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Clay M. Whitson: The cadence driven by the cadence of revenue recognition on certain projects in our utilities and transportation markets. This will be particularly true in Q1. Despite the lower outlook for those markets in fiscal 2026, they are well positioned to rebound in fiscal 2027 and beyond. Our long-term expectation for organic revenue growth remains high single digit. While we are now a single operating segment, we would like to provide some detail regarding the size and relative contributions to revenues by our core markets. 25% of revenues utilities, transportation, education, and public administration are all roughly equally weighted. From a seasonality standpoint, software license sales and professional services represent the most variable line items to forecast and can distort seasonality in a given quarter. We currently expect our revenue distribution to approximate the following: Q1, 23%; Q2, 25.5%; Q3, 24.5%; Q4, 27%. I'll now turn the call over to Rick Stanford for updates on the M&A. Thank you, Geoff. Good morning, everyone. I'll briefly address M&A and then I'll hand the call off to Paul Christians. Rick Stanford: This past quarter has presented various opportunities to assess potential acquisition targets. Our interest in some of these companies remains strong and discussions are ongoing. Acquisition philosophy remains steady. We will pursue opportunities that align with our strategic goals while maintaining a disciplined approach to pricing. Additionally, each potential acquisition must fit well within our operational framework ensuring compatibility. We remain optimistic as our acquisition pipeline is constantly churning and continually filled with promising opportunities. Our primary focus remains on strengthening our public sector vertical where we see significant potential for growth and innovation. I'll now turn the call over to Paul Christians for final comments. Paul Christians: Thank you, Rick. i3 Verticals, Inc. is structured into five primary markets: Justice tech, transportation, public administration, education, and utilities. Because we intentionally structured our organization in a market-centric model to remain as close to the customer as possible, intra-market cross-selling naturally progressed into solution bundling. As solutions have evolved, some are applicable cross-market. Given that, leadership is actively identifying synergistic opportunities across markets further accelerating revenue and deepening customer engagements. Governments are prioritizing the modernization of legacy systems, enhanced user experience, and improved transparency for constituents. The combination of modernization needs and scope expansion creates a unique market opportunity for i3 Verticals, Inc. to address the gap by providing solutions that include ancillary modules such as payments and other revenue cycle activities, that may reduce costs of systems modernizations. Additionally, i3 Verticals, Inc. is positioned to address the needs of all sides of the state and local government agencies. Our solutions architecture and service delivery model allows us to scale from a single agency to an entire state system broadening our addressable market. Recently, i3 Verticals, Inc. announced the expansion of our partnership with the West Virginia Supreme Court to deliver the i3 Court One case management solution to the state's circuit, family, and magistrate courts. With the new contract, i3 Verticals, Inc. provides ancillary value-added services designed to maximize efficiency and offset project costs for West Virginia's unified judicial system. An expanded platform will empower citizens to gain greater access to aggregated public court data, while the revenue cycle management module will streamline financial processes and improve court's case disposition rates. We are experiencing a heightened awareness and demand for technology-forward platform solutions across the public sector. Platform offerings support decision-makers' ability to manage results versus managing assembly of multiple systems, vendors, and ongoing maintenance. Recent evidence of market platform orientation includes a higher number of RFPs, an increase in the scope of the solutions covered, unified data structure for analytics, and ongoing systems evolution and maintenance requirements. The shift from traditional licensing and capital expenditure models to SaaS introduces a new budgeting paradigm for government clients. One of our differentiators is that i3 Verticals, Inc. is organized both in solution bundling and delivery structure to scale implementation from a single agency to statewide deployment. To address evolving platform market trends, we bundle ancillary services to reduce upfront costs and deliver integrated, modular solutions that deliver modernization with extended scope and enable rapid rollout of additional modules. As referenced earlier, we're observing increased RFP activity alongside continued pipeline growth. This momentum in part reflects increased recognition of i3 Verticals, Inc. as a trusted platform provider and the enhanced market visibility achieved through our brand unification over the past year. This concludes my comments, Drew. At this time, we will open the call for Q&A please. Rick Stanford: We will now begin the question and answer session. The first question comes from John Kimbrough Davis with Raymond James. Please go ahead. Good morning, guys. Geoff, just wanted to dive into the '26 organic growth outlook. Our math is about 5%. I heard 8% to 10% recurring and professional services down. Is that a function of you're no longer selling those professional services or maybe you're not putting things like Manitoba in the guide because they're lumpy and you don't know if they can if they're going to hit or when they're going to hit. Just trying to get a sense for the level of conservatism and almost have and also how much you expect professional services to be down on a year-over-year basis? Clay M. Whitson: Yes. Thanks for the question, J.D. So it's absolutely true that we are leaning into recurring revenue any chance we get. When it comes to negotiations, the West Virginia deal we just did, or any opportunity where we can push and lean on the SaaS and defer over, you know, opt for the recurring sources instead of the professional services implementation sources and contract negotiations, we're absolutely doing that. At each turn. That being said, the professional services, we don't expect that to go away. We don't think that what we have clear line of sight on in 2026 is reflective of any kind of long-term trend necessarily. There's a number of things. The West Virginia deal, utilities pipeline, they look really strong on the professional services and implementation front. Further out. Just true that for 2026, we think that the cadence and timing of some of those things is going to be a little bit lighter. And so we expect to see that line drop off a little bit here. And it was strong in Q4, some of that was a little bit of pull forward, but most of it is kind of things that we just think that the actual performance obligation fulfillment, the cadence of when we get to rev rec on these is further back end of 2026 or slipping into 2027. John Kimbrough Davis: Okay. Thanks. And then I just wanted to drill down a little bit on that dollar I think you called out 104 for the year. How much of that was priced? And how should we think about kind of the pricing tailwind going forward? So we addressed this a little bit with the market but just to kinda recap some of these things. The company has been extremely conservative on price increases historically. And I'm going to say that we are isn't like a pendulum swing to the ops end of the spectrum at all. But we're much more bought in and have been, you know, working through the contracts and the expectations to make sure we kind of get to more of a 3% to 5% price increase range. On a consistent basis with our customers. We've kind of guided that you might expect if price increases were historically contributing one, all things that we think we're gonna get a great return on. You know, West Virginia is just one of kind of, you know, the sources where that's gonna kinda come from. We're really excited about that deal. The cost is I'd say it's relatively in line with where we thought it was going to be for Q4, but these are people who are going to be with us for the foreseeable future here. And that's going to that elevated cost is going to continue into the next fiscal year here. Okay. And then Greg, $85 million cash balance on the balance sheet. Here. How do we think about buyback versus M&A just remind us how much you have them on the buyback? It looks like this year can be a little bit of a transition year at least on the revenue front. Just how are you thinking about that? M&A versus buyback here? And remind us how much you guys have authorized left? Rick Stanford: We just regarding buybacks, and I'll let Greg hit M&A. But Hey. Buybacks, we just refreshed the approval to $50 million. Not a lot of activity in this current period. See obviously the detail in our 10-Ks. That's something that the emphasis is on being opportunistic. We'll do it when we think we get a good return. And we'll we're not going to chase it when we don't think that we're given. On the M&A, we've worked in our pipeline for thirteen years. And I think you'll see some activity sooner than later. We've done a couple of small ones that we'd really don't talk a lot about. And I think we'll still do those, but I think there'll be a couple of meaningful ones we get done in 'twenty six. John Kimbrough Davis: And Greg, when you say meaningful, more tuck in but announced deals that are big enough that you're going to announce them versus maybe some that are just immaterial and not even worth kind of press releasing or talking about? Rick Stanford: Exactly. But nothing transformative. Clay M. Whitson: Yeah. Nothing transforming. They're larger. We say our sweet spot is $2 million to $5 million of EBITDA and we pay 10 times. We could get a little bit above that, but nothing dramatically. John Kimbrough Davis: Okay. Appreciate it. Thanks, guys. This concludes our question and answer session. I would like to turn the conference back over to Greg Daily for any closing remarks. Rick Stanford: Thank you. We do appreciate your interest. We're here if you need to talk discuss. The Duke We do appreciate your support. Thank you. Have a good day. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Ryan Weispenning: Hello, everyone. And thanks for joining us today for our fiscal 2026 second quarter video earnings webcast. I'm Ryan Weispenning, vice president and head of Medtronic investor relations. Joining me here today are Geoffrey Martha, chairman and chief executive officer, and Thierry Pieton, Chief Financial Officer. Geoff and Thierry will provide comments on the results of our second quarter, which ended on October 24, 2025, and our outlook for the remainder of fiscal year 2026. After our prepared remarks, we'll take questions from the sell-side analysts that cover the company. Today's program should last about an hour. Earlier this morning, we issued a press release discussing our results and containing several financial schedules. We also posted an earnings presentation that provides additional details on our performance. The presentation can be accessed in our earnings press release or on our website at investorrelations.medtronic.com. During today's program, many of the statements we make may be considered forward-looking statements, and actual results may differ materially from those projected in any forward-looking statement. Additional information concerning factors that could cause our actual results to differ is contained in our periodic reports and other filings that we make with the SEC. And we do not undertake to update any forward-looking statement. Unless we say otherwise, all comparisons are on a year-over-year basis, and revenue comparisons are made on an organic basis, which excludes the impact of foreign exchange, second-quarter revenue in the current and prior year from our this quarter of the Dutch Obesity Clinic, also known as NOK, and second-quarter revenue in the current prior year reported as other. References to sequential revenue changes compared to the '20 and are made on an as-reported basis. All share references are on a revenue and year-over-year basis and compare our second fiscal quarter to our competitors' third calendar quarter. Reconciliations of all non-GAAP financial measures can be found in our earnings press release or on our website at investorrelations.medtronic.com. And finally, our EPS guidance does not include any charges or gains that would be reported as non-GAAP adjustments to earnings during the fiscal year. With that, over to you, Geoff. Geoffrey Martha: Okay. Thanks, Ryan, and hello, everyone. Last quarter, I told you that Medtronic is on the cusp of an acceleration in our financial results and our strategy. Well, today I'm pleased to share that because of our organization's relentless focus, that acceleration is indeed underway. We delivered a strong second quarter. Both our revenue and EPS beat expectations. Looking across our business, procedure volumes and end markets are robust, and we're bringing Medtronic's full capabilities to bear as we launch innovative technologies and execute ahead of plan in some of the most attractive and fast-growing end markets in med tech. We're glad to be able to raise our revenue growth and EPS guidance for the full year on the back of this building progress. This quarter, we accelerated our growth with significant contributions from our cardiac ablations business as promised. Looking ahead, there's even more that Medtronic is capable of. We're positioning ourselves for even greater acceleration in revenue growth in the back half of the year and beyond. And our momentum is fueled by our enterprise growth drivers, including our PFA franchise for AFib, simplicity for hypertension, HUGO and soft tissue robotics, and AltaViva for incontinence. Look, these are game changers, and they'll power our trajectory. And at this pivotal inflection point in our growth journey, we recognize the need to capitalize on the incredible market opportunities before us. So we've scaled manufacturing to support our acceleration. In this quarter, we took the opportunity to increase OpEx investments to support our revenue growth momentum. We did all this while still delivering outsized EPS growth relative to our guidance. Overall, we shifted to a growth mindset. Besides our organic programs, we're focused on pursuing tuck-in M&A and executing strategic portfolio. Now let's get into the details on our enterprise growth drivers. One of them powered our growth acceleration this quarter. And together, all of them will fuel our total company revenue growth in the quarters ahead. In cardiac ablation, our PFA franchise is generating just a ton of momentum. We grew 71%, which is a strong acceleration from last quarter's nearly 50% CAS growth. This is the highest growth rate of any company in this large and fast-growing space. We're winning share as our PFA franchise grew over 300% in The US, as well as in international markets. This was based on the strength of our Ferra mapping system and our Sphere nine dual energy and high-density mapping catheter. Look. Physicians tell us that they appreciate not only the shorter procedure times that they're seeing with Afera, but increasingly, they're calling out its outstanding durability as well. And demand continues to be extremely high as we hear repeatedly from customers that they want to purchase additional affair systems to expand into even more of their labs. And in the vast majority of instances, when a new affair system goes into a lab, we take the majority of the AF procedure share in that lab. You know, our plants have scaled, as I mentioned earlier, to meet the challenge. And our mapping hiring is going really well. And as a result, we've doubled our installed base of Affair mapping systems during the quarter. And given the economics of this business with capital and consumables, our mapping system sales are a strong leading indicator of future revenue growth and margin expansion. So we're in the early, we're still in the early parts of this rollout. And we expect revenue acceleration to continue with an even higher CAS growth in Q3. We remain on track to double the revenue of this business soon, adding an incremental $1 billion off the $1 billion FY '25 base. Look, and we're not stopping there. With our pipeline, we're bringing a fair technology to the single-shot segment with Sphere 360. EPs tell us that 360 is the most anticipated PFA catheter out there, given the strength of its early clinical data. We've submitted the IDE to the FDA to get approval for our US pivotal trial. So the EP ablation space we're expecting to start in Q3 is now over $12 billion. It's growing mid-twenties, and with our low double-digit share, and the high demand I just talked about, for the current portfolio and our pipeline, we see a long runway to gain significant share and add meaningful growth to Medtronic. Now on top of that growth, we're launching as the clear market leader in two very large end markets. Our simplicity procedure for hypertension, and AltaViva for incontinence. And we're excited to have received the final Medicare NCD for simplicity three weeks ago. So now in addition to a broad label from the FDA, we have an excellent coverage outcome from CMS. The final NCD enables broad access and removes certain patient pathway barriers that were in the original proposal, including reducing in-person visits, removing a kidney function exclusion, and cutting in half the time requirement for adherence to meds. It also highlights patient quality of life as an important consideration. So the NCD gives physicians many avenues to bring simplicity to patients. Additionally, we are currently the only company to meet the full NCD criteria with an approved continued evidence development plan. And on the commercial payer front, we picked up significant momentum with wins during the quarter, including HCSC, Regions, and several Blue Cross Blue Shield plans, that collectively cover 30 million lives. Shifting to efficacy, Medtronic is the runaway leader with Ardian clinical data. And we continue to add to it. Only Simplicity RF Ardian has consistently shown sustained and improving blood pressure reductions in the long term. This is definitively unique to us. As we've not seen this with the ultrasound devices. This sets the standard that all other devices must now meet. And last month at TCT, we shared three-year data from our OnMed trial, that continue to show the procedure is effective over the long term. Patients who underwent the simplicity procedure experienced an 18.5-point average drop in systolic blood pressure. We also completed enrollment in our SPIRAL AFFIRM trial, which aims to expand simplicity into high-risk subgroups, including people with isolated systolic hypertension. The first data from a subset of this trial was also shown at TCT with very strong results. We're using these results in ongoing discussions with the FDA. So simplicity represents a massive multi-billion dollar opportunity for Medtronic. With an addressable market of 18 million people in The US, with uncontrolled hypertension. And now with a broad NCD in place, and commercial payers coming online faster than anticipated, this isn't a question of if or even how big. A question of how fast. Now we have not incorporated much Simplicity revenue into our back half guidance. But we are sprinting after this opportunity. We have supply. We've ramped up physician training and market development activities. With many hospitals initiating simplicity programs across the country. And now we're increasing our consumer awareness programs. And as a result, we expect our revenue to pick up in the back half of the fiscal year and ramp over the next few quarters and meaningfully contribute to Medtronic for years to come. Now shifting to Altaviva. We're seeing very positive signs in the first several weeks of The US launch. Physician training programs are oversubscribed. And we're expanding training capacity to meet this demand. Physicians are stacking cases and early media coverage has driven a surge in consumer search activity. Altaviva is a simple option to treat urinary urges and involuntary leaks, which affect 16 million people in The US. This small device is inserted just below the skin but above the fascia near the ankle. The procedure is minimally invasive, doesn't require sedation, and the patient goes home with a therapy activated. So they're not waiting for follow-up appointments to feel the results. The device is only recharged once or twice a year, eliminating the need for daily at-home charging equipment. And it has a 15-year battery. So we believe Ultaviva will add meaningful growth to our pelvic health business. And be a Medtronic growth driver again, for years to come. And more importantly, it is meaningful for patients. This is our first patient in South Carolina who's dancing to Jingle Bell Rock. I was getting that to be that time of the year. And it's a wonderful video. In addition to these enterprise growth drivers, we're seeing improvements in many of our other businesses as we execute on new product introductions. Getting products to market ahead of schedule, and ensuring strong commercial follow-through. So with that, I'm gonna turn it over to Thierry to cover the details of our business performance, financials, and our guidance. Thierry Pieton: Hey. Thanks, Geoff. Hi, everyone. Appreciate everyone joining us today. So I'll start with our cardiovascular portfolio, where we grew 9%. This was our strongest growth over a decade, excluding the easy comparisons we had after the pandemic. The growth acceleration was driven by our building momentum in CAS, which Geoff walked you through. And it's worth noting that PFA is now 75% of our cardiac ablation revenue. Our PFA growth significantly offset the 40% declines we had in cryo, and 90% of our remaining cryo revenue is in markets outside of The U.S. And look, it wasn't just casts. The rest of our cardiovascular portfolio grew a combined mid-single digits. Cardiac Rhythm Management grew 5%, with 18% growth in Micra leadless pacemakers and nearly 80% growth in Aurora EVICDs. In Structural Heart, we grew 7% on the strength of the Evolut TAVR platform. In peripheral vascular, we grew low single digits, and we expect growth to improve as we continue to launch the NeuroGard IEP carotid stent and begin the launch of our Liberant mechanical thrombectomy system. Next, in our neuroscience portfolio, our growth returned to mid-single digits as expected, with growth of 4%. In Cranial and Spinal Technologies, we grew 5%. That included 8% growth in Core Spine, both globally and in The U.S, and 5% in neurosurgery capital equipment. Our SpineABLE ecosystem, which includes AI-enabled preoperative planning software, and enabling capital equipment, including robotics, navigation, imaging, and powered surgical instruments, continues to attract strong spine surgeon adoption and drive meaningful share gains. And this is enabling strong pull-through of our Core Spine hardware. Our Specialty Therapies businesses had flat results in Q2, an expected improvement from last quarter driven by ENT and neurovascular. We have clear line of sight to continued improvement in specialty therapies next quarter, as we accelerate growth in both Neurovascular and Pelvic Health. In neurovascular, growth will improve as we anniversary the vast majority of China VBP in January, also expect an increasing growth contribution from the NeuroGard carotid stent launch, which is being sold by both our peripheral vascular and neurovascular businesses. In Pelvic Health, we expect growth to accelerate on the Arteviva launch that Geoff outlined. In 7% both pain stim and brain modulation grew high single digits as we continue the rollout of our Insemptiv SCS and BrainSense ADBS systems. The market continues to appreciate our differentiated fully closed-loop technology with responsive real-time therapy adjustments that's available in both of these products. Next, our MedSurg portfolio grew 1% as expected. Our Surgical business also grew 1%, impacted as we anticipated by the timing of certain tenders in emerging markets and the ongoing but stable market pressures from bariatric surgery and the shift to robotics. We expect a slight rebound in Surgical in the back half. And over time, we expect growth to continue to improve as we enter new markets with Hugo. In the back half of this fiscal year, we expect the FDA to approve Hugo with a urology indication and will start our entrance in The U.S. We also continue to make progress on expanding indications. During the quarter, we presented our Enable hernia repair study, which met its safety and effectiveness endpoints. We kicked off our Embrace Gynecology U.S. Pivotal study last month. This builds on the momentum from the positive results of our international GUIN study, which we shared at SRS in July. Given our experience in international markets, we have developed a clear understanding of the differentiated features that will make our robotics program successful. This includes Hugo's modularity and open console. It also includes continuously adding advanced technologies such as our ICG imaging and instrumentation like LigaSure RAS. Our touch surgery digital ecosystem is a force multiplier for robotics and for laparoscopic surgery. Adoption is building momentum and bringing AI into operating rooms in over 30 countries. Beyond the features, we're also leveraging our deep partnerships with through our training, support, and through our service. We look forward to robotics becoming a more meaningful growth driver over time. Next, our endoscopy business grew 8%. This was driven by double-digit growth in our esophageal products, as well as in G.I. Genius, our AI-powered solution used to detect polyps during colonoscopies. Wrapping up our business performance, our diabetes business or MiniMed, as it will be called post-separation, grew high single digits. We had particular strength in international markets, which grew 11%. As expected, The U.S. was lower this quarter in large part due to a decline in new orders as customers anticipated the launch of our new sensors. As we've started accepting orders, we're seeing this pent-up demand materialize. There's a lot of excitement behind both the Simplera Sync and Instinct sensors. Look, with the SimpleraSync, we continue to ramp manufacturing volume to support its European launch. As that ramp continues, we plan to roll it out more broadly to U.S. consumers later this fiscal year. And ahead of that, we started accepting orders during the quarter. With the Instinct sensor, we started taking preorders in The U.S. during the last month of the quarter. And we expect to begin shipping in late November. We accumulated more than 35,000 U.S. customer orders for Simplaris Inc, and preorders for Instinct. Around 25% of these orders are from new pump users or our Medtronic pump users who were not using our CGM. The rest of these orders are current customers in our install base, upgrading to the new sensors. We also saw over 9,000 HCPs in The U.S. who are new Medtronic prescribers. Look, for those of you who follow this space, you know how big a deal these numbers are. And the impact they're expected to have on increasing our installed base. We expect the demands our new sensors to accelerate our U.S. growth in the back half of the fiscal year. Our diabetes business is in a strong innovation cycle. We've had a lot of great news in the last few months as our teams execute on the pipeline. In July, the 780 gs system received CE Mark for three expanded indications, including for type two, for children as young as age two, and during pregnancy. In September, the US FDA also approved 780 gs for people with type two diabetes. And they cured our smart guard algorithm enabled integration with the Instinct sensor. Earlier this month, we received FDA approval to start The U.S. Pivotal for Vivera, our third-generation algorithm. We also continue to make progress with our new AID systems, MiniMed Flex, and MiniMed Fit. Remain on track to submit Flex, our next-generation durable pump, to the U.S. FDA. And with FIT, our AID patch system, we intend to submit to the U.S. FDA by the fall of next year. Look, finally, our planned separation of MiniMed is on track. Our preferred path continues to be a two-step IPO and split. We continue to expect the separation to be complete by the end of calendar year '26. So we have a lot of momentum with diabetes given the order inflection, and progress on the pipeline and separation. And you're hearing today that this momentum acceleration extends across the enterprise. As we advance our pipeline and deliver growth. Now turning to the financials. The second quarter revenue of $9 billion grew 6.6% reported and 5.5% organic. That's an acceleration from last quarter and 75 basis points ahead of the midpoint of our guidance. Our revenue from geographic from a geographic perspective was balanced, with double-digit growth in Japan, and mid-single-digit growth in The U.S., in Western Europe, and China. In China, we're driving growth even as we go through ongoing but very manageable volume-based procurement in a few businesses. Our adjusted gross margin was 65.9%, up 70 basis points year over year. Similar to last quarter, I'll walk you through the main components. So we got 30 basis points again from pricing. As well as 40 basis points from our COGS efficiency programs net of inflation. Importantly, margin headwinds from ramping up our manufacturing capacity on Afera are now behind us. So together, we drove a 70 basis point operational improvement in gross margin in the quarter, was offset by business mix, which represented a headwind of 80 basis points. Split roughly equally between cardiac ablation and diabetes. I noted last quarter, CAS is impacted by the mix of lower margin capital to higher margin catheters, and diabetes is early in its manufacturing ramp-up of Simplera. Over time, we expect both of these to improve as we scale our Cast business and separate the diabetes business. Next, tariffs were a 20 basis points headwind, and finally, FX was about a 100 basis points tailwind. Adjusted R&D was 8.4% of revenue and increased 8.9%, which is 230 basis points ahead of reported revenue growth. Have increased R&D investments in our core right-to-win franchises, where we've identified opportunities to accelerate top-line growth and improve our share in the near mid and long term. SG&A was 32.7% of revenue, up 20 basis points versus last year. As Geoff mentioned, we proactively took the opportunity to increase spending to accelerate our PFA and RDN launches in light of the considerable market demand and compelling near and medium-term outlooks. At the same time, we delivered disciplined leverage on G&A, with growth at under half the rate of our revenue growth. Our adjusted ARP profit was $2.2 billion, an increase of 6%. This resulted in an adjusted operating margin of 24.1%, down 20 basis points year over year but an increase of 50 basis points sequentially. Our adjusted tax rate was 16.4%, Q2 tax expense was lower than expected, which is largely due to timing and which we expect to offset in the fourth quarter. All in all, adjusted EPS was $1.36, an increase of 8 percent and $0.05 above the midpoint of our guidance. Let's cover our guidance. Given our outperformance in the first half of the year, as well as the confidence we have in our revenue growth acceleration, we're raising our full-year revenue guidance today. Year to date, we've delivered 5.2% organic growth, and we expect this to further accelerate in the back half of the year. As a result, now expect fiscal 2026 revenue growth of approximately 5.5%. A 50 basis point increase from the prior guidance. The third quarter, we're also expecting approximately 5.5% growth and Q4 will be even stronger. Based on recent rates, we now see an FX tailwind to fiscal 2026 revenue, of $625 to $725 million, including a $150 to $200 million tailwind in the third quarter. Moving down the P&L, we expect our fiscal 2026 gross margin to be slightly up ex tariffs, with pricing, FX, and COGS efficiency programs more than offsetting the negative impacts of business mix, primarily from cardiac ablation and diabetes. We anticipate a tariff impact to COGS of approximately $185 million, including $90 to $95 million in the third quarter. Including tariffs, we expect a fiscal 2026 gross margin decrease of roughly 40 basis points. We'll continue to fund R&D to grow greater than sales with SG&A in light of the outsized demand and building momentum for our enterprise growth drivers, we're capitalizing on every opportunity to accelerate our top line by strategically increasing sales and marketing investment in key programs. But will still deliver SG&A leverage on the full year by rigorously managing our G&A line. Taking all of this together, we expect fiscal 2026 adjusted operating profit to grow approximately 5% or 7% excluding tariffs. Our fiscal 2026 operating margin is expected to be roughly flat ex tariffs and down