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Graham Sutherland: Good morning, and welcome to FirstGroup's 2026 Half Year Results Presentation. In a moment, I will hand over to Ryan to take you through the financial performance for the first half of the year. I will then provide an update on business performance in bus and rail before we take your questions at the end. Moving on to Slide 3. I'm pleased to report another strong half for the group despite several economic and policy headwinds. Strong execution has ensured that we've been able to fully counter the negative impacts of lower bus funding in England, above inflation wage pressures and higher levels of employer national insurance contributions. Group adjusted revenue, which does not include the national rail contract revenues, where we take substantially no revenue risk has increased by 30% to GBP 834 million. This was largely driven by growth in First Bus due to the acquisition of First Bus London, which completed in February. Adjusted earnings per share for the half year has increased by 16% to 9.9p, with earnings growth supported by the repurchase of circa 22 million shares during the period. As a result of our strong performance in the first half, the Board has proposed an interim dividend of 2.2p per share, up 29% against the prior year. As a result of our continued strategic delivery and the restructuring of the business completed earlier this year, we are on track to deliver modest growth in our adjusted earnings per share for the full year. We expect to then at least maintain adjusted earnings per share in full year 2027 as both Avanti West Coast and GWR are nationalized. This leaves us well positioned for the remainder of the year. Our focus will continue on operational delivery and the successful execution of our U.K. growth and diversification strategy. Turning now to Slide 4, which sets out some of the key highlights against our strategic framework. Delivering day in and day out remains a key priority for the group. We continue to drive operational efficiencies in First Bus with a 24% reduction in lost mileage to 1.3%. We have also increased our Net Promoter Score to plus 15 as service delivery remains core to our strategy. We have also completed our business restructure to deliver annualized overhead savings of around GBP 15 million, which will help offset the impact of -- on the group of increased national insurance contributions. We will see the full benefit of the restructuring in the second half. Looking at modal shift, generating additional demand for our service is a commercial driver of our business and also crucial for reducing congestion, improving air quality and supporting government decarbonization goals. In open access rail, our seat miles capacity utilization of 67% remains significantly above the industry average. And we've also secured Rolling stock for our new Stirling to London Houston service, which we expect to be fully operational in mid-calendar year 2026. Turning to our sustainability pillar. We are at the forefront of bus fleet and infrastructure electrification and are working to capitalize on opportunities to unlock adjacent electrification revenue streams. In the first half, this has included the launch of First Charge and a small investment in Palmer Energy technology to bring battery storage capability to our sites. We continue to diversify our portfolio with the First Bus London performing ahead of our expectations, and we continue to grow our business and coach asset footprint with high-quality value-accretive acquisitions. At open access rail, we were pleased to have been awarded Extra pass on our existing services and the extension of some of Lumo services to Glasgow. We've also submitted applications for new routes, where we can commit further material investment and utilize our proven expertise to drive economic growth through connecting underserved communities. I will now hand over to Ryan, who will take us through the financial results for the half year. Ryan Mangold: Thank you, Graham, and good morning, everybody. This has no doubt been a more challenging half year given the headwinds of inflation and national -- employers national insurance increases. However, the early actions that we have taken have helped mitigate some of these pressures and the group has continued to make progress across the business. In my presentation, I'll be covering the following 3 areas: strong growth in adjusted revenue, the improvement in adjusted EPS with further progress on a much better balance of earnings distribution; and finally, reinforcing our capital allocation policy and our financial guidance for full year 2026 as well as full year 2027. So turning to the financial summary on Slide 6, where we have made progress across all financial KPIs despite the headwinds. The group's adjusted revenue is up over 30%, driven by both organic and inorganic growth and decent performances across the business. The revenue improvements in bus and open access rail have largely been offset by inflationary cost pressures as well as the national insurance impact as well as business development costs in open access with the mobilization of our Stirling route, which is now underway. As a result, group adjusted operating profit of GBP 103.6 million is up 2.8%. Our positive operating profit performance has benefited somewhat by the IFRS 16 adjustment in rail being lower given SWR ending, partially offset by higher net finance costs, resulting in the group delivering GBP 55.5 million in adjusted earnings, up 7.1%. The ongoing share buyback program has reduced the average share count. And as a result, the group's adjusted EPS has increased by 16.5% to 9.9p. This robust underlying business performance and strength of the balance sheet has resulted in the Board proposing an interim dividend of 2.2p per share, an increase of 29.4%. The dividend is in line with the group's current progressive dividend policy of around 3x adjusted earnings per share with around 1/3 in the interim and 2/3 at the final. The free cash flow generation before acquisitions and returns to shareholders has been impacted by the timing of a more material investment in bus electrification in the half year, and this is us taking advantage of the available government funding, resulting in an above-normal spend in the half year. The group's adjusted net debt position was GBP 207.6 million with a strong free cash generation offset by the accelerated CapEx as well as about GBP 10 million in acquisitions and GBP 76 million returned to shareholders through the buyback program and the final dividend for the year. At the bus business, despite the material organic and inorganic growth investments in the year, the post-tax return on capital employed was 9.4%, which was impacted by the acquisition of the London business in February. And as expected, the profitability is initially lower from this business. Turning to the 30% growth in adjusted revenue on Slide 7. The material increase in adjusted revenue has been mostly driven by the capital deployment in the second half of full year '25, with London in particular, performing well and is operating ahead of the investment expectations. The regional bus business passenger demand has ever been marginally weaker with a number of factors contributing to this, which Graham will cover later. However, despite the marginally lower volumes, the bus business has been able to deliver some yield growth that has been partially offset by lower government funding. First Rail's open access operations delivered some revenue growth with this progress marginally impacted by the strike action that we saw in whole trains. The Rail Services business also delivered a strong performance in the half year. And what is pleasing to note now is that more than 30% of the current contracted revenues are now with external parties, demonstrating the continued strong value creation from these businesses. Looking at the 16.5% adjusted EPS growth on Slide 8. This chart shows our adjusted EPS progression on a post-tax basis for all the variances. Open access and rail services contributed 0.5p in growth, with this now at 3.6p of our EPS, representing a materially higher proportion of earnings in rail now from more sustainable business streams. H1 has, however, had a marginal benefit from once-off rail center provision releases. First Bus increased operating profits contributed 0.2p to the improvement and central costs are 0.3p lower year-on-year, driven by the cost efficiencies and the group restructure executed earlier. Despite SWR ending in May 2025, the earnings from the DfT talks are 0.1p higher than the prior year, with the first half benefiting from once-off enhanced variable management fees as well as lower disallowable costs. Interest costs were 0.5p higher due mainly to lower interest received on cash balances and the group now being in an adjusted net debt position. The buyback programs that have now run for several years has resulted in a lower number of average shares, and this contributed 0.8p per share. As can be seen, the work that we have been doing over the past few years, together with our disciplined capital allocation approach has grown our adjusted EPS to 9.9p per share. But equally as important, we are continuing to drive a far better distribution and the quality of our earnings as we look ahead. Turning to the adjusted cash flow movements for the past 12 months on Slide 9. As a reminder, our adjusted measures excludes the ring-fenced cash as well as the impact of IFRS 16 from the DfT train operating companies. The group generated EBITDA of GBP 181.4 million before the DfT TOC cash inflows where we have received GBP 37.9 million in distributions. Just as a reminder, these DfT TOC management fees are paid by way of dividends generally in the second half of the following year after completion of the top statutory audited accounts. Working capital was a net inflow of GBP 4.4 million in the 12 months, resulting in a total of GBP 223.7 million of capital generated from operations versus the full year of 2025 of GBP 207.4 million. The capital generated was deployed in investing GBP 126.5 million in CapEx, net of grant funding and battery sales into the Hitachi strategic joint venture. GBP 6.5 million was paid in cash interest and tax, mainly relating to interest on the new finance leases and arrangements for the electric fleet in First Bus, offset by interest earned on the cash balances. There was a nominal amount of cash tax paid with the low level of cash tax being driven by the historical losses as well as the accelerated capital allowances that should apply for several years given our decarbonization investment program. Other movements include payments to acquire shares for the Employee Benefit Trust that continues to hold around 20 million shares for share award settlements and small cash payments into the pension schemes, mainly to cover costs. This has meant that the business has generated a total of GBP 78.3 million in cash despite the accelerated investment in electrification of bus. Just short of GBP 150 million was deployed in growth capital with the acquisition of RATP London for GBP 90 million being the major contributor to that as well as several bolt-on acquisitions in First Bus, mainly in the business and coach market, but also includes investment into several innovative energy businesses as well as combined with the 2 open access rail businesses with Stirling in mobilization phase. GBP 37.1 million has been paid by way of dividends in the 12 months and GBP 99.1 million was spent on the share buyback programs. What is clear from the chart is that the group continues to deploy a very balanced approach to capital allocation, focusing on both organic and inorganic growth opportunities as well as meaningful returns to shareholders in line with our strategy. This results in the group ending the half year with GBP 207.6 million in adjusted net debt and a debt cover ratio of 0.95x, which is well below our leverage policy parameters despite being a fairly busy 12 months, combined with a seasonally high level of adjusted net debt at the half year. Turning to our capital allocation framework on Slide 10. As we look ahead, we have a leverage policy of less than 2x adjusted net debt to EBITDA. With our forecast year-end position being well below 1x, there's plenty of capacity for the U.K. growth for the right opportunities, where the post-tax IRR from these investments exceeds our WACC. On an underlying basis, pre-deployment of capital for acquisitions, we expect to maintain our leverage below 1x for the time being. We have a strong focus on decarbonization in First Bus with the additional cost and efficiency benefit this brings, and we will continue to deploy capital in this area, particularly where this is supported by government funding to help deliver the U.K.'s wider decarbonization strategy. At First Bus London, we continue to expect this business to be operating cash positive from full year '27 onwards, and we are very pleased with the business performance to date. For the DfT TOCs we now estimate that GBP 125 million will be received in cash from October 2025 onwards to the end of the contracts. And this includes the anticipated continued support as required under contract from the rail services businesses. This is effectively higher than the GBP 120 million that we guided in June, due mainly to the longer-dated contracts agreed in rail services business, slightly better DfT TOC end dates and partially offset by the cash that we received in the first half of the year. Our current dividend policy remains around 3x adjusted earnings per share with this ratio and quantum being progressive over time. And finally, in line with our disciplined capital allocation approach, the group is committed to any surplus cash that cannot be effectively deployed in growth will be returned to shareholders. Given the current adjusted net debt and the pipeline of U.K. opportunities that are currently being evaluated, we are not announcing an extension to the buyback program at this stage, and this will be reviewed again with the full year results. To end with on Slide 11, looking ahead for the financial outlook for full year 2026 as well as adding in guidance now for full year 2027, given the transition of the remaining DfT TOCs at some stage within the next 12 to 18 months. The group expects to deliver modest growth in adjusted EPS for full year 2026 and then to at least maintain this level into full year '27 off a higher base. The bus business anticipates making sequential operating profit progress year-on-year with growth being driven by the material change in the business following the acquisitions, including London, with bus now consisting of 3 strong business segments, delivering a combined annual revenue that's anticipated to be above GBP 1.4 billion for full year '26. In First Rail, the open access businesses are anticipated to deliver results ahead of full year 2025, reflecting strong demand and yield management being offset by inflationary cost pressures as well as the costs for mobilizing the Stirling business. The rail services businesses are expected to make progress year-on-year given the continued support provided to previous and existing DfT TOCs as well as growth in new customers. For the DfT TOCs, the fees are anticipated to be at more normal levels going forward and combined with SWR ending means that the underlying management fees will be lower. The IFRS 16 positive impact to EBIT for the year is expected to be circa GBP 36 million in full year 2026. At the center, we anticipate costs to be circa GBP 8 million lower, benefiting from the central restructuring that was completed in the first half. Below operating profit, we anticipate incurring GBP 60 million worth of interest, of which GBP 34 million relates to IFRS 16 charges mainly due to the DFT rail leases. We anticipate deploying a net circa GBP 180 million of CapEx in the First Bus after taking into account grant funding and the benefit of GBP 10 million cash from the Hitachi Strategic Battery partnership. This CapEx of GBP 180 million now includes GBP 30 million of CapEx in London for electric vehicles, where the group is trialing an outright ownership model rather than an operating lease model on a specific large route that commenced late in 2025 due to the operating margin benefit that the ownership model delivers. The current level of CapEx in bus is above the expected normal levels given the success the business has had in accessing grant funding and annual CapEx is anticipated to be around GBP 100 million per annum as we look ahead, depending on the model that may be applied in London. First Rail remains capital light, but with some investment expected on the inorganic growth in open access as we mobilize these routes. For the pensions escrow, we have now finalized the Bus Section 2024 triennial valuation. This resulted in GBP 20 million of cash being returned to the group in November with GBP 20 million paid into the scheme and the balance of GBP 43 million retained in escrow. The escrow will be reviewed with the 2030 valuation, where a number of medium-term actuarial and asset judgments will be clarified in the scheme's performance. And when this is combined with the group section, it means that GBP 65 million is now in escrow that we will continue to explore derisking options that will be tested on the 2030 valuations. We anticipate ending the year with circa GBP 125 million to GBP 135 million worth of adjusted net debt. And this guidance is before any further inorganic growth opportunities, where there's a decent pipeline in the U.K. that we continue to evaluate. As you can see, the group retains a very strong balance sheet position with a much improved quality of earnings trajectory where we expect modest growth in EPS for full year 2026 and then to at least maintain this higher level for full year 2027. I'll now hand over to Graham for the business review. Graham Sutherland: Thank you, Ryan, for the update. Much appreciated. Moving on to Slide 13. It's been a solid half year for First Bus with operating profit growth of 4%, driven by yield management, cost efficiencies and the benefits of recent acquisitions. This has come in a challenging environment, where the transition to a GBP 3 fare cap in England resulted in lower funding levels, down GBP 17 million on last year. This, combined with related pricing activity and generally a softer economy has negatively impacted regional bus volumes. Concessionary volumes are up 4%, but this has been more than offset by a 7% decline in commercial volumes, leaving overall volumes down by 4%. As well as the move to the GBP 3 fare cap, economic factors are impacting demand. It's worth noting that just over 40% of all bus trips are for shopping and leisure purposes and around 20% are for commuting, and we're seeing these journeys impacted by lower levels of consumer confidence. To offset the drop in funding and softer demand, we introduced a new simple distance-based fare structure, resulting in a circa 10% yield improvement in the first half. Inflationary pressures remain with cost increases due to inflation of circa 3%, mainly in wages, where there was a 4% average increase in driver pay awards. We have now settled the majority of our largest bargaining units with 2-year awards achieved in most cases. We have also delivered GBP 7 million of efficiencies through the electrification progress and overhead savings, including a GBP 2 million saving in fuel costs. We've also benefited from our new businesses in London and a business in Coach, where we also continue to extend and win value-accretive contracts. Adjusted operating profit margin of 6.1% after absorbing 1.4% impact from higher national insurance contributions. Regional bus operating profit margin was 8.2%, slightly lower than the prior year. Moving now to Slide 14. The First Bus portfolio is evolving as we grow our business in Coach segment and develop our franchising capability centered on First Bus London and our operations in Rochdale. In Business and Coach, we are actively growing our operational footprint and asset base. In the first half, this included the acquisition of Tetley’'s Coaches, an established profitable operator with a large own depot in Central Leeds. This segment's revenue grew by 30% in the first half due to contract wins and extensions, the launch of Flixbus services and the contribution of our new businesses, which are trading in line with expectations. This is an attractive market worth an estimated GBP 3 billion, and we have a strong pipeline of opportunities to further grow our market share. The significant increase in our franchising segment's revenue reflects the addition of First Bus London, which contributed GBP 150 million in the first half. Thanks to our focus on service delivery to drive customer satisfaction and performance incentives, both our London and Rochdale franchise businesses consistently hold top positions in the operator league tables. Looking ahead, a number of Merrill authorities outside London are progressing with bus franchising schemes. These include Liverpool City Region, West Yorkshire, South Yorkshire, Wales and the West Midlands, representing an opportunity for us to enter new markets. There is still some uncertainty over which franchising models will be deployed, in particular around fleet and depot ownership. This could lead to potential CapEx savings and property disposals should authorities opt for an ownership model. Our track records of delivering quality bus operations under contract in London and Greater Manchester leaves us well positioned to actively take part in franchising growth. And moving on to Slide 15. The electrification of our fleet and infrastructure is a key part of our strategy to transform our bus business and to unlock potential adjacent revenue streams. We continue to make good progress with circa 23% of our fleet zero emission with 3 fully and 17 partially electrified depots across the U.K. As I flagged on a previous slide, we're benefiting from electrification efficiencies, including through fuel costs. This has led to a net fuel cost per mile reduction of 20% over the last 3 years. We're also making good progress identifying and capitalizing on opportunities to further monetize our electrification assets -- we recently launched the First Charge brand, giving access to chargers at 15 of our depots. We also made a small investment in Palmer Energy Technology to bring battery storage capability to some of our depots. This included the launch of a battery energy storage facility in Holford, and we expect to launch a second facility in Aberdeen next year. Over time, this will drive further cost efficiencies and provide a potential platform for commercial second life use of bus batteries. And now moving on to open access rail on Slide 16. Our 2 open access rail operations, Hull Trains and Lumo delivered adjusted operating profit of GBP 16.3 million in the first half. This is lower than the prior year with some impact from industrial action at Hull Trains and GBP 1.3 million of mobilization costs for our new Stirling to London Houston service. Lumo saw strong demand during the summer months and Hull Trains had a good ramp-up in business traveler demand in September. Seat miles operate were 3% lower than the prior year, reflecting higher levels of engineering works on the East Coast mainline and industrial action. Seat miles utilization remains high for both operators and still well above the rail industry benchmarks. Looking ahead, the mobilization of our new Stirling to London Houston service is progressing well, and we expect the service to be fully operational in mid-calendar year 2026. As you can see on the slide, we've set out our current rail open access seat miles capacity and how we see this developing over the coming years. We were pleased to announce in July that the ORR had approved our applications for Extra Pass on our existing services from December 2025 as well as the extension of some of Lumo's services to Glasgow. These extensions will add an additional 118 million seat miles, a 13% increase to our existing capacity. This, together with our new Sterling and Carmarthen services will see us more than double our existing seat miles capacity over the next 2 to 3 years. We've also launched a number of applications with the ORR. This includes services from Payton to London Paddington, Hereford to London Paddington, the extension of the Sterling track access agreement to December 2038 with the addition of new battery electric trains a revised Rochdale to London Houston application and an application for a new route between Cardiff and New York. We've committed significant investment to facilitate the growth of our open access services, including our circa GBP 500 million agreement for 14 new Hitachi trains that are being manufactured in County Durham, securing the skills base and jobs in the local area. If our ongoing applications are successful, we will make use of our option to commit further investment in new Hitachi trains, representing a further U.K. manufacturing investment of around GBP 300 million. And moving on to Slide 17. Our teams managing the national rail contracts at Avanti West Coast and DWR continue to focus on enhanced service delivery and effective cost management. Both teams are performing well and attributable net income from the national rail contracts has been in line with our expectations at GBP 15.3 million in the first half. In line with government policy, the DfT train operating companies are moving into public ownership. Our SWR team worked tirelessly with the DfT operator to ensure a smooth transition with the business exiting the group on schedule in May. The dates for the transfer of Avanti West Coast and GWR have not yet been announced by the government, but are anticipated to be in full year 2027. Our rail services businesses, FCC, Mistral and Consultancy continue to progress and perform well with revenue showing encouraging growth. Almost 1/3 of the current contracted revenues are now from external customers. We continue to look at opportunities to scale these businesses as we believe private sector expertise will continue to be vital to the success of the rail industry. Moving on to conclude on Slide 19. Our robust performance in the first half and a challenging economic and policy environment is testament to the work we have done to transform, grow and diversify our business. We're on track to deliver modest growth in adjusted earnings per share for the full year, and we expect to then at least maintain adjusted earnings per share in full year '27 as we transition our train operating companies to the government. In First Bus, we're an experienced operator with a large, well-capitalized fleet and a network of own depots that will allow us to continue to improve performance and to grow in attractive markets. The electrification of our fleet and infrastructure continues at pace as we look to unlock cost efficiencies and potential adjacent revenue streams. We will also be able to leverage these capabilities when bidding for new contracts. In First Rail, we will continue to work to grow our open access capacity and revenues, look to optimize our rail services businesses and to bid for contracts where we can bring forward our experience and capability. In our remaining 2 DfT train operating companies, we continue to prioritize contractual and operational delivery together with the work required to ensure a professional handover to the DfT operator. Our strong balance sheet allows us to evaluate a good pipeline of value-accretive U.K. growth opportunities. We remain committed to our discipline on capital allocation, and we'll continue to return any surplus cash to our shareholders. As a leading U.K. public transport operator, we have a critical role to play in the delivery of the U.K.'s wider economic, social and environmental goals. We will continue to be proactive, demonstrate our strengths as an experienced partner, underpinned by our significant investment in growth and decarbonization. To close, the work we have done over the last few years has allowed us to maintain our positive earnings trajectory as the U.K. bus and rail markets partially transition to new models. We aim to continuously improve performance to drive more demand for bus and rail services and to capitalize on strategic U.K. growth opportunities. Thank you for your time this morning, and we will now open for questions. We will take questions from the room first and then from the webcast. Gerald Khoo: Good morning, everyone. Gerald Khoo from Panmure Liberum. 3, if I can. Firstly, on bus franchising. You set out the regions that are moving towards franchising. I was wondering whether you could sort of quantify the sort of revenue opportunity and also what's potentially at risk in, I think, just West Yorkshire is the area that you're in amongst those. Secondly, there's been quite a big increase in the CapEx guidance for the year, but not a very big increase in the adjusted net debt guidance. I was just wondering what the sort of reconciling item there is. And finally, you talked about having a look at owning electric buses in London. I mean what are the challenges around that versus owning diesel buses in London? Is it -- is it significantly more challenging to cascade electric buses into the regions to on to other London bus contracts? Graham Sutherland: Thank you, Gerald. And it was good to see the question starting before I even sat down. So I'm very impressed. I'll maybe take the first one on bus franchising. Look, I mean, obviously, we are in West and South Yorkshire. So that's clearly a risk for us, particularly given how some of these bids are formed with the ability only to win certain depots. But when we look at the opportunities outside, we kind of feel that we can balance the kind of risk/reward scenario here. And the fact that we've worked very hard to strongly capitalize our assets over the last few years with improved fleet, improved depot, I think it leaves us in a strong position in discussions with the local authorities in terms of how those assets are positioned and the future use within franchising. So I'm not going to quote individual subsector numbers, but I think the general feeling in the team is that we will come out of this process. We're likely to release some capital from the business in the areas where we have strong asset base. And we feel we've got the qualities and the experience now within our business, particularly bringing in the London business and what we've learned from that to be competitive in the bidding process. And obviously, that has started, the results of the first phase of Liverpool around the end of this calendar year. So we'll begin to get some insight as to where we stand in pretty short order. Ryan, do you want to take the second question on CapEx and net debt? Ryan Mangold: Yes. So CapEx is higher by GBP 30 million. It's primarily driven by us trialing the GBP 30 million, it's 59 EVs that we're trialing on a specific route in London, which is all electric that the business effectively retained and won that starts later this year. So the guidance is better than what we previously gave effectively with that sort of GBP 30 million going out and a couple of reasons for that. 1 is the GBP 20 million of escrow cash that's come into the business in the second half of the year as well as some underlying sort of cash -- stronger cash generation, particularly coming out of the rail business than what we originally anticipated. So a combination of those 2 factors offset against the CapEx in London is where the net debt guidance has ended being -- being slightly higher, but better off. And just also a reminder, we deployed GBP 10 million in growth M&A in the first half of the year as well. So we've got GBP 40-odd million and GBP 20 million back on the pensions escrow, but our net debt is slightly better than that, obviously, mathematically. Graham Sutherland: And then on the bus ownership in London. Ryan Mangold: Yes. So the EVs in London, I mean the TFL is committed to electrification in London. I think that the sort of risk of transition of technology in terms of how these EVs work and the warranties that the OEMs are now providing has kind of gone beyond the kind of risk factor that you previously, I think, would have taken and hence, kind of moving those to operating leases. I think the world is also moving to more post-IFRS 16 basis in terms of financial judgments. And I think there's quite a few bankers in the room. I think the banks eventually also start moving up to covenants to be sort of on a post-IFRS 16 basis. So your net debt to [ EBITDAR ] and your total cost of borrowing is going to be all kind of caught into one thing rather than just being simply off balance sheet. And combination of sort of commitment by TFL to go to electric. So we always have a use for those buses one way or the other is a positive. Technology improvements on the OEMs in terms of length of warranty is a positive. And if we can use our strong balance sheet to effectively kind of fund our business model in London at our WACC of 9% versus the WACC of the ROSCOs, then which is much, much higher, then we can sort of, in theory, kind of capture that benefit and that capture of that benefit really kind of translates into slightly higher margins. But we're just trialing this on a specific route. So we don't want people to think that we are just buying buses now in London. We're not going to uplease them. We're just trialing them on a specific route just to see that the kind of financial benefits are as we expect them to be over time. Graham Sutherland: Alex? Alexander Paterson: 3 from me as well, please. Firstly, just in the remote possibility that the budget doesn't like the blue touch paper of the U.K. economy and the consumer still doesn't feel great on the 27th of September. If commercial bus volumes remain somewhat subdued and the trend you saw in the first half continues, what sort of levers have you got? Should we expect more mileage reduction there? Secondly, if I can just elaborate on the bus franchising question. Manchester has obviously bought depots and fleet from previous operators. Birmingham has acquired a depot, look like they're going to buy more and fleet as well. What do you expect in the regions, where you think they may franchise? You talked about capital release. I don't know if you can quantify that at all. And then finally, just on the rail services, it sounds like you've had a very positive outcome on those continuing for longer. What do you think the end game is? Should we expect government provision of these services or private? If it's private, is there actually an opportunity for you to increase your market share? Graham Sutherland: Okay. Thanks, Alex. Very comprehensive questions. I mean the budget, obviously, when you look back a year, we obviously had to deal with national insurance contributions. I think the team worked very hard to manage that. The reality is when you're running a large business, you don't always deal with these issues in a 3-month period. So the reality is it's probably taken us right through to the end of the half year to do all the work that we wanted to offset those increased costs, and we will now see that in the second half. When we look at this budget, again, we will just deal with what comes our way. I mean, on volumes, we began to see volumes begin to -- this time last year, we were talking about volumes being up 4%. So clearly, there's been a number of impacts that have affected them. But we did see them begin to drop off in the January to March period and have largely been around the 4% level since then. We begin to cycle that effect out in January this year. And we're obviously working with various initiatives to stimulate more demand as well, including having put more frequency on in some of our larger urban areas to try and stimulate more demand. So we -- it's difficult to gauge, where volumes will be next year. But we still have population growth. We still have some macro tailwinds. So we do think it will settle down a bit, but we're prepared to deal with it, if we see softer volumes next year. So it's hard to call, but I do -- we do expect some improvement from the current level. In terms of bus franchising, yes, I mean, we have seen the signal from a number of areas that they want to own depot fleet in total. But we have also seen discussions around potentially a split fleet in certain areas given the lack of available funding to do the whole thing. So I don't think it's clear how that will completely play out. A lot of it will be down to choices at a Merrill authority level as to where they invest their money. I think the fact that we have a well-capitalized business is helpful. And also, we have available capital if the opportunity arises. So I think we'll lean into each individual situation as it kind of prevails. And as I said, if in Western South Yorkshire, they're looking at an ownership model, certainly the depots and maybe partially for the buses, then we're in a strong position to work with them to make that happen. So yes, so I think relatively positive in our ability to work there, but it's very hard to call out numbers because these are active negotiations, and they're not concluded at this point. I think then on rail services, the team have done a good job. There's no doubt about that. And we provide some high-quality expertise into the train operating companies, and we've been able to broaden some of these services beyond our -- obviously, into the external market, which is a positive. It's difficult to fully assess where GBR will go. But it's -- the reality is they may bring some in-house. They may combine and consolidate and look for 1 or 2 private sector partners. And at the end of the day, our job at the moment is to provide quality services, put good contracts in place, and then we'll respond to how the market evolves. But I think we have optionality here. And within the number, the GBP 125 million of cash receipts, that includes an assumption of how much rail services cash will be there. And we're more than comfortable with giving that guidance at this point. So evolving area. But since we last spoke, we have a better contract position now than we would have had 6 months ago, and that's encouraging. Ruairi Cullinane: Good morning. It's Ruairi Cullinane from RBC. The first question, I think the M&A was described as a U.K.-focused growth strategy. Should we infer from that, that you're likely to continue primarily buying businesses in the U.K.? And is there still a reasonable pipeline of opportunities there? Secondly, I was quite struck that bus CapEx could normalize towards GBP 100 million in the medium term. Is that -- does that come back to the shift to franchising and then more regions opting to own assets? And then finally, what have you assumed in terms of the timing of the exit of the remaining talks in terms of the upgrade of the cash inflow from DfT TOCs from GBP 120 million to GBP 125 million? Graham Sutherland: Okay. Thanks very much. On M&A, we are solely focused at this point in time on our U.K. pipeline of opportunity. We've been able to do over the last 18 to 24 months, 7 or 8 acquisitions. And we have a pipeline that at the moment that's made up of live opportunities under discussion and some more medium-term opportunities that we feel could come to the market. So our job right now is to run down those opportunities. They're a good fit with the strategy of the business in terms of more growth in bus and the potential to obviously completely optimize what's there on open access. So we feel there is enough there to have a strong growth story around bus and open access rail for the next 2 to 3 years. We -- as I've said before, we -- given the type of organization we are, stuff comes our way to assess and look at. So we will continue to look at opportunities outside the U.K., but we have absolutely -- at the moment, that's really just from a kind of good corporate citizen perspective. We are solely focused on driving and delivering the U.K. pipeline we have. And until that pipeline weakens, we have no real intention of looking elsewhere. Bus CapEx, Ryan, do you want to maybe take that one? Ryan Mangold: On the CapEx, there's a number of sort of variables on that. One of them being, obviously, as we transition towards franchising some of the markets, our own fleet in terms of our regional bus operations will be slightly smaller as a result of that. Now I kind of spoke a little bit earlier in one of the questions in terms of is it going to be depots and buses owned by the combined authorities or whether we can have a partner ownership. Now clearly, we're going to have to own the buses under that scenario, then clearly, the CapEx number will be higher, but that should then be reflected in the margins that those bids will go for in terms of cost of capital pricing. So that GBP 100 million kind of doesn't include the fact that we might have to buy buses under the franchising model, and we'll obviously update the market as and when that happens in terms of how the structure is going to end up. The other factor is that we've got a lot more confidence now on the electrification of our existing diesel fleet in terms of transitioning it from being a diesel fleet to an electric bus by just doing the -- putting in an electric drivetrain and battery. Normally, with the diesel bus about midlife, they'd have a massive engine replacement and a big refurbishment. And that happens instead of putting a diesel engine back into the bus, we're now putting in an electric drivetrain as well as the batteries. And that then gives us a sort of more limited amount of CapEx that we need to then spend to be able to electrify those fleets. And so that's -- I think we've got sort of 40, I think, in operation now, [ Janet ], I think from 30 in operation already, and we've got a sort of an investment in a business called KleanDrive, which is another one of these sort of adjacencies where we're trying to use our sort of scale and expertise to be able to help monetize the benefit of being a leader in this electrification journey for large fleets. And it's those sort of factors combined means that our overall CapEx, therefore, should be a lower number on a go-forward basis. But clearly, in the shortest term, whilst we've been successful in accessing government funding, which is very important to us in order to be able to continue this accelerated journey, then that CapEx level is generally higher. And you can see it from our average fleet age being down sort of just over 8.8 years currently versus starting out 11 years as early as 4 years ago. Graham Sutherland: And then on the TOC access, I mean, as we said during the presentation, we expect both of them to be transferred by the end of full year '27. Nothing has been announced by the government, but that's a kind of working assumption at this point. And as Ryan said, on the kind of cash upgrade number that we put out there is really a function of better operating performance and a little bit more longevity on some of our contracts, which is a positive. And I think it is worth saying as well that the operational performance, particularly Avanti in terms of what they can control outside of infrastructure failures has been very, very good. It's a significant step forward over the last 12 months and all credit to the team performing well above the industry averages on those metrics. So in terms of cancellations. So that obviously has a benefit as well in the short term. So I think general, just improved performance and contract longevity is really what's driving that upgrade. Any further questions in the room? Okay. Any questions on the web? Ryan Mangold: Currently no questions on the webcast. So I'll hand back for closing remarks. Graham Sutherland: Okay. Well, look, thanks, everyone, for coming along today, and thanks for all the questions. It's been fantastic to deal with them. And then look, the company continues to push forward and grow its key financial metrics, and we intend to continue doing that. So thank you very much for your time today.
Operator: Welcome to the EON Resources Inc. announces Third Quarter 2025 Earnings Call. [Operator Instructions] It is now my pleasure to turn the floor over to your host, David Smith. Sir, the floor is yours. David M. Smith, Esq.: Good afternoon to everyone. I'm David Smith. I'm General Counsel for the company. Glad to join you this afternoon. I need to, as we get started, go to review our safe harbor statement regarding today's conference call. Please note that on this call, we will be making forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These statements are based on current expectations and assumptions, which are subject to risks and uncertainties. These statements reflect our views only as of today. They should not be relied upon as representative of views as of any subsequent date, and we undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements, in light of new information or future events. These statements are subject to a variety of risks and uncertainties that could cause actual results to differ materially from expectations. Further information regarding these and other risks and uncertainties, are included in the company's annual report on Form 10-K for the fiscal year ended December 31, 2024, and in other documents filed with the U.S. Securities and Exchange Commission. Today, I would like to introduce our presenters, the executive management staff of the company. You'll see on the slide, if you're participating in the webcast, Dante Caravaggio, he is our CEO; Mitchell Trotter, our Chief Financial Officer; myself; and Jesse Allen, who is our Vice President of Operations. To get started and to kick this off, I'd like to make a few points about the third quarter. It was a remarkable quarter. We had record net income of $5.6 billion. We retired all $41 million of senior and seller debt. We retired all preferred shares that had a redemption value of $27 million, and we increased shareholder equity by $22.7 million. In addition, we acquired a 10% override with the original seller group who had retained it when we purchased the Grayburg-Jackson Field and the company that owned it. Additionally, we were able to Farmout the San Andres formation for a Horizontal Well Drilling Program in which we retain a 35% working interest throughout that program. This is in addition to the retention and continued development of the formations other than the San Andres, which includes our current wells and producing programs. So those are unaffected by this drilling program, that will kick off next year. The thing to really note is this was all done and closed on September 9, and we took on absolutely no debt to achieve these results. So a remarkable time. The drilling program that I described will be over the next 5 years. We expect to drill as many as 92 wells under that program. We will continue to [ maintain ] that 35% working interest in that development. And there are multiple pay zones throughout our acreage, not just the San Andres, so we're going to continue to develop all that we can, in that respect. Our current production is typically out of the Seven River formation and our waterflood. We're seeing results already from our balance sheet being cleaned up with this transaction. Our ability to raise capital has really been enhanced -- it's really the look of a new company. Our phone has been ringing off the hook with opportunities. We're looking at acquisitions. We're always looking at enhancing reserves. But of course, throughout all of this, our main focus is to get the stock price up. That drives us every day. Those are the highlights. That's what strikes me in my role here as General Counsel as to what we're doing. I'm very excited about the future and really pleased to introduce Dante Caravaggio now to take it up from where I've described. Dante, go ahead. Dante Caravaggio: Well, thank you, David. And I'll just start off by saying happy Thanksgiving and Merry Christmas because this, I believe, is our last shareholder earnings call until next year, and I think the main thought we want to leave with everybody is, let's get the party started. So we really had a mountain to climb. We wanted to fulfill all the promises and commitments that we made to our shareholders. And really, as David said, on September 9, we really did that, and we didn't leave a mess. So the balance sheet is clean. The debt story is a good one. So we're attractive for investors that will help us raise capital, buy new properties and kind of off we go. And I think the other thought I'll leave you with is inventory. This deal we did with Virtus, we've got in there the potential of drilling 92 horizontal wells. You have to really look hard at a lot of oil companies much larger than us to find 92 drillable wells in inventory. Well, we've got them, and these are going to be big wells. The other thing we've got, again, I'll use that word inventory. We've got 350 producers sitting there at Grayburg-Jackson, waiting for us to stimulate them, perforate them and make them do better than they're doing. And we're now in a position where the cash is there, we can invest in these things and get that to go, and our primary focus with regard to that is conversion of another 150 SVR waterflood patterns. And by way of history, this field at one point was down to 300 barrels a day. It made it up to over 1,000 barrels a day primarily by converting current wells to SVR injectors and producers. Well, we're going to continue doing that same thing. The other thing we added to, I'll say, inventory of workovers, is the purchase of the South Justis field. So that field was down to 50 barrels a day. It's got 200 wells on it. We're going to activate those wells, and those wells, on average, make double or triple on a per well basis, the oil per day that Grayburg-Jackson does. So if I recap this, yes, we raised $45 million. We cleaned up the balance sheet with that. We sold an interest to Virtus to do some drilling in the San Andres, included in that is a $2 million fund, to do some experimental workovers to test their theory of completions in the San Andres. So that's going to give us a near-term kick in production. The Farmout, I think we discussed that, and then going forward from that, we've got an awful lot of work just to increase production, I believe, by 500 barrels a day without drilling over the next 6 to 9 months, not counting what Virtus is going to be, and that includes completing the water injection line, you're going to hear Jesse talk about that, continuing to bring on wells that are offline by using the 4 rigs that are running and then through stimulations. So with that, I'm going to turn it over first to Mitchell Trotter to talk about the finances. Mitchell Trotter: All right. Please advance to the financing highlights. Good. Well, thank you, Dante, and hello, I am Mitchell Trotter, the CFO, and I thank all of you for attending today. And as Dante and David so articulated, the September 9 funding resulted in major improvements to our Q3 financials. This highlight slide, it's the same one, that's in the funding call deck. We've been through it before. I have it there mainly for reference so that you have the deck, and it can help you understand as I go through the parts of the financials. The sources of the $40.5 million of volumetric/ORRI funding and the $5 million from the Farmout agreement, they have many parts with different GAAP treatments. So we'll kind of go through that a little bit, and the same thing for the uses where we retired the senior debt, we acquired the seller ORRI, and we retired those preferred shares, all those major impacts flew through the balance sheet and some of the income statement. So let's move on to the balance sheet slide, and then let me kind of show where some of the big parts are, on that. Again, this is a major improvement. I can't say it more times. But the slide you have here is a condensed version of what's actually in the 10-Q, and it best illustrates the impacts. So how do we clean up the balance sheet with respect to debt, which has by far the largest impact. Again, we retired $21 million of senior debt, and with that, we have a $1.5 million reduction in the debt that you will see comes through as a gain on the income statement, and I'll explain that in a little bit. We also retired that senior debt of $15 million with the seller, and it also eliminated a $5 million accrued interest, and we did all that for $7 million, thus creating a $13 million gain that you'll also see when we go through the income statement in a minute. Do note that the convertible notes, they're still there, but we reduced them to $5.4 million from the original $9.8 million that was private loans and warrant obligations by the end of the quarter. So the end result of all of this cleaning up of debt is, we only have $1 million left of current debt and the other $4.4 million is long-term debt, and we have a huge drop in our accrued liabilities. So that was all good. Now shareholder equity, that's also been transformed as well. The preferred shares, as David stated, that had a $27 million redemption value and it was retired for only 1.5 million common shares, that we announced back on September 9. And this eliminated all the minority interest. So our equity is cleaned up with respect to all the miscellaneous things. The end result of our shareholder equity, the end result of the financing, the elimination of the debt instruments, the related gains and all of that flowing through, our shareholder equity went up by over $22 million from Q2 to Q3. So with that, let's go ahead and move on to the income statement slide, please. And then this, too, is a condensed version, just like the balance sheet to hopefully let you see things a little bit better. And this, again, is a reset of our P&L going forward. The Q3 net income was the highest level to date of $5.6 million for the quarter. While most of that net income came from below the line, those gains were definitely earned by all the hard work we did. And David did a really good job of articulating how we got there. So what does that mean below the line? There's that $13.4 million of gain. That's a combination of the seller note reduction, how the various ORRIs and all the related costs relating to that are recorded for GAAP purposes. And then there's that $1.8 million gain, and that comes from the senior debt retirement plus a gain from settling an old fee. Now offsetting these gains, there's $1.1 million of onetime expenses that GAAP has us, include up in the G&A versus down below the line. GAAP retired required this grouping of the $1.1 million onetime charges in G&A, which personally I think is misleading, but that's where it is. The actual recurring G&A expenses continue to decline quarter-over-quarter, and that's a huge improvement. That's what we've been talking about all year long, and we're pleased to say that. Another cost reduction, as we stated on the Funding Call, is a decrease of interest expense of up to $500,000 a month. Most of the interest for September was eliminated with the September 9 funding, and you can see that in the reduction of about $1.7 million down to $1.2 million interest expense for the quarter. And as always, I will tell you, we'll take questions at the end of this presentation and willing to have individual discussions as well. With that, reach out to Mike Porter, our Investment Relations guy, and we'll do that. We've done that plenty of times with many of you. So with that, I do want to move on to Jesse to review operations. So please advance to Jesse's slide. Jesse Allen: Thank you. Yes. Good afternoon. I'm Jesse Allen, VP of Operations. And today, I'll talk about some of the third quarter highlights from an operations viewpoint, in other words, our daily operations. And then I'll make a few comments about the San Andres Farmout to Virtus and some of those details. So with that, safety. That's always foremost one of our -- the most important things that we can do is make sure that all our employees are safe. And as a matter of fact, we've had no reportable incidents in this quarter, and we've not had any reportable incidents since we took over operations back in November of 2023. Combined production remains consistent above 1,000 gross barrels of oil per day in the 2 fields, the Grayburg-Jackson field and our South Justis field. Currently, we have 4 well service rigs operating across both fields. We have 3 rigs in the Grayburg-Jackson field, which is just outside Loco Hills, New Mexico, and then 1 rig in the South Justice field area, which is just outside of Jal, New Mexico. One of the big projects that has been ongoing is the installation of 2 miles of injection pipeline. We're in the pressure testing mode right now and hooking up of the injection wells and each of the injection well headers. And so that's ongoing currently. And then we get to the biggie here, which is the San Andres Farmout to Virtus, which we can't say enough it was a really good deal for both parties. We signed that on the 9th of September of 2025. A few of the really big highlights are that horizontal drilling is scheduled to begin there in 2026, and depending on the length of time it takes to get the BLM permits, that would be the Federal Drilling Permits, we think it will probably be in the second quarter of 2026. Now I need to let you all know that on our website, which is eon-r.com, you can find our horizontal drilling package or deck that details a little bit of what I'm going to talk about today. And on our site, you go, first, on the home page, you click on operations, then click the Grayburg-Jackson Field and then page down to the Horizontal Operations and then click on Horizontal Drilling, and that will get you that presentation. But a few of those highlights. As a result of our Farmout to Virtus, we got a cash consideration of $5 million. The post-deal working interest will be 65% Virtus and 35% for EON. The plan is to drill 10 to 20 wells per year for the next 5 years. Initial production from those wells will be in the range of 300 to 500 barrels of oil per day per well. That's what we anticipate, and the cost of each of those wells will be in the $3.5 million to $4 million range. So with that, I'll turn the call back over to Dante Caravaggio, our CEO and President. Dante Caravaggio: Yes. Thanks, Jesse. So what's next? Some of you may ask, are we a one-trick pony? Is this third quarter going to repeat? Was that a onetime deal? And the answer is no. We have not rested on our laurels, since we got the deal done, and maybe sometimes we got to get some stuff out of David, so we would sit on them. So I have to work that out there, and we're not happy with our costs. We want to cut about $200,000 a month out of our lease operating expense and another $200,000 a month out of the G&As. And as Mitch said, we had a lot of onetime charges that hit us in Q3 that caused those costs to kind of go up and they're gone. And you might say, what was it? Well, we had a lot of help. We had a lot of brokers. We had a lot of attorneys, and they did a fabulous job. But now they're gone. They're off the payroll. So back to what's next? And it's back to the inventories that I talked about before. We got 92 wells we believe we can drill between the 2 fields we've got. We've got 500 producers that we can do workovers on, and we can't get that all done in 1 year or even 2 years. But over 3 years, we're going to be busy. And what that does is, increases production, and a lot of oil fields are in a decline mode. And people will use the term, you're buying a melting ice cube. And it's hot. It's hot here today in Houston, Texas, but we're not that. We are a company rich with opportunity, and we are raising money to make sure we get this and get it going, and every quarter, we expect to see increased production in an increasing amount. And so one of my slides here, my top bullet says, "We're going to improve financials with increased production through 2026". Well, we can see all the way to 2030. These numbers are just going to keep going up well beyond 2030. That's the magic, I think, of what we've got. Near-term production increase, we got to get the waterline energized. Jesse talked about that. We think that within 90 days, we're going to get a kick in oil production because our waterflood is [ water star ] because this 4-inch supply line is not running. And it's been that way for a year. And frankly, you haven't seen the effect of it because Jesse has been so good with stimulating wells, keeping them all going. You just haven't seen that effect. When we kick that thing in, it's going to be a real boost. I've got here, we're going to do a material acquisition the first half of next year. I'm just going to say we see big numbers without taking on debt and without selling any shares, where we can be creative to buy properties. And we are looking at these. We cannot tell you about it because it's top, top secret, but I can tell you we're working on it diligently to the point of how we're going to operate, how we're going to raise the funds, how do we do this without diluting shares, how do we do this without taking on debt? And we've got most of those questions answered. So it's really going to be fun when we can talk about it. The horizontal drilling should commence in the second quarter of next year. That's going to be a blast. You're going to get a glimpse of that when Virtus does some workovers, and we expect those workovers to happen in the next 60 days, and we'll do our best to report that, although that might be kept secret if it's too good because these guys are -- they've got something good and they're under our hood. So it's actually a battle to share much of that with everybody. The downside, oil prices are weak. We'd like them to stay above $60, and we're encouraging everybody out there to drive to your destination, fill it up with premium and stay under the speed limit and be safe. We're mostly debt-free, that helps us weather the storm. If we've got low oil prices and lower income, we can offset that with a savings of close to $400,000 a month that we don't pay an interest. So that expense is gone. We also can help that by just increasing production. So we're in a good position, if the worst happens and oil prices drop. Gas prices are increasing. So that's a good thing, but we struggle to sell all our gas. The midstream buyer has struggled keeping their plant running, and we're looking at options. And we've got some shareholders reaching out to us, which we thank, with regard to using gas-fired turbines to generate power that could save us $70,000 a month. We could also use the same turbines to power up data centers or to power up Bitcoin mining. So all those things are being done by our competitors. And we're not -- we really don't have the funds to experiment, but we are going to piggyback a proven solution. So with that, I'm going to just wrap it up and say we're excited about where we're at. We're no melting ice cube, and we've got great inventory to certainly carry us through the rest of this decade. And with that, I'll turn it back over to David and Matt. David M. Smith, Esq.: And this is David here. Thank you, if you will go forward with a question-and-answer period that we've arranged. Operator: This is David here. If you will go forward with the question-and-answer period that we've arranged. Operator: [Operator Instructions] Your first question is coming from William Peters. William Peters: Great balance sheet cleanup. Your stock seems to be [indiscernible] in the rough. My question was answered already, but I just wanted to reaffirm supplying energy to data centers, AI, mining, et cetera. It seems like a great future for the company, if they could form some type of affiliation with somebody. I know you said money was tight, but to have that correlation would be great for the future. Dante Caravaggio: William. Yes, thank you. The only note I'd say there is we just don't know enough yet. We're dabbling in it. We don't have a proposal, but we're asking for proposals, for people who know how to take our gas and monetize it. So thank you for bringing that up. Operator: [Operator Instructions] That concludes our verbal Q&A. [Operator Instructions] I will now turn the call over to Mitchell Trotter for remaining questions. Mitchell Trotter: All right. Thank you, Matthew. The first two questions are very similar, and I think we've answered, but I am going to read through them or paraphrase them, so Dante can answer a little bit more, if needed. Just so the questions are to you, Dante. When do you expect the first horizontal drilling to start up? And with respect to the future and exploring the reserves that we've identified in the past and opportunities with this drill? Dante Caravaggio: Yes. So once a month, Jesse or I are meeting with Lance Taylor and his team, and they've pretty much picked out the locations where they want to go, I'll say the first dozen. So the steps they have to go through is, go ahead and get those permitted, and as a lot of folks know, the BLM was shut down and the Trump Administration is saying, he's going to put the pedal to the metal to get drilling permits approved. But my best guess, and I base it on the feedback I have from my colleagues at Virtus is that the permitting should get into the Feds this year and then hopefully, it gets approved the end of first quarter and then maybe the end of second quarter next year, we're drilling. We should see results, we think, in June or July of '26. And by the way, the plan is to drill 10 to 20 wells a year, starting out with maybe 6 wells start out, something like that. And these things are not decided yet. And we do want a healthy oil price above $60 a barrel, it's a no-brainer. Below $60, we have to do some hard thinking. So that's the best indication I can give you. Mitchell Trotter: Thank you, Dante. The next question, I will say is for me. And the question is that EON warrants, they have two different expiration dates at two separate brokerage accounts. Any idea why? Well, there is only one expiration date, and that's 5 years from when we became the public company in November. We have found that more than two brokers have, whatever they keyed in the wrong date into people's accounts, as to when the expirations of the warrants go. So it is November of '28. So we can't control the brokers, but that's what they've done. We've reached out to them. Dante Caravaggio: Why don't we do this on that one, Mitch, just because -- that -- I want to run that question by Matt, our SEC Attorney and just double check that because -- and I'm just saying this from memory, and I apologize guys for thinking on a call like this. But -- some warrants were available by investors before we went public, and I don't know if the dates did cascade in their, depending where we bought them before we went public. Mitchell Trotter: They're all gone. This is the IPO warrants, all from the initial IPO. The brokerage accounts have admitted that they've got it wrong. So -- but we will reconfirm the date, and I think that's important... Dante Caravaggio: Because I'm confused, and I think it's an excellent question. Let's just put it on the website so everybody knows, including me, because -- yes, it's not clear in my head. So I apologize, guys. Mitchell Trotter: Yes. No, no, that's fair. And just so everyone knows, we have an FAQ under our website on the Investor page. I think it's under the Governance or the Documents that's up on the right. We'll just add that FAQ to it and so that we can then answer it there, so people can go look at it. Okay. Good point. So okay. I think, Dante, you've answered this one, but I'll give it to you again. At what barrel price does EON Resources start making money? Dante Caravaggio: Well, we make money now. I mean, really, if you look at what we're doing, we're in the red about $100,000. Mitch and I look at this. Today, we're in the red about $100,000, and I've asked Mitch, who controls G&As and Jesse, who controls lease operating expense to each cut $200,000. So if we -- and they've got a plan. So I believe we're profitable right now at today's oil price. Certainly, if we can get oil prices to go up to $65 or $70, then we don't have to work so hard, and certainly, if we buy some additional acquisitions, especially ones that don't cause the G&As to go up, which is what we believe is the case of what we're looking at, then we really get a shot in the arm. So I'm looking at really high-quality, highly profitable properties that will help us, but we don't really need anything to be profitable today. We just need to be a little better at controlling our costs, and it's well within our range. Remember, we got rid of a $700,000 principal in interest payment. So we've got lots of room to work, and we were still paying down debt. But sadly, we leaned too hard on the ELOC, which created more shares in circulation. So we are doing our best to not do that at all and make a go of it, with just the production coming out of the ground, controlling our costs and adding one or two acquisitions, hopefully, in the next 6 to 9 months, something like that. I hope that answers the question. Mitchell Trotter: Thank you. And let me give this one to Jesse. What issues are you facing selling the gas? Jesse Allen: Well, let's see. We're currently making about 600 to 700 Mcf per day or 700,000 standard cubic feet per day to a plant that's -- it's an older plant, the Maljamar Plant, and they've been doing a lot of maintenance recently on their gas treating trains and then they've been putting in some new lines. So it's not only us that are being curtailed. It's also all the other operators that produce into that plant. The operator of the Maljamar Plant, they've actually got another plant that they just got online and they're lining that out now. And so we anticipate that in the not-too-distant future, we shouldn't have this issue of getting rid of all our gas, and I'm sure that the genesis of that question probably came from, well, once you start drilling the horizontal wells and you're making a lot more gas, what are you going to do with that gas? So that gas will go to that same plant. But by that time, they should have worked out all the maintenance issues that they're having to perform. And then some of that gas will go to the new plant. And so we don't anticipate in the future having any gas sales issues and getting rid of our gas. I hope that answers the question right there. Mitchell Trotter: It sounds like it does. Okay. This one, Dante, is for you. Congratulations on the great third quarter with regards to the first 3 wells by Virtus. We'll be drilling by mid-'26. In your agreement with them, are they required to drill at least these first 3 wells regardless of the oil price at the time? Dante Caravaggio: It's really their option when to drill. Those first 3 are solid gold to us because we call it a carry. We don't have to pay a dime. They front all that money. But I believe they're going to drill as long as oil prices are -- as long as oil prices don't collapse, I believe they're going to drill. So I mean, it is $55 okay? Is $50 okay? Is $45 okay? I don't know the answer to that, but they have 5 years to drill 18 wells to hold the rights to our San Andreas formation. And we just feel confident. I mean, I'll just have to give my outlook on oil prices. If oil prices decline much below $60, it's not attractive for anybody to drill. And so what happens is the drillers and the oil producers all shut down. And then what happens? The fields just start declining. And so oil prices will start going up as oil production drops. So now oil production drops, oil prices go up, drilling starts picking up. So it's kind of a self-controlling loop. If oil prices go down, drilling slows down, decrease in production increases, U.S. slows down producing oil, oil prices go back up. Then as it goes up, drilling picks back up, production goes back up, oil prices come down. So I think the search for equilibrium is what everybody is guessing. The number is probably going to be slightly above where people would drill. And people -- frankly, they're reluctant to drill at $60. Our formation is pretty good. So we feel we have healthy economics at $60. A lot of people can't drill without $70. So if you said, where will this sort of level out and where will it be? And how does all this stuff kind of work? I mean, I feel like oil prices are going to hang in there, $60 to $70 with some excursions below that range and above that range. And that's the best I can tell you. I hope that answers your question. Mitchell Trotter: Okay. We have time for a few more questions, a couple more, but let me -- this one is for me. What convertible notes were redeemed and which have not been redeemed? And how did you decide which in the order to redeem. Going back in time, we've talked about converting the private loans and the warrant obligations into convertible notes all the way back into the end of '24, and as we have been stating really every quarter, our intent is to try to clean up all of this by the end of this year, at least with respect to the non-insiders, and that's what we've just about done. All of these private loans came from people that were close to us when we were a SPAC and had no source of income. So that's what got us across the line to begin with. So we have redeemed to date all now, all but $250,000 of non-insider in the last under $2 million is insiders, and we can't do them right now anyway. So that's kind of how we pick them and who's redeemed and who's not redeemed. Dante Caravaggio: Yes. I want to add something to that. As a management team, we take great pride that nobody who has invested with us has lost a dime. And we view that as a sacred trust with our investors and shareholders. And for those that hold the shares, trust me, I'm one of those that paid north of $2 for these shares. And I'm not going to rest until this stock is really, Joe and I talked about it, $100 a share. Now am I going to get that done this year? Probably not. In fact, I almost bet I won't get that done this year. But I think before the end of the decade, that's my goal. I'm just going to say that. Mitchell Trotter: Okay. I've got about three more questions that I think we have time for. The next one actually, next two will be for me, but the first one is very close to that. What is the dilution risk either from the current notes converting or other things? And on the $250,000 of shares, that's -- excuse me, convertible notes, that's at $0.50 a day, that's about 0.5 million shares. So it's not huge in the grand scheme of things, though we are trying to -- and as Dante had alluded to, we have the ELOC that we've talked about for -- since October of '22, and we use it very sparingly and small amounts not to drive anything. And so that's kind of the dilution risk. And when we look at these acquisitions, and this is anything else, we look at acquisitions, we're looking at the proper balance of debt whether its volumetric funding or equity, if it's accretive, if it makes sense. So like the mean 5 shares that we took out the preferred shares, that made sense because it took out $27 million of redemption value for really a minor amount of the number of shares that could have been converted, I mean. So that's how we address that. The next one is also for me. What is the '26 crude oil price value that you anticipate to hedge? We have hedged 1/4 of our production through the first quarter of '26 at $62.50, and we watch it, and we'll probably get up into the 50% max 70%. Now, if it goes crazy, we'll get closer to 70% -- oil price goes. But we watch it. I check it every day. And if the price goes up enough to lock in more over $62.50, I may, but I really want it to be much higher than that. But we're going to have to watch it, the market, what's going on at the time, what we've got going on at the time and to make certain that we are properly covered. We don't have any bank covenants or anything like that, that requires it. And so that's where we are with respect to the hedging. And this will be a good one for you to finish, Dante. So this will be the last question, I believe. An acquisition by a big player, can that be considered? Dante Caravaggio: I don't understand the question. An acquisition by a big -- can we be acquired by a big player? Mitchell Trotter: I'm guessing that's what it's saying, but are we willing -- I take it both ways. Are we to be swallowed or would we swallow somebody else? Dante Caravaggio: Yes. Okay. I'll handle that. I mean, for $1 trillion, we'll sell for $1 trillion. The issue is the marketplace is very sophisticated. They're not going to give us what we're worth. And almost very few people will pay us what the value is of the oil in the ground. They will pay us for the value of the oil barrels coming out of the ground that have been doing so for the last, say, year or 2. So with us, where we have a huge inventory of drilling and workovers, nobody is going to pay us what we're worth. So I don't think -- and we're not going to sell unless somebody paid us what we're worth. So I think the answer is for bargain basement hunter, we're not for sale. For somebody that wants 92 wells to drill and wants 500 wells to work-over and a management team that knows how to do things without selling much stock and without taking on debt, yes, for the right price, sure. But I think we're way better off serving our shareholders by doing what we've been doing, keeping our promise, buy more quality assets with a lot of inventory baked in, paying them nothing for the inventory, paying them a fair price for their PDP producing, developed, producing proven reserves and getting a crazy good return on our money for our shareholders. So we think the future is bright, and we think there's no better place to be. We're all motivated. We've had almost no turnover in our management ranks. We think our employees are happy and they're working safe. So you add all that up, and I think we're a good bet. So I'll turn it back over to Matthew to wrap it up, please. Operator: Thank you. And everyone, this concludes today's event. You may disconnect at this time, and have a wonderful day. Thank you for your participation.
