summary of our unchanged guidance. As detailed in this morning's release, our 2025 EBITDA guidance of $25 million to $50 million based on a 2025 production of 2.6 to 3 gigawatts is unchanged. In the fourth quarter, we anticipate a significant ramp in production and sales related to higher production levels, delivery of previously booked merchant sales as well as some liquidation of finished goods inventory before year-end. We expect fourth quarter production and module sales to exceed combined production and sales in the first 3 quarters of 2025 as we've now ramped the facility to average 4.5 gigawatt run rate in the fourth quarter. In our October release of preliminary third quarter results, we also introduced annual run rate EBITDA guidance of $375 million to $450 million for an integrated production of G1_Dallas with the first 2.1 gigawatt phase G2_Austin. The guidance is based upon G2_Austin achieving full run rate production and sales of 2.1 gigawatt and an annualized G1_Dallas run rate production sales of 5 gigawatts, supplied by 2.1 gigawatts of G2 cell and the remainder through a combination of non-FEOC foreign cells. Any U.S. sales procured potentially through Talon represents upside. Now let's turn to Slide 11 for a summary of T1's financial condition. Bringing the first phase of G2_Austin online to deliver a step change in T1's profitability and cash flow generation. The recent capital markets transactions Dan highlighted have advanced that future. Even prior to the equity transactions, our cash position built significantly as we anticipated in the third quarter. We ended 3Q with cash, cash equivalents and restricted cash of $87 million, $34 million of which was unrestricted. We added $118 million of cash in October. In addition, we accrued $93 million of Section 45X production tax credits through 3Q, and we expect to monetize those credits in the fourth quarter. We are currently exchanging term sheets. Aligned with our 4Q production and sales ramp, we expect to generate a similar amount of 45X credits in the fourth quarter that we expect to monetize in 1Q '26. On capital formation, we're building on the momentum of the recent equity transaction with potential G2 offtake contracts and debt investors. We also expect the recent equity raises will yield additional benefits for T1 shareholders. Our improvement in our capital -- our market capitalization and daily trading volume should further expand T1's eligibility for inclusion in passively managed index funds, and we are receiving a noticeable increase in inbound inquiries from active managed institutional funds who were previously unable to invest due to our trading and liquidity constraints. Now I'll turn the call back to Dan for closing remarks. Daniel Barcelo: Thanks, Evan. Turning to Slide 12. Let's conclude with an overview of T1's top priorities. In the near term, our focus is on preserving T1's eligibility for Section 45X credits by completing the de-FEOCing process as well as raising the capital required to complete the first phase of G2_Austin through a combination of debt and cash deposits tied to anticipated customer offtake contracts. While we advance our capital formation and count down to compliance initiatives, we're also executing our plan for 2026, which we view as the bridge year to establish an end-to-end U.S. PV solar supply chain. Our top operational priority for the next year is to source a meaningful supply of non-FEOC solar cells to feed module production at G1 prior to the expected start of operations at G2 in Q4 2026. Concurrently, as we build the G2_Austin offtake portfolio, we intend to initiate and complete the capital formation initiatives required to fund and trigger the start of construction for the planned second phase of G2 sometime in 2026. In 2027 and beyond, we will be focusing on bringing T1's integrated U.S. supply chain online and completing the second phase of G2. We plan to achieve 5 gigawatts of integrated production between G1 and G2. And by virtue of our supply agreements with Hemlock/Corning and Nextpower, we should be producing modules of domestic content that comfortably qualifies our offtake customers for ITC stacking bonuses. Our ultimate objective at T1 is to generate shareholder value by establishing a differentiated competitive position as the first fully integrated U.S. polysilicon-based solar module producer. As we grow our operations and commercial enterprise, we will work to maximize returns on capital, sustainably reduce unit cost of production through software and automation upgrades and optimize T1's balance sheet. This is an exciting time for T1, our investors, employees, customers and partners. We are building something that doesn't exist in the U.S. today, an integrated secure, traceable polysilicon-based supply chain based on advanced solar technology. On behalf of T1's Board of Directors, thank you for your continued support in this journey as we position T1 to power America. And with that, I'll turn it back to Jeff to coordinate Q&A. Jeffrey Spittel: Thanks, Dan. Shannon, I think we're ready to open the line for questions. Operator: [Operator Instructions] Our first question comes from the line of Philip Shen with ROTH Capital Partners. Philip Shen: Congrats on all the progress you're making. Yes, I wanted to check in with you guys on your de-FEOCing process to see if you guys could give us more color on the progress you've made and the main next steps that you guys have to take that we can follow to monitor that progress. Daniel Barcelo: Thanks Philip for that. We actually have Andy Monroe, who is our Chief Legal and Policy Officer on the line. Andy, why don't you take that question? Unknown Executive: Sure. Thanks, Dan and Philip. We're well positioned for compliance with our domestic and non-FEOC supply chain plans. We have a solid compliance plan developed with the assistance of world-class legal and compliance experts and we're making real progress on executing that plan. So we're confident. We're not sharing full details on the compliance for competitive reasons at this point, but we are confident that with those factors in play that we will be compliant. Philip Shen: Okay. And then as it relates to the Q3 contract dispute, could you give us a little bit more context there? Could that dispute extend longer? What kind of impacts could that be? And then how big of a contract was it? It seems like with the impairment of $50-ish-plus million, it was quite meaningful. Daniel Barcelo: Yes. Thanks, Phil. Evan, why don't you take that? And as it relates to the size of the contract, we are limited to certain confidentiality on the contract. And as you can appreciate, if we are in negotiations -- or as we are in negotiations there, we have to be sensitive to the confidentiality required in the contract. Evan, would you like to add other parts? Evan Calio: Yes. I mean I would say that we had already calculated that in our guidance. So there isn't necessarily a guidance change as it relates to this contract, and we are continuing to execute other contracts. So in terms of the financial effect, it's been in our guidance for 2 quarters now. There was goodwill because it relates to a contract that was executed when we made the acquisition. That's why there's recording a goodwill, which we made a conservative interpretation to write off that goodwill. But as Dan mentioned, we remain in discussions with the contract party. We continue to assess all options, and we'll choose a path that optimizes the value to shareholders. I hope that's helpful. Philip Shen: Okay. And then one more here. You guys have made some interesting and useful -- well, interesting investments and partnerships with Nextpower and Talon here. So I was wondering if you might be able to describe more the integration of all these companies and relationships. So specifically Nextpower, what's the volume timing? When could initial modules with U.S. frames come off your line? And then as with Talon, would you expect to source cells from them to support your G1 facility? And then finally, if there's an update with Corning and Hemlock, that would be great as well. Daniel Barcelo: Thanks, Phil. We are very committed to both an integrated -- vertically integrated supply chain and solar industry. So a lot of these projects are related to that. The second part of this is that domestic content. Frames are an increasingly large part. And as we go into the future, there will be a higher requirement for domestic content. A lot of the strategy around Nextpower was meeting that domestic content. As you know, beyond cells, we're basically looking at glass, at frames, at glues, at J-Boxes, et cetera. So this, to us, was a very strategic step to partner with a great company like Nextpower. I think also the Nextpower aspect was about scaling. Nextpower is a very confident partner in their products and how they scale. And we felt that having a partnership with Nextpower for these steel frames allows for the expression of that scaling from Nextpower that we could benefit through having a better customer experience from our modules. So that was another dimension of this beyond just the quality of that. In terms of volumes and timings of that, we'd expect to use that increasingly over into, if not '26 into '27, but we haven't disclosed the volumes there. Those are confidential under the contract. So we prefer to -- we'll make future disclosures on the volumes we're doing for Nextpower. As it relates to Talon , Talon was an opportunity to invest a small quantum, not disclosed in a minority position, where it would allow us to begin to talk to and look at and work with Talon in more detail. Talon is looking to build TOPCon cells. And yes, there is a way for us to procure those cells in the future. And to the degree, we have mixtures of different options in terms of cell supply, we could sell the cells to third parties, also many different options. But we're trying to reinforce and build around us the domestic chain that we really believe in. Last part on Hemlock and Corning -- that, as we've disclosed, we have optionality to convert our polysilicon to wafers. We're excited about those wafers to come from Michigan right into our G2 facility. I would comment too that our G2_Austin facility is discrete from Talon. These are 2 different projects. We're excited about our project, and we're excited about our minority investment in Talon. Philip Shen: Great, Dan. Looking forward to seeing the full results of your integrated supply chain. Daniel Barcelo: Thanks. Philip Shen: One more, if I may. This is from an investor. He's asking how is T1 claiming or planning to claim the 45X credits in terms of stacking when they produce cells in one site and modules at another site when the OBBA says they have to be at the same facility? Daniel Barcelo: Andy, do you want to take that, please? Unknown Executive: Sure. Without getting into all the details, there are provisions in the Act that allow for the election of unrelated party transactions, and those provisions have not been changed. That was in the original Act and were not changed by the OBBA. Operator: Our next question comes from the line of Greg Lewis with BTIG. Gregory Lewis: Guys, I was hoping to get an update on kind of how we should be thinking about the event path for G2. Any kind of hurdle rates we should be thinking about in the next couple of quarters, just as we think about getting that facility up and running by the end of '26 to really set the table for '27 production. Daniel Barcelo: Thanks, Greg. I'll have Otto layer in here, too. We've been working very hard for the last year to design the right paths here. We have over a 30% design done. We have work packages out that are live. As you know, we did raise capital earlier this last month -- this month to unlock some capital in order to begin the first stages of construction. We are still on track to go and start production -- I'm sorry, start construction in the fourth quarter of this year. The paths really go to the site, the equipment, the machines, the early earthworks and concrete and steels packages. Those are the biggest time lines in terms of risks to the time line. As Otto mentioned in his remarks, the steel package was particularly important and some of the switchgear was particularly important. Beyond that, if we look at the equipment, the equipment is not on a critical path, but we wanted to advance those work packages and get those equipment orders as fast as possible also. Otto, do you want to talk about the cadence and how we're tracking toward the fourth quarter '26? Otto Erster Bergesen: Sure, Dan. So yes, so as you mentioned, really, it's all about getting started now, getting started with earthworks, preparing to erect steel in March and also securing the long lead items. So electrical equipment, we've talked about as well, there's air units, there's other utility systems like water and utility plants that needs to come in place. So it's all about getting started and execute those contracts that we have lined up and are negotiating now as soon as possible. So we're tracking towards our time line. Gregory Lewis: Okay. Great. And then just I wanted to go back to Slide 6, where you kind of outlined the -- clearly, what's going on in power -- power is cool again, right? And so as we think about that and kind of the acceleration and the potential for solar, if you go back and look, like no one -- I feel like no one's really -- you don't hear data centers talking about solar. I mean, last year, we installed 50 gigs in the U.S. I think it was a few gigs of natural gas. And just -- so as we look at meeting this increasing demand for power gen in the U.S. are we getting the sense that we hear a lot about behind the meter are hyperscalers pursuing this or other entities? Or do you think really the bulk of this solar growth that we're going to see in the U.S. over the next 5 to 10 years. Is that largely just going to still be with utilities? Daniel Barcelo: Yes. We're seeing tremendous interest from developers and it's a pass-through basically data centers, AI companies. The utility scale levels and the quantum of power that's needed, it's really only the things that solar, which we do and storage together are only thing that's going to deliver that until basically 2029, 2030 when natural gas gen hits or nuclear starts coming back. We fully believe in a combined industry that is supportive of multiple uses of energy and all of the above strategy, but solar is the only thing that's scalable right now. When we -- when the U.S. looks -- when you look at China, China has over a terawatt of manufacturing capacity across ingot wafer cells and modules, a terawatt of manufacturing capacity. First half of the year, China put in 256 gigawatts. So there is tremendous human intelligence and tremendous scope to really deploy it. And we do think that the United States has those elements of capital, has those elements of technology to start building that, and we'd like to see more of that develop in the U.S. But solar is the answer right now. I do think we've reached the tipping point in terms of the costs, in terms of particularly the storage costs and the adjacency to solar. And I think those 2 things are delivering. I do think that building these projects and designing them with either natural gas in mind or other longer-term grid access in mind is an important dimension. And the last part I'd say is I think a lot of these other places are really going to be about distributed energy resources, energy islands. The amount of power that AI needs and the ramp that AI wants, it's just too hard to do that at current grid and current connections. So we're very confident on the future of how solar is going to contribute into that energy. Operator: Our next question comes from the line of Sean Milligan with Needham & Company. Sean Milligan: Just a quick question. It looks like you mentioned that you've ramped up G1 now to over 5 gigawatts. I'm curious about how you see that sustaining into 2026. And then what you're seeing for demand in 2026 there? And then just looking forward, kind of what you're seeing for demand in 2027 as G2 comes online? And kind of the third part of that question is another publicly traded company made some comments about pricing on their call. So is there any kind of like pricing guardrails you can give us for kind of non-FEOC cells in '26, what you're looking at and then also 2027 with G2 online? Daniel Barcelo: Yes. Thanks for that. What we've seen in this year is that we've had a very, let's say, erratic market in solar with -- is the OBBB going to kill the IRA. It did not. You have demand looking at this 232 coming, what is the teeth it's going to be. So the industry has been dealing with inventory, a lot of sales uncertainty. This uncertainty has made for a very choppy 2026. I think that ties to a lot of how we have a back-end loaded volume in 2025. So that really explains the landscape of what we've had today. As we look into 2026, which is a bridge year for us, we will not expect to produce and we will not produce domestic cells. Those are expected to start coming on in the fourth quarter of 2026. So as those come out in the fourth quarter 2026, that will be towards -- that will only be part of it. But for '26, we have to source non-FEOC cells. We feel confident that we have the ability to source quantums, but we are not yet coming out with our guidance there in terms of what we'd like to express. On pricing, it's complicated also because the pricing of those non-FEOC cells is also a question. So we'll be looking to come out with guidance for 2026 and give that pricing update and those volume updates for '26. When I look at '27, which is what we're very, very focused on, which is the domestic cell, that's where we're in active discussions with large utility scale type investors. And we do see demand. We do see strong interest there. There is strong interest in the domestic selling, domestic module, and that's what our focus is. As we get those offtake discussions or contracts done, we will, of course, be disclosing those in full. But the focus really is about how to start delivering in '27. Evan, do you add anything color to the pricing or to the volumes? Evan Calio: Yes. No, no. Look, I think you covered it, Dan. I mean, look, demand is high, right, for '26. It's going to break it up, right? And we're seeing early prices that are higher than current pricing, right? So several cents a watt higher than where we are currently in the fourth quarter. It's going to be cell availability that drives production levels more so than demand. As Dan mentioned, we've begun -- we have attractively priced non-FEOC cells in our inventory today, and we are working aggressively to procure those for 2026, which is our bridge year. But I think that's what's going to drive your value. And we'll provide production range here shortly. For 2027, that's where -- at least for Phase 1, right, Phase 1 of G2, you are in a lot of conversations with parties that have a demand that far exceeds our 2.1 gigawatt production, right? So -- and those discussions are for multiyear offtake contracts that are very attractive, okay? And so we expect to, over time, certainly by the time we're producing a facility to have most, if not all, of that volume contracted the 2.1 gigawatt. And then it becomes a question of how quickly can we convert excess demand for G1 into -- sorry, for G2 Phase 1 into an underpinning for G2 Phase 2, right, which, again, we think it's going to be driven by offtake demand, but we clearly see the potential for that following in some reasonable or short time period from financing on G2 Phase 1, right? The goal would be ultimately to put as many of the high-margin in-demand cells into G1 as possible as quickly as possible. I don't know if that gets... Sean Milligan: That's great. That's great. And then the other question was on the COGS side. So this year, I know you've been doing a lot with your supply chain. And then next year, you bring on non-FEOC cells. I'm just curious how you see COGS moving around this year and if that starts to normalize some next year as you kind of get up to scale more? Evan Calio: Look, that's a good observation. I think you'll see it in the fourth quarter, right? Obviously, when you're at scale at a level that's averaging 4.5 gigawatt run rate in the fourth quarter, your conversion costs come down significantly throughout the course of the year, and we see a forward path to a facility in its second year of operation to continue to make gains on those costs that we control. As it relates to procurement and pricing, again, we are seeing -- your cell is most of your cost, but throughout the [ BAM ] we continue to work to optimize that, and we expect to make improvements. Again, we were ramping a facility into a period that had unusual tariff volatility. So it was like you were less able to kind of optimize timing of costs and you were in a period where rising tariffs, you were hit by some of those tariffs. We think a lot of those risks will be mitigated even in an environment where 232 impacts the market, given we have a differentiated and advantaged supply chain. So we'll provide further quantification of like some of those improvements when we, in near term, put out our 2023 guidance, which we're again making traction on locking things in. Daniel Barcelo: Yes. I would just add to Evan that you touched on the polysilicon side. As you know, the cell is the bulk of the cost, and we work diligently to ensure very competitive cells. Our company, all of our polysilicon is from Hemlock. We take the polysilicon from Hemlock that's turned into wafers in Vietnam. We have control of the polysilicon side. And the reason I mentioned this is with the anticipation of what may come out of 232, we feel that we're very protected on that cost element. Again, we get the benefit of basically having a locked-in pricing on our polysilicon. So to the degree 232 does come out and does add cost to other non-American polysilicon or Chinese polysilicon, we think that we're in a very advantaged state as that feeds through into the cell costs. Sean Milligan: Great. That's great, Dan. And then on Section, the 45X tax credits. I know this year, you've built up a good amount on the balance sheet, and you said you're looking to monetize those currently. It's not like swapping term sheets. As we look forward, should we think about credit monetization being a more regular step in the process for you all? Or is it going to be kind of larger transactions single time like once a year? Or are we thinking multiyear type transactions there to help with liquidity? Daniel Barcelo: I think you're spot on the cadence, I'm going to let Evan cover some of the details. We came -- started fully commissioning full certificate of occupancy in the first half. We did get all of our first half volumes in terms of what was produced, and then we've been out in the market doing that right into the face of OBBB. So there was a lot of uncertainty around the world about those aspects. So I do expect on a go-forward basis, there will be a much more normal cadence on how we monetize 45X. And then on the other side of 45X direct pay versus selling through banks to third parties, that also is an element that we wanted to make sure we optimize in terms of the prices and the costs that we are trying to get there. Evan, do you want to talk about the timing of when we would expect to see 45X now? Evan Calio: Yes. Look, I mean, I think as I said in my comments, we expect to execute third-party sales in this quarter for all or almost all of the 45X that we generated in 2025. I think on a go-forward basis, yes, we're looking to enter into a quarterly cash settle within some number of days after the quarter with one or several parties for our volumes. I think '26 is -- it's a year that has newer requirements that are different from the past. So it might be a slower to develop year. So I think they will be more midpoint of the year and on. But kind of going forward, I think it will be more traditional of, again, quarterly cash settle on a third-party sale, right, versus direct pay. Sean Milligan: All right. Congratulations on the continued move forward. Evan Calio: Thanks, Sean. Operator: This concludes the question-and-answer session. I would now like to turn the call back over to Jeffrey Spittel for closing remarks. Jeffrey Spittel: Thank you, Shannon. Thanks, everybody, for the interest. We will be back on the road at conferences in New York next week. Please feel free to reach out with additional questions, and thanks for the interest and participation today. This will conclude the call. Operator: This concludes today's conference. Thank you for your participation. You may now disconnect.