about 50 basis points including the tariffs impact. Now coming to EPS. Second quarter EPS came in $0.05 above the midpoint of our guidance. $0.03 5 of this beat was from reduced tax expense, I mentioned earlier, that we now expect to occur in Q4. We're flowing through the remainder of the Q2 beat and increasing our fiscal 2026 EPS guidance to a new range of $5.62 to $5.66 versus the prior range of $5.60 to $5.66. For Q3, we expect EPS in the range of $1.32 to $1.34. We're expecting margins to be down a couple of 100 basis points in Q3 as the quarter includes half the annual impact of tariffs. In addition, the expected growth acceleration in CAS and diabetes will continue to impact business mix. And Q3 is typically our lowest quarter for generating COGS efficiency savings given the holidays. However, we do expect Q4 margins to increase year over year and show strong sequential improvement. Looking ahead to next year, we continue to expect high single-digit EPS growth in fiscal year 2027 driven by accelerating revenue growth, a lesser impact of business mix from cats and diabetes on the gross margin line, and leverage on SG&A while we continue to drive higher investments in R&Ds and sales and marketing. Look, we remain committed to driving both revenue and earnings growth and believe strongly that our financial algorithm will flow from our current focus on building sustained top-line momentum. Geoff, back to you. Geoffrey Martha: Okay. Thank you, Thierry. Before we go to Q&A, let me share a few quick thoughts. So when you look at our top line, you can really see the focus we've had on allocating capital and executing on our pipeline is all now coming together to drive meaningful acceleration in our growth. We're on an incredible trajectory with PFA and we're just getting started. With some big new opportunities with Simplicity and Altaviva. At the same time, our newly formed board committees are helping as we act decisively and with increased speed. We're executing on margin enhancement programs to fuel our enterprise growth drivers, the future pipeline, and earnings leverage. We continue to evaluate the overall portfolio at every level as well as tuck-in M&A, and we are committed to growing above our WAMGR while also raising the WAMGR of the company over time. And I'm looking forward to diving deeper into all of this with you at our Investor Day next year. So bottom line, we're executing on our commitments. You can see it in our numbers. And with every quarter, we're picking up more momentum. We're pleased with the progress, but eager to continue proving Medtronic has turned the page and entered a new period of greater revenue and earnings growth. Finally, I want to thank our employees who are watching today around the world. Thank you. Thank you for your steadfast commitment to the Medtronic mission. And to the patients that you and our customers serve every day. I also appreciate your continued execution, which allows us to collectively deliver on our total company performance. So thank you. Okay. Now it's time to move on to Q&A where we're going to try to get to as many analysts as possible. We ask that you limit yourself to just one question and only if needed, a related follow-up. If you have additional questions, you can reach out to Ryan and the investor relations team after the call. So Ryan, can you please give the Q&A instructions and queue up the analysts? Ryan Weispenning: Sure, Geoff. For the sell-side analysts that would like to ask a question, please select the participants button and click raise hand. If you're using the mobile app, press the more button and select raise hand. Your lines are currently on mute, and when called upon, you will receive a request to unmute your line which you must respond to before asking your question. Finally, please be advised that this Q&A session is being recorded. We'll pause for a few seconds now to assemble the queue. Okay. Let's take the first question from Patrick Wood at Morgan Stanley. Please go ahead, Patrick. Patrick, can you hear us? Patrick Wood: There we go. Nailed it. Thank you so much for taking the question. Thanks, guys. I'll keep it to one, of course. I'd love to start with simplicity. You mentioned the commercial discussions happening faster than kind of expected. Obviously, diving into any individual payer, how are those reflective relative to the NCD? Like, are there restrictions being put on? You know, what is the sort of tone of the conversation and, you know, how the payers looking to introduce this within their patient pool? Thanks. Geoffrey Martha: Yeah. Thanks. Thanks for the question, Patrick. Yeah. The commercial payers, you mentioned in the commentary, they are coming online faster than I believe we anticipated. They're getting a lot of push from patients as well. In terms of restriction, I would say first of all, I'd say, look, the NCD is, you know, the Medicare NCD is broad. And it's better than we anticipated. It's better than the proposal. So we're comparing it to that. The one area that I've heard in addition on the NCD, they've incorporated, you know, physician, you know, for lack of a better word, physician discretion, patient discretion on hey. As a patient, can I tolerate these meds? Does the physician feel like the patient cannot tolerate the meds? That gives them that avenue to move to, to move to Ardian. To simplicity. In the commercial payers, we're seeing where there is one difference that I know of is around the medications. More of an emphasis on, you know, being on a few medications for a while. So that's the one area that I'm aware of, Patrick. And, you know, we'll keep you keep everyone posted as we get more commercial payers online. Patrick Wood: Okay. Thanks for the color. Ryan Weispenning: Thanks, Patrick. We'll take the next question from Travis Steed at BofA Global Securities. Go ahead, Travis. Travis Steed: Hey. Congrats on a good quarter. I guess, first of all, the implied second half guide around 6%. And I kind of think about it two buckets, the pipeline and then kind of the base business. And maybe talk about kind of what you're assuming on RDN in the second half. And then also the base business, you know, why confident in the slight rebound in med surge and kind of the confidence that to keep the base business humming. And then on the margins in the second half, you know, this quarter, we didn't see quite as much margin flow through. Just assuming that changes in the second half. Revenue upside leads to more margin upside in the second half. Thierry Pieton: Do you want to take that one? So maybe I start with the margin. Hey. Hi, Travis. Thanks for the question. Hey. Hey. Look. You know, the momentum that we had from a commercial perspective in the second quarter. And, you know, pretty early on in the quarter, we saw the order intake being pretty strong. We also saw that we were gonna have a little bit of upside from a tax perspective even though that's timely, but we did see it coming early on in the quarter. And so we just made a decision to go invest in the places that are gonna drive the growth going forward. So, you know, we made some significant investments in the mappers structure, for example, in cardiac ablation. We started to build up the capability from a direct marketing on the simplicity side. So we took the opportunity that we were gonna see upside on revenue and a little bit on the tax line. Just to lean into the investment to make sure we fully capture the opportunities that are ahead of us. And so you saw that in R&D. You know, it's the second quarter where we have R&D growth that's pretty significantly higher than the revenue growth. And this quarter, specifically, you saw it on the SG&A line. Where we put, as I said, quite a bit of investment especially in sales and marketing, while keeping the G&A line pretty constrained. So going forward into the rest of the year, we'll keep investing in these growth areas. You'll see R&D continue to ramp up. As you know, we're targeting to get over time to roughly about 10% of our revenue on the R&D line. On SG&A, though, you should expect to see leverage in the second half. So SG&A together, so we'll start seeing a lift there. And so ex tariffs, we'll have gross margin and operating margin leverage in the second half. And we will have to contend with the tariff impact. So all in all, on the full-year basis, you'll see gross margin slightly up before tariffs. Down about 50 basis points post tariffs. And at the operating margin level, you'll see operating margin roughly flat year over year ex tariffs and slightly down with the impact of tariffs. So, look, it's all about capitalizing on the opportunities that we've got ahead of us. Second half, leverage. And that's what we'll keep doing. But, again, on both those lines. Geoffrey Martha: So on the revenue, as you see from the guidance, we're seeing we're looking at a back half ramp here that will extend into '27. And the way I'd break it down, I mean, a big piece that is these growth drivers that are kicking in, these multibillion-dollar opportunities. In terms of the back half, though, most of that is really coming from PFA. So, in terms of the new big ones. Right? When you think about PFA, simplicity, Altaviva, and we have Hugo coming, those are we would say our big, you know, multibillion-dollar, you know, up market opportunities. In the back half, the contribution will be more from PFA in that category. PFA is, I mean, you know, is cranking right now. We've got a lot of momentum there. When it comes to Simplicity, and obviously Simplicity and Ultaviva are approved in The U.S., you know, on simplicity, I'd say we're gonna see it start to, you know, tick up in the back half of the year. And then ramp, you know, in the quarters following that. You know, like I said, between the NCD, and the commercial payers coming online, you know, this market is, you know, really a best-case scenario. It's as big as what we said it is, it's not about, you know, if or even how big. Like, it's as big as we said as it's really how fast. And we're measuring that speed of adoption in quarters, not years. Altaviva, you know, again, just approved a lot of great leading indicators, physician trainings over, you know, booked, and we can talk more about that if I get questions on why we're so excited. Again, it'll start to contribute in the back half a little bit. And then Hugo, we don't have too much on, you know, we but we do still expect the approval in the back half of our year. Then there's another getting to the base business, you know, diabetes pops, you know, pops back up, as our new sensors are available. Neuromodulation continues to be strong. CST will be continue to be strong. CRM, had two really good, you know, a really good Q2, you know, I don't know if we're gonna have that same level of growth there, but still, you know, strong growth there. And then you've got two other businesses that'll I'll call it, tick up, you know, incrementally increase their growth. Peripheral vascular with the carotid stent. Mechanical thrombectomy coming. And then neurovascular, again, it's also selling like carotid stent. Some hemorrhagic products coming, and they're just lapping some issues. A recall and then, lapping VBP here. So the base business is a big contributor. PFA is a big contributor. Then you're gonna start to see Simplicity, Altaviva, and a little bit of Hugo. Great. Thanks a lot. Ryan Weispenning: Thank you, Travis. We'll go to the line of Vijay Kumar at Evercore ISI. Please go ahead, Vijay. Vijay Kumar: Hey, guys. Congrats on a nice sprint here. And Geoff. Thanks for taking my question. I had maybe a new product question, a two-parter, if you will. One on Effera, Geoff, do you feel like we have enough mappers now? And if is supply in a place enough where you can hit the $2 billion, you know, how are you thinking about supply and mapping? Then on TBL, we've got some good feedback on cannibalization of, you know, whether TBL could cannibalize Botox procedures. Could TBL be, you know, a billion-dollar product for you guys down the road? Thank you. Geoffrey Martha: So, you know, I'll start with the PFA questions. You know, on the supply that, you know, we are that that's not holding us back. So, supply is in a good spot. And then on the mappers, the mapper hiring is going well. Right? We're staying ahead. You know, but I wish the buffer a little bit more because the growth is tremendous. But we are staying ahead on the mappers and the supply is not an issue. And like I said, our PFA business is really humming, you know. I was just with a big customer yesterday. They got two systems. They will hit laid out three more that they're gonna buy and just talking about, you know, once they put, you know, especially Afera, once they put that in one of their hospitals, how it kind of, you know, takes all the market share or the majority of the market share there. For all types of cases. There's just all these benefits there. So feeling really really good about that. And, again, this mapper hiring has been a Medtronic, not just our cardiac ablation business, but a Medtronic effort. And our HR team's doing a hell of a job there. And then on tibial, you know, look, tibial is something I think everyone needs to invest a little bit of time in here. It's a huge market, 46 million people in The U.S. with overactive bladder and of that 16 million with urinary urge incontinence, where this really shines. And it takes the therapy versus sacral which works really well. It's been a great market for us. You know, there's been some channel disruption in the market lately, but it's still a great market. You know, and, like, works really well for patients. But it does take, you know, weeks or months to get that therapy to a patient from when they start. Versus tibials left less than a day. So what you're seeing here is with tibial, right, you have to do, I mean, with both with the sacral nerve, you have to do a trial, then you have to go in for the implant. Then the patient leaves without the therapy turned on, has to come back to get it activated. Versus tibial. This all happens in a day and the procedure is easier. And when patients, to get to your core, your question, when they're presented with options, all of their options, sacral nerve, tibial, Botox, they choose they tend to choose the tibial. So we do think it will take share from Botox. And I would emphasize that this we believe, look, there's a very strong place for sacral nerve. There definitely been this is an incremental opportunity on top of our sacral business. And so this that sacral combined with tibial given that it's gonna be incremental, this is gonna make that business, that pelvic health business, a growth driver for the company. That's what I'll say about that. It's gonna meaningfully improve the growth rate of that business. Ryan Weispenning: Okay. Thank you, Vijay. Next, let's go to the line of Robbie Marcus at JPMorgan. Please go ahead, Robbie. Robbie Marcus: Great. Good morning and nice quarter. Thanks for taking the questions. I wanted to ask you talked about strategically reinvesting into SG&A and over time, materially increasing R&D, I think up to 200 basis points. How are you thinking about where those dollars are going? How soon should we be thinking about that? And, you know, just help us think about the cadence and the ability to still grow operating margin in the face of higher investment. Thierry Pieton: Yes. Hi, Robbie. Thanks for the question. So, you know, first, where the dollars are going. So there are really two different categories, I would say. One is to, as I said, to capitalize to the maximum extent possible on the growth drivers that are ahead of us. So there is a significant amount of investment that's going to cast to Ardient to Altaviva and to, and, obviously, to Hugo with a profile that a little bit more long term. There are other growth drivers that we're funding. At the same time, such as structural heart and neuromodulation, for example. The second category of where we're putting investment is to make sure that we keep the leading edge from a technology perspective in the key franchises that are our bread and butter. So, you know, there's overinvestment compared to the average of the business in CRM. For example, in the next generation of micro, there's significant investment going in CST to continue to develop the ecosystem that that business has created around Able that has enabled us to, you know, make the CST business more sticky with our customers from a device perspective and gradually improve the margins. So it's really those two areas capitalize on the growth drivers on one hand, and keep the edge on innovation in the key franchises on the other side. From a sequence perspective, look, you know, I would say third quarter, we made a pretty deliberate strong investment because we saw the coming. You know, you'll see a bit less of that already in the second half. So as I said, you know, you should see leverage on the SG&A line in the 40 basis points of pricing and about 30 basis points or 40 basis points of cost out. That's been sort of a recurring performance over the last quarters. And we expect that to continue. Over time. Right? So we're generating between those two lines 70 to 80 basis points of gross margin improvement. Right? And this quarter, you had about 80 basis points of negative mix. And 20 basis point of tariffs. And that was offset with FX. Going forward, we expect that negative mix to start getting better towards the '27. So for the rest of the year, it's still gonna be, pretty significant headwind as CAS and diabetes continue to accelerate. And in the second half of, of twenty-seven, diabetes will be deconsolidated, and then on the CAS side, we'll start seeing the shift between the capital equipment and the catheters, which will make that an accretive business as opposed to being dilutive. So what's what you're gonna see there is the 70 to 80 basis points of gross margin improvement operationally start to show up more as the mix becomes a gradually smaller and a positive effect over time. And then outside of that, we've got some external factors, so we have to contend with the tariffs. So for the second half, we've got, you know, about 90% of that $185 million of tariffs that's gonna show up. In the income statement. The bigger portion is in Q3. Then we'll have a carryover of tariffs going into '27. And we expect foreign exchange, which is the last item there, to be a slight tailwind going into '27. So if you go it's a long it's a long answer. Apologies. But I think it's important that you understand the algorithm. Going into '27, we'll keep investing in R&D. To get to the 10% over time. But you should expect to see leverage on the SG&A line in '27. So, look, we're confident that with the growth with what we're doing from our gross margin performance in a sustainable fashion and COGS and pricing, and the leverage on the overhead, we'll have a leveraged P&L on the operating profit line in 2027. And that's why we hold on our commitment to have high single-digit EPS growth going into next year. Geoffrey Martha: Yeah. You know, just to just to add to that, you know, there's more oxygen here. To create for the investment. You know, it's good to see the improved pricing. And as we go forward, we're not, you know, assuming much incremental, but pricing, but at least holding the improved position that we have. But there's more oxygen in our cost down. You know, as we there's opportunities in scrap, obsolescence, and over time, you know, continue to optimize our network. So these are areas I think these are the incremental opportunity and cost down. And, Rob, you have read some of your stuff in the past that you don't think there's much to do for us on SG&A. There but there's more. There's more to go on SG&A for the company, and that's where the scale of the company should benefit us here. And, you know, it's not gonna be, you know, easy on the company, but there's opportunities there. And we're committed to doing what it takes to fund these growth drivers because, you know, what we're seeing out there with patients on these different growth drivers and what we're hearing clinicians, the impact on them and their staff. It's, you know, this is a big opportunity for the company we haven't seen in decades. We're gonna make it happen. Right? And so there's still, you know, room to go on SG&A as well. And like I said, COGS, to make this happen. Robbie Marcus: Great. That was a fantastic answer. Maybe just one, quick follow-up. Geoff and Thierry, I know even since the beginning of this year, you've talked more and more about tuck-in M&A. Are you thinking about the environment today? Do you see a lot of opportunities and any areas you see more interesting than others to help flush out the portfolio? Thanks a lot. Geoffrey Martha: No. Look, we're very focused on the tuck-in M&A. Don't wanna tip our hat in terms of, you know, exact segments, but we definitely are prioritizing some of the, it's again, it's tuck-in. We're prioritizing these higher growth segments. A lot of that is in cardiology, some in neuroscience as well. We like that affair profile, right, where you're close to market or just you're on the market early stage or close to market would be ideal. Not afraid to, you know, to make the investment that it takes. To get those type of companies. But as Thierry said on your earlier question on, like, where's the R&D going, you know, doesn't the tuck-in M&A, I wouldn't rule out some of our other, you know, key franchises that may need, to augment their R&D with a little M&A. But we are more focused on these higher growth segments. And then the, you know, the board committees we've set up help with the speed enable us to move faster. So, we'll see where it goes. But it's definitely a big focus. Thierry Pieton: Hey. One thing, that, you know, we don't communicate a lot about but we've got a pretty active ventures. That's good. And that arm's been pretty active. So it's got, you know, over 50 companies in which we have a stake right now. We like to use that arm to make investments in sort of early-stage companies. And, you know, it helps with some of the dilution, etcetera. Typically, you know, we always make these venture investments with a view of going higher into the capital over time. So it's never a venture for venture. And, again, it's been it's the pipeline there is pretty strong. We'll keep working that angle too because it's helpful to feed the pipeline for future M&A. Robbie Marcus: A lot. Appreciate it. Ryan Weispenning: Yeah. Thank you, Robbie. Looking at the clock here, I think we've got time for about three more questions. So next, we'll go to the line of Larry Biegelsen at Wells Fargo Securities. Larry, please go ahead. Larry Biegelsen: Good morning. Thanks for taking the question, and congrats on a nice print here. So, Geoff, I wanted to ask about the ramp of Ardian because as you said, it's a question of how fast. So I'm hoping you can add some precision to your earlier comments. You know, I think at our conference in September, you know, I asked US already in sales could replicate The US watchman ramp, which is about $400 million in year five. And, you know, I believe you said you'd be disappointed if your US audience sales didn't achieve $400 million by, I believe, year three. So how does the exclusion of isolated system hypertension in the NCD, you know, impact how you think about the ramp? And do you still believe you can achieve $400 million, you know, US sales by around fiscal 2028, which I think would be year three. And just confirm, Geoff, that the current run rate The US is about $50 million. Thank you. Geoffrey Martha: Well, look. Let me start by saying, yes. I would be disappointed if we're at year five, wherever you said at $400 million. We think it would go faster than that. And this the final NCD won't hold us back. And like I said, we believe it's an improvement on the proposed NCD. Maybe this is a good time because I know there was, you know, on that NCD, like I said, it's an improvement to the proposed NCD. If you go back a year, it's better than what we thought a year ago. If you go back five years, and you asked us if we thought we would get this type of NCD, we'd say that's the best-case scenario. You know, so this market, like I said, is as big as we've said it's gonna be. And, we believe that this final NCD as you dig into and really understand how hypertension, today is treated, it actually reduces the requirements for patients to get this therapy and it reduces the. And maybe this is a good time that we have, our chief scientific and medical officer on the line. Knowing that there'd be, Doctor Laura Mori, who's also an interventional cardiologist, knowing that there'd be maybe some questions on this, on the treatment pathways. Maybe I'll ask Laura to comment, you know, since you mentioned that one systolic, you know, question. Or diastolic question. Laura, can you maybe provide some context here? Laura Mori: Sure. Hey, Larry. As specific to your question about isolated systolic hypertension, those are patients who, you know, don't have an elevation of their diastolic or the lower number of their blood pressure. It's only the top one. And Jeff said we're continuing to study those patients, but I think the important thing to note is this population is actually pretty small for us overall. If you look at recent studies, people with hypertension over age 60, it's less than 15% of patients who have ISH or this condition. And for patients who are younger than 60, who are half of our patients in trials and then also in practice, it's really very unusual. So as Jeff said out the gate with the NCD, you know, if you just look at that topic, we would estimate that, you know, be less than 10% that would be affected by isolated systolic hypertension, not meet those criteria. And then overall, you know, just to reiterate what Jeff said is that the overall the final NCD makes access more practical for patients with less time delays to treatment. Less restrictions and the, you know, the couple of things that they've talked about screening for are really things that are done in standard practice, you know, by general practitioners or internists. And you yeah. I think the other port just to mention is that in their response, CMS really reiterated that quality of life a really important consideration for patients. Because lifestyle changes and being on many medications can be really difficult. And so they specifically said the good faith attempts are reasonable before referral rather than specifying some, like, mandatory minimum doses or number of medications. So overall, you know, whether it's ISH or overall, the workflow for patients to get into, referral for simplicity is not is really not restricted. Geoffrey Martha: Alright. Thank you, Mark. Larry Biegelsen: Yep. Thanks, Larry. Ryan Weispenning: Next, we'll go to the line of Shagun Singh at RBC Capital Markets. Go ahead, Shagun. Shagun Singh: Great. Thank you so much. You know, I wanted to touch on the algorithm here. A key message was growth acceleration. You know, how should we think about the base business? Is it mid-single digits? The $1 billion incremental PDFA sales is about 300 basis points. And then RDN, I don't know if you could put a final point there in terms of the growth contribution. But as you think about growth should we think about Medtronic moving towards that high single digit on the top line? And then on portfolio management, I was just wondering how you're thinking about or should we expect portfolio pruning beyond diabetes? Thank you for taking the questions. Geoffrey Martha: Well, maybe I'll, you know, Shagun, thanks for the question. I'll start with the last part of it on the portfolio management. And look, this is an ongoing focus, you know, for the company, and it's really making sure that beyond diabetes, right, first of all, that deal is tracking and on track. And going well. Beyond diabetes, we just wanna make sure that the whole portfolio fits together. We're getting the right amount of synergies. And we can provide the right amount of focus on these generational enterprise growth drivers like PFA, like Ardian, like Altaviva. And Hugo when it comes to The U.S. and others. And so it remains a focus and it remains a focus of, like, one of the board committees that we set up, and we're meeting frequently on this and at it. And that's what I'll say there. And I'll have Thierry answer. Thierry Pieton: Overall, you know, if you think about the guidance that we just gave, five and a half on the full year, we were at 5.2 at the end of the first half. We're guiding at 5.5 in the third quarter. You can do the math for what fourth quarter looks like. And, you know, we don't wanna slow down from there. And look, what I would say is, you know, it's pretty clear that CAS represents a sizable opportunity. We reiterate the incremental $1 billion coming shortly probably in the beginning of in the '27. Fiscal year '27 for us. And Ardian, you know, we have all these discussions about the speed. It's I think it's important to keep in mind that, you know, 11% of market share that population is, you know, sort of almost $3 billion of revenue for us. So it's a pretty significant opportunity. And we talked about the size of the Altaviva opportunity as well. It's 20 million patients overall. So those come in increment to the rest of the business, and the rest of the business is not standing still. So specialty therapies is getting better. You saw a first sign in this quarter, and it's gonna keep going with the product activity that we've got in neurovascular with Altaviva and pelvic. And the key franchises, look, CRM had a great quarter. It's gonna continue to perform for the rest of the year and beyond. We're investing in that business to keep the technology lead. So we don't intend to go backwards. CST has been improving on the back of, you know, the able ecosystem that the team has created. So look. You know, we're positive about the opportunities of the company going forward. And we'll keep you posted when we give next year's guidance in at the '4. Ryan Weispenning: Okay. Thank you, Shagun. We've got time for one more question, and I apologize to the analysts that we weren't able to get to. You've got additional questions, feel free to reach out to me during the day. So we'll go to our last question, Pito Chickering from Deutsche Bank. Pito, please go ahead. Pito Chickering: Hey. Good morning, guys. Thanks for taking my questions. I'll I have sort of two product, so I'll ask them upfront. First one is, as AF ablation is moving to the ASC setting, can you talk about how you are positioned in the ASC in terms of mappers, and the fair placements? And on TAVR, can you talk about what you saw The U.S., you know, Europe and Japan? And how market share is looking in those markets. Thanks so much. Geoffrey Martha: Well, thanks, Pito. Look, for, you know, PFA and ASCs, over time, we do see that as an incremental opportunity for market expansion there. It'll be a bit of a shift outside of the tertiary centers to the ASCs over time, but it also, you know, be a market expansion opportunity for us. It is a focus for us. We have been hiring across the company, quite frankly, particularly in neuroscience, and in cardiovascular. Folks that are specifically focused on market development in the ASCs for us and what our strategy is and how our product portfolio fits there. And the resources we need, including mappers. So this is definitely in the calculus for Medtronic, not just, you know, not just our cardiac ablation business. Like I said, this I think will represent, you know, an incremental growth opportunity for us there. And then on TAVR, you know, what I'll say is, you know, we had a decent Q2 here growing high single digits on a global basis. We're executing particularly well and getting more than our fair share of that of that Boston exit. You know, as we move forward in PFA, you know, I think, you know, Q3, we may see a deceleration there. Thierry Pieton: Tougher. Geoffrey Martha: In TAVR. In TAVR. What did I say? PFA. PFA. I'm sorry. No. No. No. PFA, he's gonna keep going. I'm sorry. But in TAVR, a little bit of a deceleration in Q3, but then it'll pop back up in Q4. We've seen due to a phasing we've seen this in prior quarters as well. I don't know if you wanna add anything to that. Thierry Pieton: No. That's right. We saw the Q4, Q1 effect and, you know, Q2, Q3 looks kinda similar, a little bit slower in Q3, but with a pickup in the fourth quarter. Yeah. And just for, you know, clarity, PFA will continue to go off the 71%. It'll accelerate into Q3 and beyond. Ryan Weispenning: Thank you, Pito. Geoff, if you wanna go ahead with your closing remarks. Geoffrey Martha: Sure. Well, so for thank you for joining and all your thoughtful questions this morning. And like Ryan said, apologize to the analysts. We didn't get to, certainly appreciate your support and your interest in Medtronic. Please join us again for our Q3 earnings broadcast for more updates, and there'll be more, and our continued progress. And on the long-term strategies. And we expect to hold this on Tuesday, February 17. And for those of you in The U.S., I wish you and your families a very happy Thanksgiving next week. I can't believe Thanksgiving's next week. With that, enjoy the rest of your day. Thank you.