Operator: Thank you for standing by, and welcome to the Amer Sports Third Quarter Fiscal 2025 Earnings Conference Call. [Operator Instructions] I'd now like to turn the call over to Omar Saad, SVP, Capital Markets and Investor Relations. Please go ahead. Omar Saad: Welcome, everyone. Thanks for joining Amer Sports Earnings Call for the third quarter of fiscal year 2025. Earlier this morning, we announced our financial results for the quarter ended September 30, 2025, and the release can be found on our IR website, investors.amersports.com. A quick reminder to everyone that today's call will contain forward-looking statements within the meaning of the federal securities laws. These forward-looking statements reflect our current expectations and beliefs only. They are subject to certain risks and uncertainties that could cause actual results to differ materially. Please see the safe harbor statement in our earnings release and SEC filings. We will also discuss certain non-IFRS financial measures. Please refer to our earnings release for important information regarding such non-IFRS financial measures, including reconciliations to the most comparable IFRS financial measures. We will begin with prepared remarks from our CEO, James Zheng; and CFO, Andrew Page, followed by a Q&A session until approximately 9:00 a.m. Eastern. James will cover key operational and brand highlights, and Andrew will provide a financial review at both the group and segment level and also walk through our guidance for the full year 2025 as well as an initial high-level sales and margin outlook for 2026. Arc'teryx CEO, Stuart Haselden; and Salomon's CEO, Guillaume Meyzenq, will join for the Q&A session with that, I'll turn the call over to James. Jie Zheng: Thanks, Omar. Amer Sports' strong momentum continued in the third quarter as our unique portfolio of premium technical brands continues to create white space and take share in sports and outdoor markets around the world. All 3 segments performed extremely well, led by exceptional Salomon footwear growth and Arc'teryx omni-comp reacceleration and solid growth from Wilson Tennis 360 and our Winter Sports Equipment franchise. We delivered strong results across the P&L, including 30% growth, 130 basis points of adjusted operating margin expansion and more than doubling our adjusted EPS. Our Performance was led by very strong growth and profitability in Outdoor Performance, led by Salomon footwear and Technical Apparel led by Arc'teryx. We also had a solid contribution from the Ball & Racquet segment, led by Wilson Tennis 360. All 4 regions accelerated in Q3 and achieved double-digit revenue growth, and that strong momentum has continued into Q4. We believe Amer Sports is a uniquely positioned company within the global sports and outdoor space. Our specialized, highly technical brands serve the premium sports and outdoor market, which continues to be one of the healthiest segments across the global consumer landscape. Several factors give me confidence for our near, medium and long-term outlook. First, we own a unique portfolio of premium innovation-driven sports and outdoor brands. Second, Arc'teryx is a breakout brand story with leading growth and profitability for the outdoor industry driven by its disruptive direct-to-consumer model. Third, Salomon Footwear has unique products and brand positioning and a very strong demand, but still a small share of the global sneaker market. Fourth, Wilson Equipment and our Winter Sports Equipment brands already have leading market shares and will deliver slower long-term growth, except for Wilson Softgoods, which we believe has significant long-term growth potential. And fifth, we have a strong differentiated platform in Greater China, where we continue to deliver best-in-class performance across our 3 big brands. I want to take a moment to address September fireworks incident. We regret our involvement and are working closely with the local authorities to address the impacts. We remain deeply committed to our communities and consumers and are taking actions to ensure we do better going forward. Before I turn it over to Andrew Page, allow me to briefly recap key brand highlights from our 3 segments, starting with Technical Apparel, which is led by Arc'teryx. Arc'teryx delivered another quarter of broad-based strength across regions, channels and categories, especially footwear and women's. We are encouraged by Technical Apparel's continued momentum in the direct-to-consumer channel, where the omni-com reaccelerated to 27% from 15% in Q2. We envision Arc'teryx as a truly global brand with significant runway to grow in all major markets, and we are particularly encouraged by the meaningful Q3 acceleration in North America and Europe as well as continued strength in Asia and China. Strong Women's momentum continued in Q3, growing 40% and was one of Arc'teryx' fastest-growing categories. We continue to see a large opportunity to serve women in the outdoors in a different way, focusing on pinnacle design and performance. The new women's Leutia Pant was a standout performer in the quarter and was a top 5 model across all U.S. epicenters. Our women's climbing pant, the Clarkia, also continues to be widely popular since its launch last year. For Fall-Winter 2025, we are expanding our focus on color and have launched new models like the Nia pant and women's-only shell jacket styles like Emaris and Altira. We continue to experience rising brand awareness and affinity with women in the U.S. and Europe, as we have improved fit, style and function. As we discussed at our recent Investor Day, Women's will represent approximately 25% of global Arc'teryx sales in 2025, and we expect it to become 30% of sales by 2030. Footwear also continues to be a key growth driver with 35% growth. Shoe models launched in the fall included the Konseal, a modern take on the classic approach shoe, which is light, grippy and built for long technical missions. We also launched Norvan Nivalis, a winterized evolution of the Northern LD4, delivering high-performance running in cold conditions with a bold, modern silhouette. Looking forward, Arc'teryx has an exciting pipeline of shoe launches for next year, and we continue to believe footwear will be a large and profitable growth avenue for Arc'teryx. Footwear will represent approximately 8% of global brand sales this year, and we expect it to reach 13% by 2030. Our Veilance sub-brand is still small, but grew strong double-digits in Q3 and we are excited for the future potential of this brand. Veilance is expanding into new high-end wholesale partners in North America, and you can now find Veilance in Nordstrom in the U.S., and Holt Renfrew in Canada. Veilance will represent approximately 5% of global brand sales in 2025, and we expect it to reach 7% in 2030. Circularity and ReBIRD continue to be at the heart of our brand. We now have 32 ReBIRD centers, which supported our successful September trade-in initiative, whereby guests received a 30% credit for returning their used Arc'teryx jackets. I would also like to mention Peak Performance, the other brand within our Technical Apparel segment. We are pleased to share that Peak Performance is seeing stabilizing sales, and profitability in its core European business as well as early green shoots in North America. We introduced Peak to REI in September, and we are also opening a Vancouver Flagship store in the previous Arc'teryx space in time for this Winter season. Moving to the Outdoor Performance segment, which was led by another outstanding quarter from Salomon Footwear and Apparel, as well as a healthy performance from Winter Sports Equipment. Salomon footwear momentum continues across all regions, especially Asia, with strong demand for both Sportstyle and Performance products. In addition to sneakers, bags and socks are also growing strongly across regions. There are several ongoing factors that give us confidence that Salomon footwear is well positioned for significant profitable growth in the years ahead. Number one, global Sportstyle momentum continues. One of Salomon's unique strengths as an outdoor brand, is how well we are connecting with younger consumers, especially women. Our Sportstyle offering is critical to Salomon's unique position as the modern outdoor sneakers brand, resonating with women in a way traditional outdoor brands have not. Second, our performance and running lines are also having great success. Our GRVL franchise is unlocking the run category for Salomon like never before. Salomon is gaining traction in the Run Specialty channel in North America and EMEA. And even China, which has been a Sportstyle-centric market is seeing traction in Performance Products. We are also seeing a benefit from improving capability to launch globally coordinated marketing campaigns to support our Sportstyle and Performance launch. Third is Salomon's continued amazing brand heat in Greater China and Asia, where we believe we operate the most productive and profitable sneaker shops in the industry. Beyond Great China, Salomon is also experiencing surging demand in Korea and Japan, both large sneaker markets. Fourth, our epicenter strategy is working. Our strategy to open a handful of brand stores alongside strategic elevated wholesale distribution in key metro markets is critical to elevating Salomon's presence and awareness globally. Epicenter cities include Paris, London, Shanghai, Beijing, New York, L.A., Milan, Miami and more to come. Fifth, we are seeing accelerating demand in Europe, Salomon's home market. Salomon is experiencing strong pull demand from consumers, which drives strong reorders, preorders and sell-through for both Sportstyle and Performance. Sixth in North America, which is still a much smaller sneaker market for us compared to Europe or Asia. It's growing at a solid double-digit rate, but under the surface. We can see that it's growing even faster. We are still exiting certain retail and e-com channels that work right for Salomon, while we simultaneously ramp up our North America direct-to-consumer footprint and wholesale expansion with the key strategic partners. Lastly, as we continue to elevate Salomon's brand awareness, we are excited about the upcoming Milano Cortina Olympic, where Salomon is a premium partner, outfitting all volunteers. This will be a great moment for the brand in its home market. I also want to mention our Winter Sports Equipment franchise, which had a very strong Q3 with healthy shipment to start the season and solid order books for the winter season overall. We were thrilled by the outstanding performance from Atomic athletes in the World Cup in Sölden, Austria. The event represents a great start for the season in Europe with record attendance and the broadcast viewership, which is a positive indicator of the engagement and the passion people in Europe have for winter sports. In 2025, Winter Sports Equipment is expected to represent only 28% of the outdoor performance segment, down from 46% in 2022. Moving to Ball & Racquet highlights. Ball & Racquet had strong sales in Q3 with 16% growth, driven by continued strength in Softgoods and racquet sports. Our Tennis 360 products continue to resonate very well with consumers from performance racquets to tennis apparel and footwear. Wilson Softgoods continued its explosive growth, more than doubling in the quarter with very strong growth across all 3 major regions. The brand has some big moments at this year's U.S. Open, both on and off the court. Wilson hosted brand activations across New York cities during the tournament, including our 4-day Wilson Tennis Club pop-up in Soho and our on-site U.S. Open shop again posted record traffic and sales. On court, Aryna Sabalenka won her fourth singles titles at the U.S. Open playing with Wilson Blade v9. On the product side, in July, Wilson unveiled Ultra v5. This is the most versatile Ultra racquet yet designed for intermediate to advanced players seeking both power and precision. Beyond the Tennis 360, we saw slight growth in golf, driven by EMEA and the Dynapower line and Infinite putter. Baseball was essentially flat, as growth in bats was offset by a decline in gloves and gear. Inflatables was down due to continued challenging market conditions and tariff-driven price increase. U.S. retailers and consumers are showing some price sensitivity in this category, and we plan to introduce a slightly lower price point, premium ball next year to make sure we are well positioned at the sweet spot on the price spectrum. With that, I will turn it over to Andrew. Andrew Page: Thanks, James. The headline is that our strategy is working. Our brands are firing on all cylinders, allowing us to exit Q3 with momentum and setting us up to enter 2026 with confidence. Before I get into Q3 results, I want to personally thank our more than 13,000 employees around the globe for their obsessive focus on the consumer and continued push toward operational excellence. These results are only possible through their efforts. Now to our results. Salomon footwear continues to add a strong second leg of profitable growth to Arc'teryx' already exceptional trajectory, significantly elevating the financial profile and long-term value creation potential of the Amer Sports portfolio. All 3 operating segments delivered both sales and margin ahead of expectations in the third quarter. And given our strong third quarter results and continued momentum, we are raising our full year revenue, margin and EPS expectations. Amer Sports grew sales 30% in Q3 on a reported basis or 28% ex-currency. The strong group sales performance was led by Outdoor Performance, followed by Technical Apparel. Ball & Racquet sales also accelerated and delivered double-digit growth. By channel, the group continues to be driven by direct-to-consumer, which grew 51% led by Salomon in Greater China and APAC. Wholesale grew 18% at the group level, also led by Salomon. Growth accelerated across all regions. Regional growth was led by Asia Pacific, which increased 54% and China, which grew 47%. EMEA accelerated to 23% and the Americas accelerated to 18% in Q3. Turning to profitability. Adjusted gross margin increased 240 basis points to 57.9% in Q3, primarily driven by favorable channel, geographic, product and brand mix. Gross margin also benefited by approximately 50 basis points from onetime inventory reserve adjustments. Adjusted SG&A expenses as a percentage of revenues was flat year-over-year and represented 42.3% of revenues in Q3. The Technical Apparel SG&A leverage on strong growth was offset by slight deleverage at Outdoor Performance and Ball & Racquet due to ongoing investments in Salomon Softgoods and Wilson Tennis 360. Led by strong gross margin expansion, we generated 130 basis points increase in our adjusted operating margin from 14.4% last year to 15.7% in Q3. Corporate expenses were $38 million, up from $23 million in Q3 of last year. D&A was $119 million, which includes $43 million of ROU depreciation. Adjusted net finance cost in the quarter was $18 million, which comprised primarily of $26 million of interest expense, partially offset by $7 million of FX gains on the remeasurement of certain monetary assets. In the quarter, our adjusted income tax expense was $68 million, which equates to an adjusted effective tax rate of 26%. Adjusted net income in Q3 was $185 million compared to $71 million in the prior year period. Adjusted diluted earnings per share was $0.33 compared to adjusted diluted earnings per share of $0.14 last year. Now turning to segment results. Technical Apparel revenues increased 31% to $683 million, led by Arc'teryx. Growth was fueled by 46% direct-to-consumer expansion, including a reacceleration in our omni-comp to 27% from 15% in Q2 of 2025. Technical Apparel wholesale revenues grew 11% Regionally, the Technical Apparel growth rate was led by Asia Pacific, followed by the Americas, Greater China and then EMEA. All regions grew strong double digits. Arc'teryx stores are critical to the brand's growth, especially how we engage with local consumers and community. Our stores include a mix of different formats ranging from multilevel large-scale Alpha flagship stores to small format very distinct mountain town shops. In Q3, excluding the recently acquired stores in Korea, which I will discuss shortly, Arc'teryx opened 4 net new stores with 10 openings offset by closures of 6 legacy locations as part of our ongoing strategy to optimize the quality and productivity of our store fleet. New store openings included the Arc'teryx flagship in Vancouver at Robson Street. Arc'teryx also opened brand stores in Manchester, U.K.; Canberra, Australia and Takanawa, Tokyo. We have opened 12 net new stores year-to-date, and we continue to plan to open approximately 25 net new Arc'teryx stores for the full year, with the largest number coming in North America. Our store opening plan incorporates a similar level of gross new stores as in 2024, partially offset by the closure of certain outlets and suboptimal locations. In Greater China, we continue to focus on optimizing Arc'teryx' retail footprint. This year, we will have slight net store closures, including some legacy partner doors. However, we will still grow our owned store count and our overall square footage in China with larger format, higher quality and more productive locations. A good example of this is our upgrade of the original Arc'teryx flagship in Shanghai at the Alpha Center, which will reopen this month after expansion and renovation. Looking ahead to 2026, we are planning for Arc'teryx to have net store openings in China after years of rationalizing the store fleet in the region. In North America, I would highlight our second New York City Alpha store, which recently opened on Fifth Avenue at Rockefeller Center. This store is the most pinnacle expression of the brand in the U.S., and we are encouraged by the strong sales in the first few weeks. With nearly 12,000 square feet, it's one of the largest stores in North America and a bold step forward in Arc'teryx' retail expression, designed to educate, inspire and connect more people to the mountain through immersive storytelling and product innovation. In Q3, we also closed our asset purchase agreement with Nelson Sports, Arc'teryx' distributor in Korea since 2001. This deal effectively converted 46 partner stores into our own fleet, which include a number of small format shop-in-shop locations. The revenue and margin impact in Q3 was negligible. Bringing Korea in-house will benefit our top line and operating profit dollars, as we convert from wholesale partner revenues to DTC revenues. Bringing Korea in-house will have an immaterial impact on both the segment and group operating margin. This acquisition will contribute approximately $25 million of incremental sales in Q4. On an annualized basis, Korea is expected to generate approximately $120 million of total sales at retail in 2025. Beyond 2025, we believe Korea is a large, high potential market for Arc'teryx, given its strong consumer affinity for the Sports & Outdoor category and premium global brands. Technical Apparel adjusted operating margin declined 100 basis points to 19.0% as SG&A leverage was offset by approximately 125 basis point headwind from a timing shift related to government grants. Moving to our Outdoor Performance segment, which saw revenues increase 36% to $724 million, driven by very strong performance in Salomon footwear, apparel and bags and socks. By channel, Outdoor Performance DTC grew 67%, led by new doors and higher productivity across markets, especially Greater China and APAC. Outdoor Performance achieved an impressive 33% omni-comp with strength in both stores and e-commerce. E-com is growing across regions, driven by higher traffic. Wholesale grew 26%, driven by strong sell-through and reorders in softgoods. Regionally, the Outdoor Performance growth rate was led by Greater China and APAC, followed by accelerating growth in both EMEA and the Americas. The popularity of Salomon footwear is inflecting globally, and we are well positioned to fully develop this unique opportunity over time. We believe we have very significant growth opportunities in all 3 major consumer regions and have the right talent and team structures in place to take a meaningful share of the global sneaker market. In Asia, direct-to-consumer continues to be the critical growth channel for Salomon, led by our highly productive Salomon compact shop format. We opened 19 net new Salomon shops in Greater China this quarter, including both owned stores and partner stores, bringing our total count to 253 doors. We are on track to reach approximately 290 Salomon shops in Greater China by year-end, including owned and partnered doors. We recently opened our second Salomon flagship in Shanghai, a 7,300 square foot pinnacle expression of the brand located in the French Concession district known for its boutique shopping. The 3-level store offers a more immersive experience for consumers and has performed very well in its first few months. In APAC, we opened 12 new Salomon stores in Q3, 6 in Korea, 4 in Japan and 2 in Australia. Our overall brand awareness and demand for Salomon footwear is rapidly growing across Asia. In Americas, Salomon softgoods grew strong double digits in Q3, and we continue to lay the groundwork to support significant future growth. Our first U.S. store in New York City continues to show incredible traction with consumers, and we are on track to operate 4 stores in Greater New York by the end of Q1 as well as continue to expand our presence in key wholesale accounts. New locations in Q3 include Woodbury Commons in New York, the trendy Bucktown neighborhood of Chicago. And later this week, we're opening our second New York store in Williamsburg, Brooklyn. And I also want to mention our first Los Angeles store on Melrose Avenue in West Hollywood, which opened at the beginning of Q4. The opening has been a huge success with very strong brand buzz in the area, high traffic and long lines outside the store. We were thrilled to welcome many first-time Salomon buyers, especially so many young female consumers. We will continue to focus on epicenters in 2026 and beyond, including New York, Los Angeles, Miami and San Francisco, and we are planning to open 7 to 10 new stores next year in the U.S. Looking at U.S. wholesale, Salomon is seeing growing demand across a variety of high-quality retail partners, including REI, Nordstrom and run specialty shops. In EMEA, we continue to expand our store fleets in key epicenters, including Milan and London. We recently opened our second brand store in Milan and will open a third one in Q4, and we will open a fourth store in London in Q4. In 2026, we will further develop our epicenters into Spain, Germany and other key U.K. cities. For our Winter Sports Equipment brands, Q3 was a strong quarter with double-digit growth across brands and regions. Sales also benefited from approximately $20 million of shipments that were planned in Q4 but went out in Q3. Order books for the season are solid, and our brands continue to take meaningful market share globally. In addition to strong market share in our core ski, boot and binding categories, we see incremental growth opportunities in areas such as snowboarding and protective equipment. Outdoor Performance adjusted operating profit margin expanded 420 basis points from last year to 21.7% in Q3. Margin expansion was led by gross margin, thanks to positive channel, region and product mix as well as favorable product cost driven by our footwear cost optimization initiatives. Gross margin expansion offset the very slight SG&A deleverage due to continued investments in growth. Moving to Ball & Racquet, where revenue increased 16% to $350 million, driven by softgoods and racquet sports. We continue to see very strong momentum in Tennis 360 globally. By category, the growth was led by softgoods, which more than doubled in the quarter with strong momentum in all regions. Softgoods now represents approximately 15% of segment revenue. Racquet sports also grew strong double digits, driven especially by very strong growth in EMEA and China. Regionally, the Ball & Racquet growth rate was led by China, followed by APAC, EMEA and slight growth in Americas. Globally, in Q3, we had 10 net new Wilson brand store openings, mostly in Greater China. Wilson continues to excel in China, and we are planning to open approximately 35 Wilson Tennis 360 shops in China this year, including both owned and partner doors, bringing the total to around 80. In Q3, Wilson celebrated the opening of its urban concept store, Brickhouse in Wuhan, which integrates American tennis club aesthetics with local Wuhan culture, a tribute to Olympic Champion Zheng Qinwen's hometown. In North America, our expansion into the warmer southern markets is continuing to drive strong results. Our Dallas North Park Mall location continues to perform very well, and we continue to expand our new Tennis 360 concept store into more southern and coastal locations, including our new shop in Beverly Hills and an upcoming shop in Miami. We also continue to expand our Tennis 360 test in new DICK'S Sporting Goods locations, including House of Sports locations. In APAC, we are excited to expand our retail format into 2 new markets, Japan with our first store in Tokyo's Marunouchi district and Australia with our first 2 stores in the Melbourne area. Ball & Racquet segment adjusted operating profit increased 70 basis points to 7.6%, thanks to strong gains in gross margin, driven by favorable product, region and channel mix and pricing. Ball & Racquet profitability also benefited from the above-mentioned onetime inventory reserve revaluations. These gains offset higher tariff costs and slight SG&A deleverage on continued softgoods investments. Turning to the group balance sheet. We ended the quarter with $800 million of net debt. Using the midpoint of our 2025 adjusted operating profit guidance, our net debt to adjusted EBITDA ratio was approximately 0.7x at the end of Q3. We exited the quarter with inventories up 28% year-over-year, slightly lower than our 30% sales growth. We are very comfortable with the level and quality of our inventory. This higher inventory growth is primarily related to 4 factors: number one, earlier receipt of seasonal Arc'teryx merchandise to prepare for better in-stock positions; number two, higher Arc'teryx goods-in-transit resulting from the greater use of ocean shipping versus air freight; three, FX translations due to the weaker U.S. dollar and four, the addition of Arc'teryx' Korea inventory following the recent acquisition. We expect inventory growth rates to normalize in the second half of 2026 when we start to cycle our improved in-stock positions and the higher use of ocean freight. Driven by strong profit growth and disciplined working capital management, we generated $104 million of operating cash flow in the first 9 months compared to $18 million last year. And for the full year of 2025, we expect to generate solid operating cash flow growth versus 2024 levels. Now moving to guidance. The updated guidance assumes the latest tariff rates on all countries will stay in place for the remainder of 2025 and beyond. We remain confident that we are well positioned to manage through a variety of tariff scenarios given our low exposure to the U.S., our pricing power and our clean balance sheet. We continue to expect negligible impact to our group P&L from higher tariffs in 2025 and beyond. Let's begin with our updated full year 2025 outlook. Given the upside in Q3 and our continued momentum, we are raising our full year revenue, operating margin and EPS expectations. We are raising 2025 revenue growth guidance from 20% to 21% to 23% to 24%, including an approximate 100 basis point benefit from favorable FX impact on current exchange rates. By segment, we are raising our Technical Apparel 2025 revenue growth guidance from approximately 22% to 25% to 26% to 27%, including continued strong omni-com growth. We are also increasing our outdoor performance sales growth expectations from 22% to 25% to 28% to 29% and Ball & Racquet from 7% to 9% to 10% to 11% growth. We are also raising our full year adjusted gross margin guidance from approximately 57.5% to approximately 58%, and we're also raising our adjusted operating margin guidance from approximately 11.8% to 12.2% to 12.5% to 12.7%. By segment, we continue to expect an adjusted operating margin of approximately 21% for Technical Apparel. For Outdoor Performance, we are raising adjusted operating margin guidance from 11% to 11.5% to 13% to 13.5%. For Ball & Racquet, we are maintaining our adjusted operating profit margin guidance of 3% to 4%. We are now assuming full year net finance costs of $85 million to $90 million and an effective tax rate of 27% to 28%. The lower effective tax rate is primarily driven by higher profit generation from lower tax jurisdictions. Other operating income will be approximately $20 million for the full year and net income attributable to noncontrolling interest will be approximately $15 million. We now expect adjusted diluted EPS of $0.88 to $0.92 versus our prior guidance of $0.77 to $0.82, which is based on 563 million of fully diluted shares. We are also assuming D&A of $350 million, including approximately $180 million of ROU depreciation. CapEx is expected to be approximately $300 million, primarily to support new store expansion, ERP optimization and distribution and logistics investments. As we have said before, should strong trends continue and better-than-anticipated demand materialize, we believe we will be well positioned to deliver financial performance ahead of our expectations. As we begin to look beyond 2025, we are also confident in our initial 2026 outlook. At the group level, we expect to deliver revenue towards the high end of our long-term algorithm of low double-digit to mid-teens annual sales growth. And we expect to deliver adjusted operating margin expansion within our long-term algorithm of 30 to 70-plus basis points. With that, I'll turn it back to the operator for questions. Operator: [Operator Instructions] Your first question today comes from the line of Brooke Roach from Goldman Sachs. Brooke Roach: Have you seen a sales impact in China following the fireworks incident? If so, when do you expect sales to recover? Do you think there could be any longer-term brand repercussions? Stuart Haselden: Brooke, it's Stuart. Thanks for your question. Arc’teryx China sales trends were softer at the beginning of Q4, but have since rebounded as weather has cooled. We are confident in Arc’teryx's brand position and equity with consumers across all of our markets. We are most focused on connecting with our consumers and communities and delivering great products and store experiences. Operator: Great. And as a follow-up for Andrew, how did this event impact guidance for 4Q? Andrew Page: It did not have a factor in our Q4 guide. Operator: Your next question comes from the line of Matthew Boss from JPMorgan. Matthew Boss: Congrats on a nice quarter. So James, could you speak to your confidence in guiding 2026 revenue growth to mid-teens, which is the high end of your long-term algorithm? And then, Stuart, at Arc’teryx, could you break down the cadence of the third quarter 27% omni-comp? And if you could elaborate on the strong global momentum that you've seen in the fourth quarter or just any change in demand that you've seen as we head into holiday for the brand? Jie Zheng: I'll just highlight our forecast for coming years. So we -- given the very solid foundation we built up in 2025, I think we have a -- the management team got a very good level of confidence to deliver what we guide in 2026. I think mid-teen growth patterns can be secured in 2026. Stuart Haselden: Yes, Matt, it's Stuart. So yes, the omni-comp, we're really pleased to see the momentum in the third quarter. The overall D2C revenue increase of 46%, we think is really healthy. The 27% omni-comp also reflects a strong 2-year trajectory, and that's definitely factored into how we thought about guidance into the fourth quarter. As we look at Q3 specifically, the retail performance was -- from a KPI standpoint was driven by traffic. So we saw really healthy traffic increases, more modest increases in conversion and AOV and [EPT]. Also worth mentioning, markdown levels were pretty consistent year-over-year. So it was not a markdown-driven sales increase. As you look at your -- and your question around the global demand, strong momentum around all of our regions, it was great to see an acceleration in our North American business in the third quarter, where they moved up in the ranking after Asia Pacific, which continues to be the leading region for us. But we still saw some very strong growth in China and in Europe. So we're not really seeing weakness in any of our regions. And it makes us optimistic as we look at fourth quarter and beyond. And yes, so I think feeling really good for how we've now stepped into the fourth quarter and the trends we're seeing quarter-to-date. Operator: Your next question comes from the line of Ike Boruchow from Wells Fargo. Irwin Boruchow: Let me add my congrats. I guess a higher-level question on next year's outlook, just maybe potential additional info on door growth for both technical, basically both for Salomon and Arc’teryx. And then would love to hear a little bit more about the progress on Salomon in the United States specifically? Andrew, can you give us an update of where you are in penetration there? Just there seems to be a lot of appetite for the brand locally here. Just kind of curious how you're measuring that, balancing the growth with the push-pull model? Omar Saad: We'll have Andrew actually take the first question, and then we have Guillaume Meyzenq here who's the CEO of Solomon brand, who will take the Solomon question. Andrew Page: Yes, thanks for the question. With regard to detail on store growth, I will provide more of that update as we get into our Q4 call. So not necessarily ready to provide a detailed update on store growth yet. Guillaume Meyzenq: And for Salomon, so nice to meet you all. Before jumping into North America, I think that we have to put Salomon into the context and the current momentum we have. So I'm convinced that we hold a truly distinctive position in the market, and we will fully leverage it to shape what's come next. We have an incredible opportunity to define and lead the modern mountain sports movement in the market. And if identify a few strengths of Salomon, the first one is the authentic mountain performance, which is what consumer is looking for is authenticity. We are true to what we are doing. We have a global recognition of design language led by innovation. What we are doing and developing is really true for performance, for function. And we have a growing cultural relevance reaching the mountain, the city and the modern lifestyle. And this quarter is definitely the good example of the potential of Salomon in the market, and we believe that this is just a start. If I move on the U.S. case because this is a question, of course, this is today the region that we have to build the fundamentals. So we are showing a strength in EMEA. We are very -- growing very fast in Asia Pacific and China. And today, we are focusing on U.S. And the U.S. provision is coming from this leading position in winter sports and outdoor where Salomon has high market share and high recognition in the market. And now we have to move to the city. And this is what is currently happening by a true epicenter strategy so that we started in New York a few quarters ago. Now we have L.A., the new shop opening we have in Melrose is a good example of a long line of consumer looking at this product. We have also good traction in running specialty distribution in performance. And now it's how we -- all this good signal and insight, which is coming with a new consumer, very often a female consumer, how we are transitioning and translating into a bigger scale in U.S. And this is why we look at more epicenter, more shop opening, having a curated media investment in the right spaces and of course, working with our B2B partner to drive the numeric distribution will expose Salomon to more consumers. And we feel very confident that we are on the right path to accelerate in North America. Operator: Your next question comes from the line of Lorraine Hutchinson from Bank of America. Lorraine Maikis: Just sticking with Solomon, you're pruning back some of the distribution there, which is causing a pressure. Can you talk about when that pressure will abate? And where you are on U.S. awareness at this point for the Solomon brand? Unknown Executive: I think you still speak about U.S. And of course, as I explained, we have this leading position in winter sports and outdoor performance and footwear. And this outdoor performance footwear led us a few years ago to go to places and some distribution that we think they are not anymore relevant, and we think -- and also the partner sometimes also is looking for other purity. This is why we have this kind of looking like negative -- some negative building block, which show finally kind of growth, but not growth expected as we would. We think that the end of H1 '26 will be the last time that we will not have any more anniversary sales, and we will have completely fresh and new setup for distribution. So we still wait for the -- for a few quarters, but I would say that the most of the change has been already implemented. Operator: Your next question comes from the line of Jay Sole from UBS. Jay Sole: I want to ask about Wilson, specifically the Tennis 360 stores. It sounds like -- I think you said you're up to 80 stores in China. Can you just talk about the big picture long-term opportunity in China? And I think you also mentioned that the store in Dallas, I think you said is off to a good start and you're opening some more Tennis 360 stores in the U.S. Can you just talk about the Tennis 360 opportunity outside of China and how that's developed over the last 90 days in your view? Andrew Page: Thanks, Jay. So you mentioned the Tennis 360 concept outside of Greater China. So we have 14, 15 stores in North America. I mentioned the Dallas Park store that's doing really well. We will focus really around the Smile States. So you think about where you concentrate tennis in the Southern Smile of the U.S. starting in Georgia down to Florida, around the south and then back up through California. So that's what I would expect to see from our retail format epicenter concentration. We are still -- we're in the early stages of that. We're excited and we're super motivated about where it's going. The consumer is really gravitating towards the product, but we're still in the early stages of really optimizing and formulating our total owned retail format. In addition to our owned retail format, we've also seen success in our DICK'S shop in-shop format, where we are able to present the full pathway of our Tennis 360 concept at the [indiscernible] and the consumer is really resonating with the consumer there. So you'll start to see the expansion even in the DICK'S and the House of Sports format for the DICK'S locations. Operator: Your next question comes from the line of Paul Lejuez from Citigroup. Paul Lejuez: On the margin guide for next year, I'm curious how much of the expansion is simply a function of business mix versus improvements that you might be seeing within each segment? And then I just wanted to ask a clarifying point on Solomon. Could you just say what is the number of doors that you're actually exiting in the -- within the Solomon wholesale business? And then what are you adding over the next 12 months? Stuart Haselden: Yes. Paul, thanks a lot. The same drivers of our mix shift is as before. It's going to be primarily driven by gross margin expansion. We will continue to make the proper investments in SG&A to continue to drive growth. So the margin expansion that you see will be driven primarily by gross margin expansion, that gross margin expansion is driven primarily by mix shift, both channel and product and region mix shift. As it relates to the number of doors, we're not necessarily going to comment. It's a bit nuanced as Guillaume talked about exiting some wholesale doors that could tell our full expression of the brand and getting into more strategic partners. But as we talked about, start to think about clearing that through H1 of next year and then you start to see as we get into the third quarter of next year, you start to see the brand really show up in the strategic partners that we... Operator: Your next question comes from the line of Anna Andreeva from Piper Sandler. Anna Andreeva: Congrats. We wanted to follow up on the Americas. Nice to see the region accelerate to high teens. Can you provide more color what you saw by channel? And how did U.S. perform within that? I think you mentioned slight growth at Wilson in the U.S. And as you look into '26 and the high end of the algo, should we expect Americas as a double-digit grower next year? And then we just had a quick follow-up. The CA omni-comp acceleration, great to hear about strength in traffic. Did that headwind from outlet that you saw last quarter begin to moderate? And just remind us, when do we anniversary that outlet dynamic in '26? Jie Zheng: Thanks, Anna. So we'll have Stuart answer the comp and talk about the Arc’teryx. We really think about your first question by brand, not at the group level. So since we have each of the brand CEOs here, we'll let each of them to answer. Stuart Haselden: Anna, it's Stuart. Yes, the acceleration in North America for Arc’teryx is really a function of success of our brand awareness, investments in community and different forms of brand marketing and with the growth of our store footprint. The stores are providing critical catalyst for driving guest engagement and brand awareness across our key markets. So we're pleased to see the success of that reflected in omni-comp. With regard to the -- I'll just stay on the traffic question that you had. The traffic really reflects what I just mentioned that we saw a meaningful reduction in markdown revenue in the first half of the year. So into Q3, we saw our markdowns basically on par, consistent with prior year. So as we think about next year, obviously, we would begin to lap that -- and then Anna, we have Tennis 360 in the Americas, if there's any commentary around channel and the trends there and, [indiscernible] if you want to comment on, I think you covered it pretty well. Andrew Page: Yes. I mean to your point around the uptick in North America, it was primarily driven by our Tennis 360 concept, both in footwear and apparel, both very, very strong growth in the quarter. And the other categories in Wilson also was strong, notably racquet sports was pretty strong, bats was strong, although baseball was relatively flat because it was offset by some challenges with gloves. But that's -- we're really excited about what we're seeing and how that's really inflected and returned to strong growth this quarter. Operator: Your next question comes from the line of Jonathan Komp from Baird. Jonathan Komp: Can I follow up just the initial 2026 view, would you expect technical apparel to be at least in line with the algorithm from September, mid-teens growth with China at least low double digits? Any color there? Andrew Page: Yes, this is Andrew. As you pointed out, we have reaffirmed the full algorithm from Investor Day, both at the brand level as well as at the group level. Jonathan Komp: Great. And then a follow-up just on the Q4 outlook, Andrew, operating profit growth has been very strong in the first 3 quarters, over 60%. It looks like you're embedding a single-digit growth rate in profit for the fourth quarter. So could you just share any more detail, anything unique in the fourth quarter impacting the margin outlook? And is there anything we should expect into the first half of '26 in terms of margin headwinds? Andrew Page: Yes, definitely. As I'll point out, obviously, really strong third quarter. We're excited about it. You see what happens when we're able to over deliver top line, we're able to drop that through to the bottom line. In the fourth quarter, as you start to think about what we're seeing, we still believe we're excited about our full year, you can see the implied guidance for the fourth quarter. But as Guillaume talked about, we're in the early stages of this inflection point. Fourth quarter will be the first full quarter of tariffs. We also have investments that we're making in [indiscernible] and invested in obviously continued market around our [indiscernible]. So we believe the guide for the full year and the implied guidance for the fourth quarter is responsible as well as we continue to say should demand materialize, we are -- there's no structural reason why we won't be able to overdeliver against our guidance. Operator: Your next question comes from the line of John Kernan from TD Cowen. John Kernan: Congrats on another strong quarter. Andrew, just to kind of follow-up on Jonathan's question. The guidance for the Outdoor Performance segment margin is for a decline in Q4. Obviously, there's been a ton of upside to your guidance this year and the incremental margin you've been generating on the soft goods really seems to be flowing through. I'm just curious why the conservatism here in Outdoor Performance and how you're thinking about the margin performance of Outdoor Performance into next year? Andrew Page: Yes. I mean a couple of things. As I talked about, there were some early shipments into the third quarter for sports equipment. We have some meaningful investments we want to make in the fourth quarter in marketing, increased awareness in our North American footwear and we just -- and the Olympics. And so we believe that if the business continues and the demand continues to show up as it's been, that there's opportunities in the fourth quarter. But again, we're in the early stages of that inflection point. So we don't know the end of demand at this point. John Kernan: Got it. And maybe just a quick follow-up on Technical Apparel and the segment margin there was down year-over-year on really impressive top line growth. I think you said there was a timing of government grants that affected the Technical Apparel profitability. Any comments on how you're thinking about fourth quarter and the drivers of operating margin expansion into next year for Technical Apparel? Andrew Page: Sorry, repeat the last part. John Kernan: Yes. Any thoughts on the Technical Apparel segment margin in Q4 and then into fiscal '26? Andrew Page: Yes. Okay. So Technical Apparel margins in Q4, I see those margins are in line. They are relatively strong. We've not -- for the full year, I see those margins being in the low 20s for technical apparel and talk about exceeding margins in the fourth quarter. The timing of the government grants, the point that I was making there is that in the third quarter of last year, we received a higher portion of our government grants than we did this year. And so it created a drag on the third quarter margin this year on a comparable basis. Operator: Your final question comes from the line of Alex Straton from Morgan Stanley. Alexandra Straton: I just wanted to focus on the China growth acceleration in the quarter. It definitely stands out versus a more somber narrative from a lot of your peers. So can you just help us square that difference between you and then maybe the broader Sportswear Group and then how you're thinking about industry dynamics in China into the fourth quarter and then next year? Andrew Page: Okay. Thank you for the question. So I mean, basically, we are quite pleased about the Q3 results in China, and we closed the lineup for the pattern we liked, that we projected in all 3 brands, especially Salomon and Wilson, they're growing extremely well in China market. So I think based on the Q3, we think we got a good level of foundation to finish the whole year in China with a very solid growth. In Q4, I just want to call out for 2 major seasons sitting in Q4, which is Golden Week and the Double 11. So overall, our overall achievement for these 2 major events are quite satisfied, okay? It's reached above our expectations. And I think pretty much we have a very good confidence for China this year and we will have a very good result in 2025. And so [download] for next year, I think it's the foundation is there. I mean we already mentioned, our 3 major brands, they all got a unique proposition in China, which really attract a lot of younger consumers in different segments. And we are in a very unique position to compete in markets, okay? So we are quite optimistic also for 2026 in China market. Operator: And that concludes our question-and-answer session. I will now turn the call back over to management for closing remarks. Andrew Page: Thanks, everyone, for joining. We'll see you in 3 months for our fourth quarter results. Have a great day. Operator: This concludes today's conference call. Thank you for your participation. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the BellRing Brands Fourth Quarter Fiscal Year 2025 Earnings Conference Call. [Operator Instructions] Please be advised today's conference is being recorded. I would now like to hand the conference over to your speaker today, Jennifer Meyer. Please go ahead. Jennifer Meyer: Good morning, and thank you for joining us today for BellRing Brands Fourth Quarter Fiscal 2025 Earnings Call. With me today are Darcy Davenport, our President and CEO; and Paul Rode, our CFO. Darcy and Paul will begin with prepared remarks, and afterwards, we'll have a brief question-and-answer session. The press release and supplemental slide presentation that support these remarks are posted on our website in both the Investor Relations and the SEC Filings sections at bellring.com. In addition, the release and slides are available on the SEC's website. Before we continue, I would like to remind you that this call will contain forward-looking statements, which are subject to risks and uncertainties that should be carefully considered by investors as actual results could differ materially from these statements. These forward-looking statements are current as of the date of this call, and management undertakes no obligation to update these statements. As a reminder, this call is being recorded, and an audio replay will be available on our website. And finally, this call will discuss certain non-GAAP measures. For a reconciliation of these non-GAAP measures to the nearest GAAP measure, see our press release issued yesterday and posted on our website. With that, I will turn the call over to Darcy. Darcy Davenport: Thanks, Jennifer, and thank you all for joining this morning. Fiscal year '25 was a strong year for BellRing Brands. Net sales grew 16% and adjusted EBITDA margin reached 20.8%. We launched our first media campaign since '21, delivering compelling returns, expanded distribution while elevating retailer partnerships and accelerated our multiyear innovation strategy. We also advanced our savings program, enhancing flexibility to reinvest in future growth. Our strong track record of cash generation continued this year, and we meaningfully stepped up our share repurchases, buying approximately 7% of our shares outstanding. We expect another successful year in fiscal '26 with a softer Q1 followed by a stronger balance of the year. Paul and I will provide additional detail on our guidance and quarterly cadence. Turning to the fourth quarter. The ready-to-drink shake category grew 15%, while Premier shake consumption grew 20%, driven by incremental promotion events. Premier continues to have category-leading metrics, including the #1 household penetration and the category's highest repeat rate. Notably, both household penetration and buy rate increased during the quarter, reinforcing the brand's unmatched strength and consumer loyalty. Now turning to the category. RTD shakes are one of the fastest-growing CPG categories, fueled by consumer health and wellness trends, functional beverage preferences and GLP-1 usage. Household penetration of 54% highlights a long runway for growth as it trails mature CPG categories, which are often at 80% to 90%. Retailers are leaning into this opportunity, increasing category space, testing higher traffic aisle locations and expanding display space to capture growing consumer demand. The success of this category, which has doubled in retail sales since 2019 to $8.7 billion has naturally attracted competition. Currently, the 2 leaders, including Premier Protein, have approximately 50% market share. The other participants include newer insurgent and crossover brands and some declining legacy brands. Of note, legacy brands, which collectively represent approximately 30% of the category, have been meaningful share donors for several years now. Over time, we expect retailers to consolidate the shelf behind a handful of the best-performing brands and move them to more heavily trafficked aisles. We believe that mainstream appeal, high repeat rates and execution capabilities will determine the long-term winners. Premier Protein is well positioned to benefit from these developments and continue to lead the category. Over the next few years, we expect RTD shake category dollar growth to be high-single to low-double-digit, with volume the primary driver. In late '25, a major club retailer significantly expanded their RTD assortment. While we do not know for certainty, we assumed the expanded assortment continues through fiscal '26. We expect pricing benefits to subside and promotional spending to slightly increase as new brands work to establish themselves in the market. These near-term dynamics lead us to expect category growth in the high single digits for '26. In the medium-to-long-term, we expect more marketing spending, expanded shelf space, innovation and the mainstreaming and affordability of GLP-1s to drive higher household penetration and category growth. We are confident in our continued strength of the category. Premier's deep category knowledge, strong brand equity, scalable manufacturing network and robust retailer relationships give us confidence that we will continue to be the category leader and capture meaningful share of long-term growth. I'll now turn to our long-term targets. BellRing began its journey as a public company 6 years ago with $850 million in revenue. Our total revenue base is now $2.3 billion, and our Premier Protein shake revenue has tripled. Since IPO, we have delivered a net sales CAGR of 18%, significantly ahead of our long-term revenue growth projection of 10% to 12% shared at the time of our listing. There are multiple ways to achieve strong growth in our business. However, it becomes more difficult to grow at double-digit rates of a larger revenue base. And in the near term, we are expecting a more competitive environment. As a result, we are updating our long-term revenue growth algorithm from low double digits to high single digits, specifically 7% to 9%, with Premier Protein driving our growth. This assumes that Premier Protein, the #1 market share brand will continue to grow relatively in line with the RTD category, while Dymatize slightly weighs down our growth rate. We are maintaining our adjusted EBITDA margin algorithm of 18% to 20%, which embeds higher levels of brand investment enabled by our cost savings agenda. These investments are designed to reinforce our brand strength and position us for sustained profitable growth over the long term. Our updated revenue growth algorithm is healthy. And together with attractive margins and our asset-light model, we expect to continue to generate strong cash flow and create significant value for our shareholders. Turning to our outlook for '26. Our '26 net sales guidance is a range of 4% to 8% growth with adjusted EBITDA margins of 18%. At the midpoint, sales for the year are expected to be modestly below our long-term algorithm because of the softer first quarter driven by specific items and near-term competitive dynamics. We expect performance to strengthen with the remainder of the year at the top end of our algorithm. Adjusted EBITDA margin is expected to be at the lower end of our range, primarily due to significant commodity inflation and tariffs, along with the lagged revenue impact of increased brand investments. For Q1, we expect flat consumption for premier RTD shakes with October and November lapping the toughest club channel comparisons, including a nonrecurring promotion. For context, we are lapping 23% consumption growth in the first quarter of '25, which included very strong club consumption with the smallest number of new brand entrants in an incremental promotion. Q1 net sales largely follows consumption with some additional timing-related headwinds impacting sales, resulting in a roughly 5% decrease in net sales. Paul will provide more detail later. We expect consumption along with net sales to accelerate starting in mid-December. As we move through the year, our FDM merchandising initiatives, advertising and innovation become more meaningful contributors to our growth and club comparisons ease as we lap expanded assortment. Now I'll provide additional details on our operating plans for '26. Our priorities for this year include: one, continuing to grow our distribution both in and out of aisle; two, increase advertising investment while elevating its impact; and three, launch innovation that provides consumer excitement, adds occasions and drives trial. Distribution, both in and out of the aisle is a major opportunity. Starting with club, we intend to bolster our position in club channel with new products, increased sampling and additional promotional spending. We expect our performance in club to improve as we move through the year. Our Premier shake TDP increases driven primarily in mass, food, drug and e-commerce channels grew by more than 20% in '25, and we have strong plans to expand at similar rates in '26. As I mentioned last quarter, we have partnered with a new broker to significantly expand store level coverage and launched an internal retail sales team focused on securing in-store displays, especially singles and entry price point multipacks. In late Q1, we will launch a partnership with a major mass retailer that includes placements across pharmacy and grocery aisles plus extensive displays and end caps. This program will also include the first launch of new shake innovation targeting incremental occasions, which I'll discuss later in my remarks. Our second priority is advertising. We saw a strong return on investment in fiscal '25 and decided to further invest and elevate our creative in '26. Premier has the highest unaided brand awareness in the category, though there remains significant opportunity for expansion. We have strengthened our agency roster and we'll be launching a new creative campaign designed to drive household penetration, strengthen emotional connections and bring fresh energy and relevance to the brand. The campaign kicks off in late December and includes national TV and strong digital components. Turning to innovation. In fiscal '25, we conducted a comprehensive demand study and incorporated the results into our multiyear innovation strategy. The study validated our product focus for '26 and identified several white space opportunities, some of which that we have accelerated launching in late '26 and early '27. Specifically, in '26, we are intensifying our focus on innovation across flavors, consumer segments and occasions. In June of '25, we launched almond milkshakes, our first non-dairy protein offering, with the strategy of bringing new consumers into our brand. Although early, it is already the #2 turning 4 count in the non-dairy RTD set. We are seeing strong incrementality with nearly half of the buyers new to the brand. Almond milkshakes are expanding distribution throughout '26 and supported by advertising. About a year ago, we launched our indulgent line with the goal of driving incremental occasions, it worked. In '26, we will build on that success as well as the success of our Café Latte core shake flavor with our new Coffeehouse or proffee shake line. Each shake provides 30 grams of protein and the caffeine equivalent of 1 cup of coffee, meeting the protein and energy consumer need, which is incremental to our core baseline. It will be offered in Carmel Macchiato and Mocha targeting a sweeter taste palate. Coffeehouse launches in mid-December in both mass and e-commerce channels. The launch will be fully supported with paid media influencer partnerships and in-store signage and sampling. And lastly, Premier is known for its flavor innovation, and we will continue to bring flavor excitement to category throughout the year. In closing, Premier has a history of strong growth and is the #1 brand in one of the fastest-growing categories in retail. The power of the brand is evident in our record high household penetration and repeat rates. Our first-mover advantage lies in being a scaled pure-play company with attractive margins and a deep category expertise. Retailers see the category's potential, and they are partnering with Premier as they develop their growth plans. Q1 has some unique dynamics that are causing near-term challenges, but growth in the balance of the year is strong. The brand and business fundamentals are robust, and I have confidence in delivering the year. We are investing in our brands, sharpening our execution and innovation plans and driving our sales -- our savings agenda to enable our next phase of growth. I remain confident in our future and our ability to create sustained long-term value for shareholders. Thank you for your interest in the company. I will now turn the call over to Paul. Paul Rode: Thanks, Darcy, good morning, everyone. Fiscal '25 was a year of strong performance for BellRing with net sales growth of 16%, adjusted EBITDA of $482 million and an adjusted EBITDA margin of 20.8%. Our business generated $261 million in cash flow from operations, and we ended the year at net leverage ratio of 2.1x. Our strong balance sheet enabled us to repurchase 9 million shares or $473 million in total or approximately 7% of shares outstanding. We've continued to repurchase shares in October with $40 million repurchased to date in the first quarter. In the fourth quarter, net sales were ahead of our expectations at $648 million, up 17% over the prior year. We delivered adjusted EBITDA of $117 million at a margin of 18.1%. Premier Protein net sales grew 15% and were in line with our expectations with strong volume growth for our RTD shakes and putters. RTD shake sales grew 14%, driven by volume growth from incremental promotional events and distribution gains offset partially by unfavorable price mix. As expected, Premier shake dollar consumption was up 20% and outpaced revenue growth. This difference was driven by expected changes in trade inventory, primarily the previously noted e-commerce fee load as well as the pricing impact from our incremental promotional events, which had an outsized impact to our net sales compared to consumption at retail prices. Dymatize net sales growth of 33% was well ahead of our expectations, driven by strong volumes. International benefited from strong consumption and a volume pull forward ahead of our late Q1 price increase with the latter and expected headwind to Q1 growth. Adjusted gross profit, which excludes mark-to-market adjustments on commodity hedges, was $192 million and declined 4% from prior year. Adjusted gross profit margin of 29.7% decreased 620 basis points. The decline was driven by mid-single-digit input cost inflation, increased promotional activity and onetime packaging redesign cost. Protein costs stepped up in the quarter across both powders and shakes, and we expect these headwinds, most notably on powders to continue into fiscal '26. SG&A expenses were $81 million and delivered significant leverage at 12.5% of sales versus 16% of sales in the prior year quarter. The reduction in expenses was driven by lower marketing and advertising expenses as expected as we lapped a period of heavier media and [indiscernible] testing. I'd now like to discuss our long-term targets and capital allocation priorities, followed by our 2026 financial guidance. As Darcy discussed in her remarks, we now target long-term annual net sales growth of 7% to 9%. We expect our business to maintain strong profitability and are reiterating our long-term adjusted EBITDA margin algorithm of 18% to 20%. In 2023 through 2025, we exceeded our adjusted EBITDA margin algorithm. That performance reflected strong sales growth with favorable pricing and a more constructive commodity cost environment prior to the second half of fiscal 2021. Advertising spend as a percentage of net sales was also relatively low at approximately 3% given past supply constraints. Looking ahead, our adjusted EBITDA margin algorithm reflects a healthier level of Premier brand support with total company advertising investment increasing to 4% to 5% of net sales and promotional spending at competitive levels. Our adjusted EBITDA margin algorithm also now incorporates the impact of tariffs. As previously communicated, tariffs will begin to impact our P&L starting in fiscal '26. While we have mitigated much of our tariff exposure, we do expect an ongoing annualized impact to our margins of approximately 120 basis points. We continue to evaluate ways to further mitigate these impacts. To bolster our margin target, we have accelerated cost savings initiatives across our organization. The primary areas of savings involve more efficiently utilizing our co-manufacturing, warehousing and transportation networks as well as procurement savings from ingredients and packaging. Longer term, our cost savings efforts, normalization of record highway protein costs in 2026 and modest SG&A leverage are expected to be supportive of improvement in our EBITDA margins. Our disciplined capital allocation priorities remain unchanged. We will first invest in growth initiatives, including innovation, marketing and systems and process capabilities. Second, we expect to remain asset light with low capital expenditures. After investing in our business, we expect to be aggressive and opportunistically repurchasing our shares with M&A being a longer-term priority. Turning to our fiscal '26 outlook. We expect net sales of $2.41 billion to $2.49 billion. This represents 4% to 8% growth. Adjusted EBITDA is expected to be $425 million to $455 million with a margin of 18%. From a brand perspective, we expect high single-digit sales growth from Premier Protein at the midpoint. Premier's volume growth is expected to be driven by continued category tailwinds, distribution gains, including innovation and brand investments. Volume performance is expected to be partially offset by low single-digit headwind from promotional investments as Darcy mentioned in her remarks. We expect high single-digit sales declines for the rest of the portfolio. For Dymatize, we're executing a price increase beginning in late Q1 to offset meaningful Whey protein inflation and have prudently modeled in elasticities. Additionally, we are reducing brand investment as we navigate high protein costs and the brand has a difficult sales comparison in Q4. Specific to Q1, total net sales are expected to be down approximately 5% of both Premier and Dymatize declining largely in line with our overall decrease. Consumption growth for Premier Protein shakes is expected to be flat. In Club, Q1 is our toughest comparison of the year where we lapped a period with fewer new entrants and chose not to repeat promotions for Premier and Dymatize. Additionally, Dymatize had a strong fourth quarter and benefited from a sales pull forward from Q1 of approximately $8 million, mostly related to shipments ahead of our late Q1 price increase. Together, the non-repeating promotions and sales pull forward are a 4-percentage-point headwind to our first quarter growth. As we move into Q2, we expect an acceleration in both consumption and net sales with the balance of the year sales to grow at the high end of the algorithm at the midpoint of our guidance. This is driven by Premier, which we expect to outpace overall company growth for the balance of the year, as a robust merchandising programs in the FDM channel phase-in for Q2 and beyond and Club comparables ease. Moving to fiscal 2026 adjusted EBITDA. We expect adjusted EBITDA margins to decline 280 basis points at the midpoint with lower adjusted gross margins, the primary driver. Adjusted gross margins are expected to be pressured by significant input cost inflation, particularly whey protein, the primary input costs for our powders, the introduction of tariff cost and promotional investment with margin pressure primarily in the first half of the year. Tariffs are expected to have an unfavorable impact of 80 basis points on our gross margins, net of mitigation and the impact of timing. The remaining EBITDA margin impact is primarily due to increased advertising, which is partially offset by SG&A leverage. Advertising as a percentage of sales is expected to be approximately 4%, with the largest year-over-year dollar increases in Q2 and Q3. We expect Q1 adjusted EBITDA dollars to be below prior year levels with a margin of approximately 16% to midpoint, primarily driven by lower sales and gross margins. In Q2, adjusted EBITDA dollars are expected to improve sequentially, with margin rate approximately 100 basis points lower sequentially due to a combination of higher sales, inclusive of Dymatize pricing, continued high commodity inflation and the timing of advertising support. We anticipate adjusted EBITDA growth in the second half due to higher sales growth, easing commodity inflation and higher cost savings. In closing, fiscal '25 was a strong year, highlighted by robust top line growth and strong profitability. We feel confident in our plans and ability to deliver our 2026 guidance and long-term outlook. Premier is the #1 shake brand with durable competitive advantages in an attractive category, and we expect the investments we are making this year to bolster our long-term position. Finally, our cash-generative business and strong balance sheet enable us to fund our growth plans while also opportunistically repurchasing shares. I will now turn it over to the operator for questions. Operator: [Operator Instructions] Our first question comes from Steve Powers of Deutsche Bank. Stephen Robert Powers: Darcy, I think it's fair to say that a lot has changed over the last 6 months in your categories and around your business. Maybe just -- could you start off by summarizing what you've observed and how that's influenced your '26 plans as well as your updated long-term views. And why you believe the outlook you've landed on is the right one, both in the year ahead and longer term? Darcy Davenport: Sure. I would actually start with what has not changed. I think what has not changed is the momentum in the category. There is -- I mean, the household penetrate -- it's still a low household penetration category, call it 50% with a ton of upside. There -- I mean, you could actually argue there's more momentum in the category. And what has also not changed is Premier's position in the category. So we are the #1 brand, #1 household penetration, #1 repeat, strong national supply chain, et cetera. So I think those are kind of the mainstays. I would -- so I think what has changed is it's more competitive, which I think is expected. I mean the way I view the category in total is that there are -- they're kind of -- and I walked through some of this in my prepared remarks, but they are the leading brands, which include Premier, which represents about 50% of the category. There are these insurgent and crossover brands, which represent about 10% of the category. And then there are declining legacy brands, which represent about 30% of the category, who have been kind of meaningful shared donors through the year. As I look forward, what we expect to see is the leading brands keep leading and winning. The insurgent brands are -- there's going to be some mix. There's going to be kind of a shake-up, where some will make it and some will not. And then the declining brands will continue to decline. So as I look at our guidance and our plan for '26, I feel really good. We have a tough Q1. There's some unique dynamics going on with Q1 with -- in the club side of the business. We're lapping a period with fewer new entrants and one major club customer. And we're lapping some non-repeating promos in the other. So it's a tough quarter, but that does not represent the business. The last 3 quarters are much like every other quarter that we've had, which has strong, strong growth. And the reasons to believe there is the category is healthy. We have strong plans. The rest of the business is growing very rapidly. We've got a couple of really exciting partnerships, like we have a partnership with this mass retailer that I talked about, which really is, I think, a sign of what we're going to see in other grocery accounts and then advertising hitting as well as innovation. So I think there is the reason to believe as well as my view on the category. Operator: Our next question comes from Andrew Lazar with Barclays. Andrew Lazar: Darcy, I remember last quarter, you did not yet have as much clarity as you wanted around the repeat rate for some of the new entrants or the insurgence that have come into the category, particularly at your largest customer. I'm assuming you at least have some additional clarity now on some of this. And I guess, more importantly, what that means for sort of the -- your expected shelf set, right? For the year ahead at your largest club customer. I was hoping you could maybe update us a bit on that dynamic. I think that was one of the main reasons why last quarter, you weren't yet in a position to sort of provide '26 guidance as I think many had kind of hoped at the time. Darcy Davenport: Yes, sure. So yes. As I said in my remarks, that one of the changes is that we do expect that our major club customer will keep that expanded set. So that is a change versus what we had assumed before. So we think that the competitive set will be bigger and remain the same. I think that we wanted to watch repeat rates. I would say we're continuing to monitor. I think what is clear is that not all of these kind of insurgent brands are going to make it. There is definitely going to be a shakeout. These thresholds that you have to hit at these club customers are high. And so I think that we will continue to see sort of a rotation of different kind of smaller brands, bringing news, but also kind of just coming in and out. I would say what we have learned, we are -- our fifth pallet in that customer will -- as we expected, will be -- will transition out. The rest of our business is super strong. I think that what I've learned, and what we have learned is that I think that -- the category is strong, it's expandable. I think that they're -- from an insurgent brand standpoint, there will be winners and losers, and it's really hard to hit those thresholds. I think that we are really well positioned versus consumption. When we look at the interaction between us and many of the competitors, we have a clear position and our repeat rates are only getting stronger. So -- and we're also source -- we are sourcing some volume from those competitors. So I think I feel really good about our business in the long term despite there's kind of a little bit of messiness in this quarter. Operator: Our next question comes from Megan Clapp with Morgan Stanley. Megan Christine Alexander: I just wanted to ask about the club channel, again, maybe following up a bit on Andrew's question. There's been a lot of unique dynamics, not just here in the first quarter, but all year in the club channel. And clearly, it's an important channel for the category a bit more mature for you. But when we think about the acceleration that you talked about that you're going to see in mid-December and the kind of down 5% to up 9% or so embedded in the guide. How much is driven by the Club channel in particular? And can you just tell us what that means for what you're expecting for growth in the club channel this year? And how the various headwinds and tailwinds kind of shake out in your mind as you think about that channel. Darcy Davenport: Yes. So what we expect is that -- the growth is -- the major growth is largely coming from outside of the club channel. I mean we've been seeing stronger growth for many, many quarters from our FDM, the food, drug, mass and e-commerce channels. So that is where we see -- that's where we have kind of the most potential, and where we see kind of the most opportunity for the category as well as us. So what our guidance assumes is that the club comparisons get better throughout the quarters. But the growth is largely coming from the rest of the channels. So I think that -- and in our -- in my remarks, I talked about kind of the reason to believe just around distribution, merchandising, advertising and innovation. Operator: Our next question comes from David Palmer with Evercore ISI. David Palmer: Thanks for the commentary on your general areas of investment. A lot of us are going to be looking at the all-channel scanner data, the consumption data. I wonder how you're thinking about what we will see in that consumption trend through the rest of the fourth quarter. And I presume which will be a ramp into 2Q? How you're thinking what we would see based on what your plans are -- and to the degree that you can, can you tell us how you're factoring in increased competition that you see and perhaps some room for surprises and your innovation contribution to growth. Darcy Davenport: From a consumption standpoint, we are expecting, in November, we'll continue to see Tough Club comps and remember, we have that non -- that Club promotion that we are not recurring. So expect kind of slightly negative kind of low-single digits, continuing through November. What we start seeing when you'll start seeing an acceleration in sort of the back half of December as New Year. So we have the mass partnership, so kind of expect low double digits in all of December, but it will ramp up towards the end. And then that momentum will continue through kind of Jan, Feb, March and on. So there really is some unique things going on right now within the club channel, then ease out. Obviously, the nonrecurring-club promo is very specific in October and November. But after that, I think that what happens is that it continues to accelerate as we layer on these demand drivers. David, what was the other question? David Palmer: Well, how you're thinking about increased competition being headwind, perhaps including some room for surprises there, but also contribution to growth, and how you're thinking about just the innovation giving you some help on some of the consumption numbers you're thinking about? Darcy Davenport: Yes. I would say that our guidance is very, I would say, it's prudent. It's conservative. It puts in assumptions around continued competition. And so I think it's one of the reasons why I feel really good about -- I feel really good about delivering the year quarter by quarter. Operator: Next question comes from Brian Holland with D.A. Davidson. Brian Holland: I wanted to maybe follow up on the conversation around compares over the balance of the year. I mean if I look at Premier Protein's consumption, a little bit softer in Q2 and Q3 prior year in club. Overall, consumption pretty strong throughout the year. So I know you did a longer promo event at your largest club customer this past August, September. So just a little more -- just a little better understanding about why, or how you view the compare as being easier over the balance of the year? And what level of visibility do you actually have into competitor shelf placement as we go through the year? Darcy Davenport: So I'll start, and then, Paul, if you want to add on anything? Yes, so our club comparisons do get easier. So if you remember, in our largest club customer, the expanded that started easing in Q3 and then expanded more in Q4. So we are lapping, so especially in Q1 and into Q2, we are lapping a period with kind of less competition. So the comps are more difficult in the front end. I think what -- as we move forward, I would say we have -- the visibility on competitive entrant is -- I mean, I would say, pretty good for the first half. And then we have -- I mean, we don't even know about our reset for the back half. Here's what I would say is -- as the #1 brand within the category, our retail partners are choosing us to figure out what they're going to do in this -- in their category. So there's some exciting things going on. And I'm going to -- I referred to this in my remarks, but in several retailers, a club retailer as well as some major food retailers. They're testing higher traffic dials to move the category. And they're not just -- they're not moving the entire category. What they're deciding to do is they're selecting the best performing brands the ones that have the most mainstream appeal, and they're moving those into these new higher traffic sets. Obviously, that includes Premier Protein. But some of the legacy brands will stay back in kind of the pharmacy. So that dynamic is not something they're testing it right now. So we're not seeing that necessarily make its way into consumption, but it will in the medium to long term, probably -- actually not even long term, medium term. So some of those dynamics are really exciting. And I think show you where the category is going, and whereas the #1 brand where we will be going. Paul Rode: So obviously, we had very strong distribution gains in fiscal '25. And so we'll obviously get the full year benefit of that in fiscal '26, including some pretty significant distribution gains in our fourth quarter, in particular at a mass retailer that reset shelf. And so obviously, we'll get a full year benefit of that reset as well, including -- in our first quarter, we have some innovation that's also shipping out. So as you kind of get into Q2 and beyond, some of that innovation will start shipping. Q2 obviously is a very big pulse period for us of advertising. So we're stepping up our advertising, stepping up our merchandising, stepping up our promotional events, especially in FDM. And so those are the reasons we think that sales and consumption will accelerate as we move into Q2 and beyond with additional innovation hitting later in the year. So those are the big pieces for the reasons for why we believe consumption will accelerate as we move throughout the year. Operator: Our next question comes from Thomas Palmer with JPMorgan. Thomas Palmer: I wanted to maybe bridge a little bit more on your EBITDA margin, down around 280 basis points year-over-year. You noted, I think, around 80 basis points from tariffs and your comments suggest maybe another 80 basis points for stepped-up advertising. So when we're kind of thinking through the remaining 120 basis points, maybe a little help kind of bridging like SG&A leverage, excluding advertising, inflationary pressure, excluding tariffs? And then maybe thinking through some of the cost savings that you noted. Paul Rode: So as you've highlighted, we're calling for our EBITDA margins to be down about 280 basis points compared to a year ago. And as you mentioned, about 80 basis points of that is tariff. From a line item perspective, we expect gross margins to be down, that's the lion's share of that decrease. And then SG&A, we would expect to be modestly down with advertising an 80 basis point headwind, and then there's offset partially by some G&A leverage. When you look at within gross margins, we were calling for inclusive of tariffs, a low to mid-single-digit inflation headwind. Much of that is on whey proteins, which is the input cost on our powders, we are taking pricing for late in Q1. So obviously, that will start to get offset as we move into Q2 and beyond. On our shake business, we do have a little bit of a step-up in Q1 and then inflation is pretty flat to slightly up as we kind of go through the year on shakes. And so the puts and takes are, we have some additional inflation, especially on our powder business, which were pricing. On our shake business, we have some modest inflation as we go through the year, but we also have cost savings initiatives that are more impactful in the second half of the year. So one of the things I want to point out here is that if you look at our margins, kind of by quarter, the first half obviously has -- we're lapping a very, very strong margin first half last year. We had gross margins nearly 35%. And so that's -- so as you look at kind of the headwinds throughout the year, first quarter has the biggest headwinds on a margin perspective versus a year ago. Q2 also has a sizable headwind, but less than Q1. And then as we get to the second half, things are actually fairly similar versus a year ago from a margin perspective. So it's really the first half where we have the biggest headwind related to margins. And again, largely driven by inflation, but also our stepped up promotions as well. Operator: Our next question comes from Peter Grom with UBS. Peter Grom: So I wanted to go back to the market share discussion and a follow-up to Andrew and Steve's question. And I guess specifically on what you are seeing from the insurgent brands. And I guess -- do you think they have the potential to see similar market shares to what the category leaders are at today? And I ask this more around the debate around what the competitive landscape looks like. I think some point to the potential that we could -- this industry could be similar to what we see in energy drinks, where you have a duopoly versus maybe some others where you have 5, 6 brands with similar shares. So Darcy, I know you mentioned that you think it's -- some of these brands are going to go away, but maybe you can take the other side of it, I'm curious if you think any of these insurgent brands have potential to become more real competitive threat over time? Darcy Davenport: I mean I'll just -- you guys have been along with our journey, and I think you even see it with our major competitor. It takes a long time to build a national network of a national supply chain. And so I think that from a -- I think it's -- I think you can -- some of these insurgent brands can do well in one retailer. But I think expanding out, and we've done it. This is kind of -- in many ways, this is our playbook, right? Like we started in club, we expanded outside of it. It is incredibly complicated. So it is complicated to -- it's a complicated supply chain, the expertise that you need to have the sophistication around expanding and being able to service multiple different channels simultaneously as well as the back end of -- on the co-man side. And then even if you're self-manufactured, that's a whole another piece. So I am assuming, we are assuming that, of course, there's going to be -- there are going to be a couple of these insurgent brands that probably make it. But it is going to take a while. And I think that what we're seeing, but I think there will be many more that don't. And that -- and I just do not want to underestimate the move from one kind of club customer to go national is very complicated. It takes multiple years, and it's a different skill set. So yes, I think that ultimately, I think this category is going to consolidate around kind of the most successful brands, a handful of them. And I clearly think that's going that's obviously going to include us as the #1 brand. Operator: Our next question comes from Alexia Howard with Bernstein. Alexia Howard: Can I ask about pricing expectations, price versus volumes embedded within your guidance. You're obviously taking a list price increase on Dymatize. With the rest of the portfolio, do you expect promotional activity step-up to actually bring pricing downwards? And does that cadence vary through the year? Paul Rode: Yes. So for -- I'm going to break it into brand. So for Premier Protein, we would expect a modest kind of a low single-digit headwind related to pricing. So that incorporates our stepped-up trade investments, offset by -- we expect some favorable mix. So there is a low single-digit headwind we're expecting on our shake business, which obviously is the biggest part of our business. On Dymatize, we're taking a price increase on powders, but we expect mix to play a big part of this because we now have RTD shakes and Dymatize, and those are at a much lower price per pound than powder. So it throws off a really funky mix. So net overall for total BellRing, I would expect a low single-digit headwind overall with Premier similar and then Dymatize, even though we're taking a price increase, may look like it's negative because of just mix. Operator: Our next question comes from Matt Smith with Stifel. Matthew Smith: Darcy, following up on the discussion or Paul, around higher promotional activity over the next year. We've seen a step-up in promotional intensity from insurgence in recent weeks. As you look forward, do you expect Premier promotional activity to be moving higher more on a frequency or a depth basis? And do you expect that to be focused in certain channels? It sounds like maybe club promotion should be similar relative to the prior year once we get past the first quarter? Darcy Davenport: Yes, I think that's me, right, Paul. Yes. So you're exactly right. We're expecting to see a little bit of a step-up of promotion in '26. And yes, I think, it's interesting that just October, especially in the club channel is usually not a high promotion time period, and it was a little bit more, and it's coming from the insurgent brands. So from our standpoint -- and also, I would just say that just remember that this category is actually fairly low promotion compared to many categories. It's just about -- it's about 25% to 30% sold on deal. So just keep that in mind as you're thinking about just this category kind of in the macro. But as far as our business, we are going to see a little bit of uptick in promotion mostly as we talked about, our emphasis, specifically in FDM as we are getting out of the aisle, as I've talked to you guys before, the key is for us is getting out of the aisle to get that trial, to get that -- and then with our 50% repeat, we get the repeat. So that's a big emphasis. It's why we brought on the brokers. It's why we have a new internal team focused on this, around singles and entry point priced multipacks. So because of that, when you have that merchandising, you usually have to do some sort of a TPR. So we are going to see a little bit of a step-up of promotion that comes along with that expanded merchandising. Operator: Our next question comes from Yasmine Deswandhy with Bank of America. Yasmine Deswandhy: So I just had a quick one on longer-term strategy. So you guys walked away from the PowerBar business a couple of years ago. And considering that the convenient nutrition category is expanding outside those traditional products. Have you given any thought into, say, going back into bars or expanding into breakfast offerings like waffles, pancakes and cereal. I guess I'm just asking as well because given the recent -- the press release of the recently announced Board appointment, it highlighted David's finance M&A background. So I also don't know if there's -- has there been any change in your capital allocation priorities, particularly around M&A and your product portfolio as well. Darcy Davenport: Why don't I hit the portfolio piece and Paul, you can hit capital allocation. So from a portfolio standpoint, we really -- we believe in our category, specifically ready-to-drink shakes and secondarily powders. We think that there is a ton of opportunity. I talked about in my prepared remarks just around this demand landscape study that we did. A key part of that demand landscape study was to evaluate and make sure that there was going to be a ton of room to grow, and there were many years of strong growth kind of a ton of white space that we could capture. So it confirmed that. So we love this category. We think there's a lot of opportunity. We have a great brand to compete. Now having said that, we also do participate in some of these -- we have a great brand that we have learned that can travel to heavier traffic aisles. We are competing in some of these other areas, but we're doing it through licensing. So if you -- we actually have a frozen pancake, we have a frozen waffle. We have a dry pancake mix. We have a cereal, and we're actually expanding some of those, but we do it through licensing because we want -- I want this organization laser-focused in what we believe is the biggest opportunity, which is ready-to-drink shakes and powders. So no, we do not have any plans to go back into bars. It's a highly competitive area, low barriers to entry, et cetera. So -- but we love the area that we in and we think there's a lot of upside, and I'll pass it over to Paul for capital allocation. Paul Rode: Yes, thanks, Darcy. Yes, on capital allocation, I would say that our priorities haven't shifted really that much. Obviously, our first priority is always investing in the business. And as we talked about, we are making investments this year within trade and promotions continue to drive this business. Outside of that, because we generate really strong cash flow, we're not expecting to change our asset-light model. We have low CapEx. Obviously, that provides us a lot of cash flow that we can obviously allocate from recently, and we still think is the most attractive is share repurchases. We've obviously leaned into share repurchases. And so that's still our near-term priority, but M&A, we're always looking at M&A. We're looking all the time. We get pitch things all the time. And so we'll definitely keep an eye out on M&A, and that's something I think that is becoming -- I wouldn't call it near term, but it's more kind of in the mid- to longer-term priorities for us. And yes, David, coming to the Board obviously brings a lot of strength in that area. So that's great for us. And so yes -- but yes, M&A is something we're always looking at. And if we find the right opportunity, we certainly would go after it. Darcy Davenport: Yes. And on the Board side, we're really happy to have David on board. I think he brings a great skill set, and we're always looking at expanding and improving the skill set on our board. Our Board has been incredible over the years, and we just want to continue to make it better and increase the skill set. And I think David does that. Operator: Next question comes from John Baumgartner with Mizuho Securities. John Baumgartner: I'd like to ask about RTD category segmentation. Fairlife Core Power, they've established that Premium segment in ultrafiltered milk, but now we've seen two legacy competitors relaunched with ultrafiltered, some of the newer entrants, the insurgents private label, they're adopting ultrafiltered. So I'm curious, Darcy, why the category is making this shift with ultrafiltered becoming more of a standard recipe? Is it tied to raw materials availability? Is it due to the license to move more Premium? Is there a specific consumer you sense they're chasing? Just curious your thoughts there on that recipe shift? And how might this shift position Premier differently relative to history? Darcy Davenport: Yes. Yes, I think the category is maturing. I think that it is -- when we did our demand landscape study, I think that what became very clear and our head of innovation, I will quote her, and she described the landscape is like there's different strokes for different folks. Meaning some -- when the category is more nascent, kind of everybody kind of wanted the same thing. But as it expands, there are different preferences. And so for instance, some people want thickshakes. Some people want thinner shakes. Some people want dairy shakes, some people want plant. So I think what's the good news for us is that our core 30-gram shake addresses the biggest consumer needs, but it doesn't address every consumer need. And so as we now are kind of growing up, we hit with the 30-gram with our core offering, we hit the biggest one, but now we're launching innovation to go after some of these other needs. And like -- I mean, I think a good example of that is, so when you're talking about ultra-filtered milk, that is an innovation. It's a thinner offering. It's more of a beverage. Ours is more of a thicker shake. Ours is more of a meal replacement. So I think that starts explaining why there's actually not that much interaction between the two. It's going after kind of a different consumer, different occasion. We launched almond milkshake, that's a non-dairy. We knew that was an opportunity. We think it's a smaller opportunity than the dairy side of things, but it's an incremental opportunity. And I think our numbers that we're getting from almond milkshake, even though it is early, are showing exactly that, 50% incremental, we're getting to new people. So that is a key aspect of our innovation strategy is really going after -- make sure that our 30-gram core business is strong. We always are looking at making it better. We're always looking at bringing in news and flavor innovation, et cetera. But at the same time, we also are going after some of these other incremental consumer needs with other innovation. Operator: Our next question comes from Jon Andersen with William Blair. Jon Andersen: We talked a lot about the insurgent brands this morning. And Darcy, you mentioned you expect over time there to be a bit of a shakeout, which makes sense to me with some winners and some not meeting the thresholds. But in your kind of experience, how long would you expect kind of a process like that to kind of take or to play out. And the reason I ask is because it seems like the competitive dynamic that is weighing a bit today, it could remain difficult until that kind of shakeout period -- shakeout event kind of plays out more broadly in the market. Darcy Davenport: Yes. I mean it's a great question. I think that we're seeing it right now, obviously, we're seeing brands that are not making the thresholds. I think what -- I think I would zoom out a little bit. So I think the reason why even in Steve's very first question, just about our view of the category these insurgent and kind of crossover brands, they're getting a lot of attention. They only represent 10% of the category, and there are a lot of them. So -- and I think that remembering, and I think that what is important is where the growth is coming from, it's coming from the leading brands, bringing in more households and then also sourcing volume from those declining legacy brands, which are not insignificant. 30% of the market share is in these kind of declining legacy brands. So what's happening is that, yes, there's going to be some churn in the insurgent kind of crossover brands. Some are going to make it, some of them not. There's always going to be new news. It's an exciting category. I mean you see it in energy. There's always like this group that kind of starts turning. But like if you zoom out the leading brands, which have established, which has -- they have high -- let's just talk about Premier, #1 household penetration, #1 repeat, national supply chain that we've built over years and years and years. We have -- we're now invested, we have capacity. We're now investing in the brand, we're leaning in, we're partnering with retailers to figure out where in the store that this category should be, and how it should be merchandised, and how to maximize it. They're choosing us to do that. So the leading brands are just going to -- they're going to keep on winning. There's going to be churn around the insurgent brands. And then the legacy brands are going to be the ones, I think, that continue to be -- they have been shared donors for years, and they're going to -- and that is just -- it's kind of accelerating. So your question around how long is it going to take? I mean, I think there's going to always be this kind of churn of insurgent brands. And I think it's an exciting category. We watch it for sure. But I think that there will -- I think the focus in my mind is -- and they're actually sourcing some volume from the declining legacy brands. So -- but I think the focus is that we definitely expect there to be a consolidation and the most successful brands are the ones that are going to really propel forward. Operator: Our next question comes from Robert Moskow with TD Cowen. Jacob Henry: This is Jacob Henry on for Rob. Just one question for me. I think I heard you guys mention that your fifth pallet at the large club customer is transitioning out. I'm just wondering if you have any insight into when, and why that's happening. Darcy Davenport: Yes, it was always going to be -- it was always going to be a temporary SKU. So it went in -- it's coming out in Q2. So it will phase out. Operator: And I'm not showing any further questions at this time. And as such, this does end today's presentation. We thank you for your participation. You may now disconnect, and have a wonderful day.