Operator: Ladies and gentlemen, thank you for joining us, and welcome to the Third Quarter 2025 LATAM Airlines Group Earnings Conference Call. [Operator Instructions]. Before I turn the call over to management, I'd like to remind you that certain statements in this presentation and during Q&A may relate to future events and expectations and as such, constitute forward-looking statements. Any matters discussed today that are not historical facts, particularly comments regarding the company's future plans, objectives and expected performance or guidance are forward-looking statements. These statements are based on a range of assumptions that LATAM believes are reasonable, but are subject to uncertainties and risks that are discussed in detail in the published 20-F 2025 updated guidance, earnings release, financial statements and related CMF and SEC filings. The company's actual results may differ significantly from those projected or suggested in any forward-looking statements due to a variety of factors, which are discussed in detail in our SEC filings. And if there are any members of the press on the call, please note that for the media, this is a listen-only call. I will now hand the conference over to Ricardo Bottas, Chief Financial Officer. Ricardo, please go ahead. Ricardo Dourado: Hello, everyone, and good morning. Welcome to our third quarter 2025 conference call, and thank you all for joining us today. My name is Ricardo Bottas, and I am the CFO of LATAM Airlines Group. Here with me is Roberto Alvo, our CEO; Andrés del Valle, Corporate Finance Director; and Tori Creighton, Head of Investor Relations. And we will present our highlights and results for the third quarter. I will hand it over to Roberto to share his opening remarks. Once finished, I will present the key operational and financial figures as well as provide other updates. Roberto Alvo Milosawlewitsch: Good morning. Thank you, Ricardo, and thanks to all for being here today. This month, 3 years ago, LATAM emerged from financial restructuring. This period was one of learning, designing and executing. LATAM defined a blueprint that has a collection of essential elements we needed to excel. This blueprint was implemented and is working. The group's network is the most expansive in the region, and our loyalty program is by far the largest and most valued. No one else can connect South America within the region and to the world, reward loyalty and provide choice to customers as LATAM Group can. However, these results are the product of more than a co-branded credit card and a map of routes. At LATAM, we are obsessed with execution. Every day, in every interaction, we strive to be better, to depart on time, standard zero on every flight, to improve on what we do, seek and find cost-saving opportunities for each of our activities, to make sure we deliver what was promised to the customer at every interaction and to provide the care and respect that each one of them deserves as they entrust their journey to LATAM. We have made considerable progress, but are not satisfied. I believe we can do better. Looking forward, we must ensure that we remain disciplined, disciplined in execution and disciplined in controlling costs. At the center of all of this is our people, a group of more than 40,000 employees who care about and love what they do every day. People who believe in what they do and what it represents. They are the engine and the spirit that drives LATAM Group forward, and the most important commitment is to them, making sure that they feel that every day it is worth being part of the LATAM family. As we look into the future, I'm confident that we can continue the journey of improvement and deliver on purpose that we have, which is elevating every single journey. Thank you very much. Now back to Ricardo for a description of how we are achieving profitable growth, improving the quality of our traffic, keeping high customer satisfaction and maintaining our cost under control. Ricardo Dourado: Thank you, Roberto. Please join me on Slide 3. This quarter, LATAM Group continues to show the strength of its strategy, its unmatched network footprint, focus on disciplined operational and commercial execution as well as product improvement. In terms of operations, LATAM Group transported over 22.9 million passengers, reinforcing its role as the leading airline group in South America. Capacity grew by 9.3% year-over-year with healthy load factors of 85.4% on a consolidated basis. The group is seeing consistently high levels of customer satisfaction, increased customer preference, especially in the premium segment and sustained customer loyalty. LATAM translated this operational performance into financial results, driven by an 8.4% increase in passenger unit revenues while keeping unit costs broadly stable. Adjusted operating margin expanded to 18.1%, while adjusted EBITDAR reached $1.15 billion during the quarter, and net income totaling $379 million. During this quarter, LATAM executed its second share repurchase program for a total of $433 million with the company's disciplined approach to capital allocation. During this quarter, LATAM Airlines Group signed a major agreement for an acquisition of up to 74 Embraer E2 aircraft. Moving to the next slide about the fleet and this acquisition and the transaction. The E2 will indeed enhance LATAM Group affiliates' regional connectivity in South America and represent an opportunity for our network to open up to 35 new destinations. They also offer a 30% improvement in fuel efficiency per seat compared to previous generation aircraft, reinforcing the group's commitment to sustainability and cost discipline. In total, LATAM Group will receive 24 E2s with 12 deliveries scheduled for the fourth quarter of 2026 and the remaining 12, in 2027. With this addition, LATAM's order book now exceeds 140 aircraft through 2030, supporting the group's long-term growth and fleet modernization strategy. Initial deliveries are set to begin with LATAM Airlines Brazil, which will be the first to deploy these aircraft in its network. In Brazil, this aircraft will enhance capillarity across the country, enabling LATAM Group to expand into under-penetrated regions and destinations that are currently not served by the group. Over time and subject to market conditions and strategic evaluations, other LATAM affiliates may also incorporate the E2s into their operations. Still on this slide, we expect to receive an additional 8 aircraft on this fourth quarter of 2025. And also, we project to receive additional 44 aircraft next year, including the E2s. Let's move to the following slide, Slide 5. As mentioned earlier, LATAM Group delivered another quarter of strong traffic performance, transporting more than -- almost 23 million passengers with a consolidated load factor of 85.4%. LATAM has been committed to profitable growth at the consolidated level, passenger RASK increased by 8.4% year-over-year in U.S. dollars, a result that reflects the strength of LATAM Group's strategy and execution. A clear example of this is Brazil, where LATAM Airlines Brazil grew capacity by over 12% year-over-year. With this expansion, customer preference remained strong, and the load factor even increased by 2.2 percentage points. During the quarter, the Brazilian affiliate launched 6 new domestic routes, further supporting the strategy to deepen its presence and enhance connectivity in this market. In the Spanish-speaking countries, LATAM Group's affiliates have also improved performance during this quarter with passenger RASK increasing 18% year-over-year. In particular, as compared to 2024, LATAM Airlines Colombia experienced a stable domestic industry capacity, also seeing healthy demand. Demand is in the other Spanish-speaking affiliates domestic markets also remained healthy, except for Chile, where industry traffic figures are stable against last year. However, the focus on delivery execution and a higher premium product offering helped fully offset these effects. Meanwhile, the international segment continued to operate with high load factors, reflecting the relevance of the network and LATAM Group's role as the main connector in the region with a diversified network. Altogether, the unit revenues, even in the context of increased capacity reflect the effectiveness of the group's commercial and customer strategy. It is the result of offering the right product in the right markets while executing with discipline. Looking ahead, LATAM Group continues to focus on maintaining a sustained trajectory of discipline and profitable growth. The group is also focused on reaching the goal of high single-digit consolidated capacity growth next year, compared to 2025, supported by an ongoing focus on efficiency, a relevant fleet delivery schedule and a margin preservation on top of a healthy demand environment. Moving to the next slide, Slide 6, regarding our value proposition and customer experience. LATAM Group remains committed to deliver a superior travel experience and increasing customer preference. During the quarter, the group continued advancing initiatives. The new Lima Lounge was inaugurated at recently opened Jorge Chávez International Airport, one of the group's main hubs. This new space offers a modern and comfortable environment and comes in addition to the signature check-in area that was previously inaugurated at the same terminal, both part of a strategy to elevate the end-to-end experience for premium travelers and LATAM Pass members. Looking ahead, LATAM Group also announced the launch of its new Premium Comfort Class, which will begin rolling out in 2027 on long-haul routes. This product reflects a commitment to offering more choices to our passengers for how they want to fly. The new class will be an additional option other than the existing economy and business class cabins, for passengers seeking more space and personalized service. Finally, LATAM Group was once again recognized by APEX as a Five-Star Global Airline for 2026. This marks the fourth consecutive year the group has received these distinctions based on independent passenger feedback data from over 1 million flights worldwide. It's a testament to the team's dedication and to the impact of the investments being made across the network. In addition, LATAM Cargo Group was named Air Cargo Airline of the Year by Air Cargo News, becoming the only South American carrier to win in any category, further underscoring the group's excellence across all segments of the business. Together, these efforts underscore LATAM Group's dedication to continuous improvement and reinforce its strategic commitment to quality, consistency and the passenger experience, a focus that continues to support more passengers choosing to fly with LATAM and the group's ability to capture premium revenues. Next, let's move to the Slide 7. I will now walk you through the financial results for the third quarter, a period in which LATAM once again reflects a solid execution. Total revenues reached $3.9 billion, an increase of 17.3% year-over-year, supported by growth across both Passenger and Cargo segments. Passenger revenue rose by 18.5% with revenues from premium travelers also showing relevant growth, increasing by more than 15% compared to the same period last year, while Cargo revenues grew by 6.3%. On the cost side, total adjusted expenses ex-fuel increased by 21% year-over-year, driven mainly by increased operations, especially international and also a lower base of comparison due to the one-offs impact in the same period of last year. This increase was partially offset by 4.7% year-over-year decrease in jet fuel costs. That said, on the unit cost front, LATAM upheld its firm commitment to cost efficiency, a key pillar of its strategy. As a result, LATAM delivered an adjusted operating margin of 18.1%, testament to LATAM's operational excellence through profitable growth while also holding its cost control performance and advantage. Again, a nonnegotiable and relevant part of LATAM's strategy. Lastly, net income for the quarter totaled $379 million, up 26% year-over-year, even after $105 million negative nonoperational income statement impact related to the liability management exercise completed in last July, as disclosed to the market before. Net income for the 9 months was $976 million, 38% higher than the same period of last year. Now moving to the Slide 8. As you can see on this slide, LATAM operational performance this quarter is a result of consistent and disciplined execution of the group's strategy over the past several years. Since 2019, LATAM has steadily expanded its adjusted operating margin, rising from 7.1%, to 18.1% in the third quarter of 2025. At the same time, LATAM has maintained tight control of its cost base. Adjusted passenger CASK ex-fuel has been stable between $0.042 and $0.043 on the last 12 months basis, despite inflationary pressures and higher activity. This disciplined approach to cost has enabled LATAM to consistently grow margins while preserving efficiency, in order to continue delivering sustainable and profitable growth going forward. With regard to cash generation, as shown on Slide 9. In the third quarter, LATAM delivered strong adjusted operating cash flow generation, reaching $859 million. Interest payments remaining contained at $52 million, mainly as a result of the debt refinancing executed in 2024, which enabled LATAM's significant reduction of the cost of its non-fleet financial liabilities, which continue to translate into meaningful interest savings and overall cost of capital reduction. After both 2024 and 2025, refinance execution, combined interest payment savings expected for next year amount to $151 million compared to last year. And finally, during the quarter, LATAM executed its second share repurchase program for a total of $433 million. This reflects the group's capital allocation strategy and discipline. Let's move to Slide 10 to discuss LATAM's capital structure. LATAM ended the third quarter with a liquidity level of 25.8%, slightly above the upper end of the financial policy range, the execution of the share repurchase program this quarter brought liquidity more in line with the target levels. LATAM ended the quarter with an adjusted net leverage ratio of 1.5x, aligned with the full year guidance and well below the cap from the financial policy. A strong capital structure is not just a financial metric for LATAM. It's a strategic asset. It gives the group the flexibility to pursue growth where it's most profitable, return capital to shareholders when appropriate and manage the most accretive capital structure. This financial strength, combined with assets and cost advantage set LATAM apart from its peers and remains central to its ability to compete, adapt and lead into the region over the long term. Please join me on Slide 11. Given this solid year-to-date performance, supported by continued customer preference and the disciplined execution of a strategy centered on profitable growth, cost efficiency and financial strength, LATAM has updated its full year 2025 guidance. Consolidated capacity is projected to remain broadly in line with previous estimate with -- while revenues are expected to be higher within a tighter range. In terms of margins, adjusted EBITDAR guidance has also been refined to be between $4 billion and $4.1 billion, close to 9% higher than the previous guidance. The updated range reflects a more constructive outlook now positioned higher than the previous estimate. Adjusted passenger CASK ex-fuel was updated to be between $4.35 and $4.40, mainly due to FX variation in this period. Liquidity was also updated after the execution of the share repurchase program, and we are maintaining the same estimate to be above $4 billion by the end of this year. Mainly considered debt adjusted EBITDAR improvement in the cash generation, the forecasted leverage for year-end is now at 1.4x. And for next year, as I mentioned before, the group is focused on reaching the goal of high single-digit capacity growth compared to 2025, supported by our ongoing dedication to efficiency and margin preservation. Finally, and before we move to the Q&A, I'd like to take a moment to remind you that LATAM will be hosting an Investor Day in New York on December 9, 2025. We invite you also to tune into the live webcast on these events. With that, we now open the line for your questions. Operator: [Operator Instructions] Your first question comes from the line of Guilherme Mendes with JPMorgan. Guilherme Mendes: Congrats on another pretty strong results. My question is on the international front. When compared to Brazil domestic and Spanish-speaking countries, it looks like the past performance was relatively weaker, although still growing on a year-over-year basis. Can you share more details on how international is tracking, maybe on a per-region basis, which other routes have been pressuring the overall results and which are doing relatively better? Roberto Alvo Milosawlewitsch: So we have seen, in general, stable and healthy demand in most of the international segments. I would say that South America to U.S. is a little bit softer than what we used to see in the last few months. And this is, in our view, linked to people probably avoiding going to the U.S. and moving themselves a little bit into other regions. Also the northern part of South America, the regional traffic, which is international flights on the northern part, is a little bit softer as well. But in general, nothing that we have seen that is worrisome or concerning with respect to the level and the quality of the demand. So in that sense, we remain confident on the prospects for the remainder of the year. Guilherme Mendes: Very clear, Roberto. When you say softer into the U.S., is it more leisure related or even corporate related? Roberto Alvo Milosawlewitsch: No. This is more leisure related. Operator: Your next question comes from the line of Mike Linenberg with Deutsche Bank. Michael Linenberg: I have a couple here. I guess, Roberto, can you just update us on this measure in Brazil to potentially force airlines to offer up a free bag? Is that just domestic? Is that domestic and international? And where is that in the legislative process right now? Roberto Alvo Milosawlewitsch: A few weeks ago, a couple of weeks ago, the lower chamber in Brazil passed a law to allow basically passengers to carry a bag without being charged and also select seat without charge on seat that have no distinction in terms of space. This, as the law was passed, was for both domestic and international flights, it affects eventually therefore, domestic and international carriers into Brazil. The law is -- needs to go to the Senate. It has not been presented at the Senate floor at this point in time, and we have no clarity if that would happen and when it will happen. So for the time being, that still has the second step. Ultimately, presidential veto is also something that the Brazilian constitution allows for laws like this. So we will see. Michael Linenberg: The reason I ask is, and you mentioned international, is that -- all right, domestic is one thing, but international, from the perspective, I know at least from the U.S., they may view it as a potential tax or additional cost that's unilateral and therefore, in violation of the bilateral. So I just wonder how they implement it internationally when international carriers have different ways in how they price their product and obviously are protected by the bilateral arrangements between Brazil and those countries. Roberto Alvo Milosawlewitsch: Yes. I completely agree with you, Michael. And of course, LATAM does not support the passing of the law, and we have together with the IATA and ABEAR in Brazil been making very clear and explaining the impact of this potential measure. This is not good clearly for the industry -- airline industry in Brazil and I think -- I believe has the potential of ending up with higher fares for passengers that fly whether into Brazil or outside or coming to Brazil. So I think that at an industry level, we are making a lot of effort in making sure that everybody understands the impact that this has on traffic and on the industry, and we're completely sure that this would not be a positive measure for us all. Michael Linenberg: Great. And then just my second on capital allocation. And this is Roberto, to you or Ricardo, how you think about it longer term? You've had a nice balance. Obviously -- the dividend is statutory. But you pay the dividend. You've been paying down debt. You've also been buying back stock. As we think about the sort of various levers going forward, should we expect to see, say, regular reductions in shares outstanding? Or was that more of just an opportunistic initiative on your part? Roberto Alvo Milosawlewitsch: Thanks, Mike. So first of all, I mean, as we think about capitalization, do remember that the development of the business and how we see and foresee opportunities for growth, is the priority. So that will always take over other potential decisions. At this point in time, we believe we have done a balanced mix of initiatives, and we remain very close to the target that we have in terms of financial policy. So we're content with what we have done during 2025. Going forward, looking forward, I think we will see -- I mean, this is a Board decision. Ultimately, the dividend payout in Chile per law is a shareholders' meeting, a shareholder decision, which will happen in April. But all options for capital allocation and growth investment remain open. And as we progress in the next few months, the company will, for sure, explain to the market how do we continue depending on our results and of course, the situation in the region and the opportunities we may see. Operator: Your next question comes from the line of Gabriel Rezende with Itau BBA. Gabriel Rezende: Congrats on these very strong results. I would like to follow up on your comments regarding the investments and the efforts you have been putting into bringing a more premium experience to the customers. And just trying to understand how relevant it has been so far in terms of your revenue growth as well as your profitability. So if you could maybe provide some color on how relevant these premium revenue are at