Operator: Ladies and gentlemen, thank you for standing by, and welcome to Kanzhun Limited third quarter 2025 financial results conference call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question and answer session. At this time, I would like to turn the conference over to Ms. Wenbei Wang, Head of Investor Relations. Please go ahead, ma'am. Wenbei Wang: Thank you, Operator. Good evening, and good morning, everyone. Welcome to our third quarter 2025 earnings conference call. Joining me today are our founder, chairman, and CEO, Mr. Jonathan Zhang, and our director and CFO, Mr. Fu Zhang. Before we start, we would like to remind you that today's discussion may contain forward-looking statements which are based on management's current expectations and observations that involve known and unknown risks, uncertainties, and other factors not under the company's control, which may cause actual results, performance, or achievements of the company to be materially different. The company cautions you not to place undue reliance on forward-looking statements and does not undertake any obligation to update this forward-looking information, except as required by law. During today's call, management will also discuss certain non-GAAP financial measures for comparison purposes only. For the definition of non-GAAP financial measures and a reconciliation of GAAP to non-GAAP financial results, please see the earnings release issued earlier today. In addition, a webcast replay of this conference call will be available on our website at ir.jipin.com. Now I will turn the call to Jonathan, our founder, chairman, and CEO. Jonathan Zhang: Hello, everyone. Thank you for joining our company's third quarter 2025 earnings conference call. On behalf of the company's employees, management team, and board of directors, I would like to extend our sincere gratitude to our users, investors, and friends who have continuously believed in and supported us. I will briefly walk through our key operational results and business progress this quarter, focusing on three areas. First, recovery in demand through a priority growth in our third quarter performance. Second, the evolving characteristics of recruitment demands across different dimensions. Third, progress in integrating AI into our products, technology, and overall business operations. Let's start with the financial performance. In the third quarter, we generated a total revenue of RMB 2,160,000,000, up 13.2% year on year, with growth accelerating from the previous quarter. Excluding share-based compensation expenses and other income, such as investment gains, our adjusted operating profit grew 949.3% year on year. Our GAAP net profit was RMB 2,718,000,000, up 67.2% year on year, with a net profit margin of 35.8%. Part of this improvement was attributable to a decrease in share-based compensation expenses, which was only RMB 220,000,000 this quarter, marking the third consecutive quarter of sequential declines and a year-on-year drop of 21%. The growth in the third quarter was driven by two key factors. The first and most important driver was continued user growth, supported by our increasing penetration and expanding market share. From January to October, we acquired over 40,000,000 newly verified users. In the third quarter, the average verified monthly active users, which is amazing on the bus ticketing app, reached 63.82 million. User activity is also strong. According to such data, our DAU to MAU ratio has been maintained at a high industry-leading level. The second driver was the rebound in enterprise-side demand, which also helped improve data on the monetization side. In the third quarter, the newly posted job positions increased 25% year on year, while both the number of recruiters posting new jobs and the average number of posts per recruiter grew steadily compared to the previous quarter and the same period last year. From July to September, the average number of daily active enterprise users grew at a faster pace sequentially than job seekers, marking the first time this has happened in three years. The supply-demand balance on our platform, meaning the ratio of enterprise users to job seekers, continued to improve. By September 30, the number of paid enterprise customers in the twelve months grew 13.3% year on year to 8.68 million. Throughout the quarter, the paying ratio among quarterly active users increased both year on year and quarter on quarter. The second agenda item focuses on a service entry point for current demand this quarter from multiple perspectives. From an industry perspective, blue-collar revenue growth continued to lead, with its revenue contribution reaching a record high in the third quarter. Manufacturing industries remain the most robust sector, topping the industry's revenue growth for five consecutive quarters. Taking this opportunity, I would like to do a brief review. Three years ago, the company's strategy for serving manufacturing job seekers and recruiters divided into three stages in terms of priority. The first stage is to improve the online job search environment for blue-collar workers. Between the passage of a solution for the same managed ticket or managed first and profit board second, we chose the second path. The second stage is to develop a user scale for that user base on the platform. And the third stage is to pursue commercial benefits on a reasonable scale. In 2022, we launched the Cont project to purify the job search environment for blue-collar workers, pursuing the authenticity of recruiters, job positions, and compensation, combating false information, and increasing their trust. Over the past three years, the process has been extremely challenging, and the results have gradually emerged. Meanwhile, transportation, logistics, warehousing, and the service industries also delivered solid overall performance. Among the white-collar sectors, industries such as artificial intelligence, Internet service, lifestyle service, new retail, and gaming are experiencing leading growth. One thing worth mentioning among the white-collar segment is that we have noticed a notable increase in participation from small and medium-sized enterprises in the white-collar industry, with paying user numbers growing quickly, while the average spending per customer remains stable, which is an offset to the trend of previous patterns. This, to a certain level, reflects the arrival of the white-collar entrepreneur ecosystem. From the perspective of compute-side demand, in Tier 1 cities is rebounding, Tier 2 cities remain stable, and the revenue contribution from Tier 3 and below cities continues to rise. Among enterprises of different sizes, medium-large enterprises, which means employers with between 500 to 999 employees, are growing the fastest, followed by small and micro enterprises, and then very large enterprises. The third agenda item reviews the progress we made since AI was integrated into the company's business from a product and technology perspective. On the Dosynchron service side, there are two things worth mentioning. First, after a period of continuous iteration, an AI job search assistant has been fully launched for all job seekers. Currently, it can recommend positions for users, answer questions, and also provide suggestions on how to optimize their resumes. In the third quarter, not only was the full rollout of this product achieved, but the number of interactions per user with this AI job search assistant also showed a significant quarter-on-quarter increase. We have also been continuously optimizing the AI interview coaching feature. In the third quarter, the number of job seekers who completed the mock interviews showed further improvement, and their activity level and conversion rate continued to improve compared to the previous quarter. On the recruiter service side, multiple AI products have been gradually launched to provide services. There are four aspects to mention. The AI communication assistance feature is being gradually integrated into existing commercial value-added products. As a result, the average mutual achievement conversion ratio of these products has increased by 7%. A product called AI Quick Hiring, after continuous optimization, is currently under phased rollout. Experiments show that this product not only helps the platform better understand recruiters' intentions but also allows for comparison among all job seekers on the platform, thereby improving matching accuracy. Currently, the reading rate among recruiters participating in the phased rollout campaign is steadily increasing. Third, we have extended the AI interview feature to a number of well-known customers from the contract recruitment side. For example, the AI interview can support multiple rounds of questions and customize interviewer profiles. This product has very strong appeal to students, leading to a high volume of applications in the short term, which is increasing significant pressure for recruiters during campus recruiting activities. The development of AI services has alleviated this pressure. Fourth, we are cautiously exploring AI-hosted recruitment services and AI-powered bulk placement solutions in diverse recruitment scenarios such as high-end white-collar and gold-collar positions, and blue-collar roles in the patroning and manufacturing industry. These initiatives are gradually generating benefits. Among all those enterprise-side AI services, we have been quite cautious to ensure we allow the job seekers to know whenever they are communicating with an AI service. They have the option to close the service. They have the button, and sometimes, someone might choose to close, but someone chooses to continue the communication, and we are continuously collecting related examples. We provide the option for job seekers whether they can communicate with AI or not to guarantee their interest. But, also, we are continuously observing with the intervention of AI what kind of impact it will have on mutual matching, not only on individual topics on a cultural perspective but also from a scalable double-side situation. We are continuing to update and track data. In the third quarter, we delivered high-quality growth with solid progress across user growth, commercialization, and AI technology implementation. In October, the company completed an annual dividend payment of approximately $18,000,000. Looking ahead, we will continue to focus on strengthening our core business ability. We will actively fulfill our commitment to shareholders. That concludes my part of the call. I will now turn it over to our CFO, Phil, for the review of our financials. Thank you. Phil Yu Zhang: Thanks, Jonathan. Hello, everyone. Now let me walk through the details of our financial results for 2025. In this quarter, we delivered high-quality and sustainable top-line and bottom-line growth. Our revenue reached RMB 2,200,000,000 this quarter, with growth accelerating to 13% year on year. The faster revenue growth this quarter was primarily driven by higher enterprise user growth as well as improved monetization levels due to the recovering hiring demand. Our commercialization strategy, grounded in ecological balance, enabled us to effectively and sustainably improve user payment ratios within a relatively better hiring environment. The growth in paid enterprise customers, which grew by 13% to 6,800,000 for the twelve months ended September 30, demonstrates our capability and potential to enhance monetization. Revenue from middle-sized and small-sized accounts showed continued growth momentum, with revenue contribution in this quarter up by 2.2 percentage points, while key accounts growth remained stable. As a result of the structural mix shifting, the overall ARPPU maintained stability. Moving to the cost side, total operating costs and expenses decreased by 7% year on year to RMB 1,500,000,000 in this quarter. Share-based compensation expenses dropped by 21% year on year and 6% quarter on quarter to RMB 216,000,000, shrinking for the third consecutive quarters in both absolute amount and percentage of revenue. Excluding share-based compensation expenses, adjusted income from operations grew by 49% to RMB 9,004,000,000, and our adjusted operating margin reached 41.8%, up by 10.1 percentage points year on year and relatively flat quarter on quarter. Cost of revenues decreased by 2% year on year to RMB 308,000,000 in this quarter, mainly due to the decrease in operational employee-related expenses as a result of improved operational efficiency as we continue to engage AI in our daily operations. Gross margin went up by 2.2 percentage points year on year and 0.4 percentage points quarter on quarter to 85.8%. Sales and marketing expenses decreased by 25% year on year to RMB 394,000,000 during this quarter. As we do not have sports events or marketing campaigns this year, even if we exclude the sports sponsorship costs, our adjusted sales and marketing expenses in this quarter decreased 15% year on year, while we still maintain robust user growth. This double confirms our sustainable increase in marketing efficiency due to our strong brand recognition and network effect. Our R&D expenses decreased by 12% year on year to RMB 408,000,000 in this quarter. Excluding share-based compensation expenses, our adjusted R&D expenses decreased by 8% year on year to RMB 331,000,000 in this quarter and have stayed relatively flat sequentially. Our G&A expenses increased by 28% to RMB 367,000,000 in this quarter, primarily due to a one-off impairment of intangible assets partially offset by a decrease in employee-related expenses. Excluding the impairment, our G&A expenses decreased both year on year and sequentially. Our interest and investment income in the quarter increased by 43% year on year to RMB 228,000,000, primarily due to partial disposal of an equity investment and the increased income from the Hong Kong dollar 2,200,000,000 Hong Kong share offering processed in early July. Our net income increased by 67% to RMB 775,000,000 in this quarter, with adjusted net income increased by 34% to RMB 992,000,000. Net margin improved by 11.6 percentage points year on year to 35.8%, while adjusted net margin reached 45.8%, up 77.2 percentage points year on year. Both of them have maintained sustainable improvement over the past six consecutive quarters. Net cash provided by operating activities reached RMB 1,200,000,000 in this quarter, up 45% year on year. As of September 30, 2025, we continue to maintain a strong cash position of RMB 19,200,000,000. Now for our business follow-up, for 2025, we expect our total revenue to continue the growth momentum and reach between RMB 2,050,000,000 and RMB 2,070,000,000, with a year-on-year increase of 12.4% to 13.5%. With that, concludes our prepared remarks. And now we would like to answer questions. Operator, please go ahead with the call. Operator: Thank you. We will now begin the question and answer session. Please press 11 on your telephone keypad to ask a question. Please wait for your name to be announced. To withdraw your question, please press 11 again. We will now take our first question from the line of Eddy Wong from Morgan Stanley. Please go ahead, Eddy. Eddy Wong: Thank you, management, for taking my question. I have two questions. First, what is the overall recruitment demand recently? We noticed that the unemployment rate in September and October is improving. Do you think this is mainly due to seasonal factors, or is the improving trend a leading indicator of macro recovery? What are the driving factors behind the accelerating growth in the third quarter? My second question is that as we are approaching the end of the year, what is your perception of the key account renewal willingness right now? Are there any noticeable trends in customer renewal rates or the renewal amount? Thank you. Jonathan Zhang: From our data perspective, the recruitment activities from enterprises indeed recovered in the third quarter. The growth rate of monthly active users on the enterprise side is faster compared to the job seeker side. Pressure from the job seeker side has been alleviated. If we recall back in 2021 and 2022, it was a little bit difficult for fresh graduates to find a job. In the opening, whichever was affecting or not happening as we expected, young people, especially young people, found it really difficult to find a job. This year, take July, for example, the fresh graduates' expression for job-seeking demand compared to the same period of last year declined by double digits. Meanwhile, from the enterprise side, the companies that have posted job openings for fresh graduates increased by double digits. From the situation on both ends, especially from the fresh graduate as an example, we quite clearly felt that the pressure which has been accumulating for several years was released a lot in the third quarter. In the third quarter, the ratio between job seekers and recruiters among active users improved compared to last year. The newly added user ratio also improved, and the third quarter is better than the third quarter of the previous year, which gives us continued confidence. So it is quite easy to understand that based on the improving change of supply and demand balance, we treat the recovery of the enterprise side and the improvement of the pay ratio as helping our overall business operation. The first quarter last year was a relatively low base, so from a cautious perspective, we also compared it to 2023 in the same period. It is worth mentioning that the recovery of the white-collar sector, for example, the newly added number of job postings for the white-collar profession in the first quarter, increased significantly compared to the second quarter and the previous three quarters. Based on all these observations and comparisons, I have the confidence to conclude in my prepared remarks that the improved hiring demand drove our third-quarter revenue growth. That is where my confidence comes from regarding the retention situation that you are concerned about. Phil Yu Zhang: So, Eddy, you know, companies renew their contracts individually at different points in time, not only at the year-end. Starting from the year, we have witnessed improving contract renewal rates, improving continuously. Particularly in the third quarter, for the first time in the past two years, the company-level net dollar retention rate started to bottom up. This signals a potential turning point from a previous downward trajectory. We believe this is driven primarily by improved company retention rates and higher renewal spending. We observed that this situation is not only at the key account customers but also at the small and medium-sized enterprises. Typically speaking, the company's renewal contract renewal situation improved sequentially and annually. This once again proved that the higher demand in the economy has been recovering healthily. And that is our answer to your question, Eddy. Operator, please move on to the next. Operator: Thank you. Our next question comes from Wei Xiong from UBS. Please go ahead. Wei Xiong: Thank you, management, for taking my question. Firstly, we observed that our company has continued outgrowing peers for the past few years. So if we look at the enterprise recruiting budget allocation, how much more share can we continue to gain over peers, and how do we sustain that above-peers growth going forward? Looking at next year, if the macro situation improves, will we continue to solidify our leadership, or is it possible to see higher competition pressure because the peers may step up investments? And secondly, on the margin side, given the high base this year, how do we think about the trend for our margin next year? What are the major investment areas, for example, in terms of sales marketing, do we think about the spending plan there? And previously, given the macro uncertainty, we said we want to prioritize profitability. So looking at next year, are we going to continue prioritizing that profitability or leaning towards investing a little bit for growth? Thank you for taking my question. Jonathan Zhang: I would like to start with our number of paid enterprise customers, which grew by 13.3% to 6,800,000 by the trailing twelve months. In fact, the majority, or maybe over 80% of these paid enterprise customers, are small and micro enterprises, which we use our own business model and go-to-market strategy developed over the years. By mentioning this, I would like to clarify two concepts. First, the majority of our main pay-based customers are developed on our own rather than gaining shares from our peers. The second concept is that there is data about China having over 40,000,000 small and medium-sized enterprises, and our entire enterprise cap number of paid enterprise customers is still a small percentage of that. That is why even in a relatively tight macro situation, we still have ample room to grow in terms of our market share. The logical conclusion is that when the market recovers and demand improves, we can achieve better revenue and business growth rates. But on a competitive landscape perspective, we need to admit that for the customers both we and our peers are serving, especially under economic pressure situations, clients normally tend to choose service providers who have better ROI and higher service ability, and we do have some advantages over that. Regarding profitability, which you are concerned about, the current profit margin you observed is actually a strategic selection from our company level. Last year, we decided that facing all of these uncertainties, we want to make sure that the only certainty is to guarantee profit, and this year, you have seen our very strong implementation capability and realized profit numbers. Essentially, this very strong margin profile actually reflects our effective double-sided network effect, further penetration into user mindset, and very efficient and smooth internal management and operation, all of which result in this high margin profile. As a result, I cannot predict if the profit margin for next year will continue to improve. Actually, we will not sacrifice our branding growth to achieve this profitability. So for next year, we still want to guarantee us to be with the 35,000,000 newly verified users. Our pursuit in better serving users and achieving higher revenue growth actually has higher priority compared to our pursuit of profitability. Our strategic level view on our profitability, and we hope you and our investors can better understand what profitability means to us. For your reference, and that is our answer to your question. Operator, please move on to the next. Operator: Thank you. Our next question comes from Timothy Zhao from Goldman Sachs. Please go ahead. Timothy Zhao: Thank you, management, for taking my question, and congrats on the solid results. Two questions from my side. First, as Jonathan just mentioned, we are going to explore more in the different verticals within the recruitment industry. Could management share more progress and updates on this? And what are the potential impacts on our services and monetization in the longer term? Secondly, on the AI-related question, we noticed that OpenAI recently announced its entry into the recruitment industry. Some other AI startups like Merkur have also been evolving their business models. Could management share your view on the competitive landscape between the traditional recruitment platforms and the general AI companies in the recruitment industry? Thank you. Jonathan Zhang: When we are trying to combine AI and human activities, we have some very interesting findings under our conjugate experiments. For example, when a customer is quite angry and cannot contain their temper while facing a customer service representative, they could be quite aggressive. But when the customer knows that the counterpart is AI, they normally take some very harsh words. So the beta complaint from the customer trained AI is, "You are very stupid AI." The second example is for our AI interview coaches product. A lot of job seekers who have used this service repeatedly to train their interview skills once and once again. But we found out that when the job seeker's second scoring is lower than the first one, they will stop this repeat. So you can see the number of interesting findings in our daily experiment. People can control their temper well when facing AI, and also people do not want to bother a real human coach very frequently, but they can do that with AI. All these findings are telling us that when we apply AI technology to a very old, very ancient people and job matching, superior and subordinate matching scenarios, we need to be very cautious while using the new technology. For more than two years, it is really exciting for a sampling model to be able to generate a killer-level application in our industry. Actually, we are not in a hurry, and it actually gave us more time to find a way to harness all this new development and technology. I just mentioned that in certain placement scenarios, both in blue-collar and white-collar recruitment, such as full-cycle hosting recruitment service or semi-cycle hosted recruitment service, we have been very actively trying out new services, but also quite cautiously. So far, we have some achievements, but still not in a stage to massively roll out this. We also noticed that some leading technology companies who have been empowered by AI have expressed their interest in entering the recruitment industry. The new technology combined with old and the questions possibly can generate revolution-level industry change. Like the mobile network and recommendation technology combined with the traditional recruitment demand that have generated faster too fast. This new generation of online recruitment model. Up to today, my thinking is that the combination of AI and recruitment service's key bottleneck is actually not computing power. Merkur, who has in the bottom professionals to do the tagging, actually shows the value of high-quality data. If high-quality data is very critical, then with the foster team, other peers within our industry actually have some certain level advantages. Just to leverage your question, I want to express some observations we noticed from our data operations. And that is all of our answer to your question, Timothy. Thank you. Operator: Thank you. Due to time constraints, that concludes today's question and answer session. At this time, I will turn the conference back to Wenbei Wang for any additional or closing remarks. Wenbei Wang: Thank you once again for joining us today. If you have any further questions, please contact us directly. Thank you. Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect your lines.
Toby Courtauld: Amazingly, we're a bit early. We could start, Rich? Yes. Okay. Well, in which case, welcome, everybody. Thank you very much for joining us for our interim results presentation. It's great to see you all, and we really appreciate the time that you give us. So thank you for coming along. Now, first of all, I'm going to start by summarizing some of the key messages that we'll be giving you over the next 30 or so minutes. And essentially, we have carried on where we left off at the year-end, successfully executing on our growth strategy. You'll hear about our strong operational performance so far this year, delivering some excellent leasing, well ahead of target and leading us to reiterate our rental value growth guidance. We've made further accretive acquisitions and significant sales ahead of book value, and our developers have created more premium spaces, timed to deliver into a market that is starved of such quality, meaning that we are well set to deliver both strong income and value growth. So to help us tell this story, we have a full agenda as ever for you this morning. I'll start with a reminder of how we're delivering on our very clear strategy before giving you an update on our market opportunity. I'll then run through our successful 6 months of acquisitions, sales and developments before Nick looks at our exciting fully managed growth and our results. And I'll then wrap up with our outlook before opening the floor to you for Q&A. As ever, we have the full executive committee team here to help answer any questions you have. Plus, we also have our newly promoted Rebecca Bradley as Customer Experience Director; and Simon Rowley, as Flex Workspaces Director, and congratulations to them on their appointment. But before we get into all of that, first of all, can I just say as this is probably Nick's last session before past is new. I just wanted to pay tribute to him, to thank him for his exemplary leadership across multiple facets of life at GPE. He's been a great partner to me and I know to many of you and to all of our colleagues at GPE over the past 14 years. And I know you will join me in wishing him well. Nick, thank you. So let's start then with our strategy. And to do so, I want to remind you of our investment case, essentially the 6 fundamental pillars upon which our strategy is built, and you can see them here. And in approaching each, it's always been about doing what we said we would do. First, prime central London. It's the largest city economy in Europe, it's outperforming the U.K. overall, and it has decent forecast jobs growth. And so we have been and will continue to be focused on 100% prime locations only. Second, we create and manage premium luxury offices across our HQ and our Flex products. It's where the richest theme of customer demand exists and our strong leasing and rents rising supports our position with space under offer today materially ahead of ERV. And as I'll show you later, even after substantial growth, they're still affordable, especially given the price inelastic nature of many premium customers. Third, contracyclical capital allocation. You'll recognize the chart at the top raising capital, the green circles and buying when markets are cheap, as was the case in 2009 through '13 and again last year, developing into the inevitable supply crunch before selling completed business plans as markets recover and then returning excess capital to shareholders, shown by the pink circles. We bought well, GBP 390 million, including CapEx since our rights issue last year. We're developing some of the best space in town covering 36% of our book, and we have rotated towards sales, as we said we would, more than GBP 290 million sold so far this year, 1.7% above book value and including 1 Newman Street, the largest single asset sale in the West End year-to-date. Fourth, driving innovation, leading the market in the creation of sustainable spaces and in our customer experience offer. We've delivered a world first in our circular economy activities at 30 Duke Street and our award-winning CX team is helping grow our unique Flex offer towards our 1 million square foot target, and all of this activity always with a strong balance sheet and within an LTV range of 10% to 35%. So far this year, we've delivered a record financing, maintaining high liquidity and have kept LTV low at 28%. And sixth, strong EPS and NTA growth, and we're on target to deliver a 10% plus return on equity over the medium term with more than 3x earnings per share growth. So then, with a strong strategy and supportive fundamentals, we've had another successful period of delivering on our promises. So let's then have a quick look at our half year results and our outperformance despite the challenging U.K. economic and political backdrop. Now, as you can see on the chart on the right, our excellent leasing continues, GBP 37.6 million in 6 months, the same as in the whole of last year, 7% ahead of ERV, leasing faster than underwrite and with strong appeal to AI-led customers now up to 23% of fully managed spaces. And we have a further GBP 10.3 million under offer today, a very strong 31% ahead of ERV. Our rental values were up 2.6%, with prime offices up 3.3%, bringing the total to 6.8% over the last 12 months. Our vacancy rate remains within our target range at 6.9%. Our customer retention rate remains high at 76%, well ahead of target, and we've made an attractive acquisition at a discount and sold at a premium, more on these deals later. Now, all of this activity has helped us deliver healthy financial results for the period, pro forma rent roll up 29% with our average office rents up almost 10% over the last 12 months. Our valuation was up 1.5% over the first half with developments up 6.1%, delivering NTA growth of 2% and earnings growth of almost 85%, still with low LTV at 28%. And as we think about what next, we have created a fantastic platform for further growth. Income growth of some 64% by FY '27 or more than 140% in the medium term, led by Flex. Big development surpluses of circa GBP 300 million to come with potential for upside from there. We'll buy more, we'll sell more and all supported by a London economy that continues to deliver GDP growth ahead of the U.K. overall. So significant growth to come. Now, talking of London, let's have a look at our markets. And in short, we expect supportive leasing conditions to continue with best rents to rise further despite the challenging macro backdrop. Now, why do we think this? In short, because supply and demand conditions in London are both supportive and much stronger than the U.K. picture overall. First, demand for space is strong, driven by jobs growth. As you can see in the blue bars on the right, today, there are 500,000 more jobs in London than there were at the time of the Brexit vote in 2016. Oxford Economics expect the number to continue rising by some 200,000 between now and 2030, equating to roughly 20 million square feet of new demand. Second, take-up remains robust with 5.1 million square feet signed in half 1, ahead of the 10-year average. And third, active demand, that's companies looking for space right now, is still way ahead of the long run average, dominated by banking, finance and digital sectors with the latter responsible for some 40% of U.K. GDP growth with AI-led businesses creating jobs in London today. And history shows us that 2/3 of them will only lease prime space. Plus, contrary to many commentators' perception, way more companies today are looking to expand their space take than contracted, 55% versus 14%. Plus, these companies are going to struggle to find that space. They will run into a supply drop that is extreme and shows no signs of abating anytime soon. Bottom left, we've updated our forecasts, the deliveries shown by the purple bars are very low. And we know that new starts are at lows not seen since 2010. And we think that commentators continue to overestimate deliveries and CBRE's forecast, as shown here by the pink diamonds. Now, either way, if you divide the long-run average take-up of 4.6 million feet per annum into the amount being delivered, we think, we will need to build 84% more every year than is currently planned to meet this demand. That's as higher shortfall as we can remember. And it's not as though customers have much choice from existing space. The current Grade A vacancy rate in the core West End is only 0.3%. And so as a result, we think further rental growth is coming, focused on prime spaces and continuing the theme of the chart bottom right, highlighting the very clear bifurcation between the best and the rest that we have seen since 2023. And remember, overall, rents in London remain affordable. In both the city and the West End, they are still only 5% to 8% of the average London business's salary cost. So conditions then that most definitely play to our strengths with our 100% core prime locations, 94% near in Elizabeth line station. So then, turning to our investment markets, and we think that there is good evidence to back up our view of 6 months ago that they are now recovering, albeit slowly. Capital values are rising, up 6% in nominal terms since our capital raise last year, shown on the right, driven by rental growth and tight investment supply. Prime yields shown bottom left, are now either stable or mildly falling. Investment volumes are also up by 63% in H1 '25 compared to last year, and many more larger lots are now trading, as you can see, bottom right and the green bars with 19 deals of over GBP 100 million already traded so far in '25, up from 11 last year with a further 8 currently under offer. Plus, institutions are buying again, accounting for only 2 of the larger deals done last year, but 10 so far this year, or more than 50%. And with equity demand up since May to GBP 23.5 billion, the multiple of demand to supply at 4.8x remains steady and relatively supportive to pricing. And so we'll continue using these improving conditions to take more selective acquisitions and sales, crystallizing surpluses, and more on this in a minute. So to sum up then with our market outlook, which supports strongly our strategy, the rents, whilst business confidence has weakened since May, healthy demand and a dearth of prime supply has helped us deliver rental value growth in our forecast range that we set out at our finals, as highlighted at the bottom, and so we maintain our expectations for this year overall of growth between 4% and 7%, driven by prime offices, up 6% to 10%. Looking at yields, whilst the political backdrop has probably weakened since May, we think improvements in investor confidence and likely lower interest rates could push prime yields in further, especially where rental growth is a real prospect. So given that, let's turn then and look at our investing and developing activities so far this year. And you'll remember this slide from May, and it shows our successful deployment of the capital that we raised last year. We've added to the 4 deals we told you about back then with the purchase of The Gable, shown on the far right. So that's 5 opportunities acquired since May '24, all in line with our disciplined criteria, all in the West End for a total of GBP 180 million or GBP 390 million, including CapEx and at only GBP 770 per foot and a whopping 57% discount to replacement cost. Three of our fully managed conversions, 2 offer major HQ repositioning and each with attractive stabilized yields and ungeared IRRs. From here, more acquisitions, we have 2 deals in negotiation or under offer, all in the West End and more sales to build on the GBP 290 million completed so far this year with a further GBP 150 million to GBP 200 million in the near term, and GBP 650 million to GBP 700 million identified for the medium term. So plenty of opportunity with more to come. So turning then to look at some of the detail and starting with the acquisition of The Gable, shown in yellow on the map. And it sits in an area of London we know inside out and next to The Courtyard, which we bought last year. We paid GBP 18 million, or only GBP 409 a foot, some 77% beneath replacement cost and with a current running yield of 6.4% until July '26. We have 2 possible business plans here. First, a conversion to Flex. We're in design and talking to the planners, and the economics are attractive with a near 7% yield, but this does rely on vacant possession. And if the government-based customer renews their lease, we'll maintain our low-risk running yield of at least 6.4% and probably hold for a future Flex conversion. Now, since we saw you last, we've also sold our completed and let development 1 Newman Street to a U.K. institution shown at the bottom of the map. We received GBP 250 million, priced off a 4.48% yield, more than GBP 2,000 a foot and 1.8% ahead of book value. So a good sale of this completed business plan and showing both there is liquidity at scale and strong prices for the best assets and reaffirming our long-held commitment to actively recycling capital into the next opportunities for us to drive growth. So talking of growth, let's have a look then at our development program, and taken together, we now have 11 schemes with 3 on-site HQ projects, already 71% pre-let, and 3 further Flex schemes on site. Across our 4 pipeline HQ schemes, we achieved 2 new planning consents in the past few months. And with The Gable purchased, we now have more than 1 million square feet in the program covering 36% of our book by area and delivering into the deep supply shortage that I referenced earlier. So looking then at our On-site HQ schemes, progress has indeed been good. At 2 AS, we're on time to finish in Q1 next year, although the surplus to come has reduced as the valuer has adjusted the cap rate up by 15 basis points. At 30 Duke Street, we signed our pre-let with CD&R, 6.5% ahead of ERV and nearly 12% ahead of the underwrite. As a result, we've captured some significant surplus, but there's more to come as we deliver our expected profit on cost of almost 40%. At Minerva, shown on bottom left, we are on time to finish in Q1 '27, and although costs are up since May, reducing the forecast profit to circa 15%, we are under offer on about 40% of the space at a substantial premium to ERV, which would drive our returns materially higher. Taken together, total area is up 66%. ERV is 174% higher, 99% of the CapEx to come is fixed, and we have GBP 65 million of surplus to come of current rents and current yields. They are all prime with exemplary sustainability credentials and have strong pre-letting potential for the remainder with, therefore, healthy upside to capture. For the next phase of our HQ program, we have 4 fantastic schemes, each timed to deliver into the supply drought with 3 in the West End, next to the Elizabeth line, and 1 next to London Bridge Station. At Soho Square, we're starting imminently, and strip out has begun. At Whittington, we've just received consent for our rooftop pavilion, and we're on site with proprietary works for this major refurbishment. We've also finally achieved planning at St. Thomas Yard on the South Bank for an exceptional 184,000 square foot park refurb, part newbuild project, but will be significantly more profitable than our original tower proposals, and we'll be starting here in Q3 next year. And finally, back in the West End, our Chapel Place project is in design with planning discussions ongoing for a submission next summer. So, big area and ERV gains and targeting a healthy minimum profit level all next to major transport hubs and all with strong upside potential. Now, of course, we also have multiple growth opportunities across the rest of our portfolio, too. You'll remember this portfolio stack. I've talked about our HQ developments at the top, and in the middle, sits our active portfolio management assets, representing 50% of the book, and in many ways, the engine room of the business. They are full of opportunity for us to grow rents and values, for example, on-floor refurbishments and their subsequent leasing to generate some GBP 47 million of income, capturing reversions of almost GBP 14 million, restructuring and regearing our interests and prepping assets for major repositioning. And this presents us with real upside. Their valuation is undemanding at just over