Operator: Hello, and welcome, everyone joining Helmerich & Payne's Fiscal Fourth Quarter and Full Year Earnings Call. [Operator Instructions] Please note this call is being recorded. [Operator Instructions] It is now my pleasure to turn the meeting over to Mr. Kevin Vann, CFO. Please go ahead. J. Vann: Thank you, and welcome, everyone, to Helmerich & Payne's Conference Call and Webcast for the Fourth Quarter and Fiscal Full Year 2025. Before we get started, I first wanted to extend a warm welcome to Kris Nicol, who has joined the company as Vice President of Investor Relations. Kris Nicol: Thank you, Kevin. Kevin will be joined on the call today by John Lindsay, CEO; Trey Adams, President; and Mike Lennox, Executive Vice President of the Western Hemisphere. Before we begin our prepared remarks, I'd like to remind everyone that this call will include forward-looking statements as defined under securities laws. Although management believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that the expectations will prove to be correct. Please refer to our filings with the SEC for a list of factors that may cause actual results to differ materially from those in the forward-looking statements made during this call. Reconciliations of direct margin and certain GAAP to non-GAAP measures can be found in our earnings release. With that, I'll turn the call over to John. John Lindsay: Thank you, Kris. Hello, everyone, and thank you for joining us. We appreciate your interest in H&P. Fiscal 2025 was a pivotal year for H&P. We overcame several challenges, and I am immensely proud of how our global team closed the year with strong fourth quarter results, setting the stage for continued success in fiscal 2026. While the oil and gas industry is inherently cyclical, we are increasingly encouraged by the resilience of our business and the positive long-term prospects. We have long held the view that the upstream sector will need to invest for decades to come in order to sustain, if not grow production from current levels. We are pleased to see increasing alignment with this view. The recent update from IEA now projects robust demand growth for oil over the next quarter century under the current policy scenario with energy security and affordability remaining critical global concerns. On the gas side, the rise of AI and the surging power needs for data centers is rapidly creating a new source of demand. Coupled with the build-out of significant LNG capacity on the Gulf Coast, we see strong activity in the gas-rich basins over the next several years. Ultimately, technology-driven drilling as demand continues to grow and basins become more geologically complex will be essential for decades and is a key differentiator for H&P. Operationally and financially, our North America Solutions segment has positioned H&P as the leading driller in the U.S. land market. Customers are increasingly demanding efficiency and devising more complex well designs with longer laterals to maximize returns. Our success in delivering value, safety and performance is rooted in the strong partnerships we built with both large and small customers. As acreage quality becomes more challenging in unconventional shale plays, deploying the most capable rigs and cutting-edge technology is crucial for success. This past year was particularly historic for our International Land segment. After years of effort to develop a larger and more diverse international footprint, we exported 8 FlexRigs to Saudi Arabia and completed the KCAD acquisition, making H&P the largest active land driller globally. We're also very pleased to announce that 7 suspended rigs will be reactivated in the coming months in Saudi Arabia. This exciting development will call for intensifying our efforts to execute strategic priorities, deliver customer value and meet our financial objectives. The KCAD acquisition also brought us a global offshore labor contract business that complemented our existing offshore Gulf of America operations. We now operate in 6 countries, have a blue-chip customer base supported by strong contractual coverage and a global geographic palette of growth for this business going forward. Despite the challenges faced by the oilfield services sector, we remain optimistic that the market is stabilizing, and our expanded footprint will offer new opportunities. We anticipate the first half of 2026 will mirror 2025 with oil prices range bound between the upper 50s and mid-60s and rig activity aligning with these trends. Through the cycles, OFS companies must be able to make a return for our shareholders. I'm confident in our team's ability to continue refining and executing the H&P way, demonstrating leadership in international markets as we have in North America Solutions. Alongside legacy KCAD, our team has forged robust global partnerships in the Middle East and other strategic regions, enabling us to enhance our unique capabilities and strengthen customer collaborations. We're committed to nurturing leadership and promoting talent within our organization to prepare for the future. In line with this commitment, I was very pleased to announce earlier in the quarter the promotions of several key members of the management team, reflecting their strong contribution to H&P. Most notably, Mike Lennox became EVP of Western Hemisphere. John Bell became EVP of Eastern Hemisphere. And lastly, Trey Adams has been promoted to President as we position for the next phase of growth at H&P. And with that, I will turn the call over to Trey to provide more details of Q4 performance and the 2026 outlook for our 3 segments. Raymond Adams: Thank you, John. I will start by walking through North America Solutions. We had solid fourth quarter results driven by our ability to work safely and to deliver outsized drilling efficiencies for our customers. Our operations and sales teams continue to do an excellent job managing rig churn and creating customer value. On the operational front, average lateral lengths increased 5%, while our average drilled footage per day grew at the same rate. Encouragingly, the use of our advanced digital solutions and applications increased 20% over the year. The combination of the right rigs, right people and right solutions continue to drive efficiencies for our customers over the fiscal year. In the Permian Basin, the total rig count declined throughout the year as several E&Ps reduced drilling activity in the face of softening oil price fundamentals. Despite these rig drops, our rig fleet showed great resilience. We actually expanded our share position in the Permian throughout the year. At the same time, natural gas-oriented activity picked up through the year. Our footprint and outcome-oriented approach will position us well for continued natural gas activity expansion. An important point to highlight is that the industry utilization of super-spec rigs is tighter than it's peers. Utilization rates of rigs that have been idled less than 12 months remains strong at more than 80%. In addition to the relative tightness of the market, lateral lengths continue to expand. Over 40% of our wells today are over 3-mile laterals and technology and drilling efficiencies continue to be a primary focus for customers. We believe that this combination provides a strong platform for North America Solutions in fiscal year 2026. Safety and customer value will continue to be our focus looking forward, and both will be underpinned by our great rig crews and continued commercial and technological innovation. Moving to our international operations. Our new footprint is exciting and energizing. We now have meaningful positions in Saudi Arabia, Kuwait, Oman, Argentina, Europe, along with other countries poised for growth. As John mentioned, in Saudi Arabia, we will be resuming operations on 7 previously idled rigs in fiscal year '26, with operations resuming in the second fiscal quarter and continuing into the third fiscal quarter. With these 7 reactivated rigs, we will go from 17 active rigs to 24. As you know, we encountered several challenges in fiscal 2025, particularly in the Eastern Hemisphere. However, through every challenge, there is an opportunity. We have taken advantage of the past year to reorganize, retool and get our forward strategies aligned. Our 8 FlexRigs in Saudi Arabia continue to improve on all fronts with a focus on safety and performance. We also continue to see margin health improve across those 8 rigs and intend to realize our expected run rate margins by the end of the fiscal year 2026. The addition of 7 rigs in Saudi Arabia adds scale. And as those rigs are resumptions, we expect the learning curve to be expeditious and to hit the ground running in the second and third fiscal periods. Our business in Oman continues to be a particular bright spot with strong NOC and IOC relationships, providing a constructive long-term backdrop. Our combined organization enables further expansion across the MENA region. We now have a foundation that enables more realistic and long-term oriented discussions with IOC and NOC customers across the globe. Our Offshore Segment continues to provide stable long-horizon revenues for our consolidated business. We are active today in the Gulf of America, Caspian Sea, Norway and U.K. North Sea, Africa and Canada and have roughly 30% share of the global platform operations and maintenance business. Our expanded geographic exposure strategically positions us to benefit from the anticipated strong offshore investment cycle. In addition to our geographical positioning, the integration of our operating models and safety execution between our land and offshore businesses will continue to be additive for us in the near and long term. Many of our offshore customers have robust land activity. The transference of models, approaches, technology and relationships uniquely positions us to deliver differentiated value for customers across our global operations. With that, I will turn the call over to Kevin to walk through the financial results. J. Vann: Thanks, Trey. Today, I will review our fiscal fourth quarter and full year 2025 operating results and provide operational guidance for the first fiscal quarter of 2026. Additionally, I will spend some time outlining our annual fiscal 2026 projections, our financial position and provide an update on where we stand with our deleveraging efforts and cost reduction goals. Let me start with highlights for the recently completed fourth quarter and fiscal year ended September 30, 2025 where we exceeded our direct margin guidance in all operating regions despite the challenging market environment. Alongside our continued commercial success, we also made strong progress on the deleveraging front as we have currently paid off $210 million on our term loan, and we're significantly ahead of the debt reduction goals we laid out earlier this year. During the quarter, the company generated quarterly revenues of a little over $1 billion, which is the third consecutive quarter over that $1 billion mark. Correspondingly, total direct operating costs were $715 million for the fourth quarter versus $735 million for the previous quarter. General and administrative expenses totaled $78 million for the fourth quarter and $287 million for fiscal 2025. These results include a $10 million write-off related to one of our investment securities. Normalizing for that, we were in line with our full year guidance. Also included in the fourth quarter results was an approximate $40 million write-off of the investment in that same company for which we held the note receivable. To summarize fourth quarter's results, we are operating -- we are reporting a net loss of $0.58 per diluted share versus a net loss of $1.64 in the previous quarter. Earnings per share for the full year were a net loss of $1.66 per share. The quarterly results were negatively impacted by some unusual and noncash items and absent those items would have been a loss of $0.01 per share. Capital expenditures for the fourth quarter were $64 million, with full year 2025 totaling $426 million. This outcome was primarily driven by accelerated CapEx investment in the Eastern Hemisphere and increased investment in harmonizing our ERP footprint. Currently, we operate in 3 distinct ERP platforms, and our ultimate goal is to get to one platform for the company. We are continuing to invest now to capture additional synergies and cost savings in the future. Looking ahead to 2026, we expect significantly reduced capital investment levels even with the announced rig reactivations. This reflects current fleet conditions with maintenance capital expenditures approaching historically low figures and an ongoing emphasis on capital discipline. H&P generated $207 million in operating cash flow in the fourth quarter and a total of $543 million during the full year. Our cash flow generation helped fund $100 million in base dividends in addition to the significant progress on paying down our term loan. As we have stated, we are now on track to pay this completely down by June of 2026. Now turning to our 3 segments, beginning with North American Solutions. We averaged 141 contracted rigs during the fourth quarter, which was down from the third quarter, but consistent with industry activity and our expectations. We exited the fourth quarter with 144 rigs running. Segment direct margin for North America Solutions was $242 million, which was above the midpoint of our guidance range. Overall, margins were slightly down from the third quarter, but again consistent with our expectations and guidance. Looking ahead to the first quarter of fiscal 2026 for North American Solutions, we are anticipating our margins to stay in the same ZIP code of our industry-leading fourth quarter numbers, and we also expect our operated rig count to stay relatively flat with fiscal fourth quarter results. Our North American Solutions team continues to deliver. Despite some moderate headwinds we saw during 2025, they brought there A-game to the table, helping our customers and us to win-win outcomes. We are extremely grateful to the folks out in the field on the rigs and our great sales and marketing teams that help our customers find the solutions they need. This outcome is also evidence of our commitment to our customers and shareholders. For our customers, we benefit when they benefit via our performance-based contracts. Ultimately, our goal is to help them meet their objectives of drilling consistent and timely wells and setting them up for a clean and efficient completion and production process. As of today, approximately 50% of the U.S. active fleet is on a term contract. Additionally, as our performance contracts continue to drive alignment with our customers, we currently have roughly 50% of our rigs on them. In the North American Solutions segment, we expect direct margins in our first quarter to range between $225 million to $250 million as we don't see a material change in expected margins based on our current contractual structure, expectations around operating costs and anticipated rig count. Our International Solutions segment ended the fourth quarter with 61 rigs working and generated approximately $30 million in direct margins, above the midpoint of our expectations. This result is slightly down from the third quarter, but was toward the top end of our guidance. As a reminder, we had fewer rigs working during this past quarter as many of the final Saudi rig suspensions received during the third quarter had a full negative effect during the period. As we already stated, we are ready to get back to work and are very pleased about the announced rig reactivations. For the first quarter, we are anticipating between $13 million and $23 million of direct margin for the International segment. This is reflective of the reactivation costs anticipated in the first quarter that are not capitalized. This trend will persist through the first half of 2026 with direct margin expected to step up materially thereafter. Further, we expect the average first quarter operating rig count to be approximately 57 to 63 rigs. For the first time, we are laying out expectations for the full year international rig count to provide greater visibility on our outlook. For fiscal 2026, we believe the rig count will average between 56 to 68 rigs, which includes the rigs being reactivated in Saudi. Please note that the rig count includes only partial years for those reactivated rigs and includes the expectation for some lower rig counts in non-core countries where the current EBITDA contribution is minimal. Finally, with our Offshore Solutions segment, we generated a direct margin of approximately $35 million during the quarter, which was above our guidance range as well. Again, we are excited about this business and the consistent and stable results that it continues to deliver. As John and Trey said, it requires minimal capital and generate steady cash flow from a set of blue-chip customers. As we look toward the first quarter of fiscal 2026 for this segment, we expect that it will generate between $27 million and $33 million in direct margin with 30 to 35 management contracts and operated rigs on average. Now I want to transition to the first quarter and full year 2026 for certain consolidated and corporate items. In 2026, our strategy begins with optimizing our financial position to continue to pay down the term loan and generate free cash flow that will help us get closer to our goal of returning the balance sheet strength that has always been a priority at H&P. Fiscal 2026 gross capital expenditures are expected to be approximately $280 million to $320 million. Maintenance, fleet upgrades and reactivation capital across the global fleet of operating drilling rigs is expected to be approximately $230 million and $250 million and includes all of the estimated capital for the 7 rigs being reactivated in Saudi Arabia. Also included in our capital program is $40 million to $60 million of investments in our North American solution operations related to customer demand and funds the necessary upgrades to maintain our technology-leading position across the market. Depreciation for fiscal 2026 is expected to be approximately $690 million. Our sales, general and administrative expenses for the full fiscal '26 year are expected to be between $265 million and $285 million, which includes $50 million in savings from our original pro forma run rate. We, as a company, are culturally more focused on managing costs than ever. We have our eyes set on generating further savings as we evaluate systems alignment across both our Eastern and Western Hemisphere operating models. Our investment in research and development remains largely focused on solutions for our customers, such as drilling automation, wellbore quality and power management. We anticipate R&D expenditures to be roughly $25 million in 2026. Based upon our estimated fiscal '26 operating results and CapEx, we are projecting a consolidated cash tax range of $95 million to $145 million. And lastly, we are expecting interest expense of $100 million during 2026. Now looking at our financial position. We had cash and short-term investments of approximately $218 million on September 30, 2025, including the availability under our revolving credit facility, our total liquidity is approximately $1.2 billion. As I mentioned earlier, as part of our deleveraging efforts, we are pleased with the progress we have made on paying down the $400 million term loan with only $190 million currently outstanding and a clear line of sight to have it paid off by June of next year. Regarding cash returns to shareholders, we plan to maintain our long-standing base dividend of approximately $100 million in 2026. Longer term, as we delever, we will have additional flexibility to direct free cash flow to both enhance shareholder returns and invest for growth. And that concludes our prepared comments for the quarter, and we'll now turn it back to the operator for questions. Operator: [Operator Instructions] Our first question comes from Saurabh Pant with Bank of America. Saurabh Pant: John, Kevin, I don't know who wants to address this, but I want to start on the international side of things, if you don't mind. And then really, I'm thinking about 2 things. First is the rig count. Of course, it's great to see the 7 Saudi rigs coming back. But maybe just help us think about the potential for more Saudi rigs to come back as we move through fiscal '26 and then maybe like you said, the pluses and minuses in any of the other regions. And then the other thing that I'm thinking about is international margins. Like you said, Kevin, I think it's being weighed down by reactivation cost and a bunch of short-term-ish things. How should we think about normalized margins once all of that is settled? John Lindsay: Saurabh, thanks for the question. It is very, very positive, and we're very pleased about the reactivations. And as you can imagine, we're laser-focused on execution. We think this is going to be a phased approach to the reactivations. We think we'll be finished with mid-2026, working really closely with the customer. I'm going to let Trey. Trey has been over there recently and have him give a little feedback on what they're seeing. Raymond Adams: Yes, happy to. As John pointed out, we're thrilled about the 7 reactivations in Saudi Arabia. As it relates to longer-term growth in Saudi right now, we're focused on these 7 resumptions and focused on our core business there and getting those rig fleets back and aligned. But obviously, having a number of conversations more broadly across the region, myself and the teams are very active and very engaged in the Middle East today. We're encouraged by some IOC entry into the region. Obviously, there's been some long-standing IOCs in the MENA region, but continued interest from some new players. It positions us well through '26 and then really sets a good table for 2027. And then as some of those discrete rigs that Kevin mentioned in his prepared remarks, many of those rigs that you saw have fallen off of our international count have come in really low scale single rig, single string countries. And as we've kind of reorganized and continue to refocus our efforts around Saudi Arabia and core Middle Eastern countries, we're going to continue to see further growth and enhancements there. On our margins, you can expect, right, that the first half of fiscal '26 with the reactivations and continued to getting our FlexRig fleet aligned that we're going to have some new and increased costs, and Kevin talked about that, both on the OpEx and CapEx side of the fence. But we expect that to abate mid-'26 and really expect to see some full run rate margins towards the end of the fiscal year. J. Vann: Yes. Just to further elaborate on that. I think what we had mentioned on the last call was we felt like the fourth quarter was kind of a bottoming out of margins as the FlexRigs kind of caught their stride, and we expected to see further improvement, and we do -- continue to expect to see further improvement in those margins throughout fiscal year 2026. So absent the rig reactivation charges that are going to hit over the next couple of quarters, you're going to continue to see just further margin improvement across the region. Operator: We'll now move on to Doug Becker with Capital One. Doug Becker: I wanted to touch base on North America. Revenue per day has been very resilient despite some industry headwinds. Guidance does imply daily margin declining a few hundred dollars in fiscal first quarter. Just wanted to get a little sense for how you see daily revenue and daily operating expenses going forward because there was a pretty sizable bump in OpEx per day. And then if you look in your crystal ball, just when might daily margins trough based on a relatively stable rig count outlook from today? Michael Lennox: Doug, I'll take it. This is Mike. I appreciate the question. We see the NAS market is going to remain consistent as long as commodity prices and demand are intact. We do continue to expect rigs to churn. Our publics, they've gone down year after year by about 9 rigs. Our privates actually churn at about 4x of what the publics do, but that's given us a good opportunity to work for new customers. In the last year, we worked for 19 new customers. And so a lot of great hard work and effort by our sales team, really proud of what they do, keeping these rigs working. We expect demand for longer wells, more complex wells, as John mentioned in his opening remarks, and that positions H&P very, very well. We've made investments in our rig fleet for the past few years. We'll continue to do that this next year, allowing for 1 million pound setbacks, high torque top drives. We've also continued to deploy and invest in technology. Trey mentioned in his remarks of a 20% improvement on apps per rig. We've also -- on 1/3 of our fleet now, we've got rig floor automation, which includes HexGrips and slip lifters that provides a lot of consistency and reliability for our customers as they're going to continue to drill longer and longer wells. And then we've continued to invest in our people. I think that's something we're very proud of. We bring our drillers in, continue to invest in them and train them. As far as the oil and gas basins, we've seen an uptick in the Haynesville and in the Northeast. We went from 3 rigs earlier in the year to 8. We expect that demand to continue to be there. And then on the oil side, in the Permian, I think Trey mentioned it in his remarks, we went from 33% market share to 37% market share. So we've seen growth in that, even though rig count has been slightly down. We've seen growth in our market share. And then on the performance contracts, that's a lever or a tool that we're going to continue to use to -- you asked the question on revenue. We have the leading over our peers in revenue. OpEx we lead on that. We're the lowest and there's a lot of work that goes into keeping that OpEx in check, and we fully expect to keep it in check. And so I just really want to applaud our people, all the hard work that they're doing to keep all that in line. Doug Becker: And just any -- would you expect daily operating expenses to decline this quarter from fiscal fourth... Michael Lennox: Yes, we've seen some, what I call seasonal rigs churn, we see some costs that go up, potentially -- it's welding costs, tubular costs, trucking costs. It comes and goes. And so we expect it to come down. There's some onetime costs that are in there this last quarter. We do expect it to come down. But again, as long as those rigs are churning, we fully expect there to be some costs in there. John Lindsay: And the rigs just continue to work at a much higher and higher level quarter-over-quarter. And so that drives costs higher as well, as Mike had mentioned. Operator: We'll now move on to Scott Gruber with Citi. Scott Gruber: I may have missed it, but did you guys quantify the reactivation expense that's reflected in your fiscal first quarter international income? J. Vann: No. Scott, this is Kevin. No, we did not. And I think what I mentioned was if you go back and you look at the margins that we were able to achieve during this last -- during the fourth quarter for international, we kind of felt like what we had stated previously was that was a good kind of trough for bottoming out of the margins that we expected. And that absent those items, you would have probably continued to at least achieve the mark that we saw during the fourth quarter from a margin perspective and then with some anticipated improvement from there. Scott Gruber: Okay. Okay. And then it looks like cash taxes will step down in fiscal '26. Curious, is there a benefit from the recent tax law changes in the U.S. I'm just trying to think through if there's a benefit in fiscal '26 that then lapse and doesn't recur in '27? Or are you guys able to kind of chop that down over time? How sustainable is cash tax rate? J. Vann: It is somewhat -- yes, there are some benefit -- there is some benefit in that cash tax number that we're projecting for 2026 because of the one big beautiful bill. But going forward, the benefit will always be contingent upon the amount of capital that we're spending as well because there's certain portions of the bill that allow you to accelerate some capital investment that wasn't previously being allowed to be written off for tax purposes during the current year. But we have -- I guess, yes, it's in there. And then going forward, it's all going to be based upon capital expenditures. Scott Gruber: Yes. I imagine international activity levels. Operator: We'll now move on to Eddie Kim with Barclays. Edward Kim: Sorry if this was asked already, maybe even in the previous question, but just wondering if you could dig down deeper in the full year CapEx guidance. So you highlighted $230 million to $250 million of CapEx reflects both maintenance and reactivation-related CapEx. Are you able to let us know how much is just the reactivation-related CapEx specifically? And then tied to that, the reactivation-related OpEx, is that going to be a similar amount to the CapEx? If you could just provide some more color there, that would be great. J. Vann: Yes. No, the $230 million to $250 million, yes, does include all of the rig reactivation costs. And it's difficult to give an exact number per rig because it all depends upon which rigs are going to be -- the rigs being reactivated. So it's not a homogenous number across all the rigs. So I hate to give you -- if we got more rig reactivations, you could expect another x amount per rig. But the $230 million to $250 million includes all of the maintenance and rig reactivation cost. And the question, yes, in terms of the margin, it's not one for one. There's more CapEx than there is costs that are hitting operating costs. There's more capital cost than what's hitting the margins themselves. And most of the margin stuff is, again, going to be cleared out hopefully during the first quarter fiscal quarter, but there'll be some of that will bleed over into the second quarter as well. But again, if you look at what our fourth quarter performance was from a margin perspective internationally, we felt like that was kind of a low point for us, and we expected improvement from there. Absent the additional cost that's hitting the margins, our international margins from the rig reactivations, you would have -- we would have anticipated a little bit more improvement. Operator: [Operator Instructions] We'll now move on to Dan Kutz with Morgan Stanley. Daniel Kutz: So sorry to belabor this, but maybe just kind of coming at the CapEx guide question from a different angle. Anything you can share in terms of maintenance CapEx for a U.S. versus international rig or by segment? Yes, anything you could share in terms of what's contemplated for the maintenance component of that number would be really helpful. J. Vann: Yes. I think -- this is Kevin again, and I'll let Mike and Trey contribute. The -- what we've publicly said historically is that the maintenance CapEx on a domestic rig is somewhere around $1 million per rig. That number is coming in slightly lower than that now, but roughly $1 million per rig. And then on the international front, call it, $1.3 million to $1.5 million per rig for the maintenance CapEx. And that's generally, again, depending upon the rig and what needed to be done to it in 2026, that's generally kind of where we are. Michael Lennox: Yes. And I can give some color on NAS, just it's come down post COVID. It spiked up coming out of that, and then it's been down year after year. And again, we've been making investments, like I mentioned earlier, to drill these longer laterals. So that's the setback upgrades, the high torque top drives, the rig floor automation. Again, that removes people from the exposures of on the rig floor, but also helps as we drill the longer laterals, make up and break out of tubulars. And we expect and will continue to do some of those in 2026. So that's what most of the CapEx is made up of for NAS. Daniel Kutz: Awesome. That's really helpful. And then maybe -- sorry if I missed this or if you guys have talked about it, but just kind of you guys have made a ton of progress kind of penetrating the U.S. market with the legacy H&P technology portfolio, seeing and hearing a little bit more interest internationally in the Middle East, in particular, of operators kind of adopting and appreciating some of the efficiency benefits and productivity benefits of leveraging technology like you guys offer. So just was hoping for an update or any plans or any conversations around your -- leveraging your technology profile outside of the U.S. Raymond Adams: Yes. This is Trey. I'll answer that one. And what I'll share is that the answer is absolutely yes. So it's a big focus for us today. Conversations with customers across the Eastern Hemisphere, everyone is very interested in the technology evolution and advancements we've had in the U.S. unconventional space. And they're all wanting to get more active in that arena. And so our -- one of our focuses in '25 and going into '26 will continue to be, as Kevin pointed out in his prepared remarks, this drilling automation trend that we're continuing to progress. We believe that there's a lot of efficiencies and value to be created in the Western and Eastern hemispheres. And then if you couple that with a lot of the technology that Mike was describing with rig floor automation and other advancements we continue to make, there's just a tremendous amount of opportunity on the safety and performance fronts in front of us and a lot of customer value to be created. So the answer in short is yes. That evolution and transformation, obviously, will be taking shape in earnest, primarily in the Middle East, but other markets will continue to adopt and accelerate technology. We see a lot of interest in Argentina and Australia, Europe, name it. So really excited about that evolution. Operator: We'll now move on to Don Crist with Johnson Rice. Donald Crist: I wanted to kind of expand on the last answer you just gave. On the international side, I'm just kind of curious about timing in places outside of the traditional Middle East like Libya or Turkey and Australia, kind of timing on conversations for unconventional drilling there and when you think that rig count could kind of start to pick up over the next couple of years or so? Raymond Adams: This is Trey. I think it depends on where you're talking, but I'll start in Australia. Obviously, we've been in the Beetaloo for some time, continue to see future growth opportunities there and in other parts in Australia as well. We're delivering. We have a second FlexRig in country that arrived about a month ago that will be going to work for a long string of customers and stay working in Australia for some time. And then flipping over to North Africa, obviously, there's a ton of energy around Algeria and Libya. We're involved in all those conversations. We're having deep and involved technology conversations with NOCs in both regions. We're actively engaged with IOCs, and you know who those are that have signed long-term agreements in Algeria. We think the future is bright, and we think that the transference of U.S. unconventional and shale expertise into those regions is going to be critical for growth. As it relates to timing, it all manifests over long horizons. Mike talked about private E&P churn in the Lower 48. We're not talking about a 30-day window. These programs take a while to get formed up. But we hope over the next couple of quarters that we can update you all on our progression. And then obviously, some of the E&Ps as they progress in their drilling programs and build up their plans for '26 and '27, that will be notable as well. But we're very bullish on our positioning in both of those areas. Donald Crist: I appreciate that color. And one just last one for me. Any progress on the sale of Utica Square? I know there was a comp here in Oklahoma City. Just any kind of update there? John Lindsay: This is John. Really, the update is the process is going on. It's going well. We have multiple parties that are interested. We're hopeful that we'll have more news by the end of the year to the first half of 2026 is what we're hoping for. So it looks positive, but that's about all we have. Process is going well. Operator: We'll now move on to Tom Curran with Seaport Research Partners. Thomas Patrick Curran: Trey, you just referenced the second rig that will be going to work in Australia's Beetaloo Basin where you have invested in and partnered with Tamboran Resources, which I think of as sort of like a best of U.S. shale PayPal story with the Sheffield and Liberty Energy also involved. But beyond Australia, has H&P put any rigs to work or contracted to deploy any rigs for any of the existing or planned drilling campaigns in foreign shale plays by leading U.S. E&Ps? And here, I'm asking specifically about E&Ps, not the major. So Continental push into Turkey and Argentina's Vaca Muerta or EOGs moving to Bahrain, maybe other such cases that haven't been publicized yet. Could you just expound on where H&P is at within that story and maybe your strategy more broadly beyond Australia? Raymond Adams: Yes. No, that's a great comment. And I'd point you to we have a long history of putting rigs to work, and I've done this multiple times, not working on a super major portfolio, but working with IOCs in Argentina. Across the rest of Eastern Hemisphere, the conversations are very active. Obviously, you know our positioning with those companies that you just referenced here in the Lower 48. We have a long history of a lot of value creation. And so we've been in a lot of conversations recently and I mean, very active even at ADIPEC a couple of weeks ago with key IOCs, obviously, and super majors alike. Everyone wants to transfer this U.S. shale unconventional expertise into these geographies. And so we look forward to talking about how these programs get to scale and more into a firm footing. Many of them today are still in exploration phases. But as those programs mature, they're going to need a partner like H&P, and we're well positioned to deliver value for them. Thomas Patrick Curran: So it's safe for us to assume that you're right on the nexus of those conversations like you should be. Raymond Adams: Absolutely. We're not missing a conversation these days. Operator: We'll now move on to John Daniels with Daniel Energy Partners. John Daniel: Just a quick question on the fiscal year '26 guidance for activity. I know you say in the release, it's based on current market trends. Just trying to make sure there's no embedded assumptions about either potential customer M&A and implications or upside from new E&P start-ups? And then does the guidance try to take into consideration any future drilling efficiency gains? Raymond Adams: Yes. I'll take that one, John, and just start and say that, obviously, you know the history of the organization. And as Mike pointed out, our share increase in the Permian Basin, even in the face of rig count declines, we're anticipating a pretty range-bound rig count in the U.S. Lower 48 as we look forward. Obviously, we've been impacted by customer consolidation, just like everyone has, but we believe that our impact and our rig count range binding has been able to really hold us up. It's an interesting one, but you mentioned new E&P formations. I think this last year and for almost 106-year-old company like H&P, we worked for 19 new E&Ps that we hadn't worked for in the last 5 years, just in the last year. As we sit here, and I think Mike referenced this, we sit in a great share position, top share position with super majors, with large caps, with small and mid-caps. We have more private E&P activity than anyone. So I feel like we're going to be in a good position to be pretty durable with rig counts even in the face of additional consolidation headwinds. John Daniel: Okay. Got it. And if you said this on the call, I completely missed it, but did you say where you're -- what you are in terms of working count contracted today? Michael Lennox: Yes. John, this is Mike. It's 144 today. Operator: At this time, there are no further questions in queue. I will now turn the meeting back to John Lindsay. John Lindsay: Thank you, everyone, for participating in today's call. I just want to leave you with some brief closing thoughts. Fiscal year 2025 was pivotal for H&P. And while we faced several challenges, the construct as we look forward is increasingly positive. We now have a platform where H&P can drive profitable growth across diversed global markets. Our forward-thinking commercial strategies and advanced technologies set H&P apart from the competition, and our financial strength underpins growth, dividend stability and disciplined deleveraging. Our differentiation is clear, and H&P's positioning continues to deliver strong results for our customers and our shareholders. So thank you all. And operator, you may now close the call. Operator: Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.
Operator: Ladies and gentlemen, thank you for standing by, and welcome to the PDD Holdings, Inc. Third Quarter 2025 Earnings Conference Call [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your host today. Please go ahead. Unknown Executive: Thank you, operator, and hello, everyone, and thank you for joining us today. PDD Holdings earnings release was distributed earlier and is available on our website at investor.pddholdings.com and through the Globe Newswire services. Before we begin, I'd like to refer you to our safe harbor statement in the earnings press release, which applies to this call as we will make certain forward-looking statements. Also, this call includes discussions of certain non-GAAP financial measures. Please refer to our earnings release, which contains a reconciliation of non-GAAP measures to GAAP measures. Joining us today on the call are Mr. Chen Lei, our Chairman and Co-Chief Executive Officer; Mr. Zhao Jiazhen, our Executive Director and Co-Chief Executive Officer; our VP of Finance, Ms. Liu Jun, is unfortunately on medical leave. Delivering the prepared remarks on Jun's behalf today will be Ms. Xin Yi Lim from our Investor Relations team, who has spoken on our earlier earnings calls. Lei and Jiazhen will make some general remarks and on our performance for the past quarter and our strategic focus, and Jun Liu will then walk us through our financial results for the third quarter ended September 30, 2025. And during the Q&A session, Lei and Jiazhen will answer questions in Chinese and will help translate. Please kindly note that the English translation is for reference only. And in case of any discrepancy, statements in the original language should prevail. Now it's my pleasure to introduce our Chairman and Co-Chief Executive Officer, Mr. Chen Lei. Lei, please go ahead. Lei Chen: Hello, everyone, and thank you for joining our Q3 2025 earnings conference call. This year marks the 10th anniversary of the company's founding. Just before this earnings release, we celebrated our 10th birthday. When we started in 2015, we pioneered the team purchase model, which offered the value proposition of more savings and more fun at scale and created a new e-commerce defined by 3 characters, namely benefit all, people first and more open. Since then, we have gradually grown from a start into a key player in the e-commerce industry and along our journey, created greater value for our users, our merchants as well as the industry and the society. This quarter, we reported RMB 108 billion in revenue, with growth remaining under pressure. As always, we prioritize long-term value over short-term results. Looking back over the past decade, we have upheld our core value of concern, adhered firmly to our own duties and principles and maintained focus on our core business of e-commerce. Through our journey, we strive to create value for our users and to address the needs of the widest range of consumers. We have also made every effort in giving back to the industry ecosystem, driving the industry to become more benefit all, more people first and more open. Since day 1, our mission has been to serve the broadest range of consumers by offering affordable prices and quality services. 10 years ago, we introduced the team purchase model to address the challenges faced by the farmers and growers as well as industrial belt merchants. This e-commerce model has helped a large base of farmers and everyday workers increase their income while offering urban and rural consumers across through quality foods and daily necessities at affordable prices. Today, 10 years later, our focus remains on the day-to-day of people from all walks of life. We continue to provide consumers with quality goods at affordable prices and help merchants, many of which SMEs expand their market reach. And ultimately, we help producers and consumers live a better life. As a new e-commerce platform born in the mobile Internet era, we moved beyond the traditional online shopping model that placed products at the center. And instead, we put people first. We built our model around consumer focus. We try to understand a human touch behind every click, and we honor the consumer trust behind every order. We strive to bring more savings and more fun to every purchasing experience. And with this goal in mind, we will continuously driven product innovation, technology integration, service upgrades and improvements in product selection and the efficiency of supply chain. In doing so, we aim to satisfy the diverse and rapidly growing needs of everyday consumers. Throughout our journey, we have faced fierce and persistent industry competition, and yet we have remained steadfast in our focus on the company's intrinsic value in the long run, and we promote the high-quality growth of the platform ecosystem, and we advocate for a more open industry environment. Since last year, we have further elevated our ecosystem development and roll out substantial merchant support initiatives such as the $10 billion fee reduction program and $100 billion support program. Through these initiatives, we made investments in our merchants and a wider, creating room for innovation and growth for both established brands and SMEs. We hope to play our part in facilitating supply chain upgrade and addressing the long-standing challenge faced by our merchants who had quality but lack brand recognition. As we look ahead, the e-commerce industry is witnessing even more intense competition, and we will continue to uphold the principles that have guided us for the past 10 years, staying true to our mission of creating value for our consumers and focused on investing in the high-quality development of our platform and the wider industry. Today, the scale of our business is far greater than it was 10 years ago and with greater scale comes greater social responsibility. And therefore, as we think about our growth in this new era, we must do so in a way that prioritizes the interest of wider public and the long-term outlook of the entire ecosystem. Going forward, more strategic initiatives similar to $100 billion support program will be rolled out to support both supply side and demand side. We are also strengthening our efforts in giving back to the industry and a broader society. Three years ago, we launched our global business, which has now grown to serve many markets. Today, with the rapid evolvement of trade barriers and other global events, we are seeing significant shift in the platform's regulatory environment, including in trade policies, tax rules, data security and product compliance regulation across different countries and regions. This means we will inevitably face greater challenges and more uncertainties. As a young global company, we are working hard to learn to keep up and to adapt to these trends. However, there remain significant uncertainties exposing the company to risks that are unpredictable and difficult to quantify, which may impact our financial performance, both in the short term and over the long term. And in the midst of fierce industry competition, a complex global environment and our continuous ecosystem investments, our quarterly profitability will fluctuate and is inherently unpredictable. And therefore, simple linear projection might not be a good way to projecting future performance. As we have emphasized in the past, short-term stock price fluctuation has never been our focus. And rather, our focus remains on building long-lasting intrinsic value by doing the right thing and creating value for consumers. It is with our firm commitment to high-quality development, we embark on the next decade towards our vision of Costco plus Disney. And with that, we will turn the call over to Zhao Jiazhen for further remarks. Jiazhen Zhao: [Foreign Language] Unknown Executive: [Interpreted] Good day, everyone. This is Zhao Jiazhen. Thank you again for joining our Q3 2025 earnings release. The third quarter this year marks the company's 10th anniversary. As Lei mentioned, over the past 10 years, we have remained committed to creating value for our users and growing alongside our merchants. We have strived to drive the industry to become more open and have delivered incremental value to the society. At this 10-year juncture, we will continue to step up our efforts to give back to the supply side and the demand side as part of our efforts to drive industry upgrades and deliver more savings and more funds to the general public. In this quarter, our revenue growth continued to be under pressure and operating profit grew in low single digits. Currently, we see intensified competition within the e-commerce sector that is centered around new business models. We will continue to invest back into our platform ecosystem and our investments into the merchant support initiatives similar to the RMB 10 billion fee reduction program and the RMB 100 billion support program will continue in the long run. These investments will affect the sustained performance of revenue and net profit. And accordingly, our financial results of this quarter should not be considered as guidance for future performance. We cannot rule out the possibility that the financial performance in the next few quarters will continue to fluctuate. Over the past decade, we grew from a start-up into a public platform. We benefited from China's rapid economic development. And at the same time, we have not lost sight of the social responsibilities that are inherent to a platform company and proactively gave back to the agriculture and other industries. And this year, we rolled out the first RMB 100 billion support program in the e-commerce industry to support merchants and farmers. Through initiatives such as Duo Duo Premium Produce, new quality supply and logistics support to remote regions, we continue to drive the high-quality development of the platform ecosystem. As a new e-commerce platform with roots in agriculture, the first products bought and sold on Pinduoduo was agricultural produce. Along the way, we have made long-term investments across different parts of the agricultural industry from supply chain and warehousing logistics to supporting new generations of farmers and agricultural research and development. These efforts have significantly increased the scale and efficiency of agricultural product distribution, greatly promoted product standardization and helped farmers increase output and income. And in this process, we have become the largest platform for agricultural products in China. In the third quarter, our Duo Duo Premium project team visited dozens of agriculture specialty regions, including Hubei, Jingzhou, Henan, Shangqiu, Shandong, Liyang, and Yunnan, Pu'er. This year, on the back of CNY 100 billion support program, we launched the Duo Duo Premium Produce initiative to step up our investments into agriculture. Based on the 2025 agricultural product half year report that we just issued, our investments in agriculture have yielded significant results. And in the first half of this year, agriculture sales grew by 47% year-over-year, and we saw a similarly rapid increase in the number of agricultural merchants with a particularly notable increase of over 30% year-over-year in the generation of merchants born in the 2000s. This demonstrates that the online distribution of agricultural products continues to hold immense promise. In the third quarter, our Duo Duo Premium Produce team visited dozens of agricultural specialty regions, including Hubei, Jingzhou, Henan, Shangqiu, Shandong, Liyang, and Yunnan [indiscernible] to develop tailored solutions for the merchants and help them make the transition from a model that prioritizes scale to one that prioritize quality. And during the harvest season starting in September, we allocated RMB 1 billion subsidy and RMB 2 billion traffic support and in collaboration with the 300,000 agricultural merchants on our platform, we rolled out the Duo Duo harvest season program to facilitate the timely distribution of produce from rural areas to urban markets, helping farmers increase income. In the early days of our company, our team purchase model brought about a solution to the legacy challenges within the industrial belts and enabled the industries to quickly scale across regions. The number of e-commerce merchants in many of these regions grew from just 100 or 200 to several thousands. However, this growth has also led to commoditized competition. And today, these industrial belts have reached a critical juncture that calls for transformation. This quarter, we continue to invest in a new quality supply initiative through our CNY 100 billion support program. Our teams visited dozens of industrial belts such as down jackets in Pinghu, snacks in Huizhou, children's wear in Foshan, bags and luggage in Shandong, and Hanfu in Chaoqian. Leveraging our digital capabilities and fee reduction and merchant support programs, we continue to enhance quality and efficiency for our merchants, we aim to address the challenges of commoditized competition faced by many industries by incremental innovation across each part of the supply chain from raw materials to finished products. At the end of September, we released a 1-year development report on new quality supply. The report shows rapid growth in the number of industrial merchants. The number of merchants between the age of 25 and 30 grew by 31% year-over-year and those born in the 2000s grew by 44%. The number of high-quality SKUs increased by over 50% year-over-year, and we've also seen a significant rise in the branded stores on these industrial belts. And these figures demonstrate that the key industrial belts are steadily moving towards high-quality development. And on supply side, investments have allowed us to bring more savings and more fun to a broad base of ordinary consumers. We see urban white-collar workers ordering fresh flowers from Yunnan, while young people in small towns buy trendy designer toys. We see mountain villages enjoying high-quality seafood, while herdsmen in Western regions wear UV protective jackets. And taking the Western regions as an example, the exemption of transshipment fees has led to a significant surge in order volume for pet supplies, outdoor and sun protection gears, designer toys and fresh produce and plants, among other product categories. This greatly stimulated economic activities between the regions. Starting a fresh from this 10-year mark, we will continue to put consumers first and drive organizational evolution. And one by one, we will tackle the practical problems faced by our users, merchants and the industries through persistent focused efforts and continue to build a thriving platform that benefits all, taking on greater social responsibility and creating value for the public. Now I'll hand over to in Xin Yi to provide you with an update on our Q3 financial performance. Xin Yi Lim: Thank you, Jiazhen. Hello, everyone. This is Xin Yi from the Investor Relations team. Jun is on medical leave, and I will deliver the prepared remarks on behalf of her. Let me walk you through our financial performance for the third quarter ended September 30, 2025. In terms of income statements, in the third quarter, our total revenues increased 9% year-over-year to RMB 108.3 billion. This was driven by an increase in revenues from online marketing services and transaction services. Revenues from online marketing services and others were RMB 53.3 billion this quarter, up 8% from the same quarter of 2024. Online marketing services growth moderated further as competition intensified and as we invest in the merchant ecosystem. Revenues from transaction services were RMB 54.9 billion, up 10% from the same quarter last year. Moving on to costs and expenses. Our total cost of revenues increased 18% from RMB 39.7 billion in Q3 2024 to RMB 46.8 billion this quarter, mainly due to increase in fulfillment fees, bandwidth and server costs and payment processing fees. On a GAAP basis, total operating expenses this quarter increased 3% to RMB 36.4 billion from RMB 35.4 billion in the same quarter of 2024. On a non-GAAP basis, total operating expenses increased to RMB 34.4 billion this quarter from RMB 32.9 billion in Q3 2024. Our total non-GAAP operating expenses as a percentage of total revenues this quarter was 32%, roughly in line with the same quarter last year. Looking into specific expense items. Our non-GAAP sales and marketing expenses this quarter were RMB 29.8 billion, flat compared to the same quarter last year. On a non-GAAP basis, our sales and marketing expenses as a percentage of our revenues this quarter was 28% compared to 30% in the same quarter last year. Our non-GAAP general and administrative expenses were RMB 896 million versus RMB 647 million in the same quarter of 2024. Our research and development expenses were RMB 3.7 billion this quarter on a non-GAAP basis and RMB 4.3 billion on a GAAP basis, up 41% year-over-year. Our investment in R&D reached a new high this quarter, reflecting our focus on improving the core technology capabilities of our platform. We are committed to investing in R&D over the long run to capture opportunities in supply chain innovation and consumer experience. On a GAAP basis, operating profit for the quarter was RMB 25 billion versus RMB 24.3 billion in the same quarter last year. Non-GAAP operating profit was RMB 27.1 billion versus RMB [ 28 ] billion in the same quarter last year. Non-GAAP operating profit margin was 25% this quarter, down from 27% for the same quarter last year. As we invest in the platform ecosystem, our profitability may continue to fluctuate. Net income attributable to ordinary shareholders was RMB 29.3 billion for the quarter compared to RMB 25 billion in the same quarter last year. Basic earnings per ADS was RMB 20.96 and diluted earnings per ADS was RMB 19.7 versus basic earnings per ADS of RMB 18.02 and diluted earnings per ADS of RMB 16.91 in the same quarter of 2024. Non-GAAP net income attributable to ordinary shareholders was RMB 31.4 billion versus RMB 27.5 billion in the same quarter last year. Non-GAAP diluted earnings per ADS was RMB 21.08 versus RMB 18.59 in the same quarter of 2024. Now as Lei and Jiazhen mentioned, we are facing an increasingly competitive industry landscape, which calls for more investments in the platform ecosystem. And therefore, as we roll out greater merchant support initiatives and ecosystem investments, financial results may continue to fluctuate from quarter-to-quarter. That completes our income statement. Now let me move on to cash flow. Our net cash generated from operating activities was RMB 45.7 billion compared with RMB 27.5 billion in the same quarter last year. As of September 30, 2025, we had RMB 423.8 billion in cash, cash equivalents and short-term investments. Thank you. This concludes my prepared remarks. Unknown Executive: Thank you, Xin Yi . And next, we will move on to the Q&A session. In today's Q&A session, Lei and Jiazhen will take questions from analysts on the line. [Operator Instructions] Lei and Jiazhen will answer questions in Chinese and will help translate for convenient purposes. Operator, we'll open for questions. Operator: [Operator Instructions] Your first question comes from Joyce Ju with Bank of America. Joyce Ju: [Foreign Language] I will translate myself. My first question is, in the third quarter, we see a recovery in overall online retail sector as the industry's year-over-year growth reached its best level in the past few quarters. Could management share the company's perspective on the recent industry trend? In the meantime, we noticed a slowdown in Duo Duo's online marketing service revenue this quarter, which we estimate also indicated some pressure on the take rate. Could management elaborate on the main factors driving the growth? And do you anticipate this trend will continue in the next couple of quarters? Secondly, in the past few quarters, we've seen several platform companies roll out major business innovations and ramp up investment in the new models, which has really shifted the competitive dynamics. How does management view the competitive outlook in China's e-commerce sector from here and why? Jiazhen Zhao: [Foreign Language] Unknown Executive: [Interpreted] This is Zhao Jiazhen, let me take this question. In the past few quarters, the industry has entered a new investment cycle. The e-commerce sector is evolving rapidly and within an industry landscape that has a large number of strong players, competition is unavoidable. And faced with this competitive and fast-changing environment, our primary focus should be that what unique value our platform can create for the consumers, merchants and other participants. We do not pay too much attention to the short-term industry trends or every move made by the competition. And as we see it from here onwards, we must leverage our inherent strength to pursue high-quality growth and enhance our core capabilities in order to better serve our merchants and consumers and along the way, creating more value. And of course, we are also encouraged to see the overall recovery in online retail. And at the beginning of this year, we further recognized the long-term value of high-quality growth and our management team made a commitment to elevate our platform ecosystem investments to a new stage and launched CNY 100 billion support program to support our merchants. And this involves the platform proactively dedicating substantial resources to invest in merchants and the broader industry. And in doing so, we target to provide ample room for innovation and growth for both established brands and SMEs. In the meantime, we also formed the Merchant Protection Committee to create a long-term communication mechanism with our merchants. We have also undertaken targeted upgrades to the merchant aftersales service system and implemented multiple improvements to address issues like abnormal order disputes. And these efforts are all focused on optimizing the business environment for our merchants and nurturing a platform ecosystem where all participants can thrive together. And looking ahead at this juncture, management unanimously agreed that it is our responsibility to further increase investment in our platform ecosystem and to think about the company's development from a broader perspective of public interest and the long-term health of the entire ecosystem. We will remain focused on the platform's intrinsic value and healthy development in the long run. And therefore, in the period ahead, we plan to roll out more strategic initiatives that benefit both merchants and consumers. Programs such as the CNY 100 billion support program and further enhance our efforts to invest in the industry and give back to the society. And back to the topic of growth rates, we mentioned several quarters ago that as the platform increase in scale and also as competition intensifies, our growth rate is set to slow down. As we continue to invest in programs to support merchants and the industry, our financial performance may experience ups and downs in the coming period. However, we will always maintain a long-term perspective, focusing on creating a unique value for consumers and merchants and building our intrinsic value. And in terms of your second question about competition. And as you have observed, the competition in our industry has intensified. And over the past few months, we've seen many industry peers deploying significant capital and resources to aggressively develop new business models, leading to increasingly fierce competition around emerging business models in the e-commerce sector. And in this environment, we will continue to invest substantial capital to strengthen our platform ecosystem. Major merchant support initiatives such as the CNY 10 billion fee reduction program and CNY 100 billion support program will be sustained over the long run and with more similar program to be launched. The platform is willing to let go some of the profits to create room for the development of the entire ecosystem. We view these as our long-term investments. And for instance, as mentioned earlier, this year, we launched the Duo Duo Premium Produce campaign under our CNY 100 billion support program, which has significantly helped quality agriculture merchants increase their scale and improve the efficiency of product distributions. There are numerous initiatives like this. And these long-term investments will naturally impact our revenue and profit performance. And moving forward, amid the changing external conditions and intensifying competition, our long-term investments are set to increase. And therefore, we do not think this quarter's profitability should serve as guidance for future performance, and there is still the possibility of continuous fluctuation in the results over the coming quarters. Thank you. Unknown Executive: Thank you, Joyce. Operator, we're ready for the analyst -- next analyst on the line. Operator: Your next question comes from Alicia Yap with Citigroup. Alicis a Yap: [Foreign Language] Two questions. The first one is in the global business operation, we have observed that the company and also other peers are facing regulatory and also public scrutiny in many countries, some of which are quite intense. How does management view this situation? And what are our planned response? And then second question is the company has mentioned investment in the merchant ecosystem over the past few quarters. Could you share the current status of this initiative? And how should we assess the financial impacts of this initiative? And what are the company's future plans? Lei Chen: [Foreign Language]. Unknown Executive: [Interpreted] Alicia, this is Lei. Let me answer your first question. After more than 3 years of development, the company's global business now serves local consumers in many markets and has received positive feedback from users worldwide, and we are greatly encouraged by such support and trust, but at the same time, we sense profound responsibility. So from the very beginning, the goal of our global business has been to achieve long-term sustainable development in each market and deliver tangible value to consumers. And therefore, we continuously reflect on how to integrate with the local cultural practices and legal compliance systems in each of the markets so that we become an organic part of the local economies. The growth of our business alongside regulatory trends across different markets now set a higher standard for us. We have always believed that providing consumers with a safe and trustworthy shopping environment is a fundamental duty of an e-commerce platform. And accordingly, management has made trust and safety and also product compliance a key component of the company's high-quality development strategy and has made substantial investments in this area. And on the technical front, we are continuously refining the policies and processes for merchant onboarding and product listing. The company has dedicated significant resources combining automated and manual screening to proactively monitor product listing, sales and after-sales services. And by doing so, we hope to enhance our ability to detect and respond to safety risk. And at the same time, we actively collaborate with external stakeholders and incorporate the feedback to hold ourselves to higher standards. In terms of our teams, we continue to invest in building a professional compliance team that keeps up with regulatory trends in our operating markets and promptly implement adjustments in our business operations. And despite these efforts, regulatory environment in areas such as trade policies, tax, data security and product compliance are undergoing significant changes across various countries and regions, and this presents us with greater challenges and heightened uncertainty. As a young and global organization, we are striving to learn and to adapt to these changes. However, I have to admit that this process introduces significant uncertainties, which bring unpredictable and difficult to quantify risks and could impact the company's financial performance in both the short and long term. And in facing such uncertainties to us, we remain very focused on strengthening our internal capabilities and enhancing platform compliance and fostering a healthier and more sustainable platform ecosystem. Thank you. Jiazhen Zhao: [Foreign Language] Unknown Executive: [Interpreted] This is Zhao Jiazhen. Let me answer your second question. And over the past 10 years, we have undergone an extraordinary growth journey evolving from a start-up to a public platform with certain social influence. And throughout this journey, we have benefited from the rapid development of the digital economy and while at the same time, took on social responsibilities that are expected of a platform company like ours. And over these 10 years, we have explored different ways to leverage digital capabilities to serve the broader communities and give back to the society and particularly around rural revitalization and industry upgrades. And as part of this journey, we launched strategic initiatives such as the CNY 10 billion agriculture research program to inject new energy into agriculture modernization. And this year, we took another critical step to launch the first CNY 100 billion support program in the e-commerce sector. And through the key measures such as Duo Duo Premium Produce, new quality supply and logistics support for remote regions, we are continuously improving the platform ecosystem and brought more high-quality merchants and products to the broader consumer markets, driving the high-quality development of different industries. And regarding your question around merchant support investments, we have always emphasized that as an e-commerce platform, we must collaborate closely with all the ecosystem participants to create value for consumers and merchants are vital partners in our efforts to serve the consumers well. And therefore, a healthy and sustainable merchant ecosystem is a fundamental pillar of the platform's high-quality development. We hope these initiatives will promote high-quality growth for quality merchants. For instance, the fee reduction policies we introduced have lowered merchants costs, enabling them to be more willing and able to reinvest in their products and services. And currently, we are already seeing some positive feedback from these ecosystem investments on our platform. And this year marks our 10-year anniversary and standing at this new starting point, we will continue to diligently address the practical challenges faced by our users, merchants and industries one by one, and we hope to take a greater social responsibility and by building a platform ecosystem that benefits all. Thank you. Unknown Executive: Okay. Operator, I think we have time for one more analyst. Operator: Your next question comes from Kenneth Fong with UBS. Kenneth Fong: [Foreign Language] The company operating margin decline this quarter has narrowed compared to the previous quarter. Meanwhile, management just mentioned plans for increased investment. So how should we view the company's upcoming investment pace as well as the profitability level? And my second question is, could management share what the new consumption trend that we observed during the recent annual shopping festival promotion. Additionally, we have seen other industry participants achieving good results with the new business models such as quick commerce during Double 11. So how does management view the competitive landscape under these emerging models? Jiazhen Zhao: [Foreign Language] Unknown Executive: [Interpreted] This is Zhao Jiazhen. Let me answer your question. In the third quarter, heightened competition, together with our ongoing investments in the CNY 100 billion support program put pressure on our revenue growth and also led to a decline in operating margins both year-on-year and quarter-on-quarter. At the moment, the industry landscape continues to change rapidly. And in this environment, it is crucial for us to maintain our long-term strategic focus. Looking ahead, we will continue to increase investments in our platform ecosystem. This includes measures such as merchant fee reduction and marketing support for high-quality merchants and all targeted at creating more room for the healthy development of the supply chain, and these investments will pose challenges to our revenue and profit. And at the same time, as mentioned in our prepared remarks, our global business is currently facing a complex global environment. The policies and industry regulatory landscapes across different countries and regions have undergone and are expected to continue undergoing significant changes. This will bring unforeseeable risks and challenges to our company, which may also impact the company's financial performance in both the short and long term. Now as we communicated over the past few quarters, we will firmly prioritize high-quality development in the long term over short-term financial results. And accordingly, our financial performance may fluctuate over the coming quarters and linear projections may not be appropriate for financial forecast. And as to your second question, and over the past few months, we have observed an overall positive consumption momentum with gradually recovering market confidence. And during the Q3 promotional period, consumption needs in the e-commerce sector was further stimulated, showing a steadily improving trend. At the same time, we clearly recognize that the e-commerce competition remains very, very intense. New business models continue to emerge and the market landscape is constantly evolving. Major players are increasing investments in new business directions, leading to escalating competition and creating challenges for our businesses on all fronts. And in such an environment, we will further raise our standards, strengthen our core capabilities and continue to deepen our efforts in supply chain improvement and platform ecosystem development to identify new growth opportunities. And from a long-term perspective, we will increase high-quality investments to translate these capabilities into products and services that offer consumers greater quality for money. This process will not be immediate but will demand continuous efforts. For a considerable period of time, we may be at a competitive disadvantage to our competitors, and this will potentially be accompanied by financial pressures such as slower revenue growth. But our attitude remains positive. But first, we choose to view competition through a long-term lens and plan on proactively increasing investments to create more possibilities for the healthy and sustainable development of the ecosystem, even if this means forgoing some short-term profits. And these trade-offs are made with the intention to build a more robust and sustainable long-term value amid industry competition. Thank you. Unknown Executive: Okay. Thank you, Jiazhen. It's about time, and thank you all for joining us today. We look forward to speaking with you again next quarter. Thank you, and have a great day. Operator: Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may now disconnect. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]
Pedro Courard: Good morning, good afternoon. My name is Pedro Courard, I'm CEO of Atlantic Sapphire. And today, together with Gunnar Skinderhaug, our CFO, we will present the third quarter operational update of the company. The company has been performing according to plan during the last quarter. In terms of production, achieving 1,400 tonne HOG in the third quarter at an average weight of 3.1 kilo HOG. And in terms of prices, we achieved $8.6 per kilo, let us say, 19% above the U.S. price index. We have continued the process of operational improvement in all areas, allowing us to keep our ambitions in terms of future production. As we are finishing the operational upgrades started in 2025, we are now realizing the positive impact of having more stable systems. While our feed conversion remains stable in 1.3, we have been constantly increasing our feed consumption rate permitting us sustain our future production plans. Losses were slightly higher than in previous quarters, but still within normal ranges and very low. Keeping our trend for 2025. During the third quarter, we increased our harvest maintaining good average weight, reaching premium prices. Following market tendencies during the quarter, we had a decrease in prices compared to previous one. Both net and standing biomass are showing stable levels for the last 2 quarters, in line with our expectations. Gunnar Aasbo-Skinderhaug: Efforts are currently on Phase 2. improving biological and financial performance. Phase 1 harvest data improving, sales performance is improving. As Pedro mentioned, and profitability measures are on track. All efforts are currently on Phase 1. Phase 2 investments are preliminary cost as we focus all our efforts on improving Phase 1. The profitability measures are on track and will drive down unit costs in the coming periods, mainly from 3 areas. Scale is increasing as volume increase, scale effect is increasing. Current harvest volume is expected at 5,400 metric tons for 2025, growing to 7,000 metric tons for 2026 and 7,500 metric tons for 2027. Another improvement area is cooling and energy as new measures allow more efficient water cooling on the facility. The third main area is maintenance as Pedro mentioned the maintenance program is executed and completed and will drive down unit costs going forward. Beyond the ambition, we see further potential going forward. Also through scale, increasing from 7,500 and beyond, we see optimized Phase I operating at 8,500 tonnes annual harvest weight. We also have further potential to improve cooling and energy usage and also improve FCR. This will drive down unit cost in an optimized Phase 1 further. And Phase 2 will allow further scale on the facility, allowing even further reduced operational costs per kilogram harvested. Now we open for Q&A. Gunnar Aasbo-Skinderhaug: [Operator Instructions] We have one question from IntraFish. When do you expect to be able to move to Phase 2 and how have costs for this changed? Pedro Courard: Well, first, it's important to mention that today, we are 100% focused on Phase 1. Our goal is validate Phase 1and everything is going in that direction. Once we are able to validate Phase 1, we will continue spending resources in Phase 2. So far, we don't have yet a cost estimation for this step. Gunnar Aasbo-Skinderhaug: We have no further questions posted. We are open to receiving questions also on e-mail. We will reply as quickly as we can. There is 1 here from DNB. What measures will you take to improve net biomass growth to target 2,200 to 2,500 live weight per quarter? And when do you expect to get there? Pedro Courard: Today, we are running according to the plan. The measure are the normal one. We are increasing the feed consumption per day, our goal is to be at around 32 tonnes per day, and now we are moving directly in this path. So we expect that in the first month of 2026 will be in that level of standing biomass. Gunnar Aasbo-Skinderhaug: There are no further questions posted. As mentioned, we will answer questions also on e-mail. Thank you, everyone, for attending this Q3 presentation. Wish you all a great day. Pedro Courard: Thank you very much.