this point? You mentioned that it has grown by 15% year-on-year. So just trying to understand how much it represents out of the total passenger revenue at this point? And how much could it represent in the future as you bring more efforts into this? Roberto Alvo Milosawlewitsch: Yes. Thanks for the message -- the question. So first, I think it's important to remark what is what we're experiencing. First, yes, premium revenue is growing faster than capacity. And a relevant portion of the improvement that we see in the RASK for Spanish-speaking domestic Brazil and to an extent, international is due to a change of mix where we have a larger proportion and portion of premium revenue coming from there. And that's both corporate and as well, let me call it, high leisure, I don't know if that's a context or the concept in English, revenue that we're seeing. Now this is a function of, in my mind, 2 things. Most importantly, it's impeccable execution and care in every interaction that we made for the customer. Secondly, it's improvements in products, as you probably saw in the presentation, the Lima Lounge, premium economy in the international and other things. But as we have, in a way, decommoditized, if you want, our product, we have focused very much on experience. And that, I think, has brought a willingness to pay that customers probably had that we were simply not exploiting because our product probably was not as good as they were expecting. And now we are, I think, very clearly seeing the impact that this has in our results. Operator: [Operator Instructions] Our next question comes from the line of Felipe Ballevona with Santander. Felipe Ballevona: Can you hear me? Roberto Alvo Milosawlewitsch: Yes, we can. Felipe Ballevona: Great. Awesome. So well, first of all, congrats on the strong results. I have a couple of questions here. First, following actually on the first question of the Q&A. What was the reason behind the growth slowdown in international traffic recorded in October? Is international traffic being dragged down by Colombia? The last couple of data points of the [ IDOCB ] that have showed a slowdown in your international, not only in the domestic as has been the case for the previous months, but also in the international front. And also my second question, if you have any news regarding a potential buyback? Roberto Alvo Milosawlewitsch: Yes. Felipe, so first of all, our international Colombia operation is very small as compared to the total international traffic. We have not seen, in particular, an impact on international travel in and out of Colombia, and that it's very unsubstantial to the size of our traffic, particularly out of Brazil and secondly, Chile and then Peru. No, I guess this is a function, as I explained in the beginning, softer demand into the U.S., particularly on leisure traffic. We believe that this is linked to people probably deciding to go elsewhere and probably spending more time within their countries and to the region. But we don't see this as a fundamental slowdown in demand. It's probably assigned to more external factors than that. So that's the main reason, okay? Having said that, do remember that we expect that our ASK growth for the whole of 2025 is going to be around 10% to 10.5% increase in capacity, which is a significant increase in capacity, and that's a reflection of a good level of demand that we see to operate this. Felipe Ballevona: That's very good color. And do you have any news regarding a potential buyback or... Roberto Alvo Milosawlewitsch: Sorry. Felipe Ballevona: You're fine. Roberto Alvo Milosawlewitsch: As I said before, at this point in time, we are close to the financial policy targets that we have. Going forward, we will see what the Board decides and do remember that the company has a range of alternatives to allocate capital and also be mindful that the first priority will always be growing the business. And after that, any excess that we believe should go back to shareholders, the company has a few tools to decide on how to do it. So rest -- at least, stay tuned, eventually. Operator: Next question comes from the line of Jens Spiess with Morgan Stanley. Jens Spiess: Congrats on the very strong results. Just wanted to know if you could provide any context on next year, how is the -- like the order book -- the booking curve looking like? And also how much do you expect to grow in terms of ASKs next year based on your fleet plan, that would be very helpful. And if you could remind us how many leases do you have expiring next year, I would very much appreciate that. Roberto Alvo Milosawlewitsch: Yes. Jens, so as we explained in the press release and Ricardo mentioned here, we expect high single-digit ASK growth, or that's our goal for 2026. We will provide more detailed guidance on 2026 in a few more weeks. You asked about -- the first part of the question, fleet. And by the way, yes, fleet. So we have on Slide 4 of the presentation, you can see 41 arrivals of A320 family and 7 E2 aircraft, plus 3 wide-bodies. We have relatively few leases. I don't have the correct figure here, the right figure, but we have the option to, of course, extend them if you want to. And our expectation at this point in time is to end up the year with a total fleet of just over 400 aircraft -- around 410. You can see that as well in the press release, okay? And -- sorry, I'm just looking at a note here they're sending me. Yes. And last thing, they just reminded me to make you feel comfortable that we have the fleet we need to grow for what we're expecting next year. So I don't expect -- we don't expect that we would need to make changes in our fleet plan for the capacity we have planned. The first part of the question you asked me, now, remember, is booking curve into the beginning of the year. Very early still, particularly on domestic markets, the percentage of booked seats is very low. But what we're seeing initially for the first couple of months of the year looks in the current trend that we have seen in third quarter and that we expect for the rest of the year. Operator: Your next question comes from the line of Ewald Stark with BICE. Ewald Stark Bittencourt: I want to know if you can provide any color behind what is driving the lower percentage of hedged fuel during this quarter? Especially I would like to focus on, is anything on booking going forward that is driving this lower percentage of hedged fuel, or maybe you're looking something different about forecast of oil? Unknown Executive: Yes, thanks for the question. If you look at the press release, it's nothing that different for what we usually do. You have about a 47% for Q4 of this year and then 33% for Q1. And of course, as soon as we approach the next quarters, we will have, of course, consistent with the policy, an increase the fuel hedge. But I wouldn't say that this is any different than what you have seen in the past. It's a very standard, I think, coverage that we have today for fuel price, nothing that really deviates from the policy. Ewald Stark Bittencourt: Financial statements say that you have a 26% hedge fuel for the next 12 months. Starting from first quarter of 2026, every quarter is below 30%. Unknown Executive: Yes. If you look at the detail on the earnings release, there's more detail here. I think at the financial, that's sort of on a weighted average of what's it going forward. But here, you have the actual percentages covered for every quarter. Again, 47% for Q4, 33% for Q1. So that's a difference you were look at the financials here. Then as this is as of November 14, 2025, it's more updated. I think, of course, the financials, they call for, I think, September 30, but this is -- you have the most updated vision of the current portfolio, as of November 14. Operator: [Operator Instructions] Your next question comes from the line of Guilherme Mendes with JPMorgan. Guilherme Mendes: Regarding the pilot strike in Chile, can you share some potential -- expected impact for the fourth quarter? I understand it should be material, but I just wanted to hear your thoughts on what could we expect from this negotiation. Roberto Alvo Milosawlewitsch: Thank you, Guilherme. At this point in time, we have no clarity of the potential impact. So we will update that if necessary at an appropriate time. Operator: There are no further questions at this time. I will now turn the call back to Ricardo Bottas for closing remarks. Ricardo Dourado: I would like to thank you all to participating in today's call and remind you that we will have our Investor Day again on December 9. So we would love to have all of you participating on that opportunity to get more information from the company and the additional updates. Thank you all, and have a good day. Operator: This concludes today's call. Thank you for attending. You may now disconnect.
Operator: Ladies and gentlemen, welcome to the conference call on third quarter 2025 Results. I am Mathilde, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Juergen Rebel, Head of Investor Relations. Please go ahead. Juergen Rebel: Good morning, everyone. This is Juergen speaking. We welcome you to today's call on third quarter results of fiscal year 2025. Aldo, our CEO, will comment on business and strategy; Rainer, our CFO, will focus on financials. We are referring to the Q3 earnings call presentation that you can find on our website. There, you'll also find further materials such as the full comprehensive IR presentation. Aldo, please let us have your thoughts on Q3. Aldo Kamper: Thank you, Juergen, and good morning also from my side. Overall, I would say a good quarter. Our strategic focus is paying off. We delivered strong cash flow and significant growth in the core portfolio on a like-for-like basis. Profitability was better than previous quarter, also supported by a one-off. We established base savings continue to be ahead of plan, and I'm now on Page 3, looking at the financial performance of the group. Revenues came in at EUR 853 million, above the midpoint of the guidance. We saw an almost double-digit percentage improvement in our semiconductor business. In the Auto Lamps aftermarket business, we have double-digit seasonal upswing. The weaker U.S. dollar cost us EUR 20 million top line compared to the previous quarter. Year-over-year revenues are down a bit with 3%. This is entirely due to the weaker U.S. dollar. Note the $0.07 difference in average euro-U.S. dollar exchange rate, which equals approximately EUR 35 million top line. If we truly look at the like-for-like comparison based on today's core portfolio at constant currencies, we have grown by about 6% year-over-year. This includes the traditional Auto Lamps business. The semiconductor core business, against we measure our growth grew approximately 9% on a comparable basis, a really good result in the current market conditions. It clearly shows that our portfolio choices are paying off. Profitability. Adjusted EBITDA margin improved quarter-over-quarter and year-over-year by almost 1 percentage point to 19.5%. In euro terms, adjusted EBITDA improved by EUR 21 million. Within that number, we have a profit of a bit more than EUR 10 million from the sale of some manufacturing assets in our Singapore production facility. Now quickly on the segments. Page 4, look at the traditional Halogen Lamp business, a classic seasonal upswing. We saw a steep 13% quarter-over-quarter increase in revenues driven by the aftermarket season. The darker months in the Northern Hemisphere make drivers replaced their broken lights in the car more frequently. Nothing particular to report on Specialty Lamps for industrial and entertainment applications. The business remained at a similar level as last quarter with approximately EUR 40 million of revenues. We sold this business segment to show as part of our accelerated deleveraging plan as we communicated last quarter. Closing is expected around end of first quarter '26. Adjusted EBITDA stayed almost flat. Why? If revenues were up almost EUR 25 million, the gross profit fall-through from higher volume was even up by a meaningful reduction of inventories. Now on semis, I'm on Slide 5. First, business unit OS. The sequential increase in Opto semis with 6% revenue improvement, EUR 365 million compared to EUR 344 million in the previous quarter. The increase was mainly driven by automotive, but also by the seasonal peak of the Horticulture business. The upswing could have been higher if it wasn't for the negative impact on the top line of the weaker U.S. dollar. Coming to profitability. Adjusted EBITDA improved by EUR 3 million to EUR 82 million. At first glance, you might have expected a higher fall-through from EUR 20 million more top line. However, the increase was balanced also here by inventory reductions and the absence of onetime effects that were supported in Q2, such as [ ease of ] funding catch-up. In the end, adjusted EBITDA margin stayed almost flat at 22.6%. Now Sensors and ASICS on Slide 6. An encouraging seasonal jump in revenues by 13% to EUR 271 million. Consumer products were in high demand and our business was okay. Products, we basically discontinued, still saw some further orders that live longer as often. Little changes in demand for industrial and medical products. Year-over-year, business grew by 2%, mainly driven by the new sensor products, which are more than compensating for the revenue loss from the phased-out non-core portfolio and the top line impact from the weaker U.S. dollar. Adjusted EBITDA jumped to EUR 64 million. However, I mentioned earlier that more EUR 10 million win for profits from selling manufacturing equipment was included there. Now looking at the semi end market in summary, and we are on Slide 7 here. Sequentially, 9% up and year-over-year, 2% down. If we exclude the noncore portfolio that we discontinued last year, the semi core business grew by 9% and year-on-year at constant currencies, well in line with the semiconductor growth model and higher than last quarter. First, automotive. LED inventory correction has ended, but no significant restocking in sight. We even hear from customers who want to reduce their inventory even further. Book-to-bill hovered around 1 throughout the quarter. Nevertheless, we saw a slight sequential increase in revenue of 4%. If the uncertainty in the supply chain persists, we see a lot of short-term ordering, which is now often below normal lead times. Fulfillment channel inventories went further down. We are now between 7 and 8 weeks in the old days, 8 to 10 weeks were considered healthy and normal. Second, Industrial and Medical, in line with the slow recovery of the overall market, we saw a sequential improvement of 2%. However, we're still below last year's level. And ignoring the weaker U.S. dollar, maybe roughly at the same level. As always, we have to look at the verticals individually. Horticulture revenues had a seasonal peak. Professional lighting, unchanged. Demand for initial automation is improving only gradually. Same is true for medical. If we look at the channel, same picture as last quarter, Europe and U.S., relatively stronger than China. Third, Consumer, a steep seasonal increase of 22% compared to Q2. Our main business is sensors for smartphones and wearables. Year-over-year, we see the impact of the weaker USD, a slight decline is entirely due to FX. Business-wise, our new sensor product more than compensate for the phase out noncore products. Now let's talk about future business. I'm on Slide 8. Design wins are underpinning our midterm growth model incentives. Tracks the market continued unabated in the third quarter. We are well on track to reaching again accumulated lifetime value of EUR 5 billion of new business for the full calendar year. We landed about 800 products in the September quarter across all verticals. This pushes the total to already EUR 4 billion for the first 9 months. A few wins that we are very proud of are sticking out. First, in automotive. With our industry-leading intelligent RGB interior lighting solutions, we secured another design win at a leading Chinese OEM. And on top of that, also a large design win for a prestigious car platform at the European premium OEM. Second consumer. Our spectral and proximity sensors are the best you can get. This once again convinced leading customers the design wins are worth a couple of hundred million euros. With that, let us look at some of our recent advances when it comes to differentiating technology platforms. Now on Slide 9. We do spend a lot of R&D money as we continue to believe in exciting growth opportunities. One part of our R&D is dedicated to mastering the cost pressure in more established technologies by creating cost performance optimized platforms. The other part of R&D is focused on differentiating technology, especially for new applications that might see a growth inflection in the future. We're also making sure that our customers benefit from an appropriate IP safety for those innovations. For this, we signed a comprehensive cross-license agreement with Nichia, covering thousands of patents, protected innovations in LED and laser technologies. The new agreement also covers sophisticated LED packages and also includes metric headlamps as an example. As such, we are the right partner for our customers, holding a truly unique IP position in the industry. On Slide 9, you get an impression of our leadership in further emitter technologies that are used in a multitude of applications. We're speaking of AlGaAs material systems that provides LED and laser light between 808 and 1,130 nanometers, just beyond what a human eye can see, the so-called near-infrared. Our LEDs boasts industry-leading wall-plug efficiency and red glow suppression. Our [ laser design ] is post industry-leading efficiency and optical output power, together with high-quality, cost-effective standard packages, these components are ideally suited for a multitude of applications to deliver already today a revenue contribution in the triple-digit million territory, see the infrared LEDs in the car for incumbent sensing and consumer applications or in drones among many others. The lasers are fairly established in material treatment and LiDAR with these properties also making my dealer suited for future defense applications such as drone defense or even for more visionary applications 1 day like nuclear fusion, laser-based nuclear fusion, a technology that could harness the energy generation process of our sun. We think there's much more to come here on this technology platform. Now let's switch to the center side of things on Slide 10. We recently introduced the industry leading to dimensional direct Time-of-Flight sensor platform. Why direct? This sensor measures the time of [ photon transfer ] from the optic come back and calculate the distance. Pretty fancy. I'm very proud of our engineers who delivered industry-leading sensors that featured twice the frame rate at the same resolution as competitor devices or twice the resolution at the same frame rate whatever you need in your application. You can use this performance for gesture and object recognition, but also for 3D distant measurement. It also enables edge AI sensing applications, for example, smartphones. You will see the principle in lower left when it images enhanced with the 3D dimensional information from the sensor, we can place objects such as furniture in an environment completely virtually. Just to give you an example here. We see applications for the sensor technology, not only in smartphones, but also in building automation, home appliances, robot drones, consumer electronics, you name it. Completing our technology product toward this quarter. I'm on Slide 11 now. We have the leading spectral sensing platform in the industry. Here you see on our latest spec model to Magic 8, a high-end premium smartphone with 4 cameras in the world facing side. Our sensors allow for [ eye flicker ] protection and professional grade color accuracy for an enhanced user experience. With this, let us move to bottom line profits. We established the base continues to be a great success as it has been so instrumental in mastering many of the headwinds to our bottom line, especially when it comes to gold price this year. We're on Slide 12 here. By the end of September, we have pocketed approximately EUR 185 million of implemented run rate savings. Another EUR 25 million during last quarter alone. Now this time for more details on the financials. And Rainer, please tell us about the latest progress. Rainer Irle: Thank you, Aldo. Hello, everyone, from my side as well. Let us look at the balance sheet first. With the private placement of an additional EUR 500 million of U.S. dollar in euro senior notes, we increased our cash on hand position to EUR 979 million end of September and end of October were even above EUR 1 billion. After the tap in July, we have approximately EUR 651 million equivalent of the U.S. dollar bond and EUR 1.030 billion with Eurobond, both as during March 29. Last quarter, we got some questions about why we tapped that at a particular moment. If you look at the leveraged finance market in the last couple of weeks in terms that our timing was pretty good, momentarily conditions are certainly less favorable. No news on the Malaysia sale and leaseback transaction yet. We continue to talk to interested parties, but we are not yet on the final approach. The value stood almost unchanged at EUR 422 million end of September. This brings us to an almost unchanged net debt position of EUR 2 billion compared to end of June. Having just mentioned Basel leaseback, we certainly continue full steam in negotiating the indicated asset disposals on top of the sale of the Entertainment and Specialty Lamps that we announced in July. To venture realize proceeds well above EUR 500 million. We are fully on track. Minority shares with the value of only EUR 11 million were tender during the summer months. Consequently, the outstanding minority put options stood at EUR 570 million, 12% outstanding at the end of Q3. Taking cash, the revolver and bilateral lines into account, our available liquidity significantly increased to approximately EUR 1.6 billion. We are prepared for all eventualities any liquidity concerns in the market within of the past. And switching to Slide 14, cash flows. Strong improvement in the third quarter operating cash flow. We recorded EUR 88 million. And that's despite us paying the coupon on the high-yield bonds, which, as you know, is always due in Q1 and Q3. So we paid that in Q3, but we also managed inventories well and make sure we are collecting money from litigation and subsidies. Last year in Q3, we had the customer prepayment of approximately EUR 220 million became as a onetime positive at that time. CapEx base in check, EUR 48 million in the third quarter for the full year, we will land between 6% and 7% of revenues, well below our long-term average ratio of 8%. In total, we finished the quarter with EUR 43 million positive free cash flow. This brings us year-to-date to breakeven in free cash flow. We exclude the customer prepayment last year, Q3 was the best quarter in a long time, though Q4 is expected to be better with lower interest payments and counting on the promise money from the Austrian government under the European Chips Act. We switch to Slide 15, net earnings and earnings per share. On the left, you find adjusted figures. The adjusted net result improved in line with EBITDA to EUR 27 million in the third quarter. Adjusted EPS developed accordingly. The net financing result came in with EUR 59 million. Income tax stood at just EUR 5 million. Following the rule of thumb that there's always EUR 50 million, EUR 60 million adjustments per quarter due to transformation cost depreciation of PPA and share-based compensation, we ended up with minus EUR 28 million net results according to IFRS. Consequently, IFRS earnings per share also came in negative EUR 0.28. That conclude my remarks. And with that, I would like to hand back to Aldo for the summary and outlook. Aldo Kamper: Thanks, Rainer. And now I'm on Slide 16, let me summarize the third quarter results again. Looking at the business, we delivered for revenues above the midpoint and profitability at the midpoint of the guidance. 