GBP 1,000 a foot, but with limited CapEx needed. And all of them are in prime locations. And, of course, they include our Flex assets covering some 29% of our total book and where the growth potential is significant, as you'll hear from Nick in a minute. And shown in yellow is the stabilized proportion of the portfolio, where we will rotate out of completed business plans at high capital values per foot, potentially releasing more than GBP 800 million of capital to employ for much higher returns towards the top of the stack. So lots then to do for us as we execute our plan to deliver the substantial growth available to us, on which topic and probably for the last time over to Nick to dig into our Flex options. Nick Sanderson: Thank you, Toby. Good morning, everyone. I certainly didn't need these when I started 14 years ago, nor was I talking about our unique and well-established fully managed growth strategy, where we are successfully delivering premium hassle-free spaces for our customers. Our leasing volumes continue to grow with more than a deal a week over the last 12 months, representing nearly 90% of all our sub-5,000 square foot office lettings. Rents are growing strongly, too, with these deals securing rents of GBP 37 million, and as shown in purple, regularly achieving more than GBP 250 a foot. As you can see top right, this is driving outsized performance, well ahead of our targets. We're generating strong absolute returns with an average yield on cost of 6.5% and service margin of 35%. And relative to ready to fit, we delivered a 103% rent beat and a 61% 10-year cash flow beat, and we've secured good lease duration, too, at just under 3 years. Our fully managed spaces are today generating GBP 50 million of annualized rent, and we're currently managing GBP 25 million of OpEx and other costs across the categories shown in the green bar. So with a gross to net of 50%, our annualized NOI is GBP 25 million or GBP 107 a foot. Once we factor in CapEx, along with fully managed specific corporate overheads, this results in an annualized net cash return, averaging GBP 80 a foot or 40% higher than the ready-to-fit net rent. So much higher net cash returns than on a traditional basis, and the customer base dominated by corporates, not SMEs. Our retention rate is strong at 75%, well ahead of our 50% underwrite, as our award-winning customer experience team delivers outstanding customer satisfaction. The most common driver for customer nonrenewal is needing more space than we can currently provide, as we experienced with our largest departure to date, a fast-growing unicorn status AI business, who we'd already moved twice within our portfolio. Pleasingly, we were able to relet their space within a month at a higher passing rent to Vanta, another high-growth company, with AI-led businesses now representing 23% of our fully managed customers. And our recently completed schemes are leasing quickly, too. In the heart of Soho, Wardour Street is 100% let within 2 months of launch, including 2 pre-let floors. We've secured average rents per foot of GBP 279 with more than 1/4 of the space let above GBP 300 together, driving a valuation uplift of 10% in the half. Our customers include those we've relocated from adjacent GPE fully managed space, an occupier of a GPE developed HQ building on Broadwick Street as well as a new customer who decided to double their space take within a month of moving in. And over at Piccadilly, which launched last month, 35% of the space is already let or under offer at an average rent of GBP 296 a foot, although we're breaking through GBP 400 on a smaller space. So with an 11% beat to ERV and healthy interest in the balance of the building, the prospects look strong. So, having more than tripled NOI over the last 2 years and our leasing velocity ahead of target, there's plenty more growth to come from today's GBP 25 million. We'll generate GBP 7 million of additional NOI, as we finish leasing up the recent completions. Our 3 on-site schemes, all in the West End, will deliver a further GBP 12 million with our pipeline schemes expected to add another GBP 15 million, taking our fully managed NOI to GBP 59 million, so an organic growth uplift of 2.4x. And as we execute more acquisitions, total NOI would increase to around GBP 90 million if we grow Flex of 1 million square feet. And with more than GBP 19 million of additional service profit, shown in blue, we'll be creating additional value of more than GBP 200 million or more than GBP 200 per foot. So lots more income and value growth to come on top of the strong outperformance we're already delivering with fully managed ERV growth and valuation growth of 11% over the last 12 months. Now a few comments on our overall performance in the half year. We delivered like-for-like value growth of 1.5%, as the best continues to outperform and EPRA NTA rose 2% to 504p per share. As expected and in line with consensus, EPRA EPS increased 70% to 3.9p, and we're paying an interim dividend of 2.9p. Our consistent financial strength saw EPRA LTV falling to 28.2%, and available liquidity rising to more than GBP 450 million, as we transition to a net seller and secured our largest ever bank facility. Overall, we generated positive TAR of 3% and 7.5%, respectively, over the last 6 and 12 months, delivering prime spaces against the backdrop of ERV growth with more to come as we continue to execute our growth strategy. Our opportunity-rich GBP 3.1 billion portfolio is 83% in offices, where we experienced the strongest value growth of 1.8% and ERV growth of 2.7%, with retail ERVs up 1.9% in the half year and fully managed rents up 3.5%. And with an overall valuation uplift of 1.5%, developments delivered the strongest performance, up 6.1%, with GBP 30 million of surpluses captured in the half year valuation. Yields were broadly stable with our portfolio equivalent yield today at 5.5% and our reversionary yield at 6.7%, higher still at 8.7% on a share price implied basis. Finally, the best continues to relatively outperform at both an ERV growth level in purple and by evaluation shown in green. In particular, our West End properties, representing nearly 3/4 of the portfolio, again, outperformed with capital growth of 2.9%. And as we continue to allocate capital to drive value growth, our almost GBP 700 million CapEx program is predominantly in the West End, combining GBP 290 million to complete our 6 on-site schemes shown in black with approximately GBP 400 million for pipeline schemes in gray. You'll find the usual scheme-by-scheme detail in the appendices. With a total GDV of GBP 1.8 billion, we'll deliver further surpluses of more than GBP 300 million based on conservative 10% cumulative rental growth. And you can see by the solid line, more than GBP 125 million should come through within the next 18 months based on profit release at scheme PC although our pre-letting activities typically accelerate these, plus there's serious upside potential with further rental growth and some mild prime yield compression taking the surpluses to more than GBP 500 million or 130p per share. On the right, our investing and leasing activities will clearly change the portfolio composition, with stabilized properties shown in yellow, growing from 19% to 55%, all else equal. However, our recycling activities will evolve the portfolio mix further with prospective sales of around GBP 800 million in the next few years, meaning active portfolio management properties, shown in blue, will, again, dominate with Flex also representing around 40% of the office portfolio. In reality, our sales will likely be higher still, given our disciplined capital management, as they were in the last cycle with more than GBP 3 billion of disposals. Plus, I imagine there'll be some acquisitions, too, to replenish the GPE development hopper. Now, we'll also be driving more income growth. Like-for-like rental income was up 5% over the last 12 months, whilst rent roll was up almost 30%, standing at the GBP 127 million today following the sale of Newman Street. Over the next 18 months, this builds by more than GBP 80 million or 64% and rises to around GBP 30 million in the medium term, an uplift of 142%, including the market rental growth we expect to capture. Of course, some of this uplift will be tempered through sales of stabilized properties, but there's still lots of growth to go for, and we reiterate our guidance for a threefold increase in EPRA EPS over the medium term. Nearer term, we expect EPRA EPS to roughly double to around 10p by FY '27, as we lease up our on-site development and refurb program with more growth to come as we deliver our pipeline and capture market rental growth. Once we factor in finance and other costs to deliver this growth, along with our likely earnings accretive sales, we anticipate annual EPRA EPS of 15 to 20p in around 4 years' time. As a result, we expect a stable dividend for FY '26 with potential DPS growth thereafter. Whilst continuing to invest for growth, we've maintained our financial strength and capacity, including through proactive management of our debt profile. We've recently issued a new 5-year GBP 525 million ESG-linked RCF, allowing us to redeem an early '27 maturing facility and repay a higher-margin term loan. We've also extended the maturity of our smaller RCF, and Moody's reaffirmed our Baa2 credit rating. When combined with our successful sales activity, LTV today is 28%, as we continue to operate within our 10% to 35% through the cycle target range. Interest cover is strong at 15x, with more than GBP 450 million of liquidity, and we have extended our average debt maturity to almost 6 years, whilst our weighted average interest rate remains in the 4s. Looking ahead, as the bar chart shows, we expect LTV to remain above the midpoint of our through-the-cycle range as we invest for growth in a rising market. But remember, a couple of big sales can really move the needle and give us significant incremental acquisition capacity. So wrapping up with a positive financial outlook, we expect to deliver further property value and NTA growth in the second half and beyond, based on current market outlook and our active business plans. H2 EPS will likely be broadly in line with H1, and the capture of our organic rental growth opportunity will drive significant income and EPRA EPS growth moving forward with an expected threefold EPS increase supporting our progressive dividend policy. Our through-the-cycle LTV range and disciplined capital management will be maintained. And through the capture of attractive prime rental growth and the delivery of our development-led growth strategy, we expect FY '26 TAR to at least match FY '25 as GPE moves towards delivering a 10% plus annual return on equity. And of course, shareholder returns would be higher still should the share price discount narrow. So I'll certainly be holding on to my GPE shares. And whilst I'm not leaving just yet, as Toby said, this will likely be my last set of GPE results. It's, of course, been a privilege to have been part of such an awesome GPE team. And I'm also proud of my contribution to both the strategic evolution of the business and its very special culture. But I'm also departing happy in the knowledge that GPE is in great shape with an exciting growth strategy to deliver for shareholders and customers alike, and as I look around the room with slightly blurry glasses and massive thanks to all of you for your support, your challenge, and most importantly, your good humor and camaraderie. And given this is the 29th time that I've run through this presentation, I think it merits a very special thanks to both Stevie and to Rich and their teams for the uniquely special work that they put into putting this presentation together. Not only do I know that footnote 13 on Page 99 will be accurate, I know that it will be accurate to at least 1 decimal place. So a massive thanks to you guys for leaving Toby and I do the easy work of tapping the ball over the line. And as I hand back to you, Toby, I must say it's certainly been fun. You're a good man, a great colleague, and there are many things I will miss at GPE, including your exceptional taste in wine. Over to Toby for the wrap up. Toby Courtauld: But not I should add at this time of day. Thank you, Nick. Very good. Okay. So let's wrap up then with our outlook. And in short, it's all about delivering more growth, as we continue doing what we said we would do. We think that our market opportunity is strengthening. London remains Europe's Business Capital, will outperform the U.K. economically and will generate jobs growth, driving healthy demand for space that will collide with a supply drought, meaning rents are and will continue to rise with the best buildings materially outperforming the rest. As a result, office values are rising, the invest market continues its recovery with prime yield compression a real possibility. Meanwhile, we are focused fully on executing our growth strategy, first, capturing significant income growth of more than 140% in the medium term. Second, delivering development surpluses of between GBP 180 million and GBP 520 million, just from our existing program, some GBP 130 per share. Third, more acquisitions. And fourth, significant further sales of more than GBP 800 million and always operating only in prime Central London, majority West End, 94% near an Elizabeth line station. So all in all then, GPE is well set. Our operational infrastructure is in place and is delivering, and our deeply experienced team, bound together by our collegiate culture, along with our strong balance sheet will help us generate an attractive return on equity, even more so for shareholders should our share price continue its re-rating to properly reflect the group's exciting prospects. So GPE is in great shape with all to play for, and we can look forward to capturing our strong potential over the next few years. Now I know some of you will have questions, maybe even for Nick, last chance. We'll have some microphones running around the room. As I say, we've got the team, home team to help answer any of those questions that you may have. Toby Courtauld: Who would like to raise something? Any hands? Yes, here at the front. Good morning, Tom. Thomas Musson: Yes, I guess I'll ask the question to Nick. You -- it's Tom Musson from Berenberg by the way. You talked about the big growth potential in the business, and I think a tripling of EPS probably stands alone in the sector in terms of the growth outlook. If you can achieve that, there's lots of development surplus to come that will drive NAV growth. Fully managed is a big part of that. Nick, I think you've led the charge on. So given the growth prospects, why is now the right time for you to move on from the business? And then, I had a couple of follow-ups on a couple of the numbers if that's all right afterwards. Nick Sanderson: Sure. Well, I joined GPE 14 years ago. I thought I'd be here for 5 years, and I've been here for 14 years, and I absolutely love -- I love GPE. Equally, hopefully, as we've articulated, not just in this presentation, but in all the presentations that lead up to this, there is a very clear strategy in place. There is very clear and strong team in place. I love the sector. I'm just looking for something a little bit different. I think I was talking to one of our advisers, who works at a similar business to Savills. His comment was, "You love it because it's very similar to what you're doing now, but it's very different". And so I'm moving to a business that like GPE absolutely loves real estate. Unlike GPE, only Central London, I'm moving to a global business, moving from a team of 150,000 to 42,000. And I'm very much -- whilst GPE, I'm confident in the EPS growth that it will deliver, Savills is absolutely an EPS business rather than the balance sheet business. So something to keep you energized. But as I said, I will remain very invested in GPE, both financially, but also emotionally. If you asked any question, I'll be delighted to leave it at that. Thomas Musson: I did have just a couple on the numbers. The fully managed services income, net of fully managed services expenses, has just moved from being slightly profitable last year to slightly loss making this year. Can you just help explain that dynamic there? Is that just a reflection of growth? And then the second one was I think I saw that there was a material, sort of, GBP 3 million reduction in other property expenses in the EPRA P&L from GBP 4.1 million down to GBP 1 million. What was driving that? Toby Courtauld: Nick, do you want to try the first one? Nick Sanderson: Yes. Tom, you were referring to what's actually in the P&L? Yes. I mean, look -- so one of the things that we've done this year within our own targets, so as to you know, we are now incentivized specifically around delivering NOI returns in the P&L. At the moment, they are still lumpy because not -- they're not particularly reflecting a significant amount of the income that, yes, we're generating. But it also -- we tend to take a hit upfront for the agent fees that we're -- broker's fees that we're incurring in putting the customers in place. So I think you'd expect to see the P&L reported NOI will be a little bit volatile as we go through the lease-up of the space. I would hope that over time, those margins improve because the cost of customer acquisition will reduce if we don't have a cost of customer acquisition, i.e., we keep customer retention rate high. And that's why I think you should expect to see over time an even bigger focus, particularly on the fully managed side around customer retention. And as I think I alluded to in the presentation, the single biggest cause for us losing customers out of fully managed is we don't have enough space for them. So that is not the only reason, but it's one of the reasons why we are looking to grow this part of the footprint. On the -- I'm looking Stevie here on the property cost, my guess is probably on empty rates will have been lower over this period. Anything else material to cover? Toby Courtauld: Nothing materially. This is largely due to empty rates, but we can get into the weeds offline. Callum Marley: Yes. Callum Marley from Kolytics. Two questions, one on vacancy and one on artificial intelligence. Is the new vacancy range that you've set of, 6% to 7.5% a new target for this period? And then how do you explain the divergence relative to your close peer who has a vacancy of about half that? Toby Courtauld: Yes. Thanks, Callum. So if you think -- can we just go back to the contracyclical chart right upfront, please, Rich, you do not want your portfolio full when everybody else has put their cranes away, okay? You want to be contracyclical in the delivery of space when everybody else has run for cover, especially when there is an 84% shortage of demand against supplies. So we actively want our vacancy rate up. So right at the beginning, I talked about being countercyclical in our approach, and that's exactly what we're doing here. We're developing into a serious shortage of supply. And we've now got CEOs from large financial institutions around the world saying London does not have enough space. We've got companies looking 6 years ahead to try and forward purchase space. We pre-let most of our H2 developments, as you saw with CD&R during this year. And you will have heard this morning that we're under offer on a good chunk of the space down at Minerva. So you want to have vacancy at this point in the cycle, especially with rents rising. 6% to 7.5%, we're in the range, the single biggest vacancy that we've got at the -- in the portfolio at the minute, we've just finished, which is our Piccadilly Holdings, where we've just completed the repositioning of that building for fully managed. That's leasing up pretty well. Simon, I'll come to you in a second, just for a bit of color on that lease-up. But again, great locations, great buildings, rents rising, it's now that you want vacancy. So I would think we would be failing if our vacancy was 0, okay? I want vacancy. So with that point made, just talk a little bit about the color on how that's going and maybe just what we experienced in the core markets and maybe draw the distinct between the peripheral markets. Simon Rowley: Yes. So Callum, we've -- we completed 170 in September, which was about a month after Wardour Street and some people might have thought, well, why has Wardour Street let faster than 170? One of the principal reasons for that is that Wardour Street was a building that was really easy to understand through construction. So if anyone attended our Capital Markets Day back in February, one of the things I said at the time was that I thought we would pre-let some of Wardour Street. It wasn't in our underwrite. We don't tend to underwrite pre-lets and fully managed. But we did manage to pre-let 2 floors in there because it was easy to understand. Conversely, 170 Piccadilly finished a month later. There are 13 units in that building. It's a heavy intervention as mentioned earlier. It's a Grade 2 listed building. And so it's a much harder building to understand. Nevertheless, once completed, it looks absolutely fantastic. And there are a number of you in the room who have seen it. And that, in turn, has driven some absolutely incredible ERV beats. As you can see, moving through GBP 400 per square foot on some of this building was definitely not in our underwrite. But an average ERV of 296 so far for the deals that we've done, 35% of the building let are under offer, we are really, really confident with the rest of that building. And we are more certain than ever that core locations, prime core locations are where we would like our space to be. There are examples around the market of fully managed space being released in areas where, frankly, the price of a cup of coffee that we make is the same irrespective of where you are in London. We want our fully managed buildings to be in these core locations, these clusters. We are building a much better portfolio of clusters of buildings and that has allowed us to move companies such as, we mentioned, Wunderkind earlier, but others around the portfolio, that is helping that retention rate. Nick mentioned that, that is a big focus for the business. We have, in just this part of this year, done a really good job retaining customers, that's about 70% of the retention rate that we have managed to create. It does not involve broker fees. So as Nick mentioned, the cost of doing that business is far less for us. So it's a really important area. That's why the clusters work. The clusters will also work for reducing some of our operational costs as we are able to transfer some of the cost of our customer experience team across a wider portfolio. So I'm really excited. I mean, we've been doing this for about 5 years now. Looking forward to some of the projects that we have got on site, and the team that we've created really gives us a lot of confidence. Toby Courtauld: Brilliant. Thank you, Simon. AI. Callum Marley: Yes. Second question, stating that entry-level positions in white collar jobs are potentially being displaced by AI. How do you think about that long term, the different scenarios to your job's growth figures that you publish in which AI adoption materially changes, hiring needs, and then, ultimately the impact on office? Toby Courtauld: Yes, a really important question, one that we could spend all week talking about, so we won't do that. But just to give you a couple of thoughts to take away. And Marc, I'll come to you in a second, if you wouldn't mind, just expanding a bit on the sorts of companies you've seen in the market today in that space. I mean, one view, in fact, we asked AI, what AI thought about white collar jobs in London. And it started with an analysis of white collar jobs globally. And one version of AI said to us that it thought 90-odd million white collar jobs would be essentially disintermediated by AI. But 185 million would be created globally. Now, they won't all come to London, unfortunately, but it is an interesting debate as to exactly where they do go. And our experience would suggest that, by and large, they're going to places with talent, with infrastructure, with magnetism, with great buildings, clearly part of the equation, with universities that are world leading in some of these topics, and it's for that reason that places in and around California and some of the Eastern seaboard in the U.S. and the golden triangle around London are performing relatively well. It's why 23% of our customer base in fully managed is AI led. They're not AI businesses, but they have AI in the description as a heavy part of what they're all about. So I actually think there is an opposite side to this coin that you should take, which is that you should consider it as an opportunity. You should consider this as something that great commerce centers, like London, are going to capture more of the opportunity than most other locations. Just in terms of demand, what are we actually seeing right now from businesses in that tangentially related? Marc Wilder: Yes. So as an overview, active demand is about GBP 12.4 million, which is 26% up on this time last year. And of that, TMT is around 15%. And of that, about 12% is AI-focused companies and 88% is non-AI. Now, if you look, Toby has obviously mentioned about the dominance of London in terms of its tech ecosystem, the deepwater talent, world-class universities and that regulatory environment. There are currently 382 companies that are being founded in H2 in London with more than 50 people employed. So it is really quite a mature market. And if you look at AI as a catalyst for demand, there's currently around 0.5 million square feet today of well-established companies and some of the names that are out there that are either under offer, regearing on a short term, either have searches or in negotiation. Names such as OpenAI, obviously, ChatGPT, they are currently under offer on 100,000 square feet. You've got Databricks who are looking for 100,000 square feet and rumored to be in negotiation. Anthropic, who are behind Claude, 50,000 square feet. Palantir, who we know very well, next door to Soho Square, regearing on a short term because they can't find what they need. And we're obviously hopeful that we may have further conversations with them next door. Synthesia which is obviously the AI company that Nick referred to without referring by name, but we took them at 1,500 -- sorry, yes, 1,500 square feet in Dufour's. They grew 3x with us and then have moved to a managed facility of 21,000 square feet. So there's quite a lot of names that are out there. And the other thing I would also say in terms of is it a net promoter or a detractor in terms of jobs, if you look at the case study for San Francisco, currently, in 2025, there are 5.6 million square feet occupied by AI companies. That's moved up from 2.7 million in 2021. And if you look at the prospective job numbers, which is around 50,000 new jobs accretive, then that could lead to about 16 million square feet of new jobs of -- sorry, new requirements up to 2030. So that averages out at about 2.7 million square feet per annum through to 2030. So we believe, if you look at what's going on in London, what is -- what we're seeing in San Francisco, we think that the prospects are positive rather than negative for us. Toby Courtauld: Not complacent, mind you. And we would always make sure that we are realistic when coming to market with spaces, but we've got some good interest in businesses in that line of work. Okay. Where else can we go? Yes, Neil, right at the back. We'll need a microphone, please. Thank you. Neil Green: Neil Green from JPMorgan. Just one question. Given the progress you've already made on disposals and quite sizable pipeline of disposals that you're earmarking, how do you think about leverage and potentially even excess capital down the line should acquisition opportunities become harder to find, please? Toby Courtauld: Yes. Good question. Thank you, Neil. So we have a long track record, as you know, of -- thanks, Rich, of returning when we have not been able to find a more productive use for the capital post-sale. So you can see that from the pink circles in the middle there, and we gave back probably GBP 600 million to shareholders, having raised GBP 300 million at the beginning of the cycle last time around. This time around, we've already raised the GBP 300 million, and let's see what happens. But the same mantra applies. We will give back where it is excess to our needs and we can't make an attractive return for shareholders on it. Last time around, it was interesting, a number of shareholders said, "Well, why don't you hold on to it because you might be able to use it, and we don't really want it back". And we said, well, it's frankly, that's your problem, not ours. Our problem is whether we can use it accretively or not. And if we can't, you are going to get it back. And we did share buybacks. We did a capital restructuring and a capital return. So we've done all variations of it. And we would do them again if we were not able to find enough accretive opportunities to reemploy that capital post-sales. Scale is one reason I hear people arguing for not giving back capital, that is not relevant to us. Return on capital employed is the thing you should look at, and we will not simply hold capital for the sake of feeling a bit bigger if you can't use it productively. So shareholders should know that we will give it back if it's excess. If we don't give it back, it's because we felt we've found a great series of opportunities to employ it for an accretive return. Yes, Max. Maxwell Nimmo: Max Nimmo at Deutsche Numis. Maybe just kind of follow-up question to Neil on that capital recycling point. And talking about kind of liquidity at the larger end of the market, and if you can't sell some of those assets, are there other assets you can kind of pull in and out? And perhaps a theme that we're seeing a little bit at the moment is this sort of disposals below book value, which I think it hasn't really been a problem for you guys so far, but just some of your views on that well. Toby Courtauld: Okay. If you wouldn't mind coming in Dan in a second on how you're seeing the landscape playing out from here, but first up, Max, again, good question, what I think the correlation, I think, you need to be clear about is between sales ability, getting that deal done and quality of asset, right? And quality isn't just the way it looks. It's where it is, who's in it, what the rental position looks like, what its transport interchange, the hub near it looks like, the public realm immediately around it. There I say, even it's feng shui, right? So this whole idea of the way that building sits and feels matters. Now we've just sold the largest single asset trade in the West End. So we have not encountered a problem with scale, and it was ahead of book value. So that tells you that our values are broadly getting right what the market is willing to pay for an asset as they should. As we go from here, one thing that is very clear is that Hanover Square is in that list of stabilized assets, 2 Aldermanbury, both buildings where we've essentially will have delivered our business plan. We've got some rent reviews to do, as you know, in Hanover, before we consider that. And Wells & More is currently in the market. So these are quite big assets, especially to AS and Hanover So we'll be testing the outer envelope, I think, of scale when we get there, but we're not there at the minute. So the evolution of the market will be interesting to see. We will not be overly concerned about hitting book value, okay? We will be principally concerned about the forward IRR from the price on offer. And if we do not think that, that is sufficiently accretive to shareholders, the opportunity cost is much more powerful. We'll take the money. But given the quality, and I said before, I think Hanover Square is one of the best buildings in Europe, therefore, the world, and I mean that. It's an unbelievably good asset. And Wells & More is out there testing the market at the minute, and 2 AS will be a 20-year lease to Clifford Chance. So of a rent, which was struck in 2021, '22, there or thereabouts. So probably reversionary. So these are great quality assets, and I think they will do well. Dan, just in terms of market dynamic. Dan Nicholson: Thank you. And so, I think, at the moment, the market dynamics are such that we've seen lot sizes start to go up. I think, the Newman Street asset we sold a few weeks back, that was the biggest asset in the single asset deal in the West End through this part of the cycle, and so for several years. So it really sets a marker. And I think the -- you're starting to see -- so not only a lot sizes, you're starting to see new investors in the market as well. So against that backdrop, the volumes are up to, I think it was, 63%. On the top left there is the stat that we've quoted. So not only are you selling bigger assets, there's more institutions in the market who are typical buyers of the mature finished product that we've got -- stabilized product that we get at the end of our recycling process. So I think the landscape for sales is very good and definitely improving. So Newman Street set a new benchmark, the likes of Hanover and 2 AS, which again are a step up in scale. And as the market evolves, those larger lot sizes, they will become digestible by the market. And if you look at -- Rich, I think it's Page 4, if you just look at our cyclical part of the chart that we always look. This is where we want to be buying, these pieces here, and that's why we've been conducting such an intensive acquisition strategy over the last 18 months, 5 done, 1 under offer, hopefully done by Christmas, no pressure, Alexa. So that's -- we are buying exactly the right time. And then also, you'll -- so we -- and we're selling those mature, stabilized assets as that part of the market. And we talked about it 6 months ago, different parts of the market get hot at a different time. At the moment, those core assets become attractive because those institutions are coming back in, like the stabilized assets. The value-add part of that curve has been hot for a while. But obviously, we don't want to be selling into that. That's a product we want to be buying. So have we been going into the market and buying value-add assets in competition with a bunch of other people? Not really. Most of the stuff that we've been doing has been off market. So if you look at the map of the acquisitions that we've done, 2 or 3 have come from the city of London, and those have been one-on-one interactions, not in processes. So we're seeing that our acquisitions are playing to the curve there. Our disposals are playing to that part of the market that's warming up, and the general landscape is improving such that over the next 12 months, the larger assets such as 2 AS and Hanover will become liquid at the right times. Toby Courtauld: Rich, can you just jump to Slide 6? Because one of the things you might be thinking is selling at that point on the curve isn't necessarily the right answer. The reason, there's a complicated bifurcation going on between the best and the rest, right? If you are slightly off pitch or there's something wrong with your building, you're going to struggle to sell it, which is a sort of stuff that Dan has described we've been buying. But if you look bottom right, the reason we're now willing to sell some of the buildings we are is because we have seen this bifurcation run riot through rent. And those prime rents have really grown. And it's that differential that is now allowing us to sell prime assets at really strong numbers that I don't think was the case even 12 months ago. And that change is quite dramatic. Dan Nicholson: And it says institutions with a low cost of capital who are buying. And our forward look on those doesn't hit our cost of capital, but it's fine for those buyers. Toby Courtauld: Yes. Thank you, Dan. Thank you, Max. Any more for any more. We are just past the hour. Yes, we've got a couple over here. Yes. Zach? Zachary Gauge: This is Zachary Gauge from UBS. A couple of questions related to returns, and then, hopefully quite straightforward one just on EPRA earnings. But firstly, you seem quite bullish on near-term yield compression. I'm just wondering how you reconcile that with the valuers moving out the yield on Aldermanbury Square by 15 basis points. And I'm sure you have seen the latest MSCI data for the London office market in West End turning negative in October and flat ERVs for the last 2 months in the West End. And sort of following on from that, looking at your 10%-plus ROE medium-term target, can you give any more color on when you expect that to be realized? And I think at the end of FY '25, you guided to more growth to come, and now, it sounds a little bit like this year is in line with last year as opposed to necessarily growing from there. And then the straightforward question was, is the tax credit you received included in the EPRA earnings number? Toby Courtauld: Fabulous question, Zach. I mean, you say I sound a bit more bullish. You sound a bit more bearish, and we will get you to the right place at some point over the next few years. But putting that aside for a second, Nick, if you could deal with the second one, and maybe the third, and then, Stevie, you want to deal with it. So on the yield point, well, funny enough, the further they move the yields out, the more bullish we're going to get on compression, especially in an environment where yields are going to be -- and we know they're driven by interest rates, and in an environment where interest rates are likely to come in. And -- I mean, I think the issue with that is scale. It's just -- it's a big building. It's going to be GBP 400-ish million, there or thereabouts, and that is a rare part of the market. So that's my challenge for the team when we come to selling that one. But more broadly, we are bullish on prime product. I mean, we -- for reasons Dan has just described. We think that really good assets in really good locations are gold. They are irreplaceable, by and large, and we're not talking about the peripheral central London markets. We're talking about core 100% prime, which is where we're focused. And that's why, if anything, we have concentrated even more over the last 5 years than you would have seen us. I'm not sure we'd buy Whitechapel again, put it that way, unless it was unbelievably cheap. It was quite cheap at the time. But I think as those peripheral markets get less relatively attractive to the prospective customer base, we get less interested from an acquisitions perspective on them, but if you are in the core, I've said it before, it's incredibly powerful. We think we'll sell very well because we're leasing very well. So that's the first point. On the second one. Nick Sanderson: Rich, you give 54. Look, we were clear that the aspiration around the 10% plus TAR was one for the medium term. We set out the breakdown of that in the appendices. We said at the beginning of this year that we expected this year's TAR to be in line or ahead of where we were last year. We've maintained that. I think it's fair to say it will be my successor who stands up here talks about a 10% TAR rather than me, but I think that is something the -- looking at our own business plans, we look like we're set to deliver in FY '27-'28. In terms of the tax credit, yes, it is in EPRA earnings in accordance with the guidance. That being said, we are not anticipating it has a material impact on the overall numbers. We still stand by the guidance that we gave on EPRA earnings at the beginning of the year irrespective of that credit. It's a one-off we don't expect to repeat it. But in accordance with EPRA guidance, you include it. Zachary Gauge: Maybe just a follow-up here, if I can. I think everyone largely understands that the prime versus secondary debate, but how much of your portfolio is prime versus secondary? Because presumably, you have a prime guidance and an ERV guidance, so it must be some form of blend of the 2? Toby Courtauld: Well, what -- in an ideal world, at this point in the cycle, thinking contracyclically, in an ideal world, what you want is raw material that is in some way needing attention in prime locations, okay? That is, to me, the holy grail. And so what you can see in GPE is some -- if we can go to the capital stack, please, Rich, some buildings in yellow, which are reaching the end of their GPE life because we've done things -- all of the things we can to them and their prospective numbers are not good enough for us, back to Dan's point about there'll be some institutions out there with a lower cost of capital than us will be happier holders than us. But the majority of your book, in other words, the blue and above, needs to be prime location buildings that you can improve. And then you have a business that's really interesting. If you're simply stuff full of all the yellows, right, and this idea that you just collect, income-producing assets that are yellow, you are a proxy to market moves. You are nothing more than a beta story, right? If you want to be an alpha story that's creating something of value, you go above the yellow and you focus on things that you can do things, too, to generate rent growth, net area again, higher quality buildings in great locations. And that's the underlying, which is why we started this presentation with 100% prime Central London. So if you look at -- I think you could probably argue that Whitechapel is the only building in our book, which would not qualify in the 100% prime Central London. That's the only one. The rest of them are, and the rest of them will be improved over time, and we will transmission, will basically capture growth in the blue section, turn it into a yellow tradable asset and out shall go. That's been our model for as long as I can remember. And it feels -- if you go back to slide -- the cycle one, please, Rich, it feels much more alive today than it did in that really difficult period post Brexit, all the way through COVID, where, frankly, markets we felt should have corrected and didn't because the monetary response was so aggressive. And it took inflation, which was the consequence of -- and QE unwind for capital values to come off sufficient for us to get interested again. And so we're back into a really dynamic cycle, which feels like a good place to be. On that note, I think I'm going to draw proceedings to a close. I think we've given plenty of time for Q&A. Thank you very much. Just to wrap up for me then, this story today is all about our excellent leasing, which is all about our excellent positioning and our financial strength, looking forward with a lot to do over the second half to your point, but a lot to do over the next few years, and I'm very excited about that. As I hope you are. Thank you all for coming.