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: Greetings. Welcome to the Cengage Group's Second Quarter Fiscal Year 2026 Conference Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Richard Veith. Sir, you may begin. Richard Veith: Good morning, and welcome to Cengage Group's Fiscal 2026 Second Quarter Investor Update. Joining me on the call are Michael Hansen, Chief Executive Officer; and Dean Tilsley, Chief Financial Officer. A copy of the slide presentation for today's call has been posted to the company's website at cengagegroup.com/investors. The following discussion and the earnings materials contains forward-looking statements within the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as believe, expect, intend, may, could, should, will, estimate, likely or similar words and are neither historical facts nor assurances of future performance and relate to future results and events, and they are based on Cengage Group's current expectations and assumptions. Forward-looking statements relate to the future, and are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Forward-looking statements are not guarantees of future performance, and you should not rely on any of these forward-looking statements. Many factors could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements. You should consider such factors, many of which are subject to the risks and uncertainties discussed in the slide presentation, which accompanies this call and in the Risk Factors section of our fiscal 2025 annual report for the year ended March 31, 2025, as may be updated by our quarterly reports for the fiscal year 2026. Any forward-looking statement made during this discussion or in earnings materials is based on currently available information and speaks only as of the date of this discussion and the date of the earnings materials. The company disclaims any obligation to publicly update or revise any forward-looking statements, whether written or oral, except as required by law. On today's call and in our slide presentation, we will refer to certain non-GAAP financial measures, definitions and the rationale for using these measures and reconciliations of each to its most directly comparable GAAP financial measure are provided in the legal disclaimer and in the appendix of the slide presentation. I'll now turn the call over to Michael for an update on the business, followed by Dean, who will take you through the second quarter and first half details before we open the call for questions. Michael? Michael Hansen: Thank you, Richard, and good morning, everyone. Our second quarter results for fiscal year '26 demonstrates strong digital acceleration in our core business, partially offset by cyclical market factors in the K-12 and English Language Learning markets. Overall, our financial performance through Q2 shows adjusted cash revenue down slightly by 2% year-over-year at $872 million, adjusted cash EBITDA down 8%. Our U.S. Higher Ed business is performing strongly. First half U.S. Higher Ed adjusted cash revenue was up 4% year-over-year, driven by continued digital growth of 7%. Our work segment is thriving, fueled by ed2go, where first half adjusted cash revenue was up a robust 28%, demonstrating the power of our education for employment mission. We will continue to invest in this business to capture accelerating demand for workforce skills, including investment into relevant courses non-English language courses, improved pipeline conversion, distribution channels, outcomes data and skills verification to drive growth and help people meet their career aspirations. The headwinds impacting our overall results were primarily in our school and English Language Learning segments. Both faced a low adoption year and funding restrictions as well as political climate challenges. Despite this slow adoption here, we continue to position the business for success for the upcoming large adoption year supported by the updated Big Ideas Learning partnership and investments in go-to-market content and technology. We remain focused on sustainable growth. Our strategy is clear and built on a belief that trusted content is considered table stakes and value is shifting to workflow tools, outcomes data and skills verification. In this context, I will highlight 3 major initiatives we are currently driving. First, we are anchoring generative AI in our curated pedagogy based content. Our student Assistant 2.0 is live in over 100 products and the Instructor Assistant is on track for a January 2026 release. Second, we are transforming our school business with the launch of our new unified digital platform Explore, which is scheduled for release in January. The new digital teaching and learning experience will consolidate our solutions and embed AI to meet key customer criteria. This is a core part of our strategy to transform the school business into a largely digital business. Finally, we are continuing to invest in Cengage work by driving higher demand conversion and preparing for the implementation of Workforce Pell in July of 2026. In closing, we are continuing to execute on our education for employment mission and have a powerful portfolio of digital platform businesses that will deliver robust growth in both top and bottom line. I will now hand the call over to our CFO, Dean Tilsley who will provide a more detailed review of our Q2 financial performance. Dean Tilsley: Thank you, Michael. I'll now walk through the specifics of our financial results for the second quarter and the first half of fiscal year '26. The second quarter saw a material improvement on our Q1 results as we move through our Q2 sales period, driven by strong sales performance in our key higher Ed and Work segments, which represent around 70% of our revenues. K-12 exposed segments, including school and to a smaller extent, ELL, that performed in line with the expected headwinds due to 2026 being a known low adoption year, but we remain well positioned in the large California and Florida state adoptions coming next year. The management team retained a clear balance on managing costs by accelerating investment in AI, digital first and work funded by efficiency savings as we simplify our operating model. The strong performance of digital sales, rollout of new AI products and go-to-market investments position the company in a strong position for sustainable and profitable growth. To help you understand the true underlying performance of the business, I will provide normalized results and nonrecurring items alongside reported financials. Trailing 12 months adjusted cash revenue came in at $1.522 billion, down 1% as reported but up 1% year-on-year when normalized for nonrecurring items. Trailing 12-month adjusted cash EBITDA came in at $511 million, up 4% as reported, but up $33 million or 7% were normalized for nonrecurring items. Moving to the quarter. Q2 adjusted cash revenue came in at $612 million, flat year-on-year as reported, but up 1% year-on-year when adjusting for nonrecurring items. On an adjusted GAAP basis, revenues were up 1% year-on-year as reported. Q2 adjusted cash EBITDA declined 1.5% year-on-year but up 1% year-on-year when normalized to nonrecurring items. On a GAAP basis, adjusted EBITDA was down slightly with higher Ed and Work segment both growing strongly, offset by lower K-12 performance. On a year-to-date basis, adjusted cash revenues reached $872 million, a decline of 2% year-on-year as reported, with Q2 performance helping offset the 8% year-on-year decline reported in Q1. Normalized to nonrecurring items, adjusted cash revenues would be flat year-on-year and on an adjusted GAAP basis, revenues are up 1% year-on-year as reported. Year-to-date, adjusted cash EBITDA of $343 million represents a decline of 8% as reported and down 5% when normalizing for nonrecurring items. On a GAAP basis, EBITDA was down 2% year-on-year as reported. Now turning to performance highlights by segment. Higher education, which represents 50% of our business leads in our digital-first strategy and is leveraging strong tailwinds within its key U.S. market. Normalizing for the change in our Latin American go-to-market model and nonrecurring items, Q2 and H1 adjusted cash revenues at $303 million to $404 million, respectively, are up 2.5% year-on-year. Q2 and H1 U.S. Higher Ed adjusted cash revenue grew 4% year-on-year, driven by 7% growth in digital sales, improved sell-through rates and growth in institutional sales and pricing. Institutional sales at over $200 million year-to-date were over 20% year-on-year and now represent 53% of U.S. Higher Ed sales. Gale performance improved in Q2 due to an uptick in renewals and demand as we get past the uncertainty in funding related to federal action that impacted Q4 of '25 and Q1 of '26. Adjusted cash revenues were down 6.7% for the quarter versus a 15% decline in Q1. International adjusted cash revenues are flat year-on-year when normalized for the change in LatAm sales channel to a third party, leading to revenues being repurposed on a net basis in '26 versus growth in 2025. U.S. Higher Ed is a business of clear focus for the company, and we continue to invest in AI tools, products and go-to market to position the business for sustained revenue growth and continuous record of improving margins. A good example of this focus has been to hire new top talent to lead our U.S. and international sales and marketing teams, further driving the strong forward momentum for this business. Higher Ed Q2 adjusted cash EBITDA is flat year-on-year as reported, reflecting flat revenue and investment into AI and go-to-market to position the segment for sustained growth. Turning now to the Work segment. The work segment is a bright spot for the company in terms of revenue growth and opportunity and benefit from operational leverage. Q2 adjusted cash revenues were up 9% year-on-year and up 5% year-to-date, powered by ed2go up 32% year-on-year for the quarter and 28% year-to-date and CTE revenues, which were up 7% year-on-year for the quarter due to strong sales in the quarter. We are building on the ed2go momentum and increasing investment to capture the accelerating demand for workforce skills training, improving our pipeline conversion and expanding the number of courses, institution, geographies and languages that we operate in. For the first half of the year, Infosec and Milady businesses declined 5% year-on-year, impacted by federal budgeting pressures, government shutdown, and the recent immigration policy. We expect these pressures to continue through the rest of the year. Top line revenue growth, coupled with cost efficiencies due to our new operating model delivered Q2 adjusted cash EBITDA growth of 13% and 10% year-to-date, taking adjusted cash EBITDA margin to 51.3%, up 270 bps on a direct margin basis. The School segment, which only represents 17% of our total adjusted cash revenues continued to be impacted by 2026 being a low adoption year. Q2 adjusted cash revenues were down 4% year-on-year, which reflects a significant improvement on Q1, where revenues were down 22%, with no large adoptions such as the $40 million and new contracts signed in 2025. The sales team will be focused on winning open territories where they retained strong win rates. Gale adjusted cash revenues have declined 15% year-on-year, in line with expectations due to federal policy, creating funding uncertainty leading to market softness for renewals and demand for databases. The focus for school this year is to position the business for the large adoption year in 2027 and '28 were California and Florida, maintaining investment into AI tools, content and go-to-market capabilities. Q2 and year-to-date adjusted cash EBITDA year-on-year decline reflected lower revenue, new loyalty and considerable delivery for the revised Big Idea of many partnerships and a one-off $4 million bad debt charge related to Baker & Taylor. Moving to the final and smaller segment, our English Language Learning. Q2 adjusted cash revenue at $41 million were down 19% year-on-year and H1 revenues are down 15% year-on-year. Year-on-year comparisons were impacted by one large nonrecurring international deal in fiscal 2025 and headwinds from government policy. Normalizing for the exit from the Ministry of Education contract in Egypt and nonrecurring international deal, H1 revenues will be down 5% year-on-year reflecting federal funding headwinds in the core U.S. market. Q2 adjusted cash EBITDA is down 10% year-on-year when normalized for a nonrecurring international deal and H1 down 7% year-on-year, normalized for nonrecurring items. Turning now to cash flow, liquidity and debt. H1 cash flow performance reflects the flow-through of lower cash EBITDA and timing impacts that we expect to create in Q3. Technical issues with the new SAP accounting system caused delays to invoices going out during our key selling season, which has in turn delayed selection. These issues have now been resolved, and we maintained strong communication with customers during the period, no contractor revenue or loss, and we anticipate strong collections in Q3 and Q4. Our success in institutional sales is driving a change in revenue mix resulting in collection timing shifting from Q2 to Q3. And faster billings for School and ELL relative to fiscal 2025, again, due to not having any large adoptions this year, plus the revised partnership with Big Ideas many impacted cash. This will be partially offset in the second half by lower reimbursement to Big Ideas learning under the new agreement. The $42 million year-on-year change in leveraged free cash flow reflects a lower cash EBITDA, higher restructuring costs due to implementing our new operating model that will lead to future savings, higher taxes as we've improved due to improving profitability, offset by lower consulting costs and lower interest payments for margin reduction achieved through the November '24 repricing. Lastly, 2 preferred equity dividend payments were made in H1 '26 versus 1 in H1 '25, which also impacted cash flow. Liquidity position remains strong, with net leverage below 3x for 5 consecutive quarters. We expect this position to improve as we improve cash collection in the second half of the year and lower restructuring costs. Net leverage ratio of 2.8x represents an improvement in our trailing 12-month adjusted cash EBITDA as the cost saving programs continue to take hold, enhance year-on-year profitability. Cumulative deleveraging over the past 24 months, reinforces Cengage's capacity to navigate macro challenges while executing growth and transformation strategies. In summary, we continue to see robust performance in our key Higher Ed and Work segment, which are both set up for strong future performance. School and to a lesser degree, English Language Learning have faced some known headwinds in the first half of the year but we are well positioned to return to growth. Our cost structure continues to become more efficient, bringing up capacity for our continued investment to AI, digital first and [ Work ] businesses, while also improving margin. and the projected improvement in free cash flow and the substantial reduction in net cash interest underscore our strong financial trajectory and ability to generate value for our shareholders. We are now happy to take your questions. Operator: [Operator Instructions] This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.
Operator: Good day, and thank you for standing by, and welcome to Weibo Reports Third Quarter 2025 Financial Results. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the call over to your first speaker today, Ms. Sandra Zhang from IR. Thank you. Please go ahead. Sandra Zhang: Thank you, operator. Welcome to Weibo's Third Quarter 2025 Earnings Conference Call. Joining me today are Chief Executive Officer, Gaofei Wang; and our Chief Financial Officer, Fei Cao. The conference call is also being broadcasted on Internet and is available through Weibo's IR website. Before the management remarks, I would like to read you the safe harbor statement in connection with today's conference call. During today's conference call, we may make forward-looking statements, statements that are not historical facts, including statements of our beliefs and expectations. Forward-looking statements involve inherent risks and uncertainties. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statements. Weibo assumes no obligation to update the forward-looking statement in this conference call and elsewhere. Further information regarding this and other risks is included in Weibo's annual report on Form 20-F and other filings with the SEC. All the information provided in this press release is occurring as the date hereof. Weibo assumes no obligation to update such information except as required under applicable law. Additionally, I would like to remind you that our discussion today includes certain non-GAAP measures, which excludes stock-based compensation and certain other expenses. We use non-GAAP financial measures to gain a better understanding of Weibo's comparative operating performance and the future prospects. Our non-GAAP financials exclude certain expenses, gains or losses and other items that are not expected to result in future cash payments or are nonrecurring in nature or are not indicative of our core operating results and outlook. Please refer to our press release for more information about our non-GAAP measures. Following management's prepared remarks, we'll open the lines for a brief Q&A session. With this, I would like to turn the call over to our CEO, Gaofei Wang. Gaofei Wang: [Interpreted] Thank you. Hello, everyone. Welcome to Weibo's Third Quarter 2025 Earnings Conference Call. On today's call, I will share with you highlights on Weibo's product and monetization in the third quarter 2025. On the user front, in September 2025, Weibo's MAUs reached 578 million and average DAUs reached 257 million. In the third quarter, Weibo's total revenues reached USD 442.3 million, a decrease of 5% year-over-year. Our total ad revenues reached USD 375.4 million, a decrease of 6% year-over-year. Our non-GAAP operating income reached USD 132.0 million, representing a non-GAAP operating margin of 30%. In 2025, our overall corporate strategy continued to focus on enhancing user value sustaining Weibo's leading position in hot topics and the entertainment content ecosystem while reinforcing the competitiveness of our social products. Building on this, we also leverage large language model to enhance our recommendation feeds and search products, aiming to increase our user base and engagement. Next, I'll share with you highlights in Weibo's product operation and monetization in the third quarter. On user growth and engagement, in 2025, our key product revamp is the upgrade of the homepage information feed, which put the recommendation feed as the default core feed. The revamp has largely rolled out in all users by late July. Alongside the information feed revamp, we also optimized our recommendation algorithm, especially for video content recommendation. During the summer vacation, leveraging the active entertainment events and hot topics during the summer vacation, we saw significant improvement in user engagement of the mid- and low frequency-user group. The per capita viewership, time spent and retention of the mid- and low-frequency user group grew double digits quarter-over-quarter, which in turn drove per capita time spent in recommendation feed for the whole user group to increase for Q3 quarter-over-quarter. In the third quarter, we implemented two key strategies. First, we enhanced the algorithm of the recommendation feed to improve user satisfaction with content, which matches their real-time interest. For example, in hot topic distribution, we established user behavior linkage between the recommendation feed and the search function. We use the view and engage with the hot topics in search function. They are showing more precisely targeted content in recommendation feed. This strategy has been proven particularly effective in enhancing engagement and retention among mid- and low frequency users of Weibo. Second, we enhanced our algorithm to better integrate video content into the recommendation feed, driving deeper content consumption. With the homepage information feed shifting from a relationship-based model to a recommendation-based one, video content could be distributed through our recommendation algorithms to reach more precise and broader user group on top of the traditional social distribution mechanisms. As a result, we saw a notable increase in the distribution of original and mid- to long-form video content in the recommendation feed. The enriched mid to long form video content extending user time spent in the recommendation feed and supporting healthy development of the content ecosystems. Meanwhile, we continue to enhance our interest-based content operation, strengthening large-scale content production by content creators around user interest and thereby improving the quality and diversity of content supplied to the recommendation feed. The restructuring of the information feed was strategic significance for Weibo, which is comparable to our transition from the chronological to algorithm-based sorting several years ago. In the short term, user experience for certain user group may face some challenges. However, from a long-term perspective, the increased weight of recommendation content and video content will strengthen Weibo's core competitiveness as a social media platform while laying a solid foundation for the sustainable and healthy development of our content ecosystem. While improving the efficiency of the homepage recommendation feed, we also strengthened social discussion in a relationship feed ensuring its role as the cornerstone of Weibo's differentiated competitiveness. In the third quarter, our efforts focus on two key aspects: driving interaction between content creators and their followers, and stimulating interest-based social engagement among users to fully boost the social engagement across the platform. First, to further drive the interaction between content creators and their followers, we upgraded the core fan mechanism and optimized the content reach and distribution. This significantly improved interaction efficiency in the relationship feed which is measured by the ratio of total interactions versus total viewership, resulting in double-digit growth of this ratio, both quarter-over-quarter and year-over-year in Q3 while further driving content creators' motivation to consistently produce high-quality content in text and image. Second, to enhance ordinary user social interaction around interest-based content, we continue to develop the Super Topics community, focusing on key summer events, concert and anime conventions, which young people are interested in. We encourage users to share meaningful and emotional content around their interest, positioning Super Topics as the front-end useful space for interest-based sharing and interaction. In the third quarter, the number of users who posted and engaged in Super Topics grew double digit year-over-year. This effective initiative has strengthened Weibo's differentiated advantages in text and image, complementing the homepage recommendation feed and contributing to the solid development of the platform's ecosystem. Turning to search products. In the third quarter, we continued to reinforce AI application in search function, focusing on technical infrastructure upgrades and integration across ecosystem scenarios. First, in upgrading technical infrastructure, we continue to enhance intelligent search capability to understand user search intent and content matching capability, which effectively improve the relevance and accuracy of search results and making it easier for users to find desired content. At the same time, we upgraded the search model from conventional onetime information search to continuous exploratory dialogue, enabling users to engage in coherent conversations with intelligent search and enjoy a more intelligent and seamless information across experience. Second, the integration across ecosystem scenarios, we focused on extending intelligent search application in information feed, fostering a Search as a Service user mindset. We deeply integrated intelligent search into the content consumption experience with enhanced content verification and the content summary features. The system leveraged AI to assess the authenticity of the original post, extract key information and provide extended insights, helping users quickly access structured and reliable information while consuming contents. In the third quarter, the MAUs of Weibo intelligent search product exceeded 70 million with its DAU and search queries increasing more than 50% quarter-over-quarter. This momentum not only reflects users' recognition of Weibo's intelligent search product, but also further contribute to the expansion of Weibo search ecosystem. As a result, the total search queries on Weibo increased 20% quarter-over-quarter in the third quarter. Looking ahead, we will continue to deepen the innovative application of AI in search products. On the technology front, we aim to make search more user aware. As for user experience, we strive to deliver a more seamless and intelligent usage journey. And in terms of the ecosystem, service will become more contextually relevant. These efforts will continuously provide users with a smarter, more convenient search experience and further unlock the value of Weibo's content ecosystem. Moving on to monetization. In 2025, the ad product and sales team focused on two main priorities: first, to expand and solidify customers' mindset of choosing Weibo as a go-to platform for content marketing across more industries and clients. Second, to continuously enhance the performance and conversion capabilities of our ad products. In the third quarter, due to the high base effect from the Olympic last year, Weibo's ad revenue decreased 6% year-over-year. From the overall market perspective, thanks to the stimulus policy aimed at driving domestic demand and consumption, e-commerce platform and related industry maintain a relatively high level of advertising spend, which supported our third quarter ad revenues. According to client feedback, after several years of substantial and continuous budget allocation towards performance ad, the bidding for the commercial traffic has become increasingly intense, which pushed their cost upward. In addition, the government recently issued tax policy that limit the cap of the feed ad spend for tax deduction purpose. This dynamic has driven clients to reevaluate their ad budget allocation, placing renewed emphasis on the value of the brand advertising. In particular, marketing approaches such as celebrity endorsement have generally become a key option for clients to consider. In light of this trend, leveraging Weibo's strength in celebrity resources, we aim to better facilitate clients' needs across the full celebrity endorsement and marketing life cycle. We hope to create richer celebrity marketing playbook together with clients, helping them enhance their marketing effectiveness. Let me share more color from an industry perspective. Competitive dynamics within the e-commerce sector has persisted since the second quarter, benefiting from deep partnerships with leading e-commerce platforms. Ad revenues from e-commerce sector achieved notable year-over-year growth in the third quarter. Meanwhile, we have been gradually cultivating partnerships with other business lines within this e-commerce group promoting a more balanced revenue mix and thus laying a solid foundation for the future revenue stability. Ad revenues from the automobile sector sustained year-over-year growth trend in third quarter. Weibo has continued to solidify its strength in the new energy vehicle content ecosystem. Revenue from traditional fuel vehicles also remained stable this year, contributing to improved revenue stability for the automobile industry. In the online game and smartphone sectors, revenue declined due to overall budget contraction. As for the food and beverage, dairy products and footwear and apparel sectors, revenue fell year-over-year primarily due to the tough comparable base from last year's Olympics. However, with the recovery and strengthening of celebrity marketing in clients' mindset, ad revenues from celebrity endorsements continue to grow year-over-year. On the ad product front, we have continually strengthened the application of AI technology across the entire advertising life cycle this year to enhance ad efficiency. By the third quarter, we have deployed AI capabilities throughout the process from the ad creative production and bidding model optimization to campaign performance improvement. Notably, Weibo's AI ad creative platform, Lingchuang, launched in the second quarter has been widely adopted, enabling even scalable and personalized ad production in both text and image formats. Furthermore, in the third quarter, we have extended AI-generated ad creatives to video contents. This upgrade enables intelligent extraction of key highlights for the pre-roll segments and the generation of eye-catching cover images. This not only improved the efficiency and diversity of video ad creative production, but also enhanced targeting precision and user viewing experience. As of the end of October, AI-generated ad creatives accounted for nearly 30% of the consumption. Besides this, to address the common needs of the brand clients, we launched new products via live stream the press conference. We leveraged AI to click live streams in real time, extract the most engaging highlights and transform them into high-quality material suitable for KOL distribution. These highlights are further distributed through our feed ad product, amplifying the overall content reach and influence. This model not only addresses clients' difficulties in efficiently converting live stream content into shareable materials but also enable clients to achieve secondary distribution of valuable live stream content through a combination of high-quality materials and precise targeting. For example, in live stream product launched by a smartphone brand, AI-generated material make up 10% of all materials. It contributed towards much as 30% of total interactions. We plan to roll out this model to more brand clients hosting product launch, thereby further unlocking the potential of AI in brand marketing. In terms of ad performance, the upgraded AI-powered ad performance model has demonstrated impressive results in key scenarios. Experimental data shows that the conversion efficiency of both app download ads and form submission campaigns have improved. AI-powered performance ad models have enabled us to better deliver on client campaign objectives. Entering into the fourth quarter, we will focus on capturing marketing opportunities from sector with high budget visibility such as the e-commerce sector. We will beef up our efforts to further expand the penetration of our brand plus content marketing approach across key industries, sustain the growth momentum in the automobile sector and strive for recovery in the consumer goods. At the same time, we will continue to drive the application of AI in ad creative generation and AI placement optimization with the hope of offering smarter and more efficient advertising solutions to clients of all sizes and thus further strengthening Weibo's differentiated competitiveness in the advertising market. Next, let me turn the call over to Fei Cao for our financial review. Cao Fei: Thank you, Gaofei, and hello, everyone. Welcome to Weibo's Third Quarter 2025 Earnings Conference Call. Let me start with operating metrics. In September 2025, Weibo's MAU and average DAU reached 578 million and 257 million, respectively, with a steady improving DAU versus MAU ratio year-over-year. The modest year-over-year decline in MAU was primarily due to the high traffic base during the Paris Olympic game in the same period last year. On the user product side, in the third quarter, we completed the revamp of our information feed and prioritized the recommendation feed for content consumption. We are encouraged by early signs of improvement in user engagement with interest-based feed and video content on Weibo in addition. User scale and search queries from Weibo intelligent search feature continued to grow robustly quarter-over-quarter with intelligent search MAU exceeding 70 million in the third quarter. This growth was mainly driven by our AI technology upgrades, which allow us to better meet users' content search and discovery needs on the platform. Turning to financials. As a reminder, my prepared remarks will focus on non-GAAP results. Commentary amounts are in U.S. dollar terms and all comparisons are on a year-over-year basis unless otherwise noted. Now let me walk you through our financial highlights for the third quarter 2025. Weibo's third quarter 2025 net revenues were USD 442.3 million, a decrease of 5% or 4% on a constant currency basis. Operating income was USD 132 million, representing operating margin of 30%. Net income attributable to Weibo reached USD 110.7 million and diluted EPS was $0.42. Let me give you more color on third quarter 2025 revenue performance. Weibo's advertising and marketing revenue for the third quarter 2025 was USD 375.4 million, down 6% or 5% on a constant currency basis, while value-added service VAS revenues was USD 66.9 million, up 2% Weibo's advertising business saw a modest decline, primarily due to the high base effect from last year's Paris Olympics. By industry, our top 3 verticals were FMCG, e-commerce and 3C products. In terms of growth drivers, e-commerce, Internet services, automobile and local services were the key contributors. Notably, the e-commerce sector recorded over 50% year-over-year growth, driven by similar policy amid a boosting domestic demand and consumption. We are pleased to see increased ad budget across multiple business lines within these platforms, including traditional e-commerce activities and local service initiatives. Weibo has continued to demonstrate its unique value in driving brand awareness and user acquisition for e-commerce platforms amid intensified market share competition. The automobile sector sustained solid growth this quarter, thanks to Weibo's thriving auto-related content ecosystem, a dynamic EV launch season and stable ad spend from ICE vehicle brands. On the other hand, we faced a significant year-over-year decline in the food and beverage and apparel industry, again, due to the high base effect from the last year's Olympics. And as for 3C products, this year, government-backed trade-in subsidies encouraged many consumers to upgrade their phones or home appliance earlier this year, which leads to softer shipments and lower ad spend from advertisers in the second half. Other underperforming sectors that weighed on overall top line recovery included online games, largely due to a tough year-over-year comparison and overall ad budget contraction in the sector. By ad product category, promoted feed ads remained the largest contributor followed by social display ads and topic and search placements. AI has progressively transformed the entire life cycle of Weibo's ad products from creative generation to ad placement. Notably, our real-time bidding feed products sustained double-digit growth, driven by AI-powered ad tech upgrades that enhanced conversion and ROI for advertisers, particularly for ad download and lead generation campaigns. Ad revenues from Alibaba reported robust growth of 112%, reaching USD 45.5 million in the third quarter. We are pleased with the strong momentum from Alibaba this year, driven by deeper collaboration during key marketing windows and Alibaba's increased ad spend on its local services initiatives. Value-added service VAS revenues grew 2% to USD 66.9 million in the third quarter, mainly due to modest increase in revenues from game-related business and membership services. Turning to cost and expenses. Total cost and expenses for the third quarter was USD 310.3 million, an increase of 3%. Operating income in the third quarter was USD 132 million, representing an operating margin of 30% compared to [ 36% ] last year. Turning to income tax under GAAP measure. Income tax expenses for the third quarter were USD 57.2 million compared to USD 32.2 million last year, primarily due to the recognition of USD 29.4 million deferred tax liability related to equity pick-up gains in the third quarter of 2025. Net income attributable to Weibo in the third quarter was USD 110.7 million, representing a net margin of 25% compared to 30% last year, primarily attributable to top-line pressure. Turning to our balance sheet and cash flow items. As of September 30, 2025, Weibo's cash, cash equivalents and short-term investments totaled USD 2.04 billion compared to USD 2.35 billion as of December 31, 2024. The decrease of Weibo's cash, cash equivalents and short-term investments was mainly resulted from the purchase of long-term wealth management products and the payment of the annual dividend to our shareholders and was partially offset by the operating cash flows in the past 3 quarters this year. In the third quarter, cash provided by operating activities was USD 200 million. Capital expenditures totaled USD 5.1 million and depreciation and amortization expenses amounted to USD 15.4 million. With that, let me now turn the call over to the operator for the Q&A session. Operator: [Operator Instructions] Our first question comes from the line of Alicia Yap of Citigroup. Alicis a Yap: [Foreign Language] Can management share with us the overall advertising outlook for the fourth quarter and also 2026. So any color that you can provide in terms of the growth rate for fourth quarter? And also how should we be thinking about the overall ad revenue growth into next year? And then what is your future strategy for the overall advertising product upgrade? How is AI been helping or will be benefiting the click-through rate or even the advertising monetization and also how AI could be also improving -- help advertisers to improve their ROI. Any color that you can share would be great. Gaofei Wang: [Interpreted] All right. Thank you for the question. So according to the financial report that we have just delivered in Q3, we've been seeing the overall decrease of the ad revenue primarily due to several reasons. The first one is that we had a high base last year due to the Olympic Games. And also, second is that even if we had a poorer performance of the headset industry and the verticals of gaming, and also, we had a little bit better performance from the e-commerce and automotive. But I think that on the overall basis, this is actually the performance within our expectations. Looking forward to Q4, we have been seeing that in the second half of this year, overall speaking, the overall figures and statistics of the consumption-related figures are actually slowing down. And we've been seeing that in some certain provinces and cities, the national subsidy policies have been seeing some kind of headwinds like the limitations on the spending as well as the exiting. So I think that this is going to have a continuous impact on the headset industry as well as the automotive industry next year because we are foreseen a kind of exiting of the national subsidy policy for this industry for certain regions. Okay. So these are some of the uncertainties that we've been witnessing, but still, except for these uncertainties, we could see some of the certainties for next year and also 2026 in specifics. So you know that in 2025, we did not have any hot topics or hot trends or events happening. But in 2026, we are expecting several important events like the Winter Olympics and also the World Cup as well. So this will be actually bringing a better placement of the advertisers from the consumer goods verticals. And you know that in Q3, the decreased performance of the ad revenue primarily was due to the decreased performance of the ad placement from the consumer goods industry. Okay. So as a result, it is very difficult for me to give you a very precise prediction of our performance in 2026. Having said that, in Q4, we've been seeing some of the important things. First of all, is that there are actually fierce -- more fierce competition for the e-commerce industry, especially from the off-line scenario and targeting the life service -- lifestyle service. We used to have -- Weibo used to have actually quite low percentage of the market share in this particular segment. But still, we do see fierce competition going on for the food delivery and lifestyle service as well as the other relevant ones. So that is to say that in Q4, we are expecting a huge demand increase in this particular area. Okay. And also for the e-commerce, of course, I've been already shared some of the colors on this. And second is that in terms of the automotive industry, we believe that it will be actually performing quite good in Q4. But first of all, due to the anti-evolution policies, we've been seeing at some of the customers or advertisers from this particular industry had issues like the price competition or price war. And in the first half of this year, those advertisers did not pretty much focus a lot of their revenues on the product promotion or the mindset establishment. So I think that this situation will be getting better in the second half of the year. I'm talking about the automotive -- I mean headset and also gaming industries. For headset industry, we know that this was primarily impacted negatively by the trend of exiting the national subsidy policy. So in the second half of this year, we'll be seeing that except for Apple, the rest of the other headset makers were having a deteriorating sales volume. And that's the reason why we do see a lower frequency of the new phone launch. And for gaming industry, you could see that from a financial report of NetEase or Tencent, they did not have that lot of new game release in the second half of this year. But of course, they are claiming that in 2026, Q1, we're going to see some of the new games launched from these two major game makers. But still as for whether or not they're going to be allocating more budget on this, this is still uncertain. All right. And second point on the overall strategies. So we're talking about two directions. The first one is that in the previous years, a lot of those budget of advertisements actually was pretty much placed on the performance-based ad and we did not see a lot of spending from those advertisers on the mindset related areas. And also after COVID-19, in order to consume more ad locks, we do see the behaviors of focusing on the live stream e-commerce. So I think that this year, we've seen a very obvious trend that there are more budget allocated to the areas of establishing and building the mindset. So as the traditional advantageous platform on this particular area, Weibo is definitely going to seize this opportunity. And I think that we are going to focus on the hot topics and KOL, especially top notch KOLs in terms of the integrated marketing. So we do actually see the trend of increasing budget from these advertisers on those fronts. Okay. And the second point is on the bidding ad and also performance-based ad. So last year, we've been seeing a decrease of our overall revenue -- ad revenue contributed to the overall ad revenue from the performance-based ad. But recently, in the past years, we've been dedicating a lot of efforts in making wonderful products in the performance-based ad and also increasing and updating our technologies. And also, most importantly, we've been applying a lot of AI technologies to really have a very good boost of the revenue from the performance-based ad. So you can see that in Q3, we had a lot of increase on this area. So because -- not only because of the overall data and traffic and also the adjustments of our strategies, but most importantly, I think that the overall use of the AI technology is really important. So we will be actually expecting a very good increase of this performance-based ad. All right, pretty much for the answer for this question. Operator: The next questions will come from the line of Leo You from CLSA. Yang You: [Foreign Language] I have two questions on the product commercialization. And first is on the strategy and the progress of intelligent search. Do we have the commercialization attempts already in the fourth quarter? And what other AI application could management share? And second question is on the information feed revamp. What are the initial feedback from users' content consumption, engagement? And how would that translate into revenue growth in the future? Gaofei Wang: [Interpreted] So thank you for this question. First of all, we could see that in terms of the intelligent search, as we already said that this has been increased a lot in Q3 in terms of the overall products. So resulting in a very good performance. For instance, in September, the MAU exceeded 70 million. And in terms of the DAU and also the query number, we had a quarter-by-quarter increase of over 50%. So of course, in terms of the monetization of the intelligent search, first point is that we do see a very good increase of the overall intelligence search-based volume, and that was resulted in the performance like in Q3, we had a query increase by about 20% quarter-by-quarter. And this actually provided with us a very good traffic to actually have a better performance on this. And second point is that, of course, at the current stage, we do not have the ability of all the consumers. I mean the customers are not having this particular requirement of placing the ad precisely just based on the intelligent search results. But this did actually provide some of the impacts to the customers because, for instance, we are able to use the GEO technology to actually facilitate better product and better content creations and helping the customers understanding or advertisers in understanding the new product-related issues and some of the other important things and also issues as well. So this is going to be generating a lot of ad assets for our advertisers so that they are able to use in the near future. Of course, this is not going to be directly charging from the customers, but I think in the future, the customers and advertisers are able to put more weight on this particular part of the intelligent search. So I do think that in the future, we are going to see a very good increase, be it the brand-based ad revenue or the overall budget of the performance-based ad. And also, the second question is pretty much based on the information feed. So as we have already stated that we have an updated version or modification of this information-based feed in 2025 and already provided to the users. So we've been already finishing the first stage switch for information feed in July. But of course, it takes time for the users to get used to this and nurture their habit of using. But still, I think that this particular new information feed is going to be very useful and beneficial to the overactivity of the users and also improving the overall retention and the total time spent on the consumption as well. So I think that this is also going to be lowering the threshold for the users of using Weibo. Okay. Of course, I think that this particular kind of modification or the version update is pretty much like what happened years ago from the time spent based to the non-time spent base. And of course, at the current stage, we think that there are a lot of variations between different versions. So it still takes time for the user to adopt this new kind of a platform or it takes time for them to nurture their habits of using. But still, I think that on the overall basis, this did have a lot of benefits impacting the overall consumption behavior. And also, of course, in Weibo, we are going to continuously focusing on the upgrades and optimization of our products as well. Okay. And also, I think that this is very good to have a certain kind of improvements on two fronts. The first front is that, of course, it is going to impact some of the new users using a process of this particular product because it used to be the case that the users need to log on the Weibo and establish following a relationship before they could take any action on consumption of the content. But at the current stage, this particular process is waived so that we are at the same starting point as the other competitors for this particular part. So the users are able to actually consume a very good quality or content at the very beginning. And second is that for the existing users, of course, from an experience standpoint, it still takes time for them to be adopted -- adopting this new concept and also establishing a new using habit. But still, I think that at the current stage, this has primarily given us better opportunities, especially for those new users to take actions on consumption more frequently without even establishing a following relationship as the prerequisite. Okay. And also, I need to add another point, which is the third point that is for the video-based consumption. So we know that in the past, for those of consumers, I think that the videos are actually very difficult for the users to actually consume upon so that was impacting a lot of the original social-based relationship. And you know that in the past, for those content creators, especially the video content creators, it is very difficult for them to establish a social relationship with the users and also consumers as well. So even if on the relationship-based feed, it is also very difficult for those video content creators to expose their content in front of the wide audience. So also for the hot topic search because of the real timeliness of their content, especially the video-based content, it is also very difficult for them to expose their content as well. But now after the change, we could see that we are going to proactively recommending more video-based content to the users. And this is going to be very, very important for Weibo in the long run, be it from a growth standpoint or from the standpoint of enhancing our core competitive edge. Operator: That's the end of the question-and-answer session. With that, I would like to conclude the conference call today. Thank you all for participating. You may now disconnect your lines. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]
Operator: You are in the right place for the KULR Technology Group's third quarter 2025 earnings call set for today, Tuesday, November 18. The call will begin at 4:30 PM Eastern. Please hold on the line. Thank you everyone for joining us here today for the KULR Technology Group's third quarter 2025 earnings call. I will be your host and moderator, Stuart Smith. In just a moment, I will be joined by the Chief Executive Officer of the company, Michael Mo, as well as the Chief Financial Officer for the company, Shawn Canter. After we are given their opening statements, we will have a question and answer section on the call today. But before we get started, please listen to the following safe harbor statement which will cover the statements made on the call today. This call may contain certain forward-looking statements based on the company's current expectations, forecasts, and assumptions that involve risks and uncertainties. Forward-looking statements made on this call are based on information available to the company as of the date hereof. KULR Technology Group's actual results may differ materially from those stated or implied in such forward-looking statements due to risks and uncertainties associated with their business, which include risk factors disclosed in their Form 10-K filed with the Securities and Exchange Commission on 03/31/2025, as may be amended or supplemented by other reports KULR files with the Securities Exchange Commission from time to time. Forward-looking statements include statements regarding the company's expectations, beliefs, intentions, or strategies regarding the future and can be identified by forward-looking words such as anticipate, believe, could, estimate, expect, intend, may, should, and would, or similar words. All forecasts provided by management on this call are based on information available at this time, and management expects that internal projections and expectations may change over time. In addition, the forecasts are based entirely on management's best estimate of their future financial performance given their current contracts, current backlog of opportunities, and conversations with new and existing customers about their products and services. KULR Technology Group assumes no obligation to update the information included in this call whether as a result of new information, future events, or otherwise. Now with that, let me welcome onto the call Chief Executive Officer of KULR Technology Group, Michael Mo. Michael? The call is yours. Michael Mo: Thank you everyone for joining us today. I'm proud to share that KULR delivered our strongest quarter to date. In Q3 2025, we generated approximately $6.9 million in revenue, growing 116% year over year and 75% sequentially from last quarter. Our product revenue more than doubled, showing that our transition from services to a product-driven company is firmly underway. We also strengthened our financial foundation. We have approximately $140 million in cash and digital assets and no debt, following the full repayment of the $8 million Coinbase loan. This strong financial foundation allows us to invest in research and development, growing product production capabilities, expand facilities, and accelerate growth across the KULR One platform. We believe we are at the beginning of a super growth cycle in our energy storage and management business, and this optimism is backed by real results. This summer, we launched KULR One Air, built on the same technology foundations as our KULR One Space and Guardian platforms. This July, we created more than 150 KULR One Air battery SKUs, giving us one of the largest made-in-USA battery portfolios in the market. The demand is growing strong. We have over a dozen late-stage opportunities or signed contracts across unmanned autonomous vessels, drones, direct energy systems, and underwater vehicles, and we're seeing an acceleration in customer engagements. At the same time, we're expanding the KULR One platform into AI data centers and telecom infrastructure with new battery backup units (BBUs) and battery energy storage systems (BESS) products, both of which fit in some of the fastest-growing energy markets in the world. With these growth engines coming online, we expect our energy storage and management business to grow tenfold over the next three years. What sets KULR apart is simple. We deliver faster, deliver with higher quality, and we deliver better performance all at a competitive price point. Customers feel that difference immediately. A big part of the advantage comes from our team and our facility in Texas. We design, prototype, build, and test our batteries in-house, all under one roof, which allows us to move with speed and precision. And to meet the rising demand, we're preparing for our next phase of expansion. In 2026, we plan to grow our Texas headquarters to over 100,000 square feet and scale production from a few thousand packs per month right now to more than 50,000 packs per month, supported by new automated battery production lines. This is an exciting moment for KULR. We have the technology, the team, the balance sheet, and the momentum to be America's trusted energy source for these growing applications. I'm very excited that we are entering a super growth cycle as demand surges for advanced energy storage and management products across our core markets. UAVs, drones, and autonomous robots are scaling rapidly, and the KULR One Air and Guardian platforms meet this demand with safe, high-performance, production-ready propulsion batteries at competitive commercial prices. Space exploration is accelerating in both private and public sectors, and KULR One Space positions us as a trusted partner for mission-critical energy systems built to operate in extreme environments. AI data centers need dramatically more energy, and they need it fast. Our KULR One Max platform aligns directly with the industry's shift towards high-density, high-power, and high-reliability backup battery systems. Telecom networks and critical infrastructures are investing heavily in resilience, driving greater demand for certified high-reliability energy storage solutions. And the US is moving decisively towards a domestic, secure battery supply chain, and our Texas-based design and production operation give us a strong strategic advantage. Let me summarize why KULR is winning. Why we're winning right now. First, speed. Our entire value proposition is built on getting high-performance energy systems to customers faster than anyone else. Because we design, engineer, test, certify, and prepare for production under one roof, we can move from concept to manufacturable products in a fraction of traditional industry timelines. That speed has become a decisive advantage as customers demand semi-custom and high-performance solutions delivered quickly and reliably. Second, quality. KULR's heritage in thermal management and battery safety is a core differentiator. We're 40 AS 9100 and ISO 2001 certified. Customers increasingly view quality and safety not as checkboxes but as strategic factors in selecting long-term partners. Third, performance. We use next-generation battery cells, advanced categorization, and validation processes to ensure every KULR One system delivers consistent high-confidence performance, even in the harshest mission profiles. Our focus on thermal stability and optimization is separating us from legacy pack manufacturers. Fourth, safety. Our engineering platform is built on NASA's space-grade safety architecture, applied across the full KULR One ecosystem. As energy levels rise across all applications, safety is becoming one of the most important buying criteria, and this is an area where KULR has a structural advantage. Fifth, secure supply chain. Every KULR One battery we ship is designed, built, and tested in Texas. Customers want a domestic, transparent, and highly controlled supply chain. KULR provides that, supported by strategically secured components and partnerships worldwide. And finally, customer experience and value. We believe that we have the best team in the industry. Because everything is done under one roof, we deliver fast turnaround, better quality, higher performance, and more competitive pricing than our competition. That combination is building customers' trust, winning their business, and is a major reason why KULR is capturing momentum across the markets we serve. Let me highlight one of the most exciting developments at KULR. The launch of KULR One Air. We introduced this platform in July and immediately positioned us in one of the fastest-growing segments of the electrification economy: the UAV, drone, electric aviation, and autonomous robotics. KULR One Air is a purpose-built, high-performance propulsion battery architecture designed specifically for those next-generation systems. The momentum has been extraordinary. In just a few months, the platform has expanded to over 150 commercial-ready SKUs across multiple cell manufacturers and form factors. That makes KULR One Air one of the largest made-in-USA battery portfolios in the market. And we're entering the market at exactly the right time. The UAV and drone battery market is expected to grow from roughly $1.5 billion in 2025 to more than $2.4 billion by 2030, driven by rapid adoption in commercial operations, public sector modernization, and the rise of autonomous robotic platforms across industries. KULR One Air is built on space-grade engineering heritage, delivering safer busbar and connector architectures, lower thermal rise, and high power performance that the series demands that legacy packs simply cannot handle. This performance profile is resonating strongly with customers who operate in demanding mission environments. Demand is accelerating on every front. Today, we have actively engaged with a broad range of commercial and government customers using drones for inspection, logistics, imaging, environmental monitoring, public safety, and advanced robotics. In every case, operators need high-power batteries that deliver safety, power, and reliability at scale. On the production side, we're scaling aggressively. We're currently producing a few thousand packs per month, and with our Texas expansion, we're targeting 50,000 packs per month by mid-2026. And if demand signals accelerate, which we anticipate, we're ready to scale to 100,000 packs per month and beyond. We have the capital, the talent, the supply chain partnerships, and the facility space to execute. KULR One Air isn't just a product line. It's a platform that leverages our decades-long engineering heritage and opens up a multibillion-dollar market for us. AI is creating one of the largest energy transformations we've ever seen, and KULR is stepping directly into the center of this. We're expanding our KULR One Max platform into two massive markets: data center battery backup units (BBUs) and telecom infrastructure energy storage systems. Across NVIDIA GPU generations, power consumption per server is increasing by about 100x. Rack power is climbing from today's 30 to 80 kilowatts to more than 250 kilowatts in some deployments, and NVIDIA's roadmap is pushing towards one megawatt racks by 2028. At these levels, rack-level battery backup units (BBUs) become essential. NVIDIA's latest GB 300 NBL 72 architecture now bakes BBUs directly into the reference design to manage power spikes, ride through micro outages, and reduce reliance on massive UPS systems. As data centers transition to 800-volt high-voltage DC systems, the whole industry is moving this way, including Meta's open compute project. But with high power comes higher risk, and battery safety is now mission-critical. Operators must meet stringent standards like the UR 9540A as they push for greater energy and higher discharge rates. This is where KULR has a unique advantage. Our space-grade safety architecture makes the KULR One Max platform ideally suited for these AI rack applications. We're designing 21700 bays and 5 amp-hour class BBU systems specifically for next-generation NVIDIA systems, while much of the market is still relying on older 18650 cells under 3 amp-hours. We expect our BBU system to be UR 9540 certified and production-ready in 2026, positioning KULR to compete in this multibillion-dollar fast-growing market. AI is rewriting the energy transition, and KULR intends to be at the forefront of that transition. AI isn't just changing data centers. It's transforming the entire power and thermal landscape. Power and thermal have moved from backroom issues to network-wide operating constraints. We're seeing pressure everywhere: on towers, radio, fiber hubs, central offices, and, of course, inside high-density AI data centers. So it's across the entire telecom infrastructure. Recent incidents are reminding everyone why safety matters. One of the clearest examples came from South Korea, where a battery-origin fire disrupted hundreds of government systems and took nearly a full day to extinguish. Events like this are forcing operators to reevaluate their backup power and thermal protection. KULR's role is to help operators safely increase runtime and energy density as they push infrastructure to its new limits. Near term, we're partnering with established backup power providers to deliver safer and higher energy lithium-ion battery packs and thermal runaway mitigation to existing UPS platforms, especially in space-constrained towers, fiber hubs, and central offices. Looking ahead, we'll need to align with platform players and co-development partners to leverage our safety hardware to integrate with recurring business software-as-a-service business models. More to come in the near future. Let me take a moment to update you on our Bitcoin treasury strategy because it continues to be an important part of how we build long-term shareholder value. As a Bitcoin-plus treasury company, we stay close to the digital asset treasury market, and we remain disciplined. We have not taken on any convertible debt to acquire Bitcoin. Instead, our approach is intentional. We're making incremental and economically sound BTC acquisitions through our mining operations while directing our primary capital towards high-value and high-growth energy businesses. Our mining strategy itself creates additional strategic upside. We focus on projects with renewable, low-cost power, and that puts us in direct partnership with mining hosts who are increasingly expanding to high-power computing and AI infrastructure. These relationships give us a front-row seat in new opportunities where KULR can deliver battery energy solutions, BBUs, and UPS systems to support AI workloads and grid resilience. Through Q3, our mining operations produced Bitcoin at an all-in cost of approximately $102,000 per coin. We continue to evaluate projects where we can lower our average cost of acquisition even further. In short, our Bitcoin treasury and mining strategy is disciplined, aligned with shareholder value, and increasingly synergistic with our move into the AI data center energy markets. Let me give you an update on KULR Vibe, which is becoming another exciting part of our portfolio. This year, we'll be working closely with helicopter OEMs and operators across both civilian and government sectors in the US. Vibration mitigation remains one of the most challenging maintenance issues in aviation. It is often described as more of an art than a science. KULR Vibe is changing that. Our system enables maintenance teams to track and balance aircraft quickly, accurately, and without needing decades of experience. The software learns over time, becoming more precise with each balance on each specific aircraft through its built-in learning algorithm. Now that the government shutdown has ended, we expect our US Army program to resume and advance to the next level. On the commercial side, demand is growing rapidly. To support the civilian helicopter market, we're preparing to launch the KULR Vibe app on iOS in 2026 in partnership with a global aviation leader, making this technology more accessible than ever. Let me give you a quick update on Exia. In just a few months of marketing Exia in North America, we've already deployed more than 30 units across multiple verticals. In retail, Exia is supporting workers in distribution centers of a major North American retailer. In logistics, it's operating inside a national 3PL specializing in oversized and bulky items. For industrial distributors, Exia is deployed across three warehouse locations serving the restaurant sector, and in healthcare, we've been running a successful pilot in a nursing home in Montreal, with highly positive feedback from caretakers. We're preparing to launch a second pilot with a major hospital in the Northeast. The momentum is strong because Exia's seventh-generation architecture delivers the right balance of cost reduction, performance, and safety—a combination that's resonating with industrial customers who need productivity gains without compromising worker well-being. As industries look to empower workers, reduce injuries, and bridge labor gaps, Exia allows us to play a strategic role in the future of the modern, augmented workforce. Next, Shawn Canter will provide financial updates. Shawn? Shawn Canter: Thanks, Mike. Overall, the third quarter was another strong quarter for KULR. Our operating activity continues to position KULR for continued growth and future success. With that in mind, I'll touch on some highlights. Revenue grew 116% from the same quarter last year to approximately $6.9 million. Q3 was the highest revenue quarter KULR has ever posted. This grows the streak to the fifth straight quarter KULR has grown revenue over the comparable prior year period. The third quarter also sets another growth record, this one a new trailing twelve months revenue record at $16.7 million. The third quarter grew this streak to the fifth consecutive quarter KULR has set a trailing twelve-month record. For the third quarter 2025 versus the third quarter 2024, product revenue grew 112%, but services revenue was down 74%. Let me make a brief comment on our services revenue. Our services work plays an important role in complementing our products business. But over time, you'll continue to see us focus our resources on products. This reflects our belief that our products business can go after a much larger global market, benefit from economies of scale, leverage our already strong and growing brand awareness, and offers KULR a long sustainable growth trajectory in which to invest. Now let's touch on our operating expenses. In addition to what is in the 10-Q, I'd like to share the trend from the first, second, and now third quarter this year. Both R&D and SG&A have gone down each quarter since the beginning of the year. R&D is down 5.2%, and SG&A is down 13%. Our operating costs reflect the everyday costs to run the business as a public company, find and retain high-quality talented teammates, and make the necessary investments to drive growth in the short and long term. In fact, many of the investments that we've made are bearing fruit and serve as a foundation for the vision that Mike just outlined. We are seeing increases in the number, quality, and size of customer engagements. I'll point out that the payoffs for some of the investments will take longer to realize. It's to be expected that every investment doesn't always play out over a straight line. But we remain confident of their future payoff. One last point on operating expenses. We won't be able to reduce costs every quarter. Our goal is to get to positive operating earnings through strong revenue growth with appropriate investments to maintain the durability of that growth. Now a few points on our balance sheet. At the end of the third quarter, our cash balance was just over $20 million. Our current accounts receivable was approximately $3 million. We held Bitcoin worth approximately $120 million, and our total assets were approximately $156 million. Before I hand things back to Stuart, I'll just add a point to another topic Mike spoke about. We continue to be enthusiastic about the exoskeleton market and technology. Based on our early commercial customer experiences and what we can see in the marketplace, the appetite for exoskeletons appears to be strong. Nike's recent announcement of their own exoskeleton is an example. Notwithstanding that outlook, I do want to state that based on information from German Bionic, we made the appropriate decision to take one-time impairments. We do not anticipate this will materially affect our US commercial sales activity going forward. Overall, we are enthusiastic about another strong positive growth momentum quarter for KULR. Back to you, Stuart. Stuart Smith: Alright. Thank you very much, Shawn. So that again brings us to the question and answer portion of our call today. And, Michael, the first question is for you. And here it is. What are KULR's strategic priorities today as a Bitcoin treasury company with operations? Michael Mo: Yeah. Thank you, Stuart. And this is a question that we are often asked, and I'm glad to answer it. Our priorities are focused and deliberate. Bitcoin treasury is an important role for our treasury strategy. But, operationally, we're very focused and anchored in our core energy management and storage business as well as our vibration reduction technologies. So, because we're seeing both areas present strong revenue growth for 2026. And that's where we're gonna focus all of our attention and our commercial efforts on. Stuart Smith: Very good. Well, Shawn, the next question is for you. What is the long-term strategy for the Bitcoin treasury and mining operations? Shawn Canter: Thanks, Stuart. That's a good follow-up after the prior question about our future. We believe Bitcoin's supply and demand structure supports a favorable long-term pricing outlook. After initially purchasing Bitcoin on the spot market, we shifted in mid-July to growing our position through mining. In addition to accumulating more Bitcoin, mining brings us closer to the data center ecosystem as we explore new opportunities in energy storage solutions. While we're on the topic of Bitcoin, perhaps it makes sense to have a word about Bitcoin's price volatility and even the equity market volatility, which we've all recently seen. We like to maintain a strong cash position and no debt as a buffer to Bitcoin's price and stock market volatility. We don't have any interest payments or debt maturities to worry about. We're focused on growing revenue. We worked very hard to position ourselves to be able to take advantage of volatility rather than to be a victim of it. Stuart Smith: Okay. Thank you for that, Shawn. Michael, next question for you. Given the previous reverse split and the ongoing share price pressure, what outcomes have been achieved in terms of institutional participation and market perception, and is another reverse split being considered? Michael Mo: Well, since the reverse split that went into effect in June 2025, third-party data has indicated that the company has more than doubled its institutional ownership. And today, we can say definitively that there is no basis for considering another reverse split. Stuart Smith: Alright, Michael. The next question is also for you. Several partnerships, government, military, aerospace, and corporate have been announced with limited follow-up. Can management provide detailed updates, expected and how these programs contribute to revenue and long-term enterprise value? Michael Mo: Well, across government, aerospace, defense, and corporate accounts, we continue to make steady progress on the partnerships that we have previously announced. Many of these partners involve multistage qualification, certification, design, testing, and integration processes. And as you know, those cycles often span several quarters, and also, they are governed by confidentiality agreements that limit the level of program-specific details that we can publicly talk about. As we transition to a product-focused company, these engagements are important because they establish long-term technical and operational pathways for products to get inside of these critical platforms where reliability, safety, and performance matter the most. At the same time, as I talked about in my prepared remarks, it's important to highlight that the future growth engine of the company is now being driven by our KULR One Air product and also the entire KULR One platform, which is seeing significant broader and faster commercial adoption. As we enter 2026, we'll keep everybody up to date on the commercial efforts around our KULR One Max and AI BBU, and also telecom applications as well. These new platforms are expanding our addressable market into multibillion-dollar markets. Stuart Smith: Alright. Shawn, previously KULR has issued investor letters. Mike has said he would try to communicate more with shareholders. Is this still a priority? And if so, how will you be doing it? Shawn Canter: Sure. Well, as Mike just mentioned, due to the nature of many of our government, defense, and even commercial customers and the programs we work on, we're often limited in our ability to disclose contracts and progress until later milestones occur. With that said, as we've indicated before, we hear our shareholders and their desire for more communications. Early 2026, we will write an investor letter in addition to everything else that we do to communicate. Going forward, at least once a year in an investor letter, we'll share a more intimate account of what we're seeing and doing. We'll use it as a reflection on where we are and a window into what may lie ahead. In 2026, we're looking forward to our next open house at our headquarters in Texas. We're looking forward to attending more events where we can speak about our progress. We're looking forward to increased coverage from research analysts. I guess it's worth noting that, as everybody knows, the analysts independently make those decisions. We don't. And, of course, where we can publicly announce new contracts, customers, and programs, we certainly will. Stuart Smith: Shawn, the next question's also for you. What concrete steps is management taking to stabilize the stock price? Shawn Canter: Well, Stuart, our primary focus is squarely on accelerating revenue growth in our core energy storage and vibration markets. The investments we've made are showing real traction. As we've mentioned earlier, we are securing meaningful business in autonomous systems and expect additional wins ahead. As Mike mentioned, we're pushing into infrastructure with our market-leading energy storage and management solutions. We also are advancing KULR Vibe towards a scalable, globally marketable platform. It's probably worth noting, also that our Bitcoin treasury strategy has sort of touched on this question too. Both Mike and I have mentioned at the end of the third quarter, we held about $120 million worth of Bitcoin. We have intentionally taken a conservative approach to our Bitcoin holdings. We have no debt or other complex structures on our balance sheet, unlike others who have levered up their balance sheets to acquire Bitcoin and have experienced or perhaps still own the risk of leverage in volatile markets. As Mike mentioned, we believe in the long-term value of Bitcoin and its unique fixed supply and increasing demand characteristics. Individuals, institutions, and governments are buyers of Bitcoin. The regulatory environment has moved from a headwind to a tailwind. Increased domestic and international economic and political macro risk and resulting volatility on global currencies appear to further contribute to Bitcoin demand. Let me put some numbers associated with this just to understand the scale of the demand trend. And I asked AI for some help here. In 2011, there were an estimated 100,000 active Bitcoin addresses. In 2015, an estimated 6 million. In 2020, the estimated number of active addresses increased fivefold to 30 million, and an estimate for November 2025 indicates the number of active addresses to be approximately 60 million. That's a 58% compounded annual growth rate. It's not easy, and one doesn't find every day, or one can find something that grows 58% a year for fourteen years. So simply, fixed supply, strong growth demand trend, all else equal, we think this suggests over time the price of Bitcoin should rise and along with it, the value of our holdings. Historically, we acquired Bitcoin via the spot market, more recently via mining operations, and as Mike mentioned, one of the reasons for this is the strategic position for KULR to both acquire Bitcoin and get insight into the infrastructure energy solutions market. Overall, Stuart, over time, we believe our stock price should reflect the results of our strong operational execution. Stuart Smith: Thank you for that, Shawn. And this really dove into that. Here is the next question, and I will direct it back towards you again, Shawn. Given so much that has happened at KULR in the last year or two, how is management viewing these changes in relationship to revenue growth and, ultimately, stock price appreciation? Shawn Canter: Sure. Well, that's a great question. A lot certainly has changed over the last couple of years. I guess, again, it's worth stating again, our focus is on growing 2026. We believe that the market demand number and nature of customer engagements and the engagement sizes will show up in scaling durable revenue. From programs that took our batteries into outer space and to the bottom of the ocean, we're now applying those same technologies, insights, and learnings to higher volume programs related to autonomous vehicles covering air, land, and sea. Another example of change that took place over time is our decision to implement and then consolidate our facilities into just one location in Texas. As Mike mentioned earlier, we're already seeing demand signals indicating that we need more space to accommodate the customer engagements and growing programs that we see heading our way. Additionally, as we've already touched on, we're exploring how our products can be applied to even larger global infrastructure markets. Again, all of this to say, we see revenue materially growing in 2026. And as we talked about in the prior question, while we don't predict ours or anyone else's stock price, it would seem that it would stand to reason. KULR's stock price should follow as revenue grows and we gain further scale. Since we're talking about change, I guess I'll add one more observation even though we have touched on it already. Looking at our balance sheet and how it has evolved over the last two years. Today, we have no debt. We have over $100 million in liquid assets. We are seeing real traction across products and markets. We can and are investing in our real durable growth. Thanks, Stuart. Stuart Smith: Thank you, Shawn. And Michael, we're gonna close out the Q&A portion with this final question directed towards you, and it is a long one. It's in regards to the KULR Intelligent Data System, which currently generates high-fidelity vibration and thermal telemetry at scale from active battery deployments. And it says it's a multipart question, actually. Will KULR in the future, one, tokenize the aggregated dataset on a public blockchain with verifiable provenance, and two, license access to leading AI labs for training foundation models specialized in battery physics, electrochemistry, and predictive safety? If so, what is the minimum data moat size in terabytes of raw sensor streams that KULR believes would be required to position the platform as the de facto Bloomberg terminal of battery physics? That's in quotes, that last part. And then he has this comment. Thank you again for your vision in building the data backbone of safe electrification. So, Michael, will you handle that one, please? Michael Mo: Yeah. No. Thanks, Stuart. This is actually a really interesting question. Actually, it kind of relates to AGI, artificial general intelligence. It's something like that type of question. You can think about this question or answering this in three buckets. First is how much data you can get from individual models of battery cells and packs. Second is how many of these cells and packs do you have in operation to get the data moat size, terabyte data that this investor is referring to. And third is what you do with that data both as a primary and secondary application for these batteries. We can probably spend hours talking about this in general, but the first point is that some of these proprietary testing and categorization techniques that we have, such as FTRC, IgM, IFC trigger cells, and etcetera, we can get some of the most detailed and quantitative data on thermal runaway and safety behavior on both the battery cells and packs that we're interested in building for KULR battery packs. This will probably not include all the battery cells in the world, but just focus on the cells relevant to our applications and our customers. Then it's to get to scale by deploying as many packs as possible into the field and continuously monitor them. That's where I say the EV vendors will have a tremendous advantage because they have the largest scale deployments, and the EV BMS monitor all the cells. We can do similar with our KULR One battery platform. And that is actually becoming a business model question on, you know, do you sell the battery packs, or do you lease them out and charge for the use of the energy consumption through the batteries as a subscription service? So, I think the shareholder's question is actually leaning towards the second case. So if your business model is energy as a service, then you could have data on primary application usage and potentially second-life applications for these battery packs as well to maximize the lifetime value of these batteries. I actually really believe that energy as a service will be the business model for telecom, for AI data centers, and advanced electric mobility applications. They all have different requirements for the cell performance and lifespan of the batteries. So you can price something for each one of them as a primary application. And then you can eventually take possession of the battery and then apply second-life applications for another industry. And in that case, you can maximize the economic value of the battery packs and also minimize waste. In those applications, the Bloomberg terminal analogy for battery information and an AGI-like monitoring system, I believe, will be the killer app. Stuart Smith: Well, Michael, thank you for that. I want to thank both Michael Mo, CEO of KULR Technology Group, as well as Shawn Canter, the CFO of KULR Technology Group. That concludes our call today. And with that, I'll hand the call back over to our operator. Thomas. Thomas, the call is yours. Operator: Thank you. This does conclude today's webcast and conference call. You may disconnect at this time. Have a wonderful day. Thank you once again for your participation.