9% growth in the core semi business year-over-year on a comparable basis, well in line with our midterm target model. Execution of resemblance based program is ahead of plan now with another EUR 85 million run rate savings implemented. And we are securing future semiconductor business with an abated design win streak, now EUR 4 billion already in the first 9 months of this year. Looking at the leveraging plan, everything well on track without being able to go to further detail right now. R&D investments, I've presented to you an example of our relentless efforts to find future growth opportunities by investing in differentiated technology with great potential. Today, we talked about infrared emitter and to 2 dimensional Time-of-Flight sensors. With that, let us look at the right-hand side of the slide, the outlook for the fourth quarter. We expect revenues to come in between EUR 790 million and EUR 890 million at an exchange rate of 1.16. Compared to the beginning of the year, the weaker U.S. dollar cost us a middle double-digit million figure in top line. Automotive lamps will see its beacon annual lighting season. For semis altogether, we expect a small seasonal decline. Industrial medical might be kind of stable, but it sends a lot of uncertainty in the automotive market, maybe flattish at best, where I think consumer, the smartphone season is cooling a bit logically. We expect adjusted EBITDA margin to come in at 17.5%, plus or minus 1.5 percentage points, in absent stable compared to Q3. If you back out the win for profit from the selling of manufacturing assets in Singapore. Looking at cash flow. With easily 0 and keeping our promise for the full year, we expect free cash flow of more than EUR 100 million in the fourth quarter, certainly also driven by the expected inflows from the Chips Act. With this, I conclude my remarks, and we're now ready for your questions. Operator: [Operator Instructions] The first question comes from the line of Sébastien Sztabowicz from Kepler Cheuvreux. Sébastien Sztabowicz: The first 1 is on the automotive market. So do you see the demand building up, it seems that you are coming to the end of the inventory correction. But I'm just curious about the trajectory of growth moving into the next few quarters? And in the short term, have you seen any specific downside to demand linked to next turmoil or is not something that is affecting the global car production volume for your demand? And the second question is on the synergies and the cost saving program. You already reached EUR 185 million at the end of Q3, which is well above the target for '25 and you are coming closer to what you expect for 2026. Do you plan to accelerate a little bit more further the cost-cutting action or you will stick to EUR 225 million for next year and then are you going to stop cutting the cost base? Aldo Kamper: Yes. Thanks, Sébastien for those questions. Yes, on the automotive side, I would say inventory situation is okay. We do see that there is a lot of short-term order behavior. And I do also link that partly to the Nexperia topic, just our carmakers also have to be very agile in their production schedules and what they build and when they build it does vary a bit. So I would expect this quarter and next quarter to be impacted a bit by that. But overall, vehicle build volumes globally are actually holding up quite well. And here, this is also important that we have a good position in China. The Chinese market is doing -- is growing quite nicely, I have to say. And Europe and the U.S. are struggling a bit. But given our global exposure, we are able to benefit out. So I would say, overall, the story hasn't really changed. We still see more content per vehicle globally that we benefit from a fairly stable vehicle build volume currently and not for next year. At the same time, also the usual price pressure that eat up a bit. And then, of course, FX that also goes against us. But yes, underlying demand, I would say, is a principal okay with some short-term hiccups as explained. On reestablished base, yes, we're very happy that we are making very good progress, EUR 185 million already. So I would assume that we can get to the EUR 225 million goal also significantly ahead of plan, and we are thinking about how to extend this program after that. But we, at the moment, mainly focused on bringing in the savings as quickly as possible of the measure that we've already defined. Operator: The next question comes from the line of Harry Blaiklock from UBS. Harry Blaiklock: First is just on the consumer business. I know you've had success at 1 of your big consumer customers in terms of getting a socket rolled out across the whole kind of smartphone portfolio. And historically, you've spoken about potentially getting further socket wins in that business. I was wondering whether you could just provide an update on that? And then my second question is just on whether there's any update you can give us in terms of progress on the further asset disposals for generating over EUR 500 million? Aldo Kamper: Sure, Harry. Thanks for the question. So yes, at the various cellphone customers, we are making good progress and are winning new sockets. And I must say that it goes across both Android and non-Android space in a very steady and good manner, I must say, without calling out 1 specific socket, but I must say the engagement across the customer base is very strong and we continue to see good growth potential in this space with our technology. On the asset disposals, yes, it's hard to comment on that in detail, but I can say we are very active in the process. And the plan still stands. We will deliver significantly more than EUR 500 million of disposals proceeds. As we have communicated, the first step, EUR 100 million on the lamp business, on the entertainment lamp business is in execution. We are progressing well towards closing, probably by the end of Q1 next year. And on a second bigger step, we are making a good progress, and we'll share that, of course, as soon as we can with all of you. Operator: [Operator Instructions] We now have a question from the line of Reto Huber from Research Partners. Reto Huber: Yes. Thank you very much for your very detailed reporting. Now I was wondering, the adjusted EBITDA maybe I missed it, that includes the gain from sales of assets, if I understood this correctly. Have you disclosed that number somewhere? And how much is the one-off gain? And then secondly, what is the reduction in year-over-year sales due to disposals? Rainer Irle: Yes the adjusted EBITDA had a benefit from that asset sale of roughly EUR 10 million, a bit north of EUR 10 million. That's obviously a onetime impact. And yes, if you look at the year-over-year impact from asset disposals from portfolio, I would say that that's probably EUR 30 million. Operator: Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Juergen Rebel for any closing remarks. Juergen Rebel: Thanks very much for the interest. We had a lot of people who dialed in. If you have any further questions, don't hesitate to reach out to us. And we're looking forward to receiving your feedback. Thank you. Bye. Aldo Kamper: Bye-bye. Operator: Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.
Toby Courtauld: Amazingly, we're a bit early. We could start, Rich? Yes. Okay. Well, in which case, welcome, everybody. Thank you very much for joining us for our interim results presentation. It's great to see you all, and we really appreciate the time that you give us. So thank you for coming along. Now, first of all, I'm going to start by summarizing some of the key messages that we'll be giving you over the next 30 or so minutes. And essentially, we have carried on where we left off at the year-end, successfully executing on our growth strategy. You'll hear about our strong operational performance so far this year, delivering some excellent leasing, well ahead of target and leading us to reiterate our rental value growth guidance. We've made further accretive acquisitions and significant sales ahead of book value, and our developers have created more premium spaces, timed to deliver into a market that is starved of such quality, meaning that we are well set to deliver both strong income and value growth. So to help us tell this story, we have a full agenda as ever for you this morning. I'll start with a reminder of how we're delivering on our very clear strategy before giving you an update on our market opportunity. I'll then run through our successful 6 months of acquisitions, sales and developments before Nick looks at our exciting fully managed growth and our results. And I'll then wrap up with our outlook before opening the floor to you for Q&A. As ever, we have the full executive committee team here to help answer any questions you have. Plus, we also have our newly promoted Rebecca Bradley as Customer Experience Director; and Simon Rowley, as Flex Workspaces Director, and congratulations to them on their appointment. But before we get into all of that, first of all, can I just say as this is probably Nick's last session before past is new. I just wanted to pay tribute to him, to thank him for his exemplary leadership across multiple facets of life at GPE. He's been a great partner to me and I know to many of you and to all of our colleagues at GPE over the past 14 years. And I know you will join me in wishing him well. Nick, thank you. So let's start then with our strategy. And to do so, I want to remind you of our investment case, essentially the 6 fundamental pillars upon which our strategy is built, and you can see them here. And in approaching each, it's always been about doing what we said we would do. First, prime central London. It's the largest city economy in Europe, it's outperforming the U.K. overall, and it has decent forecast jobs growth. And so we have been and will continue to be focused on 100% prime locations only. Second, we create and manage premium luxury offices across our HQ and our Flex products. It's where the richest theme of customer demand exists and our strong leasing and rents rising supports our position with space under offer today materially ahead of ERV. And as I'll show you later, even after substantial growth, they're still affordable, especially given the price inelastic nature of many premium customers. Third, contracyclical capital allocation. You'll recognize the chart at the top raising capital, the green circles and buying when markets are cheap, as was the case in 2009 through '13 and again last year, developing into the inevitable supply crunch before selling completed business plans as markets recover and then returning excess capital to shareholders, shown by the pink circles. We bought well, GBP 390 million, including CapEx since our rights issue last year. We're developing some of the best space in town covering 36% of our book, and we have rotated towards sales, as we said we would, more than GBP 290 million sold so far this year, 1.7% above book value and including 1 Newman Street, the largest single asset sale in the West End year-to-date. Fourth, driving innovation, leading the market in the creation of sustainable spaces and in our customer experience offer. We've delivered a world first in our circular economy activities at 30 Duke Street and our award-winning CX team is helping grow our unique Flex offer towards our 1 million square foot target, and all of this activity always with a strong balance sheet and within an LTV range of 10% to 35%. So far this year, we've delivered a record financing, maintaining high liquidity and have kept LTV low at 28%. And sixth, strong EPS and NTA growth, and we're on target to deliver a 10% plus return on equity over the medium term with more than 3x earnings per share growth. So then, with a strong strategy and supportive fundamentals, we've had another successful period of delivering on our promises. So let's then have a quick look at our half year results and our outperformance despite the challenging U.K. economic and political backdrop. Now, as you can see on the chart on the right, our excellent leasing continues, GBP 37.6 million in 6 months, the same as in the whole of last year, 7% ahead of ERV, leasing faster than underwrite and with strong appeal to AI-led customers now up to 23% of fully managed spaces. And we have a further GBP 10.3 million under offer today, a very strong 31% ahead of ERV. Our rental values were up 2.6%, with prime offices up 3.3%, bringing the total to 6.8% over the last 12 months. Our vacancy rate remains within our target range at 6.9%. Our customer retention rate remains high at 76%, well ahead of target, and we've made an attractive acquisition at a discount and sold at a premium, more on these deals later. Now, all of this activity has helped us deliver healthy financial results for the period, pro forma rent roll up 29% with our average office rents up almost 10% over the last 12 months. Our valuation was up 1.5% over the first half with developments up 6.1%, delivering NTA growth of 2% and earnings growth of almost 85%, still with low LTV at 28%. And as we think about what next, we have created a fantastic platform for further growth. Income growth of some 64% by FY '27 or more than 140% in the medium term, led by Flex. Big development surpluses of circa GBP 300 million to come with potential for upside from there. We'll buy more, we'll sell more and all supported by a London economy that continues to deliver GDP growth ahead of the U.K. overall. So significant growth to come. Now, talking of London, let's have a look at our markets. And in short, we expect supportive leasing conditions to continue with best rents to rise further despite the challenging macro backdrop. Now, why do we think this? In short, because supply and demand conditions in London are both supportive and much stronger than the U.K. picture overall. First, demand for space is strong, driven by jobs growth. As you can see in the blue bars on the right, today, there are 500,000 more jobs in London than there were at the time of the Brexit vote in 2016. Oxford Economics expect the number to continue rising by some 200,000 between now and 2030, equating to roughly 20 million square feet of new demand. Second, take-up remains robust with 5.1 million square feet signed in half 1, ahead of the 10-year average. And third, active demand, that's companies looking for space right now, is still way ahead of the long run average, dominated by banking, finance and digital sectors with the latter responsible for some 40% of U.K. GDP growth with AI-led businesses creating jobs in London today. And history shows us that 2/3 of them will only lease prime space. Plus, contrary to many commentators' perception, way more companies today are looking to expand their space take than contracted, 55% versus 14%. Plus, these companies are going to struggle to find that space. They will run into a supply drop that is extreme and shows no signs of abating anytime soon. Bottom left, we've updated our forecasts, the deliveries shown by the purple bars are very low. And we know that new starts are at lows not seen since 2010. And we think that commentators continue to overestimate deliveries and CBRE's forecast, as shown here by the pink diamonds. Now, either way, if you divide the long-run average take-up of 4.6 million feet per annum into the amount being delivered, we think, we will need to build 84% more every year than is currently planned to meet this demand. That's as higher shortfall as we can remember. And it's not as though customers have much choice from existing space. The current Grade A vacancy rate in the core West End is only 0.3%. And so as a result, we think further rental growth is coming, focused on prime spaces and continuing the theme of the chart bottom right, highlighting the very clear bifurcation between the best and the rest that we have seen since 2023. And remember, overall, rents in London remain affordable. In both the city and the West End, they are still only 5% to 8% of the average London business's salary cost. So conditions then that most definitely play to our strengths with our 100% core prime locations, 94% near in Elizabeth line station. So then, turning to our investment markets, and we think that there is good evidence to back up our view of 6 months ago that they are now recovering, albeit slowly. Capital values are rising, up 6% in nominal terms since our capital raise last year, shown on the right, driven by rental growth and tight investment supply. Prime yields shown bottom left, are now either stable or mildly falling. Investment volumes are also up by 63% in H1 '25 compared to last year, and many more larger lots are now trading, as you can see, bottom right and the green bars with 19 deals of over GBP 100 million already traded so far in '25, up from 11 last year with a further 8 currently under offer. Plus, institutions are buying again, accounting for only 2 of the larger deals done last year, but 10 so far this year, or more than 50%. And with equity demand up since May to GBP 23.5 billion, the multiple of demand to supply at 4.8x remains steady and relatively supportive to pricing. And so we'll continue using these improving conditions to take more selective acquisitions and sales, crystallizing surpluses, and more on this in a minute. So to sum up then with our market outlook, which supports strongly our strategy, the rents, whilst business confidence has weakened since May, healthy demand and a dearth of prime supply has helped us deliver rental value growth in our forecast range that we set out at our finals, as highlighted at the bottom, and so we maintain our expectations for this year overall of growth between 4% and 7%, driven by prime offices, up 6% to 10%. Looking at yields, whilst the political backdrop has probably weakened since May, we think improvements in investor confidence and likely lower interest rates could push prime yields in further, especially where rental growth is a real prospect. So given that, let's turn then and look at our investing and developing activities so far this year. And you'll remember this slide from May, and it shows our successful deployment of the capital that we raised last year. We've added to the 4 deals we told you about back then with the purchase of The Gable, shown on the far right. So that's 5 opportunities acquired since May '24, all in line with our disciplined criteria, all in the West End for a total of GBP 180 million or GBP 390 million, including CapEx and at only GBP 770 per foot and a whopping 57% discount to replacement cost. Three of our fully managed conversions, 2 offer major HQ repositioning and each with attractive stabilized yields and ungeared IRRs. From here, more acquisitions, we have 2 deals in negotiation or under offer, all in the West End and more sales to build on the GBP 290 million completed so far this year with a further GBP 150 million to GBP 200 million in the near term, and GBP 650 million to GBP 700 million identified for the medium term. So plenty of opportunity with more to come. So turning then to look at some of the detail and starting with the acquisition of The Gable, shown in yellow on the map. And it sits in an area of London we know inside out and next to The Courtyard, which we bought last year. We paid GBP 18 million, or only GBP 409 a foot, some 77% beneath replacement cost and with a current running yield of 6.4% until July '26. We have 2 possible business plans here. First, a conversion to Flex. We're in design and talking to the planners, and the economics are attractive with a near 7% yield, but this does rely on vacant possession. And if the government-based customer renews their lease, we'll maintain our low-risk running yield of at least 6.4% and probably hold for a future Flex conversion. Now, since we saw you last, we've also sold our completed and let development 1 Newman Street to a U.K. institution shown at the bottom of the map. We received GBP 250 million, priced off a 4.48% yield, more than GBP 2,000 a foot and 1.8% ahead of book value. So a good sale of this completed business plan and showing both there is liquidity at scale and strong prices for the best assets and reaffirming our long-held commitment to actively recycling capital into the next opportunities for us to drive growth. So talking of growth, let's have a look then at our development program, and taken together, we now have 11 schemes with 3 on-site HQ projects, already 71% pre-let, and 3 further Flex schemes on site. Across our 4 pipeline HQ schemes, we achieved 2 new planning consents in the past few months. And with The Gable purchased, we now have more than 1 million square feet in the program covering 36% of our book by area and delivering into the deep supply shortage that I referenced earlier. So looking then at our On-site HQ schemes, progress has indeed been good. At 2 AS, we're on time to finish in Q1 next year, although the surplus to come has reduced as the valuer has adjusted the cap rate up by 15 basis points. At 30 Duke Street, we signed our pre-let with CD&R, 6.5% ahead of ERV and nearly 12% ahead of the underwrite. As a result, we've captured some significant surplus, but there's more to come as we deliver our expected profit on cost of almost 40%. At Minerva, shown on bottom left, we are on time to finish in Q1 '27, and although costs are up since May, reducing the forecast profit to circa 15%, we are under offer on about 40% of the space at a substantial premium to ERV, which would drive our returns materially higher. Taken together, total area is up 66%. ERV is 174% higher, 99% of the CapEx to come is fixed, and we have GBP 65 million of surplus to come of current rents and current yields. They are all prime with exemplary sustainability credentials and have strong pre-letting potential for the remainder with, therefore, healthy upside to capture. For the next phase of our HQ program, we have 4 fantastic schemes, each timed to deliver into the supply drought with 3 in the West End, next to the Elizabeth line, and 1 next to London Bridge Station. At Soho Square, we're starting imminently, and strip out has begun. At Whittington, we've just received consent for our rooftop pavilion, and we're on site with proprietary works for this major refurbishment. We've also finally achieved planning at St. Thomas Yard on the South Bank for an exceptional 184,000 square foot park refurb, part newbuild project, but will be significantly more profitable than our original tower proposals, and we'll be starting here in Q3 next year. And finally, back in the West End, our Chapel Place project is in design with planning discussions ongoing for a submission next summer. So, big area and ERV gains and targeting a healthy minimum profit level all next to major transport hubs and all with