Operator: Ladies and gentlemen, welcome to the conference call on the third quarter 2025 results. I am Mathilde, the Chorus Call operator. [Operator Instructions] And the conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Jürgen Rebel, Head of Investor Relations. Please go ahead. Jürgen Rebel: Good morning, everyone. This is Jürgen speaking. We welcome you to today's call on third quarter results for fiscal year 2025. Aldo, our CEO, will comment on business and strategy; Rainer, our CFO, will focus on financials. We are referring to the Q3 earnings call presentation that you can find on our website. There, you'll also find further materials such as the full comprehensive IR presentation. Aldo, please let us have your thoughts on Q3. Aldo Kamper: Thank you, Jürgen, and good morning also from my side. Overall, I would say a good quarter. Our strategic focus is paying off. We delivered strong cash flow and significant growth in the core portfolio on a like-for-like basis. Profitability was better than previous quarter, also supported by a one-off. We reestablished the base savings continue to be ahead of plan. And I'm now on Page 3, looking at the financial performance of the group. Revenues came in at EUR 853 million, above the midpoint of the guidance. We saw an almost double-digit percentage improvement in our semiconductor business. In the auto lamps aftermarket business, we had double-digit seasonal upswing. The weaker U.S. dollar cost us EUR 20 million top line compared to the previous quarter. Year-over-year revenues are down a bit with 3%. This is entirely due to the weaker U.S. dollar. Note the 0.07 difference in the average euro-U.S. dollar exchange rate, which equals approximately EUR 35 million top line. If we truly look at the like-for-like comparison based on today's core portfolio at constant currencies, we have grown by about 6% year-over-year. This includes the traditional auto lamps business. The semiconductor core business, that as we measure our growth, grew approximately 9% on a comparable basis, a really good result in the current market conditions. It clearly shows that our portfolio choices are paying off. Profitability. Adjusted EBITDA margin improved quarter-over-quarter and year-over-year by almost 1 percentage point to 19.5%. In euro terms, adjusted EBITDA improved by EUR 21 million. Within that number, we have a profit of a bit more than EUR 10 million from the sale of some manufacturing assets in our Singapore production facility. Now quickly on the segments. Page 4, look at the traditional halogen lamp business, a classic seasonal upswing. We saw a steep 13% quarter-over-quarter increase in revenues driven by the aftermarket season. The darker months in the Northern Hemisphere make drivers replace their broken lights in their cars more frequently. Nothing particular to report on specialty lamps for industrial and entertainment applications. The business remained at a similar level as last quarter with approximately EUR 40 million of revenues. We sold this business segment to Ushio as part of our accelerated deleveraging plan as we communicated last quarter. Closing is expected around end of first quarter '26. Adjusted EBITDA stayed almost flat. Why? If revenues were up by almost EUR 25 million, the gross profit fall-through from higher volume was eaten up by a meaningful reduction of inventories. Now on semis. I'm on Slide 5. First, business unit OS. The sequential increase in Opto Semis with 6% revenue improvement, EUR 365 million compared to EUR 344 million in the previous quarter. The increase was mainly driven by automotive, but also by the seasonal peak of the horticulture business. The upswing could have been higher if it wasn't for the negative impact on the top line of the weaker U.S. dollar. Coming to profitability, adjusted EBITDA improved by EUR 3 million to EUR 82 million. At first glance, you might have expected a higher fall-through from EUR 20 million more top line. However, the increase was balanced also here by inventory reductions and the absence of onetime effects that were supported in Q2, such as IPCEI funding catch-up. In the end, adjusted EBITDA margin stayed almost flat at 22.6%. Now sensors and ASICs on Slide 6, an encouraging seasonal jump in revenues by 13% to EUR 271 million. Consumer products were in high demand. Indoor business was okay. Products we basically discontinued still saw some further orders that, that live longer as often. Little changes in demand for industrial and medical products. Year-over-year, business grew by 2%, mainly driven by the new sensor products, which are more than compensating for the revenue loss from the phased out noncore portfolio and the top line impact from the weaker U.S. dollar. Adjusted EBITDA jumped to EUR 64 million. However, I mentioned earlier that more than EUR 10 million of windfall profit from selling manufacturing equipment was included there. Now looking at the semi end market in summary, and we are on Slide 7 here. Sequentially, 9% up and year-over-year, 2% down. If we exclude the noncore portfolio that we discontinued last year, the semi core business grew by 9% year-on-year at constant currencies, well in line with our semiconductor growth model and higher than last quarter. First, automotive. LED inventory correction has ended, but no significant restocking in sight. We even hear some customers who want to reduce their inventory reach even further. Book-to-bill hovered around 1 throughout the quarter. Nevertheless, we saw a slight sequential increase in revenues of 4%. The uncertainty in the supply chain persists, we see a lot of short-term ordering, which is now often below normal lead times. Fulfillment channel inventories went further down. We are now between 7 and 8 weeks. In the old days, 8 to 10 weeks were considered healthy and normal. Second, industrial and medical. In line with the slow recovery of the overall market, we saw a sequential improvement of 2%. However, we're still below last year's level and ignoring the weaker U.S. dollar, maybe roughly at the same level. As always, we have to look at the verticals individually. Horticulture revenues had a seasonal peak, professional lighting unchanged. Demand for industrial automation is improving only gradually. Same is true for medical. When we look at the channel, same picture as last quarter, Europe and U.S. relatively stronger than China. Third, consumer, a steep seasonal increase of 22% compared to Q2. Our main business is sensors for smartphones and wearables. Year-over-year, we see the impact of the weaker USD. The slight decline is entirely due to FX. Business-wise, our new sensor product more than compensate for the phaseout of our products. Now let's talk about future business. I'm on Slide 8. Design wins are underpinning our midterm growth model in semis. Traction in the market continued unabated in the third quarter. We are well on track reaching again accumulated lifetime value of EUR 5 billion of new business for the full calendar year. We landed about 800 projects in the September quarter across all verticals. This pushes the total to already EUR 4 billion for the first 9 months. A few wins that we are very proud of are sticking out. First, in automotive. With our industry-leading intelligent RGBi interior lighting solutions, we secured another design win at a leading Chinese OEM. And on top of that, also a large design win for a prestigious car platform at a European premium OEM. Second, consumer. Our spectral and proximity sensors are the best you can get. This once again convinced leading customers the design wins are worth a couple of hundred million euros. With that, let us look at some of our recent advances when it comes to differentiating technology platforms. Now on Slide 9. We do spend a lot of R&D money as we continue to believe in exciting growth opportunities. One part of our R&D is dedicated to mastering the cost pressure in more established technologies by creating cost performance optimized platforms. The other part of R&D is focused on differentiating technologies, especially for new applications that might see a growth inflection in the future. We're also making sure that our customers benefit from an appropriate IP safety for those innovations. For this, we signed a comprehensive cross-license agreement with Nichia covering thousands of patent protected innovations in LED and laser technologies. The new agreement also covers sophisticated LED packages and also includes metric headlamps as an example. As such, we are the right partner for our customers, holding a truly unique IP position in the industry. On Slide 9, you get an impression of our leadership in infrared emitter technologies that are used in a multitude of applications. We are speaking of AlGaAs material systems that provides LED and laser light between 808 and 1130 nanometers, just beyond what a human eye can see, the so-called near infrared. Our LEDs boast industry-leading wall-plug efficiency and red glow suppression. Our laser IOs boast industry-leading efficiency and optical output power. Together with high-quality, cost-effective standard packages, these components are ideally suited for a multitude of applications that deliver already today a revenue contribution in the triple-digit million territory. We see the infrared LEDs in the car for in-cabin sensing and consumer applications or in drones, among many others. Our lasers are very established in material treatment and LiDAR, but these properties also make them ideally suited for future defense applications such as drone defense or even for more visionary applications one day like nuclear fusion -- laser-based nuclear fusion, a technology that could harness the energy generation process of our sun. We think there's much more to come here on this technology platform. Now let's switch to the sensor side of things on Slide 10. We recently introduced the industry-leading 2-dimensional direct time-of-flight sensor platform. By direct, the sensor measures the time of photon traps from the object and back and calculates the distance pretty fancy. I'm very proud of our engineers who delivered industry-leading sensors that feature twice the frame rate at the same resolution as competitor devices or twice resolution at the same frame rate, whatever you need in your application. You can use this performance for gesture and object recognition, but also for 3D distance measurement. It also enables Edge AI sensing applications, for example, in smartphones. You will see the principle in the lower left corner when an image is enhanced with the 3D dimensional depth information from the sensor, you can place objects such as furniture in an environment completely virtually. Just to give you an example here. We see applications for the sensor technology, not only in smartphones, but also in building automation, home appliances, robot drones, consumer electronics, you name it. Completing our technology product to this quarter, I'm on Slide 11 now. We have the leading spectral sensing platform in the industry. Here, you see Honor's latest flagship model, the Magic 8, a high-end premium smartphone with 4 cameras on the world-facing site. Our sensors allow for eye-fatigue protection and professional-grade color accuracy for an enhanced user experience. With this, let us move to bottom line products. We reestablished the base continues to be a great success as it has been so instrumental in mastering many of the headwinds to our bottom line, especially when it comes to gold price this year. We're on Slide 12 here. By the end of September, we have pocketed approximately EUR 185 million of the implemented run rate savings, another EUR 25 million during the last quarter alone. Now this time for more details on the financials. And Rainer, please tell us about the latest progress. Rainer Irle: Thank you, Aldo. Hello, everyone, from my side as well. Let us look at the balance sheet first. With the private placement of an additional EUR 500 million of U.S. dollar and euro senior notes, we increased our cash on hand position to EUR 979 million end of September and end of October, we were even above EUR 1 billion. After the tap in July, we have approximately EUR 651 million equivalent of the U.S. dollar bond and EUR 1.30 billion the Eurobond, both are due on March '29. Last quarter, we got some questions about why we tapped at a particular moment. If you look at the leverage finance market in the last couple of weeks, it turns out that our timing was pretty good. Momentarily, conditions are certainly less favorable. No news on the Malaysia sale and leaseback transaction yet. We continue to talk to interested parties, but we are not yet on the final approach. The value stood almost unchanged at EUR 422 million end of September. This brings us to an almost unchanged net debt position of EUR 2 billion compared to end of June. Having just mentioned the sale and leaseback, we certainly continue full steam in negotiating the indicated asset disposals on top of the sale of the entertainment and specialty lamps that we announced in July to venture realize proceeds well above EUR 500 million. We are fully on track. Minority shares with a value of only EUR 11 million were tendered during the summer months. Consequently, the outstanding minority put options stood at EUR 570 million or 12% outstanding at the end of Q3. Taking cash, the revolver and bilateral lines into account, our available liquidity significantly increased to approximately EUR 1.6 billion. We are prepared for all eventualities, any liquidity concerns in the market should be a thing of the past. And switching to Slide 14, cash flows. A strong improvement in the third quarter operating cash flow. We recorded EUR 88 million. And that's despite us paying the coupon on the high-yield bonds, which, as you know, is always due in Q1 and Q3. So we paid that in Q3, but we also managed inventories well and made sure we are collecting money from litigation and subsidies. Last year in Q3, we had the customer prepayment of approximately EUR 220 million that came as a onetime positive at that time. CapEx stayed in check, EUR 48 million in the third quarter. For the full year, we will land between 6% and 7% of revenues, well below our long-term average ratio of 8%. In total, we finished the quarter with EUR 43 million positive free cash flow. This brings us year-to-date to breakeven in free cash flow. If you exclude the customer prepayment last year, Q3 was the best quarter in a long time, though Q4 is expected to be better with lower interest payments and counting on the promised money from the Austrian government under the European CHIPS Act. We switch to Slide 15, net earnings and earnings per share. On the left, you find the adjusted figures. The adjusted net result improved in line with EBITDA to EUR 27 million in the third quarter. Adjusted EPS developed accordingly. The net financing result came in at EUR 59 million. Income tax stood at just EUR 5 million. So following the rule of thumb that there's always EUR 50 million, EUR 60 million adjustments per quarter due to transformation cost, depreciation of PPA and share-based compensation, we ended up with minus EUR 28 million net result according to IFRS. Consequently, IFRS earnings per share also came in negative EUR 0.28. That concludes my remarks. And with that, I would like to hand back to Aldo for the summary and outlook. Aldo Kamper: Thanks, Rainer. And now on Slide 16, let me summarize the third quarter results again. Looking at the business, we delivered revenues above the midpoint and profitability at the midpoint of the guidance. 9% growth in the core semi business year-over-year on a comparable basis, well in line with our midterm target model. Execution of reestablish the base program is ahead of plan now with EUR 185 million run rate savings implemented. And we are securing future semiconductor business with unabated design win streak, now EUR 4 billion already in the first 9 months of this year. Looking at the deleveraging plan, everything well on track without being able to go into further detail right now. R&D investments I've presented to you, an example of our relentless efforts to find future growth opportunities by investing in differentiated technology with great potential. Today, we talked about infrared emitters and 2-dimensional time-of-flight sensors. With that, let us look at the right-hand side of the slide, the outlook for the fourth quarter. We expect revenues to come in between EUR 790 million and EUR 890 million at an exchange rate of 1.16. Compared to the beginning of the year, the weaker U.S. dollar cost us a middle double-digit million figure in top line. Automotive lamps will see its peak in the annual lighting season. For semis altogether, we expect a small seasonal decline. Industrial medical might be kind of stable, but we sense a lot of uncertainty in the automotive market, maybe flattish at best, whereas in consumer, the smartphone season is cooling off a bit logically. We expect adjusted EBITDA margin to come in at 17.5%, plus or minus 1.5 percentage points in absent, stable compared to Q3, if you back out the windfall profit from the selling of manufacturing assets in Singapore. Looking at cash flow. With year-to-date 0 and keeping up our promise for the full year, we expect free cash flow of more than EUR 100 million in the fourth quarter, certainly also driven by the expected inflows from the Austrian CHIPs Act. With that, I conclude my remarks, and we're now ready for your questions. Operator: [Operator Instructions] The first question comes from the line of Sébastien Sztabowicz from Kepler Cheuvreux. Sébastien Sztabowicz: The first one is on the automotive market. So do you see the demand building up? It seems that you are coming to the end of the inventory correction, but I'm just curious about the trajectory of growth moving into the next few quarters. And in the short term, have you seen any specific downside to demand linked to Nexperia turmoil or is not something that is affecting the global car production volume for you or your demand? The second question is on the synergies and the cost saving program. You already reached EUR 185 million at the end of Q3, which is well above the target for '25, and you are coming closer to what you expect for 2026. Do you plan to accelerate a little bit more further the cost-cutting action? Or you will stick to EUR 225 million for next year and then you're going to stop cutting the cost base? Aldo Kamper: Yes. Thanks, Sébastien, for those questions. Yes, on the automotive side, I would say inventory situation is okay. We do see that there is a lot of short-term order behavior. And I do also link that partly to the Nexperia topic, just our carmakers also have to be very agile in their production schedules and what they build and when they build it does vary a bit. So I would expect this quarter and next quarter to be impacted a bit by that. But overall, vehicle build volumes globally are actually holding up quite well. And here, it is also important that we have a good position in China as the Chinese market in this is doing -- is growing quite nicely, I have to say. And Europe and the U.S. are struggling a bit. But given our global exposure, we are able to balance that out. So I would say, overall, the story hasn't really changed. We still see more content per vehicle globally that we benefit from a fairly stable vehicle build volume currently and also for next year. At the same time, yes, also the usual price pressure that eats it up a bit. And then, of course, FX that also goes against us. But yes, underlying demand, I would say, is in principle, okay with some short-term hiccups, as explained. On reestablished the base, yes, we were very happy that we are making very good progress, EUR 185 million already. So I would assume that we can get to the EUR 225 million goal also significantly ahead of plan. And we are thinking about how to extend this program after that. But we at the moment, mainly focused on bringing in the savings as quickly as possible of the measures that we've already defined. Operator: The next question comes from the line of Harry Blaiklock from UBS. Harry Blaiklock: The first is just on the consumer business. I know you've had success at one of your big consumer customers in terms of getting a socket rolled out across the whole kind of smartphone portfolio. And historically, you've spoken about potentially getting further socket wins in that business. I was wondering whether you could just provide an update on that. And then my second question is just on whether there's any update you can give us in terms of progress on the further asset disposals for generating over EUR 500 million. Aldo Kamper: Sure, Harry. Thanks for the question. So yes, at the various cell phone customers, we are making good progress and are winning new sockets. And I must say that it goes across both Android and non-Android space in a very steady and good manner, I must say, without calling out one specific socket, but I must say the engagement across the customer base is very strong, and we continue to see good growth potential in this space with our technology. On the asset disposals, yes, it's hard to comment on that in detail, but I can say we are very active in the process and the plan still stands. We will deliver significantly more than EUR 500 million of disposal proceeds. As we have communicated, the first step, the EUR 200 million, on the lamp business, on the entertainment lamp business is in execution. We are progressing well towards closing probably by the end of Q1 next year. And on a second bigger step, we are making good progress, and we'll share that, of course, as soon as we can with all of you. Operator: [Operator Instructions] We now have a question from the line of Reto Huber from Research Partners. Reto Huber: Now I was wondering the adjusted EBITDA, maybe I missed it, that includes the gain from sales of assets, if I understood this correctly. Have you disclosed that number somewhere? And how much is the one-off gain? And then secondly, what is the reduction in year-over-year sales due to disposals? Rainer Irle: Yes. The adjusted EBITDA had a benefit from that asset sale of roughly EUR 10 million, a bit north of EUR 10 million. That's obviously a onetime effect. And yes, if you look at the year-over-year impact from asset disposals from the portfolio, I would say that, that is probably EUR 30 million. Operator: Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Jürgen Rebel for any closing remarks. Jürgen Rebel: Thanks very much for the interest. We had a lot of people who dialed in. If you have any further questions, don't hesitate to reach out to us. And we're looking forward to receiving your feedback. Thank you. Bye. Rainer Irle: Bye-bye. Operator: Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.
Operator: Excuse me, ladies and gentlemen. This is the operator speaking. Please continue to stand by, and your conference will begin momentarily. Thank you. Excuse me, ladies and gentlemen. This is the operator. Please continue to stand by. Your conference will begin momentarily. Thank you. Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Zynex, Inc. Third Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. As a reminder, this conference is being recorded. I would now like to turn the conference over to Vikram Bajaj, Chief Financial Officer of Zynex, Inc. Please go ahead. Vikram Bajaj: Thank you, operator. And good afternoon, everyone. Yesterday, we released financial results for the third quarter ended September 30, 2025. A copy of the press release is available on the company's website. Before we begin, I would like to remind you that during this conference call, the company will make projections and forward-looking statements regarding future events. We encourage you to review the company's past and future filings with the SEC, including, without limitation, the company's 2024 Form 10-K and subsequent Form 10-Qs, along with any amendments which identify the specific factors that may cause actual results or events to differ materially from those described in these forward-looking statements. These factors may include, without limitation, statements regarding product development, product potential, the regulatory and legal environment, sales and marketing strategy, restructuring activities, or operating performance. With that, I'll now turn the call over to Steven Dyson, our CEO. Steven Dyson: Thank you, Vikram. And good morning to everyone attending today's earnings call. It's been three months since Vikram and I joined the company. And since joining, we have been tirelessly focused on addressing the business and compliance challenges at Zynex, Inc. while creating a new future for the company. As you will already know from our public disclosures, we have an entirely new management team with the addition of new leaders in sales, legal, compliance, regulatory, HR, and billing, as well as a recent addition to our leadership team in the critical role of strategic marketing. We have also complemented our governance and oversight with the addition of two new directors on our board, Brett Wise and Paul Aronson. Brett is our new audit committee chair, and he brings a wealth of experience in healthcare and med tech, as well as financial expertise with a strong background in compliance oversight. Paul Aronson is the chair of our special committee, which is tasked with overseeing the company's efforts to evaluate strategic alternatives for the company, including potential capital raising opportunities and recapitalization and restructuring strategies. As you can see from these additions, we have recruited a highly experienced and capable team to help turn the company around. Now, this is my first earnings call with investors. I thought it would be good to share a few points on the value I see in the Zynex, Inc. franchise, as well as our near-term strategy and priorities. The first thing to appreciate is the quality of our flagship product, the NexWave electrotherapy device. The NexWave device is cleared by the FDA for chronic and acute pain indications. The NexWave is a product that is very much loved by our patients and clinicians. People suffering with pain are looking for non-pharmaceutical ways to get back on their feet, and this company has a great product with the reach and the channel to provide life-changing relief to individuals while providing significant value to the healthcare system. We have thousands of patient testimonials supporting the effectiveness of the NexWave device, and it represents an amazing business opportunity. This is the main reason I came to Zynex, Inc., and it is the main reason we have been able to attract great talent to the management team and directors. Moving on to our strategy and priorities. Over the last ninety days, we've been implementing a three-part strategy to turn the company around. First, addressing the concerns of government agencies and ongoing investigations. Second, addressing the near-term maturity of our $60 million in convertible senior notes, and liquidity concerns, and seeking to raise new capital to fund operations. And third, improving revenue and cash flow performance of the core business. First, as it relates to government investigations, we are proactively engaging with government agencies and investigators in a collaborative way to deliver a new future for Zynex, Inc. that is focused on compliance and integrity. These discussions have been positive, and we are making progress on our commitments. While we do not have certainty on any potential TRICARE reinstatement or resolution of ongoing investigations, or the timing thereof, it will be critical as we move forward to reach resolution based on the company's commitment to the future. In support of our renewed commitment to compliance and integrity, starting October 1, we implemented a new resupply order fulfillment policy. Under this new policy, we do not process resupply orders unless a patient first confirms their needs. We systematically reach out to each patient to ask about their resupply needs, and patients can contact us at any time. We are already seeing good results. Not only is the policy leading to far more regular patient contact, but our patients are responding positively. We expect these efforts to result in a significant improvement in how patients, public and private payers, and their providers experience doing business with Zynex, Inc. Second, we need to manage the company's near-term debt obligations as we seek to raise additional capital. As you know, we have $60 million in convertible senior notes that mature in May 2026. Also in Q3, we had negative cash flow of $6.3 million. And as of September 30, the company had cash and cash equivalents of $13.3 million on the balance sheet. It is important that we address the convertible notes maturity and our cash burn relative to the amount of our cash and cash equivalents in order to continue as a going concern and give certainty to our customers and suppliers that we could honor our commitments going forward. As you have seen in our announcements, we have recently hired Providence LLC to advise the company on various strategic and financing alternatives and evaluate a range of strategic alternatives, including potential capital raising and restructuring strategies. We've also formed a highly experienced special committee of the board of directors to oversee this process. We have initiated collaborative discussions with our debt holders, and while we cannot predict the outcome, we believe that our business plans for the future are compelling and will be critical to this process. Third, we need to address the company's revenue and cash flow performance. Since I started, we have initiated several quick-win projects in multiple functions within the company, focused on near-term performance improvements in Salesforce productivity, order conversion efficiency, and collections. These efforts are showing early signs of success and are bearing fruit. After customer order volume had been down for many months sequentially, we have recently seen orders stabilize, even with a substantially reduced sales force. To increase sales productivity and improve order volumes, we have improved and simplified our commission plans, provided improved communication and technology to our sales reps, and increased their focus on targeted accounts. We have also engaged with a new partner for our VA business, and early signs there point to a good opportunity for increased penetration to VA accounts. So these are the three key elements of our strategies to turn around the company's performance and create a new future for Zynex, Inc. While our Q3 performance released yesterday is more of a continuation of the challenges from the first two quarters, I'm encouraged to see progress in all three elements of our strategy. Now I'll turn the call back over to Vikram, our CFO, to give you an overview of our Q3 financial results. Vikram Bajaj: Thank you, Steven. Please refer to our press release issued yesterday for our summary of financial results for the third quarter ended September 30, 2025. Net revenue was $13.4 million compared to $50 million in 2024. Device revenue was $7.1 million, and supplies revenue was $6.3 million. The decline in net revenue for the three months ended September 30, 2025, compared to the prior year period, is primarily related to the company's TRICARE payment suspension, along with a $2.8 million reduction in revenue related to payments received from TRICARE during the suspension period. Through 2025, changes to certain payers' claim submission review practices have resulted in denials and payment delays, which have negatively impacted our revenue. Additionally, Q1 and Q2 workforce reductions in many functions, including sales, have negatively impacted device orders and corresponding supplies, new patient onboarding, and order completion, contributing to the overall decline in net revenue during the three months ended September 30, 2025. Gross profit in the third quarter was $8.1 million or 60% of revenue, as compared to $39.8 million or 80% of revenue in Q3 2024. Sales and marketing expenses decreased 54% to $9.5 million in the third quarter of 2025. The primary contributor to the decrease in sales and marketing expenses was a headcount reduction. G&A expenses were $11.8 million in 2025 compared to $15.3 million in Q3 last year. Net loss was also negatively impacted by a non-cash asset impairment charge of $50.7 million during the quarter ended September 30, 2025, primarily related to goodwill, definite-lived intangible assets, and certain fixed assets associated with Zynex, Inc. monitoring solutions. Net loss was $42.9 million and $1.42 per share in 2025 compared to net income of $2.4 million in 2024. Adjusted EBITDA loss for the three months ended September 30, 2025, was $12.3 million, as compared to adjusted EBITDA of positive $5.1 million in the quarter ended September 30, 2024. On the balance sheet, we have $13.3 million of cash in hand at September 30, 2025, and we're able to reduce our cash burn during the quarter. As part of our cash management program, Zynex, Inc. has elected to enter the contractual thirty-day grace period under the terms of the company's $60 million of convertible notes and did not make a $1.5 million interest payment due November 17, 2025. The company is in discussions with holders of the convertible notes regarding potential restructuring opportunities. Our convertible debt of $60 million is due May 2026, so you'll notice it's now a current liability. We are currently working with our advisers to address this liability. I'll now turn the call back to Steven. Steven Dyson: Thank you, Vikram. And thank you for joining us today. We appreciate your time and interest in Zynex, Inc. Have a great day. Operator: Thank you. And ladies and gentlemen, this now concludes today's conference call. Thank you all for joining. You may now disconnect.