Operator: Ladies and gentlemen, thank you for standing by, and welcome to the Qfin Holdings Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please also note today's event is being recorded. At this time, I'd like to turn the conference over to Ms. Karen Ji, Senior Director of Capital Markets. Please go ahead, Karen. Karen Ji: Thank you, Ken. Hello, everyone, and welcome to Qfin Holdings Third Quarter 2025 Earnings Conference Call. Our earnings release was distributed earlier today and is available on our IR website. Joining me today are Mr. Wu Haisheng, our CEO; Mr. Alex Xu, our CFO; and Mr. Zheng Yan, our CRO. Before we start, I would like to refer you to our safe harbor statement in the earnings press release, which applies to this call as we will make certain forward-looking statements. Also, this call includes discussions of certain non-GAAP financial measures. Please refer to our earnings release, which contains a reconciliation of non-GAAP financial measures to GAAP financial measures. Also, please note that unless otherwise stated, all figures mentioned in this call are in RMB terms. In addition, today's prepared remarks from our CEO will be delivered in English using an AI-generated voice. Now I will turn the call over to Mr. Wu Haisheng. Please go ahead. Haisheng Wu: [Interpreted] Hello, everyone. Thank you for joining us today. In the first 9 months of this year, China's economy and the consumer finance sector have both faced persistent headwinds. The outstanding balance of short-term consumer loans has declined for 3 consecutive quarters on both a year-over-year and quarter-over-quarter basis. Going into Q3, the industry is undergoing a series of regulatory-driven adjustments to improve consumer financial inclusion. We believe these changes will strengthen the sector's long-term prospects and sustainability, paving the way for healthier and more structured competitive landscape. As such, we view these adjustments not only a challenge but also an opportunity for Qfin. As a leading credit tech platform in China, we continued to prioritize risk management, advance our AI capabilities and deepen collaboration with financial institutions. We believe these efforts will enable us to better serve inclusive finance needs and strengthen our leadership in the industry. Now I'll walk you through the progress we made in Q3. By the end of the quarter, our AI-powered credit decision engine and asset distribution platform served 167 financial institutions, delivering efficient, intelligent digital credit services to over 62 million credit line users on a cumulative basis. To navigate the evolving regulatory environment, we dynamically fine-tuned our risk strategies to maintain a healthy balance between risk and growth. As a result, total loan facilitation and origination volume on our platform reached RMB 83.3 billion in the quarter, broadly in line with Q2. Despite the macro headwinds, we delivered steady financial results. Non-GAAP net income reached RMB 1.51 billion, while non-GAAP EPADS on a fully diluted basis, came in at RMB 11.36, reflecting our solid profitability and operating resilience. On the risk front, funding liquidity in the high-price segment continued to tighten in Q3, leading to an uptick in overall delinquency risk across the industry. To stay closely aligned with evolving market conditions, we further tightened our credit standards and optimized our customer mix by increasing the proportion of high-quality borrowers. In addition, we proactively refined our risk models and completed 611 iterations, implementing differentiated risk management and distribution strategies. On the collection front, we improved efficiency through smarter resource allocation and deeper technology integration. For example, we allocated more resources to high-performing collection partners to ensure sufficient capacity and better productivity. For customers willing to repay but facing temporary financial difficulties, we offered measured concessions and flexible repayment options. In addition, we were able to assess repayment intent and capacity in real time through large language model algorithms, enabling more precise segmentation and more agile resource deployment. These efforts helped us maintain steady progress even as the broader industry faced rising collection pressure. Our FPD 7, a leading risk indicator for new loans declined in September versus August. Since October, given the new regulations and heightened industry self-discipline initiatives, we expect risk indicators to remain volatile in the near term with current levels above historical averages. That said, having navigated multiple industry adjustment cycles in the past with prompt and effective responses, we remain confident that we can once again bring risk levels back within a reasonable range in a timely manner. On the funding front, we have been white-listed by all of our active financial institution partners, ensuring a smooth and stable cooperation going forward. Despite a relatively tight funding environment driven by liquidity conditions and policy factors, we maintained the industry-leading pricing power and secured ample funding supply at stable costs. Our average funding cost for Q3 held steady from last quarter, remaining at historical lows. In the ABS market, we issued RMB 4.5 billion during the quarter, up 29% year-over-year with issuance costs down by another 10 basis points. For the first 9 months of 2025, total ABS issuance grew 41% year-over-year to RMB 18.9 billion, further optimizing our funding structure. Looking ahead, we expect our funding costs to remain largely stable in the coming quarters. For user acquisition, we continue to diversify our channels, enhance targeted operation and improve efficiency compared with last quarter. The number of new credit line users grew by 9% to $1.95 million while average cost per credit line user declined by 8%. The number of new borrowers also grew 10% sequentially to $1.35 million. We have seamlessly integrated convenient and efficient credit services into diversified channels and scenarios, including short-form videos, e-commerce, mobility, food delivery, and financial services. In Q3, we further expanded our embedded finance network, adding 7 new strategic partners and extending our presence across Internet and financial institution platforms. As a result, the number of new credit line users from the embedded finance channels increased by 13% sequentially, while loan volume up by 11%. For placement strategy, we remain focused on onboarding high-quality users and optimizing our overall user mix. As such, our long-term strategic priority will focus more on our high-quality customers. Supported by AI-driven data models, we expect to gain deeper insights into user needs and behaviors and further refine products and services. This approach will allow us to deliver a superior user experience and improve both our unit economics and user lifetime value. We believe this focus is critical to strengthening our long-term competitive edge and cementing our leadership position in the industry. In our Technology Solutions business, we continue to advance our AI plus banking strategy, empowering financial institutions in their digital and intelligent transformation. During the quarter, loan volume supported by this business achieved exponential growth, up by roughly 218% on a sequential basis. Our collaboration with banks continue to deepen, expanding from their proprietary channels to a broader range of Internet scenarios where we provide end-to-end technology support in customer acquisition and risk management. Powered by our FocusPRO credit tech platform, our proprietary solution for SME lending, which is built on a 3-tiered credit assessment system, was adopted by several new banking partners and received positive feedback for its industry-leading performance. As part of our AI plus banking initiative, our 2 proprietary AI agents, the AI Credit Officer and AI Loan Officer, entered pilot testing with our first bank client. The engagement rate among the activated user base has reached around 50%, providing initial validation for the AI agent practical effectiveness in core credit scenarios. Looking ahead, we will focus on strengthening our capabilities in multimodal recognition, voice data collection, lead management and feedback loops while expanding pilot programs and further improving user engagement. At the same time, we are seeing growing interest from financial institutions, laying a strong foundation for broader commercial rollout and scaled adoption in the next phase. On October 1, the new rules officially came into effect. As a leading player in the industry, we have always held ourselves to the highest compliance standards with no exception this time. Working closely with our financial institution partners, we quickly optimized our business structure and product experience. While these measures may temporarily impact our loan volume and profitability, we believe that prioritizing value for users will eventually strengthen their trust and help us maintain more sustainable and resilient growth over the long term. Meanwhile, certain new industry-wide regulatory measures may have some impact on the industry dynamics. That said, we believe our diversified business model and ample funding capacity will help position us to navigate these changes with limited disruption. Given the current phase of industry-wide adjustment, we will prioritize risk management over near-term growth, focusing on improving user quality and collection efficiency. Since mid-October, we have already seen encouraging early signs of stabilization in asset quality. Over the years, we have a proven track record of emerging stronger from past challenges, including multiple industry-wide adjustments, and we are confident that this time will be no different. Looking ahead, we will continue to advance our One Body, Two Wings strategy, further strengthen our AI capabilities and empower financial institutions in their digital transformation, driving efficient, healthy and sustainable development of our core business. On the international front, we are actively exploring opportunities across multiple overseas markets. After extensive research, we are even more convinced that our fintech capabilities are among the best in the world. We view the international expansion as a challenging yet strategically sound path. Quality always comes from deliberate execution, and we are confident we will deliver. In closing, short-term industry headwinds will not alter our long-term trajectory or our fundamental commitment to giving back to our shareholders. Going forward, we will continue to pursue efficient capital allocation and deliver value to our shareholders through compelling shareholder returns. With that, I will now turn the call over to Alex. Zuoli Xu: Thank you, Haisheng. Good morning, and good evening, everyone. Welcome to our third quarter earnings call. Unexpected China events in the last few months put significant pressure to our operations, and such headwinds may persist through the next couple of quarters as the consumer finance industry faces new round of regulatory scrutiny and the participants try to settle in the vastly different environment. Total net revenue for Q3 was CNY 5.21 billion versus CNY 5.22 billion in Q2 and CNY 4.37 billion a year ago. Revenue from credit-driven service capital heavy was CNY 3.87 billion in Q3 compared to CNY 3.57 billion in Q2 and CNY 2.9 billion a year ago. The sequential and year-on-year increase was mainly driven by higher capital heavy loan balance. Overall funding costs remained stable Q-on-Q despite some liquidity shortage later in the quarter. In the first 3 quarters, we issued a record-breaking CNY 18.9 billion ABS, an increase of over 40% year-on-year. Revenue from platform service capital light was CNY 1.34 billion in Q3 compared to CNY 1.65 billion in Q2 and CNY 1.47 billion a year ago. The year-on-year and sequential decline was mainly driven by lower capital light facilitation and ICE volume. Platform service account for roughly 48% of our quarter-ending loan balance. We will continue to make timely adjustments to the business mix through the rest of the year to reflect the changing market dynamics and regulatory guidelines. During the quarter, average IRR of the loans we originated and/or facilitated was 20.9% compared to 21.4% in Q2. Looking forward, we may see further pricing decline as the new regulatory environment requirement being fully implemented across the industry, although the pace of the decline should be modest. Sales and marketing expenses remained stable Q-on-Q, but unit cost declined by about 8% sequentially. We added approximately 1.95 million new credit line users in Q3 versus 1.79 million in Q2. We will likely to adjust the pace of the new user acquisition in the coming months given the volatile macro condition and further optimize our user acquisition channels and improve user engagement and retention. 90-day delinquency rate was 2.09% in Q3 compared to 1.97% in Q2. Day 1 delinquency rate was 5.5% in Q3 versus 5.1% in Q2. 30-day collection rate was 85.7% in Q3 versus 87.3% in Q2. C-M2, which represents the outstanding delinquency rate after 30 days collection increased Q-on-Q to 0.79% from 0.64%. As overall portfolio risk continued to increase in the last few months, we took additional measures to tighten the risk standard in September and October. While still a bit too early to reverse the trend, we start to see marginal improvement in new loans quality. It may take a few more months to see overall portfolio risk improves as the mix of the loans become more favorable. In such a challenging backdrop, we took even more conservative approach to book provisions against potential credit loss. Total new provisions for risk-bearing loans in Q3 were approximately CNY 2.58 billion versus CNY 2.5 billion in Q2 despite lower risk-bearing loan volume Q-on-Q. Provision booking ratio hit another historical high. Write-backs of previous provisions were approximately CNY 785 million in Q3 versus CNY 1.18 billion in Q2. Provision coverage ratio, which is defined as total outstanding provisions divided by total outstanding delinquent risk-bearing loan balance between 90 and 180 days, remain near historical high at 613% in Q3. Non-GAAP net profit was CNY 1.51 billion in Q3 compared to CNY 1.85 billion. Non-GAAP net income per fully diluted ADS was RMB 11.36 in Q3 compared to RMB 13.63 in Q2 and RMB 12.35 a year ago. At the end of Q3, total outstanding ADS share count was approximately 130.2 million compared to 132.4 million at the end of Q2 and 144.2 million a year ago. Effective tax rate for Q3 was 20.9% compared to our typical ETR of approximately 15%. The higher-than-normal ETR was mainly due to withholding tax provision related to the cash distribution from onshore to offshore. With higher contribution from capital heavy model, our leverage ratio, which is defined as a risk-bearing loan balance divided by shareholders' equity was 3.0x in Q3, still near the low end of historical range. We expect to see leverage ratio fluctuated around this level in the near term. We generate approximately CNY 2.5 billion cash from operations in Q3 compared to CNY 2.62 billion in Q2. Total cash and cash equivalents and short-term investment was CNY 14.35 billion in Q3 compared to CNY 13.34 billion in Q2. Our strong cash flow and financial position should give us sufficient resources to navigate through the challenging environment and allow us to satisfy the commitment and obligations to the market. We started to execute the $450 million share repurchase program in January 1. As of November 18, 2025, we had in aggregate purchased approximately 7.3 million ADS in the open market for the total amount of approximately CNY 281 million, inclusive of commissions at the average price of USD 38.7 per ADS. We intend to resume the repurchase program after the window opened after this earnings call. Finally, regarding our business outlook. Given the persistent economic uncertainty and fast-changing market dynamic, we will continue to take a cautious approach in business planning for the next couple of quarters, focusing on risk control of our operation. For the fourth quarter of 2025, the company expects to generate non-GAAP net income between CNY 1 billion and CNY 1.2 billion. This outlook reflects the company's current and preliminary view, which is subject to material changes. With that, I would like to conclude our prepared remarks. Operator, we can now take some questions. Operator: [Operator Instructions] For those who can speak Chinese, please start your question in Chinese, followed by English translation. [Operator Instructions] Your first question today comes from Chiyao Huang from Morgan Stanley. Chiyao Huang: [Foreign Language] So basically 2 questions from me. One is after the new loan facilitation come into effect in October, how should the management think about the change to the business model or profit model of the loans? And what's the expectation for the take rate in 2026? And maybe over the long run, how should we think about the loan economics when they normalize? And number two is how do management think about the competitive landscape after the loan facilitation rule taking effect? Zuoli Xu: Thank you, Zheong. And in terms of regulation and take rate, with the new rules in place, both on loan facilitation space and the broader consumer finance industry will need some time to adjust. In near term, the rules will have some impact on market size, risk levels and profitability. This is for sure. But in the long run, we believe the competitive environment will become more sustainable and healthier, which is good to our industry. As for the near-term impact, let me talk about what we are seeing right now. First, as the entire industry is lifting the risk bar, funding capacity for our ICE and referral businesses will come down. This means some users will no longer be served, and this will have some impact on our loan volume. For the rest of ICE business, as we adjust pricing, the take rates will decline. Also on the positive side, we expect to see better conversion, higher loan amounts and less early repayment. This will help you reduce some of the pressure on the net take rate. Second, the liquidity pressure in the market is pushing overall risk higher for the broader consumer finance space. Our C2M2 was up to 0.79% in Q3 from 0.64% in Q2, and the net provisions were up about 36% compared to Q2. We expect this trend to continue at least in the next 1 or 2 quarters. Based on our Q4 guidance, we are roughly talking about take rate of 3% to 4% because of pricing and the risk impact. Over the next 2 quarters, we expect the industry to remain volatile, and we are trying to get a better understanding on our take rate for in the new loan. For 2026 and beyond, the take rates will depend on how things evolve from the Q4 baseline. Specifically, our focus will be a few things. First, we will continue to optimize our risk strategies and improve collection efficiency to enhance our risk performance. Second, we will further optimize costs in user acquisition and operations to improve overall efficiency. Third, we will also explore some new service offerings to further improve user conversion and retention. We hope these efforts could help improve our take rate over time. And for your second question, for the competitive landscape, since the new rules came out in April, we have seen a major shakeup in the high pricing segment. New loan volumes in that market decreased a lot. Some smaller platform may not survive in the future. The rest of the platform are also shrinking their loan book. So entering Q4, we are actually seeing less competition for traffic. Looking ahead, some of the platform currently operating in high pricing segment may also try to move into the 18% to 24% range, but it is very difficult for them to be profitable in that band, given their disadvantage in funding risk management and operational efficiency. So in longer term, we think some of these players will eventually leave the market. We think that the market consolidation will benefit us in a few ways. With fewer smaller platforms competing for traffic, our marketing efforts will be more effective. We can acquire higher-value users more accurately with lower acquisition costs. In the new market environment, the user's multi-borrowing situation improves. We should be able to expect lower credit risk and better conversion rates. As such, users' lifetime value will improve in the longer term. So overall, we think the longer-term competitive environment will become more in our favor, and we see room to take more market shares over time. Thank you. Operator: Your next question comes from Lincoln Yu at JPMorgan. Lihan Yu: [Foreign Language] I will translate my question. So my question is on shareholder return. So given the recent share price volatility and the regulatory uncertainties, would there be any change in the company's execution of the existing buyback plans? As I see, we still have about like 170 million remaining from the plan announced like in last November. And also in longer term, what is the company's consideration on shareholder return? Zuoli Xu: Okay. Lincoln, I will take this question then. So just like you said, as of now, we still have about 170 million left under our 450 million program designed for this year. And we took a temporary pause during the third quarter, just given the incoming regulatory update and all the risk associated with that. Now after today's earnings call, the new window will open in terms of repurchase. We will resume the execution of this program to fulfill our commitment for the rest of the year. And then regarding the dividend, we have been stated that our goal is to gradually increase dividend per ADS through the -- through each semiannual kind of a dividend payout. And right now, the Board-approved dividend payout ratio is 20% to 30%, which still gives us enough room to maintain that kind of a progressive dividend trend, even with the volatile kind of earnings movement for the next few quarters there. Eventually, we still aim to achieve that progressive dividend target for the foreseeable future. In the long run, we still put the shareholder return as one of the top priorities for this company, although the mix between the buyback and dividend payout may change from time to time depending on the situation that we are facing at any given time. Thank you. Operator: Your next question comes from Alex Ye at UBS. Xiaoxiong Ye: [Foreign Language] So my question is regarding the asset quality trend. So just wondering how has been the trend -- monthly trends for October and September and November? Have we seen any rate deterioration versus Q3? And assuming there's no further trends in regulatory framework, so how -- when does management expect the equity to stabilize and pick? What are the upside that we should be aware of? Haisheng Wu: [Foreign Language] Karen Ji: [Interpreted] So let me do the translation. Since the new rules started to take effect on October 1, high-cost fundings have tightened further. At the same time, industry risk levels have been going up in Q3. So pretty much all platforms, no matter the price level, have made risk management first and tightened their risk policies. This has made liquidity even tighter and pushed over risk levels further up. But we are also seeing some positive signs in November. The early risk indicators of new loans are showing signs of stabilization and slight improvement. The FPD7 delinquency rate for new loans in September decreased by 8% compared to that of July. In terms of the risk performance of overall loan portfolio, the 7-day delinquency rate observed in November has remained broadly flat compared to October with no further upward trend. Haisheng Wu: [Foreign Language] Karen Ji: [Interpreted] So right now, we mainly focus on 2 areas to lower rates. For pre and in loan processes, we are modestly increasing the share of high-quality users to optimize overall rate structure. We are also increasing operational resources for low-risk users and use large language model algorithms to improve pricing. With more tailored pricing, exclusive benefits and a simpler user journey, we intend to improve user conversion and retention. For collection, we are adding more in-house capacity and increasing support for our partner agencies. We are also improving how we profile users and match cases. So each case can go to direct team. Powered by large language algorithms, we can now get a better read on borrowers' ability and willingness to repay, addressing their grouping and tailor our approach to drive better [indiscernible]. Haisheng Wu: [Foreign Language] Karen Ji: [Interpreted] So looking ahead, although we have seen some early signs of stabilization, it's only been about 2 weeks into November. So we will need some more time to tell if the trend will hold. Our loan tenure is usually 9 to 10 months. So when we tighten risk strategies for new loans, it usually takes 2 to 3 quarters for the improvement to show up in the overall portfolio. But the market dynamic is still evolving, and the leading risk indicators for new loans haven't been down to our desired levels yet, so this adjustment cycle will likely take a bit longer than we expected. On the financial side, our provisions and profit buffer of our business are both very solid. This gives us plenty of room to manage through the short-term industry headwinds. We have been through many challenges before. At each time, we were able to respond quickly and effectively. So we are confident we can bring risk levels back to a reasonable range once again. Operator: Your next question comes from Emma Xu of BofA Securities. Emma Xu: [Foreign Language] So according to recent media reports, regulators are starting new regulations for consumer finance companies that will lower the APR of newly issued loans to 20%. So although these regulations will not apply to loan facilitation firms, has the management evaluated the potential implications if the average APR will fall to below 20%? Could this lead to a slowdown in loan growth and an increase in credit cost? In such a scenario, does the company has any measures in place to hedge against the impact on profitability? Zuoli Xu: Emma, let me take this one. Yes, on the pricing guidance for consumer finance companies, there's no formal document [ tariff ] at this point, just informal communication. As we understand, consumer finance companies are required to keep their average pricing below 20%. We think the logic behind this is quite close to the new rules on loan facilitation sector as the regulators' intention is also to reduce the borrowing costs for consumers and make credit more accessible. In the near term, yes, it will have some impact on market size, risk levels and profitability. But over time, we think it will help create healthier competition and improve asset quality. In terms of funding, our direct exposure to consumer finance companies is small. So the direct impact on us is limited. First, the consumer finance companies source their business from diverse channels. Industry-wide, about 40% of their loans is self-operated and about 60% from API channels, mostly platform under other Internet companies. Our cooperation with them just accounts for a very small part. In terms of funding, they only account for about 15% of our loan mix. Most of our funding comes from banks. So we are flexible to shift our funding structure if needed. As such, we think the direct impact on us is quite limited, but there is indirect impact. As consumer finance companies adjust their pricing, we may expect further pressure on liquidity in the short term, leading to risk volatility. In that case, we may continue to lift our bar to mitigate the risk. Our average APR in Q3 was 20.9%. Going forward, we need to strengthen our ability to serve higher-quality users. With a broader user base and a better mix, we should be able to optimize pricing and keep our risk well balanced. In the meantime, we will maintain our operation to improve overall profitability. The point is we care about -- we care more about our users' long-term value than certain profitability. Thank you. Operator: Your next question comes from Cindy Wang at China Renaissance. Yun-Yin Wang: [Foreign Language] I have 2 questions here. First, during the opening remarks, CEO mentioned Technology Solutions loan volume up more than 200% quarter-over-quarter in Q3. What's the main drivers behind it? And what is the outlook of this business? Second, in Q3, capital light accounted for 42% of the new loan volume, largely the same as Q2, but down 3 percentage points quarter-over-quarter to 48% of loan balance. So how do you expect the ratio of capital-heavy and capital-light business to new loan volume and loan balance in Q4 and 2026? Haisheng Wu: Thank you, Cindy. I can take a first one, and Alex, you can take the second one. So far -- yes, so far, our Technology Solutions business has partnered with over 20 financial institutions. In Q3, we facilitated around RMB 5.4 billion in loan volume through this model, up 218% quarter-on-quarter. And the outstanding balance has exceeded RMB 10 billion lately. Two main factors are driving this growth. First, loan volume with our same partners is steadily ramping up. Second, we are expanding the way we collaborate with financial institutions. Not only can we facilitate credit business within their ecosystem, but also across a broader set of online scenarios. This really highlights the value we bring in customer acquisition and risk management across diverse channels. We are also seeing strong demand from financial institutions for AI agents. Because of that, our solution is more than technology infrastructure. We are currently upgrading our FocusPRO product into our super credit AI agent. Take our AI Credit Officer as an example. Traditional off-line credit products in banks have long complicated processes. Powered by large language model capabilities, AI Credit Officer can use the one single model to handle all kinds of documents processing tasks during due diligence and credit approval states. This will streamline the process by removing overlapping models running in parallel. As a result, users do not need to resubmit their materials. The whole process can be accelerated and the approvals can be completed within the same day. On the risk assessment side, by leveraging our trillion-level risk decision data sets and multi-model large language model technology, the agent can identify risk in seconds, generate more precise user profiles within minutes and keep iterating based on feedback. In the pilot run with our bank partners, our AI agents are already making an impact in key areas like customer acquisition and approvals. The market feedback has also been very positive. We are also seeing interest from several other financial institutions in their products. We believe the future upside of our super credit AI agent is very huge. Thank you. Zuoli Xu: Cindy, to your second question regarding the mix between capital heavy and capital light. In the short term, as we are facing very volatile kind of market condition that we discussed earlier, we may need to make some flexible adjustments to the mix. On one hand, for example, in this kind of generally higher risk environment, we intend to do more capital light versus capital heavy. But on the other hand, the price cap on the '24 also limited our capability to do the ICE side of the business. So those 2 forces probably will work together in the fourth quarter in particular. But directionally, I would say you probably will see a little bit more on the capital light side in the fourth quarter and -- as we intend to reduce the risk exposure. And then the longer term, I think we still need to make from quarter-to-quarter or time to time, we still need to make timely adjustments based on the conditions we were facing based on the risk level the market presents and also based on the funding sources we're getting to decide what's the best solution or best mix for us in terms of mix. So I don't think there will be -- at least for the 2026, I don't think there will be a directional movement toward the light or towards the heavy, and most likely, we'll be sort of bouncing around the sort of the 50-50 line throughout the next year. Thank you. Operator: Thank you. That concludes our question-and-answer session for today. I'd like to hand back for closing remarks. Thank you. Zuoli Xu: Okay. Thank you again for everyone to join us for the call. If you have additional questions, please feel free to contact us offline. Thank you. Have a good day. Operator: Thank you. That does conclude our call for today. You may now disconnect your lines. Thank you. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]
Operator: Thank you for standing by, and welcome to the Argosy Property Limited FY '26 Interim Results Conference Call and webcast. [Operator Instructions] I would now like to hand the conference over to Mr. Peter Mence, CEO. Please go ahead. Peter Mence: Thank you, and welcome. Thanks for joining us for this presentation for the F '26 half year results. The results, with due respect to Sean Fitzpatrick, very much looked like a game of 2 halves. The first few months were very much characterized by a lack of activity and very little lease inquiry. This gave way quite abruptly in the end to a significant increase in inquiry levels and more recently, to significantly improved activity. Moving through to the results summary on Slide 5. The revaluation at $31.3 million was principally driven by the extended lease of 9 years to MBIE at the Stout Street development. Now you'd be aware that I've been talking about that for some time. It actually took just over 5 years to negotiate, but it includes a reasonably exciting decarbonization project, which is jointly conceived between Argosy and MBIE, and we'll be starting work on that fairly shortly. The NTA lifts slightly on the strength of that revaluation to $1.56 and the gearing sitting just above the midpoint in the target range. We're pretty comfortable at this point in the market to be at the upper end of that range with some sales still to come. We've reached agreement to sell 143 Lambton Quay, usually known as TPK at book value and that will remove the vacancy from that building. The sale is to a private buyer. It is expected to be unconditional prior to the Christmas break, not much time left for that. And it's expected to settle before the end of the financial year. Vacancy is obviously a little higher than we would have liked, but with the significant increase in inquiry levels that we're now fielding, there is cause for optimism in the year ahead. We have still been realizing some rental growth on the way through and the 9-year extension to MBIE has obviously had a good positive impact on the weighted average lease term being the largest lease in the portfolio. The tenant retention rate remains solid, but we often see that in a quieter market where tenants are more likely to stay put than to look at a change. On Slide 7, the weightings are showing actually little change since I last spoke to you. They remain target -- close to the target levels with current activity in terms of sales and development moving us closer to those targets. The revaluations were characterized by a lack of evidence with respect to both sales and leasing. But post balance date activity is suggesting a market in line with the valuations with some evidence of the expected firming in the cap rates driven by the lower interest rates, albeit that that's relatively modest at this point. The economy in general remains relatively weak in both Auckland and Wellington, and there remains a risk that there will be tenant failures, although thus far, these have been significantly fewer than we had expected. Of note, there is that the cap rate comparable for the last year excludes the Marketplace building as this was only valued on a discounted cash flow basis at that time being largely vacant. This building has seen some significant change. You will have been aware of the change in the earthquake-prone building announcement that the government is working through. That has resulted more quickly than we had expected in a change to the tenant interest in NBS ratings. Obviously, that is a big positive for this building. And as a result, we've seen a significant increase in lease inquiry and recently signed 2 additional tenants into the building. The value-add and green developments, Mt Richmond is progressing as planned with no orange lights so far. Both the building platforms have been completed and leased to existing tenants elsewhere in the portfolio. But of the rest of the list in that value-add schedule, there is nothing that is pending out of those properties over the next 12 months. Forward inquiry for the Mt Richmond site has improved in line with the market, but there's nothing to announce at this point. Looking at 224 Neilson Street, both buildings have been completed on budget, on program, and we're very pleased with the quality of the construction, thanks to Haydn & Rollett on those sites. The first building, obviously, was leased when we last announced. The second building, we've just moved to agreement to lease stage with a very good quality logistics operator on a new 10-year lease, and we have a backup negotiation still current. So pretty positive news on that one. It is fair to say that prior to October, leasing inquiries were sparse, and that was concerning at that time. It has been much welcomed to see the increase in inquiry levels coming through. With 8-14 Mt Richmond, the project is literally smack on target. It's progressing well. There is now no further leasing activity required for this development on site with both the platforms and the building that's under construction all committed. We did well with value increase on the land prior to the development, and we expect to make solid profits on the remainder of the development, thanks principally to a very strong location. I'll hand over to Dave to take us through the financials. David Fraser: Thanks, Peter, and hello, everyone. So the first slide from me, as usual, is the gross property income waterfall. So gross property income was $69.4 million compared to $66.6 million last year, up by 4.1%. There were some strong rent reviews in the period, and there's more detail on that in the appendix as usual. Most reviews were fixed with an annualized increase of 2.6%. 29% by rent were market reviews with an annualized increase of 7.7%. Income from developments offset the effect of the disposal of Forge Way in March of this year. So on to the next slide, net profit for the half year. Net property income was up by 4.9% on the prior period at $61.2 million. The property expenses were slightly lower as rates increases were offset by lower insurance charges. Our insurance captive has been a very successful initiative and allowing us to market to reinsurers directly. In particular, we've seen some reasonable reductions in premiums for the Wellington market, which you'll know as gross. Expenses were flat in the period. Management expense to NPI improved to 9.2% from 9.8% in March and the management expense ratio improved to 51 basis points from 56 basis points at March. Net interest expense was down on the prior period. Lower rates and higher capitalized interest more than offset a negative volume variance in the period. Peter's covered the revaluation gain, and we sold a small sliver of land at Ti Rakau Drive for $230,000 in the period. We'll cover off tax in the next slide, but net profit after tax was $61.1 million compared to $33 million in the prior period. The next slide covers net distributable income. After the usual fair value adjustments, gross distributable income was $36.8 million compared to $31.6 million last year. That's up by 16.4%. Current tax expense was $6.1 million compared to $4.1 million last year. This is mainly due to higher taxable profit. There's been a lot of information published about the government's investment boost program. There was little impact from this at the half year, but we'll receive a $5.7 million deduction in the second half of this financial year as a result of the practical completion of Warehouse A at 224 Neilson Street. So last year, we were complaining about the removal of depreciation deductions on buildings, but we're obviously a lot happier this time around. So on a per share basis, net distributable income was $0.0358 per share compared to $0.0325 per share last year, up by 10%. And this slide covers adjusted funds from operations or AFFO. The AFFO adjustments were reasonably consistent with the prior year. Maintenance CapEx is up by $1.1 million, mainly due to a number of smaller office fitouts across the portfolio. So AFFO was $29.6 million compared to $26.8 million last year, an increase of 10.4%. On a per share basis, AFFO was $0.0345 per share compared to $0.0317 per share last year. The next slide covers the movement in investment properties. Investment properties increased by $70 million compared to March '25. As Peter already talked about the reval gain of $31 million. The balance was mainly spending on developments, principally Neilson Street and Mt Richmond. The portfolio after deducting the right-of-use asset in respect of the ground lease at 39 Marketplace was valued at $2.2 billion at 30 September. The next slide covers debt to total assets. The balance sheet remains in good shape, and we have capacity to complete developments and acquire assets as evidenced by the recent acquisition of 291 East Tamaki Road, which is a very exciting future development opportunity, and this property settled in October. The debt to total asset ratio was 35.9% at 30 September compared to 35.7% at March and 37.2% at 30 September last year. As at 30 September, 7 properties were regarded as noncore with a book value of $148 million, and we'll sell these properties as conditions allow. And Pete's already mentioned one sale that we hope to complete this year. The next slide covers interest rate management. It's been great to see rates continue to decline during the period. Our weighted average cost of debt reduced to 4.8% compared to 5.1% at March. The interest cover ratio improved slightly to 2.6x, well above the bank covenant of 2x. The level of fixed rate cover was 57%, down from 63% in March. And we continue to add cover as appropriate, and we've added 3 swaps in October to a value of $80 million at around the 2.5% mark. So we'll provide a lot more color on our hedging profile in the appendix. The next slide looks at our debt profile. We refinanced our bank debt during the period, pushing out tenor, including a new 7-year tranche of $100 million. The nearest bank expiry is now October 2028. Bank margins remain extremely competitive, as you'll see from the appendix. The nearest green bond matures next March, and we'll refinance that later this financial year. And the final slide for me is on dividends. We announced this morning a second quarter dividend of $0.016625 per share with imputation credits of $0.002633 per share attached. The record date is 3 December and the payment date will be 17 December. There's no change at this stage to the full year guidance of $0.0665 per share. The DRP remains open for shareholders to participate in. I'll now pass you back to Pete for a leasing update. Peter Mence: Thanks, Dave. I guess most importantly is the leasing environment has been challenging, but has recently improved, is looking a lot more promising for the year ahead. A couple of the ones that really stand out that we did achieve. Obviously, the MBIE lease extension dominates this half year result. And there was also a 6-year extension of the New Zealand Post lease at 7WQ. So we've got quite a bit of activity still coming through in that space. And what is really notable if we look at the forward demand is the deficit of certified green space that is going to be evident in the market over the next 3 to 4 years. This is particularly so in the industrial space, but also with commercial offices in both Auckland and in Wellington. It's really only large-format retail where we're seeing virtually no demand for sustainably rated space. Looking at the lease expiry profile. Clearly, this has changed a lot with the MBIE lease dominating this chart for the last 6 years. So pushing that out by the 9 years has made a big difference to that. And obviously, it leaves the March '27 year with modest expiries. The year through to March '28, the largest expiry there is General Distributors or Woolworths at the 80 Favona Road property in Mangere. Now -- we've obviously been working with general distributors on the way through that. And the reality is that we are not expecting them to be able to leave during that time. So they will still ultimately depart the site. It will still ultimately be a redevelopment, but the expectation is that, that expiry will be pushed out into later years. So it's certainly not on the current site. Once that is taken into account, then we're sort of looking at that 10% or less for the next 5 years. So not a big leasing demand coming forward. Looking at the 3 principal sectors, as I mentioned, overall, the expectation is a deficit of supply of certified green space for both industrial and office. Large-format retail is actually performing relatively well at this stage. For us, that is principally the Albany Mega Centre, where we're going through some remerchandising. We've recently opened the new JD Sports facility over there. That is trading extremely well and has provided some additional gravity to the site. In addition, we are in the process of -- in fact, we have conditional lease agreement for food operators over there, and we have managed to re-lease pending vacancies with a trade up on the site. So that site is going pretty well. Turning back to the industrial space. We are looking at a period where demand is returning. That activity is now evident, and it is interesting that it is dominated by international tenants. And as a result of that, we're seeing that increased demand for green-rated space coming through. So we do expect to see '26 being a busier space in industrial leasing. In the office space, the trends that we've been looking at over the last few announcements continue in terms of organizations looking to adjust the workplace to encourage office workers back in. I don't know any CEOs in the portfolio who don't want all their staff back in the office 5 days a week. We are conscious that we'll be moving into an election year when we come back from Christmas. That characteristically in Wellington gives us a quieter period, particularly with Crown tenants, but we've had very little activity from Crown tenants in Wellington over the last year in any event. Wellington potentially is overdiscounted at the moment. We do have excellent inquiry levels for our building at 147 Lambton Quay with around 5,000 meters of space available in that building. There's only one 500-meter floor that we don't have negotiations on currently. So qualified inquiry is very strong for that building. Obviously, that is from nongovernmental tenants. So turning to what we're looking at for the period ahead. The domestic economy is expected to gradually improve. And the reality is that it is still relatively challenged in both Auckland and in Wellington at the present, but inquiry levels and activity levels are improving. The interest rate situation is obviously positive, and the expectation is that we will ultimately see cap rate compression as a net result of that. Certainly, we're starting to see just in the last 2 months, increased levels of inquiry, particularly from offshore. Dave's mentioned insurance levels. But as premiums fall, that is also a positive for the market, and we're seeing that start to come through in the interest levels. So we're still dealing with relatively strong bottom-up fundamentals with the industrial sector. And with both industrial and commercial in Auckland and in Wellington, we've been dealing with a period of relatively modest supply levels, and that should be positive for us over the year ahead. So looking forward, the calendar year for 2026 should see a gentle return to business for the sector. And it's fair to say that Dave and I and the Board are reasonably comfortable with the way this business has weathered the last recession. Happy to take questions. Operator: [Operator Instructions] your first question comes from Vishal Bhula from Jarden. Vishal Bhula: A couple of quick ones for me. Just with your NPI coming in at $61.2 million, I mean, it's up 5% on the PCP as well as second half '25. There was no acquisition activity in the half, and you did lose the rental from Forge Way as well as maybe some rental on the Mt Richmond development. So the growth here just seems really strong. Is there anything specific to call out? Like was there any one-off income from 4 Henderson Place or anything like that? David Fraser: Yes. There's 2 things to call out. One is a significant rental uplift from one of our tenants in terms of a rent review, which flowed through into this year. And also, we did receive a surrender payment in respect of an industrial tenant. So in terms of the NPI line impact was $1.1 million. But the good news for that particular property was that we were able to re-lease the property within a month. So it's something of a bonus, I guess. Vishal Bhula: No, perfect. And then just on your office occupancy, you've put it in the presentation at 91.6% by income when at FY '25, that was 88%. But on a vacant space on a square meter basis, you've got 25,000 vacant space versus 15,000 at '25. So on an occupancy basis, you're down to 83% from 88%. So I just don't quite get how those percentages can be up on an income basis. Peter Mence: I think, Vishal, that will be principally down to the 143 Lambton Quay building, where it was effectively over-rented. Vishal Bhula: No, thanks. That clears that up. And then maybe could we just get a bit more color over 143 Lambton and that sale process that you know that is currently conditional? Peter Mence: Yes. I'm not -- I'm pretty tight. So I can't tell you a hell of a lot more, but we do have an agreement for sale sitting there around book value. It is a very short due diligence period. And the domestic private buyer knows the building very well. Vishal Bhula: I won't push more on that then. And then just a couple of short ones for me. Just East Tamaki, are those capital works now finished? And is it still 58% occupied? Peter Mence: Yes. The works are now finished. It did take a lot longer, and you'd be aware that we struggle with a delayed settlement from the vendor unable to meet their obligations. But -- so we've got that through now. Leasing activity is pretty good on that site. Inquiry levels are good and strong. So we're not expecting that to cause any particular issues for us. Obviously, they tend to be shorter-term leases because it's a development site for us and because it's secondary quality buildings that are sitting on the site, obviously. So we tend to get shorter-term leases from that, and that is having a negative impact on the weighted average lease term as it currently sits. Vishal Bhula: And then just a last one on me. Your guidance, there's no mention of the payout range this time around, whereas previously, you were expecting to be towards the top end of your policy range. Are you still kind of targeting that or the investment, those benefits coming through kind of see you push down to the middle of that range? David Fraser: Well, I think it will be in the top end of the range, but below 100%. Operator: Your next question comes from Nick Mar from Macquarie. Nick Mar: Just on Stout Street, can you just talk through what the potential rental step-up is at the market review that's coming up next year? Peter Mence: So we've got a rental review pending. I can't go into too much detail, obviously, on that at the moment, but the expectation is for a good solid lift out of that. But we've treated that completely separately to the renewal documentation. Nick Mar: No, that makes sense. And then in terms of the CapEx that you're spending, how did you look to, I guess, rentalize that as part of the process? Peter Mence: That's been a 5-year project working with MBIE in terms of what they wanted to achieve with the building and how we were able to add value. It really is the total being greater than sum of the parts. So it's been full disclosure with them on the way through with the work that we wanted to do, the results they wanted to see and how we rentalize that on the way through. So very much part of the negotiation over the 5-year period to make sure that it's stacked up. Nick Mar: Can you give us an indication of what rentalization rate you effectively achieved on the $13 million? Peter Mence: I'm looking at Dave, and he's not looking at me. David Fraser: Well, I mean, the reversion that Pete is talking about is about $1 million is what we're expecting in July next year, and the capital spend is about $13 million. So you're looking at it... Nick Mar: But did Pete just say that that's a separate impact versus the renewal in itself because [indiscernible] market view? Peter Mence: Yes. So it's both, Nick. Obviously, the market rental has to be landed out of the reversion rental for the upgrade to the building. Nick Mar: So you're saying that, that $1 million is on top of the market rental? Peter Mence: Yes, that's right. Obviously, you're looking at -- just so we're clear, we're obviously looking at a situation in Wellington where market rentals have actually declined marginally over the last 12 months. Nick Mar: Yes, but it comes down to the time between the last reviews... Peter Mence: You're all over it, Mate. Well done. Nick Mar: Yes. Okay. And then on divestments, you've taken a few other assets to market, particularly some of those new market assets. Can you just talk us through what's happened there, whether they're still in train or whether you've pulled them given lack of demand or anything else? Peter Mence: Yes. It's fair to say that we didn't get a great response. The numbers that we got were less than book value, looked at it and said, hey, there's no urgency to move these assets at the moment. They're still yielding quite well and the risk wasn't there. So we -- they remain on the sales list. We've pulled them from active marketing. If the market looks the way I expect it to look when we come back, we'll probably relaunch those to the market in February. So the intent is still to move them on, but not at any cost. Nick Mar: Did your updated book values reflect the feedback from the market on them? Peter Mence: Yes, yes. As I think I mentioned earlier -- I hope I mentioned earlier, the valuers have really been dealing with a paucity of evidence as at September. It's only really since September that we've seen any improvement in the activity levels. Nick Mar: Okay. And then just on valuations, have you got any initial indication of the amount of seismic allowances that are sitting in the portfolio, which may be removed as the sort of new earthquake legislation moves through? Peter Mence: Yes, that's a slightly tricky one to address. Obviously, as far as this building is concerned, then you're dealing with a straight removal because there's no requirement to do that. But with the change in the seismic rules, it's important that we all remember that, that doesn't actually change the NBS rating at all. It changes the obligation to do anything about it. So what has been surprising, I think, is the degree to which the leasing market has stopped focusing on that in the Auckland market. So the requirement to actually do it commercially is probably less. But where you have a situation where you've got a building that is less than 50% NBS, that doesn't actually change its NBS rating. And in circumstances, tenants may still require that upgrade to go through. So it's very much a case-by-case analysis. It is this building principally where you're simply drawing a line through it because it's a ground leased asset. And therefore, it is only the building with a lease expiring in 2039, it is cash flow management. So there is no requirement to spend any money on the building at all. Nick Mar: And as context, what kind of delta is sitting in that building? Peter Mence: This building -- the pure seismic upgrade was expected to be around $18 million. Operator: Your next question comes from Bianca Murphy from UBS. Bianca Fledderus: So first question is just around your comments around inquiry levels picking up significantly so far over the last couple of months. And I know it's still early days, but could you just talk about how much of that interest is actually turning into signed leases? Peter Mence: Yes. Good question, Bianca. At the moment, we've had some really good results, but I don't know whether that's generally reflective of the market. We've had Intrepid Travel moving downstairs in this building. We've recently signed an architectural practice for the other end of the building. So there was a lot of improvement in inquiry levels, but it's only relatively recently that we've actually seen that lock away. It's only relatively recently that we actually signed the first lease up at 147 Lambton Quay. So it's -- inquiry levels obviously have to come first. We had the improved inquiry levels for, say, 8 weeks before we actually started to get results, but the conversion rate looks like it's improving over the current period. Bianca Fledderus: Okay. That's helpful. And then just on your interest expenses. So yes, pleasing to see that drop, of course, as a result of lower rates and higher capitalized interest. Can you give us a sense of where you expect interest expenses to land for the full year? David Fraser: Well, it's going to come down further because -- if you look at our most recent rollover of our -- of the 90-day rate we rolled over in September, the base rate was sort of 3.1%. When you look at the base rate now, it's under 2.5%. So -- and we've got over $300 million of floating debt at the moment. So rate is going to keep coming down, actually, which is obviously a huge positive for the business. Operator: [Operator Instructions] Your next question comes from Rohan Koreman-Smit Forsyth Barr. Rohan Koreman-Smit: Just going back to that AFFO, you said you'd be at the top end of the policy range. Are you not taking the investment boost deductions through AFFO? Is that how we should read that? David Fraser: No, no, we are. We are. Rohan Koreman-Smit: [indiscernible] down further, what's the other moving part there to offset $6 million of deductions? David Fraser: Well, there's -- the offset is things that are going to really going to move into next year. So we've got lower repairs and maintenance deductions than normal because the lease to Neilson Street, the incentives to that lease may move into next year. There's a number of other things that impact the tax line, which effectively will flow through into next year as opposed to this year. Rohan Koreman-Smit: And you mentioned Mt Richmond, I guess, the first building plus Stage 2. You said it was committed. I think what's the comment there, but there's 2 pad sites, right? You haven't committed to building sheds on those pads yet, have you? Peter Mence: No, no. So what is committed is the first building Viatris that is obviously leased. Then we created the building platforms for 2 further buildings, and we said at the full year result that we wanted to get those completed and leased. So those have been leased as hardstands, not as buildings. Rohan Koreman-Smit: Okay. Okay. So they're leased as hardstand. So that suggests that development leasing is a bit slower contrary to other comments around pickup in leasing inquiries if you're prepared to lease those as hardstands because unless you've got some development break clause, I was just wondering about inquiry and when the, I guess, CapEx -- the balance of the CapEx at Mt Richmond because there's a reasonable chunk there may kick off. Peter Mence: Yes, there is -- look, Mt Richmond is going exactly as per the plan. Obviously, it's a progressive development that we've been looking at pulling those buildings in. And it's probably fair to say that current inquiry is stronger than we would have expected, but we still don't see that we'll be moving ahead faster than we planned on that site. So the reality is that things like the DRP are going to pay for that development pipeline as it comes through. Rohan Koreman-Smit: Okay. And on that, you're talking to cap rates improving, leasing seems to be going well. There's good tenant demand. You expect to be able to sell noncore assets. Do you think the DRP is being overly conservative at this point in time? It's just a very expensive way to raise money where your share price is? David Fraser: Well, it's not expensive actually. I mean the current share price, very, very limited discount. You're applying that to brand developments, it's accretive. So I would argue that it's not an expensive way of raising capital at all. Rohan Koreman-Smit: Okay. We'll have to agree to disagree on that one. And then just last one, Marketplace. The previous strategy was to sell it to a -- or potentially turn it into a hotel, I believe. But now you're leasing it up. Has the earthquake rules materially changed, I guess, how you view the exit on that building? Peter Mence: The earthquake rules have materially changed the way we view the exit on the building, yes. So obviously, it's going to be a lot more feasible to manage the cash flow into a positive situation through until 2039. But we looked for a hotel conversion on this. We had really good demand for it, and then it went completely flat. And the same happened in 143 Lambton Quay, where that building we felt was going to make a very good hotel. All the designs came through looking really positive. And then the hotel market, especially in Wellington, went completely flat. I think government travel -- government-related travel in Wellington was down 54%, I heard yesterday. So that market simply got removed from us. The -- obviously, the -- we did put quite a bit of work into the seismic review situation to try and get a more rational risk-based approach, and that's been extremely positive as far as this building is concerned. Rohan Koreman-Smit: And then last one, just on 147 Lambton Quay, I believe that's in that noncore pipeline, but has a decent amount of vacancy. You talked to some potential inquiry. Kind of how do you see that one progressing given it is kind of probably a net drag on the earnings at the moment? Peter Mence: Yes, I expect it will turn into being a positive very shortly with the solid lease inquiry that we're fielding at the present. So expect that will be fine, but it remains on the sale list. It's just not in the immediate future. Operator: There are no further questions at this time. I'll now hand back to Mr. Mence for any closing remarks. Peter Mence: Very good. Well, just to say thank you very much for joining us. We've put these results together, as I said, very much a game of 2 halves, and we're expecting that the period ahead will be quite remunerative. Obviously, with the interest rates coming down, the expectation is that cap rates will firm and recent research suggests that, that is already happening. So it will be a case of seeing what sort of evidence we've got by the time we start doing the 31 March valuations, but the indications are positive at this point. Thanks very much. David Fraser: Thank you. Operator: Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.