strong upside potential. Now, of course, we also have multiple growth opportunities across the rest of our portfolio, too. You'll remember this portfolio stack. I've talked about our HQ developments at the top, and in the middle, sits our active portfolio management assets, representing 50% of the book, and in many ways, the engine room of the business. They are full of opportunity for us to grow rents and values, for example, on-floor refurbishments and their subsequent leasing to generate some GBP 47 million of income, capturing reversions of almost GBP 14 million, restructuring and regearing our interests and prepping assets for major repositioning. And this presents us with real upside. Their valuation is undemanding at just over GBP 1,000 a foot, but with limited CapEx needed. And all of them are in prime locations. And, of course, they include our Flex assets covering some 29% of our total book and where the growth potential is significant, as you'll hear from Nick in a minute. And shown in yellow is the stabilized proportion of the portfolio, where we will rotate out of completed business plans at high capital values per foot, potentially releasing more than GBP 800 million of capital to employ for much higher returns towards the top of the stack. So lots then to do for us as we execute our plan to deliver the substantial growth available to us, on which topic and probably for the last time over to Nick to dig into our Flex options. Nick Sanderson: Thank you, Toby. Good morning, everyone. I certainly didn't need these when I started 14 years ago, nor was I talking about our unique and well-established fully managed growth strategy, where we are successfully delivering premium hassle-free spaces for our customers. Our leasing volumes continue to grow with more than a deal a week over the last 12 months, representing nearly 90% of all our sub-5,000 square foot office lettings. Rents are growing strongly, too, with these deals securing rents of GBP 37 million, and as shown in purple, regularly achieving more than GBP 250 a foot. As you can see top right, this is driving outsized performance, well ahead of our targets. We're generating strong absolute returns with an average yield on cost of 6.5% and service margin of 35%. And relative to ready to fit, we delivered a 103% rent beat and a 61% 10-year cash flow beat, and we've secured good lease duration, too, at just under 3 years. Our fully managed spaces are today generating GBP 50 million of annualized rent, and we're currently managing GBP 25 million of OpEx and other costs across the categories shown in the green bar. So with a gross to net of 50%, our annualized NOI is GBP 25 million or GBP 107 a foot. Once we factor in CapEx, along with fully managed specific corporate overheads, this results in an annualized net cash return, averaging GBP 80 a foot or 40% higher than the ready-to-fit net rent. So much higher net cash returns than on a traditional basis, and the customer base dominated by corporates, not SMEs. Our retention rate is strong at 75%, well ahead of our 50% underwrite, as our award-winning customer experience team delivers outstanding customer satisfaction. The most common driver for customer nonrenewal is needing more space than we can currently provide, as we experienced with our largest departure to date, a fast-growing unicorn status AI business, who we'd already moved twice within our portfolio. Pleasingly, we were able to relet their space within a month at a higher passing rent to Vanta, another high-growth company, with AI-led businesses now representing 23% of our fully managed customers. And our recently completed schemes are leasing quickly, too. In the heart of Soho, Wardour Street is 100% let within 2 months of launch, including 2 pre-let floors. We've secured average rents per foot of GBP 279 with more than 1/4 of the space let above GBP 300 together, driving a valuation uplift of 10% in the half. Our customers include those we've relocated from adjacent GPE fully managed space, an occupier of a GPE developed HQ building on Broadwick Street as well as a new customer who decided to double their space take within a month of moving in. And over at Piccadilly, which launched last month, 35% of the space is already let or under offer at an average rent of GBP 296 a foot, although we're breaking through GBP 400 on a smaller space. So with an 11% beat to ERV and healthy interest in the balance of the building, the prospects look strong. So, having more than tripled NOI over the last 2 years and our leasing velocity ahead of target, there's plenty more growth to come from today's GBP 25 million. We'll generate GBP 7 million of additional NOI, as we finish leasing up the recent completions. Our 3 on-site schemes, all in the West End, will deliver a further GBP 12 million with our pipeline schemes expected to add another GBP 15 million, taking our fully managed NOI to GBP 59 million, so an organic growth uplift of 2.4x. And as we execute more acquisitions, total NOI would increase to around GBP 90 million if we grow Flex of 1 million square feet. And with more than GBP 19 million of additional service profit, shown in blue, we'll be creating additional value of more than GBP 200 million or more than GBP 200 per foot. So lots more income and value growth to come on top of the strong outperformance we're already delivering with fully managed ERV growth and valuation growth of 11% over the last 12 months. Now a few comments on our overall performance in the half year. We delivered like-for-like value growth of 1.5%, as the best continues to outperform and EPRA NTA rose 2% to 504p per share. As expected and in line with consensus, EPRA EPS increased 70% to 3.9p, and we're paying an interim dividend of 2.9p. Our consistent financial strength saw EPRA LTV falling to 28.2%, and available liquidity rising to more than GBP 450 million, as we transition to a net seller and secured our largest ever bank facility. Overall, we generated positive TAR of 3% and 7.5%, respectively, over the last 6 and 12 months, delivering prime spaces against the backdrop of ERV growth with more to come as we continue to execute our growth strategy. Our opportunity-rich GBP 3.1 billion portfolio is 83% in offices, where we experienced the strongest value growth of 1.8% and ERV growth of 2.7%, with retail ERVs up 1.9% in the half year and fully managed rents up 3.5%. And with an overall valuation uplift of 1.5%, developments delivered the strongest performance, up 6.1%, with GBP 30 million of surpluses captured in the half year valuation. Yields were broadly stable with our portfolio equivalent yield today at 5.5% and our reversionary yield at 6.7%, higher still at 8.7% on a share price implied basis. Finally, the best continues to relatively outperform at both an ERV growth level in purple and by evaluation shown in green. In particular, our West End properties, representing nearly 3/4 of the portfolio, again, outperformed with capital growth of 2.9%. And as we continue to allocate capital to drive value growth, our almost GBP 700 million CapEx program is predominantly in the West End, combining GBP 290 million to complete our 6 on-site schemes shown in black with approximately GBP 400 million for pipeline schemes in gray. You'll find the usual scheme-by-scheme detail in the appendices. With a total GDV of GBP 1.8 billion, we'll deliver further surpluses of more than GBP 300 million based on conservative 10% cumulative rental growth. And you can see by the solid line, more than GBP 125 million should come through within the next 18 months based on profit release at scheme PC although our pre-letting activities typically accelerate these, plus there's serious upside potential with further rental growth and some mild prime yield compression taking the surpluses to more than GBP 500 million or 130p per share. On the right, our investing and leasing activities will clearly change the portfolio composition, with stabilized properties shown in yellow, growing from 19% to 55%, all else equal. However, our recycling activities will evolve the portfolio mix further with prospective sales of around GBP 800 million in the next few years, meaning active portfolio management properties, shown in blue, will, again, dominate with Flex also representing around 40% of the office portfolio. In reality, our sales will likely be higher still, given our disciplined capital management, as they were in the last cycle with more than GBP 3 billion of disposals. Plus, I imagine there'll be some acquisitions, too, to replenish the GPE development hopper. Now, we'll also be driving more income growth. Like-for-like rental income was up 5% over the last 12 months, whilst rent roll was up almost 30%, standing at the GBP 127 million today following the sale of Newman Street. Over the next 18 months, this builds by more than GBP 80 million or 64% and rises to around GBP 30 million in the medium term, an uplift of 142%, including the market rental growth we expect to capture. Of course, some of this uplift will be tempered through sales of stabilized properties, but there's still lots of growth to go for, and we reiterate our guidance for a threefold increase in EPRA EPS over the medium term. Nearer term, we expect EPRA EPS to roughly double to around 10p by FY '27, as we lease up our on-site development and refurb program with more growth to come as we deliver our pipeline and capture market rental growth. Once we factor in finance and other costs to deliver this growth, along with our likely earnings accretive sales, we anticipate annual EPRA EPS of 15 to 20p in around 4 years' time. As a result, we expect a stable dividend for FY '26 with potential DPS growth thereafter. Whilst continuing to invest for growth, we've maintained our financial strength and capacity, including through proactive management of our debt profile. We've recently issued a new 5-year GBP 525 million ESG-linked RCF, allowing us to redeem an early '27 maturing facility and repay a higher-margin term loan. We've also extended the maturity of our smaller RCF, and Moody's reaffirmed our Baa2 credit rating. When combined with our successful sales activity, LTV today is 28%, as we continue to operate within our 10% to 35% through the cycle target range. Interest cover is strong at 15x, with more than GBP 450 million of liquidity, and we have extended our average debt maturity to almost 6 years, whilst our weighted average interest rate remains in the 4s. Looking ahead, as the bar chart shows, we expect LTV to remain above the midpoint of our through-the-cycle range as we invest for growth in a rising market. But remember, a couple of big sales can really move the needle and give us significant incremental acquisition capacity. So wrapping up with a positive financial outlook, we expect to deliver further property value and NTA growth in the second half and beyond, based on current market outlook and our active business plans. H2 EPS will likely be broadly in line with H1, and the capture of our organic rental growth opportunity will drive significant income and EPRA EPS growth moving forward with an expected threefold EPS increase supporting our progressive dividend policy. Our through-the-cycle LTV range and disciplined capital management will be maintained. And through the capture of attractive prime rental growth and the delivery of our development-led growth strategy, we expect FY '26 TAR to at least match FY '25 as GPE moves towards delivering a 10% plus annual return on equity. And of course, shareholder returns would be higher still should the share price discount narrow. So I'll certainly be holding on to my GPE shares. And whilst I'm not leaving just yet, as Toby said, this will likely be my last set of GPE results. It's, of course, been a privilege to have been part of such an awesome GPE team. And I'm also proud of my contribution to both the strategic evolution of the business and its very special culture. But I'm also departing happy in the knowledge that GPE is in great shape with an exciting growth strategy to deliver for shareholders and customers alike, and as I look around the room with slightly blurry glasses and massive thanks to all of you for your support, your challenge, and most importantly, your good humor and camaraderie. And given this is the 29th time that I've run through this presentation, I think it merits a very special thanks to both Stevie and to Rich and their teams for the uniquely special work that they put into putting this presentation together. Not only do I know that footnote 13 on Page 99 will be accurate, I know that it will be accurate to at least 1 decimal place. So a massive thanks to you guys for leaving Toby and I do the easy work of tapping the ball over the line. And as I hand back to you, Toby, I must say it's certainly been fun. You're a good man, a great colleague, and there are many things I will miss at GPE, including your exceptional taste in wine. Over to Toby for the wrap up. Toby Courtauld: But not I should add at this time of day. Thank you, Nick. Very good. Okay. So let's wrap up then with our outlook. And in short, it's all about delivering more growth, as we continue doing what we said we would do. We think that our market opportunity is strengthening. London remains Europe's Business Capital, will outperform the U.K. economically and will generate jobs growth, driving healthy demand for space that will collide with a supply drought, meaning rents are and will continue to rise with the best buildings materially outperforming the rest. As a result, office values are rising, the invest market continues its recovery with prime yield compression a real possibility. Meanwhile, we are focused fully on executing our growth strategy, first, capturing significant income growth of more than 140% in the medium term. Second, delivering development surpluses of between GBP 180 million and GBP 520 million, just from our existing program, some GBP 130 per share. Third, more acquisitions. And fourth, significant further sales of more than GBP 800 million and always operating only in prime Central London, majority West End, 94% near an Elizabeth line station. So all in all then, GPE is well set. Our operational infrastructure is in place and is delivering, and our deeply experienced team, bound together by our collegiate culture, along with our strong balance sheet will help us generate an attractive return on equity, even more so for shareholders should our share price continue its re-rating to properly reflect the group's exciting prospects. So GPE is in great shape with all to play for, and we can look forward to capturing our strong potential over the next few years. Now I know some of you will have questions, maybe even for Nick, last chance. We'll have some microphones running around the room. As I say, we've got the team, home team to help answer any of those questions that you may have. Toby Courtauld: Who would like to raise something? Any hands? Yes, here at the front. Good morning, Tom. Thomas Musson: Yes, I guess I'll ask the question to Nick. You -- it's Tom Musson from Berenberg by the way. You talked about the big growth potential in the business, and I think a tripling of EPS probably stands alone in the sector in terms of the growth outlook. If you can achieve that, there's lots of development surplus to come that will drive NAV growth. Fully managed is a big part of that. Nick, I think you've led the charge on. So given the growth prospects, why is now the right time for you to move on from the business? And then, I had a couple of follow-ups on a couple of the numbers if that's all right afterwards. Nick Sanderson: Sure. Well, I joined GPE 14 years ago. I thought I'd be here for 5 years, and I've been here for 14 years, and I absolutely love -- I love GPE. Equally, hopefully, as we've articulated, not just in this presentation, but in all the presentations that lead up to this, there is a very clear strategy in place. There is very clear and strong team in place. I love the sector. I'm just looking for something a little bit different. I think I was talking to one of our advisers, who works at a similar business to Savills. His comment was, "You love it because it's very similar to what you're doing now, but it's very different". And so I'm moving to a business that like GPE absolutely loves real estate. Unlike GPE, only Central London, I'm moving to a global business, moving from a team of 150,000 to 42,000. And I'm very much -- whilst GPE, I'm confident in the EPS growth that it will deliver, Savills is absolutely an EPS business rather than the balance sheet business. So something to keep you energized. But as I said, I will remain very invested in GPE, both financially, but also emotionally. If you asked any question, I'll be delighted to leave it at that. Thomas Musson: I did have just a couple on the numbers. The fully managed services income, net of fully managed services expenses, has just moved from being slightly profitable last year to slightly loss making this year. Can you just help explain that dynamic there? Is that just a reflection of growth? And then the second one was I think I saw that there was a material, sort of, GBP 3 million reduction in other property expenses in the EPRA P&L from GBP 4.1 million down to GBP 1 million. What was driving that? Toby Courtauld: Nick, do you want to try the first one? Nick Sanderson: Yes. Tom, you were referring to what's actually in the P&L? Yes. I mean, look -- so one of the things that we've done this year within our own targets, so as to you know, we are now incentivized specifically around delivering NOI returns in the P&L. At the moment, they are still lumpy because not -- they're not particularly reflecting a significant amount of the income that, yes, we're generating. But it also -- we tend to take a hit upfront for the agent fees that we're -- broker's fees that we're incurring in putting the customers in place. So I think you'd expect to see the P&L reported NOI will be a little bit volatile as we go through the lease-up of the space. I would hope that over time, those margins improve because the cost of customer acquisition will reduce if we don't have a cost of customer acquisition, i.e., we keep customer retention rate high. And that's why I think you should expect to see over time an even bigger focus, particularly on the fully managed side around customer retention. And as I think I alluded to in the presentation, the single biggest cause for us losing customers out of fully managed is we don't have enough space for them. So that is not the only reason, but it's one of the reasons why we are looking to grow this part of the footprint. On the -- I'm looking Stevie here on the property cost, my guess is probably on empty rates will have been lower over this period. Anything else material to cover? Toby Courtauld: Nothing materially. This is largely due to empty rates, but we can get into the weeds offline. Callum Marley: Yes. Callum Marley from Kolytics. Two questions, one on vacancy and one on artificial intelligence. Is the new vacancy range that you've set of, 6% to 7.5% a new target for this period? And then how do you explain the divergence relative to your close peer who has a vacancy of about half that? Toby Courtauld: Yes. Thanks, Callum. So if you think -- can we just go back to the contracyclical chart right upfront, please, Rich, you do not want your portfolio full when everybody else has put their cranes away, okay? You want to be contracyclical in the delivery of space when everybody else has run for cover, especially when there is an 84% shortage of demand against supplies. So we actively want our vacancy rate up. So right at the beginning, I talked about being countercyclical in our approach, and that's exactly what we're doing here. We're developing into a serious shortage of supply. And we've now got CEOs from large financial institutions around the world saying London does not have enough space. We've got companies looking 6 years ahead to try and forward purchase space. We pre-let most of our H2 developments, as you saw with CD&R during this year. And you will have heard this morning that we're under offer on a good chunk of the space down at Minerva. So you want to have vacancy at this point in the cycle, especially with rents rising. 