Operator: Ladies and gentlemen, thank you for joining us, and welcome to the Third Quarter 2025 LATAM Airlines Group Earnings Conference Call. [Operator Instructions]. Before I turn the call over to management, I'd like to remind you that certain statements in this presentation and during Q&A may relate to future events and expectations and as such, constitute forward-looking statements. Any matters discussed today that are not historical facts, particularly comments regarding the company's future plans, objectives and expected performance or guidance are forward-looking statements. These statements are based on a range of assumptions that LATAM believes are reasonable, but are subject to uncertainties and risks that are discussed in detail in the published 20-F 2025 updated guidance, earnings release, financial statements and related CMF and SEC filings. The company's actual results may differ significantly from those projected or suggested in any forward-looking statements due to a variety of factors, which are discussed in detail in our SEC filings. And if there are any members of the press on the call, please note that for the media, this is a listen-only call. I will now hand the conference over to Ricardo Bottas, Chief Financial Officer. Ricardo, please go ahead. Ricardo Dourado: Hello, everyone, and good morning. Welcome to our third quarter 2025 conference call, and thank you all for joining us today. My name is Ricardo Bottas, and I am the CFO of LATAM Airlines Group. Here with me is Roberto Alvo, our CEO; Andrés del Valle, Corporate Finance Director; and Tori Creighton, Head of Investor Relations. And we will present our highlights and results for the third quarter. I will hand it over to Roberto to share his opening remarks. Once finished, I will present the key operational and financial figures as well as provide other updates. Roberto Alvo Milosawlewitsch: Good morning. Thank you, Ricardo, and thanks to all for being here today. This month, 3 years ago, LATAM emerged from financial restructuring. This period was one of learning, designing and executing. LATAM defined a blueprint that has a collection of essential elements we needed to excel. This blueprint was implemented and is working. The group's network is the most expansive in the region, and our loyalty program is by far the largest and most valued. No one else can connect South America within the region and to the world, reward loyalty and provide choice to customers as LATAM Group can. However, these results are the product of more than a co-branded credit card and a map of routes. At LATAM, we are obsessed with execution. Every day, in every interaction, we strive to be better, to depart on time, standard zero on every flight, to improve on what we do, seek and find cost-saving opportunities for each of our activities, to make sure we deliver what was promised to the customer at every interaction and to provide the care and respect that each one of them deserves as they entrust their journey to LATAM. We have made considerable progress, but are not satisfied. I believe we can do better. Looking forward, we must ensure that we remain disciplined, disciplined in execution and disciplined in controlling costs. At the center of all of this is our people, a group of more than 40,000 employees who care about and love what they do every day. People who believe in what they do and what it represents. They are the engine and the spirit that drives LATAM Group forward, and the most important commitment is to them, making sure that they feel that every day it is worth being part of the LATAM family. As we look into the future, I'm confident that we can continue the journey of improvement and deliver on purpose that we have, which is elevating every single journey. Thank you very much. Now back to Ricardo for a description of how we are achieving profitable growth, improving the quality of our traffic, keeping high customer satisfaction and maintaining our cost under control. Ricardo Dourado: Thank you, Roberto. Please join me on Slide 3. This quarter, LATAM Group continues to show the strength of its strategy, its unmatched network footprint, focus on disciplined operational and commercial execution as well as product improvement. In terms of operations, LATAM Group transported over 22.9 million passengers, reinforcing its role as the leading airline group in South America. Capacity grew by 9.3% year-over-year with healthy load factors of 85.4% on a consolidated basis. The group is seeing consistently high levels of customer satisfaction, increased customer preference, especially in the premium segment and sustained customer loyalty. LATAM translated this operational performance into financial results, driven by an 8.4% increase in passenger unit revenues while keeping unit costs broadly stable. Adjusted operating margin expanded to 18.1%, while adjusted EBITDAR reached $1.15 billion during the quarter, and net income totaling $379 million. During this quarter, LATAM executed its second share repurchase program for a total of $433 million with the company's disciplined approach to capital allocation. During this quarter, LATAM Airlines Group signed a major agreement for an acquisition of up to 74 Embraer E2 aircraft. Moving to the next slide about the fleet and this acquisition and the transaction. The E2 will indeed enhance LATAM Group affiliates' regional connectivity in South America and represent an opportunity for our network to open up to 35 new destinations. They also offer a 30% improvement in fuel efficiency per seat compared to previous generation aircraft, reinforcing the group's commitment to sustainability and cost discipline. In total, LATAM Group will receive 24 E2s with 12 deliveries scheduled for the fourth quarter of 2026 and the remaining 12, in 2027. With this addition, LATAM's order book now exceeds 140 aircraft through 2030, supporting the group's long-term growth and fleet modernization strategy. Initial deliveries are set to begin with LATAM Airlines Brazil, which will be the first to deploy these aircraft in its network. In Brazil, this aircraft will enhance capillarity across the country, enabling LATAM Group to expand into under-penetrated regions and destinations that are currently not served by the group. Over time and subject to market conditions and strategic evaluations, other LATAM affiliates may also incorporate the E2s into their operations. Still on this slide, we expect to receive an additional 8 aircraft on this fourth quarter of 2025. And also, we project to receive additional 44 aircraft next year, including the E2s. Let's move to the following slide, Slide 5. As mentioned earlier, LATAM Group delivered another quarter of strong traffic performance, transporting more than -- almost 23 million passengers with a consolidated load factor of 85.4%. LATAM has been committed to profitable growth at the consolidated level, passenger RASK increased by 8.4% year-over-year in U.S. dollars, a result that reflects the strength of LATAM Group's strategy and execution. A clear example of this is Brazil, where LATAM Airlines Brazil grew capacity by over 12% year-over-year. With this expansion, customer preference remained strong, and the load factor even increased by 2.2 percentage points. During the quarter, the Brazilian affiliate launched 6 new domestic routes, further supporting the strategy to deepen its presence and enhance connectivity in this market. In the Spanish-speaking countries, LATAM Group's affiliates have also improved performance during this quarter with passenger RASK increasing 18% year-over-year. In particular, as compared to 2024, LATAM Airlines Colombia experienced a stable domestic industry capacity, also seeing healthy demand. Demand is in the other Spanish-speaking affiliates domestic markets also remained healthy, except for Chile, where industry traffic figures are stable against last year. However, the focus on delivery execution and a higher premium product offering helped fully offset these effects. Meanwhile, the international segment continued to operate with high load factors, reflecting the relevance of the network and LATAM Group's role as the main connector in the region with a diversified network. Altogether, the unit revenues, even in the context of increased capacity reflect the effectiveness of the group's commercial and customer strategy. It is the result of offering the right product in the right markets while executing with discipline. Looking ahead, LATAM Group continues to focus on maintaining a sustained trajectory of discipline and profitable growth. The group is also focused on reaching the goal of high single-digit consolidated capacity growth next year, compared to 2025, supported by an ongoing focus on efficiency, a relevant fleet delivery schedule and a margin preservation on top of a healthy demand environment. Moving to the next slide, Slide 6, regarding our value proposition and customer experience. LATAM Group remains committed to deliver a superior travel experience and increasing customer preference. During the quarter, the group continued advancing initiatives. The new Lima Lounge was inaugurated at recently opened Jorge Chávez International Airport, one of the group's main hubs. This new space offers a modern and comfortable environment and comes in addition to the signature check-in area that was previously inaugurated at the same terminal, both part of a strategy to elevate the end-to-end experience for premium travelers and LATAM Pass members. Looking ahead, LATAM Group also announced the launch of its new Premium Comfort Class, which will begin rolling out in 2027 on long-haul routes. This product reflects a commitment to offering more choices to our passengers for how they want to fly. The new class will be an additional option other than the existing economy and business class cabins, for passengers seeking more space and personalized service. Finally, LATAM Group was once again recognized by APEX as a Five-Star Global Airline for 2026. This marks the fourth consecutive year the group has received these distinctions based on independent passenger feedback data from over 1 million flights worldwide. It's a testament to the team's dedication and to the impact of the investments being made across the network. In addition, LATAM Cargo Group was named Air Cargo Airline of the Year by Air Cargo News, becoming the only South American carrier to win in any category, further underscoring the group's excellence across all segments of the business. Together, these efforts underscore LATAM Group's dedication to continuous improvement and reinforce its strategic commitment to quality, consistency and the passenger experience, a focus that continues to support more passengers choosing to fly with LATAM and the group's ability to capture premium revenues. Next, let's move to the Slide 7. I will now walk you through the financial results for the third quarter, a period in which LATAM once again reflects a solid execution. Total revenues reached $3.9 billion, an increase of 17.3% year-over-year, supported by growth across both Passenger and Cargo segments. Passenger revenue rose by 18.5% with revenues from premium travelers also showing relevant growth, increasing by more than 15% compared to the same period last year, while Cargo revenues grew by 6.3%. On the cost side, total adjusted expenses ex-fuel increased by 21% year-over-year, driven mainly by increased operations, especially international and also a lower base of comparison due to the one-offs impact in the same period of last year. This increase was partially offset by 4.7% year-over-year decrease in jet fuel costs. That said, on the unit cost front, LATAM upheld its firm commitment to cost efficiency, a key pillar of its strategy. As a result, LATAM delivered an adjusted operating margin of 18.1%, testament to LATAM's operational excellence through profitable growth while also holding its cost control performance and advantage. Again, a nonnegotiable and relevant part of LATAM's strategy. Lastly, net income for the quarter totaled $379 million, up 26% year-over-year, even after $105 million negative nonoperational income statement impact related to the liability management exercise completed in last July, as disclosed to the market before. Net income for the 9 months was $976 million, 38% higher than the same period of last year. Now moving to the Slide 8. As you can see on this slide, LATAM operational performance this quarter is a result of consistent and disciplined execution of the group's strategy over the past several years. Since 2019, LATAM has steadily expanded its adjusted operating margin, rising from 7.1%, to 18.1% in the third quarter of 2025. At the same time, LATAM has maintained tight control of its cost base. Adjusted passenger CASK ex-fuel has been stable between $0.042 and $0.043 on the last 12 months basis, despite inflationary pressures and higher activity. This disciplined approach to cost has enabled LATAM to consistently grow margins while preserving efficiency, in order to continue delivering sustainable and profitable growth going forward. With regard to cash generation, as shown on Slide 9. In the third quarter, LATAM delivered strong adjusted operating cash flow generation, reaching $859 million. Interest payments remaining contained at $52 million, mainly as a result of the debt refinancing executed in 2024, which enabled LATAM's significant reduction of the cost of its non-fleet financial liabilities, which continue to translate into meaningful interest savings and overall cost of capital reduction. After both 2024 and 2025, refinance execution, combined interest payment savings expected for next year amount to $151 million compared to last year. And finally, during the quarter, LATAM executed its second share repurchase program for a total of $433 million. This reflects the group's capital allocation strategy and discipline. Let's move to Slide 10 to discuss LATAM's capital structure. LATAM ended the third quarter with a liquidity level of 25.8%, slightly above the upper end of the financial policy range, the execution of the share repurchase program this quarter brought liquidity more in line with the target levels. LATAM ended the quarter with an adjusted net leverage ratio of 1.5x, aligned with the full year guidance and well below the cap from the financial policy. A strong capital structure is not just a financial metric for LATAM. It's a strategic asset. It gives the group the flexibility to pursue growth where it's most profitable, return capital to shareholders when appropriate and manage the most accretive capital structure. This financial strength, combined with assets and cost advantage set LATAM apart from its peers and remains central to its ability to compete, adapt and lead into the region over the long term. Please join me on Slide 11. Given this solid year-to-date performance, supported by continued customer preference and the disciplined execution of a strategy centered on profitable growth, cost efficiency and financial strength, LATAM has updated its full year 2025 guidance. Consolidated capacity is projected to remain broadly in line with previous estimate with -- while revenues are expected to be higher within a tighter range. In terms of margins, adjusted EBITDAR guidance has also been refined to be between $4 billion and $4.1 billion, close to 9% higher than the previous guidance. The updated range reflects a more constructive outlook now positioned higher than the previous estimate. Adjusted passenger CASK ex-fuel was updated to be between $4.35 and $4.40, mainly due to FX variation in this period. Liquidity was also updated after the execution of the share repurchase program, and we are maintaining the same estimate to be above $4 billion by the end of this year. Mainly considered debt adjusted EBITDAR improvement in the cash generation, the forecasted leverage for year-end is now at 1.4x. And for next year, as I mentioned before, the group is focused on reaching the goal of high single-digit capacity growth compared to 2025, supported by our ongoing dedication to efficiency and margin preservation. Finally, and before we move to the Q&A, I'd like to take a moment to remind you that LATAM will be hosting an Investor Day in New York on December 9, 2025. We invite you also to tune into the live webcast on these events. With that, we now open the line for your questions. Operator: [Operator Instructions] Your first question comes from the line of Guilherme Mendes with JPMorgan. Guilherme Mendes: Congrats on another pretty strong results. My question is on the international front. When compared to Brazil domestic and Spanish-speaking countries, it looks like the past performance was relatively weaker, although still growing on a year-over-year basis. Can you share more details on how international is tracking, maybe on a per-region basis, which other routes have been pressuring the overall results and which are doing relatively better? Roberto Alvo Milosawlewitsch: So we have seen, in general, stable and healthy demand in most of the international segments. I would say that South America to U.S. is a little bit softer than what we used to see in the last few months. And this is, in our view, linked to people probably avoiding going to the U.S. and moving themselves a little bit into other regions. Also the northern part of South America, the regional traffic, which is international flights on the northern part, is a little bit softer as well. But in general, nothing that we have seen that is worrisome or concerning with respect to the level and the quality of the demand. So in that sense, we remain confident on the prospects for the remainder of the year. Guilherme Mendes: Very clear, Roberto. When you say softer into the U.S., is it more leisure related or even corporate related? Roberto Alvo Milosawlewitsch: No. This is more leisure related. Operator: Your next question comes from the line of Mike Linenberg with Deutsche Bank. Michael Linenberg: I have a couple here. I guess, Roberto, can you just update us on this measure in Brazil to potentially force airlines to offer up a free bag? Is that just domestic? Is that domestic and international? And where is that in the legislative process right now? Roberto Alvo Milosawlewitsch: A few weeks ago, a couple of weeks ago, the lower chamber in Brazil passed a law to allow basically passengers to carry a bag without being charged and also select seat without charge on seat that have no distinction in terms of space. This, as the law was passed, was for both domestic and international flights, it affects eventually therefore, domestic and international carriers into Brazil. The law is -- needs to go to the Senate. It has not been presented at the Senate floor at this point in time, and we have no clarity if that would happen and when it will happen. So for the time being, that still has the second step. Ultimately, presidential veto is also something that the Brazilian constitution allows for laws like this. So we will see. Michael Linenberg: The reason I ask is, and you mentioned international, is that -- all right, domestic is one thing, but international, from the perspective, I know at least from the U.S., they may view it as a potential tax or additional cost that's unilateral and therefore, in violation of the bilateral. So I just wonder how they implement it internationally when international carriers have different ways in how they price their product and obviously are protected by the bilateral arrangements between Brazil and those countries. Roberto Alvo Milosawlewitsch: Yes. I completely agree with you, Michael. And of course, LATAM does not support the passing of the law, and we have together with the IATA and ABEAR in Brazil been making very clear and explaining the impact of this potential measure. This is not good clearly for the industry -- airline industry in Brazil and I think -- I believe has the potential of ending up with higher fares for passengers that fly whether into Brazil or outside or coming to Brazil. So I think that at an industry level, we are making a lot of effort in making sure that everybody understands the impact that this has on traffic and on the industry, and we're completely sure that this would not be a positive measure for us all. Michael Linenberg: Great. And then just my second on capital allocation. And this is Roberto, to you or Ricardo, how you think about it longer term? You've had a nice balance. Obviously -- the dividend is statutory. But you pay the dividend. You've been paying down debt. You've also been buying back stock. As we think about the sort of various levers going forward, should we expect to see, say, regular reductions in shares outstanding? Or was that more of just an opportunistic initiative on your part? Roberto Alvo Milosawlewitsch: Thanks, Mike. So first of all, I mean, as we think about capitalization, do remember that the development of the business and how we see and foresee opportunities for growth, is the priority. So that will always take over other potential decisions. At this point in time, we believe we have done a balanced mix of initiatives, and we remain very close to the target that we have in terms of financial policy. So we're content with what we have done during 2025. Going forward, looking forward, I think we will see -- I mean, this is a Board decision. Ultimately, the dividend payout in Chile per law is a shareholders' meeting, a shareholder decision, which will happen in April. But all options for capital allocation and growth investment remain open. And as we progress in the next few months, the company will, for sure, explain to the market how do we continue depending on our results and of course, the situation in the region and the opportunities we may see. Operator: Your next question comes from the line of Gabriel Rezende with Itau BBA. Gabriel Rezende: Congrats on these very strong results. I would like to follow up on your comments regarding the investments and the efforts you have been putting into bringing a more premium experience to the customers. And just trying to understand how relevant it has been so far in terms of your revenue growth as well as your profitability. So if you could maybe provide some color on how relevant these premium revenue are at this point? You mentioned that it has grown by 15% year-on-year. So just trying to understand how much it represents out of the total passenger revenue at this point? And how much could it represent in the future as you bring more efforts into this? Roberto Alvo Milosawlewitsch: Yes. Thanks for the message -- the question. So first, I think it's important to remark what is what we're experiencing. First, yes, premium revenue is growing faster than capacity. And a relevant portion of the improvement that we see in the RASK for Spanish-speaking domestic Brazil and to an extent, international is due to a change of mix where we have a larger proportion and portion of premium revenue coming from there. And that's both corporate and as well, let me call it, high leisure, I don't know if that's a context or the concept in English, revenue that we're seeing. Now this is a function of, in my mind, 2 things. Most importantly, it's impeccable execution and care in every interaction that we made for the customer. Secondly, it's improvements in products, as you probably saw in the presentation, the Lima Lounge, premium economy in the international and other things. But as we have, in a way, decommoditized, if you want, our product, we have focused very much on experience. And that, I think, has brought a willingness to pay that customers probably had that we were simply not exploiting because our product probably was not as good as they were expecting. And now we are, I think, very clearly seeing the impact that this has in our results. Operator: [Operator Instructions] Our next question comes from the line of Felipe Ballevona with Santander. Felipe Ballevona: Can you hear me? Roberto Alvo Milosawlewitsch: Yes, we can. Felipe Ballevona: Great. Awesome. So well, first of all, congrats on the strong results. I have a couple of questions here. First, following actually on the first question of the Q&A. What was the reason behind the growth slowdown in international traffic recorded in October? Is international traffic being dragged down by Colombia? The last couple of data points of the [ IDOCB ] that have showed a slowdown in your international, not only in the domestic as has been the case for the previous months, but also in the international front. And also my second question, if you have any news regarding a potential buyback? Roberto Alvo Milosawlewitsch: Yes. Felipe, so first of all, our international Colombia operation is very small as compared to the total international traffic. We have not seen, in particular, an impact on international travel in and out of Colombia, and that it's very unsubstantial to the size of our traffic, particularly out of Brazil and secondly, Chile and then Peru. No, I guess this is a function, as I explained in the beginning, softer demand into the U.S., particularly on leisure traffic. We believe that this is linked to people probably deciding to go elsewhere and probably spending more time within their countries and to the region. But we don't see this as a fundamental slowdown in demand. It's probably assigned to more external factors than that. So that's the main reason, okay? Having said that, do remember that we expect that our ASK growth for the whole of 2025 is going to be around 10% to 10.5% increase in capacity, which is a significant increase in capacity, and that's a reflection of a good level of demand that we see to operate this. Felipe Ballevona: That's very good color. And do you have any news regarding a potential buyback or... Roberto Alvo Milosawlewitsch: Sorry. Felipe Ballevona: You're fine. Roberto Alvo Milosawlewitsch: As I said before, at this point in time, we are close to the financial policy targets that we have. Going forward, we will see what the Board decides and do remember that the company has a range of alternatives to allocate capital and also be mindful that the first priority will always be growing the business. And after that, any excess that we believe should go back to shareholders, the company has a few tools to decide on how to do it. So rest -- at least, stay tuned, eventually. Operator: Next question comes from the line of Jens Spiess with Morgan Stanley. Jens Spiess: Congrats on the very strong results. Just wanted to know if you could provide any context on next year, how is the -- like the order book -- the booking curve looking like? And also how much do you expect to grow in terms of ASKs next year based on your fleet plan, that would be very helpful. And if you could remind us how many leases do you have expiring next year, I would very much appreciate that. Roberto Alvo Milosawlewitsch: Yes. Jens, so as we explained in the press release and Ricardo mentioned here, we expect high single-digit ASK growth, or that's our goal for 2026. We will provide more detailed guidance on 2026 in a few more weeks. You asked about -- the first part of the question, fleet. And by the way, yes, fleet. So we have on Slide 4 of the presentation, you can see 41 arrivals of A320 family and 7 E2 aircraft, plus 3 wide-bodies. We have relatively few leases. I don't have the correct figure here, the right figure, but we have the option to, of course, extend them if you want to. And our expectation at this point in time is to end up the year with a total fleet of just over 400 aircraft -- around 410. You can see that as well in the press release, okay? And -- sorry, I'm just looking at a note here they're sending me. Yes. And last thing, they just reminded me to make you feel comfortable that we have the fleet we need to grow for what we're expecting next year. So I don't expect -- we don't expect that we would need to make changes in our fleet plan for the capacity we have planned. The first part of the question you asked me, now, remember, is booking curve into the beginning of the year. Very early still, particularly on domestic markets, the percentage of booked seats is very low. But what we're seeing initially for the first couple of months of the year looks in the current trend that we have seen in third quarter and that we expect for the rest of the year. Operator: Your next question comes from the line of Ewald Stark with BICE. Ewald Stark Bittencourt: I want to know if you can provide any color behind what is driving the lower percentage of hedged fuel during this quarter? Especially I would like to focus on, is anything on booking going forward that is driving this lower percentage of hedged fuel, or maybe you're looking something different about forecast of oil? Unknown Executive: Yes, thanks for the question. If you look at the press release, it's nothing that different for what we usually do. You have about a 47% for Q4 of this year and then 33% for Q1. And of course, as soon as we approach the next quarters, we will have, of course, consistent with the policy, an increase the fuel hedge. But I wouldn't say that this is any different than what you have seen in the past. It's a very standard, I think, coverage that we have today for fuel price, nothing that really deviates from the policy. Ewald Stark Bittencourt: Financial statements say that you have a 26% hedge fuel for the next 12 months. Starting from first quarter of 2026, every quarter is below 30%. Unknown Executive: Yes. If you look at the detail on the earnings release, there's more detail here. I think at the financial, that's sort of on a weighted average of what's it going forward. But here, you have the actual percentages covered for every quarter. Again, 47% for Q4, 33% for Q1. So that's a difference you were look at the financials here. Then as this is as of November 14, 2025, it's more updated. I think, of course, the financials, they call for, I think, September 30, but this is -- you have the most updated vision of the current portfolio, as of November 14. Operator: [Operator Instructions] Your next question comes from the line of Guilherme Mendes with JPMorgan. Guilherme Mendes: Regarding the pilot strike in Chile, can you share some potential -- expected impact for the fourth quarter? I understand it should be material, but I just wanted to hear your thoughts on what could we expect from this negotiation. Roberto Alvo Milosawlewitsch: Thank you, Guilherme. At this point in time, we have no clarity of the potential impact. So we will update that if necessary at an appropriate time. Operator: There are no further questions at this time. I will now turn the call back to Ricardo Bottas for closing remarks. Ricardo Dourado: I would like to thank you all to participating in today's call and remind you that we will have our Investor Day again on December 9. So we would love to have all of you participating on that opportunity to get more information from the company and the additional updates. Thank you all, and have a good day. Operator: This concludes today's call. Thank you for attending. You may now disconnect.