Operator: Thank you for standing by, and welcome to the Nufarm Limited FY '25 Results Conference Call. [Operator Instructions] I would now like to hand the conference over to Mr. Greg Hunt, CEO. Please go ahead. Gregory Hunt: Thank you, and good morning, everyone. Welcome to Nufarm's Financial Year '25 Results Presentation. Joining me today are Brendan Ryan, Nufarm's CFO; Brent Zacharias, Group Executive of Seed Technologies; as well as Rico Christensen, who is the Group Executive Portfolio Solutions. And as you'll see from this morning's announcement, CEO [Technical Difficulty], I will talk to the transition in more detail later in the presentation. But in terms of the call today, I will speak to the financial year '25 results. Brendan will speak to the financials and Rico will cover priorities for financial year '26 and the outlook. Before we move to the presentation, I draw your attention to the disclaimer on Slide 2 and in particular, the wording related to forward-looking statements. To the result, since the half year, we have delivered on key profitability and leverage unwind targets that we communicated to the market in August. We are very pleased with the performance of Crop Protection, delivering an earnings increase of 18%, with importantly, growth across all regions. We have concluded the review of Seed Technologies and the Board has determined that a reprioritized strategy is expected to deliver the best value for shareholders. We have taken steps during the year to reduce cost and capital requirements across the Seeds business, and we are in very good shape to deliver upside from the business in the future. We reported a statutory loss of $165 million, which includes $142 million of mainly non-cash material items relating to the outcomes of the Seed Technology review and the broader performance improvement program across the business. We are confident that the action that we have taken sets the business up well for the future. We reduced net debt by $538 million from the half and ended the period with a leverage of 2.7x. This reflects both the seasonal unwind that's inherent in our business, as well in our ability to delever through internal discipline and efficiency. We are in good shape to deliver earnings growth and further leverage reduction this financial year through growth in Crop Protection and improved performance in Seed Technologies. Meaningful positive cash flow generation and a lower CapEx profile is expected to support further deleverage at the end of the 2026 financial year. I'll now cover some of the highlights across financial year '25. In Crop Protection, as I said, we delivered a strong result, with growth in profitability in all regions and EBITDA margin improvement of 140 basis points. In North America, we recorded a record year for profitability in the turf and ornamental segment and in APAC, a record profit in Asia. In Europe, a 22% uplift in profitability, and this reflects the focus that we've had on improving returns in that business. Across Seed Technologies, we have made good progress on the repositioning, which includes a reduction in cash costs. Our focus is on growing our profitable hybrid seeds business, and we are really pleased with the increased revenue and profitability in South America. In bioenergy, as the market fundamentals have continued to strengthen, we increased the planted area in carinata. The market has evolved as expected, with a shortage of feedstocks to supply the demand creation by the implementation of the Renewable Energy Directive in Europe and the subsequent mandates. We have a long track record in developing solutions for farmers through innovation, with a capital-light technology partnership model. We have a very strong near- and medium-term pipeline and have delivered multiple product launches in multiple markets across our Seed and Crop Protection platforms. New product launches in Crop Protection contributed around 15% of financial year '25 revenues. And on operating performance, we are pleased with the gross margin improvement of 100 basis points. Good internal discipline around working capital and cost has supported the net debt unwind in the second half. As you know, we announced a review of our Seed Technologies business in May of this year. The review considered a thorough assessment of our strategy as well as the potential for a sale and bringing in a capital partner. After a considerable amount of work, the Board has determined the highest value outcome for shareholders is expected to be continued ownership under a reprioritized strategy, where we are focused on growing our hybrids seeds business, a reduction in the cash requirements for omega-3 and expanding our bioenergy business with BP. We have already taken action to reduce cash costs and capital requirements across the business. We are focusing on the continued growth of hybrid seeds in markets where we have established positions and strong growth prospects, particularly in South America and Australia. We plan to grow bioenergy, supported by our agreement with BP, and expected demand growth coming from biofuels mandates. In omega-3, our near-term focus is on supporting customers with the existing inventory and managing to a cash flow-neutral outcome. We have the opportunity to reposition production over the medium term to South America, with the aim of lowering our cost of production and improving our competitive position. We have a clear path to generate benefits for shareholders as we partner with downstream customers and optimize to a lower cost position. We are really pleased with performance across Crop Protection, with underlying EBITDA up 18%. We focused on profitable growth in a flat volume environment. Revenue and profit grew with the benefit of both mix and margin. And the team did a really good job on inventory management, and we are seeing the benefits coming from the performance improvement plan predominantly in Europe. Turning now to the regional Crop Protection businesses. Underlying earnings increased 10% in APAC, a good result considering the impact of dry weather in Australia. We delivered record revenue and profitability in Asia, and the margin uplift was driven by improved COGS of goods and product mix. In North America, we grew underlying earnings by 19% across the year, with momentum building in the second half, which was up 30% on the second half of 2025. This was an excellent result given the team we're navigating some dynamic market conditions in relation to tariffs and antidumping duties. The turf and ornamental segment had a very good year delivering a record result, primarily driven by improved demand in the golf and lawn care sectors. Margin uplift was driven by improved COGS and product mix. As I mentioned earlier, we also had a very good year in Europe with underlying EBITDA increasing by 21%. Margins expanded from improved mix and the benefit improvement program. Performance also benefited from better seasonal conditions and market conditions driving volume growth. The business has good momentum with more upside to come from the continued execution of our performance improvement plans in the current year. Turning now to Seed Technologies. We thought it would be helpful to give you more visibility on the segments. So we have split out our earnings from hybrid seeds and the emerging technologies, which includes bioenergy and omega-3. Hybrid seeds performed well with EBITDA of $67 million, with the lower earnings on the prior period mainly a result of dry weather in Australia, which impacted canola seed sales. South America sorghum and sunflower were ahead of the prior year. We have streamlined our European and North American operations as we focus on the markets which are most attractive and where we have the strongest positions and growth potential. In bioenergy, we had the benefit of growth in hectares planted and resulting seed margin. However, this was offset by lower licensing fees from our agreement with BP. We have seen strong recovery in GHG market values in Europe, which is driving increased oil demand and value outlook for carinata. Omega-3 earnings were impacted by the fall in fish oil prices. Inventory has been carried into this financial year and will provide us with the ability to serve customers while we look to ship production to South America, where we are targeting our lower cost of goods. We are advancing towards customer offtake agreements to improve both volume and price predictability. And as I said before, we have significantly reduced the cost and capital profile for our omega-3 business. As a final point, I'd like to emphasize that as a result of our view -- our review, we have shifted the cash requirements of the Seed Technologies business to become more self-funding. I will now hand over to Brendan to cover the financials. Brendan Ryan: Thanks, Greg. I'll begin with a summary of the financial year '25 performance. The results presented today is consistent with the market update provided in August. For financial year '25, we delivered a solid top line growth with revenue up 3% year-on-year. Gross profit increased by 7% and the gross profit margin expanded by 1 percentage point to 26.1%, driven by strong Crop Protection margins and a favorable mix. EBITDA after material items was a loss of $74 million. Net financing costs were $101 million, down 6% year-on-year. The reported statutory loss of $165 million, impacted by 2 significant factors. The material items of $142 million, primarily from the Seed Technologies' review. I'll provide more detail on this shortly -- and $53 million of early-stage losses from emerging platforms, principally omega-3 relates to the fall in fish oil prices. Underlying EBITDA was $302 million compared to $311 million in the prior year. Importantly, excluding emerging platform losses, underlying EBITDA was up 10% year-on-year, reflecting a strong improvement in crop protection profitability and resilient hybrid seeds performance. Now to more detail on the material items. The after-tax impact on material items was $142 million, which is predominantly non-cash with a financial year '25 cash impact of approximately $30 million. The key component of material items were $118.7 million from Seed Technologies' asset rationalization and restructuring. In hybrid seeds, we have scaled back our European sunflower operations as the prolonged, more severe Russia-Ukraine conflict has significantly reduced the attractiveness of that market. This resulted in the impairment of sunflower IP and a write-down on associated seeds inventory, representing the majority of this material item. Also included in this material item is to scale back on omega-3 plantings in North America, with plans to move production to South America to achieve more competitive cost of goods sold. This has resulted in the write-down of the excess omega-3 seed inventory. There are also associated redundancy costs with the cost out program and workforce reductions. Separately disclosed but primarily connected to seeds review is $5.4 million of legal and advisory costs. We also incurred $13.4 million restructuring costs in Crop Protection. These costs include redundancy costs with the cost-out program and some asset rationalization. In financial year '26, we expect to see clear benefits from the action taken in financial year '25, with reduced capital expenditure, more focused capital allocation and lower staff and operating costs. Turning now to margin and costs. Underlying gross margin increased by 80 basis points, with Crop Protection delivered a strong 140 basis points improvement, driven by cost of goods efficiencies and favorable mix. Operating costs remain an important focus. Underlying SG&A increased by 10% year-on-year and when expressed relative to revenue was up 140 basis points. This growth reflects inflationary pressures, increased investment in R&D, marketing and business development to support growth to the top line. Looking ahead, operating cost discipline is a priority. Full period benefit of the $50 million cost savings program is expected to broadly offset natural cost inflation in financial year '26. Now to the balance sheet. Average net working capital sales improved to 38.2%, improving by 440 basis points and firmly within our 35% to 40% target range under our capital management framework. The improvement was primarily driven by inventory efficiency, supported by a focused program and inventory reductions across all crop-protected regions. Average inventory days improved by 16 while receivables days were down 4, reflecting strong cash collections during the second half seasonal unwind. Payable days remained flat, reinforcing that the net working capital progress was largely an inventory story. Working capital management remains a key focus with further improvements targeted in financial year '26. In respect to capital expenditure, it was broadly consistent with the prior year. Same as property, plant and equipment focused on health, safety and environmental priorities and plant reliability. Proper tax intangible CapEx continues to deliver value into the product pipeline. Investment in Seed Technologies growth platforms was also similar to prior year. For financial year '26, we are targeting CapEx below $200 million, reflecting disciplined capital allocation. The reduction will come from lower manufacturing spend following significant investment in recent years. Crop Protection R&D focus more on the near-term priorities and reduce capital for Seed Technologies aligned to the reposition strategy. It's worth noting that CapEx in the first half of 2026 is expected to be a significant reduction compared to the prior period, given the spend last year was first half weighted. In terms of free cash flow, it was negative $131 million, reflecting several key factors. While net working capital movements excluding omega-3 were positive, these gains were offset by the omega-3 position. The outflows on interest, tax, CapEx, lease and step-up security distributions contributed to the overall cash flow result. Looking ahead, we are strongly positioned to deliver meaningful positive free cash flow in financial year '26, supported by anticipated continued improvement in working capital efficiency, planned CapEx below $200 million, reflecting disciplined investment, significantly lower cash requirements from omega-3 and expected EBITDA growth year-on-year. In terms of net debt, net debt reduced by $538 million in the second half '25, reflecting the normal seasonal unwind, demonstrating strong second half cash conversion. Year-end net debt was $824 million, with unfavorable FX movements and omega-3 inventory contributing to the year-on-year increase. Leverage closed at 2.7x, below the guidance provided in August. Reducing average remains a priority, supported by the actions outlined earlier to deliver positive free cash flow in financial year '26. In terms of funding, gross debt, excluding leases was $1.154 billion at year-end. Liquidity remained strong with $345 million of undrawn facilities, consistent with the prior period and $475 million in cash. Our diversified and flexible debt facilities are underpinned by a covenant-light financing structure and a staggered maturity profile. The short-term omega-3 credit facility has been successfully refinanced into a 2-year amortizing loan facility with a maturity of September 2027. Looking ahead, we are well positioned to support seasonal working capital build. We anticipate that this year's build will be lower. CapEx will be $50 million lower in the first half. Omega-3 cash requirements will be significantly lower, and there is further benefit from the improvement in earnings. Importantly, Nufarm's capital structure is designed to accommodate seasonal funding demands. There are no expected short-term refinancing needs for the group's primary debt facilities other than the standby liquidity facility, which the extension to November 2027 is well advanced, and the ABL facility matures in November 2027. Importantly, Nufarm's capital structure is designed to deal with seasonal fluctuations. In concluding, Nufarm enters financial year '26 with a solid base of profitability and a strong liquidity position. Crop Protection profitability improved across all regions, and our hybrid seeds business is generating strong profits. Our funding structure remains flexible, supported by $345 million of undrawn facilities and $475 million in cash at the balance date. Second half 2025, net debt had the usual seasonal unwind of $538 million. We are continuing actions to reduce costs and deleverage. We're expected to deliver further benefits in financial year '26. We are expecting positive cash flow, with anticipated further reduction in net working capital, disciplined capital management with capital expenditure below $200 million and EBITDA growth. To help with your models, we are giving the following guidance on some key items for financial year '26. Depreciation and amortization, circa $225 million; net interest expense, circa $105 million; and the effective tax rate, circa 30%. I will now hand you back to Greg. Gregory Hunt: Thanks, Brendan. Rico is now going to cover the outlook and priorities for the year ahead. But before he does, I would just like to make some introductory remarks. As you would have seen on our ASX announcement, Rico has been appointed CEO and Managing Director of Nufarm, commencing in the role in the new year. Rico joined Nufarm to run portfolio solutions 4.5 years ago, having spent over 2 decades in the industry. He's done an excellent job in that role and brings considerable global experience running businesses in the Americas, Europe and Asia before his time at Nufarm. I am looking forward to working with Rico over the coming weeks and months to support the transition. I would also like to take the opportunity to thank our shareholders for their support over the last 10 years. It's been a fantastic opportunity to lead this business, and I'm very confident in the future of Nufarm under Rico's leadership. Over to you, Rico. Rico Christensen: Thanks, Greg. First, let me start by thanking the Board for the trust they have shown in appointing me CEO designate of Nufarm and also to Greg for his support over the last 4.5 years in the business. I am honored that I will be leading Nufarm, a great Australian company that I deeply respect. In agriculture, Nufarm is known far beyond the borders of Australia. When I talk to farmers and channel partners in Brazil, in Canada and Spain and other countries, we have instant brand recognition and respect. We are known for our solutions and our dedication to be easy to do business with. We are a leader in key geographies and core crops, and in key product segments. We are known for our innovative mindset, thinking of new ways to support agriculture as it continues to evolve. I have more than 2 decades of experience from the agricultural industry, running businesses in Europe, South America, North America and Australia. I've spent most of my career competing against Nufarm. Taking that outsider's view, I cannot emphasize enough how valuable our brand is, how valuable our leading positions are and how valuable our relationships are, the relationships we have built with farmers, channel partners and technology partners for more than 100 years of doing business. I have regular conversations with partners about our innovations across Crop Protection and Seed. We are known and respected for our innovation and our partnership model. That means our R&D cost is many times lower than our competitors. This is the Nufarm way. Above everything else, we have a team of dedicated, hard-working people who show up every single day with fire in their eyes wanting to do better for Nufarm, for our customers, and for our shareholders. When we have all of those things I just mentioned, it's very valuable, and our competitors envy us for it. My job, with the help of all of our people around the globe, is to translate that half-fought position into strong financial performance and returns to our shareholders and position Nufarm for improved performance through the cycle. This leads me to my priorities for FY '26. First, we are already taking action to instill a strong cost and capital deployment discipline. We are doing that through a range of changes in our processes, accountability and ways of working, which combined will result in a positive free cash flow to support reduction in debt and leverage. We will extend that by embedding that cost and capital discipline into our corporate culture by refining structure, delegations and incentives. The aim is to ensure not just a onetime improvement in performance, but that this remains a focus through the years and is reflected in our performance through the cycle. Second, FY '25 showed positive signs in the performance and profitability of our Crop Protection business. We plan to build on our leading positions across geographies and crops. A great example is our phenoxy portfolio, which has growth potential that can be unlocked through partnerships and market presence. To that point, our pipeline looks healthy in the short, medium and long term. Combined with a stronger focus on launch excellence, we expect to accelerate the impact of the near-term pipeline. We have also made good progress improving our net working capital in Crop Protection and we have plans underway to deliver further improvement. Third, the seed review has provided us with valuable learnings. Most importantly, we need to be more focused in our efforts. We are repositioning our strategy and capital allocation to deliver improved performance and returns over time. We've already taken action in FY '25 to reduce cash expenditure and capital requirements, in particular in omega-3. We expect to benefit from these actions in financial year '26. Our hybrid seeds is a high-quality cash-generative business. It has unique and valuable IP that we are looking to scale in Southern Hemisphere markets. With the appropriate focus and attention, we see a clear runway for future growth and that will be a priority in FY '26. We are committed to building on our strategic partnerships and emerging platforms to improve the annual earnings profile. Turning now to outlook and how these initiatives provide confidence into FY '26. We are expecting strong EBITDA growth, assuming normal seasonal and market conditions. In Crop Protection, we expect continued growth in EBITDA, moderating on the 18% growth we saw in financial year '25. In hybrid seeds, we also expect growth in EBITDA and we are targeting approximately $30 million improvement in EBITDA in our emerging platforms. We are targeting a leverage of 2.0x at the end of FY '26 compared to 2.7x at the end of FY '25. We also expect meaningful positive free cash flow coming from improved earnings, the improvements in net working capital and from a step down in capital expenditure to less than $200 million. For the first half, we expect net debt similar to the prior period, but with a leverage below prior period coming from improved earnings. I would like to close by saying that I'm looking forward to leading Nufarm. While my immediate priority is on delivering on FY '26, I'm looking forward to speaking with you more in the future about longer-term growth plans across the business. Greg, Brendan and I will be joined now on Q&A by Brent Zacharias. We'll now hand back to the operator. Operator: [Operator Instructions] Your first question comes from John Purtell with Macquarie. John Purtell: I just had a couple of questions, please. Firstly, just in terms of the seeds review process, can you provide some further color there, particularly regarding the decision to hold on to the business and also the degree of third-party interest in the business? Gregory Hunt: Yes. Thanks for the question, John. Look, there was broad market engagement with multiple parties, and the review -- as I said in our presentation, the review allowed us to challenge ourselves around the cost structure, around capital allocation, and around strategic focus. So the review was quite broad, widespread, encompassed the whole strategy. It wasn't just about a sale of the business or bringing in a capital partner. And as we said, we've concluded that we believe the best value for shareholders will be realized by implementing from that reprioritized or repositioned strategy. John Purtell: And just a second question, and Greg, just beforehand, I just wanted to wish you all the best going forward. And thanks for all your help over the years. Just the second question around what you're seeing in terms of the broader ag chem industry. It's obviously been a tough few years. Cost of goods sold looks to have reset, which is good, but pricing still looks subdued, and markets remain competitive. So I just want to get your thoughts on that. Gregory Hunt: Yes. And John, thanks for the comments. So look, I would say the overall outlook is positive. Seasonal conditions generally around all of our markets are positive. Grain pricing supports demand for both crop protection and our oil seeds sales. I think the important point is that active ingredient prices have stabilized. So we've replenished inventory at competitive COGS. And as a general statement, I'd say that channel inventories, particularly in North America, where it's been a little stubborn, have normalized. So I would say in terms of 2026, we would continue to see some volume improvement in Europe. I would expect sort of APAC to probably be broadly flat with last year. And in North America, we've had strong growth in the turf and ornamental business, and that's to some extent as a result of the lower spend, particularly in golf and in lawn care coming out of COVID. I think a more sort of normalized tariff situation, that seems to have settled down now. The tariff benefits on phenoxies and stable active ingredient pricing, I think key drivers for our business in North America. So generally, I would say, going into '26 in what is a pretty positive environment. Operator: Your next question comes from William Park with Citi. William Park: Can I just ask about the $30 million of earnings recovery you're expecting across emerging platform. Just looking at your slide now, you've alluded to $29 million of non-cash inventory revaluation hit that you've taken above the line this year. Is it basically the $30 million, is that basically the online to that $29 million? Or are there any other sort of changes you've made across the emerging platform you've alluded to sort of moving production from North America to South America, but just wondering whether that $30 million recovery would be -- whether if you would need to see some recovery in fish oil price or lower costs going forward that would help you -- that will effectively contribute to delivering that, please? Brendan Ryan: Yes, thanks for your question. There's 2 elements -- sorry. Apologies. Sorry, there's 2 elements to the question. Yes, as part of the repositioned strategy, we have reduced the cost and the capital profile of the business. And as you mentioned, the second aspect is related to the carrying value of the inventory that we're taking into the current year and financial year '26, which is effectively assuming that $29 million will come through largely reflectable where fish oil pricing is today. Gregory Hunt: Maybe we can -- Brent, if you wouldn't mind probably providing a little more color around fish oil pricing? Brent Zacharias: Yes, certainly. I think as everyone's understood, fish oil pricing had come down from historic highs and persisted at levels of about $2,500, $2,600 through calendar year 2025. And that was really due to very large back-to-back quotas that we haven't seen in more than 10 years. So the comments about our position going into 2026 and the $30 million improvement in emerging businesses is based on the understanding of our inventory position based on fish oil prices as of September, which were around the $2,600 level. So obviously, then if fish oil prices improve throughout the year, that does provide likely support for upward pricing. The other thing I would add is that in recent weeks, we've seen the recommended North Atlantic quota come out at 35% down from last year. And we've also seen the Peruvian quota announced at about 35% down from last year as well. So hopefully, that provides a little more color for you, William. William Park: And just staying with omega-3, you committed to sort of selling off your inventories there, but you were alluding to sort of cash flow neutral outcome. Just curious to know what you mean by that? Brendan Ryan: Yes. In terms of the cash flow neutral outcome, it's supported by the reduced cost of the capital profile of the business. The exact timing of cash flow is obviously dependent on when we sell through on the inventory. And obviously, that's a consideration in terms of how optimally we do that over the next 1 to 3 years. William Park: And then just one last question I had is, obviously, now with seed treatment business sitting in Crop Protection, how are you sort of internally thinking about the growth profile for the seed treatment business? Does it sort of trend in line with hybrid seeds business, the earnings growth that you're expecting through hybrid seeds business? Just any color around seed treatment would be appreciated. Brendan Ryan: Yes, the reclassification in terms of the change of the segment in terms of taking seed treatment, which is approximately $20 million in financial year '25 EBITDA from -- included in Seed Technologies segment and Crop Protection. So following the review of Seed Technologies, we felt that was appropriate. It has no impact from an overall group perspective on the P&L nor the balance sheet. And in terms of sort of future profile, there's no significant change seen with predominantly, I guess, sourced on North America and Europe. Gregory Hunt: And I think, Will, just if I can add, there's no direct link between our seed treatment business and our hybrid seeds business. Seed treatment provides chemical applications for the broader seed market, not just our hybrid seeds business. Operator: Your next question comes from Ramoun Lazar with Jefferies. Ramoun Lazar: Welcome, Rico, and Greg, best of luck in your future endeavors. Just a couple of questions. One on the Crop Protection, just a point of clarification there on the growth drivers. So it sounds like a bit of volume growth, but are you assuming a continuing improvement in that gross margin profile through '26? Rico Christensen: Yes. That is correct. What we've talked about in the past is that when we look at the profile coming in through our product launches, the NPIs, they are generally at a higher margin than the existing business. That's something we've spoken to the past, and it continues to be the case looking forward. And I would also say that over the coming years, what we know about the pipeline today that is pretty consistent that they come in with a higher margin than the existing business, which you then will see reflected in the margin for the business overall. Ramoun Lazar: That's pretty clear. And then I just had a question on the emerging platform, particularly omega-3. I mean it sounds like you're going to manage the cash requirements of that business more tightly. I mean can you maybe just talk about I guess, how that potentially impacts the potential growth profile of that omega-3 platform? Is there anything else also you can do to potentially improve the cost profile of that business, just given the volatility that we've seen over the last year or so? Brendan Ryan: Yes. So we have -- as part of the review, we have reduced the cost and the capital profile of the omega-3 business with the focus on selling through on the current inventory in terms of really the customer supply requirements over the next couple of years. The focus also is looking at how do we improve our cost of goods competitive positioning, and that's planned with a change in the production zone to the Southern Hemisphere. That's underway in terms of that activity today. We'll continue to look at the capital profile and the cost profile knowing that there has been significant steps already taken, and that will continue to be a focus throughout the financial year '26. Gregory Hunt: And just one other point there in relation to the carinata bioenergy business, the capital contributions from BP support the growth in that platform as well. Ramoun Lazar: Okay. Okay. But to get -- I guess to get it back to a breakeven position, so you need to see either a further improvement in fish oil pricing or some of these shifting of growing to some of these lower cost regions before that -- before the earnings get to a breakeven? I guess do you have some sort of time frame on when you could get back to breakeven? It doesn't sound like '26, obviously, but maybe '27? Gregory Hunt: Well, we've said we're not going to grow a crop in calendar year 2026. We have said that we will start -- so we're talking specifically about omega-3 now. What we have said is we will start to plant in South America small volumes in 2026 and then grow through '27, '28. I think the other point I'd just remind everybody of is that a big catalyst -- value catalyst in this platform is global deregulation. And we still believe we're on track to achieve that in '27, '28. In relation to the hybrid seeds business, that is cash-generative, so in effect, it funds itself. And as I said, just to be clear, the relationship with BP, they are continuing to support us with the ramp-up, both through SG&A and R&D support to accelerate the growth of that platform. So you're right, it's fundamentally an omega-3 issue. Operator: The next question comes from Jonathan Snape with Bell Potter. Jonathan Snape: Look, I'm going to ask 3 questions for the time because there are 3 different people. First sort of touch on the seeds, and I know you've gone through it a little bit of detail, but that $30 million improvement in the emerging platform looks like it's like really 3 buckets going on there, if I can talk about it, obviously, one is carinata. I think you said the plantings are up. I didn't catch if you said how much they were up this year, but I imagine that has some kind of earnings benefit to Nufarm. It sounds like the second bucket in there is omega-3, you're planting less of it. So imagine losses just from simply planting less again be lower in '26 when you sell '25 crop in terms of metric you mentioned it's the fish oil component. And I think you've referenced pricing [ together for '26 ]. Gregory Hunt: Sorry, Jonathan. Well, I got the first part of the question, which was increased carinata, the impact on seed sales or seed revenue, seed margin and oil, yes, we didn't get the second and third questions. Jonathan Snape: With the omega-3 oil pressure, reduce planting, how much that kind of contribute into the omega-3 loss reduction year-on-year. And then I'm trying to figure out fish oil because the prices in Peruvian and Chilean ports last week took quite a big jump. And I'm trying to think if you -- it doesn't sound like you put any of that in your thought process at the moment. And I think that's the first reference price since the [ AMAPE ] numbers came out. So if that was to hold or continue, that would be a benefit to the sell-through, I imagine, of the inventory. Is that kind of how I should think about it but with the latter bit probably not in your thinking at this point? Gregory Hunt: Thanks for the question, Jonathan. Brent, do you want to have a crack at that? Brent Zacharias: Sure. Jonathan, just some comments on fish oil pricing first. Yes, we have seen some indications of that jump that you referenced in the Peruvian market, but it's just important to recognize that very little volume has actually traded yet until the quotas are actually caught. So yes, we're alive to it. But you're right, our $30 million improvement target for emerging platforms is based on where fish oil prices were trading as of September, which was about $2,600 on the North Atlantic, which is the one we tend to track and follow because they sell into certified fisheries. So absolutely, you're right. If we do see some upward movement that creates upside to that $30 million improvement target. It was really based around the $2,600 that we saw as of September. And just to add... Jonathan Snape: No, I was just interested in the carinata side and how much that contributes. Brent Zacharias: Yes. Carinata, as Greg covered in the script, we're starting to see some really strong fundamentals with the increase in GHG values. Just to comment on that. A year ago, the German GHG ticket price was $75 for a ton of carbon. Today, it's trading at over $250 as referenced by Argus. So that's encouraging us. And as you noted, we did increase our plantings last year, and we'll continue to scale further going into 2026, which creates seed margin as well as with rising fundamentals on GHG, it should expand oil premiums that we share with BP as well. Jonathan Snape: And look, can I ask -- this is -- the next question is around active ingredients prices. I noticed you said that kind of stabilized. And I think some of your competitors have said that as well in the recent week. If I look at ex-China factory gate price and some of the actives, it's actually started to be kind of an upward movement like high single-digit year-on-year gains in some of those commodities. So when you're looking into 2026 in your baseline thoughts, are you kind of assuming a fairly benign environment for actives and therefore, sell through prices? Or do you factor in that there has been kind of this upward movement in the last 2 or 3 months in actives and if you find anything, it's a carry on active? Rico Christensen: So we definitely use the current pricing for budgeting and forecasting for the coming years. But obviously, we're also very attuned to change in the prices coming out of China. And it does feel like not just when we look at our own momentum in the second half, but also looking across the industry. It does feel like we're beginning to see the industry as such beginning to climb out of that pricing depression we've had in the last couple of years. So we hope that we will see that continue in FY '26. Jonathan Snape: And look, my last question is balance sheet as always. The off-balance sheet facility utilization was down quite materially year-on-year. It looks like you shifted $100 million from off to on, which obviously says your operating cash flow is probably a little bit better. But if I'm looking at it right, I think that's the lowest utilization of the off-balance sheet facilities by Nufarm that I can find. Is there any particular reason why you're utilizing those facilities materially less than you have in the past? Is it aged stock? Is it something else? It just looks like an exceptionally low number. Brendan Ryan: No, it's not -- so Jonathan, just on the supplier financing, just the one facility. The balance at -- $26 million at the balance date. Why is lower primarily related to the arbitrage, I guess just on interest rates, particularly between the Chinese rates? And I guess, just to reinforce, if you look at our payables days, they remain flat. So there's no trade-off between, I guess, terms of trade versus debt. Jonathan Snape: Yes. Okay. But if you were to use those like closer to the historical average, obviously, it would move debt off your own balance sheet. So it's just an interest rate arbitrage thing. It's nothing else? Brendan Ryan: Yes, that's correct. Operator: The next question comes from Owen Birrell with RBC. Owen Birrell: Look, first question for me, just again on the omega-3. I just wanted to get a better indication from you as to your current omega-3 oil inventory position. Just wanted to get a sense as to how much oil was actually produced through '25 and therefore, what's your carryover inventory into '26? And just acknowledging the comment that you said about no crop being grown in '26, does that mean there's going to be zero oil generated in '26? Brendan Ryan: Yes. Thanks for the question, Owen. Just clarifying on omega-3 inventory position, I won't call it metric tons, that's quite commercially sensitive. But what we have is a carryover of the inventory into '26 from the crop last year, and that's been valued at the current North Atlantic fish oil pricing, which one person referred to a $29 million non-cash revaluation. So that's the -- effectively a benefit that carries through to the sales profile in financial year '26. In terms of new crop, there is a legacy crop coming from the FY '25 plantings. That will -- we're factoring in that there will be some revaluation on that crop relative to where fish oil pricing may go in the future. So it's a factor of that. And then, I guess, overall, the focus is on managing that inventory in terms of optimally gaining cash position from it. And that's in parallel then with managing the demand requirements from our customers. Owen Birrell: I know the -- effectively the $29 million write-down of that inventory position, but are you able to give us a sense as to what the -- how much -- what the value of that inventory sits on your books right now post that write-down? Brendan Ryan: Look, the value of that book is probably closer on the majority of the omega-3 facility, which is disclosed in the accounts. So it's in the order of -- I give an approximate of about $100 million, which is pretty close to that. Owen Birrell: Okay. And just second question, just on the bioenergy platform. You mentioned quite extensively the sort of new capital-light model. But I'm just wondering if you can give us a sense, I guess, functionally or operationally, how has the model changed from what you were previously doing? Brendan Ryan: The model hasn't previously changed. So the model hasn't changed in terms of 3 years into the agreement. It's a capital-light model in terms of -- from our perspective, as we take no balance sheet. So no inventory comes on to our balance sheet and also through the partnership, some of the supporting costs and capital requirements are co-funded. Owen Birrell: So previously, you were taking that inventory on your balance sheet? Is that what I'm reading into there? Brendan Ryan: No. we're taking no inventory to the balance sheet previously. Just other than the underlying carinata seeds, no oil, no carinata oil or biofuel oil on our balance sheet. Owen Birrell: Okay. But it sounds like the capital-light is very much that the capital contributions are coming from BP rather than yourself? Is that the difference? Brendan Ryan: It's co-funded between us and BP. Owen Birrell: Okay. I'm just trying to understand what's actually different. What's changed? You're talking about a capital-light model, but it doesn't sound like anything has actually changed. Brendan Ryan: Nothing has changed. Just stating that it's a capital-light model. Operator: The next question comes from Scott Ryall with Rimor Equity Research. Scott Ryall: My first question relates to Slide 13 and the talk about R&D expenditure. I just want to make sure I heard Brendan correctly that the R&D expenditure, broadly speaking, is expected to continue to grow. Did I catch that right? And if so, I guess I'm looking at the material items -- the slide before. We've impaired some intellectual property on sunflower and canola. And I'm just wondering, and the question stands, regardless of what the outlook for R&D is. But how do you make sure that you get your real bang for buck? And how are you ensuring that you learn from whatever has gone wrong with that intellectual property? And how does that fit within your reprioritization, please? Brendan Ryan: Well, thanks for the question. Just on R&D, just to clarify. So the expenditure going forward into financial year '26 has a lower level of expenditure than financial year '25, and that's primarily driven by the near-term focus on the research and development pipeline. Sorry, what was your second part of the question? Scott Ryall: Just R&D and making sure that you're not -- your material items in the future are not writing off intellectual property, which presumably is where the R&D has gone to. How does that fit within the reprioritization, please? Brendan Ryan: Yes. So thanks for that. In terms of material items, the material item relating to the sunflower is a result of the position or the conflict going on in Ukraine and Russia. It's been much more prolonged and severe than we initially anticipated. And given it's a significant sunflower market, that was the driver in terms of the impairment around the sunflower IP. In terms of more broadly managing the benefit that comes from our investments in R&D, there's a rigorous process around identifying the research and development product line that provides, I guess, a balance, both in the short term and the medium term, followed with a disciplined approach around stage gating and review in terms of monitoring the progress in terms of the delivery of the benefits. I might pass to Rico, he might add a few more comments just around that. Rico Christensen: Yes, sure. I think we expect the R&D cost to be lower in FY '26 compared to FY '25. It's due to some of those reasons Brendan mentioned around more efficiency around stage gate processes and so on and also because we did have some one-offs in our R&D cost in '25 that we've announced in different press releases we've done in agreements with different partners. Again, those are capital-light models compared to different -- what different companies are doing on R&D. So generally speaking, we do spend a lot less on R&D than our competitors because of those partnerships that we have. Scott Ryall: Okay. All right. And then, Rico, my last question is just for you. I -- sorry for the football results overnight, by the way. So you've been onboarded in Nufarm for more than 3 years. I guess I'm just wondering, how do you think the position of Nufarm will change over the next 3 to 5 years relative to what you've observed the position has been over the year has changed over the last 3? What do you really think is going to be where the change in direction for the company, please? Rico Christensen: I think it's a good question, and I also spoke to it a little bit about in the priorities and the outlook. And I think... Scott Ryall: That was just for 1 year, right? Rico Christensen: Yes. Well, exactly. So as I said in the -- in my comments, the short-term focus is really on -- around capital discipline and cash discipline. We have -- we want to get our leverage down as we've stated. But at the same time, obviously, we also have to solve for the growth for tomorrow in Nufarm, and we continue to do that through our investments in R&D in both seeds and cost protection where we have a strong near, medium and long-term pipeline. And I think as we talked about earlier, when you see the impact of our new product introductions across the business in Crop Protection. We've said overly it's around 15% on revenue. But in fact, it is a little bit more when we talk about gross margin. And what you will see over time is that as those new products coming into the portfolio, they will keep improving our gross margin profile and therefore, also the earnings for the company. Operator: There are no further questions at this time. I'll now hand the call back to Rico Christensen for closing remarks. Please go ahead. Rico Christensen: Yes. Thank you. I just wanted to end up by saying, thanks for dialing in. I look forward to catching up with many of you over the coming days. And this then concludes our call. Thank you. Operator: That does conclude our conference for today. Thank you for participating. You may now disconnect.
Operator: Thank you for standing by, and welcome to the Argosy Property Limited FY '26 Interim Results Conference Call and webcast. [Operator Instructions] I would now like to hand the conference over to Mr. Peter Mence, CEO. Please go ahead. Peter Mence: Thank you, and welcome. Thanks for joining us for this presentation for the F '26 half year results. The results, with due respect to Sean Fitzpatrick, very much looked like a game of 2 halves. The first few months were very much characterized by a lack of activity and very little lease inquiry. This gave way quite abruptly in the end to a significant increase in inquiry levels and more recently, to significantly improved activity. Moving through to the results summary on Slide 5. The revaluation at $31.3 million was principally driven by the extended lease of 9 years to MBIE at the Stout Street development. Now you'd be aware that I've been talking about that for some time. It actually took just over 5 years to negotiate, but it includes a reasonably exciting decarbonization project, which is jointly conceived between Argosy and MBIE, and we'll be starting work on that fairly shortly. The NTA lifts slightly on the strength of that revaluation to $1.56 and the gearing sitting just above the midpoint in the target range. We're pretty comfortable at this point in the market to be at the upper end of that range with some sales still to come. We've reached agreement to sell 143 Lambton Quay, usually known as TPK at book value and that will remove the vacancy from that building. The sale is to a private buyer. It is expected to be unconditional prior to the Christmas break, not much time left for that. And it's expected to settle before the end of the financial year. Vacancy is obviously a little higher than we would have liked, but with the significant increase in inquiry levels that we're now fielding, there is cause for optimism in the year ahead. We have still been realizing some rental growth on the way through and the 9-year extension to MBIE has obviously had a good positive impact on the weighted average lease term being the largest lease in the portfolio. The tenant retention rate remains solid, but we often see that in a quieter market where tenants are more likely to stay put than to look at a change. On Slide 7, the weightings are showing actually little change since I last spoke to you. They remain target -- close to the target levels with current activity in terms of sales and development moving us closer to those targets. The revaluations were characterized by a lack of evidence with respect to both sales and leasing. But post balance date activity is suggesting a market in line with the valuations with some evidence of the expected firming in the cap rates driven by the lower interest rates, albeit that that's relatively modest at this point. The economy in general remains relatively weak in both Auckland and Wellington, and there remains a risk that there will be tenant failures, although thus far, these have been significantly fewer than we had expected. Of note, there is that the cap rate comparable for the last year excludes the Marketplace building as this was only valued on a discounted cash flow basis at that time being largely vacant. This building has seen some significant change. You will have been aware of the change in the earthquake-prone building announcement that the government is working through. That has resulted more quickly than we had expected in a change to the tenant interest in NBS ratings. Obviously, that is a big positive for this building. And as a result, we've seen a significant increase in lease inquiry and recently signed 2 additional tenants into the building. The value-add and green developments, Mt Richmond is progressing as planned with no orange lights so far. Both the building platforms have been completed and leased to existing tenants elsewhere in the portfolio. But of the rest of the list in that value-add schedule, there is nothing that is pending out of those properties over the next 12 months. Forward inquiry for the Mt Richmond site has improved in line with the market, but there's nothing to announce at this point. Looking at 224 Neilson Street, both buildings have been completed on budget, on program, and we're very pleased with the quality of the construction, thanks to Haydn & Rollett on those sites. The first building, obviously, was leased when we last announced. The second building, we've just moved to agreement to lease stage with a very good quality logistics operator on a new 10-year lease, and we have a backup negotiation still current. So pretty positive news on that one. It is fair to say that prior to October, leasing inquiries were sparse, and that was concerning at that time. It has been much welcomed to see the increase in inquiry levels coming through. With 8-14 Mt Richmond, the project is literally smack on target. It's progressing well. There is now no further leasing activity required for this development on site with both the platforms and the building that's under construction all committed. We did well with value increase on the land prior to the development, and we expect to make solid profits on the remainder of the development, thanks principally to a very strong location. I'll hand over to Dave to take us through the financials. David Fraser: Thanks, Peter, and hello, everyone. So the first slide from me, as usual, is the gross property income waterfall. So gross property income was $69.4 million compared to $66.6 million last year, up by 4.1%. There were some strong rent reviews in the period, and there's more detail on that in the appendix as usual. Most reviews were fixed with an annualized increase of 2.6%. 29% by rent were market reviews with an annualized increase of 7.7%. Income from developments offset the effect of the disposal of Forge Way in March of this year. So on to the next slide, net profit for the half year. Net property income was up by 4.9% on the prior period at $61.2 million. The property expenses were slightly lower as rates increases were offset by lower insurance charges. Our insurance captive has been a very successful initiative and allowing us to market to reinsurers directly. In particular, we've seen some reasonable reductions in premiums for the Wellington market, which you'll know as gross. Expenses were flat in the period. Management expense to NPI improved to 9.2% from 9.8% in March and the management expense ratio improved to 51 basis points from 56 basis points at March. Net interest expense was down on the prior period. Lower rates and higher capitalized interest more than offset a negative volume variance in the period. Peter's covered the revaluation gain, and we sold a small sliver of land at Ti Rakau Drive for $230,000 in the period. We'll cover off tax in the next slide, but net profit after tax was $61.1 million compared to $33 million in the prior period. The next slide covers net distributable income. After the usual fair value adjustments, gross distributable income was $36.8 million compared to $31.6 million last year. That's up by 16.4%. Current tax expense was $6.1 million compared to $4.1 million last year. This is mainly due to higher taxable profit. There's been a lot of information published about the government's investment boost program. There was little impact from this at the half year, but we'll receive a $5.7 million deduction in the second half of this financial year as a result of the practical completion of Warehouse A at 224 Neilson Street. So last year, we were complaining about the removal of depreciation deductions on buildings, but we're obviously a lot happier this time around. So on a per share basis, net distributable income was $0.0358 per share compared to $0.0325 per share last year, up by 10%. And this slide covers adjusted funds from operations or AFFO. The AFFO adjustments were reasonably consistent with the prior year. Maintenance CapEx is up by $1.1 million, mainly due to a number of smaller office fitouts across the portfolio. So AFFO was $29.6 million compared to $26.8 million last year, an increase of 10.4%. On a per share basis, AFFO was $0.0345 per share compared to $0.0317 per share last year. The next slide covers the movement in investment properties. Investment properties increased by $70 million compared to March '25. As Peter already talked about the reval gain of $31 million. The balance was mainly spending on developments, principally Neilson Street and Mt Richmond. The portfolio after deducting the right-of-use asset in respect of the ground lease at 39 Marketplace was valued at $2.2 billion at 30 September. The next slide covers debt to total assets. The balance sheet remains in good shape, and we have capacity to complete developments and acquire assets as evidenced by the recent acquisition of 291 East Tamaki Road, which is a very exciting future development opportunity, and this property settled in October. The debt to total asset ratio was 35.9% at 30 September compared to 35.7% at March and 37.2% at 30 September last year. As at 30 September, 7 properties were regarded as noncore with a book value of $148 million, and we'll sell these properties as conditions allow. And Pete's already mentioned one sale that we hope to complete this year. The next slide covers interest rate management. It's been great to see rates continue to decline during the period. Our weighted average cost of debt reduced to 4.8% compared to 5.1% at March. The interest cover ratio improved slightly to 2.6x, well above the bank covenant of 2x. The level of fixed rate cover was 57%, down from 63% in March. And we continue to add cover as appropriate, and we've added 3 swaps in October to a value of $80 million at around the 2.5% mark. So we'll provide a lot more color on our hedging profile in the appendix. The next slide looks at our debt profile. We refinanced our bank debt during the period, pushing out tenor, including a new 7-year tranche of $100 million. The nearest bank expiry is now October 2028. Bank margins remain extremely competitive, as you'll see from the appendix. The nearest green bond matures next March, and we'll refinance that later this financial year. And the final slide for me is on dividends. We announced this morning a second quarter dividend of $0.016625 per share with imputation credits of $0.002633 per share attached. The record date is 3 December and the payment date will be 17 December. There's no change at this stage to the full year guidance of $0.0665 per share. The DRP remains open for shareholders to participate in. I'll now pass you back to Pete for a leasing update. Peter Mence: Thanks, Dave. I guess most importantly is the leasing environment has been challenging, but has recently improved, is looking a lot more promising for the year ahead. A couple of the ones that really stand out that we did achieve. Obviously, the MBIE lease extension dominates this half year result. And there was also a 6-year extension of the New Zealand Post lease at 7WQ. So we've got quite a bit of activity still coming through in that space. And what is really notable if we look at the forward demand is the deficit of certified green space that is going to be evident in the market over the next 3 to 4 years. This is particularly so in the industrial space, but also with commercial offices in both Auckland and in Wellington. It's really only large-format retail where we're seeing virtually no demand for sustainably rated space. Looking at the lease expiry profile. Clearly, this has changed a lot with the MBIE lease dominating this chart for the last 6 years. So pushing that out by the 9 years has made a big difference to that. And obviously, it leaves the March '27 year with modest expiries. The year through to March '28, the largest expiry there is General Distributors or Woolworths at the 80 Favona Road property in Mangere. Now -- we've obviously been working with general distributors on the way through that. And the reality is that we are not expecting them to be able to leave during that time. So they will still ultimately depart the site. It will still ultimately be a redevelopment, but the expectation is that, that expiry will be pushed out into later years. So it's certainly not on the current site. Once that is taken into account, then we're sort of looking at that 10% or less for the next 5 years. So not a big leasing demand coming forward. Looking at the 3 principal sectors, as I mentioned, overall, the expectation is a deficit of supply of certified green space for both industrial and office. Large-format retail is actually performing relatively well at this stage. For us, that is principally the Albany Mega Centre, where we're going through some remerchandising. We've recently opened the new JD Sports facility over there. That is trading extremely well and has provided some additional gravity to the site. In addition, we are in the process of -- in fact, we have conditional lease agreement for food operators over there, and we have managed to re-lease pending vacancies with a trade up on the site. So that site is going pretty well. Turning back to the industrial space. We are looking at a period where demand is returning. That activity is now evident, and it is interesting that it is dominated by international tenants. And as a result of that, we're seeing that increased demand for green-rated space coming through. So we do expect to see '26 being a busier space in industrial leasing. In the office space, the trends that we've been looking at over the last few announcements continue in terms of organizations looking to adjust the workplace to encourage office workers back in. I don't know any CEOs in the portfolio who don't want all their staff back in the office 5 days a week. We are conscious that we'll be moving into an election year when we come back from Christmas. That characteristically in Wellington gives us a quieter period, particularly with Crown tenants, but we've had very little activity from Crown tenants in Wellington over the last year in any event. Wellington potentially is overdiscounted at the moment. We do have excellent inquiry levels for our building at 147 Lambton Quay with around 5,000 meters of space available in that building. There's only one 500-meter floor that we don't have negotiations on currently. So qualified inquiry is very strong for that building. Obviously, that is from nongovernmental tenants. So turning to what we're looking at for the period ahead. The domestic economy is expected to gradually improve. And the reality is that it is still relatively challenged in both Auckland and in Wellington at the present, but inquiry levels and activity levels are improving. The interest rate situation is obviously positive, and the expectation is that we will ultimately see cap rate compression as a net result of that. Certainly, we're starting to see just in the last 2 months, increased levels of inquiry, particularly from offshore. Dave's mentioned insurance levels. But as premiums fall, that is also a positive for the market, and we're seeing that start to come through in the interest levels. So we're still dealing with relatively strong bottom-up fundamentals with the industrial sector. And with both industrial and commercial in Auckland and in Wellington, we've been dealing with a period of relatively modest supply levels, and that should be positive for us over the year ahead. So looking forward, the calendar year for 2026 should see a gentle return to business for the sector. And it's fair to say that Dave and I and the Board are reasonably comfortable with the way this business has weathered the last recession. Happy to take questions. Operator: [Operator Instructions] your first question comes from Vishal Bhula from Jarden. Vishal Bhula: A couple of quick ones for me. Just with your NPI coming in at $61.2 million, I mean, it's up 5% on the PCP as well as second half '25. There was no acquisition activity in the half, and you did lose the rental from Forge Way as well as maybe some rental on the Mt Richmond development. So the growth here just seems really strong. Is there anything specific to call out? Like was there any one-off income from 4 Henderson Place or anything like that? David Fraser: Yes. There's 2 things to call out. One is a significant rental uplift from one of our tenants in terms of a rent review, which flowed through into this year. And also, we did receive a surrender payment in respect of an industrial tenant. So in terms of the NPI line impact was $1.1 million. But the good news for that particular property was that we were able to re-lease the property within a month. So it's something of a bonus, I guess. Vishal Bhula: No, perfect. And then just on your office occupancy, you've put it in the presentation at 91.6% by income when at FY '25, that was 88%. But on a vacant space on a square meter basis, you've got 25,000 vacant space versus 15,000 at '25. So on an occupancy basis, you're down to 83% from 88%. So I just don't quite get how those percentages can be up on an income basis. Peter Mence: I think, Vishal, that will be principally down to the 143 Lambton Quay building, where it was effectively over-rented. Vishal Bhula: No, thanks. That clears that up. And then maybe could we just get a bit more color over 143 Lambton and that sale process that you know that is currently conditional? Peter Mence: Yes. I'm not -- I'm pretty tight. So I can't tell you a hell of a lot more, but we do have an agreement for sale sitting there around book value. It is a very short due diligence period. And the domestic private buyer knows the building very well. Vishal Bhula: I won't push more on that then. And then just a couple of short ones for me. Just East Tamaki, are those capital works now finished? And is it still 58% occupied? Peter Mence: Yes. The works are now finished. It did take a lot longer, and you'd be aware that we struggle with a delayed settlement from the vendor unable to meet their obligations. But -- so we've got that through now. Leasing activity is pretty good on that site. Inquiry levels are good and strong. So we're not expecting that to cause any particular issues for us. Obviously, they tend to be shorter-term leases because it's a development site for us and because it's secondary quality buildings that are sitting on the site, obviously. So we tend to get shorter-term leases from that, and that is having a negative impact on the weighted average lease term as it currently sits. Vishal Bhula: And then just a last one on me. Your guidance, there's no mention of the payout range this time around, whereas previously, you were expecting to be towards the top end of your policy range. Are you still kind of targeting that or the investment, those benefits coming through kind of see you push down to the middle of that range? David Fraser: Well, I think it will be in the top end of the range, but below 100%. Operator: Your next question comes from Nick Mar from Macquarie. Nick Mar: Just on Stout Street, can you just talk through what the potential rental step-up is at the market review that's coming up next year? Peter Mence: So we've got a rental review pending. I can't go into too much detail, obviously, on that at the moment, but the expectation is for a good solid lift out of that. But we've treated that completely separately to the renewal documentation. Nick Mar: No, that makes sense. And then in terms of the CapEx that you're spending, how did you look to, I guess, rentalize that as part of the process? Peter Mence: That's been a 5-year project working with MBIE in terms of what they wanted to achieve with the building and how we were able to add value. It really is the total being greater than sum of the parts. So it's been full disclosure with them on the way through with the work that we wanted to do, the results they wanted to see and how we rentalize that on the way through. So very much part of the negotiation over the 5-year period to make sure that it's stacked up. Nick Mar: Can you give us an indication of what rentalization rate you effectively achieved on the $13 million? Peter Mence: I'm looking at Dave, and he's not looking at me. David Fraser: Well, I mean, the reversion that Pete is talking about is about $1 million is what we're expecting in July next year, and the capital spend is about $13 million. So you're looking at it... Nick Mar: But did Pete just say that that's a separate impact versus the renewal in itself because [indiscernible] market view? Peter Mence: Yes. So it's both, Nick. Obviously, the market rental has to be landed out of the reversion rental for the upgrade to the building. Nick Mar: So you're saying that, that $1 million is on top of the market rental? Peter Mence: Yes, that's right. Obviously, you're looking at -- just so we're clear, we're obviously looking at a situation in Wellington where market rentals have actually declined marginally over the last 12 months. Nick Mar: Yes, but it comes down to the time between the last reviews... Peter Mence: You're all over it, Mate. Well done. Nick Mar: Yes. Okay. And then on divestments, you've taken a few other assets to market, particularly some of those new market assets. Can you just talk us through what's happened there, whether they're still in train or whether you've pulled them given lack of demand or anything else? Peter Mence: Yes. It's fair to say that we didn't get a great response. The numbers that we got were less than book value, looked at it and said, hey, there's no urgency to move these assets at the moment. They're still yielding quite well and the risk wasn't there. So we -- they remain on the sales list. We've pulled them from active marketing. If the market looks the way I expect it to look when we come back, we'll probably relaunch those to the market in February. So the intent is still to move them on, but not at any cost. Nick Mar: Did your updated book values reflect the feedback from the market on them? Peter Mence: Yes, yes. As I think I mentioned earlier -- I hope I mentioned earlier, the valuers have really been dealing with a paucity of evidence as at September. It's only really since September that we've seen any improvement in the activity levels. Nick Mar: Okay. And then just on valuations, have you got any initial indication of the amount of seismic allowances that are sitting in the portfolio, which may be removed as the sort of new earthquake legislation moves through? Peter Mence: Yes, that's a slightly tricky one to address. Obviously, as far as this building is concerned, then you're dealing with a straight removal because there's no requirement to do that. But with the change in the seismic rules, it's important that we all remember that, that doesn't actually change the NBS rating at all. It changes the obligation to do anything about it. So what has been surprising, I think, is the degree to which the leasing market has stopped focusing on that in the Auckland market. So the requirement to actually do it commercially is probably less. But where you have a situation where you've got a building that is less than 50% NBS, that doesn't actually change its NBS rating. And in circumstances, tenants may still require that upgrade to go through. So it's very much a case-by-case analysis. It is this building principally where you're simply drawing a line through it because it's a ground leased asset. And therefore, it is only the building with a lease expiring in 2039, it is cash flow management. So there is no requirement to spend any money on the building at all. Nick Mar: And as context, what kind of delta is sitting in that building? Peter Mence: This building -- the pure seismic upgrade was expected to be around $18 million. Operator: Your next question comes from Bianca Murphy from UBS. Bianca Fledderus: So first question is just around your comments around inquiry levels picking up significantly so far over the last couple of months. And I know it's still early days, but could you just talk about how much of that interest is actually turning into signed leases? Peter Mence: Yes. Good question, Bianca. At the moment, we've had some really good results, but I don't know whether that's generally reflective of the market. We've had Intrepid Travel moving downstairs in this building. We've recently signed an architectural practice for the other end of the building. So there was a lot of improvement in inquiry levels, but it's only relatively recently that we've actually seen that lock away. It's only relatively recently that we actually signed the first lease up at 147 Lambton Quay. So it's -- inquiry levels obviously have to come first. We had the improved inquiry levels for, say, 8 weeks before we actually started to get results, but the conversion rate looks like it's improving over the current period. Bianca Fledderus: Okay. That's helpful. And then just on your interest expenses. So yes, pleasing to see that drop, of course, as a result of lower rates and higher capitalized interest. Can you give us a sense of where you expect interest expenses to land for the full year? David Fraser: Well, it's going to come down further because -- if you look at our most recent rollover of our -- of the 90-day rate we rolled over in September, the base rate was sort of 3.1%. When you look at the base rate now, it's under 2.5%. So -- and we've got over $300 million of floating debt at the moment. So rate is going to keep coming down, actually, which is obviously a huge positive for the business. Operator: [Operator Instructions] Your next question comes from Rohan Koreman-Smit Forsyth Barr. Rohan Koreman-Smit: Just going back to that AFFO, you said you'd be at the top end of the policy range. Are you not taking the investment boost deductions through AFFO? Is that how we should read that? David Fraser: No, no, we are. We are. Rohan Koreman-Smit: [indiscernible] down further, what's the other moving part there to offset $6 million of deductions? David Fraser: Well, there's -- the offset is things that are going to really going to move into next year. So we've got lower repairs and maintenance deductions than normal because the lease to Neilson Street, the incentives to that lease may move into next year. There's a number of other things that impact the tax line, which effectively will flow through into next year as opposed to this year. Rohan Koreman-Smit: And you mentioned Mt Richmond, I guess, the first building plus Stage 2. You said it was committed. I think what's the comment there, but there's 2 pad sites, right? You haven't committed to building sheds on those pads yet, have you? Peter Mence: No, no. So what is committed is the first building Viatris that is obviously leased. Then we created the building platforms for 2 further buildings, and we said at the full year result that we wanted to get those completed and leased. So those have been leased as hardstands, not as buildings. Rohan Koreman-Smit: Okay. Okay. So they're leased as hardstand. So that suggests that development leasing is a bit slower contrary to other comments around pickup in leasing inquiries if you're prepared to lease those as hardstands because unless you've got some development break clause, I was just wondering about inquiry and when the, I guess, CapEx -- the balance of the CapEx at Mt Richmond because there's a reasonable chunk there may kick off. Peter Mence: Yes, there is -- look, Mt Richmond is going exactly as per the plan. Obviously, it's a progressive development that we've been looking at pulling those buildings in. And it's probably fair to say that current inquiry is stronger than we would have expected, but we still don't see that we'll be moving ahead faster than we planned on that site. So the reality is that things like the DRP are going to pay for that development pipeline as it comes through. Rohan Koreman-Smit: Okay. And on that, you're talking to cap rates improving, leasing seems to be going well. There's good tenant demand. You expect to be able to sell noncore assets. Do you think the DRP is being overly conservative at this point in time? It's just a very expensive way to raise money where your share price is? David Fraser: Well, it's not expensive actually. I mean the current share price, very, very limited discount. You're applying that to brand developments, it's accretive. So I would argue that it's not an expensive way of raising capital at all. Rohan Koreman-Smit: Okay. We'll have to agree to disagree on that one. And then just last one, Marketplace. The previous strategy was to sell it to a -- or potentially turn it into a hotel, I believe. But now you're leasing it up. Has the earthquake rules materially changed, I guess, how you view the exit on that building? Peter Mence: The earthquake rules have materially changed the way we view the exit on the building, yes. So obviously, it's going to be a lot more feasible to manage the cash flow into a positive situation through until 2039. But we looked for a hotel conversion on this. We had really good demand for it, and then it went completely flat. And the same happened in 143 Lambton Quay, where that building we felt was going to make a very good hotel. All the designs came through looking really positive. And then the hotel market, especially in Wellington, went completely flat. I think government travel -- government-related travel in Wellington was down 54%, I heard yesterday. So that market simply got removed from us. The -- obviously, the -- we did put quite a bit of work into the seismic review situation to try and get a more rational risk-based approach, and that's been extremely positive as far as this building is concerned. Rohan Koreman-Smit: And then last one, just on 147 Lambton Quay, I believe that's in that noncore pipeline, but has a decent amount of vacancy. You talked to some potential inquiry. Kind of how do you see that one progressing given it is kind of probably a net drag on the earnings at the moment? Peter Mence: Yes, I expect it will turn into being a positive very shortly with the solid lease inquiry that we're fielding at the present. So expect that will be fine, but it remains on the sale list. It's just not in the immediate future. Operator: There are no further questions at this time. I'll now hand back to Mr. Mence for any closing remarks. Peter Mence: Very good. Well, just to say thank you very much for joining us. We've put these results together, as I said, very much a game of 2 halves, and we're expecting that the period ahead will be quite remunerative. Obviously, with the interest rates coming down, the expectation is that cap rates will firm and recent research suggests that, that is already happening. So it will be a case of seeing what sort of evidence we've got by the time we start doing the 31 March valuations, but the indications are positive at this point. Thanks very much. David Fraser: Thank you. Operator: Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.
Operator: Thank you for standing by, and welcome to the Nufarm Limited FY '25 Results Conference Call. [Operator Instructions] I would now like to hand the conference over to Mr. Greg Hunt, CEO. Please go ahead. Gregory Hunt: Thank you, and good morning, everyone. Welcome to Nufarm's Financial Year '25 Results Presentation. Joining me today are Brendan Ryan, Nufarm's CFO; Brent Zacharias, Group Executive of Seed Technologies; as well as Rico Christensen, who is the Group Executive Portfolio Solutions. And as you'll see from this morning's announcement, CEO [Technical Difficulty], I will talk to the transition in more detail later in the presentation. But in terms of the call today, I will speak to the financial year '25 results. Brendan will speak to the financials and Rico will cover priorities for financial year '26 and the outlook. Before we move to the presentation, I draw your attention to the disclaimer on Slide 2 and in particular, the wording related to forward-looking statements. To the result, since the half year, we have delivered on key profitability and leverage unwind targets that we communicated to the market in August. We are very pleased with the performance of Crop Protection, delivering an earnings increase of 18%, with importantly, growth across all regions. We have concluded the review of Seed Technologies and the Board has determined that a reprioritized strategy is expected to deliver the best value for shareholders. We have taken steps during the year to reduce cost and capital requirements across the Seeds business, and we are in very good shape to deliver upside from the business in the future. We reported a statutory loss of $165 million, which includes $142 million of mainly non-cash material items relating to the outcomes of the Seed Technology review and the broader performance improvement program across the business. We are confident that the action that we have taken sets the business up well for the future. We reduced net debt by $538 million from the half and ended the period with a leverage of 2.7x. This reflects both the seasonal unwind that's inherent in our business, as well in our ability to delever through internal discipline and efficiency. We are in good shape to deliver earnings growth and further leverage reduction this financial year through growth in Crop Protection and improved performance in Seed Technologies. Meaningful positive cash flow generation and a lower CapEx profile is expected to support further deleverage at the end of the 2026 financial year. I'll now cover some of the highlights across financial year '25. In Crop Protection, as I said, we delivered a strong result, with growth in profitability in all regions and EBITDA margin improvement of 140 basis points. In North America, we recorded a record year for profitability in the turf and ornamental segment and in APAC, a record profit in Asia. In Europe, a 22% uplift in profitability, and this reflects the focus that we've had on improving returns in that business. Across Seed Technologies, we have made good progress on the repositioning, which includes a reduction in cash costs. Our focus is on growing our profitable hybrid seeds business, and we are really pleased with the increased revenue and profitability in South America. In bioenergy, as the market fundamentals have continued to strengthen, we increased the planted area in carinata. The market has evolved as expected, with a shortage of feedstocks to supply the demand creation by the implementation of the Renewable Energy Directive in Europe and the subsequent mandates. We have a long track record in developing solutions for farmers through innovation, with a capital-light technology partnership model. We have a very strong near- and medium-term pipeline and have delivered multiple product launches in multiple markets across our Seed and Crop Protection platforms. New product launches in Crop Protection contributed around 15% of financial year '25 revenues. And on operating performance, we are pleased with the gross margin improvement of 100 basis points. Good internal discipline around working capital and cost has supported the net debt unwind in the second half. As you know, we announced a review of our Seed Technologies business in May of this year. The review considered a thorough assessment of our strategy as well as the potential for a sale and bringing in a capital partner. After a considerable amount of work, the Board has determined the highest value outcome for shareholders is expected to be continued ownership under a reprioritized strategy, where we are focused on growing our hybrids seeds business, a reduction in the cash requirements for omega-3 and expanding our bioenergy business with BP. We have already taken action to reduce cash costs and capital requirements across the business. We are focusing on the continued growth of hybrid seeds in markets where we have established positions and strong growth prospects, particularly in South America and Australia. We plan to grow bioenergy, supported by our agreement with BP, and expected demand growth coming from biofuels mandates. In omega-3, our near-term focus is on supporting customers with the existing inventory and managing to a cash flow-neutral outcome. We have the opportunity to reposition production over the medium term to South America, with the aim of lowering our cost of production and improving our competitive position. We have a clear path to generate benefits for shareholders as we partner with downstream customers and optimize to a lower cost position. We are really pleased with performance across Crop Protection, with underlying EBITDA up 18%. We focused on profitable growth in a flat volume environment. Revenue and profit grew with the benefit of both mix and margin. And the team did a really good job on inventory management, and we are seeing the benefits coming from the performance improvement plan predominantly in Europe. Turning now to the regional Crop Protection businesses. Underlying earnings increased 10% in APAC, a good result considering the impact of dry weather in Australia. We delivered record revenue and profitability in Asia, and the margin uplift was driven by improved COGS of goods and product mix. In North America, we grew underlying earnings by 19% across the year, with momentum building in the second half, which was up 30% on the second half of 2025. This was an excellent result given the team we're navigating some dynamic market conditions in relation to tariffs and antidumping duties. The turf and ornamental segment had a very good year delivering a record result, primarily driven by improved demand in the golf and lawn care sectors. Margin uplift was driven by improved COGS and product mix. As I mentioned earlier, we also had a very good year in Europe with underlying EBITDA increasing by 21%. Margins expanded from improved mix and the benefit improvement program. Performance also benefited from better seasonal conditions and market conditions driving volume growth. The business has good momentum with more upside to come from the continued execution of our performance improvement plans in the current year. Turning now to Seed Technologies. We thought it would be helpful to give you more visibility on the segments. So we have split out our earnings from hybrid seeds and the emerging technologies, which includes bioenergy and omega-3. Hybrid seeds performed well with EBITDA of $67 million, with the lower earnings on the prior period mainly a result of dry weather in Australia, which impacted canola seed sales. South America sorghum and sunflower were ahead of the prior year. We have streamlined our European and North American operations as we focus on the markets which are most attractive and where we have the strongest positions and growth potential. In bioenergy, we had the benefit of growth in hectares planted and resulting seed margin. However, this was offset by lower licensing fees from our agreement with BP. We have seen strong recovery in GHG market values in Europe, which is driving increased oil demand and value outlook for carinata. Omega-3 earnings were impacted by the fall in fish oil prices. Inventory has been carried into this financial year and will provide us with the ability to serve customers while we look to ship production to South America, where we are targeting our lower cost of goods. We are advancing towards customer offtake agreements to improve both volume and price predictability. And as I said before, we have significantly reduced the cost and capital profile for our omega-3 business. As a final point, I'd like to emphasize that as a result of our view -- our review, we have shifted the cash requirements of the Seed Technologies business to become more self-funding. I will now hand over to Brendan to cover the financials. Brendan Ryan: Thanks, Greg. I'll begin with a summary of the financial year '25 performance. The results presented today is consistent with the market update provided in August. For financial year '25, we delivered a solid top line growth with revenue up 3% year-on-year. Gross profit increased by 7% and the gross profit margin expanded by 1 percentage point to 26.1%, driven by strong Crop Protection margins and a favorable mix. EBITDA after material items was a loss of $74 million. Net financing costs were $101 million, down 6% year-on-year. The reported statutory loss of $165 million, impacted by 2 significant factors. The material items of $142 million, primarily from the Seed Technologies' review. I'll provide more detail on this shortly -- and $53 million of early-stage losses from emerging platforms, principally omega-3 relates to the fall in fish oil prices. Underlying EBITDA was $302 million compared to $311 million in the prior year. Importantly, excluding emerging platform losses, underlying EBITDA was up 10% year-on-year, reflecting a strong improvement in crop protection profitability and resilient hybrid seeds performance. Now to more detail on the material items. The after-tax impact on material items was $142 million, which is predominantly non-cash with a financial year '25 cash impact of approximately $30 million. The key component of material items were $118.7 million from Seed Technologies' asset rationalization and restructuring. In hybrid seeds, we have scaled back our European sunflower operations as the prolonged, more severe Russia-Ukraine conflict has significantly reduced the attractiveness of that market. This resulted in the impairment of sunflower IP and a write-down on associated seeds inventory, representing the majority of this material item. Also included in this material item is to scale back on omega-3 plantings in North America, with plans to move production to South America to achieve more competitive cost of goods sold. This has resulted in the write-down of the excess omega-3 seed inventory. There are also associated redundancy costs with the cost out program and workforce reductions. Separately disclosed but primarily connected to seeds review is $5.4 million of legal and advisory costs. We also incurred $13.4 million restructuring costs in Crop Protection. These costs include redundancy costs with the cost-out program and some asset rationalization. In financial year '26, we expect to see clear benefits from the action taken in financial year '25, with reduced capital expenditure, more focused capital allocation and lower staff and operating costs. Turning now to margin and costs. Underlying gross margin increased by 80 basis points, with Crop Protection delivered a strong 140 basis points improvement, driven by cost of goods efficiencies and favorable mix. Operating costs remain an important focus. Underlying SG&A increased by 10% year-on-year and when expressed relative to revenue was up 140 basis points. This growth reflects inflationary pressures, increased investment in R&D, marketing and business development to support growth to the top line. Looking ahead, operating cost discipline is a priority. Full period benefit of the $50 million cost savings program is expected to broadly offset natural cost inflation in financial year '26. Now to the balance sheet. Average net working capital sales improved to 38.2%, improving by 440 basis points and firmly within our 35% to 40% target range under our capital management framework. The improvement was primarily driven by inventory efficiency, supported by a focused program and inventory reductions across all crop-protected regions. Average inventory days improved by 16 while receivables days were down 4, reflecting strong cash collections during the second half seasonal unwind. Payable days remained flat, reinforcing that the net working capital progress was largely an inventory story. Working capital management remains a key focus with further improvements targeted in financial year '26. In respect to capital expenditure, it was broadly consistent with the prior year. Same as property, plant and equipment focused on health, safety and environmental priorities and plant reliability. Proper tax intangible CapEx continues to deliver value into the product pipeline. Investment in Seed Technologies growth platforms was also similar to prior year. For financial year '26, we are targeting CapEx below $200 million, reflecting disciplined capital allocation. The reduction will come from lower manufacturing spend following significant investment in recent years. Crop Protection R&D focus more on the near-term priorities and reduce capital for Seed Technologies aligned to the reposition strategy. It's worth noting that CapEx in the first half of 2026 is expected to be a significant reduction compared to the prior period, given the spend last year was first half weighted. In terms of free cash flow, it was negative $131 million, reflecting several key factors. While net working capital movements excluding omega-3 were positive, these gains were offset by the omega-3 position. The outflows on interest, tax, CapEx, lease and step-up security distributions contributed to the overall cash flow result. Looking ahead, we are strongly positioned to deliver meaningful positive free cash flow in financial year '26, supported by anticipated continued improvement in working capital efficiency, planned CapEx below $200 million, reflecting disciplined investment, significantly lower cash requirements from omega-3 and expected EBITDA growth year-on-year. In terms of net debt, net debt reduced by $538 million in the second half '25, reflecting the normal seasonal unwind, demonstrating strong second half cash conversion. Year-end net debt was $824 million, with unfavorable FX movements and omega-3 inventory contributing to the year-on-year increase. Leverage closed at 2.7x, below the guidance provided in August. Reducing average remains a priority, supported by the actions outlined earlier to deliver positive free cash flow in financial year '26. In terms of funding, gross debt, excluding leases was $1.154 billion at year-end. Liquidity remained strong with $345 million of undrawn facilities, consistent with the prior period and $475 million in cash. Our diversified and flexible debt facilities are underpinned by a covenant-light financing structure and a staggered maturity profile. The short-term omega-3 credit facility has been successfully refinanced into a 2-year amortizing loan facility with a maturity of September 2027. Looking ahead, we are well positioned to support seasonal working capital build. We anticipate that this year's build will be lower. CapEx will be $50 million lower in the first half. Omega-3 cash requirements will be significantly lower, and there is further benefit from the improvement in earnings. Importantly, Nufarm's capital structure is designed to accommodate seasonal funding demands. There are no expected short-term refinancing needs for the group's primary debt facilities other than the standby liquidity facility, which the extension to November 2027 is well advanced, and the ABL facility matures in November 2027. Importantly, Nufarm's capital structure is designed to deal with seasonal fluctuations. In concluding, Nufarm enters financial year '26 with a solid base of profitability and a strong liquidity position. Crop Protection profitability improved across all regions, and our hybrid seeds business is generating strong profits. Our funding structure remains flexible, supported by $345 million of undrawn facilities and $475 million in cash at the balance date. Second half 2025, net debt had the usual seasonal unwind of $538 million. We are continuing actions to reduce costs and deleverage. We're expected to deliver further benefits in financial year '26. We are expecting positive cash flow, with anticipated further reduction in net working capital, disciplined capital management with capital expenditure below $200 million and EBITDA growth. To help with your models, we are giving the following guidance on some key items for financial year '26. Depreciation and amortization, circa $225 million; net interest expense, circa $105 million; and the effective tax rate, circa 30%. I will now hand you back to Greg. Gregory Hunt: Thanks, Brendan. Rico is now going to cover the outlook and priorities for the year ahead. But before he does, I would just like to make some introductory remarks. As you would have seen on our ASX announcement, Rico has been appointed CEO and Managing Director of Nufarm, commencing in the role in the new year. Rico joined Nufarm to run portfolio solutions 4.5 years ago, having spent over 2 decades in the industry. He's done an excellent job in that role and brings considerable global experience running businesses in the Americas, Europe and Asia before his time at Nufarm. I am looking forward to working with Rico over the coming weeks and months to support the transition. I would also like to take the opportunity to thank our shareholders for their support over the last 10 years. It's been a fantastic opportunity to lead this business, and I'm very confident in the future of Nufarm under Rico's leadership. Over to you, Rico. Rico Christensen: Thanks, Greg. First, let me start by thanking the Board for the trust they have shown in appointing me CEO designate of Nufarm and also to Greg for his support over the last 4.5 years in the business. I am honored that I will be leading Nufarm, a great Australian company that I deeply respect. In agriculture, Nufarm is known far beyond the borders of Australia. When I talk to farmers and channel partners in Brazil, in Canada and Spain and other countries, we have instant brand recognition and respect. We are known for our solutions and our dedication to be easy to do business with. We are a leader in key geographies and core crops, and in key product segments. We are known for our innovative mindset, thinking of new ways to support agriculture as it continues to evolve. I have more than 2 decades of experience from the agricultural industry, running businesses in Europe, South America, North America and Australia. I've spent most of my career competing against Nufarm. Taking that outsider's view, I cannot emphasize enough how valuable our brand is, how valuable our leading positions are and how valuable our relationships are, the relationships we have built with farmers, channel partners and technology partners for more than 100 years of doing business. I have regular conversations with partners about our innovations across Crop Protection and Seed. We are known and respected for our innovation and our partnership model. That means our R&D cost is many times lower than our competitors. This is the Nufarm way. Above everything else, we have a team of dedicated, hard-working people who show up every single day with fire in their eyes wanting to do better for Nufarm, for our customers, and for our shareholders. When we have all of those things I just mentioned, it's very valuable, and our competitors envy us for it. My job, with the help of all of our people around the globe, is to translate that half-fought position into strong financial performance and returns to our shareholders and position Nufarm for improved performance through the cycle. This leads me to my priorities for FY '26. First, we are already taking action to instill a strong cost and capital deployment discipline. We are doing that through a range of changes in our processes, accountability and ways of working, which combined will result in a positive free cash flow to support reduction in debt and leverage. We will extend that by embedding that cost and capital discipline into our corporate culture by refining structure, delegations and incentives. The aim is to ensure not just a onetime improvement in performance, but that this remains a focus through the years and is reflected in our performance through the cycle. Second, FY '25 showed positive signs in the performance and profitability of our Crop Protection business. We plan to build on our leading positions across geographies and crops. A great example is our phenoxy portfolio, which has growth potential that can be unlocked through partnerships and market presence. To that point, our pipeline looks healthy in the short, medium and long term. Combined with a stronger focus on launch excellence, we expect to accelerate the impact of the near-term pipeline. We have also made good progress improving our net working capital in Crop Protection and we have plans underway to deliver further improvement. Third, the seed review has provided us with valuable learnings. Most importantly, we need to be more focused in our efforts. We are repositioning our strategy and capital allocation to deliver improved performance and returns over time. We've already taken action in FY '25 to reduce cash expenditure and capital requirements, in particular in omega-3. We expect to benefit from these actions in financial year '26. Our hybrid seeds is a high-quality cash-generative business. It has unique and valuable IP that we are looking to scale in Southern Hemisphere markets. With the appropriate focus and attention, we see a clear runway for future growth and that will be a priority in FY '26. We are committed to building on our strategic partnerships and emerging platforms to improve the annual earnings profile. Turning now to outlook and how these initiatives provide confidence into FY '26. We are expecting strong EBITDA growth, assuming normal seasonal and market conditions. In Crop Protection, we expect continued growth in EBITDA, moderating on the 18% growth we saw in financial year '25. In hybrid seeds, we also expect growth in EBITDA and we are targeting approximately $30 million improvement in EBITDA in our emerging platforms. We are targeting a leverage of 2.0x at the end of FY '26 compared to 2.7x at the end of FY '25. We also expect meaningful positive free cash flow coming from improved earnings, the improvements in net working capital and from a step down in capital expenditure to less than $200 million. For the first half, we expect net debt similar to the prior period, but with a leverage below prior period coming from improved earnings. I would like to close by saying that I'm looking forward to leading Nufarm. While my immediate priority is on delivering on FY '26, I'm looking forward to speaking with you more in the future about longer-term growth plans across the business. Greg, Brendan and I will be joined now on Q&A by Brent Zacharias. We'll now hand back to the operator. Operator: [Operator Instructions] Your first question comes from John Purtell with Macquarie. John Purtell: I just had a couple of questions, please. Firstly, just in terms of the seeds review process, can you provide some further color there, particularly regarding the decision to hold on to the business and also the degree of third-party interest in the business? Gregory Hunt: Yes. Thanks for the question, John. Look, there was broad market engagement with multiple parties, and the review -- as I said in our presentation, the review allowed us to challenge ourselves around the cost structure, around capital allocation, and around strategic focus. So the review was quite broad, widespread, encompassed the whole strategy. It wasn't just about a sale of the business or bringing in a capital partner. And as we said, we've concluded that we believe the best value for shareholders will be realized by implementing from that reprioritized or repositioned strategy. John Purtell: And just a second question, and Greg, just beforehand, I just wanted to wish you all the best going forward. And thanks for all your help over the years. Just the second question around what you're seeing in terms of the broader ag chem industry. It's obviously been a tough few years. Cost of goods sold looks to have reset, which is good, but pricing still looks subdued, and markets remain competitive. So I just want to get your thoughts on that. Gregory Hunt: Yes. And John, thanks for the comments. So look, I would say the overall outlook is positive. Seasonal conditions generally around all of our markets are positive. Grain pricing supports demand for both crop protection and our oil seeds sales. I think the important point is that active ingredient prices have stabilized. So we've replenished inventory at competitive COGS. And as a general statement, I'd say that channel inventories, particularly in North America, where it's been a little stubborn, have normalized. So I would say in terms of 2026, we would continue to see some volume improvement in Europe. I would expect sort of APAC to probably be broadly flat with last year. And in North America, we've had strong growth in the turf and ornamental business, and that's to some extent as a result of the lower spend, particularly in golf and in lawn care coming out of COVID. I think a more sort of normalized tariff situation, that seems to have settled down now. The tariff benefits on phenoxies and stable active ingredient pricing, I think key drivers for our business in North America. So generally, I would say, going into '26 in what is a pretty positive environment. Operator: Your next question comes from William Park with Citi. William Park: Can I just ask about the $30 million of earnings recovery you're expecting across emerging platform. Just looking at your slide now, you've alluded to $29 million of non-cash inventory revaluation hit that you've taken above the line this year. Is it basically the $30 million, is that basically the online to that $29 million? Or are there any other sort of changes you've made across the emerging platform you've alluded to sort of moving production from North America to South America, but just wondering whether that $30 million recovery would be -- whether if you would need to see some recovery in fish oil price or lower costs going forward that would help you -- that will effectively contribute to delivering that, please? Brendan Ryan: Yes, thanks for your question. There's 2 elements -- sorry. Apologies. Sorry, there's 2 elements to the question. Yes, as part of the repositioned strategy, we have reduced the cost and the capital profile of the business. And as you mentioned, the second aspect is related to the carrying value of the inventory that we're taking into the current year and financial year '26, which is effectively assuming that $29 million will come through largely reflectable where fish oil pricing is today. Gregory Hunt: Maybe we can -- Brent, if you wouldn't mind probably providing a little more color around fish oil pricing? Brent Zacharias: Yes, certainly. I think as everyone's understood, fish oil pricing had come down from historic highs and persisted at levels of about $2,500, $2,600 through calendar year 2025. And that was really due to very large back-to-back quotas that we haven't seen in more than 10 years. So the comments about our position going into 2026 and the $30 million improvement in emerging businesses is based on the understanding of our inventory position based on fish oil prices as of September, which were around the $2,600 level. So obviously, then if fish oil prices improve throughout the year, that does provide likely support for upward pricing. The other thing I would add is that in recent weeks, we've seen the recommended North Atlantic quota come out at 35% down from last year. And we've also seen the Peruvian quota announced at about 35% down from last year as well. So hopefully, that provides a little more color for you, William. William Park: And just staying with omega-3, you committed to sort of selling off your inventories there, but you were alluding to sort of cash flow neutral outcome. Just curious to know what you mean by that? Brendan Ryan: Yes. In terms of the cash flow neutral outcome, it's supported by the reduced cost of the capital profile of the business. The exact timing of cash flow is obviously dependent on when we sell through on the inventory. And obviously, that's a consideration in terms of how optimally we do that over the next 1 to 3 years. William Park: And then just one last question I had is, obviously, now with seed treatment business sitting in Crop Protection, how are you sort of internally thinking about the growth profile for the seed treatment business? Does it sort of trend in line with hybrid seeds business, the earnings growth that you're expecting through hybrid seeds business? Just any color around seed treatment would be appreciated. Brendan Ryan: Yes, the reclassification in terms of the change of the segment in terms of taking seed treatment, which is approximately $20 million in financial year '25 EBITDA from -- included in Seed Technologies segment and Crop Protection. So following the review of Seed Technologies, we felt that was appropriate. It has no impact from an overall group perspective on the P&L nor the balance sheet. And in terms of sort of future profile, there's no significant change seen with predominantly, I guess, sourced on North America and Europe. Gregory Hunt: And I think, Will, just if I can add, there's no direct link between our seed treatment business and our hybrid seeds business. Seed treatment provides chemical applications for the broader seed market, not just our hybrid seeds business. Operator: Your next question comes from Ramoun Lazar with Jefferies. Ramoun Lazar: Welcome, Rico, and Greg, best of luck in your future endeavors. Just a couple of questions. One on the Crop Protection, just a point of clarification there on the growth drivers. So it sounds like a bit of volume growth, but are you assuming a continuing improvement in that gross margin profile through '26? Rico Christensen: Yes. That is correct. What we've talked about in the past is that when we look at the profile coming in through our product launches, the NPIs, they are generally at a higher margin than the existing business. That's something we've spoken to the past, and it continues to be the case looking forward. And I would also say that over the coming years, what we know about the pipeline today that is pretty consistent that they come in with a higher margin than the existing business, which you then will see reflected in the margin for the business overall. Ramoun Lazar: That's pretty clear. And then I just had a question on the emerging platform, particularly omega-3. I mean it sounds like you're going to manage the cash requirements of that business more tightly. I mean can you maybe just talk about I guess, how that potentially impacts the potential growth profile of that omega-3 platform? Is there anything else also you can do to potentially improve the cost profile of that business, just given the volatility that we've seen over the last year or so? Brendan Ryan: Yes. So we have -- as part of the review, we have reduced the cost and the capital profile of the omega-3 business with the focus on selling through on the current inventory in terms of really the customer supply requirements over the next couple of years. The focus also is looking at how do we improve our cost of goods competitive positioning, and that's planned with a change in the production zone to the Southern Hemisphere. That's underway in terms of that activity today. We'll continue to look at the capital profile and the cost profile knowing that there has been significant steps already taken, and that will continue to be a focus throughout the financial year '26. Gregory Hunt: And just one other point there in relation to the carinata bioenergy business, the capital contributions from BP support the growth in that platform as well. Ramoun Lazar: Okay. Okay. But to get -- I guess to get it back to a breakeven position, so you need to see either a further improvement in fish oil pricing or some of these shifting of growing to some of these lower cost regions before that -- before the earnings get to a breakeven? I guess do you have some sort of time frame on when you could get back to breakeven? It doesn't sound like '26, obviously, but maybe '27? Gregory Hunt: Well, we've said we're not going to grow a crop in calendar year 2026. We have said that we will start -- so we're talking specifically about omega-3 now. What we have said is we will start to plant in South America small volumes in 2026 and then grow through '27, '28. I think the other point I'd just remind everybody of is that a big catalyst -- value catalyst in this platform is global deregulation. And we still believe we're on track to achieve that in '27, '28. In relation to the hybrid seeds business, that is cash-generative, so in effect, it funds itself. And as I said, just to be clear, the relationship with BP, they are continuing to support us with the ramp-up, both through SG&A and R&D support to accelerate the growth of that platform. So you're right, it's fundamentally an omega-3 issue. Operator: The next question comes from Jonathan Snape with Bell Potter. Jonathan Snape: Look, I'm going to ask 3 questions for the time because there are 3 different people. First sort of touch on the seeds, and I know you've gone through it a little bit of detail, but that $30 million improvement in the emerging platform looks like it's like really 3 buckets going on there, if I can talk about it, obviously, one is carinata. I think you said the plantings are up. I didn't catch if you said how much they were up this year, but I imagine that has some kind of earnings benefit to Nufarm. It sounds like the second bucket in there is omega-3, you're planting less of it. So imagine losses just from simply planting less again be lower in '26 when you sell '25 crop in terms of metric you mentioned it's the fish oil component. And I think you've referenced pricing [ together for '26 ]. Gregory Hunt: Sorry, Jonathan. Well, I got the first part of the question, which was increased carinata, the impact on seed sales or seed revenue, seed margin and oil, yes, we didn't get the second and third questions. Jonathan Snape: With the omega-3 oil pressure, reduce planting, how much that kind of contribute into the omega-3 loss reduction year-on-year. And then I'm trying to figure out fish oil because the prices in Peruvian and Chilean ports last week took quite a big jump. And I'm trying to think if you -- it doesn't sound like you put any of that in your thought process at the moment. And I think that's the first reference price since the [ AMAPE ] numbers came out. So if that was to hold or continue, that would be a benefit to the sell-through, I imagine, of the inventory. Is that kind of how I should think about it but with the latter bit probably not in your thinking at this point? Gregory Hunt: Thanks for the question, Jonathan. Brent, do you want to have a crack at that? Brent Zacharias: Sure. Jonathan, just some comments on fish oil pricing first. Yes, we have seen some indications of that jump that you referenced in the Peruvian market, but it's just important to recognize that very little volume has actually traded yet until the quotas are actually caught. So yes, we're alive to it. But you're right, our $30 million improvement target for emerging platforms is based on where fish oil prices were trading as of September, which was about $2,600 on the North Atlantic, which is the one we tend to track and follow because they sell into certified fisheries. So absolutely, you're right. If we do see some upward movement that creates upside to that $30 million improvement target. It was really based around the $2,600 that we saw as of September. And just to add... Jonathan Snape: No, I was just interested in the carinata side and how much that contributes. Brent Zacharias: Yes. Carinata, as Greg covered in the script, we're starting to see some really strong fundamentals with the increase in GHG values. Just to comment on that. A year ago, the German GHG ticket price was $75 for a ton of carbon. Today, it's trading at over $250 as referenced by Argus. So that's encouraging us. And as you noted, we did increase our plantings last year, and we'll continue to scale further going into 2026, which creates seed margin as well as with rising fundamentals on GHG, it should expand oil premiums that we share with BP as well. Jonathan Snape: And look, can I ask -- this is -- the next question is around active ingredients prices. I noticed you said that kind of stabilized. And I think some of your competitors have said that as well in the recent week. If I look at ex-China factory gate price and some of the actives, it's actually started to be kind of an upward movement like high single-digit year-on-year gains in some of those commodities. So when you're looking into 2026 in your baseline thoughts, are you kind of assuming a fairly benign environment for actives and therefore, sell through prices? Or do you factor in that there has been kind of this upward movement in the last 2 or 3 months in actives and if you find anything, it's a carry on active? Rico Christensen: So we definitely use the current pricing for budgeting and forecasting for the coming years. But obviously, we're also very attuned to change in the prices coming out of China. And it does feel like not just when we look at our own momentum in the second half, but also looking across the industry. It does feel like we're beginning to see the industry as such beginning to climb out of that pricing depression we've had in the last couple of years. So we hope that we will see that continue in FY '26. Jonathan Snape: And look, my last question is balance sheet as always. The off-balance sheet facility utilization was down quite materially year-on-year. It looks like you shifted $100 million from off to on, which obviously says your operating cash flow is probably a little bit better. But if I'm looking at it right, I think that's the lowest utilization of the off-balance sheet facilities by Nufarm that I can find. Is there any particular reason why you're utilizing those facilities materially less than you have in the past? Is it aged stock? Is it something else? It just looks like an exceptionally low number. Brendan Ryan: No, it's not -- so Jonathan, just on the supplier financing, just the one facility. The balance at -- $26 million at the balance date. Why is lower primarily related to the arbitrage, I guess just on interest rates, particularly between the Chinese rates? And I guess, just to reinforce, if you look at our payables days, they remain flat. So there's no trade-off between, I guess, terms of trade versus debt. Jonathan Snape: Yes. Okay. But if you were to use those like closer to the historical average, obviously, it would move debt off your own balance sheet. So it's just an interest rate arbitrage thing. It's nothing else? Brendan Ryan: Yes, that's correct. Operator: The next question comes from Owen Birrell with RBC. Owen Birrell: Look, first question for me, just again on the omega-3. I just wanted to get a better indication from you as to your current omega-3 oil inventory position. Just wanted to get a sense as to how much oil was actually produced through '25 and therefore, what's your carryover inventory into '26? And just acknowledging the comment that you said about no crop being grown in '26, does that mean there's going to be zero oil generated in '26? Brendan Ryan: Yes. Thanks for the question, Owen. Just clarifying on omega-3 inventory position, I won't call it metric tons, that's quite commercially sensitive. But what we have is a carryover of the inventory into '26 from the crop last year, and that's been valued at the current North Atlantic fish oil pricing, which one person referred to a $29 million non-cash revaluation. So that's the -- effectively a benefit that carries through to the sales profile in financial year '26. In terms of new crop, there is a legacy crop coming from the FY '25 plantings. That will -- we're factoring in that there will be some revaluation on that crop relative to where fish oil pricing may go in the future. So it's a factor of that. And then, I guess, overall, the focus is on managing that inventory in terms of optimally gaining cash position from it. And that's in parallel then with managing the demand requirements from our customers. Owen Birrell: I know the -- effectively the $29 million write-down of that inventory position, but are you able to give us a sense as to what the -- how much -- what the value of that inventory sits on your books right now post that write-down? Brendan Ryan: Look, the value of that book is probably closer on the majority of the omega-3 facility, which is disclosed in the accounts. So it's in the order of -- I give an approximate of about $100 million, which is pretty close to that. Owen Birrell: Okay. And just second question, just on the bioenergy platform. You mentioned quite extensively the sort of new capital-light model. But I'm just wondering if you can give us a sense, I guess, functionally or operationally, how has the model changed from what you were previously doing? Brendan Ryan: The model hasn't previously changed. So the model hasn't changed in terms of 3 years into the agreement. It's a capital-light model in terms of -- from our perspective, as we take no balance sheet. So no inventory comes on to our balance sheet and also through the partnership, some of the supporting costs and capital requirements are co-funded. Owen Birrell: So previously, you were taking that inventory on your balance sheet? Is that what I'm reading into there? Brendan Ryan: No. we're taking no inventory to the balance sheet previously. Just other than the underlying carinata seeds, no oil, no carinata oil or biofuel oil on our balance sheet. Owen Birrell: Okay. But it sounds like the capital-light is very much that the capital contributions are coming from BP rather than yourself? Is that the difference? Brendan Ryan: It's co-funded between us and BP. Owen Birrell: Okay. I'm just trying to understand what's actually different. What's changed? You're talking about a capital-light model, but it doesn't sound like anything has actually changed. Brendan Ryan: Nothing has changed. Just stating that it's a capital-light model. Operator: The next question comes from Scott Ryall with Rimor Equity Research. Scott Ryall: My first question relates to Slide 13 and the talk about R&D expenditure. I just want to make sure I heard Brendan correctly that the R&D expenditure, broadly speaking, is expected to continue to grow. Did I catch that right? And if so, I guess I'm looking at the material items -- the slide before. We've impaired some intellectual property on sunflower and canola. And I'm just wondering, and the question stands, regardless of what the outlook for R&D is. But how do you make sure that you get your real bang for buck? And how are you ensuring that you learn from whatever has gone wrong with that intellectual property? And how does that fit within your reprioritization, please? Brendan Ryan: Well, thanks for the question. Just on R&D, just to clarify. So the expenditure going forward into financial year '26 has a lower level of expenditure than financial year '25, and that's primarily driven by the near-term focus on the research and development pipeline. Sorry, what was your second part of the question? Scott Ryall: Just R&D and making sure that you're not -- your material items in the future are not writing off intellectual property, which presumably is where the R&D has gone to. How does that fit within the reprioritization, please? Brendan Ryan: Yes. So thanks for that. In terms of material items, the material item relating to the sunflower is a result of the position or the conflict going on in Ukraine and Russia. It's been much more prolonged and severe than we initially anticipated. And given it's a significant sunflower market, that was the driver in terms of the impairment around the sunflower IP. In terms of more broadly managing the benefit that comes from our investments in R&D, there's a rigorous process around identifying the research and development product line that provides, I guess, a balance, both in the short term and the medium term, followed with a disciplined approach around stage gating and review in terms of monitoring the progress in terms of the delivery of the benefits. I might pass to Rico, he might add a few more comments just around that. Rico Christensen: Yes, sure. I think we expect the R&D cost to be lower in FY '26 compared to FY '25. It's due to some of those reasons Brendan mentioned around more efficiency around stage gate processes and so on and also because we did have some one-offs in our R&D cost in '25 that we've announced in different press releases we've done in agreements with different partners. Again, those are capital-light models compared to different -- what different companies are doing on R&D. So generally speaking, we do spend a lot less on R&D than our competitors because of those partnerships that we have. Scott Ryall: Okay. All right. And then, Rico, my last question is just for you. I -- sorry for the football results overnight, by the way. So you've been onboarded in Nufarm for more than 3 years. I guess I'm just wondering, how do you think the position of Nufarm will change over the next 3 to 5 years relative to what you've observed the position has been over the year has changed over the last 3? What do you really think is going to be where the change in direction for the company, please? Rico Christensen: I think it's a good question, and I also spoke to it a little bit about in the priorities and the outlook. And I think... Scott Ryall: That was just for 1 year, right? Rico Christensen: Yes. Well, exactly. So as I said in the -- in my comments, the short-term focus is really on -- around capital discipline and cash discipline. We have -- we want to get our leverage down as we've stated. But at the same time, obviously, we also have to solve for the growth for tomorrow in Nufarm, and we continue to do that through our investments in R&D in both seeds and cost protection where we have a strong near, medium and long-term pipeline. And I think as we talked about earlier, when you see the impact of our new product introductions across the business in Crop Protection. We've said overly it's around 15% on revenue. But in fact, it is a little bit more when we talk about gross margin. And what you will see over time is that as those new products coming into the portfolio, they will keep improving our gross margin profile and therefore, also the earnings for the company. Operator: There are no further questions at this time. I'll now hand the call back to Rico Christensen for closing remarks. Please go ahead. Rico Christensen: Yes. Thank you. I just wanted to end up by saying, thanks for dialing in. I look forward to catching up with many of you over the coming days. And this then concludes our call. Thank you. Operator: That does conclude our conference for today. Thank you for participating. You may now disconnect.