6% to 7.5%, we're in the range, the single biggest vacancy that we've got at the -- in the portfolio at the minute, we've just finished, which is our Piccadilly Holdings, where we've just completed the repositioning of that building for fully managed. That's leasing up pretty well. Simon, I'll come to you in a second, just for a bit of color on that lease-up. But again, great locations, great buildings, rents rising, it's now that you want vacancy. So I would think we would be failing if our vacancy was 0, okay? I want vacancy. So with that point made, just talk a little bit about the color on how that's going and maybe just what we experienced in the core markets and maybe draw the distinct between the peripheral markets. Simon Rowley: Yes. So Callum, we've -- we completed 170 in September, which was about a month after Wardour Street and some people might have thought, well, why has Wardour Street let faster than 170? One of the principal reasons for that is that Wardour Street was a building that was really easy to understand through construction. So if anyone attended our Capital Markets Day back in February, one of the things I said at the time was that I thought we would pre-let some of Wardour Street. It wasn't in our underwrite. We don't tend to underwrite pre-lets and fully managed. But we did manage to pre-let 2 floors in there because it was easy to understand. Conversely, 170 Piccadilly finished a month later. There are 13 units in that building. It's a heavy intervention as mentioned earlier. It's a Grade 2 listed building. And so it's a much harder building to understand. Nevertheless, once completed, it looks absolutely fantastic. And there are a number of you in the room who have seen it. And that, in turn, has driven some absolutely incredible ERV beats. As you can see, moving through GBP 400 per square foot on some of this building was definitely not in our underwrite. But an average ERV of 296 so far for the deals that we've done, 35% of the building let are under offer, we are really, really confident with the rest of that building. And we are more certain than ever that core locations, prime core locations are where we would like our space to be. There are examples around the market of fully managed space being released in areas where, frankly, the price of a cup of coffee that we make is the same irrespective of where you are in London. We want our fully managed buildings to be in these core locations, these clusters. We are building a much better portfolio of clusters of buildings and that has allowed us to move companies such as, we mentioned, Wunderkind earlier, but others around the portfolio, that is helping that retention rate. Nick mentioned that, that is a big focus for the business. We have, in just this part of this year, done a really good job retaining customers, that's about 70% of the retention rate that we have managed to create. It does not involve broker fees. So as Nick mentioned, the cost of doing that business is far less for us. So it's a really important area. That's why the clusters work. The clusters will also work for reducing some of our operational costs as we are able to transfer some of the cost of our customer experience team across a wider portfolio. So I'm really excited. I mean, we've been doing this for about 5 years now. Looking forward to some of the projects that we have got on site, and the team that we've created really gives us a lot of confidence. Toby Courtauld: Brilliant. Thank you, Simon. AI. Callum Marley: Yes. Second question, stating that entry-level positions in white collar jobs are potentially being displaced by AI. How do you think about that long term, the different scenarios to your job's growth figures that you publish in which AI adoption materially changes, hiring needs, and then, ultimately the impact on office? Toby Courtauld: Yes, a really important question, one that we could spend all week talking about, so we won't do that. But just to give you a couple of thoughts to take away. And Marc, I'll come to you in a second, if you wouldn't mind, just expanding a bit on the sorts of companies you've seen in the market today in that space. I mean, one view, in fact, we asked AI, what AI thought about white collar jobs in London. And it started with an analysis of white collar jobs globally. And one version of AI said to us that it thought 90-odd million white collar jobs would be essentially disintermediated by AI. But 185 million would be created globally. Now, they won't all come to London, unfortunately, but it is an interesting debate as to exactly where they do go. And our experience would suggest that, by and large, they're going to places with talent, with infrastructure, with magnetism, with great buildings, clearly part of the equation, with universities that are world leading in some of these topics, and it's for that reason that places in and around California and some of the Eastern seaboard in the U.S. and the golden triangle around London are performing relatively well. It's why 23% of our customer base in fully managed is AI led. They're not AI businesses, but they have AI in the description as a heavy part of what they're all about. So I actually think there is an opposite side to this coin that you should take, which is that you should consider it as an opportunity. You should consider this as something that great commerce centers, like London, are going to capture more of the opportunity than most other locations. Just in terms of demand, what are we actually seeing right now from businesses in that tangentially related? Marc Wilder: Yes. So as an overview, active demand is about GBP 12.4 million, which is 26% up on this time last year. And of that, TMT is around 15%. And of that, about 12% is AI-focused companies and 88% is non-AI. Now, if you look, Toby has obviously mentioned about the dominance of London in terms of its tech ecosystem, the deepwater talent, world-class universities and that regulatory environment. There are currently 382 companies that are being founded in H2 in London with more than 50 people employed. So it is really quite a mature market. And if you look at AI as a catalyst for demand, there's currently around 0.5 million square feet today of well-established companies and some of the names that are out there that are either under offer, regearing on a short term, either have searches or in negotiation. Names such as OpenAI, obviously, ChatGPT, they are currently under offer on 100,000 square feet. You've got Databricks who are looking for 100,000 square feet and rumored to be in negotiation. Anthropic, who are behind Claude, 50,000 square feet. Palantir, who we know very well, next door to Soho Square, regearing on a short term because they can't find what they need. And we're obviously hopeful that we may have further conversations with them next door. Synthesia which is obviously the AI company that Nick referred to without referring by name, but we took them at 1,500 -- sorry, yes, 1,500 square feet in Dufour's. They grew 3x with us and then have moved to a managed facility of 21,000 square feet. So there's quite a lot of names that are out there. And the other thing I would also say in terms of is it a net promoter or a detractor in terms of jobs, if you look at the case study for San Francisco, currently, in 2025, there are 5.6 million square feet occupied by AI companies. That's moved up from 2.7 million in 2021. And if you look at the prospective job numbers, which is around 50,000 new jobs accretive, then that could lead to about 16 million square feet of new jobs of -- sorry, new requirements up to 2030. So that averages out at about 2.7 million square feet per annum through to 2030. So we believe, if you look at what's going on in London, what is -- what we're seeing in San Francisco, we think that the prospects are positive rather than negative for us. Toby Courtauld: Not complacent, mind you. And we would always make sure that we are realistic when coming to market with spaces, but we've got some good interest in businesses in that line of work. Okay. Where else can we go? Yes, Neil, right at the back. We'll need a microphone, please. Thank you. Neil Green: Neil Green from JPMorgan. Just one question. Given the progress you've already made on disposals and quite sizable pipeline of disposals that you're earmarking, how do you think about leverage and potentially even excess capital down the line should acquisition opportunities become harder to find, please? Toby Courtauld: Yes. Good question. Thank you, Neil. So we have a long track record, as you know, of -- thanks, Rich, of returning when we have not been able to find a more productive use for the capital post-sale. So you can see that from the pink circles in the middle there, and we gave back probably GBP 600 million to shareholders, having raised GBP 300 million at the beginning of the cycle last time around. This time around, we've already raised the GBP 300 million, and let's see what happens. But the same mantra applies. We will give back where it is excess to our needs and we can't make an attractive return for shareholders on it. Last time around, it was interesting, a number of shareholders said, "Well, why don't you hold on to it because you might be able to use it, and we don't really want it back". And we said, well, it's frankly, that's your problem, not ours. Our problem is whether we can use it accretively or not. And if we can't, you are going to get it back. And we did share buybacks. We did a capital restructuring and a capital return. So we've done all variations of it. And we would do them again if we were not able to find enough accretive opportunities to reemploy that capital post-sales. Scale is one reason I hear people arguing for not giving back capital, that is not relevant to us. Return on capital employed is the thing you should look at, and we will not simply hold capital for the sake of feeling a bit bigger if you can't use it productively. So shareholders should know that we will give it back if it's excess. If we don't give it back, it's because we felt we've found a great series of opportunities to employ it for an accretive return. Yes, Max. Maxwell Nimmo: Max Nimmo at Deutsche Numis. Maybe just kind of follow-up question to Neil on that capital recycling point. And talking about kind of liquidity at the larger end of the market, and if you can't sell some of those assets, are there other assets you can kind of pull in and out? And perhaps a theme that we're seeing a little bit at the moment is this sort of disposals below book value, which I think it hasn't really been a problem for you guys so far, but just some of your views on that well. Toby Courtauld: Okay. If you wouldn't mind coming in Dan in a second on how you're seeing the landscape playing out from here, but first up, Max, again, good question, what I think the correlation, I think, you need to be clear about is between sales ability, getting that deal done and quality of asset, right? And quality isn't just the way it looks. It's where it is, who's in it, what the rental position looks like, what its transport interchange, the hub near it looks like, the public realm immediately around it. There I say, even it's feng shui, right? So this whole idea of the way that building sits and feels matters. Now we've just sold the largest single asset trade in the West End. So we have not encountered a problem with scale, and it was ahead of book value. So that tells you that our values are broadly getting right what the market is willing to pay for an asset as they should. As we go from here, one thing that is very clear is that Hanover Square is in that list of stabilized assets, 2 Aldermanbury, both buildings where we've essentially will have delivered our business plan. We've got some rent reviews to do, as you know, in Hanover, before we consider that. And Wells & More is currently in the market. So these are quite big assets, especially to AS and Hanover So we'll be testing the outer envelope, I think, of scale when we get there, but we're not there at the minute. So the evolution of the market will be interesting to see. We will not be overly concerned about hitting book value, okay? We will be principally concerned about the forward IRR from the price on offer. And if we do not think that, that is sufficiently accretive to shareholders, the opportunity cost is much more powerful. We'll take the money. But given the quality, and I said before, I think Hanover Square is one of the best buildings in Europe, therefore, the world, and I mean that. It's an unbelievably good asset. And Wells & More is out there testing the market at the minute, and 2 AS will be a 20-year lease to Clifford Chance. So of a rent, which was struck in 2021, '22, there or thereabouts. So probably reversionary. So these are great quality assets, and I think they will do well. Dan, just in terms of market dynamic. Dan Nicholson: Thank you. And so, I think, at the moment, the market dynamics are such that we've seen lot sizes start to go up. I think, the Newman Street asset we sold a few weeks back, that was the biggest asset in the single asset deal in the West End through this part of the cycle, and so for several years. So it really sets a marker. And I think the -- you're starting to see -- so not only a lot sizes, you're starting to see new investors in the market as well. So against that backdrop, the volumes are up to, I think it was, 63%. On the top left there is the stat that we've quoted. So not only are you selling bigger assets, there's more institutions in the market who are typical buyers of the mature finished product that we've got -- stabilized product that we get at the end of our recycling process. So I think the landscape for sales is very good and definitely improving. So Newman Street set a new benchmark, the likes of Hanover and 2 AS, which again are a step up in scale. And as the market evolves, those larger lot sizes, they will become digestible by the market. And if you look at -- Rich, I think it's Page 4, if you just look at our cyclical part of the chart that we always look. This is where we want to be buying, these pieces here, and that's why we've been conducting such an intensive acquisition strategy over the last 18 months, 5 done, 1 under offer, hopefully done by Christmas, no pressure, Alexa. So that's -- we are buying exactly the right time. And then also, you'll -- so we -- and we're selling those mature, stabilized assets as that part of the market. And we talked about it 6 months ago, different parts of the market get hot at a different time. At the moment, those core assets become attractive because those institutions are coming back in, like the stabilized assets. The value-add part of that curve has been hot for a while. But obviously, we don't want to be selling into that. That's a product we want to be buying. So have we been going into the market and buying value-add assets in competition with a bunch of other people? Not really. Most of the stuff that we've been doing has been off market. So if you look at the map of the acquisitions that we've done, 2 or 3 have come from the city of London, and those have been one-on-one interactions, not in processes. So we're seeing that our acquisitions are playing to the curve there. Our disposals are playing to that part of the market that's warming up, and the general landscape is improving such that over the next 12 months, the larger assets such as 2 AS and Hanover will become liquid at the right times. Toby Courtauld: Rich, can you just jump to Slide 6? Because one of the things you might be thinking is selling at that point on the curve isn't necessarily the right answer. The reason, there's a complicated bifurcation going on between the best and the rest, right? If you are slightly off pitch or there's something wrong with your building, you're going to struggle to sell it, which is a sort of stuff that Dan has described we've been buying. But if you look bottom right, the reason we're now willing to sell some of the buildings we are is because we have seen this bifurcation run riot through rent. And those prime rents have really grown. And it's that differential that is now allowing us to sell prime assets at really strong numbers that I don't think was the case even 12 months ago. And that change is quite dramatic. Dan Nicholson: And it says institutions with a low cost of capital who are buying. And our forward look on those doesn't hit our cost of capital, but it's fine for those buyers. Toby Courtauld: Yes. Thank you, Dan. Thank you, Max. Any more for any more. We are just past the hour. Yes, we've got a couple over here. Yes. Zach? Zachary Gauge: This is Zachary Gauge from UBS. A couple of questions related to returns, and then, hopefully quite straightforward one just on EPRA earnings. But firstly, you seem quite bullish on near-term yield compression. I'm just wondering how you reconcile that with the valuers moving out the yield on Aldermanbury Square by 15 basis points. And I'm sure you have seen the latest MSCI data for the London office market in West End turning negative in October and flat ERVs for the last 2 months in the West End. And sort of following on from that, looking at your 10%-plus ROE medium-term target, can you give any more color on when you expect that to be realized? And I think at the end of FY '25, you guided to more growth to come, and now, it sounds a little bit like this year is in line with last year as opposed to necessarily growing from there. And then the straightforward question was, is the tax credit you received included in the EPRA earnings number? Toby Courtauld: Fabulous question, Zach. I mean, you say I sound a bit more bullish. You sound a bit more bearish, and we will get you to the right place at some point over the next few years. But putting that aside for a second, Nick, if you could deal with the second one, and maybe the third, and then, Stevie, you want to deal with it. So on the yield point, well, funny enough, the further they move the yields out, the more bullish we're going to get on compression, especially in an environment where yields are going to be -- and we know they're driven by interest rates, and in an environment where interest rates are likely to come in. And -- I mean, I think the issue with that is scale. It's just -- it's a big building. It's going to be GBP 400-ish million, there or thereabouts, and that is a rare part of the market. So that's my challenge for the team when we come to selling that one. But more broadly, we are bullish on prime product. I mean, we -- for reasons Dan has just described. We think that really good assets in really good locations are gold. They are irreplaceable, by and large, and we're not talking about the peripheral central London markets. We're talking about core 100% prime, which is where we're focused. And that's why, if anything, we have concentrated even more over the last 5 years than you would have seen us. I'm not sure we'd buy Whitechapel again, put it that way, unless it was unbelievably cheap. It was quite cheap at the time. But I think as those peripheral markets get less relatively attractive to the prospective customer base, we get less interested from an acquisitions perspective on them, but if you are in the core, I've said it before, it's incredibly powerful. We think we'll sell very well because we're leasing very well. So that's the first point. On the second one. Nick Sanderson: Rich, you give 54. Look, we were clear that the aspiration around the 10% plus TAR was one for the medium term. We set out the breakdown of that in the appendices. We said at the beginning of this year that we expected this year's TAR to be in line or ahead of where we were last year. We've maintained that. I think it's fair to say it will be my successor who stands up here talks about a 10% TAR rather than me, but I think that is something the -- looking at our own business plans, we look like we're set to deliver in FY '27-'28. In terms of the tax credit, yes, it is in EPRA earnings in accordance with the guidance. That being said, we are not anticipating it has a material impact on the overall numbers. We still stand by the guidance that we gave on EPRA earnings at the beginning of the year irrespective of that credit. It's a one-off we don't expect to repeat it. But in accordance with EPRA guidance, you include it. Zachary Gauge: Maybe just a follow-up here, if I can. I think everyone largely understands that the prime versus secondary debate, but how much of your portfolio is prime versus secondary? Because presumably, you have a prime guidance and an ERV guidance, so it must be some form of blend of the 2? Toby Courtauld: Well, what -- in an ideal world, at this point in the cycle, thinking contracyclically, in an ideal world, what you want is raw material that is in some way needing attention in prime locations, okay? That is, to me, the holy grail. And so what you can see in GPE is some -- if we can go to the capital stack, please, Rich, some buildings in yellow, which are reaching the end of their GPE life because we've done things -- all of the things we can to them and their prospective numbers are not good enough for us, back to Dan's point about there'll be some institutions out there with a lower cost of capital than us will be happier holders than us. But the majority of your book, in other words, the blue and above, needs to be prime location buildings that you can improve. And then you have a business that's really interesting. If you're simply stuff full of all the yellows, right, and this idea that you just collect, income-producing assets that are yellow, you are a proxy to market moves. You are nothing more than a beta story, right? If you want to be an alpha story that's creating something of value, you go above the yellow and you focus on things that you can do things, too, to generate rent growth, net area again, higher quality buildings in great locations. And that's the underlying, which is why we started this presentation with 100% prime Central London. So if you look at -- I think you could probably argue that Whitechapel is the only building in our book, which would not qualify in the 100% prime Central London. That's the only one. The rest of them are, and the rest of them will be improved over time, and we will transmission, will basically capture growth in the blue section, turn it into a yellow tradable asset and out shall go. That's been our model for as long as I can remember. And it feels -- if you go back to slide -- the cycle one, please, Rich, it feels much more alive today than it did in that really difficult period post Brexit, all the way through COVID, where, frankly, markets we felt should have corrected and didn't because the monetary response was so aggressive. And it took inflation, which was the consequence of -- and QE unwind for capital values to come off sufficient for us to get interested again. And so we're back into a really dynamic cycle, which feels like a good place to be. On that note, I think I'm going to draw proceedings to a close. I think we've given plenty of time for Q&A. Thank you very much. Just to wrap up for me then, this story today is all about our excellent leasing, which is all about our excellent positioning and our financial strength, looking forward with a lot to do over the second half to your point, but a lot to do over the next few years, and I'm very excited about that. As I hope you are. Thank you all for coming.