Toby Courtauld: Amazingly, we're a bit early. We could start, Rich? Yes. Okay. Well, in which case, welcome, everybody. Thank you very much for joining us for our interim results presentation. It's great to see you all, and we really appreciate the time that you give us. So thank you for coming along. Now, first of all, I'm going to start by summarizing some of the key messages that we'll be giving you over the next 30 or so minutes. And essentially, we have carried on where we left off at the year-end, successfully executing on our growth strategy. You'll hear about our strong operational performance so far this year, delivering some excellent leasing, well ahead of target and leading us to reiterate our rental value growth guidance. We've made further accretive acquisitions and significant sales ahead of book value, and our developers have created more premium spaces, timed to deliver into a market that is starved of such quality, meaning that we are well set to deliver both strong income and value growth. So to help us tell this story, we have a full agenda as ever for you this morning. I'll start with a reminder of how we're delivering on our very clear strategy before giving you an update on our market opportunity. I'll then run through our successful 6 months of acquisitions, sales and developments before Nick looks at our exciting fully managed growth and our results. And I'll then wrap up with our outlook before opening the floor to you for Q&A. As ever, we have the full executive committee team here to help answer any questions you have. Plus, we also have our newly promoted Rebecca Bradley as Customer Experience Director; and Simon Rowley, as Flex Workspaces Director, and congratulations to them on their appointment. But before we get into all of that, first of all, can I just say as this is probably Nick's last session before past is new. I just wanted to pay tribute to him, to thank him for his exemplary leadership across multiple facets of life at GPE. He's been a great partner to me and I know to many of you and to all of our colleagues at GPE over the past 14 years. And I know you will join me in wishing him well. Nick, thank you. So let's start then with our strategy. And to do so, I want to remind you of our investment case, essentially the 6 fundamental pillars upon which our strategy is built, and you can see them here. And in approaching each, it's always been about doing what we said we would do. First, prime central London. It's the largest city economy in Europe, it's outperforming the U.K. overall, and it has decent forecast jobs growth. And so we have been and will continue to be focused on 100% prime locations only. Second, we create and manage premium luxury offices across our HQ and our Flex products. It's where the richest theme of customer demand exists and our strong leasing and rents rising supports our position with space under offer today materially ahead of ERV. And as I'll show you later, even after substantial growth, they're still affordable, especially given the price inelastic nature of many premium customers. Third, contracyclical capital allocation. You'll recognize the chart at the top raising capital, the green circles and buying when markets are cheap, as was the case in 2009 through '13 and again last year, developing into the inevitable supply crunch before selling completed business plans as markets recover and then returning excess capital to shareholders, shown by the pink circles. We bought well, GBP 390 million, including CapEx since our rights issue last year. We're developing some of the best space in town covering 36% of our book, and we have rotated towards sales, as we said we would, more than GBP 290 million sold so far this year, 1.7% above book value and including 1 Newman Street, the largest single asset sale in the West End year-to-date. Fourth, driving innovation, leading the market in the creation of sustainable spaces and in our customer experience offer. We've delivered a world first in our circular economy activities at 30 Duke Street and our award-winning CX team is helping grow our unique Flex offer towards our 1 million square foot target, and all of this activity always with a strong balance sheet and within an LTV range of 10% to 35%. So far this year, we've delivered a record financing, maintaining high liquidity and have kept LTV low at 28%. And sixth, strong EPS and NTA growth, and we're on target to deliver a 10% plus return on equity over the medium term with more than 3x earnings per share growth. So then, with a strong strategy and supportive fundamentals, we've had another successful period of delivering on our promises. So let's then have a quick look at our half year results and our outperformance despite the challenging U.K. economic and political backdrop. Now, as you can see on the chart on the right, our excellent leasing continues, GBP 37.6 million in 6 months, the same as in the whole of last year, 7% ahead of ERV, leasing faster than underwrite and with strong appeal to AI-led customers now up to 23% of fully managed spaces. And we have a further GBP 10.3 million under offer today, a very strong 31% ahead of ERV. Our rental values were up 2.6%, with prime offices up 3.3%, bringing the total to 6.8% over the last 12 months. Our vacancy rate remains within our target range at 6.9%. Our customer retention rate remains high at 76%, well ahead of target, and we've made an attractive acquisition at a discount and sold at a premium, more on these deals later. Now, all of this activity has helped us deliver healthy financial results for the period, pro forma rent roll up 29% with our average office rents up almost 10% over the last 12 months. Our valuation was up 1.5% over the first half with developments up 6.1%, delivering NTA growth of 2% and earnings growth of almost 85%, still with low LTV at 28%. And as we think about what next, we have created a fantastic platform for further growth. Income growth of some 64% by FY '27 or more than 140% in the medium term, led by Flex. Big development surpluses of circa GBP 300 million to come with potential for upside from there. We'll buy more, we'll sell more and all supported by a London economy that continues to deliver GDP growth ahead of the U.K. overall. So significant growth to come. Now, talking of London, let's have a look at our markets. And in short, we expect supportive leasing conditions to continue with best rents to rise further despite the challenging macro backdrop. Now, why do we think this? In short, because supply and demand conditions in London are both supportive and much stronger than the U.K. picture overall. First, demand for space is strong, driven by jobs growth. As you can see in the blue bars on the right, today, there are 500,000 more jobs in London than there were at the time of the Brexit vote in 2016. Oxford Economics expect the number to continue rising by some 200,000 between now and 2030, equating to roughly 20 million square feet of new demand. Second, take-up remains robust with 5.1 million square feet signed in half 1, ahead of the 10-year average. And third, active demand, that's companies looking for space right now, is still way ahead of the long run average, dominated by banking, finance and digital sectors with the latter responsible for some 40% of U.K. GDP growth with AI-led businesses creating jobs in London today. And history shows us that 2/3 of them will only lease prime space. Plus, contrary to many commentators' perception, way more companies today are looking to expand their space take than contracted, 55% versus 14%. Plus, these companies are going to struggle to find that space. They will run into a supply drop that is extreme and shows no signs of abating anytime soon. Bottom left, we've updated our forecasts, the deliveries shown by the purple bars are very low. And we know that new starts are at lows not seen since 2010. And we think that commentators continue to overestimate deliveries and CBRE's forecast, as shown here by the pink diamonds. Now, either way, if you divide the long-run average take-up of 4.6 million feet per annum into the amount being delivered, we think, we will need to build 84% more every year than is currently planned to meet this demand. That's as higher shortfall as we can remember. And it's not as though customers have much choice from existing space. The current Grade A vacancy rate in the core West End is only 0.3%. And so as a result, we think further rental growth is coming, focused on prime spaces and continuing the theme of the chart bottom right, highlighting the very clear bifurcation between the best and the rest that we have seen since 2023. And remember, overall, rents in London remain affordable. In both the city and the West End, they are still only 5% to 8% of the average London business's salary cost. So conditions then that most definitely play to our strengths with our 100% core prime locations, 94% near in Elizabeth line station. So then, turning to our investment markets, and we think that there is good evidence to back up our view of 6 months ago that they are now recovering, albeit slowly. Capital values are rising, up 6% in nominal terms since our capital raise last year, shown on the right, driven by rental growth and tight investment supply. Prime yields shown bottom left, are now either stable or mildly falling. Investment volumes are also up by 63% in H1 '25 compared to last year, and many more larger lots are now trading, as you can see, bottom right and the green bars with 19 deals of over GBP 100 million already traded so far in '25, up from 11 last year with a further 8 currently under offer. Plus, institutions are buying again, accounting for only 2 of the larger deals done last year, but 10 so far this year, or more than 50%. And with equity demand up since May to GBP 23.5 billion, the multiple of demand to supply at 4.8x remains steady and relatively supportive to pricing. And so we'll continue using these improving conditions to take more selective acquisitions and sales, crystallizing surpluses, and more on this in a minute. So to sum up then with our market outlook, which supports strongly our strategy, the rents, whilst business confidence has weakened since May, healthy demand and a dearth of prime supply has helped us deliver rental value growth in our forecast range that we set out at our finals, as highlighted at the bottom, and so we maintain our expectations for this year overall of growth between 4% and 7%, driven by prime offices, up 6% to 10%. Looking at yields, whilst the political backdrop has probably weakened since May, we think improvements in investor confidence and likely lower interest rates could push prime yields in further, especially where rental growth is a real prospect. So given that, let's turn then and look at our investing and developing activities so far this year. And you'll remember this slide from May, and it shows our successful deployment of the capital that we raised last year. We've added to the 4 deals we told you about back then with the purchase of The Gable, shown on the far right. So that's 5 opportunities acquired since May '24, all in line with our disciplined criteria, all in the West End for a total of GBP 180 million or GBP 390 million, including CapEx and at only GBP 770 per foot and a whopping 57% discount to replacement cost. Three of our fully managed conversions, 2 offer major HQ repositioning and each with attractive stabilized yields and ungeared IRRs. From here, more acquisitions, we have 2 deals in negotiation or under offer, all in the West End and more sales to build on the GBP 290 million completed so far this year with a further GBP 150 million to GBP 200 million in the near term, and GBP 650 million to GBP 700 million identified for the medium term. So plenty of opportunity with more to come. So turning then to look at some of the detail and starting with the acquisition of The Gable, shown in yellow on the map. And it sits in an area of London we know inside out and next to The Courtyard, which we bought last year. We paid GBP 18 million, or only GBP 409 a foot, some 77% beneath replacement cost and with a current running yield of 6.4% until July '26. We have 2 possible business plans here. First, a conversion to Flex. We're in design and talking to the planners, and the economics are attractive with a near 7% yield, but this does rely on vacant possession. And if the government-based customer renews their lease, we'll maintain our low-risk running yield of at least 6.4% and probably hold for a future Flex conversion. Now, since we saw you last, we've also sold our completed and let development 1 Newman Street to a U.K. institution shown at the bottom of the map. We received GBP 250 million, priced off a 4.48% yield, more than GBP 2,000 a foot and 1.8% ahead of book value. So a good sale of this completed business plan and showing both there is liquidity at scale and strong prices for the best assets and reaffirming our long-held commitment to actively recycling capital into the next opportunities for us to drive growth. So talking of growth, let's have a look then at our development program, and taken together, we now have 11 schemes with 3 on-site HQ projects, already 71% pre-let, and 3 further Flex schemes on site. Across our 4 pipeline HQ schemes, we achieved 2 new planning consents in the past few months. And with The Gable purchased, we now have more than 1 million square feet in the program covering 36% of our book by area and delivering into the deep supply shortage that I referenced earlier. So looking then at our On-site HQ schemes, progress has indeed been good. At 2 AS, we're on time to finish in Q1 next year, although the surplus to come has reduced as the valuer has adjusted the cap rate up by 15 basis points. At 30 Duke Street, we signed our pre-let with CD&R, 6.5% ahead of ERV and nearly 12% ahead of the underwrite. As a result, we've captured some significant surplus, but there's more to come as we deliver our expected profit on cost of almost 40%. At Minerva, shown on bottom left, we are on time to finish in Q1 '27, and although costs are up since May, reducing the forecast profit to circa 15%, we are under offer on about 40% of the space at a substantial premium to ERV, which would drive our returns materially higher. Taken together, total area is up 66%. ERV is 174% higher, 99% of the CapEx to come is fixed, and we have GBP 65 million of surplus to come of current rents and current yields. They are all prime with exemplary sustainability credentials and have strong pre-letting potential for the remainder with, therefore, healthy upside to capture. For the next phase of our HQ program, we have 4 fantastic schemes, each timed to deliver into the supply drought with 3 in the West End, next to the Elizabeth line, and 1 next to London Bridge Station. At Soho Square, we're starting imminently, and strip out has begun. At Whittington, we've just received consent for our rooftop pavilion, and we're on site with proprietary works for this major refurbishment. We've also finally achieved planning at St. Thomas Yard on the South Bank for an exceptional 184,000 square foot park refurb, part newbuild project, but will be significantly more profitable than our original tower proposals, and we'll be starting here in Q3 next year. And finally, back in the West End, our Chapel Place project is in design with planning discussions ongoing for a submission next summer. So, big area and ERV gains and targeting a healthy minimum profit level all next to major transport hubs and all with strong upside potential. Now, of course, we also have multiple growth opportunities across the rest of our portfolio, too. You'll remember this portfolio stack. I've talked about our HQ developments at the top, and in the middle, sits our active portfolio management assets, representing 50% of the book, and in many ways, the engine room of the business. They are full of opportunity for us to grow rents and values, for example, on-floor refurbishments and their subsequent leasing to generate some GBP 47 million of income, capturing reversions of almost GBP 14 million, restructuring and regearing our interests and prepping assets for major repositioning. And this presents us with real upside. Their valuation is undemanding at just over GBP 1,000 a foot, but with limited CapEx needed. And all of them are in prime locations. And, of course, they include our Flex assets covering some 29% of our total book and where the growth potential is significant, as you'll hear from Nick in a minute. And shown in yellow is the stabilized proportion of the portfolio, where we will rotate out of completed business plans at high capital values per foot, potentially releasing more than GBP 800 million of capital to employ for much higher returns towards the top of the stack. So lots then to do for us as we execute our plan to deliver the substantial growth available to us, on which topic and probably for the last time over to Nick to dig into our Flex options. Nick Sanderson: Thank you, Toby. Good morning, everyone. I certainly didn't need these when I started 14 years ago, nor was I talking about our unique and well-established fully managed growth strategy, where we are successfully delivering premium hassle-free spaces for our customers. Our leasing volumes continue to grow with more than a deal a week over the last 12 months, representing nearly 90% of all our sub-5,000 square foot office lettings. Rents are growing strongly, too, with these deals securing rents of GBP 37 million, and as shown in purple, regularly achieving more than GBP 250 a foot. As you can see top right, this is driving outsized performance, well ahead of our targets. We're generating strong absolute returns with an average yield on cost of 6.5% and service margin of 35%. And relative to ready to fit, we delivered a 103% rent beat and a 61% 10-year cash flow beat, and we've secured good lease duration, too, at just under 3 years. Our fully managed spaces are today generating GBP 50 million of annualized rent, and we're currently managing GBP 25 million of OpEx and other costs across the categories shown in the green bar. So with a gross to net of 50%, our annualized NOI is GBP 25 million or GBP 107 a foot. Once we factor in CapEx, along with fully managed specific corporate overheads, this results in an annualized net cash return, averaging GBP 80 a foot or 40% higher than the ready-to-fit net rent. So much higher net cash returns than on a traditional basis, and the customer base dominated by corporates, not SMEs. Our retention rate is strong at 75%, well ahead of our 50% underwrite, as our award-winning customer experience team delivers outstanding customer satisfaction. The most common driver for customer nonrenewal is needing more space than we can currently provide, as we experienced with our largest departure to date, a fast-growing unicorn status AI business, who we'd already moved twice within our portfolio. Pleasingly, we were able to relet their space within a month at a higher passing rent to Vanta, another high-growth company, with AI-led businesses now representing 23% of our fully managed customers. And our recently completed schemes are leasing quickly, too. In the heart of Soho, Wardour Street is 100% let within 2 months of launch, including 2 pre-let floors. We've secured average rents per foot of GBP 279 with more than 1/4 of the space let above GBP 300 together, driving a valuation uplift of 10% in the half. Our customers include those we've relocated from adjacent GPE fully managed space, an occupier of a GPE developed HQ building on Broadwick Street as well as a new customer who decided to double their space take within a month of moving in. And over at Piccadilly, which launched last month, 35% of the space is already let or under offer at an average rent of GBP 296 a foot, although we're breaking through GBP 400 on a smaller space. So with an 11% beat to ERV and healthy interest in the balance of the building, the prospects look strong. So, having more than tripled NOI over the last 2 years and our leasing velocity ahead of target, there's plenty more growth to come from today's GBP 25 million. We'll generate GBP 7 million of additional NOI, as we finish leasing up the recent completions. Our 3 on-site schemes, all in the West End, will deliver a further GBP 12 million with our pipeline schemes expected to add another GBP 15 million, taking our fully managed NOI to GBP 59 million, so an organic growth uplift of 2.4x. And as we execute more acquisitions, total NOI would increase to around GBP 90 million if we grow Flex of 1 million square feet. And with more than GBP 19 million of additional service profit, shown in blue, we'll be creating additional value of more than GBP 200 million or more than GBP 200 per foot. So lots more income and value growth to come on top of the strong outperformance we're already delivering with fully managed ERV growth and valuation growth of 11% over the last 12 months. Now a few comments on our overall performance in the half year. We delivered like-for-like value growth of 1.5%, as the best continues to outperform and EPRA NTA rose 2% to 504p per share. As expected and in line with consensus, EPRA EPS increased 70% to 3.9p, and we're paying an interim dividend of 2.9p. Our consistent financial strength saw EPRA LTV falling to 28.2%, and available liquidity rising to more than GBP 450 million, as we transition to a net seller and secured our largest ever bank facility. Overall, we generated positive TAR of 3% and 7.5%, respectively, over the last 6 and 12 months, delivering prime spaces against the backdrop of ERV growth with more to come as we continue to execute our growth strategy. Our opportunity-rich GBP 3.1 billion portfolio is 83% in offices, where we experienced the strongest value growth of 1.8% and ERV growth of 2.7%, with retail ERVs up 1.9% in the half year and fully managed rents up 3.5%. And with an overall valuation uplift of 1.5%, developments delivered the strongest performance, up 6.1%, with GBP 30 million of surpluses captured in the half year valuation. Yields were broadly stable with our portfolio equivalent yield today at 5.5% and our reversionary yield at 6.7%, higher still at 8.7% on a share price implied basis. Finally, the best continues to relatively outperform at both an ERV growth level in purple and by evaluation shown in green. In particular, our West End properties, representing nearly 3/4 of the portfolio, again, outperformed with capital growth of 2.9%. And as we continue to allocate capital to drive value growth, our almost GBP 700 million CapEx program is predominantly in the West End, combining GBP 290 million to complete our 6 on-site schemes shown in black with approximately GBP 400 million for pipeline schemes in gray. You'll find the usual scheme-by-scheme detail in the appendices. With a total GDV of GBP 1.8 billion, we'll deliver further surpluses of more than GBP 300 million based on conservative 10% cumulative rental growth. And you can see by the solid line, more than GBP 125 million should come through within the next 18 months based on profit release at scheme PC although our pre-letting activities typically accelerate these, plus there's serious upside potential with further rental growth and some mild prime yield compression taking the surpluses to more than GBP 500 million or 130p per share. On the right, our investing and leasing activities will clearly change the portfolio composition, with stabilized properties shown in yellow, growing from 19% to 55%, all else equal. However, our recycling activities will evolve the portfolio mix further with prospective sales of around GBP 800 million in the next few years, meaning active portfolio management properties, shown in blue, will, again, dominate with Flex also representing around 40% of the office portfolio. In reality, our sales will likely be higher still, given our disciplined capital management, as they were in the last cycle with more than GBP 3 billion of disposals. Plus, I imagine there'll be some acquisitions, too, to replenish the GPE development hopper. Now, we'll also be driving more income growth. Like-for-like rental income was up 5% over the last 12 months, whilst rent roll was up almost 30%, standing at the GBP 127 million today following the sale of Newman Street. Over the next 18 months, this builds by more than GBP 80 million or 64% and rises to around GBP 30 million in the medium term, an uplift of 142%, including the market rental growth we expect to capture. Of course, some of this uplift will be tempered through sales of stabilized properties, but there's still lots of growth to go for, and we reiterate our guidance for a threefold increase in EPRA EPS over the medium term. Nearer term, we expect EPRA EPS to roughly double to around 10p by FY '27, as we lease up our on-site development and refurb program with more growth to come as we deliver our pipeline and capture market rental growth. Once we factor in finance and other costs to deliver this growth, along with our likely earnings accretive sales, we anticipate annual EPRA EPS of 15 to 20p in around 4 years' time. As a result, we expect a stable dividend for FY '26 with potential DPS growth thereafter. Whilst continuing to invest for growth, we've maintained our financial strength and capacity, including through proactive management of our debt profile. We've recently issued a new 5-year GBP 525 million ESG-linked RCF, allowing us to redeem an early '27 maturing facility and repay a higher-margin term loan. We've also extended the maturity of our smaller RCF, and Moody's reaffirmed our Baa2 credit rating. When combined with our successful sales activity, LTV today is 28%, as we continue to operate within our 10% to 35% through the cycle target range. Interest cover is strong at 15x, with more than GBP 450 million of liquidity, and we have extended our average debt maturity to almost 6 years, whilst our weighted average interest rate remains in the 4s. Looking ahead, as the bar chart shows, we expect LTV to remain above the midpoint of our through-the-cycle range as we invest for growth in a rising market. But remember, a couple of big sales can really move the needle and give us significant incremental acquisition capacity. So wrapping up with a positive financial outlook, we expect to deliver further property value and NTA growth in the second half and beyond, based on current market outlook and our active business plans. H2 EPS will likely be broadly in line with H1, and the capture of our organic rental growth opportunity will drive significant income and EPRA EPS growth moving forward with an expected threefold EPS increase supporting our progressive dividend policy. Our through-the-cycle LTV range and disciplined capital management will be maintained. And through the capture of attractive prime rental growth and the delivery of our development-led growth strategy, we expect FY '26 TAR to at least match FY '25 as GPE moves towards delivering a 10% plus annual return on equity. And of course, shareholder returns would be higher still should the share price discount narrow. So I'll certainly be holding on to my GPE shares. And whilst I'm not leaving just yet, as Toby said, this will likely be my last set of GPE results. It's, of course, been a privilege to have been part of such an awesome GPE team. And I'm also proud of my contribution to both the strategic evolution of the business and its very special culture. But I'm also departing happy in the knowledge that GPE is in great shape with an exciting growth strategy to deliver for shareholders and customers alike, and as I look around the room with slightly blurry glasses and massive thanks to all of you for your support, your challenge, and most importantly, your good humor and camaraderie. And given this is the 29th time that I've run through this presentation, I think it merits a very special thanks to both Stevie and to Rich and their teams for the uniquely special work that they put into putting this presentation together. Not only do I know that footnote 13 on Page 99 will be accurate, I know that it will be accurate to at least 1 decimal place. So a massive thanks to you guys for leaving Toby and I do the easy work of tapping the ball over the line. And as I hand back to you, Toby, I must say it's certainly been fun. You're a good man, a great colleague, and there are many things I will miss at GPE, including your exceptional taste in wine. Over to Toby for the wrap up. Toby Courtauld: But not I should add at this time of day. Thank you, Nick. Very good. Okay. So let's wrap up then with our outlook. And in short, it's all about delivering more growth, as we continue doing what we said we would do. We think that our market opportunity is strengthening. London remains Europe's Business Capital, will outperform the U.K. economically and will generate jobs growth, driving healthy demand for space that will collide with a supply drought, meaning rents are and will continue to rise with the best buildings materially outperforming the rest. As a result, office values are rising, the invest market continues its recovery with prime yield compression a real possibility. Meanwhile, we are focused fully on executing our growth strategy, first, capturing significant income growth of more than 140% in the medium term. Second, delivering development surpluses of between GBP 180 million and GBP 520 million, just from our existing program, some GBP 130 per share. Third, more acquisitions. And fourth, significant further sales of more than GBP 800 million and always operating only in prime Central London, majority West End, 94% near an Elizabeth line station. So all in all then, GPE is well set. Our operational infrastructure is in place and is delivering, and our deeply experienced team, bound together by our collegiate culture, along with our strong balance sheet will help us generate an attractive return on equity, even more so for shareholders should our share price continue its re-rating to properly reflect the group's exciting prospects. So GPE is in great shape with all to play for, and we can look forward to capturing our strong potential over the next few years. Now I know some of you will have questions, maybe even for Nick, last chance. We'll have some microphones running around the room. As I say, we've got the team, home team to help answer any of those questions that you may have. Toby Courtauld: Who would like to raise something? Any hands? Yes, here at the front. Good morning, Tom. Thomas Musson: Yes, I guess I'll ask the question to Nick. You -- it's Tom Musson from Berenberg by the way. You talked about the big growth potential in the business, and I think a tripling of EPS probably stands alone in the sector in terms of the growth outlook. If you can achieve that, there's lots of development surplus to come that will drive NAV growth. Fully managed is a big part of that. Nick, I think you've led the charge on. So given the growth prospects, why is now the right time for you to move on from the business? And then, I had a couple of follow-ups on a couple of the numbers if that's all right afterwards. Nick Sanderson: Sure. Well, I joined GPE 14 years ago. I thought I'd be here for 5 years, and I've been here for 14 years, and I absolutely love -- I love GPE. Equally, hopefully, as we've articulated, not just in this presentation, but in all the presentations that lead up to this, there is a very clear strategy in place. There is very clear and strong team in place. I love the sector. I'm just looking for something a little bit different. I think I was talking to one of our advisers, who works at a similar business to Savills. His comment was, "You love it because it's very similar to what you're doing now, but it's very different". And so I'm moving to a business that like GPE absolutely loves real estate. Unlike GPE, only Central London, I'm moving to a global business, moving from a team of 150,000 to 42,000. And I'm very much -- whilst GPE, I'm confident in the EPS growth that it will deliver, Savills is absolutely an EPS business rather than the balance sheet business. So something to keep you energized. But as I said, I will remain very invested in GPE, both financially, but also emotionally. If you asked any question, I'll be delighted to leave it at that. Thomas Musson: I did have just a couple on the numbers. The fully managed services income, net of fully managed services expenses, has just moved from being slightly profitable last year to slightly loss making this year. Can you just help explain that dynamic there? Is that just a reflection of growth? And then the second one was I think I saw that there was a material, sort of, GBP 3 million reduction in other property expenses in the EPRA P&L from GBP 4.1 million down to GBP 1 million. What was driving that? Toby Courtauld: Nick, do you want to try the first one? Nick Sanderson: Yes. Tom, you were referring to what's actually in the P&L? Yes. I mean, look -- so one of the things that we've done this year within our own targets, so as to you know, we are now incentivized specifically around delivering NOI returns in the P&L. At the moment, they are still lumpy because not -- they're not particularly reflecting a significant amount of the income that, yes, we're generating. But it also -- we tend to take a hit upfront for the agent fees that we're -- broker's fees that we're incurring in putting the customers in place. So I think you'd expect to see the P&L reported NOI will be a little bit volatile as we go through the lease-up of the space. I would hope that over time, those margins improve because the cost of customer acquisition will reduce if we don't have a cost of customer acquisition, i.e., we keep customer retention rate high. And that's why I think you should expect to see over time an even bigger focus, particularly on the fully managed side around customer retention. And as I think I alluded to in the presentation, the single biggest cause for us losing customers out of fully managed is we don't have enough space for them. So that is not the only reason, but it's one of the reasons why we are looking to grow this part of the footprint. On the -- I'm looking Stevie here on the property cost, my guess is probably on empty rates will have been lower over this period. Anything else material to cover? Toby Courtauld: Nothing materially. This is largely due to empty rates, but we can get into the weeds offline. Callum Marley: Yes. Callum Marley from Kolytics. Two questions, one on vacancy and one on artificial intelligence. Is the new vacancy range that you've set of, 6% to 7.5% a new target for this period? And then how do you explain the divergence relative to your close peer who has a vacancy of about half that? Toby Courtauld: Yes. Thanks, Callum. So if you think -- can we just go back to the contracyclical chart right upfront, please, Rich, you do not want your portfolio full when everybody else has put their cranes away, okay? You want to be contracyclical in the delivery of space when everybody else has run for cover, especially when there is an 84% shortage of demand against supplies. So we actively want our vacancy rate up. So right at the beginning, I talked about being countercyclical in our approach, and that's exactly what we're doing here. We're developing into a serious shortage of supply. And we've now got CEOs from large financial institutions around the world saying London does not have enough space. We've got companies looking 6 years ahead to try and forward purchase space. We pre-let most of our H2 developments, as you saw with CD&R during this year. And you will have heard this morning that we're under offer on a good chunk of the space down at Minerva. So you want to have vacancy at this point in the cycle, especially with rents rising. 