Operator: Good afternoon, and welcome to the Nanoco Group plc Investor Presentation. [Operator Instructions] Before we begin, I'd like to submit the following poll. I'd now like to hand you over to the management team from Nanoco Group plc. Dmitry, good afternoon, sir. Dmitry Shashkov: Good afternoon, good morning. Dmitry Shashkov, CEO of the company. Liam? Liam Gray: I'm Liam Gray, CFO. Dmitry Shashkov: Okay. Welcome to our annual results presentation. I will take you through the operational highlights, and I pass it off to Liam to cover the financials, after which we will take any questions which you may have. My main topics will be around the revised Nanoco strategy, which we've been developing throughout the year, the progress along the strategy, especially in the area of image sensor, which was the main focus. And in the end, I will also give you an update on our strategic options review known as the CDX process. With that, let me proceed. 2025 was a big year for Nanoco. We accomplished a lot in a short period of time. As we reported earlier to the shareholders, we started the year by significantly adjusting our cost base. In the end, we were able to reduce our cash burn by approximately 30%, extending our cash runway and giving us opportunity to reinvest in the business development. Along the way, we also changed our organization following the changes in the Board composition earlier in the previous year, we proceeded to build a global commercial organization, which is now operational on 3 continents. And the early part of the year was strongly focused around redesigning our strategy. We really started with a blank sheet of paper, and we rebuild the strategy from the ground up by analyzing all available market opportunities with a strong focus on those which could deliver revenue and profitable growth to the company in the short to medium term and prioritizing other opportunities lower on the list to stay focused on what will deliver the value in the coming years. Along the way, we reconfirmed that image sensors remains the main market and should remain the top focus area for the company for the reasons which I will get into later. But in brief, it's a combination of very favorable external factors in the market trends which favor the development and adoption of this technology and a strong competitive position inside Nanoco, which we've built through the years through the combination of our technology, IP, production capabilities and new product development. Throughout the year, we signed a second joint development agreement that happened in the spring of 2025. And just about a month ago, we extended our first joint development agreement by additional 3 years. Those are both very important milestones in the company development, and I'll comment on that later as we go through the presentation. And finally, earlier in 2025 in the calendar 2025, we started the strategic options review with CDX. The process after a few months resulted in significant progress, and I will give you an update in the end of this presentation. Let me start by categorizing our markets. As a result of the strategic strategy review, we put our markets into 3 categories. And in the first category, top priority, one market image sensor is strongly revalidated as the top area of focus for Nanoco. There are a couple of reasons for that, but most important ones, as I mentioned, on the outside -- in the outside world, we have rapidly developing applications, which are enabled by this new quantum dot sensor technology. They range from facial recognition for consumer electronics to automotive safety, helping monitor the driver's condition as well as various collision avoidance systems to industrial quality control where in a variety of industries, quantum dot sensors can deliver capabilities not achievable with other methods, all the way to medical monitoring and various applications in defense and surveillance. All of these applications are developing in parallel. And against these trends, we formulated the strategy to focus in image sensors around 3 main themes. One is around new product development. We pursue aggressive new product development, which is focused on high-volume markets. For us, that means predominantly consumer electronics and automotive markets with others to follow. Secondly, we work on our product portfolio. In addition to our first-generation material, we now have second and third-generation materials under development, which fit the needs of those high-volume markets, consumer and electronics. We also -- in addition to new materials, we're also offering longer wavelengths available for this type of sensing, which also opens up additional applications for us. And finally, we said from the beginning to have a broad commercial outreach to really cover any significant programs globally, whether they are in North America, in Europe or in Asia, if any of the end users of the sensor technology is considering introduction of QD sensors into their product lineup, we would like to be their partner of choice and work with them on developing this technology and bringing it to commercial adoption. The second category are the markets where we see growth potential in the medium term, and they could nicely balance our presence in image sensors with additional applications, which are less cyclical and growing on independent, based on different trends than the image sensor market. Those are the markets such as flat panel display, photovoltaic, agriculture and paints and pigments. In each of those, we see some opportunity for the future. But right now, they do not warrant the same amount of attention and focus as image sensor market. And flat panel display is a more mature market, but would give us additional opportunities to grow if and when we see favorable regulatory trends manifesting towards substitution of cadmium, which is one of our main strengths in the flat panel display market. The other 3 markets photovoltaic, agriculture and paints and pigments are much younger. And rather than pursuing these new markets by ourselves, we are looking to find a development partner, typically one partner per segment to pursue that development jointly. And if and when those market segments develop to larger commercial opportunities, we would be able to scale up our resources and participate in them with a more significant effort. So for now, those are growth options, which we continue to pursue with modest amount of resources, so we can focus all our efforts on image sensor. And finally, for the 4 market segments, which were previously considered for growth, that's lighting, biomedical applications, authentication markets and quantum technologies. We do believe that quantum dots offer nice opportunities in the longer term. But for now, those markets do not warrant additional attention. As a relatively small company for the sake of focus, we will continue monitoring these applications, but we're not going to put any additional effort into them as of today. With that, I would like to take a deeper dive into the image sensor market, the one which is the main focus of our product development and our strategy investment. We are witnessing a major and a positive shift happening in this market. Just in the 12 months that I've been with Nanoco, we see quite a dramatic change where today, it's predominantly low-volume markets, mostly centered around industrial and defense applications. They enable some important possibilities such as machine vision, whether it's for agricultural applications for produce inspection or for semiconductor fabs as well as a variety of defense applications. Those are good applications with good value proposition, but the volume of sensors and associated systems tends to be in the hundreds and thousands of units, not in the millions. Those pave the way for high-volume application to come through. And what we witnessed is that consumer and automotive markets are rapidly moving towards commercial adoption. Consumer market has already been our focus. That is the focus of both of our joint development agreements. The first one signed a little bit over 2 years ago and now extended and the second one, which we only signed in the spring of 2025. But in addition to consumer, we witnessed rapid changes in the automotive market. Conventional wisdom, what you would read in the market reports would say that automotive market typically is delayed by a few years after consumer because of high reliability requirements and conservative nature of the end users. But that's not what we witnessed. We observe that some of the companies, especially Asia-based companies are pursuing this technology quite aggressively, and we believe that adoption in high volume in the automotive segment will rapidly follow the adoption in consumer. For us, those are the 2 main high-volume markets. In addition to consumer and automotive, we see some favorable developments in the medical field where those quantum dot sensors can be used for diagnostic as well as for biomonitoring. And this also could be a pretty high-volume application. If it's taken to wearable devices, opportunities would be in the millions, whereas for automotive, it's already in the tens of millions because you expect to have multiple sensors per car performing different functions once they are introduced. And on the consumer side, if you just count the cell phones, approximately 1.4 billion cell phones are manufactured every year. So even a modest penetration into the cell phone segment would indicate hundreds of millions of units. So that is the reason why we strongly focus on the right-hand side of that panel where really high-volume opportunities lie. And we, as a company, are really well positioned to succeed in this market. In the existing products, during 2025, we developed a detailed capacity model. And we now can confidently say that our existing production facility in Runcorn can produce 2D materials enough for approximately 150 million sensors on a 1-shift operation, 5 days a week, 1 shift. If we change that operation to 3 days -- sorry, 3 shifts, 7 days a week, we are capable of producing up to 700 million sensors worth of quantum dot material. This, again, enables us to participate fully in this growing high-volume market, whether it's consumer or automotive, this amount of capacity is sufficient to service this market globally. Along the way, we also analyzed our cost position and Nanoco is in a unique situation compared to other companies in this field because of our extensive production experience in high volume of those quantum dot materials as well as our unique IP. And as a result, we concluded that once we are on scale, we're able to provide this quantum dot material at a very modest cost to the end user. It remains a high-margin profitable product for us, but the contribution to the cost of the sensor would be somewhere in the ballpark of $0.12 to $0.25 per sensor. Again, contrary to popular belief, quantum dots are not necessarily expensive. They deliver their unique functionality in such a small quantity that to enable a sensor, we only need to contribute a very modest amount of the cost. And that's an encouraging calculation, which tells us that we can really aim at very high-volume cost-sensitive markets with our production capabilities. We also recently received a small grant from Innovate UK and that grant is to further optimize our first-generation material, lead sulfide to develop what is known as a single-layer ink. That will be an improvement to an existing manufacturing process, which will make us even more productive with this first-generation material. On the new product side, most important developments during the year were really the signing of the second joint development agreement with an Asian manufacturer, which we announced in April. And that joint development is focused on consumer applications just like the first. And the first joint development agreement was successfully renewed just about a month ago for additional 3 years. That is perhaps the most important milestone we achieved during the year because in 3 years, we expect to finalize the material selection, go through all the steps of process development, manufacturing process development and most importantly, to go through the scale-up phases where our material is extensively tested in high volume, validated by the end user and gets ready to be adopted in high volume. And that means that within this 3-year period, we will rapidly increase our production volumes for the sake of the customer, and we are looking to get a lot closer to breakeven sometime in 2027 as a company. On the technical side, we also made some significant advances. We can now state that Nanoco achieved the best-in-class performance with the leading material, which we are developing for this market, which is indium arsenide. The 4 numbers highlighted here in the light green, I will explain them on the next page, but those are the best result which any company or organization has been able to achieve, and that's very encouraging result for our customers. And in addition, we launched some new internal projects to extend our capabilities further. One of them has to do with new materials. In addition to indium arsenide, which is our main material, we also now have a project on indium antimonide. That is the third-generation material, if you'd like to call it that, which can deliver additional capabilities, which indium arsenide material cannot. So we are now pursuing device development with Indium antimonide. And in addition, we started to look at extending our wavelength capabilities as well. Current capabilities in the short-wave infrared, SWIR region, as it's known, tend to extend all the way to 2,000 nanometers. But between 2,000 and 3,000 nanometers is the extended SWIR and above that region between 3,000 and 5,000 nanometers, we have the mid-wave infrared region. And in both of these regions, there is no low-cost applications, so no low-cost technology, which can sense objects at this wavelength. This wavelengths opens significant additional opportunities and high-volume applications, and we started the projects in this area to be first extending our capabilities into these wavelengths. So this page is a bit technical, but I will explain. This page demonstrates all the results known to us, which were achieved with this quantum dot sensor technology in a very important spectral range of 1,400 to 1,500 nanometers. This is a popular wavelength, which a number of organizations, commercial and technical are pursuing. Companies like IMEC, companies like Sony and some of the others have done a lot of work at this wavelength with this material. And technically, the expectations of this material are twofold. There are 2 most important performance parameters. On the horizontal axis is what is known as quantum efficiency. This is the measure of how strong is the signal coming from the sensor when the object is illuminated. And on the Y-axis is what is known as dark current. This is the measure of noise or useless signal, which comes from the sensor when object is not illuminated. So as you can imagine, on the horizontal axis, the higher quantum efficiency, the better. And on the dark current, the lower dark current, the better. So ideally, you would like to be positioned as low on the Y-axis and as far to the right on the X-axis. And the 2 champion devices are circled at the bottom of the chart in red boxes. Those are the 2 champion devices which we developed with indium arsenide technology. And as you can see, they far exceed any other results which were published so far. I also point out that the scale on the Y-axis is logarithmic. So additional reductions in dark current are quite significant, and they're very difficult to achieve. For comparison, you can see the blue oval, which roughly outlines the region -- the range of performance, which now puts us into a position to be adopted into commercial applications. And as you can see, we're already meeting requirements for dark current, and we are very close to meeting requirements for quantum efficiency. We're quite confident that we can get there with a few additional developments, which are already underway. So again, very encouraging results for our customers who see this performance and clearly putting us in a leader category in this new market. So with sensors capable of this, we can do a lot of things. I think we already demonstrated some of the pictures. Those are pictures taken with the camera and inside the camera are Nanoco quantum dots. This is the first-generation material. And on the first panel, you can see clearly improved visibility through smoke. Left-hand side is the conventional visible camera. Right-hand side is the infrared camera, which shows very clear visibility through the smoke and a very good level of contrast, which you otherwise cannot achieve. The second panel demonstrates visibility through a silicon wafer. In the visible light on the left, it looks opaque and slightly purple. But in the infrared illumination, you can clearly see the Nanoco logo, which is printed on a piece of paper underneath the silicon wafer. Clearly, light goes through silicon without any obstacle, and that opens up a variety of applications in the semiconductor industry, including wafer inspection and quality control. Likewise, the picture on the bottom shows visibility through plastic packaging. Again, in the visible light, the package appears opaque. But with infrared illumination, you can clearly see through the package, which allows you to accomplish material sorting or simple quality control without breaking the packaging open. And many other applications can be enabled with this kind of capabilities, which we're just beginning to implement in real world. With that, I would like to shift gears and give you an update on our strategic options review with CDX. You will probably remember when we started this process roughly in January, there was a significant amount of activity, which we reported on. Our outreach was quite broad. We ended up in conversations with more than 200 companies globally. The idea was to leave no stones unturned and really assess all types of potential investors with their potential to make an investment in Nanoco and to deliver higher value to our shareholders than we could through organic development. And after months of activity, we identified a number of interested parties and discussions with these parties are continuing. I am cognizant that the process has taken quite a long time. But again, as I stated in our spring presentation, the objective is to find the highest value option for the shareholders, and that doesn't always happen as fast as we'd like. We continue this process, and we will update the shareholders as soon as we're able to. But overall, we are confident that between the organic strategy, which has been underway and under implementation throughout the year and the inorganic options, which we are now lining up, we are in the best position to deliver shareholder value. With that, I'd like to pass the baton to Liam, and he will cover the financials. Liam? Liam Gray: If we start with some of the financial highlights for the year. Firstly, revenue of GBP 7.6 million is down GBP 0.3 million on the prior year, and this is due to the prior year having the full year benefit of the JDA with the European customer, which they canceled in October '24. And this was partially mitigated in FY '25 by the new JDA we signed with the second Asian customer. Our adjusted EBITDA in spite of the fall of revenue has increased to GBP 1.5 million from GBP 1.2 million in the prior year, and that reflects the reduction in the cash cost base as a result of the restructuring program we completed during the year. During the year, we also completed the previously promised GBP 33 million return of capital to shareholders with the final GBP 1 million of buyback being completed in October '24. Our year-end cash position was GBP 14 million, and our ongoing cash cost base is now stable at GBP 0.5 million per month. And just to clarify, that is our gross cash cost base before any revenue. So our net cash depletion is around GBP 350,000 to GBP 400,000 per month. As a business, we obviously continue to maintain a strong focus on our cost management. And finally, we currently have an order book of GBP 7.6 million, which can be broken down into GBP 6 million relating to the Samsung license, which has obviously been prepaid, GBP 1.5 million relating to services revenue and GBP 0.1 million of grant revenue from Innovate UK grant, which Dmitry referenced. This order book of GBP 7.6 million is equal to the revenue achieved in FY '25 and gives us a solid foundation to outperform the FY '25 financial results. Moving on to the next slide, we have our summary income statement. So starting from the top. As mentioned previously, revenue in the year was GBP 7.6 million compared to GBP 7.9 million in the prior period. Our cost of sales has fallen compared to the prior year due to a combination of lower revenue and also a reallocation of staff to internal R&D investments. And you can see that increase in cost further down the table on the fifth row. This has resulted in a gross profit in FY '25 of GBP 7 million compared to GBP 6.7 million in the prior year. Other administrative expenses have fallen by GBP 0.5 million, and that reflects the benefit of the restructuring we completed during the year. This gets us down to an adjusted EBITDA of GBP 1.5 million. Further down within other adjusted items, there are a number of small one-off charges, which included GBP 0.3 million relating to the ongoing strategic review, GBP 0.3 million related to the LG litigation and GBP 0.2 million related to the requisition general meeting last year. And we also incurred GBP 0.1 million related to the restructuring. We then have our noncash share-based payment charge of GBP 0.7 million. And in the comparative period, that was GBP 1 million, which -- and that was offset by a positive FX gain of GBP 2.7 million on the Samsung receivable. Depreciation and amortization has increased due to the full year impact of device lab, our investment in CapEx over the past couple of years. And then we have finance income, which is largely interest on cash deposits and the tax charge is the unwinding of the withholding tax assets and a change in the calculation of the deferred tax asset. And just for reference, that movement is all noncash, and we actually received a GBP 0.3 million payment from HMRC for R&D tax credits claimed during the year. And that gets us down to bottom line loss after tax of GBP 2.2 million. So this next slide reconciles our movement in cash from GBP 20.3 million at the start of the financial year to GBP 14 million as of 31st July 2025. We have the completion of the buyback, which cost GBP 1 million in the current financial year. And then we had our cash outflow from operations during the year, which is GBP 5.2 million, which is essentially the cash we used to run the business. We had some one-off exceptional cash costs, as mentioned previously, for the general meeting, the CDX process and the LG litigation, which comes to GBP 0.8 million. We had some small investments in capital equipment and costs related to the new IP, and that came to GBP 0.4 million in the year. Interest income, as mentioned before, on our cash deposits amounted to GBP 0.6 million. And then we had the R&D tax credit of GBP 0.3 million and then some other small movements, which amounted to an inflow of GBP 0.2 million. And this meant we finished the financial year with GBP 14 million. So in summary, the company has an order book of GBP 7.6 million of revenue. As I mentioned earlier, this is in line with the FY '25 revenue and gives us a strong foundation from which to grow and potentially financially outperform FY '25. Our gross cash cost base before revenue is stable at GBP 0.5 million per month, which is a significant reduction on where we were 12 months ago. As a business, we remain focused on identifying and implementing further savings where possible without compromising on our capabilities. No further investment is required. The device lab is settled and delivering great results, and we have full operational autonomy over the lab for use with any of our customers. We have the facilities to continue to fulfill our joint development agreements, and we have the installed capacity to rapidly scale our sensing materials if the market adoption takes place and the demand increases. And also as previously mentioned, we have completed the GBP 3 million return of capital to shareholders. And finally, on our cash resources, our runway is secure, and there is significant potential for upside without incurring further costs or investments. And as mentioned in the Chairman's report, we have a plan to scale up our materials and be achieving a level of revenues in the calendar year 2027, which means we, as a business, will be self-sustaining. And with that, I'll pass you back to Dmitry. Dmitry Shashkov: Thank you, Liam. In summary, I'd like to say that this was a significant year for Nanoco. We really streamlined the company, and we positioned the company well for organic growth. On the outside, we continue to face very favorable market developments, and those are especially favorable in the image sensor market. We have an excellent competitive position in this market, and we are well positioned to succeed. As we began to implement this strategy during the year, we made significant progress on the commercial front. We have a broad commercial reach. We have 2 joint development agreements, and we are working to sign additional ones when we are ready. We expanded our product portfolio in the image sensor, and we made quite a rapid technical progress. And as a result, there is a growing recognition of the leading role which Nanoco plays in the image sensor market. In addition, we are pursuing some of the additional markets with minimum investment, so we can maintain strong focus on image sensor. So all of this together positions us very well to pursue organic pathway for the company. But as we said in the beginning of the year to explore additional strategic options, which may include the sale of the operating business, now after a few months of the CDX process, we are really well positioned to compare what the inorganic options can deliver. And I'm confident that in due course, we will be able to put the highest value option on the table, whether it is organic or inorganic development as we conclude our CDX process. With that, I'd like to close the formal part of the presentation and open it up for questions. We received quite a few. Operator: [Operator Instructions] I would like to remind you that recording of this present along with a copy of the slides and the published Q&A can be accessed by investor dashboard. We have received a number of questions about today's presentation. Liam, could I please ask you to read out the questions and give responses where appropriate to do so, and I'll pick up from you at the end. Liam Gray: Of course. So the first question we have received is, can you give an update on the LG case, at least in terms of potential dates for development along with the outlook for IP protection generally, please? Dmitry Shashkov: Thanks, Liam. So all I can say about LG case is that it's progressing as expected, but I cannot give you further comments or any potential dates on that. For the second part of the question, outlook for IP protection, yes, of course, that remains part of our focus to look for additional opportunities to assert our IP and enter licensing arrangements, which will help the company financially. We will continue to evaluate those opportunities as we are progressing with LG, then after that, we would look at additional opportunities if and where it makes sense. Just to remind everybody, IP protection doesn't have to take a form of a lawsuit. Lawsuits are costly and risky. First and foremost, we would be looking for opportunities to take in a license, but legal options remain on the table if they are financially justified. Again, we need to recognize that the process could take a while and can cost a substantial amount of money. Therefore, it's always a trade-off between what's achievable and what's practical given the financial limitations and risks involved. I think second question is very much related to that. So we can skip it. Next question is maybe, Liam, I'll pass it to you. What is the current cash burn per month for Nanoco? Is an equity raise likely in 2026? Liam Gray: Thank you. So as I mentioned, the gross cash cost per month is GBP 0.5 million, we do have revenue of sort of GBP 100,000 to GBP 150,000 per month offsetting that. So the gross cost per month are GBP 350,000 to GBP 400,000. Will the cash balance at the year-end be GBP 14 million? No. It's very unlikely an equity raise is likely in 2026, unless something significant happens in that we have to scale quickly or deploy cash for investment. But in regards to run the business, no an equity raise isn't likely in 2026. Okay. Next question. How is the transition in the technology team progressing post the departure of Dr. Nigel Pickett, Founder and CTO of the Nanoco Group? Could you provide a further color on his departure? Dmitry Shashkov: Thanks, Liam. Yes, good question. So we announced that Nigel will eventually retire from the company. And that is after building up this company from the garage stage literally in a closet in the University of Manchester to the company that it is today 24, almost 25 years later. So Nigel is simply ready to move to the next stage. And that was his intention to eventually retire. Along the way, we invested significantly into our technology resources. As we announced, we replaced his role with a non-Board role, but it's a senior technologist, Ombretta Masala, who was already in a leading role in the technology organization, supported by a number of your quite seasoned R&D colleagues. And I must say that this transition has been very smooth. Operationally, the new team is already fully running independently of Nigel. Nigel continues to be with the company for a few additional months to provide some of the transition as well as to focus on some of the special tasks, which he is uniquely capable of doing. We're certainly wishing him well, but the organization at this point is well positioned to continue. I also will mention that in the fall of 2025, we also brought 3 additional resources into the R&D team. And that still keeps us with the reduced cash burn, which Liam outlined, but we brought two senior chemists and one device physicist onto our team, and they're already well engaged and they bring additional capabilities to our technology organization. So transition is going well, and we are confident that we're well positioned to capture the opportunities. Liam Gray: Okay. Next question. Sorry if I have missed it in the first few minutes, but there has always been a focus on the TV screen market and a huge growth market that Nanoco is well positioned to capitalize on. That now seems less of a focus. Are you now telling us that you don't see this as a major opportunity any longer? Dmitry Shashkov: Excellent question, and it's always good to reflect and say, how did our views change from a couple of years back? Yes. So flat panel display is the first market for quantum dots, which developed into relatively high volume. Along the way, market also commoditized significantly. So when we look at the opportunities to introduce our materials into the existing flat panel applications such as LCD technology, really the legacy technology, the one which started, the penetration of QDs. This market is rather commoditized. And there are pockets in this market, which remain attractive. For example, especially in China and in Taiwan, significant amount of LCD product is still produced using cadmium-based material. We at Nanoco pioneered the cadmium-free technology, and we think it may be an attractive opportunity to replace cadmium-based materials with the cadmium-free. However, right now, in China specifically, there is no regulatory trend or regulatory drive to substitute cadmium away. Therefore, we see this as an opportunity which we will monitor, but not necessarily put a lot of resources into given that absent regulatory drive, this is not going to be a high-margin opportunity for us to pursue. On the new technologies, new technologies, especially microLED is expected to be introduced in the coming years. And quantum dots will likely play a role. They would be used in relatively high volume comparable to LCD. And this may become a good market for us to pursue. But as of today, this technology has been delayed by years and years because of very significant technical hurdles as well as the economics. This new and improved TV technologies have to compete with existing ones, which are continuing to improve their own performance and to reduce their cost. So on balance, we still think it's an opportune market for us to pursue, but it does not warrant the same focus as a few years ago. Liam Gray: Thank you. Next question. Why is the strategic review taking longer than initially guided? Is Nanoco still of the view that an outright sale of its key division is likely? Or is it also considering strategic equity investors? Dmitry Shashkov: Good question. So I can answer it in very simple terms. Nanoco is not an easy company to assess and value because the technology is quite new and a number of applications are relatively technically complex. So when we started the CDX process, we had to recognize that complexity. And the fact that at the early revenue stage where we are, it may take a while for potential investors to assess the viability of our business plan and to proceed with potential acquisition. So again, our objective is not to get to any deal no matter what it is, but to try and find a deal which would value the company higher than it is currently valued in the public market. And therefore, this may take some time to build that conviction from the potential investors in this inorganic option. That is the main reason, right? We are not trying to rush into a deal, but we are trying to develop an option which could offer high value to the shareholders than organic development. To answer the second part of the question, are we considering straight sale only or an equity -- partial equity investment? In principle, we can consider both. But practically speaking, outright sale of the operating business is the main scenario we are focusing on. So there is a clean transition from the current ownership into the new ownership. That is the main scenario we are continuing to pursue. Liam Gray: Thank you, Dmitry. The next question is, when does Nanoco expect to announce further deals with its technology? Any such discussions at a closing stage? Dmitry Shashkov: Yes. So we have 2 joint development agreements, which we announced. We have quite a few other commercial and technical relationships, which may result in similar joint development agreements. But if and when they will happen, I cannot fully tell you. Yes, we would very much like to expand that portfolio. Three is better than 2, 4 is better than 3, but they come when our partner on the other side is ready to put additional resources and make it into a real project. So we are aiming to have more than 2, but when they will happen, I cannot tell you. What I did witness in my 12 months at Nanoco is that the level of interest in the image sensor market continues to steadily grow that we see a larger number of companies getting involved. I already gave you an example of automotive applications, which 1 year ago, everybody was convinced are pretty far away. But as of today, even coming off the industry conferences 2 weeks ago in Korea, I have pretty clear visibility on a number of large companies pursuing those automotive applications, which 1 year ago was not the case. So I think new agreements will come into place. I just cannot tell you exactly when. Liam Gray: Thank you. Next question. You are not talking about image sensing in the same way as you used to talk about screen market and Nanoco's unique position, which has never transpired. How do you expect shareholders to continue on this journey of assurance that Nanoco can eventually find a commercial product that turns the company's fortunes around? Dmitry Shashkov: Yes. Good question. And obviously, I wasn't there when Nanoco was focused almost exclusively on the flat panel market. But indeed, that market did not materialize for us in the form of sustainable product revenue. It did materialize for us in the largest licensing deal, I think, in the history of advanced materials when we achieved settlement with Samsung. And as you're well aware, we are pursuing a similar type of process with other potential users of our IP. But the market did not develop into sustainable product supply, which ideally we, as a materials -- advanced materials company would like to pursue. I believe image sensor market is different for a couple of reasons. One, we are clearly in the lead when it comes to developing this new technology. Nobody, neither the material manufacturers nor device companies have neither IP, nor production experience, nor the product portfolio, which we have in image sensors. Secondly, we have at least 2 actively engaged customers who vote with their wallet and with their resources. They commit substantial amount of resources from their side to proceed with those joint development agreements. And as we progress with those JDAs, we will continue to update you on our performance. But in and of itself, it's an evidence of customers committed to this market, developing this technology jointly with us where we would become the supplier of choice. We are not worried about not becoming a supplier because the production of these materials is difficult. The production processes are protected by our IP, and we do not expect that anything similar to the Samsung situation will materialize here. So I believe this is a very different market, and these are very different times. And our business model is pretty well protected in the image sensor. Liam Gray: Thanks, Dmitry. Next question, Nanoco Director, Jalal Bagherli and yourself undertook material share buys in November 2024. Are you still of the view that Nanoco is still undervalued? Are directors considering further share buys? And if I may make as subjective inference, you seem a lot less ebullient compared to IMC webinar earlier in the year/April 2025? Dmitry Shashkov: Yes. So to answer the factual questions, yes, I continue to be an investor and a shareholder in Nanoco, mainly because I do believe that we're undervalued. And I believe our Non-Executive Chairman, Jalal, is in the same situation. So I'm confident that the company is worth more, but my job is now to prove it with either organic development, which lead to that recognition in the market or inorganic deal, which will prove it through a transaction value. So that's all I have, I can say about that. In terms of being less ebullient, is ebullient, does it mean bullish? Liam Gray: Cheerful, full of energy. Dmitry Shashkov: Well, I'm certainly full of energy with regards to Nanoco's future. But yes, perhaps on day 1, I was a bit less informed about the complexities of the company. But 1 year later, I'm just as enthusiastic about what the company can do, whether we stay on the organic path or whether we'll find the new owners. I continue to believe that there is significant value locked in the company right now, and we are well positioned to unlock it. Liam Gray: Next question. If you succeed in getting your materials into driver monitoring, do you think that need will be there for a long time? Or do you think autonomous vehicles will mean the opportunity is only there for a short time? Dmitry Shashkov: Yes, good question. I'm not a specialist in autonomous driving. But I think under most realistic scenarios, transition away from human drivers to completely autonomous driving is the transition measured in decades, not years. And under completely driverless cars, even if and when it happens that all the cars on the road are robotically controlled, well, then the cars need to monitor each other. They just don't need to monitor the drivers. So applications in automotive technology, yes, they -- some of them are tailored towards self-driving cars. Others are tailored towards cars with drivers. But either way, the expectation is that quantum dot sensors, infrared sensors will be adopted in multiple units per car, just like today's even proximity sensors, which help you park, you probably have at least a dozen sensors in different points of the car. Likewise, with the 2D sensors, expectation is going to be more than one per vehicle. And therefore, we're not just dependent on driver monitoring alone. Liam Gray: Okay. Next question. The RNS suggests that it is more likely than not that the CDX process won't conclude in the sale. What's the point of continuing if no acceptable offer has been received to date. After everything that has been promised, it would be a huge failure of the Board to execute a sale. Will the Board consider their decisions if that is the outcome. And when you say the process is nearing conclusion, what time frame does that actually mean? Operator: Yes. So I don't know how you read the RNS to say that we are less confident. We are closer to the goal than we were in the beginning, but we are not yet -- we have not yet identified a high-value option, which would come through an inorganic process. The reason we are continuing with the process is because we believe that goal is well within reach. We just haven't been able to deliver it by today, but that remains firmly in our sight. And as I said, we are looking forward to updating all of you as soon as we can. Liam Gray: Next question. The cost of running the business seems too far out. The turnover generated from any production rate sales, how can this continue and when will it change? With spend of GBP 6 million per annum, the GBP 14 million will soon be gone. So just on this, as I mentioned before, the gross monthly spend is between GBP 350,000 GBP 400,000. So is GBP 4 million to GBP 4.5 million. And that's the current revenue levels. We are looking at further JDAs, as Dmitry mentioned, which would reduce that cash burn. And then as we ramp up our scale to production of the materials, we do anticipate the level of revenue from material sales to increase significantly, which is why we believe that come calendar year 2027, we will be in a self-sustain or breakeven position. Next question. You say how significant this year has been for Nanoco. The market sees things differently. Up until now, the market has always been right. Why would this time be any different? Dmitry Shashkov: Yes. I don't know if I can answer this question convincingly, right? I haven't been there at the previous junctions, but I do see that the way we are pursuing commercial engagement with our customers in image sensors and otherwise puts us in a position to succeed. I mean, just to state the obvious, up until December of last year, there was no commercial organization. The company was entirely internally focused on the technical development. Nobody was out there listening to the customers, asking questions, explaining our capabilities and engaging with various customers commercially, whether it's through joint development agreements or any other form of technical or commercial collaboration. We put this organization in place for the first time. We now have a broader pipeline than we ever had of potential customers evaluating our technology. And for all these reasons, yes, I do believe that this time is different. And markets clearly do not see it the same way, but markets do not have access to the inside knowledge, which we are privy to in our discussions with potential customers and development partners. So again, I -- my goal is to disclose as much of it as I'm able to through favorable market trends and specific agreements and commercial developments when we are ready to announce them. But apart from that, we can simply do our jobs, proceed with the commercial development and the results will speak for themselves. I do believe that the markets will eventually align with our vision once we demonstrate tangible progress towards those goals. Liam Gray: Please, can you talk a little bit more about the change of pace of development in automotive? What sort of opportunities do you foresee? Dmitry Shashkov: Yes. Again, infrared sensors can deliver particular functionality better than existing sensors. Existing sensors, if they operate in a visible or near infrared region have limited ability to see through adverse conditions. So for the collision avoidance and similar type of safety tasks, infrared sensors are able to penetrate through rain, snow, fog, smog, smoke or any other types of adverse conditions. So both for driver awareness of an obstacle or automatic collision avoidance systems. Once those sensors are introduced, they can help steer the car away from an object on the road. They're even able to distinguish between a live object and a dead object, lacking better term. If you have a cat on the left and the rock on the right, you would rather steer towards the rock than the cat, et cetera, et cetera. On the driver monitoring side, infrared sensors in some of the wavelengths, which we're working on, are particularly good, for example, to see through the tinted glass, which is good for other types of automotive safety, even for law enforcement. But they're also able to see, for example, through sunglasses. So in some of the countries, legislation is now coming where driver monitoring, especially preventing driver from falling asleep is becoming a mandated feature in some of the new vehicles. Well, infrared sensors are able to easily see, for example, through the sunglasses to track ice movement and to make sure that the driver is awake and attentive with attention on the road. So these are just some of the applications where we see this being adopted. And as I stated, especially in Asia, automotive companies are very keen to differentiate themselves with some of the additional safety features. And this technology gives them an opportunity to get ahead with introduction of this technology. Liam Gray: And just a few more left. Could any of the very large tech companies get involved with Nanoco to pursue quantum dots for quantum computing? Dmitry Shashkov: Quantum dots for quantum computing. Yes, that remains a possibility. We've done some academic work with the University of Manchester to demonstrate that quantum dots could be usable for quantum computing and quantum communication. Those -- this application is in our third category. We believe in the long-term value, but we are not willing at this point to put significant resources into this just simply because of the time it takes to develop. If there is a willing development partner who would like to co-invest in this technology with us, for sure, we would consider. Right now, we just would not like to make it a self-funded activity because I think these markets will take some time to develop. Liam Gray: Is Nanoco eligible for U.K. government R&D grants? Have any such avenues been explored? Dmitry Shashkov: Yes, of course. So we're already a receiver of Innovate UK grant, which is, I guess, one of the main funding agencies in the U.K. We will continue to look at other opportunities. One of our senior staff members is IT and grant manager, Nathalie Gresty, who is monitoring the space quite carefully, both in the U.K. and on the continent. Some of the EU opportunities are still applicable to the U.K. companies, and we will continue to pursue those funding opportunities. They've been quite limited, but with increasing amount of attention from the government to high-tech sector and semiconductor industry in general in the U.K., yes, we believe there are going to be some additional funds available to us, and we will pursue that. Liam Gray: And the final question, you've clearly worked hard at the last year, seem quite optimistic. What are the top 3 things that excite you about Nanoco? Dmitry Shashkov: Yes. Just kind of thinking on my feet right off the bat. The first one is I do think it's a diamond in the rough. I think that Nanoco is one of the very few companies, perhaps it's the oldest quantum dot company, which is still alive, and it's one of the few companies which survived through the years. We only see perhaps 2 or 3 companies around the world pursuing these technologies because it's hard. And most others have been acquired or have gone bankrupt at this time. I do feel that we are now finally in a position to capitalize on all the technology investment, all the complicated developments and all the IP, which was put in place and really become the leader in a fast-growing, very profitable market, which for us will start as image sensor and over time, other markets can be added to this. So that's the main reason. I see that it's a tremendous technology, which is currently undervalued, and we can unlock that value. A couple of other reasons. The team is great. It's a very dedicated team. We have seen relatively low turnover. Just like many of you, our investors stuck with Nanoco, our team has been sticking around and really contributing to the company development through some really hard times, right? So there's a level of resilience and optimism within the company because if we made it that far, we can definitely make it further where others have failed. And there's an element of technology here, which also makes me excited. We are simply contributing to positive developments in the world, not to get too high horsey about it, but we are developing applications, which will help really improve our lives through automotive safety or some of the other applications, which this technology is able to offer. We have solutions which are more energy efficient, ecologically preferable to some of the legacy solutions and those which do deliver real value in a variety of markets. For me, that's pretty exciting. Operator: Dmitry, Liam, thank you for answering all those questions you can from investors. And of course, the company can review all questions submitted today, and we'll publish those responses on the Investor Meet Company platform. Just before redirecting investors to provide you with their feedback, which is particularly important to the company, Dmitry, could I please just ask you for a few closing comments? Dmitry Shashkov: Yes. I'll just simply recap that it's my first full year, which I'm completing at Nanoco. I feel quite satisfied with what we've done. It was a difficult task to pursue organic strategy development and implementation in parallel with the strategic options review, the CDX process. I feel that we made very good progress on both fronts, and we're looking forward to updating the shareholders once that process -- CDX process is complete. And we will be in a position to offer the highest option value -- highest value option to the shareholders. I'm looking forward to updating you on this as soon as we're ready. Operator: Dmitry, Liam, thank you for updating investors today. Can I please ask investors not to close this session as you'll now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations. This will only take a few moments to complete, and I'm sure will be greatly valued by the company. On behalf of the management team of Nanoco Group plc, we'd like to thank you for attending today's presentation, and good afternoon to you all.