Operator: Excuse me, ladies and gentlemen. This is the operator speaking. Please continue to stand by, and your conference will begin momentarily. Thank you. Excuse me, ladies and gentlemen. This is the operator. Please continue to stand by. Your conference will begin momentarily. Thank you. Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Zynex, Inc. Third Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. As a reminder, this conference is being recorded. I would now like to turn the conference over to Vikram Bajaj, Chief Financial Officer of Zynex, Inc. Please go ahead. Vikram Bajaj: Thank you, operator. And good afternoon, everyone. Yesterday, we released financial results for the third quarter ended September 30, 2025. A copy of the press release is available on the company's website. Before we begin, I would like to remind you that during this conference call, the company will make projections and forward-looking statements regarding future events. We encourage you to review the company's past and future filings with the SEC, including, without limitation, the company's 2024 Form 10-K and subsequent Form 10-Qs, along with any amendments which identify the specific factors that may cause actual results or events to differ materially from those described in these forward-looking statements. These factors may include, without limitation, statements regarding product development, product potential, the regulatory and legal environment, sales and marketing strategy, restructuring activities, or operating performance. With that, I'll now turn the call over to Steven Dyson, our CEO. Steven Dyson: Thank you, Vikram. And good morning to everyone attending today's earnings call. It's been three months since Vikram and I joined the company. And since joining, we have been tirelessly focused on addressing the business and compliance challenges at Zynex, Inc. while creating a new future for the company. As you will already know from our public disclosures, we have an entirely new management team with the addition of new leaders in sales, legal, compliance, regulatory, HR, and billing, as well as a recent addition to our leadership team in the critical role of strategic marketing. We have also complemented our governance and oversight with the addition of two new directors on our board, Brett Wise and Paul Aronson. Brett is our new audit committee chair, and he brings a wealth of experience in healthcare and med tech, as well as financial expertise with a strong background in compliance oversight. Paul Aronson is the chair of our special committee, which is tasked with overseeing the company's efforts to evaluate strategic alternatives for the company, including potential capital raising opportunities and recapitalization and restructuring strategies. As you can see from these additions, we have recruited a highly experienced and capable team to help turn the company around. Now, this is my first earnings call with investors. I thought it would be good to share a few points on the value I see in the Zynex, Inc. franchise, as well as our near-term strategy and priorities. The first thing to appreciate is the quality of our flagship product, the NexWave electrotherapy device. The NexWave device is cleared by the FDA for chronic and acute pain indications. The NexWave is a product that is very much loved by our patients and clinicians. People suffering with pain are looking for non-pharmaceutical ways to get back on their feet, and this company has a great product with the reach and the channel to provide life-changing relief to individuals while providing significant value to the healthcare system. We have thousands of patient testimonials supporting the effectiveness of the NexWave device, and it represents an amazing business opportunity. This is the main reason I came to Zynex, Inc., and it is the main reason we have been able to attract great talent to the management team and directors. Moving on to our strategy and priorities. Over the last ninety days, we've been implementing a three-part strategy to turn the company around. First, addressing the concerns of government agencies and ongoing investigations. Second, addressing the near-term maturity of our $60 million in convertible senior notes, and liquidity concerns, and seeking to raise new capital to fund operations. And third, improving revenue and cash flow performance of the core business. First, as it relates to government investigations, we are proactively engaging with government agencies and investigators in a collaborative way to deliver a new future for Zynex, Inc. that is focused on compliance and integrity. These discussions have been positive, and we are making progress on our commitments. While we do not have certainty on any potential TRICARE reinstatement or resolution of ongoing investigations, or the timing thereof, it will be critical as we move forward to reach resolution based on the company's commitment to the future. In support of our renewed commitment to compliance and integrity, starting October 1, we implemented a new resupply order fulfillment policy. Under this new policy, we do not process resupply orders unless a patient first confirms their needs. We systematically reach out to each patient to ask about their resupply needs, and patients can contact us at any time. We are already seeing good results. Not only is the policy leading to far more regular patient contact, but our patients are responding positively. We expect these efforts to result in a significant improvement in how patients, public and private payers, and their providers experience doing business with Zynex, Inc. Second, we need to manage the company's near-term debt obligations as we seek to raise additional capital. As you know, we have $60 million in convertible senior notes that mature in May 2026. Also in Q3, we had negative cash flow of $6.3 million. And as of September 30, the company had cash and cash equivalents of $13.3 million on the balance sheet. It is important that we address the convertible notes maturity and our cash burn relative to the amount of our cash and cash equivalents in order to continue as a going concern and give certainty to our customers and suppliers that we could honor our commitments going forward. As you have seen in our announcements, we have recently hired Providence LLC to advise the company on various strategic and financing alternatives and evaluate a range of strategic alternatives, including potential capital raising and restructuring strategies. We've also formed a highly experienced special committee of the board of directors to oversee this process. We have initiated collaborative discussions with our debt holders, and while we cannot predict the outcome, we believe that our business plans for the future are compelling and will be critical to this process. Third, we need to address the company's revenue and cash flow performance. Since I started, we have initiated several quick-win projects in multiple functions within the company, focused on near-term performance improvements in Salesforce productivity, order conversion efficiency, and collections. These efforts are showing early signs of success and are bearing fruit. After customer order volume had been down for many months sequentially, we have recently seen orders stabilize, even with a substantially reduced sales force. To increase sales productivity and improve order volumes, we have improved and simplified our commission plans, provided improved communication and technology to our sales reps, and increased their focus on targeted accounts. We have also engaged with a new partner for our VA business, and early signs there point to a good opportunity for increased penetration to VA accounts. So these are the three key elements of our strategies to turn around the company's performance and create a new future for Zynex, Inc. While our Q3 performance released yesterday is more of a continuation of the challenges from the first two quarters, I'm encouraged to see progress in all three elements of our strategy. Now I'll turn the call back over to Vikram, our CFO, to give you an overview of our Q3 financial results. Vikram Bajaj: Thank you, Steven. Please refer to our press release issued yesterday for our summary of financial results for the third quarter ended September 30, 2025. Net revenue was $13.4 million compared to $50 million in 2024. Device revenue was $7.1 million, and supplies revenue was $6.3 million. The decline in net revenue for the three months ended September 30, 2025, compared to the prior year period, is primarily related to the company's TRICARE payment suspension, along with a $2.8 million reduction in revenue related to payments received from TRICARE during the suspension period. Through 2025, changes to certain payers' claim submission review practices have resulted in denials and payment delays, which have negatively impacted our revenue. Additionally, Q1 and Q2 workforce reductions in many functions, including sales, have negatively impacted device orders and corresponding supplies, new patient onboarding, and order completion, contributing to the overall decline in net revenue during the three months ended September 30, 2025. Gross profit in the third quarter was $8.1 million or 60% of revenue, as compared to $39.8 million or 80% of revenue in Q3 2024. Sales and marketing expenses decreased 54% to $9.5 million in the third quarter of 2025. The primary contributor to the decrease in sales and marketing expenses was a headcount reduction. G&A expenses were $11.8 million in 2025 compared to $15.3 million in Q3 last year. Net loss was also negatively impacted by a non-cash asset impairment charge of $50.7 million during the quarter ended September 30, 2025, primarily related to goodwill, definite-lived intangible assets, and certain fixed assets associated with Zynex, Inc. monitoring solutions. Net loss was $42.9 million and $1.42 per share in 2025 compared to net income of $2.4 million in 2024. Adjusted EBITDA loss for the three months ended September 30, 2025, was $12.3 million, as compared to adjusted EBITDA of positive $5.1 million in the quarter ended September 30, 2024. On the balance sheet, we have $13.3 million of cash in hand at September 30, 2025, and we're able to reduce our cash burn during the quarter. As part of our cash management program, Zynex, Inc. has elected to enter the contractual thirty-day grace period under the terms of the company's $60 million of convertible notes and did not make a $1.5 million interest payment due November 17, 2025. The company is in discussions with holders of the convertible notes regarding potential restructuring opportunities. Our convertible debt of $60 million is due May 2026, so you'll notice it's now a current liability. We are currently working with our advisers to address this liability. I'll now turn the call back to Steven. Steven Dyson: Thank you, Vikram. And thank you for joining us today. We appreciate your time and interest in Zynex, Inc. Have a great day. Operator: Thank you. And ladies and gentlemen, this now concludes today's conference call. Thank you all for joining. You may now disconnect.
John Crosse: Good morning, and welcome, everyone, in the room and joining online or on the phones. Thanks for joining us for our FY '25 results. Just a few housekeeping things before we kick off. There are no planned fire alarm tests today. So if the alarm does go off, for those in the room, it's a real one. And you can see the fire exits just behind you marked in green. And then finally, just wanted to draw your attention to the usual disclaimer in the presentation. We've got for you this morning. So without further ado, I would like to hand over to Lukas. Lukas Paravicini: Thank you very much, John. And good morning, and a very warm welcome to all of you here in the room, and a very warm welcome to you all who join us online. Today marks another exciting day on the journey of Imperial Brands. I'm very pleased to share with you another year of strong performance, and I'm very excited about this being my first time in the role of CEO of the group, a true honor and a true privilege, which I don't take lightly. I'm joined today by Murray McGowan, our newly appointed Chief Financial Officer; and John Crosse, our Head of Investors Relation. I'll start off by giving you the highlights of fiscal year '25. Murray will then join us and share more about the financial performance and the outlook for '26. I will then come back, talk a bit more about our operational delivery, our transformation and also to reconfirm our strategic ambition that we set out in March this year. At the end of that, we look very much forward to all your questions. And with that, let me get down to business, and let's start the presentation. What I really would like to do today is highlight 3 things. First, the quality of our performance during this past fiscal year and how this builds on our growing track record of consistent growth. Second, how our evolved strategy is not just a confident evolution, it is also a step change in our capabilities and a commitment to delivering further significant value to our shareholders. And third, our own personal excitement at the opportunities that lie ahead of us. Since the half year results in May and the announcement of our new roles, Murray and I have been spending a lot of time with our people across our global businesses. This included face-to-face events in all regions attended by more than 600 of our leaders. We've been discussing our recent achievements, our refreshed strategy and how we can make an even bigger impact over the next 5 years. What's been really energizing is the sheer enthusiasm of our colleagues about where we are going next. And it has reinforced my belief that we have the right plan and the right people to make the step change we highlighted at the CMD in March. We'll come back to those plans later. But first, let's look at our fiscal year '25 dashboard. Once again, all the key metrics are delivering in line with our commitments. You can see here how consistent operational delivery is underpinning improvements in our key financial measures and in turn, driving shareholder returns. In combustibles, we maintained share in our priority markets while also delivering another year of strong pricing. In NGP, we recorded a further year of double-digit revenue growth with share growing in all categories. This progress at an operational level has translated into revenue growth of more than 4% and an improvement of more than 9% in earnings per share. This has also been a year of strong cash flow. All this has supported material increases in our -- in both our underlying dividend and our ongoing share buyback. During fiscal year '26, we further intend to make total capital returns in excess of GBP 2.7 billion. These results add to our consistent track record of growth. You can see here how each year of incremental improvement adds up to a powerful cumulative effect over the past 5 years, a 48 basis points improvement in aggregate market share. NGP revenue up 73%, EPS up 1/3, and the GBP 10 billion in capital returns. That's equivalent to 2/3 of our market cap when we started our 2021 strategy. So that's what we have delivered. Even more important is how we have delivered. As you have heard us say many times, the unifying theme behind our success is our challenger approach. These things is about 3 things: getting really close to our consumer, staying focused on the most important drivers of growth and investing to become more agile. During the CMD, you've heard us talk in more detail about how we brought to life this challenger idea. For example, investing in new consumer capabilities, prioritizing must-win market battles, developing a high-performance culture, investing in technology and harnessing our self-help opportunities. It was these investments, these changes, which helped us turn around our tobacco business and build an NGP business where we now have attractive products across all consumer categories. At this point, I would also like to take a moment to thank Stefan, Stefan Bomhard, for his leadership in the turnaround of Imperial Brands over the past 5 years. He leaves behind a strong platform for future growth. Looking ahead, you'll see us continue to play our important distinctive role as a challenger business in this sector. And as we said at the Capital Market Day, our purpose remains unchanged. We're still going to be forging a path to a healthier future for moments of relaxation and pleasure. In this way, we will continue to deliver strong performance for shareholders. I will now hand over to Murray. And when I come back, I'll take a closer look into our strategic ambition and how we transform our business to actually achieve them. Murray, over to you. Murray McGowan: Thank you, Lukas, and good morning, everyone. As many of you know, I joined Imperial Brands just over 5 years ago, heading up Strategy and Corporate Development. And in that role back in 2021, I led the development of our previous strategy, which we shared in January '21. And more recently, I led the work to develop our evolved strategy that we shared in March of this year at our Capital Markets Day. Now I am really honored to have the opportunity to step up to be Chief Financial Officer for Imperial Brands, and I absolutely share Lukas's excitement about the opportunities that we have ahead of us. As I pick up the CFO baton from Lukas, I'm pleased to show you another positive year of financial results and a year of strong delivery. As Lukas said, we've maintained aggregate share in our 5 priority markets, whilst delivering strong pricing. We have again delivered double-digit net revenue growth in NGP and strong operational performance has enabled us to deliver group adjusted operating profit in line with guidance, up by 4.6%. This, together with the GBP 1.25 billion share buyback, enabled us to deliver high single-digit EPS growth that we committed to. Leverage of 2x is in line with the target of being at the lower end of our 2 to 2.5x range. And this has been driven by cash conversion near the upper end of our 90% to 100% range, delivering robust free cash flow of GBP 2.7 billion. Turning to volume and price mix at the regional and group level. Once again here, we can see the strength of the tobacco value model in action. Our investment in brand equity and improved sales execution enabled strong pricing across our footprint, shown in orange on the chart. Price/mix has more than offset volume declines shown here in gray to deliver tobacco net revenue growth of 3.7%, a similar rate to last year. Volume declines in Europe and AACE improved relative to historical rates and strong pricing in Europe helped deliver net revenue growth of 4.2% in this region. In the U.S., we saw strong price/mix of 9.9%, more than offsetting volume declines, which were slightly more moderate than the prior year. Moving on to adjusted operating profit. Tobacco performance has been the main contributor to group adjusted operating profit growth, supported by NGP and Logista. In tobacco, the strong pricing I just described has driven higher profit. As usual, we benefit from the operational gearing as we move down the P&L. In NGP, losses remained at a similar level to last year as we increased investment in certain parts of our portfolio, for example, Zone in the U.S. We're making good progress towards building a sustainable and profitable NGP business as we continue to build scale. Overall, tobacco and NGP adjusted operating profit grew 4.9%. At Logista, performance was behind prior years with growth from tobacco price increases offset by performance in the long-distance transport sector. So overall, I am pleased with the 4.6% growth in group adjusted operating profit. Now as CFO, I will always be transparent about items that we classify as adjustments. Today, we are disclosing 2 charges related to our 2030 strategy. The first is an impairment charge related to our recent announcement that we will cease production at our Langenhagen factory. The second relates to the initial cost of our wider transformation program. These costs are within the guidance we gave at our Capital Markets Day back in March, and the remaining costs related to transformation will be adjusting items in future years. Strong adjusted operating profit growth, coupled with the share count reduction has driven earnings per share growth of 9.1%. The increase in tax reflects a slightly higher adjusted effective tax rate at 23.3% with higher net finance costs in line with our guidance. There was a small increase in minority interest, reflecting the strong performance in Africa. These impacts are more than offset by the benefit of the reduced share count. During the year, we repurchased just over 5% of our share capital, bringing the total repurchase since we began the share buyback program in 2022 to 15.8%. Turning to cash and capital allocation. Our operating cash conversion was 97%, enabling strong free cash flow generation of GBP 2.7 billion. This means that over the past 5 years, we generated cumulative cash of GBP 11.6 billion. Now disciplined capital investment remains a key part of how we create value. And let me assure you that I remain committed to our capital allocation framework as I step into the CFO role. Our first priority is to invest in the business. As a reminder, our approach is primarily organic. We have committed to invest in transformation, but we will also consider bolt-on acquisitions where they support the delivery of our strategy. Second, we maintain a strong and efficient balance sheet. Third, we deliver progressive dividends. And fourth, we're committed to returning surplus capital to our shareholders. As we announced on the 7th of October, we've increased our FY '26 share buyback to GBP 1.45 billion. As Lukas said, we've now returned over GBP 10 billion to our shareholders since FY '21. This represents 2/3 of our market value when we launched a previous strategy in January 2021. And going forward, we are committed to an evergreen share buyback throughout the next 5-year strategic period. Our expectations for the coming year are in line with the medium-term guidance that we set out at the Capital Markets Day in March 2025. We will continue to invest to support low single-digit tobacco and double-digit NGP net revenue growth on a constant currency basis. Given the strong momentum in our NGP business, we'll continue to invest to drive growth while balancing our objective to build a sustainable and profitable business. Group adjusted operating profit is expected to grow in the 3% to 5% range, driven primarily by the continued profit growth of our combustible business. In line with previous years, because of the phasing of combustible pricing and investment, performance will be weighted to the second half. Free cash flow generation is expected to be at least GBP 2.2 billion after investments in our transformation. The growth in adjusted operating profit, combined with the ongoing share buyback is expected to deliver at least high single-digit EPS growth, even after slightly increased tax, finance and minority interest costs. At current rates, we expect foreign exchange translation to be a 2% to 2.5% tailwind to profit. As usual, there is a slide in the appendix with guidance on the specific items. Now, I believe the results we are delivering today demonstrate the strong foundation that we have built that will enable us to continue to deliver over the next 5 years and generate value for our shareholders. Thank you. I'll now hand back to Lukas. Lukas Paravicini: Thank you very much, Murray. And in this part, I'll start off by giving you a bit more details about our operational delivery and how they underpinned our fiscal year '25 performance. I will then turn back to our strategic ambitions, and I'll explain how in our opinion, the distinctive combination of actually consistent in-year delivery and an accelerated transformation add up to a compelling investment proposition. So let's start with the tobacco business. We have driven pricing successfully and created significant value. This pricing has been achieved while also maintaining stable share in our priority markets. Our portfolio has been performing in line with our strategic objectives. The times where we were the largest owner of market share have gone for good. Our overarching priority is to balance aggregate share, pricing and long-term brand building to generate sustainable value. In any given year, we may make deliberate decisions in individual markets to monetize share gains made in previous years. The U.S. and Germany, our 2 largest markets, which together account for about half of our revenue and profits. And we have grouped them on the same slide because they share key characteristics. In both markets, we are benefiting from long-term investments in our sales force, which have improved effectiveness and coverage. In both markets, we are competing successfully at the premium end with iconic brands like Gauloises and Davidoff in Germany and Winston and Kool in the U.S. In both markets, we are also capitalizing well on our consumer down trading into the discount segment. Both markets continue to be highly affordable for consumers, and we see attractive opportunities for the future. In Germany, we have continued the improving share trajectory of last year after a decade of share declines. Aligned with our strategy in the U.S., we delivered stable share in what is a highly competitive marketplace. Our U.S. business also has a strong mass market cigar franchise, led by our premium Backwoods brand. And this has continued to grow well over the past year. Turning to the other key markets. In Spain, we took a conscious choice to monetize share gains over the past 4 years. We see this market as continuing to be highly affordable and attractive over the next 5 years and beyond. As we have always said, the U.K. and Australia both face rising excise rates, leading to growing illicit trades. And we expect these trends to continue into fiscal year '26. Having spent time in both markets recently, I've been impressed by our team's ability to continue to generate value. In Australia, for the first time, we moved into the #1 position in terms of market share. And in the U.K., the team managed our tobacco business skillfully, while also making good progress building a meaningful NGP franchise. And our Africa cluster contains diverse markets from Morocco in the Northwest to Madagascar in the Indian Ocean and accounts for 10% of our operating -- our tobacco adjusted operating profit. As you would expect, in any emerging markets business, the performance of individual countries can vary. But in aggregate, these markets have been growing strongly and consistently. And we expect it to become an even more material contributor to the