Operator: Good afternoon, and welcome to the Nanoco Group plc Investor Presentation. [Operator Instructions] Before we begin, I'd like to submit the following poll. I'd now like to hand you over to the management team from Nanoco Group plc. Dmitry, good afternoon, sir. Dmitry Shashkov: Good afternoon, good morning. Dmitry Shashkov, CEO of the company. Liam? Liam Gray: I'm Liam Gray, CFO. Dmitry Shashkov: Okay. Welcome to our annual results presentation. I will take you through the operational highlights, and I pass it off to Liam to cover the financials, after which we will take any questions which you may have. My main topics will be around the revised Nanoco strategy, which we've been developing throughout the year, the progress along the strategy, especially in the area of image sensor, which was the main focus. And in the end, I will also give you an update on our strategic options review known as the CDX process. With that, let me proceed. 2025 was a big year for Nanoco. We accomplished a lot in a short period of time. As we reported earlier to the shareholders, we started the year by significantly adjusting our cost base. In the end, we were able to reduce our cash burn by approximately 30%, extending our cash runway and giving us opportunity to reinvest in the business development. Along the way, we also changed our organization following the changes in the Board composition earlier in the previous year, we proceeded to build a global commercial organization, which is now operational on 3 continents. And the early part of the year was strongly focused around redesigning our strategy. We really started with a blank sheet of paper, and we rebuild the strategy from the ground up by analyzing all available market opportunities with a strong focus on those which could deliver revenue and profitable growth to the company in the short to medium term and prioritizing other opportunities lower on the list to stay focused on what will deliver the value in the coming years. Along the way, we reconfirmed that image sensors remains the main market and should remain the top focus area for the company for the reasons which I will get into later. But in brief, it's a combination of very favorable external factors in the market trends which favor the development and adoption of this technology and a strong competitive position inside Nanoco, which we've built through the years through the combination of our technology, IP, production capabilities and new product development. Throughout the year, we signed a second joint development agreement that happened in the spring of 2025. And just about a month ago, we extended our first joint development agreement by additional 3 years. Those are both very important milestones in the company development, and I'll comment on that later as we go through the presentation. And finally, earlier in 2025 in the calendar 2025, we started the strategic options review with CDX. The process after a few months resulted in significant progress, and I will give you an update in the end of this presentation. Let me start by categorizing our markets. As a result of the strategic strategy review, we put our markets into 3 categories. And in the first category, top priority, one market image sensor is strongly revalidated as the top area of focus for Nanoco. There are a couple of reasons for that, but most important ones, as I mentioned, on the outside -- in the outside world, we have rapidly developing applications, which are enabled by this new quantum dot sensor technology. They range from facial recognition for consumer electronics to automotive safety, helping monitor the driver's condition as well as various collision avoidance systems to industrial quality control where in a variety of industries, quantum dot sensors can deliver capabilities not achievable with other methods, all the way to medical monitoring and various applications in defense and surveillance. All of these applications are developing in parallel. And against these trends, we formulated the strategy to focus in image sensors around 3 main themes. One is around new product development. We pursue aggressive new product development, which is focused on high-volume markets. For us, that means predominantly consumer electronics and automotive markets with others to follow. Secondly, we work on our product portfolio. In addition to our first-generation material, we now have second and third-generation materials under development, which fit the needs of those high-volume markets, consumer and electronics. We also -- in addition to new materials, we're also offering longer wavelengths available for this type of sensing, which also opens up additional applications for us. And finally, we said from the beginning to have a broad commercial outreach to really cover any significant programs globally, whether they are in North America, in Europe or in Asia, if any of the end users of the sensor technology is considering introduction of QD sensors into their product lineup, we would like to be their partner of choice and work with them on developing this technology and bringing it to commercial adoption. The second category are the markets where we see growth potential in the medium term, and they could nicely balance our presence in image sensors with additional applications, which are less cyclical and growing on independent, based on different trends than the image sensor market. Those are the markets such as flat panel display, photovoltaic, agriculture and paints and pigments. In each of those, we see some opportunity for the future. But right now, they do not warrant the same amount of attention and focus as image sensor market. And flat panel display is a more mature market, but would give us additional opportunities to grow if and when we see favorable regulatory trends manifesting towards substitution of cadmium, which is one of our main strengths in the flat panel display market. The other 3 markets photovoltaic, agriculture and paints and pigments are much younger. And rather than pursuing these new markets by ourselves, we are looking to find a development partner, typically one partner per segment to pursue that development jointly. And if and when those market segments develop to larger commercial opportunities, we would be able to scale up our resources and participate in them with a more significant effort. So for now, those are growth options, which we continue to pursue with modest amount of resources, so we can focus all our efforts on image sensor. And finally, for the 4 market segments, which were previously considered for growth, that's lighting, biomedical applications, authentication markets and quantum technologies. We do believe that quantum dots offer nice opportunities in the longer term. But for now, those markets do not warrant additional attention. As a relatively small company for the sake of focus, we will continue monitoring these applications, but we're not going to put any additional effort into them as of today. With that, I would like to take a deeper dive into the image sensor market, the one which is the main focus of our product development and our strategy investment. We are witnessing a major and a positive shift happening in this market. Just in the 12 months that I've been with Nanoco, we see quite a dramatic change where today, it's predominantly low-volume markets, mostly centered around industrial and defense applications. They enable some important possibilities such as machine vision, whether it's for agricultural applications for produce inspection or for semiconductor fabs as well as a variety of defense applications. Those are good applications with good value proposition, but the volume of sensors and associated systems tends to be in the hundreds and thousands of units, not in the millions. Those pave the way for high-volume application to come through. And what we witnessed is that consumer and automotive markets are rapidly moving towards commercial adoption. Consumer market has already been our focus. That is the focus of both of our joint development agreements. The first one signed a little bit over 2 years ago and now extended and the second one, which we only signed in the spring of 2025. But in addition to consumer, we witnessed rapid changes in the automotive market. Conventional wisdom, what you would read in the market reports would say that automotive market typically is delayed by a few years after consumer because of high reliability requirements and conservative nature of the end users. But that's not what we witnessed. We observe that some of the companies, especially Asia-based companies are pursuing this technology quite aggressively, and we believe that adoption in high volume in the automotive segment will rapidly follow the adoption in consumer. For us, those are the 2 main high-volume markets. In addition to consumer and automotive, we see some favorable developments in the medical field where those quantum dot sensors can be used for diagnostic as well as for biomonitoring. And this also could be a pretty high-volume application. If it's taken to wearable devices, opportunities would be in the millions, whereas for automotive, it's already in the tens of millions because you expect to have multiple sensors per car performing different functions once they are introduced. And on the consumer side, if you just count the cell phones, approximately 1.4 billion cell phones are manufactured every year. So even a modest penetration into the cell phone segment would indicate hundreds of millions of units. So that is the reason why we strongly focus on the right-hand side of that panel where really high-volume opportunities lie. And we, as a company, are really well positioned to succeed in this market. In the existing products, during 2025, we developed a detailed capacity model. And we now can confidently say that our existing production facility in Runcorn can produce 2D materials enough for approximately 150 million sensors on a 1-shift operation, 5 days a week, 1 shift. If we change that operation to 3 days -- sorry, 3 shifts, 7 days a week, we are capable of producing up to 700 million sensors worth of quantum dot material. This, again, enables us to participate fully in this growing high-volume market, whether it's consumer or automotive, this amount of capacity is sufficient to service this market globally. Along the way, we also analyzed our cost position and Nanoco is in a unique situation compared to other companies in this field because of our extensive production experience in high volume of those quantum dot materials as well as our unique IP. And as a result, we concluded that once we are on scale, we're able to provide this quantum dot material at a very modest cost to the end user. It remains a high-margin profitable product for us, but the contribution to the cost of the sensor would be somewhere in the ballpark of $0.12 to $0.25 per sensor. Again, contrary to popular belief, quantum dots are not necessarily expensive. They deliver their unique functionality in such a small quantity that to enable a sensor, we only need to contribute a very modest amount of the cost. And that's an encouraging calculation, which tells us that we can really aim at very high-volume cost-sensitive markets with our production capabilities. We also recently received a small grant from Innovate UK and that grant is to further optimize our first-generation material, lead sulfide to develop what is known as a single-layer ink. That will be an improvement to an existing manufacturing process, which will make us even more productive with this first-generation material. On the new product side, most important developments during the year were really the signing of the second joint development agreement with an Asian manufacturer, which we announced in April. And that joint development is focused on consumer applications just like the first. And the first joint development agreement was successfully renewed just about a month ago for additional 3 years. That is perhaps the most important milestone we achieved during the year because in 3 years, we expect to finalize the material selection, go through all the steps of process development, manufacturing process development and most importantly, to go through the scale-up phases where our material is extensively tested in high volume, validated by the end user and gets ready to be adopted in high volume. And that means that within this 3-year period, we will rapidly increase our production volumes for the sake of the customer, and we are looking to get a lot closer to breakeven sometime in 2027 as a company. On the technical side, we also made some significant advances. We can now state that Nanoco achieved the best-in-class performance with the leading material, which we are developing for this market, which is indium arsenide. The 4 numbers highlighted here in the light green, I will explain them on the next page, but those are the best result which any company or organization has been able to achieve, and that's very encouraging result for our customers. And in addition, we launched some new internal projects to extend our capabilities further. One of them has to do with new materials. In addition to indium arsenide, which is our main material, we also now have a project on indium antimonide. That is the third-generation material, if you'd like to call it that, which can deliver additional capabilities, which indium arsenide material cannot. So we are now pursuing device development with Indium antimonide. And in addition, we started to look at extending our wavelength capabilities as well. Current capabilities in the short-wave infrared, SWIR region, as it's known, tend to extend all the way to 2,000 nanometers. But between 2,000 and 3,000 nanometers is the extended SWIR and above that region between 3,000 and 5,000 nanometers, we have the mid-wave infrared region. And in both of these regions, there is no low-cost applications, so no low-cost technology, which can sense objects at this wavelength. This wavelengths opens significant additional opportunities and high-volume applications, and we started the projects in this area to be first extending our capabilities into these wavelengths. So this page is a bit technical, but I will explain. This page demonstrates all the results known to us, which were achieved with this quantum dot sensor technology in a very important spectral range of 1,400 to 1,500 nanometers. This is a popular wavelength, which a number of organizations, commercial and technical are pursuing. Companies like IMEC, companies like Sony and some of the others have done a lot of work at this wavelength with this material. And technically, the expectations of this material are twofold. There are 2 most important performance parameters. On the horizontal axis is what is known as quantum efficiency. This is the measure of how strong is the signal coming from the sensor when the object is illuminated. And on the Y-axis is what is known as dark current. This is the measure of noise or useless signal, which comes from the sensor when object is not illuminated. So as you can imagine, on the horizontal axis, the higher quantum efficiency, the better. And on the dark current, the lower dark current, the better. So ideally, you would like to be positioned as low on the Y-axis and as far to the right on the X-axis. And the 2 champion devices are circled at the bottom of the chart in red boxes. Those are the 2 champion devices which we developed with indium arsenide technology. And as you can see, they far exceed any other results which were published so far. I also point out that the scale on the Y-axis is logarithmic. So additional reductions in dark current are quite significant, and they're very difficult to achieve. For comparison, you can see the blue oval, which roughly outlines the region -- the range of performance, which now puts us into a position to be adopted into commercial applications. And as you can see, we're already meeting requirements for dark current, and we are very close to meeting requirements for quantum efficiency. We're quite confident that we can get there with a few additional developments, which are already underway. So again, very encouraging results for our customers who see this performance and clearly putting us in a leader category in this new market. So with sensors capable of this, we can do a lot of things. I think we already demonstrated some of the pictures. Those are pictures taken with the camera and inside the camera are Nanoco quantum dots. This is the first-generation material. And on the first panel, you can see clearly improved visibility through smoke. Left-hand side is the conventional visible camera. Right-hand side is the infrared camera, which shows very clear visibility through the smoke and a very good level of contrast, which you otherwise cannot achieve. The second panel demonstrates visibility through a silicon wafer. In the visible light on the left, it looks opaque and slightly purple. But in the infrared illumination, you can clearly see the Nanoco logo, which is printed on a piece of paper underneath the silicon wafer. Clearly, light goes through silicon without any obstacle, and that opens up a variety of applications in the semiconductor industry, including wafer inspection and quality control. Likewise, the picture on the bottom shows visibility through plastic packaging. Again, in the visible light, the package appears opaque. But with infrared illumination, you can clearly see through the package, which allows you to accomplish material sorting or simple quality control without breaking the packaging open. And many other applications can be enabled with this kind of capabilities, which we're just beginning to implement in real world. With that, I would like to shift gears and give you an update on our strategic options review with CDX. You will probably remember when we started this process roughly in January, there was a significant amount of activity, which we reported on. Our outreach was quite broad. We ended up in conversations with more than 200 companies globally. The idea was to leave no stones unturned and really assess all types of potential investors with their potential to make an investment in Nanoco and to deliver higher value to our shareholders than we could through organic development. And after months of activity, we identified a number of interested parties and discussions with these parties are continuing. I am cognizant that the process has taken quite a long time. But again, as I stated in our spring presentation, the objective is to find the highest value option for the shareholders, and that doesn't always happen as fast as we'd like. We continue this process, and we will update the shareholders as soon as we're able to. But overall, we are confident that between the organic strategy, which has been underway and under implementation throughout the year and the inorganic options, which we are now lining up, we are in the best position to deliver shareholder value. With that, I'd like to pass the baton to Liam, and he will cover the financials. Liam? Liam Gray: If we start with some of the financial highlights for the year. Firstly, revenue of GBP 7.6 million is down GBP 0.3 million on the prior year, and this is due to the prior year having the full year benefit of the JDA with the European customer, which they canceled in October '24. And this was partially mitigated in FY '25 by the new JDA we signed with the second Asian customer. Our adjusted EBITDA in spite of the fall of revenue has increased to GBP 1.5 million from GBP 1.2 million in the prior year, and that reflects the reduction in the cash cost base as a result of the restructuring program we completed during the year. During the year, we also completed the previously promised GBP 33 million return of capital to shareholders with the final GBP 1 million of buyback being completed in October '24. Our year-end cash position was GBP 14 million, and our ongoing cash cost base is now stable at GBP 0.5 million per month. And just to clarify, that is our gross cash cost base before any revenue. So our net cash depletion is around GBP 350,000 to GBP 400,000 per month. As a business, we obviously continue to maintain a strong focus on our cost management. And finally, we currently have an order book of GBP 7.6 million, which can be broken down into GBP 6 million relating to the Samsung license, which has obviously been prepaid, GBP 1.5 million relating to services revenue and GBP 0.1 million of grant revenue from Innovate UK grant, which Dmitry referenced. This order book of GBP 7.6 million is equal to the revenue achieved in FY '25 and gives us a solid foundation to outperform the FY '25 financial results. Moving on to the next slide, we have our summary income statement. So starting from the top. As mentioned previously, revenue in the year was GBP 7.6 million compared to GBP 7.9 million in the prior period. Our cost of sales has fallen compared to the prior year due to a combination of lower revenue and also a reallocation of staff to internal R&D investments. And you can see that increase in cost further down the table on the fifth row. This has resulted in a gross profit in FY '25 of GBP 7 million compared to GBP 6.7 million in the prior year. Other administrative expenses have fallen by GBP 0.5 million, and that reflects the benefit of the restructuring we completed during the year. This gets us down to an adjusted EBITDA of GBP 1.5 million. Further down within other adjusted items, there are a number of small one-off charges, which included GBP 0.3 million relating to the ongoing strategic review, GBP 0.3 million related to the LG litigation and GBP 0.2 million related to the requisition general meeting last year. And we also incurred GBP 0.1 million related to the restructuring. We then have our noncash share-based payment charge of GBP 0.7 million. And in the comparative period, that was GBP 1 million, which -- and that was offset by a positive FX gain of GBP 2.7 million on the Samsung receivable. Depreciation and amortization has increased due to the full year impact of device lab, our investment in CapEx over the past couple of years. And then we have finance income, which is largely interest on cash deposits and the tax charge is the unwinding of the withholding tax assets and a change in the calculation of the deferred tax asset. And just for reference, that movement is all noncash, and we actually received a GBP 0.3 million payment from HMRC for R&D tax credits claimed during the year. And that gets us down to bottom line loss after tax of GBP 2.2 million. So this next slide reconciles our movement in cash from GBP 20.3 million at the start of the financial year to GBP 14 million as of 31st July 2025. We have the completion of the buyback, which cost GBP 1 million in the current financial year. And then we had our cash outflow from operations during the year, which is GBP 5.2 million, which is essentially the cash we used to run the business. We had some one-off exceptional cash costs, as mentioned previously, for the general meeting, the CDX process and the LG litigation, which comes to GBP 0.8 million. We had some small investments in capital equipment and costs related to the new IP, and that came to GBP 0.4 million in the year. Interest income, as mentioned before, on our cash deposits amounted to GBP 0.6 million. And then we had the R&D tax credit of GBP 0.3 million and then some other small movements, which amounted to an inflow of GBP 0.2 million. And this meant we finished the financial year with GBP 14 million. So in summary, the company has an order book of GBP 7.6 million of revenue. As I mentioned earlier, this is in line with the FY '25 revenue and gives us a strong foundation from which to grow and potentially financially outperform FY '25. Our gross cash cost base before revenue is stable at GBP 0.5 million per month, which is a significant reduction on where we were 12 months ago. As a business, we remain focused on identifying and implementing further savings where possible without compromising on our capabilities. No further investment is required. The device lab is settled and delivering great results, and we have full operational autonomy over the lab for use with any of our customers. We have the facilities to continue to fulfill our joint development agreements, and we have the installed capacity to rapidly scale our sensing materials if the market adoption takes place and the demand increases. And also as previously mentioned, we have completed the GBP 3 million return of capital to shareholders. And finally, on our cash resources, our runway is secure, and there is significant potential for upside without incurring further costs or investments. And as mentioned in the Chairman's report, we have a plan to scale up our materials and be achieving a level of revenues in the calendar year 2027, which means we, as a business, will be self-sustaining. And with that, I'll pass you back to Dmitry. Dmitry Shashkov: Thank you, Liam. In summary, I'd like to say that this was a significant year for Nanoco. We really streamlined the company, and we positioned the company well for organic growth. On the outside, we continue to face very favorable market developments, and those are especially favorable in the image sensor market. We have an excellent competitive position in this market, and we are well positioned to succeed. As we began to implement this strategy during the year, we made significant progress on the commercial front. We have a broad commercial reach. We have 2 joint development agreements, and we are working to sign additional ones when we are ready. We expanded our product portfolio in the image sensor, and we made quite a rapid technical progress. And as a result, there is a growing recognition of the leading role which Nanoco plays in the image sensor market. In addition, we are pursuing some of the additional markets with minimum investment, so we can maintain strong focus on image sensor. So all of this together positions us very well to pursue organic pathway for the company. But as we said in the beginning of the year to explore additional strategic options, which may include the sale of the operating business, now after a few months of the CDX process, we are really well positioned to compare what the inorganic options can deliver. And I'm confident that in due course, we will be able to put the highest value option on the table, whether it is organic or inorganic development as we conclude our CDX process. With that, I'd like to close the formal part of the presentation and open it up for questions. We received quite a few. Operator: [Operator Instructions] I would like to remind you that recording of this present along with a copy of the slides and the published Q&A can be accessed by investor dashboard. We have received a number of questions about today's presentation. Liam, could I please ask you to read out the questions and give responses where appropriate to do so, and I'll pick up from you at the end. Liam Gray: Of course. So the first question we have received is, can you give an update on the LG case, at least in terms of potential dates for development along with the outlook for IP protection generally, please? Dmitry Shashkov: Thanks, Liam. So all I can say about LG case is that it's progressing as expected, but I cannot give you further comments or any potential dates on that. For the second part of the question, outlook for IP protection, yes, of course, that remains part of our focus to look for additional opportunities to assert our IP and enter licensing arrangements, which will help the company financially. We will continue to evaluate those opportunities as we are progressing with LG, then after that, we would look at additional opportunities if and where it makes sense. Just to remind everybody, IP protection doesn't have to take a form of a lawsuit. Lawsuits are costly and risky. First and foremost, we would be looking for opportunities to take in a license, but legal options remain on the table if they are financially justified. Again, we need to recognize that the process could take a while and can cost a substantial amount of money. Therefore, it's always a trade-off between what's achievable and what's practical given the financial limitations and risks involved. I think second question is very much related to that. So we can skip it. Next question is maybe, Liam, I'll pass it to you. What is the current cash burn per month for Nanoco? Is an equity raise likely in 2026? Liam Gray: Thank you. So as I mentioned, the gross cash cost per month is GBP 0.5 million, we do have revenue of sort of GBP 100,000 to GBP 150,000 per month offsetting that. So the gross cost per month are GBP 350,000 to GBP 400,000. Will the cash balance at the year-end be GBP 14 million? No. It's very unlikely an equity raise is likely in 2026, unless something significant happens in that we have to scale quickly or deploy cash for investment. But in regards to run the business, no an equity raise isn't likely in 2026. Okay. Next question. How is the transition in the technology team progressing post the departure of Dr. Nigel Pickett, Founder and CTO of the Nanoco Group? Could you provide a further color on his departure? Dmitry Shashkov: Thanks, Liam. Yes, good question. So we announced that Nigel will eventually retire from the company. And that is after building up this company from the garage stage literally in a closet in the University of Manchester to the company that it is today 24, almost 25 years later. So Nigel is simply ready to move to the next stage. And that was his intention to eventually retire. Along the way, we invested significantly into our technology resources. As we announced, we replaced his role with a non-Board role, but it's a senior technologist, Ombretta Masala, who was already in a leading role in the technology organization, supported by a number of your quite seasoned R&D colleagues. And I must say that this transition has been very smooth. Operationally, the new team is already fully running independently of Nigel. Nigel continues to be with the company for a few additional months to provide some of the transition as well as to focus on some of the special tasks, which he is uniquely capable of doing. We're certainly wishing him well, but the organization at this point is well positioned to continue. I also will mention that in the fall of 2025, we also brought 3 additional resources into the R&D team. And that still keeps us with the reduced cash burn, which Liam outlined, but we brought two senior chemists and one device physicist onto our team, and they're already well engaged and they bring additional capabilities to our technology organization. So transition is going well, and we are confident that we're well positioned to capture the opportunities. Liam Gray: Okay. Next question. Sorry if I have missed it in the first few minutes, but there has always been a focus on the TV screen market and a huge growth market that Nanoco is well positioned to capitalize on. That now seems less of a focus. Are you now telling us that you don't see this as a major opportunity any longer? Dmitry Shashkov: Excellent question, and it's always good to reflect and say, how did our views change from a couple of years back? Yes. So flat panel display is the first market for quantum dots, which developed into relatively high volume. Along the way, market also commoditized significantly. So when we look at the opportunities to introduce our materials into the existing flat panel applications such as LCD technology, really the legacy technology, the one which started, the penetration of QDs. This market is rather commoditized. And there are pockets in this market, which remain attractive. For example, especially in China and in Taiwan, significant amount of LCD product is still produced using cadmium-based material. We at Nanoco pioneered the cadmium-free technology, and we think it may be an attractive opportunity to replace cadmium-based materials with the cadmium-free. However, right now, in China specifically, there is no regulatory trend or regulatory drive to substitute cadmium away. Therefore, we see this as an opportunity which we will monitor, but not necessarily put a lot of resources into given that absent regulatory drive, this is not going to be a high-margin opportunity for us to pursue. On the new technologies, new technologies, especially microLED is expected to be introduced in the coming years. And quantum dots will likely play a role. They would be used in relatively high volume comparable to LCD. And this may become a good market for us to pursue. But as of today, this technology has been delayed by years and years because of very significant technical hurdles as well as the economics. This new and improved TV technologies have to compete with existing ones, which are continuing to improve their own performance and to reduce their cost. So on balance, we still think it's an opportune market for us to pursue, but it does not warrant the same focus as a few years ago. Liam Gray: Thank you. Next question. Why is the strategic review taking longer than initially guided? Is Nanoco still of the view that an outright sale of its key division is likely? Or is it also considering strategic equity investors? Dmitry Shashkov: Good question. So I can answer it in very simple terms. Nanoco is not an easy company to assess and value because the technology is quite new and a number of applications are relatively technically complex. So when we started the CDX process, we had to recognize that complexity. And the fact that at the early revenue stage where we are, it may take a while for potential investors to assess the viability of our business plan and to proceed with potential acquisition. So again, our objective is not to get to any deal no matter what it is, but to try and find a deal which would value the company higher than it is currently valued in the public market. And therefore, this may take some time to build that conviction from the potential investors in this inorganic option. That is the main reason, right? We are not trying to rush into a deal, but we are trying to develop an option which could offer high value to the shareholders than organic development. To answer the second part of the question, are we considering straight sale only or an equity -- partial equity investment? In principle, we can consider both. But practically speaking, outright sale of the operating business is the main scenario we are focusing on. So there is a clean transition from the current ownership into the new ownership. That is the main scenario we are continuing to pursue. Liam Gray: Thank you, Dmitry. The next question is, when does Nanoco expect to announce further deals with its technology? Any such discussions at a closing stage? Dmitry Shashkov: Yes. So we have 2 joint development agreements, which we announced. We have quite a few other commercial and technical relationships, which may result in similar joint development agreements. But if and when they will happen, I cannot fully tell you. Yes, we would very much like to expand that portfolio. Three is better than 2, 4 is better than 3, but they come when our partner on the other side is ready to put additional resources and make it into a real project. So we are aiming to have more than 2, but when they will happen, I cannot tell you. What I did witness in my 12 months at Nanoco is that the level of interest in the image sensor market continues to steadily grow that we see a larger number of companies getting involved. I already gave you an example of automotive applications, which 1 year ago, everybody was convinced are pretty far away. But as of today, even coming off the industry conferences 2 weeks ago in Korea, I have pretty clear visibility on a number of large companies pursuing those automotive applications, which 1 year ago was not the case. So I think new agreements will come into place. I just cannot tell you exactly when. Liam Gray: Thank you. Next question. You are not talking about image sensing in the same way as you used to talk about screen market and Nanoco's unique position, which has never transpired. How do you expect shareholders to continue on this journey of assurance that Nanoco can eventually find a commercial product that turns the company's fortunes around? Dmitry Shashkov: Yes. Good question. And obviously, I wasn't there when Nanoco was focused almost exclusively on the flat panel market. But indeed, that market did not materialize for us in the form of sustainable product revenue. It did materialize for us in the largest licensing deal, I think, in the history of advanced materials when we achieved settlement with Samsung. And as you're well aware, we are pursuing a similar type of process with other potential users of our IP. But the market did not develop into sustainable product supply, which ideally we, as a materials -- advanced materials company would like to pursue. I believe image sensor market is different for a couple of reasons. One, we are clearly in the lead when it comes to developing this new technology. Nobody, neither the material manufacturers nor device companies have neither IP, nor production experience, nor the product portfolio, which we have in image sensors. Secondly, we have at least 2 actively engaged customers who vote with their wallet and with their resources. They commit substantial amount of resources from their side to proceed with those joint development agreements. And as we progress with those JDAs, we will continue to update you on our performance. But in and of itself, it's an evidence of customers committed to this market, developing this technology jointly with us where we would become the supplier of choice. We are not worried about not becoming a supplier because the production of these materials is difficult. The production processes are protected by our IP, and we do not expect that anything similar to the Samsung situation will materialize here. So I believe this is a very different market, and these are very different times. And our business model is pretty well protected in the image sensor. Liam Gray: Thanks, Dmitry. Next question, Nanoco Director, Jalal Bagherli and yourself undertook material share buys in November 2024. Are you still of the view that Nanoco is still undervalued? Are directors considering further share buys? And if I may make as subjective inference, you seem a lot less ebullient compared to IMC webinar earlier in the year/April 2025? Dmitry Shashkov: Yes. So to answer the factual questions, yes, I continue to be an investor and a shareholder in Nanoco, mainly because I do believe that we're undervalued. And I believe our Non-Executive Chairman, Jalal, is in the same situation. So I'm confident that the company is worth more, but my job is now to prove it with either organic development, which lead to that recognition in the market or inorganic deal, which will prove it through a transaction value. So that's all I have, I can say about that. In terms of being less ebullient, is ebullient, does it mean bullish? Liam Gray: Cheerful, full of energy. Dmitry Shashkov: Well, I'm certainly full of energy with regards to Nanoco's future. But yes, perhaps on day 1, I was a bit less informed about the complexities of the company. But 1 year later, I'm just as enthusiastic about what the company can do, whether we stay on the organic path or whether we'll find the new owners. I continue to believe that there is significant value locked in the company right now, and we are well positioned to unlock it. Liam Gray: Next question. If you succeed in getting your materials into driver monitoring, do you think that need will be there for a long time? Or do you think autonomous vehicles will mean the opportunity is only there for a short time? Dmitry Shashkov: Yes, good question. I'm not a specialist in autonomous driving. But I think under most realistic scenarios, transition away from human drivers to completely autonomous driving is the transition measured in decades, not years. And under completely driverless cars, even if and when it happens that all the cars on the road are robotically controlled, well, then the cars need to monitor each other. They just don't need to monitor the drivers. So applications in automotive technology, yes, they -- some of them are tailored towards self-driving cars. Others are tailored towards cars with drivers. But either way, the expectation is that quantum dot sensors, infrared sensors will be adopted in multiple units per car, just like today's even proximity sensors, which help you park, you probably have at least a dozen sensors in different points of the car. Likewise, with the 2D sensors, expectation is going to be more than one per vehicle. And therefore, we're not just dependent on driver monitoring alone. Liam Gray: Okay. Next question. The RNS suggests that it is more likely than not that the CDX process won't conclude in the sale. What's the point of continuing if no acceptable offer has been received to date. After everything that has been promised, it would be a huge failure of the Board to execute a sale. Will the Board consider their decisions if that is the outcome. And when you say the process is nearing conclusion, what time frame does that actually mean? Operator: Yes. So I don't know how you read the RNS to say that we are less confident. We are closer to the goal than we were in the beginning, but we are not yet -- we have not yet identified a high-value option, which would come through an inorganic process. The reason we are continuing with the process is because we believe that goal is well within reach. We just haven't been able to deliver it by today, but that remains firmly in our sight. And as I said, we are looking forward to updating all of you as soon as we can. Liam Gray: Next question. The cost of running the business seems too far out. The turnover generated from any production rate sales, how can this continue and when will it change? With spend of GBP 6 million per annum, the GBP 14 million will soon be gone. So just on this, as I mentioned before, the gross monthly spend is between GBP 350,000 GBP 400,000. So is GBP 4 million to GBP 4.5 million. And that's the current revenue levels. We are looking at further JDAs, as Dmitry mentioned, which would reduce that cash burn. And then as we ramp up our scale to production of the materials, we do anticipate the level of revenue from material sales to increase significantly, which is why we believe that come calendar year 2027, we will be in a self-sustain or breakeven position. Next question. You say how significant this year has been for Nanoco. The market sees things differently. Up until now, the market has always been right. Why would this time be any different? Dmitry Shashkov: Yes. I don't know if I can answer this question convincingly, right? I haven't been there at the previous junctions, but I do see that the way we are pursuing commercial engagement with our customers in image sensors and otherwise puts us in a position to succeed. I mean, just to state the obvious, up until December of last year, there was no commercial organization. The company was entirely internally focused on the technical development. Nobody was out there listening to the customers, asking questions, explaining our capabilities and engaging with various customers commercially, whether it's through joint development agreements or any other form of technical or commercial collaboration. We put this organization in place for the first time. We now have a broader pipeline than we ever had of potential customers evaluating our technology. And for all these reasons, yes, I do believe that this time is different. And markets clearly do not see it the same way, but markets do not have access to the inside knowledge, which we are privy to in our discussions with potential customers and development partners. So again, I -- my goal is to disclose as much of it as I'm able to through favorable market trends and specific agreements and commercial developments when we are ready to announce them. But apart from that, we can simply do our jobs, proceed with the commercial development and the results will speak for themselves. I do believe that the markets will eventually align with our vision once we demonstrate tangible progress towards those goals. Liam Gray: Please, can you talk a little bit more about the change of pace of development in automotive? What sort of opportunities do you foresee? Dmitry Shashkov: Yes. Again, infrared sensors can deliver particular functionality better than existing sensors. Existing sensors, if they operate in a visible or near infrared region have limited ability to see through adverse conditions. So for the collision avoidance and similar type of safety tasks, infrared sensors are able to penetrate through rain, snow, fog, smog, smoke or any other types of adverse conditions. So both for driver awareness of an obstacle or automatic collision avoidance systems. Once those sensors are introduced, they can help steer the car away from an object on the road. They're even able to distinguish between a live object and a dead object, lacking better term. If you have a cat on the left and the rock on the right, you would rather steer towards the rock than the cat, et cetera, et cetera. On the driver monitoring side, infrared sensors in some of the wavelengths, which we're working on, are particularly good, for example, to see through the tinted glass, which is good for other types of automotive safety, even for law enforcement. But they're also able to see, for example, through sunglasses. So in some of the countries, legislation is now coming where driver monitoring, especially preventing driver from falling asleep is becoming a mandated feature in some of the new vehicles. Well, infrared sensors are able to easily see, for example, through the sunglasses to track ice movement and to make sure that the driver is awake and attentive with attention on the road. So these are just some of the applications where we see this being adopted. And as I stated, especially in Asia, automotive companies are very keen to differentiate themselves with some of the additional safety features. And this technology gives them an opportunity to get ahead with introduction of this technology. Liam Gray: And just a few more left. Could any of the very large tech companies get involved with Nanoco to pursue quantum dots for quantum computing? Dmitry Shashkov: Quantum dots for quantum computing. Yes, that remains a possibility. We've done some academic work with the University of Manchester to demonstrate that quantum dots could be usable for quantum computing and quantum communication. Those -- this application is in our third category. We believe in the long-term value, but we are not willing at this point to put significant resources into this just simply because of the time it takes to develop. If there is a willing development partner who would like to co-invest in this technology with us, for sure, we would consider. Right now, we just would not like to make it a self-funded activity because I think these markets will take some time to develop. Liam Gray: Is Nanoco eligible for U.K. government R&D grants? Have any such avenues been explored? Dmitry Shashkov: Yes, of course. So we're already a receiver of Innovate UK grant, which is, I guess, one of the main funding agencies in the U.K. We will continue to look at other opportunities. One of our senior staff members is IT and grant manager, Nathalie Gresty, who is monitoring the space quite carefully, both in the U.K. and on the continent. Some of the EU opportunities are still applicable to the U.K. companies, and we will continue to pursue those funding opportunities. They've been quite limited, but with increasing amount of attention from the government to high-tech sector and semiconductor industry in general in the U.K., yes, we believe there are going to be some additional funds available to us, and we will pursue that. Liam Gray: And the final question, you've clearly worked hard at the last year, seem quite optimistic. What are the top 3 things that excite you about Nanoco? Dmitry Shashkov: Yes. Just kind of thinking on my feet right off the bat. The first one is I do think it's a diamond in the rough. I think that Nanoco is one of the very few companies, perhaps it's the oldest quantum dot company, which is still alive, and it's one of the few companies which survived through the years. We only see perhaps 2 or 3 companies around the world pursuing these technologies because it's hard. And most others have been acquired or have gone bankrupt at this time. I do feel that we are now finally in a position to capitalize on all the technology investment, all the complicated developments and all the IP, which was put in place and really become the leader in a fast-growing, very profitable market, which for us will start as image sensor and over time, other markets can be added to this. So that's the main reason. I see that it's a tremendous technology, which is currently undervalued, and we can unlock that value. A couple of other reasons. The team is great. It's a very dedicated team. We have seen relatively low turnover. Just like many of you, our investors stuck with Nanoco, our team has been sticking around and really contributing to the company development through some really hard times, right? So there's a level of resilience and optimism within the company because if we made it that far, we can definitely make it further where others have failed. And there's an element of technology here, which also makes me excited. We are simply contributing to positive developments in the world, not to get too high horsey about it, but we are developing applications, which will help really improve our lives through automotive safety or some of the other applications, which this technology is able to offer. We have solutions which are more energy efficient, ecologically preferable to some of the legacy solutions and those which do deliver real value in a variety of markets. For me, that's pretty exciting. Operator: Dmitry, Liam, thank you for answering all those questions you can from investors. And of course, the company can review all questions submitted today, and we'll publish those responses on the Investor Meet Company platform. Just before redirecting investors to provide you with their feedback, which is particularly important to the company, Dmitry, could I please just ask you for a few closing comments? Dmitry Shashkov: Yes. I'll just simply recap that it's my first full year, which I'm completing at Nanoco. I feel quite satisfied with what we've done. It was a difficult task to pursue organic strategy development and implementation in parallel with the strategic options review, the CDX process. I feel that we made very good progress on both fronts, and we're looking forward to updating the shareholders once that process -- CDX process is complete. And we will be in a position to offer the highest option value -- highest value option to the shareholders. I'm looking forward to updating you on this as soon as we're ready. Operator: Dmitry, Liam, thank you for updating investors today. Can I please ask investors not to close this session as you'll now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations. This will only take a few moments to complete, and I'm sure will be greatly valued by the company. On behalf of the management team of Nanoco Group plc, we'd like to thank you for attending today's presentation, and good afternoon to you all.
Operator: Hello, and thank you for standing by. Welcome to Solana Company Third Quarter Operating Results Conference Call. At this time, participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. I would now like to hand the conference over to Serena Jassy, Investor Relations. You may begin. Serena Jassy: Before we begin, I would like to inform you that comments and responses to your questions during today's call reflect management's views as of today, November 18, 2025, only, and will include forward-looking statements and opinion statements including predictions, estimates, plans, expectations, and other similar information. Actual results may differ materially from those expressed or implied as a result of certain risks and uncertainties. These risks and uncertainties are more fully described in our press release issued earlier today and in the sections entitled Risk Factors in our annual report on Form 10-K filed with the United States Securities and Exchange Commission or the SEC on March 25, 2025, and in other subsequent filings with the SEC. Our SEC filings can be found on our website or on the SEC's website. Investors are cautioned not to place undue reliance on forward-looking statements. We disclaim any obligation to update or revise these forward-looking statements. Please note that this conference call will be available for audio replay on our website under the news and events section of our Investor Relations page. With that, I would now like to turn the call over to Solana Company's Executive Chairman, Joseph Chi. Thank you. Joseph Chi: Good morning, everyone, and welcome to our first earnings call since we successfully raised over $500 million to fund our digital asset treasury strategy in September. I'm Joseph Chi, the Executive Chairman of Solana Company. I'm honored and pleased to be able to work with the capable board of directors and team closely since my appointment. Additionally, since 2017, I have served as the founder and chairman of Summit Capital, one of the earliest licensed funds in Asia that invest in the crypto blockchain sector. One of the co-sponsors for the PIPE transaction and now one of two strategic advisers to Solana Company. The Solana digital edge rate digital treasury strategy and the PIPE transaction mark a new beginning for Solana Company as its shareholders. Pantera Summer is committed to providing strategic support to accelerate the growth of the company going forward. The US dollar's $120 million investment by Pantera is the single largest cash investment in Pantera history. Pantera, together with Summer Capital and its ecosystem partners, accounted for roughly half of the total capital raised, underscoring their conviction in Solana Company's strategy and long-term potential, and the company's commitment to deliver results. I believe the background experience that Pantera and Summer give HSCT both global reach and institutional credibility. Since the closing of the PIPE transaction, we are now squarely focused on executing our digital asset treasury strategy. We aim to incorporate all of the learnings from our strategic investors about what has worked well, and what hasn't worked to really hone the plan. As we look forward, there are three pillars of execution we are focused on: advocacy, capital markets, and treasury management. First, let's talk about advocacy. Our goal is to maximize shareholder value and we believe we can do so through maximizing Solana per share accumulation. One key underlying assumption here is that Solana itself is worthy of investment. Therefore, our number one job is advocating for Solana or telling the Solana story to help investors understand why Solana is a compelling asset. Solana has become the most widely adopted and financially productive blockchain in the world. It now processes close to 80 million transactions per day with a median fee below one-tenth of a cent and provides a native staking yield of more than 7%. That combination of throughput, affordability, and productivity is why we believe Solana is the only blockchain that's both economically sustainable and institutionally relevant. We see that in the numbers, Solana is the number one chain in decentralized exchange volumes, the leading platform for stablecoin payments through integration with PayPal and Stripe, and one of the fastest-growing ecosystems for real-world asset tokenization with activities from firms like BlackRock, Franklin Templeton, and Apollo. It is definitely one of the most secure and decentralized blockchains built for institutional adoption. Our focus at HSDG has been on advocating for Solana matters not only to the crypto-native community but also to mainstream and traditional financial institutions globally. We believe this broader audience will ultimately determine which assets are relevant. As part of the effort, we have been productive in reaching outside of the crypto echo chamber and bringing Solana's story to the institutional world. Since our launch, HSDD has already appeared more than 10 times on main media such as CNBC and Bloomberg, helping bridge the conversation between traditional equity investors and the Solana ecosystem. Our adviser, Dan Moorhead, my partner, Cosmo Zhang, and I have been actively participating in media interviews, podcasts, relevant conferences, and events to promote Solana Company and its underlying assets not only in the US and UK but also in Asia and the Middle East. We and the Solana Company were featured in many local print and digital press in the regions mentioned. Each of these opportunities reinforces our central message: Solana's speed, cost efficiency, and real-world adoption make it one of the most credible and investable assets in our industry worldwide. Since we are the designated DAT to support Solana Foundation APAC region, we have traveled with the Solana Foundation senior management to Beijing, Shanghai, Hangzhou, Shenzhen, Hong Kong, and Singapore in the last two months. By organizing and attending multiple conferences, panels, and gatherings intensively over a few weeks, we have managed to reach out to thousands of people, including developers, investors, universities, research institutions, regulators, and industry partners, including major tech companies, to advocate for the Solana blockchain ecosystem. The enthusiastic participation on location and the conversations we had with the local communities made us realize that Asia is probably the single largest underpenetrated market with the highest potential for Solana. We believe it also has the largest population of keen users, developers, tech companies, and entrepreneurs ready to embrace the high-performance Solana blockchain. This outreach is translating into results. Trading volume in HSCT has meaningfully outperformed the average of peer DATs, including other Solana DATs, reflecting a growing awareness of Solana's fundamental confidence in a DAT model. We view this as an early indicator that our advocacy strategy is working, and investors are starting to view HSTT as the public gateway to Solana. As we committed to the investors during the fundraising process for the PIPE transaction, we have been focused on running the business with best market practices and the highest level of governance, diligence, and care. Cosmo will go through the outstanding results we achieved with the instantaneous activation of the ATM for fundraising, the tactical approach to Solana accumulation, and the rigor and discipline we apply through staking. We believe Pantera as the asset manager has delivered stellar results all around since we started with a new strategy. Just to reiterate, we are attempting to build a Berkshire Hathaway of the Solana ecosystem that compounds shareholder value and trades at a premium with a strong balance sheet, a clear strategy, and the expertise of a team that's experienced with DATs and is shareholder aligned with meaningful ownership. With that, I will turn it over to Cosmo to elaborate more on our strategy in Capital Markets and treasury management, and let's take a closer look at our third-quarter financials. Cosmo Jiang: Thank you, Joseph. I'm Cosmo Jiang, a Director for Solana Company and General Partner at Pantera Capital. Pantera brings deep experience as a digital asset specialist investment firm. Pantera was the first blockchain-dedicated institutional investment firm starting in 2013. Pantera anchored the first deals that catalyzed the digital asset treasury boom earlier this year, including coining the term DAT or debt. And as such, have unmatched experience in digital asset treasuries as well as the U.S. Capital markets broadly. I will now discuss the market environment and our launch progress. Now let me take a step back. It is important to acknowledge the broader market backdrop. Over the past several months, the digital asset treasury market has cooled after a period of rapid expansion earlier in the year. That is not unexpected. From an investor's lens, when I think back to what I mapped out as the white space roughly six months ago, now in our view, much of that white space has been taken. We just witnessed the creation of a whole new category of businesses over the last seven months, and the creation of a new category can only happen once. I believe this initial genesis phase of new dApps being launched is now largely over. Now that we see the white space as largely taken, we believe the industry is entering the execution and consolidation phase. The barriers to entry are a lot higher now for new entrants. Most DATs will be outcompeted and have uninteresting outcomes, ultimately resulting in healthy industry consolidation. We at Solana Company anticipate that this will be where the strongest DATs will prove themselves out and win out through operational excellence and capital discipline. We believe the best DATs can be amazing long-term outcomes for both shareholders and token holders. Those with credible management teams, transparent reporting, and durable token per share growth. We believe we have the ingredients to do so here at Solana Company. Our balance sheet strength, institutional sponsorship, and operational focus give us the foundation to continue building even in a more selective environment. As part of the company's continued commitment to maximize SOL per share through disciplined execution of its digital asset treasury strategy, including capital deployment, active on-chain management, and transparent reporting, Solana Company has increased its holdings of SOL by $100,000 or $100,000 in the first month of operation to a total of over 2,300,000 tokens. The company also still holds $9,800,000 of cash and stablecoins, which it intends to use to further the digital asset treasury. For the month of October, the company's average gross staking yield was 7.3% APY. This performance was approximately 36 basis points better than the 6.67% APY stake-weighted average of the top 10 largest validators over the same period. Solana Company's SOL holdings are primarily through institutional-grade validator infrastructure with rewards automatically restaked to compound returns. This staking yield translates to consistent daily on-chain revenue generation while preserving full liquidity and custody of underlying assets. Let me elaborate on the next two of our execution pillars, capital markets and treasury management. Capital market strategy is one of our pillars for execution, a driver of Solana per share growth. The objective is straightforward: to maximize tokens per share, disciplined capital formation, and balance sheet management. We are focused on ensuring that every financing decision, whether equity or equity-linked, is structured to be accretive, meaning it increases the number of SOL per share for our existing shareholders. As mentioned earlier, we have launched our ATM program and recently also announced a share buyback. The ATM is an important tool for a DAT. It allows us to access liquidity continuously and on efficient spreads rather than relying on episodic and uncertain capital raises. The buyback is an important complement. Whether we are trading at a premium or a discount to MNAV, we now have the flexibility to act in ways that maximize Solana per share growth. When we trade above our NAV, the ATM allows us to issue accretively. When we trade below NAV, we can use other tools such as share buybacks. Beyond that, we are evaluating structured equity transactions including convertible debt and warrant-linked financings that could provide flexible, non-dilutive growth capital while monetizing Solana's inherent volatility. Finally, we are open to participating in M&A within the DAT ecosystem. As we move from the launch phase of the market into the execution phase, we believe consolidation will naturally occur. HSCT is well-positioned to be an acquirer where it makes strategic sense, particularly in cases where smaller DATs trade below 1x MNAS and can be integrated accretively. Now to treasury management. As the asset manager, Pantera's expertise is really helpful here. That experience is already reflected in our execution. On our Solana purchases, we have been deliberate and data-driven. Our average cost basis is approximately $220 per SOL, to about $240 at launch, representing roughly a 10% improvement versus a passive approach. On the validator side, we've also been disciplined in how we stake. In October, as mentioned above, we outperformed our peers, and that comes from careful validator selection, MED capture, and continuous rebalancing. We believe that is a meaningful amount of outperformance versus what any individual investor may be able to achieve, and even many other publicly traded Solana DATs. Looking ahead, DeFi yield opportunities are on our roadmap, but only where we can identify risk-adjusted returns that make sense. We are carefully evaluating counterparty, smart contract, and regulatory risks before deployment. The goal is not to chase yield, it is to grow tokens per share in a sustainable, risk-controlled way. We believe through this approach of disciplined accumulation, active validator management, and selective yield enhancement, we are building a treasury that compounds value per share, not just one that holds tokens passively. I would now like to turn the call over to Dane Andreeff for updates on the company's legacy business, its orally applied technology platform. Dane Andreeff: Thank you, Cosmo. At its core, the company was founded as a neurotechnology company dedicated to addressing neurologic deficits through its innovative orally applied technology platform. This proprietary platform enhances the brain's ability to activate physiologic compensatory mechanisms, promoting neuroplasticity and improving the lives of individuals with neurological conditions. The company's first commercial product, the portable neuromodulation stimulator, or PoNS, exemplifies its mission to advance neurorehab through science and technology. The company has made some exciting progress over the past quarter, both clinically and strategically. The PoNS stroke registration program study was successfully executed, resulting in positive clinical outcomes. The successful results of the stroke registrational program supported our PoNS device submission for FDA 510(k) designation filed under its current FDA breakthrough device designation. Statistical analysis for the functional gait assessment primary endpoints demonstrated PoNS' superior effectiveness in improving gait deficit by achieving a clinically meaningful mean improvement compared to the control group, reflecting the clinical significance of this therapeutic intervention. In the third quarter, we have seen increased US activity, including increased VA and cash sales. This has been supplemented by additional out-of-network third-party reimbursement. We are happy with the progress made at Healius this quarter and would like to reiterate our excitement that this strategic evolution represents Healius' next chapter as Solana Company. By aligning its corporate strategy with the Solana Foundation and the broader Solana community, Solana Company positions itself at the intersection of breakthrough neuroscience and digital asset innovation, uniting two powerful platforms for sustainable growth and technological progress. I'm excited for the future of Solana. Now I would like to turn the call over to Jeff to cover the financial results. Jeff Mathiesen: Thank you, Dane. Our financial results include the $500 plus million PIPE transaction that closed on September 18, 2025, and related DAT activities from that date through the end of the quarter. Our third-quarter revenue of $697,000 included first-time staking rewards income of $342,000, comprising the majority of the increase from the prior year period. For the third quarter, the cost of revenue was $103,000 compared to $187,000 for the prior year period, mainly due to decreased inventory reserve and production scrap expenses. Selling, general, and administrative expenses for 2025 were $4,600,000 compared to the $2,900,000 reported in 2024, with the increase comprised of a $101,500,000 discretionary bonus in the current year. Research and development expenses for 2025 were $900,000 compared to $1,100,000 in 2024, driven primarily by reduced clinical trial activities. Unrealized loss on digital assets of $30,500,000 resulted from the net change in fair value of digital assets held by the company as of quarter-end. Total operating expenses for 2025 were $36,000,000 compared to $3,900,000 in 2024. The resulting loss from operations for the third quarter of 2025 was $35,400,000 compared to a loss of $4,100,000 for the prior year period. The current year non-operating loss in the third quarter of $317,300,000 included a $545,700,000 loss on derivative liability attributable to the valuation of the staples warrants from the September PIPE transaction and $194,700,000 of financing costs from the September PIPE transaction, including a $171,300,000 non-cash charge from the advisory warrants issued and an $8,600,000 non-cash charge for shares issued to Clear Street, offset by a $423,300,000 gain from the change in fair value of the derivative-related derivative liability from those stapled warrants as of September 30, 2025. We reported a net loss for 2025 of $352,800,000 or a loss of $32.89 per share. We had a net loss of $3,700,000 in the prior year period or a loss of 744.35¢ per basic and diluted common share. At September 30, 2025, we had $124,000,000 in cash and $350,200,000 of digital assets at fair value for a combined total of $474,200,000. Also at that date, we had a combined total of 75,900,000 common shares and prefunded warrants outstanding. Finally, as of November 17, 2025, certain provisions of the 2025 stapled warrants related to adjustments of the Black-Scholes inputs in determining the warrant value in the event of a fundamental transaction were amended. I'll now hand it over to the operator for questions. Operator: Thank you. Ladies and gentlemen, as a reminder to ask a question, please press 11 on your telephone, then wait for your name to be announced. To withdraw your question, please press 11 again. I'm showing no questions in the queue. I would now like to turn the call back over to Joseph for closing remarks. Joseph Chi: Well, thank you all for joining the Solana Company third-quarter operating results update. We are pleased by the strategic change and progress we have made this quarter and look forward to sharing further updates next quarter. Thank you. Operator: Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect.
Operator: Ladies and gentlemen, welcome to the Dolby Laboratories Conference Call discussing Fourth Quarter Fiscal Year 2025 Results. During the presentation, all participants will be in a listen-only mode. Afterwards, you will be invited to participate in a question and answer session. If you would like to ask a question at that time, please press star then the number one on your phone. Simply press star one again. As a reminder, this call is being recorded Tuesday, November 18, 2025. I would now like to turn the conference over to Mr. Peter Goldmacher, Vice President of Investor Relations. Peter, please go ahead. Peter Goldmacher: Good afternoon. Welcome to Dolby Laboratories' Fourth Quarter 2025 earnings conference call. Joining me today are Kevin Yeaman, Dolby Laboratories' CEO, and Robert Park, our CFO. As a reminder, today's discussion will include forward-looking statements, including our fiscal 2026 first quarter and full-year outlook, management's expectations for our future performance, and other statements regarding our plans, opportunities, and expectations. These statements are subject to risks and uncertainties that may cause actual results to differ materially from the statements made today, including, among other things, changes in customer demand, in law and regulation, and the impact of macroeconomic events on our business. A discussion of these and additional risks and uncertainties can be found in our earnings press release as well as in the Risk Factors section of our Forms 10-K and 10-Q. Dolby assumes no obligation to update any forward-looking statements. During today's call, we will discuss non-GAAP financial measures. These measures should be considered in addition to and not as a substitute for GAAP measures. A reconciliation between GAAP and non-GAAP financial measures is available in our earnings press release and in the Interactive Analyst Center on the Investor Relations section of our website. With that, I'd like to turn the call over to Kevin. Kevin Yeaman: Thank you, Peter, and thanks to everyone for joining the call today. I'd like to share a brief overview of our financial results and a few highlights for the quarter, and then I'd like to talk about our unique position in the market and our opportunities heading into FY 2026 and beyond. After that, I'll turn the call over to Robert to cover the financials before we get to Q&A. We wrapped up Q4 and the full year in line with the expectations we provided on the last earnings call. In FY 2025, we grew revenue by 6%, aided by the acquisition of GE Licensing, and we expanded our operating margins by 1.8 percentage points. Robert will walk through the results in more detail in just a moment. I'll start by walking through some of the Q4 highlights as it relates to Dolby Atmos, Dolby Vision, and imaging patents. For Dolby Atmos and Dolby Vision, we continue to see strong engagement from our ecosystem of content creators, content distributors, and device OEMs, as they increasingly embrace the value of content created in Dolby Atmos and Dolby Vision across sports, music, TV, and movies. In September, we announced Dolby Vision 2, which will dramatically improve picture quality and unleash the full capabilities of modern TVs, from mainstream sets to the top-of-the-line models. Some of the benefits of Dolby Vision 2 include automatically adjusting contrast via ambient light detection, motion control to optimize sports and gaming content, and features that enable creators to take full advantage of the latest advancements in higher-end TV displays. By bringing two distinct offerings to market, Dolby Vision II will allow TV OEMs to bring Dolby Vision deeper into their lineups by improving their mid-range offerings, while Dolby Vision 2 Max will offer important differentiation at the high end. Dolby Vision 2 is receiving a strong reception from the industry. Hisense and TCL, two of the top three global TV OEMs, are the first TV makers to announce support, with release dates yet to be announced. This quarter, we had several TV launches with Dolby Atmos and/or Dolby Vision with device partners including TCL, Samsung, Hisense, Xiaomi, and Amazon. And Peacock is now streaming Sunday night football games and this season's NBA games in Dolby Atmos. Moving on to automotive, the value proposition for Dolby Atmos and increasingly Dolby Vision continues to resonate in the auto world. This past quarter, we signed agreements with Maruti Suzuki, the top passenger vehicle brand in India with over 40% market share, Depaul in China, and VinFast in Vietnam. Also, the first in-car game featuring Dolby Atmos, Loner, officially launched on Li Auto Vehicles as more content creators are looking to add value by taking advantage of Dolby Atmos in the car. A number of partners recently announced new models with Dolby Technologies, including Li Auto, Mahindra, Cadillac, Zika, and Mercedes. In mobile, we are very happy to share that Instagram is now distributing content in Dolby Vision, with initial support for iOS. In a blog post, Instagram concluded that content in Dolby Vision increased the time spent in the app. The blog post also noted that Meta intends to expand Dolby Vision to other Meta apps and corresponding operating systems. Additionally, Douyin, known in many parts of the world as TikTok, has made Dolby Vision available to its users in China, joining other Chinese social media companies, including Xiao Hongshu, Kuaishou, and Bilibili, in offering their users the ability to capture, share, and edit content in Dolby Vision. We've seen how support on social media platforms and video sharing sites in China drives demand for Dolby Vision on mobile devices. These new partnerships with Instagram and Douyin are another important catalyst to further penetrating the mobile device ecosystem. In wearables, Meta announced that the Meta Quest will have Dolby Atmos and Dolby Vision, and Samsung announced that its Galaxy XR comes with Dolby Atmos. The wearables market is still in its early days, and we are working with the ecosystem to ensure that we are able to offer all device makers the technology to help them create the most immersive and connected experience possible. Turning to imaging patents, where we participate in patent pools, which help device makers license critical imaging technology, the primary growth driver to date has been growth in OEM licensees. In FY 2025, we helped launch a new patent pool focused on providing critical imaging technology to content streaming providers using a consumption-based pricing model. This video distribution program significantly expands the TAM for imaging patents beyond devices. The pool signed its first licensees in 2025, and we will start recognizing revenue in fiscal 2026. The progress we've made in FY 2025 gives us confidence that we can grow Dolby Atmos, Dolby Vision, and imaging patents at a growth rate of about 15% to 20% per year over the next three to five years. Now before I wrap up, I'd like to take a few minutes to talk about Dolby and where we're going. Today, we are at the beginning of an opportunity to expand our total addressable market by delivering value to new sets of customers via consumption-based revenue models. We currently have two such offerings. We just discussed the first, which is the video distribution program for content streamers. The second is Dolby OptiView. Dolby OptiView is our software as a service solution that is focused on delivering real-time, personalized, and interactive streaming experiences in sports, sports betting, and iGaming. Dolby OptiView combines very low latency video streaming with the ability to optimize advertising and integrate additional content. For example, highlights of another game that's happening, to engage viewers and drive higher revenue through subscriptions and advertising. We see a significant opportunity in reinventing the fan experience for live sports, aligning with content owners to increase the value of their content. The NFL has been delivering Red Zone to the NFL Plus app using Dolby OptiView streaming since the start of the season, and they've seen significant increases in the quality of the streaming experience while delivering content at half the previous latency. All of these improvements contribute to longer viewing time. While our focus in the near term is on scaling these two new offerings, Dolby OptiView and the video distribution program for content distributors, we believe that there will be opportunities in the future to deliver new value to trusted partners and new customers, expanding into new verticals with consumption-based revenue models. And this is increasingly an important focus of our innovation pipeline. Dolby has maintained its leadership position for sixty years by innovating and raising the bar on the quality and efficiency of entertainment. We do this by working with each part of the ecosystem, creatives, content distributors, device makers, and earning their trust. This gives us a unique connection to their needs, challenges, and opportunities, enabling us to deliver experiences that come to life in the highest possible quality. As we look to the next chapter of the Dolby story, our expansion into consumption-based models is a natural extension of our work to date. We have always delivered value to the distributors in our ecosystem, and the opportunity to bring new experiences to life through the power of streaming is an opportunity to create new revenue streams. The world is changing fast, and we are too. In the last three years, we have transformed our research and innovation capabilities in our advanced technology group, bringing in new capabilities aligned with the future, particularly as it relates to AI. This team is focused on AI-powered innovations to enhance our current and future offerings. So what does this mean for Dolby going forward? We are very excited about where we are, where the world is going, and our ability to work with our customers and partners to grow our ecosystems. I'm proud of the progress and confident in our strategy to grow Dolby Atmos, Dolby Vision, and imaging patents at 15% to 20% per year over the next several years. And now that Dolby Atmos, Dolby Vision, and imaging patents are approaching 50% of our licensing revenue, its impact on our overall growth rate is more meaningful. And while it's still early days, there is a significant opportunity to expand our total addressable market with consumption-based revenue models by serving the providers of audio-video content that are looking to deliver more engaging interactive entertainment experiences. With that, I'd like to turn the call over to Robert to review our Q4 and FY 2025 results and our guidance for FY 2026. Robert Park: Thank you, Kevin. Revenue for the quarter came in at $307 million, above the midpoint of guidance we shared last quarter. Non-GAAP earnings per share of $0.99 was above the high-end guidance due to a $0.28 discrete tax benefit this quarter. Excluding this discrete tax item, non-GAAP earnings per share came in at $0.71, which was above the midpoint of guidance primarily due to higher revenue and better gross margins, partially offset by higher operating expenses. Licensing revenue was $282 million, and products and services revenue was $25 million. We generated approximately $123 million in operating cash flow, repurchased $35 million of common stock, and have approximately $277 million remaining on our share repurchase authorization. We declared a $0.36 dividend, up 9% from a dividend a year ago, and ended the quarter with cash and investments of approximately $783 million. We recorded a $6 million restructuring charge in the quarter as we continue to streamline operations and adjust resources towards the most impactful areas. For the full fiscal 2025, we reported revenues of $1.35 billion, which was above the midpoint of guidance and up 6% year over year, and non-GAAP earnings per share of $4.24, or $3.97 excluding the previously mentioned discrete tax benefit, within the range of our annual earnings guidance. As Kevin mentioned, we expanded our full-year non-GAAP operating margins by 180 basis points. For the year, Dolby Atmos, Dolby Vision, and Imaging Patents grew just over 14%, in line with our expectations of roughly 15% growth, and represented 45% of licensing revenue. Foundational Audio Technology revenue came in just under negative 1%, again close to our expectations of roughly flat growth. Detailed licensing performance by end market and other components are on the IR portion of our website. And as we share with you every quarter, while trends are typically smoother on an annual basis, the timing of recoveries, minimum volume commitments, and true-ups can drive quarterly volatility. In terms of end market performance for the full year, we saw strong growth in mobile driven by the GE Licensing acquisition and other revenue due to auto and Dolby Cinema. PC and broadcast grew mid-single digits, and CE was down, in line with expectations coming into the year. Moving on to guidance. For the full year, we expect revenue between $1.39 billion and $1.44 billion, or up about 3% to 7% year over year. We expect licensing revenue to be between $1.285 billion and $1.335 billion, with revenue from Foundational Audio Technologies expected to be down low single digits due to timing of deals in mobile, and lower expected unit shipments in PC and CE. We expect Dolby Atmos, Dolby Vision, and patents revenue to grow approximately 15%. We are targeting non-GAAP operating expenses to be between $780 million and $800 million. This guidance implies operating margin improvement of between fifty and one hundred basis points. We expect non-GAAP earnings per share to be between $4.19 and $4.34. As a reminder, fiscal 2025 non-GAAP EPS was $3.97 excluding the discrete tax benefit in Q4. From an end market perspective, for the full year, we expect other revenue to be up high teens, broadcast and mobile to be up mid-single digits, and consumer electronics and PCs to be down high single digits. Imaging patents revenue from content distributors, which we call the video distribution program, or VDP for short, will be reported in the Other category given that these patents aren't licensed to a specific device. For Q1 fiscal 2026, we expect revenue to be between $315 million and $345 million. Within that, we expect licensing revenue to be between $290 million and $320 million. Gross margin should be approximately 90% on a non-GAAP basis, and we expect non-GAAP operating expenses to be between $195 million and $205 million. Non-GAAP earnings per share is expected to be between $0.79 and $0.94. Q1 revenue is expected to be down approximately 8% year over year at the midpoint due to two main factors. The first is a tough comparison against 2025 when we had a large favorable true-up. The second is the timing of recoveries and minimum volume commitments. The composition of revenue between the first half and the second half of the year will likely be more evenly distributed this year than it was last year. In closing, the creation and distribution of Dolby-enabled content continues to grow, and we are on the cusp of a significant opportunity to expand our offering and to expand our future market opportunities and grow our customer base. Our financials remain solid with high gross margins, healthy cash flows, and a strong balance sheet. With that, I'd like to turn it back to Peter, and we'll open the line for your questions. Peter? Peter Goldmacher: Thanks, Robert. Before I turn the call back to the operator to open up the lines for Q&A, I'd like to announce that we're going to have a casual event for investors at CES on Wednesday, January 7, from 8 AM to 9 AM at the Dolby Live Theater in the Park MGM. We will be in a quiet period, so there won't be any formal remarks or commentary on the business, but we always appreciate the opportunity to show off our technology. If you'd like to join us, please reach out to me for details or send a note to ir@dolby.com. With that, operator, can we please open up the call for Q&A? Operator: Thank you. We will now begin the question and answer session. Press 1 again. Thank you. Your first question comes from the line of Ralph Schackart with William Blair. Your line is open. Ralph Schackart: Kevin, maybe you can provide a little bit more color on what seems like a pretty interesting opportunity to expand the TAM on the new consumption models you talked about. Kevin Yeaman: I think you talked about video distribution for streamers. I think that came primarily from the GE patents. If you could sort of confirm that and sort of provide an update there? And then OptiView, and maybe just kind of taking a step back, give us a sense of the contribution in the 2026 guidance. And will this be something that will build throughout the year? Or just sort of you can sort of frame that opportunity? And then I have a follow-up. Ralph Schackart: Yeah. Thanks, Ralph. So if you put this in the context of Dolby's journey for sixty years, we've been leading the way in the quality and efficiency of experience, and we've been doing that by providing the services, technologies, the know-how to not just our paying customers, the device licensees, but also to content creators and to distributors of content. And so as we look to where that future is going, we believe that we have significant opportunities to begin to add new value to the content streamers, to bring that future to life. It's a future where streaming services are more aware of what engages audiences. They're able to respond to that in the form of not just which content they show them, but actually having the content itself be personalized to that audience. And to introduce interactive features. That's, of course, what we are doing with Dolby OptiView for sports betting and iGaming. We talked about I talked about on the call just a moment ago about how the NFL is now utilizing Dolby OptiView for its Red Zone service. And I think we've been in the market for about two years with Dolby OptiView. And over that time, we brought on a fantastic roster of customers, and many of them are still in the early stages of scaling. For some of them, these are new offerings. For others, they're testing the offerings on a percentage of the user base before they go bigger. So we think that as we look forward, scaling the customers we've won is a big opportunity to increase revenue. And also Dolby OptiView is becoming known in these circles compared to a year ago. So that is healthy for our pipeline. And then more recently, you asked about the video distribution video patent distribution program. So as you know, imaging patent licensing has always been driven by licensing per device. And what's new is that the pool has now established a pool for content streamers. That's a combination, Ralph, of the patents we've always had in the imaging patent pools and the GE licensing patents. The significance is that it significantly expands the addressable market by opening up the world of these content streamers. And that's one of the things that gives us confidence in sustaining growth in our Dolby Atmos, Dolby Vision imaging patents because that's still part of patent licensing revenue. Dolby OptiView is a part of product and services. Yes, we're continuing to look to drive growth, but we're optimistic about the midterm. And we think that between those two programs, in three years, we could have probably 10% of our revenue coming from service provider customers as opposed to device customers. And we'll be looking for opportunities to introduce new offerings and do everything we can to accelerate that. Ralph Schackart: Great. And maybe just double click on the energy patents. I think you had mentioned there's four new content streamers, if I heard that correctly. Is that you, sort of approaching the market with the patents in combination with GE and looking for opportunities to work with the streamers? Or are there are you bringing sort of, I guess, revenue-enhancing opportunities to them versus, I guess, IP you know, in terms of monetization? Thanks. Kevin Yeaman: Yeah. Thank you. So, so we most of our past licensing revenue, we license through patent pools. So the patent pools are a structure where many licensors contribute their patents for a particular purpose. In this case, the content streaming industry has obviously grown, and there's also a growing recognition of the critical nature of this imaging patent technology to what they do. And so it is we participate in those pools. It's via the pool that the decisions are made to establish new programs. And that's what led to the opening of this pool. There's five licensees have signed up. We didn't have any that was all in 2025. So it'll first start generating revenues in FY 2026. And going forward, one of the natures of these pools is that it in a sense licensors to innovate into those pools. And so we would expect to see opportunities to innovate into those pools to meet the future needs of content streamers at any markets that those pools decide to focus on in the future. Ralph Schackart: Great. Just one last one, if I could, Kevin. I think you had mentioned that in the second half of 2025 fiscal year that the licensee signed that you'll generate revenue in 2026. Can you just sort of bridge the gap and know, from signing to monetization? And that time period and sort of what's taking place in between? Thanks a lot. Kevin Yeaman: Well, the patent like the patent pool side of the business still operates somewhat like what you're used to in the early Dolby days where we recognize that revenue when we get the reports from the pools. And so that is the that's the probably the most important thing to understand as it relates to patent licensing is when we sign someone up, we are then waiting for that first royalty report. Ralph Schackart: Okay, understood. Thank you. Operator: Your next question comes from the line of Steven Frankel with Rosenblatt. Your line is open. Steven Frankel: I want to follow-up on Ralph's questions around this new model. And I'm just trying to fundamentally understand whether the pool is selling new capabilities to the stream the streamers, or are we enforcing patents from the pool on activities and technologies that they're already deploying? Kevin Yeaman: So, on day one, Steve, it's essentially the same patents that were in the pool that was established for device licensees. That is the pool for content streamers. As I said, going forward, the purpose of these pools is to establish a mechanism to incent licensors to continue to collaborate and innovate into the future needs of the licensees. So the second part of your question, was oh, why now? It really is just that industry has grown significantly, and there is a recognition that these imaging patent technologies are essential to the way they generate value. Steven Frankel: Let me ask it a different way. So were they using these at with the understanding that at some point, they would have to pay for what they're using? Or are you approaching them saying, you should be using this now? Going forward. That's what I'm basically trying to understand what your what your go-to-market motion is. Enforcement or upselling? Kevin Yeaman: Yeah, got you. So, again, it's the pool that we participate in, which is approaching the customers. We sometimes approach bilaterally or participate in that. Generally speaking, these are technologies that have been being used. And I would say it's a combination. I mean, first and foremost, we look to the pool looks to bring licensees on board. And it also, like I said, provides value going forward. You have the certainty of having the ability to operate against this growing number of patents from innovation across a growing number of licensors. And sometimes there is enforcement. That's a last resort, but it's always when it's used, it's to ensure a level playing field across all licensees. Steven Frankel: Okay. Thank you. And you know, we've had some past discussion on Atmos music and automobiles kind of approaching a level where it might have to be broken out. At about subsegment, like you break out these other markets. Where did you exit the year? And do you think that's something that could happen in fiscal 2026? Kevin Yeaman: I don't anticipate doing it in fiscal 2026, but I do anticipate that automotive will become a separate end market. We're still in the early days. It's still one of the fastest growers. And we continue to make great progress bringing Dolby Atmos music to cars. And we're even earlier days bringing Dolby Vision to cars. So automotive continues to be one of the areas that gives us confidence in our ability to continue to grow Dolby Atmos, Dolby Vision, and imaging patents. Steven Frankel: Okay. And we want to leave Robert out. So, what were true-ups in the quarter? Robert Park: Okay. Steve, for not leaving me out. Appreciate that. True-ups for the quarter was really not a factor. It's minus $1 million for the quarter. Steven Frankel: Okay. Great. And then maybe one more time back on auto. Kevin, how do you feel in your progress of going deeper into some of the brands that you've already been with? And what's your visibility into maybe going in the North American brands getting into some lower price points and more aggressively priced cars? Than in a lot of the high-end vehicles so far. Kevin Yeaman: Yes. We continue to make progress getting deeper into lineups. You're aware of what we've done with Mercedes. Obviously a higher-end brand, but getting deeper in lineups. Cadillac in the tire EV lineup. Across our portfolio, we see a number of our partners bringing Dolby Atmos to additional models. We also feel very good about the pipeline activity around bringing it even deeper. And so we still believe that Dolby Atmos is an experience that should be the standard way to listen to music in the car, just as stereo has been for a very, very long time. Operator: Your next question comes from Patrick Scholl with Barrington Research. Your line is open. Patrick Scholl: Hi. Thank you. Just another follow-up on your the new model that you're rolling out with the content distributors. I was just wondering, just in terms of the imaging patent licensing, is any of their is there any, like, overlap between the technologies that you're licensing there and the services being able to distribute content in, like, in Dolby Vision and Dolby Atmos? Kevin Yeaman: Separate things. The Dolby Vision actually, is not dependent on video codec. We implement Dolby Vision across a range of video codecs. Dolby Atmos is implemented with the branded Dolby audio codec. Patrick Scholl: Oh, okay. And then with the Dolby Vision 2, is there I guess, in any when you when you produce an update, to to Dolby Vision, is there any sort of process to updating the content pipeline or the service distribution pipeline in order to get adoption from device manufacturers? Is that more accelerated from other you know, technology rollouts, or is it similar in that area? Kevin Yeaman: Yes. So, yes, good question. I mean, first of all, we're always introducing new features and functionality as it relates to our core offerings. But significant about Dolby Vision 2 is this is a significant upgrade. So it really I hope you can join us at CES. It's a noticeable difference across all TV entire TV range. And that's why we think we've gotten such good engagement, and Hisense and TCL announced right along with us on announcing Dolby Vision 2 that they plan to adopt it. And yes, this does include providing new tools to creators to take advantage of the full range of capabilities. And we expect that the first TVs will be in the market by 2026. We expect to have content we're working the content pipeline at the same time. And I would say compared if your question is compared to when we first brought Dolby Vision to life, I would say it can go it's faster than that because of the general the broad adoption of Dolby Vision and because like I said, this makes a significant difference. We have good engagement across the ecosystem. Patrick Scholl: Okay. And then just on the three-year growth outlook for Atmos and Vision and the ImagePat and Thing, I think if I heard you correctly, like, the top end of that, you know, kind of three-year CAGR is brought down a little bit from what it had been. Is that just sort of a law of large numbers or just the kind of just the macro kind of view of just how things are been trending more recently is the and, like, the potential macro impacts from trade issues and things like that. Kevin Yeaman: Yes, I would say law of numbers. We were when we first started providing this construct, we were at about just over 20% of our revenue was 50%. And I would say today we've on the Q&A we've talked about auto. We just talked about Dolby Vision 2. We talked about the video distribution program. All of those are things that are in the early stages of growth and can contribute to this growth rate going forward. And we haven't yet talked about the fact that Instagram is now including Dolby support for Dolby Vision for iOS, which is a partnership we're also very excited about. We're on the with Dolby Atmos and Dolby Vision. Now we're on Instagram. And, that's important because social media is the most prominent use case on mobile devices. And so we've seen in China how when we get included on social media and video distribution sites. We mentioned I mentioned on the call that Douyin has now adopted us. That drives demand for Dolby Vision and Dolby Vision playback on mobile devices. And so we think this is also a good driver. So what we're seeing is quite a few important wins that are early growth drivers for us to keep driving that forward. And now that it's approaching 50%, it has a much greater impact on the overall top-line growth. Operator: Okay. Thank you. Your next question comes from Vikram Kasavabhotla with Baird. Your line is open. Vikram Kasavabhotla: Yes. Hey, thanks for taking the question. Maybe just a follow-up on some of the comments you made on the last response. Just could you talk more about your observations around the macro environment right now? What is your latest thinking in terms of the potential impacts from the tariffs as well as just the state of the consumer and how have you gone about incorporating that into the outlook for '26? Kevin Yeaman: Yeah. Thanks for the question, Vikram. So first, I would say that over this last year, we haven't seen any specific identifiable impact of the tariffs. If anything, I think what we're seeing is that our device partners have been dealing with supply chain issues for quite some time beginning with the pandemic, and they've invested a lot in resiliency. And I think they've proven to be quite resilient. At the same time, I would say the overall device market is flattish, sluggish. And so as it relates to foundational, Robert said, we're planning for low single digits. But we are seeing a big improvement from 2022 to 2024 when one of the biggest reasons for our larger declines was because we were coming off those really strong purchasing years in 2021 where everybody went out to buy a TV and a PC. So in that respect, we see it stabilizing relative to that period of time. Don't think it will be sluggish forever. We think our partners are hard at work doing exciting things. But and I guess I would also add that we have been able to grow Dolby Atmos 20% a year through all of that. So we're really focusing on what we can control, and that is all the things we just talked about that we think will drive continued growth in Dolby Atmos, Dolby Vision imaging patents. And we are of course excited that we see new paths to expanding our addressable market by adding value to new customers, some of whom are already partners. Vikram Kasavabhotla: Okay, great. And then maybe a follow-up on the 2026 outlook. I think you called out a couple of drivers that are affecting the first quarter year-over-year trend here. Curious if there's anything else to call out as we think about the cadence throughout the rest of the year? Robert Park: Yes. Hi, Vikram. This is Robert. Yeah. Our quarterly results can fluctuate widely due to timing of true-ups, minimum volume commitments, and recoveries. And Q1 is no different than the previous past where we've had Q1 is depressed due to a Q1 true-up of last year and then timing of some minimum volume commitments. And I think this year we expect our revenue to be more evenly distributed between the first half and second half versus what it was last year. Vikram Kasavabhotla: Okay. Great. And then maybe just the last one for me. It'd be great to get your latest thoughts around allocation here. It looks like you saw some share repurchase authorization left. Looks like it's in good shape. What is your latest thinking on how you plan to approach repurchase activity going forward? Kevin Yeaman: Yes, we do have just over $70 million of repurchase authorization remaining. Our policy, of course, is to, as I'm sure you know, is we do dilution on a regular basis from equity comp. We have a regular dividend that we announced an increase today. We've increased that every year except for one during the pandemic. And then we do look closely at this with our board each quarter, and over time we have sometimes done more buybacks than is necessary to offset dilution. So we continue to look at it closely. Vikram Kasavabhotla: Okay. Thank you for the comments. Operator: And with no further questions in queue, this will conclude our conference call today. You may now disconnect.