group over the next few years. So let me talk now about NGP. We continue to see share growth across all categories. In modern oral, we are excited by the significant growth we are delivering with Zone in the U.S. We have established a national share of 2.8%, and the product is now available in 100,000 stores. And we are committed to ongoing investment in building this brand. In the Nordic markets, we are also growing strongly with Skruf. Here, targeted innovation in flavors and the design of our pouches is paying off with a positive response from consumers. Our vape business is performing well. We're focused on Western Europe where vaping is established as a dominant category. Across our footprint, we are growing share. And in the big 3 European markets, the U.K., France and Spain, we now have well-established double-digit positions. I've been particularly pleased to see the agility with which we adapted to regulatory changes. Our new pod-based blu Kit ranges was rolled out at pace during the year and has already become the big driver of our growth. In heated tobacco, we have made further progress. Here, we are growing share in our focused footprint. While it is early days, our new Pulze 3.0 device is winning positive feedback from the trade and consumers. So it's been a strong operational performance, which builds on our solid record. I'm proud of what our teams have achieved over the past 5 years. Their success gives us a firm foundation for the next strategic period. But I want to be clear, absolutely clear, this management team is not resting on its laurels. As we said at the CMD, we know we need to go further, and we need to go faster. And we are confident we have the right plans to deliver continued strong performance for our shareholders. At one level, our strategy is a confident evolution. As I said earlier, we will continue to follow the challenger approach, which has underpinned our recent success. Our strategy will further drive significant sustainable value in our combustible business and build an NGP business operating at scale. This is a combination, we believe, create material value for shareholders over the next 5 years. These are the twin priorities, which sit on the top of our strategy wheel. But this is more, more than just an evolution. Delivering these ambitious priorities will require a further step change in our capabilities. And the 3 elements on the bottom half of our wheel, our strategic enablers explain how we will achieve them. Taking these elements together, the big opportunity is this. We are a business that was stitched together from many acquisitions over several decades. Over the past few years, we have made progress towards building a consumer-centric, simplified and more joined-up business. And we have assembled a fantastic team of people with a unique blend of broad consumer experience and deep knowledge of our consumer, our markets and our industry. But this journey, this journey remains unfinished. During the next few years, by investing further in our consumer capabilities, our technology and data and by equipping our people with the right skills, we are setting ourselves up for success. We will, at last, complete our long transition from a loose collection of businesses to become a true challenger business, which leads the industry in consumer intimacy. And we will become an agile, data-led and high-performing organization. And at that moment, we will fully unleash the brilliant talent we have brought together. An important element of this new team is our 1,000 strong global consumer organization. Our investment in people and capabilities has enabled us to continue deepening our insights into the consumers we need to target. This enables us to build more sharply differentiated brands, which create passion among our consumers and drive material commercial outcomes. A fresh capability we have added over the past year is our new brand building framework. This adds more rigor to how we identify target consumers, build compelling marketing campaigns and ultimately, deliver share and revenue. An early output of this work has been our new "Touch of Blue" campaign for Gauloises in Germany, which is already helping drive an improvement in the share trend. We are applying the same processes to our NGP business. For example, here, you can see some of the work we are doing with our Zone in the U.S. and blu here in the U.K. Armed with a clearer view of our target consumers and their needs, we are getting more intentional in how we innovate in tobacco and NGP. For example, by mapping the flavors preferred by our Moroccan consumers, we discovered we were missing an important opportunity. To meet that need, we launched Gauloises Rich Gold, and it's performing well. In vape, the new blu Kit range I mentioned earlier was in response to our consumers expressing a need for more authentic tasting flavors and a differentiated quality design. In O&D, in close collaboration with consumers, we've revamped the format, creating a new pouch that delivers superior flavor, faster nicotine release and a smoother mouth feel. And excitingly, as you will have seen in the area outside this morning, today marks the official launch of our nicotine pouch in the U.K. market under the Zone brand. And the latest iteration of our Pulze heated tobacco device is another example of highly focused innovation. We know our consumer wants convenient, all-in-one package, which closely replicates the experience of a cigarette. And the early signs are that this is going to be a winning proposition with our consumers. Over the past 12 months, we made further progress in transforming the other elements of our business to simplify our organization and become more efficient and data enabled. Our 5-year program to build a new ERP platform is on track, and we recently went live in our first large production site. We've launched a stronger and more integrated business planning process. We continue to drive efficiency through manufacturing excellence. And in October, we took the difficult but necessary decision to withdraw from Langenhagen factory in Germany. We're also continuing to drive sales excellence, investing in technology and the skills of our sales teams to become the trade partner of choice. Right now, it would be fair to say we are still playing catch-up with other consumer businesses, which started transformation years earlier. Over the next strategic period, though, we can accelerate our progress by learning from the journeys taken by our peers. We can leapfrog technologies and we skip unnecessary development steps. I think of the opportunity as being a little bit like those emerging countries, which successfully jumped from coins and banknotes, straight to mobile wallets. At future results presentations, I look forward to providing more detail of our transformation plans and updating you on the progress we make. As we grow and transform our business, we want to do so in a responsible, sustainable way. We continue to invest in consumer insights and scientific research to develop our understanding of how we are contributing to harm reduction. Our most recent research looked at the behavior of adult smokers with no plans to quit when introduced to blu vapes. It was very encouraging to see that 6 months into the survey, between 1/3 and 40% of participants had either significantly reduced smoking cigarettes or stopped completely. And we are committed to incorporating these kinds of insights into how we market and develop our future product ranges. Also today, we are announcing further reductions in CO2 and waste. Now let me draw all these trends together. It's been another year of consistent broad-based growth. Strong foundations are in place for the next 5 years, and we have a clear strategy for value creation. Our focused approach to getting close to our consumers and building differentiated brands works well. We now have a stronger, more sustainable combustible business. And in NGP, competitive products across all categories, and we are building scale and margins. But we are never complacent, and we take absolutely nothing for granted. That said, as we look to fiscal year '26, we feel confident that we can continue to deliver sustainable growth. At the same time, we are excited about the opportunities to further transform this business to deliver a step-up in our capabilities. It's a transformation that will ensure that we can deliver sustainable growth in the years to 2030 and well beyond. We think that when you stand back, what we are offering is a highly attractive investment proposition, broad-based operational delivery, which translates into growing revenues and profitability with strong cash generation and significant capital returns at what is still a very attractive valuation. As we always say, if you are invested in us, we thank you for your support. And if you aren't yet a shareholder, well, we think this is a great time for you to take another look at what we are doing and where we are going next. Thank you very much. And with that, I would like to ask John to open for our Q&A session. John Crosse: Great. Thank you, Lukas. I think as usual, we'll start with questions in the room first. We've also got questions on the phone for those of you who joined by telephone and also on the webcast as well. [Operator Instructions] But as I said, let's take the first question from here in the room. Do you want to go at the front? Can you please state your name and your organization as well, please, just for those listening on the webcast. Mirza Faham Baig: It's Faham Baig, UBS. First question, I appreciate Imperial has transitioned away from a share donor. And sorry for being pedantic, but the volume share performance in the U.S. and Germany has turned slightly negative in the scanner data. And the question is, as competitive activity rises in the deep discount segment, how are you thinking about balancing aggregate share stability versus value delivery? And the second question on Zone in U.S. nicotine pouches. I appreciate that you've been able to keep share relatively stable as the category has become more price competitive. The question is 2 part. Where do you believe if you stand with Zone's product -- Zone's product quality versus that of incoming launches? And would you maybe look to use some of the duty drawback benefits to reinvest into price? Lukas Paravicini: So those are 3 questions. I'll try to answer them in sequence. Please remind me if I forget one. Let's start with market share. Listen, as you pointed out, I think what you have seen over the last 5 years is that we have clearly moved away from being the biggest donor of market share in the industry, if you go back 5 years to where we are today. I don't think that has happened by accident. That has happened because we have invested in our capabilities. We have built a muscle. And that capability is all around starting with the consumer, starting with the consumer, understanding our consumer better, hence, being able to build more differentiated brands, invest into better innovation, which you have seen over the last years coming to market. We have invested in our sales force. We have actually extended sales coverage in Germany and the U.S. We have increased significantly productivity by adding technology to that. And I think we have been very agile in also managing our portfolio of brands and portfolio of markets to always achieve a stable market share across our aggregate 5 markets, which is our goal. And the goal is stable market share. That's what is in our model. And I think we have shown that capability, that agility to balance off well market share and pricing or revenue. And I'm convinced, I'm confident in those same capabilities that going forward, we can still generate very much value out of our combustible business without losing share. Okay? I'm sorry, that was the first one. I thought it was it. There was sort of relief of that question. Yes, U.S. Zone. Well, we are really excited about U.S. Zone in the U.S. Actually, our growth has actually accelerated in the second half. And you all know there has been quite a bit of aggressiveness, which we would never follow. And so we are pleased. We gained -- we started 18 months ago. We came from nowhere to 2.8% market share. We're in 100,000 stores. And we have a proposition that our consumers really like. We maintained our market share throughout the summer and throughout September, throughout that competitive pricing. This is a growing category, and it is highly competitive. We always expected more competition to come in. We are confident in our product proposition, and we are confident in building a significant business in the U.S. continuing to grow at our pace on the long term. So that's the second one. The third one was duty drawback. Listen, now that we have clarity with duty drawback in the U.S., as you know, in summer, there has been some legislation passed through Congress in the U.S. We have very agilely put ourselves to work. And it is not as easy as -- it's not a thing you do overnight. But as a global organization, we are well placed to take opportunity and benefit of that duty drawback scheme. We do have to certify certain lines and certain factories abroad for U.S. imports. We do hope -- so it's less a question of if, it's more a question of when. We -- I mean, we -- let's be clear. We hope that this year, we still see a little benefit, but we'll for sure ramp it up next year. So that will come. I think that covered everything. John Crosse: Next question in the room. Damian, you want to take it down the front. Damian McNeela: So Damian McNeela from Deutsche Bank. First question, just following on from Faham's question on Zone. I think you indicated you're in about 100,000 stores. Just can you talk about whether -- what your expectations are for further distribution gains behind Zone for the coming year? And then just in terms of NGP profitability, it was broadly stable in the year just finished. Given the sort of expectations for sort of relaunch of Zone in U.K. and U.S., how should we think about NGP profitability next year? And then just the last one on the NGP side. European NGP revenues growth slowed in the second half, obviously, because of lapping launches in the first half. But can you sort of indicate what we should expect in the second half, please? Sorry, for FY '26... Lukas Paravicini: '26. Yes. So let me go back. I'll quickly answer the Zone question. I'll also touch on the NGP in '26, and then Murray will answer the question on the profitability. So listen, we've been in 100,000 stores. There's a bit more to come there. There's some more distribution we can harness. Ultimately, we want a weighted distribution of north of 85%. Well, there's some to be hold there. But I think that's one element of our growth and our confidence. The other is that we have a proposition that our consumer, which we target very precisely, does enjoy our products. And there is confidence that by continuing to invest behind the brand, we will be able to continue to grow at our pace that product. In general, when you go back at NGP and the growth you highlighted or asked for in Europe, I just want to step back again and share our excitement of where we are with NGP. Let me just remind you where we are 5 years ago. Many of you in this room would not give us very much credit for NGP. Since we almost doubled the net revenue, we have a proposition in all 3 categories. Over the last 3 years, we have grown double digit in NGP, and we have grown share in all 3 categories. And we have committed to build or we have an ambition to build a meaningful business over the next 5 years. And we have underpinned that commitment with a double-digit growth. Now we've pointed out in the CMD that growth will be different depending on regions and categories. We knew that vape is a category which is more mature, which goes through regulatory changes in the years we are in the middle of. And hence, you will see a different growth rate from O&D -- sorry, nicotine pouches and heated tobacco. But if you look at Europe, the point you make, if you look at '25, our modern oral nicotine pouches in Nordics grew very, very well. Our heated tobacco in Italy grew very well. But yes, vape is in the middle of a transition from a disposable vape to a rechargeable, reusable pod-based system, which obviously has that effect of slowing down growth. Okay. Sorry, you wanted -- I keep forgetting that there are other questions. Murray McGowan: In terms -- profitability -- as we said in the Capital Markets Day, we're really clear that we want to build a sustainable, scaled next-generation products business that generates both profit and cash and contribution to the group. What we're not looking to do is set an average time line as to when we'll hit that profitability. As we look at our businesses now, we see opportunities to invest to drive growth, whether it be Zone in the U.S. or Zone in the U.K. or other vaping opportunities or heated tobacco in Southern Eastern Europe. What we do believe is those we can see healthy margins, healthy gross margins across our portfolio of next-generation products. And if you look in the appendices of the presentation today, we share the margins across each of the different platforms. So we believe the right call for us is to invest to grow and to grow towards profitability. But we are confident that by the time we get to the end of the plan, it will be a good contributor to the group overall. In terms of your specific question about profitability next year, I wouldn't expect a significant shift in terms of level of profitability for next year. But in the grand scheme of our P&L, we think it's a sensible investment from a shareholder perspective. John Crosse: [Mariah Deshnov] from Barclays here. Just thinking about your agreement with TJP, does that prevent you at all from launching Skruf as a product in the U.S. if there was interest? And also, if there were to be any PMTAs of any new products in 2026, would that have to be done through TJP or how would that work? Lukas Paravicini: So TJP Labs is our partner. We were very agile a few years ago, and that was a good demonstration on how we look at bolt-on acquisitions, how we move agile when it comes to opportunities and where we want to enter new market. And we have a contract manufacturing agreement with them. We bought the products. So the products are ours. They are under in the PMTA. So the question whether we want to launch a product that is used on the Skruf in the U.S. has nothing to do with TJ Lab. It has to be with the PMTA process that you would have to require a PMTA. And then that is a more complicated undertaking. So TJ Lab is our contract manufacturer, but has nothing to do with the choices we make on products. And there was -- no, that's it. Yes. John Crosse: We'll take another question in the room. And then we'll go to the phone lines. There's one waiting. Bastien Agaud: Bastien Agaud from Bank of America. On the next tobacco product directive, experts say that we should have something probably next year calling for potentially normalization at the European level, whether with some restriction on the flavor. So given the opportunity on the potential geographical expansion, whether with restriction on the flavor, is that an opportunity for you? Or how should we think about it given potentially more country where you can open or whether with more restriction on the flavor? And I'm thinking about modern oral particularly. Lukas Paravicini: So I think I remember when I joined this group, the first thing that I learned is that there is regulation and there's a lot of noise around regulation. But I also learned quite quickly that regulation has been with this industry for the last 30, 40 years. And the industry and ourselves have built a muscle to adapt and live with regulation, which we fully understand and support. So I think that's the first point. We are a company that is accustomed to operate in a regulated market, and we will adapt, and we have adapted well to that like the others in the industry. I think the EU TPD that you are referring to is a well-established, long process. We have now finally seen the basics or the proposal. As you know, there's lots of differences around the 29 markets or 27. I'm not sure really how many in the European Union, I apologize for that. But in the conglomerate of all those markets, there's all different kind of opinions. And so it will take at least to your point, we believe it's a good year for this to harmonize to find a solution. But we know the direction and the direction actually helps us also put a framework. We've always been in favor of some thoughtful regulation that allows adult smoker to get to those products that help them get off smoking, but also prevent you getting to those same products, which we do not market to. So we'll see what comes out. We are confident that we'll continue to operate well in that framework. And as you said, more regulation that is thoughtful will actually help us going forward. John Crosse: Great. Thanks, Lukas. We go to the phone lines now. Sharon, do you just want to remind people on the phones again how to register? Operator: [Operator Instructions] I will now hand back to you, John. John Crosse: Thanks. So we do have some questions in the queue. The first one is David from Morgan Stanley. Unknown Analyst: David [indiscernible] from Morgan Stanley. I just had one question on cash flow looking forward. How should we think about working capital in '26 and outer years? Should we expect an inflow or outflow? Murray McGowan: Thanks for the question, David. Working capital, we try to ensure we maintain a tight control on working capital as a group. In terms of guidance going forward, look, we guide on free cash flow as a business. We're very clear the guidance for the business in the meantime in the medium term is from GBP 2.2 billion up to GBP 3 billion by the end of the strategic period. Working capital, we're not expecting any significant shifts plus or minus during that period of time at this stage. So we don't guide on that. I think the focus more on the free cash flow commitment, so at least GBP 2.2 billion next year. John Crosse: Great. Thanks, David. We do also have one question that's come through online from [John Guy]. John, I think we've answered that. Your question was around the building blocks of driving double-digit growth in NGP next year. I think we covered that early on. John, do drop us an e-mail and get in touch if you feel you need a bit more detail, but I think we've answered that already. So come back into the room if there's any other questions in the room. No. Okay. There's no other questions online. So with that, I hand it over to you, Lukas, to wrap up. Lukas Paravicini: Thank you very much. It's been a pleasure to have you here. Thanks for your interest. And again, as I said, we are very excited with not just what we have delivered this year, what we have delivered over the last 5 years. Again, also thanks to Stefan, who is not with us today, but has always been instrumental in delivering the last 5 years. But also very excited about how we continue our confident evolution in delivering against a good tobacco business, sustainable value there, why we build an NGP business at scale and also very excited how we're going to step up our capability built around getting closer to consumers, invest further in technology to underpin our strategic ambitions. Thank you very much, and hope to see you soon again. Thank you.