6% to 7.5%, we're in the range, the single biggest vacancy that we've got at the -- in the portfolio at the minute, we've just finished, which is our Piccadilly Holdings, where we've just completed the repositioning of that building for fully managed. That's leasing up pretty well. Simon, I'll come to you in a second, just for a bit of color on that lease-up. But again, great locations, great buildings, rents rising, it's now that you want vacancy. So I would think we would be failing if our vacancy was 0, okay? I want vacancy. So with that point made, just talk a little bit about the color on how that's going and maybe just what we experienced in the core markets and maybe draw the distinct between the peripheral markets. Simon Rowley: Yes. So Callum, we've -- we completed 170 in September, which was about a month after Wardour Street and some people might have thought, well, why has Wardour Street let faster than 170? One of the principal reasons for that is that Wardour Street was a building that was really easy to understand through construction. So if anyone attended our Capital Markets Day back in February, one of the things I said at the time was that I thought we would pre-let some of Wardour Street. It wasn't in our underwrite. We don't tend to underwrite pre-lets and fully managed. But we did manage to pre-let 2 floors in there because it was easy to understand. Conversely, 170 Piccadilly finished a month later. There are 13 units in that building. It's a heavy intervention as mentioned earlier. It's a Grade 2 listed building. And so it's a much harder building to understand. Nevertheless, once completed, it looks absolutely fantastic. And there are a number of you in the room who have seen it. And that, in turn, has driven some absolutely incredible ERV beats. As you can see, moving through GBP 400 per square foot on some of this building was definitely not in our underwrite. But an average ERV of 296 so far for the deals that we've done, 35% of the building let are under offer, we are really, really confident with the rest of that building. And we are more certain than ever that core locations, prime core locations are where we would like our space to be. There are examples around the market of fully managed space being released in areas where, frankly, the price of a cup of coffee that we make is the same irrespective of where you are in London. We want our fully managed buildings to be in these core locations, these clusters. We are building a much better portfolio of clusters of buildings and that has allowed us to move companies such as, we mentioned, Wunderkind earlier, but others around the portfolio, that is helping that retention rate. Nick mentioned that, that is a big focus for the business. We have, in just this part of this year, done a really good job retaining customers, that's about 70% of the retention rate that we have managed to create. It does not involve broker fees. So as Nick mentioned, the cost of doing that business is far less for us. So it's a really important area. That's why the clusters work. The clusters will also work for reducing some of our operational costs as we are able to transfer some of the cost of our customer experience team across a wider portfolio. So I'm really excited. I mean, we've been doing this for about 5 years now. Looking forward to some of the projects that we have got on site, and the team that we've created really gives us a lot of confidence. Toby Courtauld: Brilliant. Thank you, Simon. AI. Callum Marley: Yes. Second question, stating that entry-level positions in white collar jobs are potentially being displaced by AI. How do you think about that long term, the different scenarios to your job's growth figures that you publish in which AI adoption materially changes, hiring needs, and then, ultimately the impact on office? Toby Courtauld: Yes, a really important question, one that we could spend all week talking about, so we won't do that. But just to give you a couple of thoughts to take away. And Marc, I'll come to you in a second, if you wouldn't mind, just expanding a bit on the sorts of companies you've seen in the market today in that space. I mean, one view, in fact, we asked AI, what AI thought about white collar jobs in London. And it started with an analysis of white collar jobs globally. And one version of AI said to us that it thought 90-odd million white collar jobs would be essentially disintermediated by AI. But 185 million would be created globally. Now, they won't all come to London, unfortunately, but it is an interesting debate as to exactly where they do go. And our experience would suggest that, by and large, they're going to places with talent, with infrastructure, with magnetism, with great buildings, clearly part of the equation, with universities that are world leading in some of these topics, and it's for that reason that places in and around California and some of the Eastern seaboard in the U.S. and the golden triangle around London are performing relatively well. It's why 23% of our customer base in fully managed is AI led. They're not AI businesses, but they have AI in the description as a heavy part of what they're all about. So I actually think there is an opposite side to this coin that you should take, which is that you should consider it as an opportunity. You should consider this as something that great commerce centers, like London, are going to capture more of the opportunity than most other locations. Just in terms of demand, what are we actually seeing right now from businesses in that tangentially related? Marc Wilder: Yes. So as an overview, active demand is about GBP 12.4 million, which is 26% up on this time last year. And of that, TMT is around 15%. And of that, about 12% is AI-focused companies and 88% is non-AI. Now, if you look, Toby has obviously mentioned about the dominance of London in terms of its tech ecosystem, the deepwater talent, world-class universities and that regulatory environment. There are currently 382 companies that are being founded in H2 in London with more than 50 people employed. So it is really quite a mature market. And if you look at AI as a catalyst for demand, there's currently around 0.5 million square feet today of well-established companies and some of the names that are out there that are either under offer, regearing on a short term, either have searches or in negotiation. Names such as OpenAI, obviously, ChatGPT, they are currently under offer on 100,000 square feet. You've got Databricks who are looking for 100,000 square feet and rumored to be in negotiation. Anthropic, who are behind Claude, 50,000 square feet. Palantir, who we know very well, next door to Soho Square, regearing on a short term because they can't find what they need. And we're obviously hopeful that we may have further conversations with them next door. Synthesia which is obviously the AI company that Nick referred to without referring by name, but we took them at 1,500 -- sorry, yes, 1,500 square feet in Dufour's. They grew 3x with us and then have moved to a managed facility of 21,000 square feet. So there's quite a lot of names that are out there. And the other thing I would also say in terms of is it a net promoter or a detractor in terms of jobs, if you look at the case study for San Francisco, currently, in 2025, there are 5.6 million square feet occupied by AI companies. That's moved up from 2.7 million in 2021. And if you look at the prospective job numbers, which is around 50,000 new jobs accretive, then that could lead to about 16 million square feet of new jobs of -- sorry, new requirements up to 2030. So that averages out at about 2.7 million square feet per annum through to 2030. So we believe, if you look at what's going on in London, what is -- what we're seeing in San Francisco, we think that the prospects are positive rather than negative for us. Toby Courtauld: Not complacent, mind you. And we would always make sure that we are realistic when coming to market with spaces, but we've got some good interest in businesses in that line of work. Okay. Where else can we go? Yes, Neil, right at the back. We'll need a microphone, please. Thank you. Neil Green: Neil Green from JPMorgan. Just one question. Given the progress you've already made on disposals and quite sizable pipeline of disposals that you're earmarking, how do you think about leverage and potentially even excess capital down the line should acquisition opportunities become harder to find, please? Toby Courtauld: Yes. Good question. Thank you, Neil. So we have a long track record, as you know, of -- thanks, Rich, of returning when we have not been able to find a more productive use for the capital post-sale. So you can see that from the pink circles in the middle there, and we gave back probably GBP 600 million to shareholders, having raised GBP 300 million at the beginning of the cycle last time around. This time around, we've already raised the GBP 300 million, and let's see what happens. But the same mantra applies. We will give back where it is excess to our needs and we can't make an attractive return for shareholders on it. Last time around, it was interesting, a number of shareholders said, "Well, why don't you hold on to it because you might be able to use it, and we don't really want it back". And we said, well, it's frankly, that's your problem, not ours. Our problem is whether we can use it accretively or not. And if we can't, you are going to get it back. And we did share buybacks. We did a capital restructuring and a capital return. So we've done all variations of it. And we would do them again if we were not able to find enough accretive opportunities to reemploy that capital post-sales. Scale is one reason I hear people arguing for not giving back capital, that is not relevant to us. Return on capital employed is the thing you should look at, and we will not simply hold capital for the sake of feeling a bit bigger if you can't use it productively. So shareholders should know that we will give it back if it's excess. If we don't give it back, it's because we felt we've found a great series of opportunities to employ it for an accretive return. Yes, Max. Maxwell Nimmo: Max Nimmo at Deutsche Numis. Maybe just kind of follow-up question to Neil on that capital recycling point. And talking about kind of liquidity at the larger end of the market, and if you can't sell some of those assets, are there other assets you can kind of pull in and out? And perhaps a theme that we're seeing a little bit at the moment is this sort of disposals below book value, which I think it hasn't really been a problem for you guys so far, but just some of your views on that well. Toby Courtauld: Okay. If you wouldn't mind coming in Dan in a second on how you're seeing the landscape playing out from here, but first up, Max, again, good question, what I think the correlation, I think, you need to be clear about is between sales ability, getting that deal done and quality of asset, right? And quality isn't just the way it looks. It's where it is, who's in it, what the rental position looks like, what its transport interchange, the hub near it looks like, the public realm immediately around it. There I say, even it's feng shui, right? So this whole idea of the way that building sits and feels matters. Now we've just sold the largest single asset trade in the West End. So we have not encountered a problem with scale, and it was ahead of book value. So that tells you that our values are broadly getting right what the market is willing to pay for an asset as they should. As we go from here, one thing that is very clear is that Hanover Square is in that list of stabilized assets, 2 Aldermanbury, both buildings where we've essentially will have delivered our business plan. We've got some rent reviews to do, as you know, in Hanover, before we consider that. And Wells & More is currently in the market. So these are quite big assets, especially to AS and Hanover So we'll be testing the outer envelope, I think, of scale when we get there, but we're not there at the minute. So the evolution of the market will be interesting to see. We will not be overly concerned about hitting book value, okay? We will be principally concerned about the forward IRR from the price on offer. And if we do not think that, that is sufficiently accretive to shareholders, the opportunity cost is much more powerful. We'll take the money. But given the quality, and I said before, I think Hanover Square is one of the best buildings in Europe, therefore, the world, and I mean that. It's an unbelievably good asset. And Wells & More is out there testing the market at the minute, and 2 AS will be a 20-year lease to Clifford Chance. So of a rent, which was struck in 2021, '22, there or thereabouts. So probably reversionary. So these are great quality assets, and I think they will do well. Dan, just in terms of market dynamic. Dan Nicholson: Thank you. And so, I think, at the moment, the market dynamics are such that we've seen lot sizes start to go up. I think, the Newman Street asset we sold a few weeks back, that was the biggest asset in the single asset deal in the West End through this part of the cycle, and so for several years. So it really sets a marker. And I think the -- you're starting to see -- so not only a lot sizes, you're starting to see new investors in the market as well. So against that backdrop, the volumes are up to, I think it was, 63%. On the top left there is the stat that we've quoted. So not only are you selling bigger assets, there's more institutions in the market who are typical buyers of the mature finished product that we've got -- stabilized product that we get at the end of our recycling process. So I think the landscape for sales is very good and definitely improving. So Newman Street set a new benchmark, the likes of Hanover and 2 AS, which again are a step up in scale. And as the market evolves, those larger lot sizes, they will become digestible by the market. And if you look at -- Rich, I think it's Page 4, if you just look at our cyclical part of the chart that we always look. This is where we want to be buying, these pieces here, and that's why we've been conducting such an intensive acquisition strategy over the last 18 months, 5 done, 1 under offer, hopefully done by Christmas, no pressure, Alexa. So that's -- we are buying exactly the right time. And then also, you'll -- so we -- and we're selling those mature, stabilized assets as that part of the market. And we talked about it 6 months ago, different parts of the market get hot at a different time. At the moment, those core assets become attractive because those institutions are coming back in, like the stabilized assets. The value-add part of that curve has been hot for a while. But obviously, we don't want to be selling into that. That's a product we want to be buying. So have we been going into the market and buying value-add assets in competition with a bunch of other people? Not really. Most of the stuff that we've been doing has been off market. So if you look at the map of the acquisitions that we've done, 2 or 3 have come from the city of London, and those have been one-on-one interactions, not in processes. So we're seeing that our acquisitions are playing to the curve there. Our disposals are playing to that part of the market that's warming up, and the general landscape is improving such that over the next 12 months, the larger assets such as 2 AS and Hanover will become liquid at the right times. Toby Courtauld: Rich, can you just jump to Slide 6? Because one of the things you might be thinking is selling at that point on the curve isn't necessarily the right answer. The reason, there's a complicated bifurcation going on between the best and the rest, right? If you are slightly off pitch or there's something wrong with your building, you're going to struggle to sell it, which is a sort of stuff that Dan has described we've been buying. But if you look bottom right, the reason we're now willing to sell some of the buildings we are is because we have seen this bifurcation run riot through rent. And those prime rents have really grown. And it's that differential that is now allowing us to sell prime assets at really strong numbers that I don't think was the case even 12 months ago. And that change is quite dramatic. Dan Nicholson: And it says institutions with a low cost of capital who are buying. And our forward look on those doesn't hit our cost of capital, but it's fine for those buyers. Toby Courtauld: Yes. Thank you, Dan. Thank you, Max. Any more for any more. We are just past the hour. Yes, we've got a couple over here. Yes. Zach? Zachary Gauge: This is Zachary Gauge from UBS. A couple of questions related to returns, and then, hopefully quite straightforward one just on EPRA earnings. But firstly, you seem quite bullish on near-term yield compression. I'm just wondering how you reconcile that with the valuers moving out the yield on Aldermanbury Square by 15 basis points. And I'm sure you have seen the latest MSCI data for the London office market in West End turning negative in October and flat ERVs for the last 2 months in the West End. And sort of following on from that, looking at your 10%-plus ROE medium-term target, can you give any more color on when you expect that to be realized? And I think at the end of FY '25, you guided to more growth to come, and now, it sounds a little bit like this year is in line with last year as opposed to necessarily growing from there. And then the straightforward question was, is the tax credit you received included in the EPRA earnings number? Toby Courtauld: Fabulous question, Zach. I mean, you say I sound a bit more bullish. You sound a bit more bearish, and we will get you to the right place at some point over the next few years. But putting that aside for a second, Nick, if you could deal with the second one, and maybe the third, and then, Stevie, you want to deal with it. So on the yield point, well, funny enough, the further they move the yields out, the more bullish we're going to get on compression, especially in an environment where yields are going to be -- and we know they're driven by interest rates, and in an environment where interest rates are likely to come in. And -- I mean, I think the issue with that is scale. It's just -- it's a big building. It's going to be GBP 400-ish million, there or thereabouts, and that is a rare part of the market. So that's my challenge for the team when we come to selling that one. But more broadly, we are bullish on prime product. I mean, we -- for reasons Dan has just described. We think that really good assets in really good locations are gold. They are irreplaceable, by and large, and we're not talking about the peripheral central London markets. We're talking about core 100% prime, which is where we're focused. And that's why, if anything, we have concentrated even more over the last 5 years than you would have seen us. I'm not sure we'd buy Whitechapel again, put it that way, unless it was unbelievably cheap. It was quite cheap at the time. But I think as those peripheral markets get less relatively attractive to the prospective customer base, we get less interested from an acquisitions perspective on them, but if you are in the core, I've said it before, it's incredibly powerful. We think we'll sell very well because we're leasing very well. So that's the first point. On the second one. Nick Sanderson: Rich, you give 54. Look, we were clear that the aspiration around the 10% plus TAR was one for the medium term. We set out the breakdown of that in the appendices. We said at the beginning of this year that we expected this year's TAR to be in line or ahead of where we were last year. We've maintained that. I think it's fair to say it will be my successor who stands up here talks about a 10% TAR rather than me, but I think that is something the -- looking at our own business plans, we look like we're set to deliver in FY '27-'28. In terms of the tax credit, yes, it is in EPRA earnings in accordance with the guidance. That being said, we are not anticipating it has a material impact on the overall numbers. We still stand by the guidance that we gave on EPRA earnings at the beginning of the year irrespective of that credit. It's a one-off we don't expect to repeat it. But in accordance with EPRA guidance, you include it. Zachary Gauge: Maybe just a follow-up here, if I can. I think everyone largely understands that the prime versus secondary debate, but how much of your portfolio is prime versus secondary? Because presumably, you have a prime guidance and an ERV guidance, so it must be some form of blend of the 2? Toby Courtauld: Well, what -- in an ideal world, at this point in the cycle, thinking contracyclically, in an ideal world, what you want is raw material that is in some way needing attention in prime locations, okay? That is, to me, the holy grail. And so what you can see in GPE is some -- if we can go to the capital stack, please, Rich, some buildings in yellow, which are reaching the end of their GPE life because we've done things -- all of the things we can to them and their prospective numbers are not good enough for us, back to Dan's point about there'll be some institutions out there with a lower cost of capital than us will be happier holders than us. But the majority of your book, in other words, the blue and above, needs to be prime location buildings that you can improve. And then you have a business that's really interesting. If you're simply stuff full of all the yellows, right, and this idea that you just collect, income-producing assets that are yellow, you are a proxy to market moves. You are nothing more than a beta story, right? If you want to be an alpha story that's creating something of value, you go above the yellow and you focus on things that you can do things, too, to generate rent growth, net area again, higher quality buildings in great locations. And that's the underlying, which is why we started this presentation with 100% prime Central London. So if you look at -- I think you could probably argue that Whitechapel is the only building in our book, which would not qualify in the 100% prime Central London. That's the only one. The rest of them are, and the rest of them will be improved over time, and we will transmission, will basically capture growth in the blue section, turn it into a yellow tradable asset and out shall go. That's been our model for as long as I can remember. And it feels -- if you go back to slide -- the cycle one, please, Rich, it feels much more alive today than it did in that really difficult period post Brexit, all the way through COVID, where, frankly, markets we felt should have corrected and didn't because the monetary response was so aggressive. And it took inflation, which was the consequence of -- and QE unwind for capital values to come off sufficient for us to get interested again. And so we're back into a really dynamic cycle, which feels like a good place to be. On that note, I think I'm going to draw proceedings to a close. I think we've given plenty of time for Q&A. Thank you very much. Just to wrap up for me then, this story today is all about our excellent leasing, which is all about our excellent positioning and our financial strength, looking forward with a lot to do over the second half to your point, but a lot to do over the next few years, and I'm very excited about that. As I hope you are. Thank you all for coming.
Operator: Ladies and gentlemen, thank you for standing by. Welcome to Elbit Systems' Third Quarter 2025 Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to hand over the call to Daniella Finn, Elbit Systems' VP, Investor Relations. Daniella, please go ahead. Daniella Finn: Thank you, Karen. Hello, everyone, and welcome to our third quarter 2025 earnings call. On the call with me today are Butzi Machlis, President and CEO of Elbit Systems; and Kobi Kagan, Corporate CFO. Before we begin, I would like to point out that the safe harbor statement in the company's press release issued earlier today also refers to the contents of this conference call. As usual, we will provide you with both GAAP financial data as well as certain supplemental non-GAAP information. We believe that this non-GAAP information provides additional detail to help understand the performance of the ongoing business. You can find all the detailed GAAP financial data as well as the non-GAAP information and the reconciliation in today's press release. Kobi will begin by providing a discussion of the financial results, followed by Butzi, who will talk about some of the significant developments during the quarter and beyond. We will then turn the call over to question-and-answer session. With that, I would like to now turn the call over to Kobi. Kobi, please go ahead. Yaacov Kagan: Thank you, Daniella. Hello, everyone, and thank you for joining us today. We are very pleased to announce another set of quarterly results with double-digit year-over-year growth in revenues, backlog and EPS. Quarterly free cash flow was solid at $101 million, underscoring our healthy cash generation. I will now highlight and discuss some of the key figures and trends in our financial results this quarter. Third quarter 2025 revenues were $1.922 billion, compared to $1.718 billion in the third quarter of 2024, a solid 12% growth in quarterly revenues year-over-year and 18% growth for the 9 months ended 30th September. In the third quarter of 2025, Europe contributed 28%; North America, 21%; Asia Pacific, 14%; and Israel was 33% of revenues. GAAP gross margin in the third quarter was 24.9% of revenues compared to 24% in the third quarter of 2024. The non-GAAP gross margin for the third quarter was 25.2% of revenues, compared to 24.4% in the third quarter of 2024. GAAP operating income for the third quarter was $171.4 million or 8.9% of revenues versus $125.8 million or 7.3% of revenues in the third quarter of 2024. Non-GAAP operating income was $186.7 million or 9.7% of revenues, compared with $140.7 million or 8.2% of revenues in the third quarter of last year. We are very pleased with this margin expansion trajectory. The operating expense breakdown in the third quarter was as follows: net R&D expense were $129.1 million or 6.7% of revenues, compared to $119.9 million or 7% of revenues in the third quarter of 2024. Elbit continues to invest in R&D to secure future profitable growth, which will maintain Elbit's position as the market leader in years to come. Marketing and selling expenses were $91 million or 4.7% of revenues versus $91.3 million or 5.3% in the third quarter of 2024. G&A expenses were $86.7 million or 4.5% of revenues, compared to $75.7 million or 4.4% of revenues in the third quarter of 2024. Financial expenses were $34.5 million in the third quarter, compared to $45 million in the third quarter of 2024. The decrease in financial expenses, net in the third quarter of 2025, was mainly due to a reduction in the average net debt. We recorded a tax expense of $11.4 million in the third quarter compared to $12.8 million in the third quarter of 2024. The effective tax rate in the third quarter of 2025 was 8.2% compared to 14.6% in the third quarter of 2024. The decrease in the effective tax rate for the third quarter of 2025, was mainly due to the increase in deferred tax assets. GAAP diluted EPS was $2.80 for the third quarter of 2025 compared to $1.77 in the third quarter of 2024. Our non-GAAP diluted EPS was $3.35 for the third quarter of 2025, compared to $2.21 in the third quarter of 2024. Quarterly segment revenue for the third quarter of 2025. Aerospace, third quarter revenues decreased by 3% year-over-year, mainly due to a decrease in Precision Guided Munition sales in Asia Pacific, partially offset by the increase in PGM sales in Israel and an increase in unmanned aerial system sales in Europe. Revenues for the 9 months were up 9%. C4I and Cyber, revenues increased by 14% year-over-year, mainly due to radio systems and command and control system sales in Europe. For the 9 months, revenue rose by 15%. ISTAR and EW, revenues increased by 5% in the third quarter of 2025, mainly due to Electro-Optic systems and Electronic Warfare systems sales in Israel and high-power laser sales in Israel. For the 9 months, revenue increased by 8%. Land revenue increased by 41% in the third quarter of 2025, due to ammunition and munition sales in Israel and in Europe. For the 9 months, revenues were up 44%. Elbit Systems of America, revenues decreased by 2% due to a decrease in Electronic systems and medical instrument sales, partially offset by the increase in Maritime and Warfighter system sales. For the 9 months, revenue rose 6%. The order backlog as of September 30, 2025, was $25.2 billion, $3.1 billion higher than the backlog at the end of the third quarter of 2024, and $1.4 billion higher than the backlog in the second quarter of 2025. The increase in backlog during the quarter came mainly from new European orders. Approximately 69% of the current backlog is derived from order outside of Israel. Approximately 38% of the current backlog is scheduled to be performed during the remainder of 2025 and during 2026. And the rest is scheduled for 2027 and beyond. Cash flow provided by operating activities in the 9 months ended September 30, 2025, was $461 million, as compared to $82.5 million in the 9 months ended September 30, 2024. The cash flow in the 9 months ended September 30, 2025, was affected mainly by the strong increase in net income. On the back of the continuous strength of the company's result the Board of Directors declared a dividend of $0.75 per share to be paid on January 5, 2026. I will now turn the call over to Mr. Machlis, Elbit's CEO. Butzi, please go ahead. Bezhalel Machlis: Thank you, Kobi. Hello, everyone, and thank you once again for joining us today. As Kobi just described, these results continued the growth and margin expansion trajectory, driven by strong demand for our solutions, particularly in Europe and Israel. Elbit's seventh consecutive quarter of double-digit growth further demonstrates our global leadership on the modern battleship. Our recently tested and proven solutions position us as the leading authority in our rapidly changing industry as defense budget continued to rise globally and our customers seek cutting-edge battle-proven system to secure and protect their population. Our portfolio of ever relevant technologies support our customers pursue of advanced warfighter solution across all domains. On the back of the strong results, I am proud that we continue to improve the translation of our revenue growth in both profit and cash flow. This is the fifth consecutive quarter where we delivered positive free cash flow and improved the company's cash conversion. Yesterday, we announced the signing of an international contract for a strategic solution for approximately USD 2.3 billion. This contract will be performed over a period of 8 years. I'm extremely pleased with this announcement of the largest contract in Elbit history, further testament to the superiority of our product and technologies. We will continue to equip our customers with advanced and relevant solutions. During the quarter, Elbit received another large contract to supply a European country with a range of our solutions totaling of USD 1.625 billion (sic) [ USD 1.635 billion ] to be delivered over the next 5 years. The contract includes long-range precision strike artillery-rocket systems and broad-spectrum of unmanned reconnaissance and loitering aerial combat systems, highly sophisticated ISTAR capabilities, including SIGINT, COMINT and electric warfare system. Enabled intelligence collections and processing system will also be delivered, along with advanced electro-optic, and night-vision system, combat vehicle upgrade, and protective systems. New orders also included contracts for our Hermes 900 drones, advanced airborne munitions for the IMOD and USD 260 million contract for DIRCM system to Airbus. Following the 12-day campaign against Iran, Elbit has seen growing interest in our solutions, mainly through not exclusively for the Hermes drones, EW system and training platforms. The Hermes platforms enable us to cross-sell products for other segments and offer our customers comprehensive solutions, since its first order in 2011, the Hermes 900 has been selected by over 20 customers worldwide. In August, we successfully launched the advanced JUPITER space camera, abroad the National Advanced Optical System satellite, supporting a wide span of earth observation mission, including military operations, environmental, monitoring and scientific research, developed by Elbit System ISTAR and EW, JUPITER is one of the world's most advanced space camera, featuring a very large aperture and exceptionally lightweight design. The camera is multispectral offering a combination of imaging channels. During the quarter, we expanded our operation in Europe, opening new facilities in Sweden and Germany to enhance our local delivery capabilities to ensure more secure, faster support to our customers. Being close to our customers is crucial for us, our enhanced presence in Europe strengthen our ability to deliver modern and reliable solutions at the pace required to ensure the unforced capability to defend Europe from its offenders. In June, we launched PAWS 2, a next-generation infrared missile warning system for fighter aircraft designed to enhance their survivability and operational effectiveness. The system detect wide range of threats regardless of seeker type and provides advanced protection for fighter jets, transport aircraft, and helicopter operating in complex high-threat environment. At DSEI, we unveiled Frontier, a cutting-edge wide-area persistent surveillance system, designed to address the inducing complexity and intensity of border protection challenges. Frontier autonomously operates multiple type of sensors to visually confirm and classify threats transmitting only the most relevant analyzed information to the appropriate forces. It leverage advanced artificial intelligence to optimize intelligence gathering and decision-making across land, air and maritime domains. All this notable achievement would not have been possible without our dedicated employees whose day and night, commitment to Elbit is truly unique. I would like to thank each and every one of our outstanding employees for their continued professionalism and dedication. And with that, I will be happy to answer your questions. Operator? Operator: [Operator Instructions] The first question is from Jordan Lyonnais of Bank of America. Jordan Lyonnais: So with the ceasefire now happening, how enduring are you guys thinking about the domestic demand? And if we do see a slowdown in the domestic bookings, how are we -- how should we think about the trade-off with margins as orders start to skew more towards international? Yaacov Kagan: Thank you, Jordan. So your question about the domestic demand, we can look at this quarter. We had an increase of $1.4 billion in our backlog, $200 million in Israel and $1.2 billion outside of Israel. We are looking at that as some kind of the nature of the growth of the backlog for the future. We are targeting around flattish backlog in Israel and growth outside of Israel, predominantly in Europe. That will be the growth area, which -- we see our funnel, we see our opportunities, and we see the demand that's coming out from Europe. And we think that this is the place that predominantly will provide the growth in the future in the backlog. Operator: The next question is from Seth Seifman from JPMorgan. Seth Seifman: I wanted to ask about when we think about the Aerospace business from here, and we saw the decline in the quarter. How should we think about the trajectory in that business going forward? I know you called out some decline in sales to Asia but also some drone orders during the quarter. So kind of where does that go from here? Bezhalel Machlis: It's Butzi. I believe that we will continue to see growth in this segment as well. We -- first, I would like to mention that our avionics is embedded on top of most of the Western platforms. It includes our helmet, but not only that, also quite a lot of other equipment from us is embedded in each -- in many, many platforms, all -- in many, many countries, not just in the U.S. So we enjoy from revenues coming from international sales of Boeing and Lockheed and other OEMs of all the platforms they bought. So I really feel that this -- I really believe that this market will continue to grow for us. And I would like also to mention UAVs. There is a huge demand for UAVs, for loitering munition. We have 20 international customers who bought till now, the Hermes 900 from us. And we provide not just a platform. We provide an integrated solution, which includes all our sensors and payloads from the company, and we have a very unique offering to our customers. And they see a growing market for UAVs or main UAVs, but also for small UAVs and for loitering munition, which are all under the Airborne segment. So I believe that this segment will continue to grow the company in Israel and mainly abroad. Yaacov Kagan: And Seth, this is Kobi to further add on Butzi's answer, we -- if you look at the 3 quarters over 3 quarters last year, Aerospace segment grew 9%. And we think that the relevant growth number for the Aerospace is a single-digit growth in revenues, because this segment is leaning predominantly on the U.S. budget with a lot of revenue coming from the U.S., which is a single-digit budget growth. And for that reason, that is the number that we think is relevant for this quarter -- for this segment. Seth Seifman: Okay. Excellent. Excellent. If I could add one follow-up question. Can you talk a little bit more about the opportunities that are emerging in directed energy. We've seen some of the progress on IRON BEAM. Are you seeing a lot of opportunities emerge for directed energy solutions outside of Israel as well? Bezhalel Machlis: Yes. The answer is yes. As you know, we are part of the Israeli program for ground high-power laser systems. The laser source is coming from us, and the first system should be deployed by the end of this year, the IRON BEAM system. And there's going to be -- I believe that next year, we'll see many more orders here in Israel for ground high-power lasers. Based on the success of Israel, there's a lot of interest in many other places for high-power lasers and for ground high-power laser system, and we are part of this solution. Here in Israel, we lead the airborne high-power laser system. It's still in the development phase. And actually -- and I believe that there is a very big potential for us, for the system. I think that high-power lasers in the air will be a game changer in the way countries are fighting against ones and against drones and against cruise missiles. And this is still under development, but also, it's only -- it's still in development, there is a lot of interest for that for many, many customers abroad. We are not developing just high-power lasers. We have other type of energy weapons, which are in a very advanced phase of development, which are -- some of them are confidential, but I can tell you that they are very unique. We really believe that this energy weapon activity is a very important growth engine for Elbit for the future. Operator: The next question is from Ellen Page of Jefferies. Ellen Page: Just the margin was very strong in the quarter on a year-over-year and sequential basis. Can you discuss the drivers of that? And was there any element of mix that supported profitability in the quarter? And how do we think about the progression of margins from here? Yaacov Kagan: Ellen, if you notice, there is a very strong expansion in margin this quarter, as you indicated, which comes as 0.9% improvement, a 1%, shy of 1% in the gross profitability of the company, an additional 0.5% on the operational expenses. So we are looking at a 1% expansion in the gross profitability and 1.5% expansion in the operational profitability. Those two are the fruits of improvement in our backlog profitability and for using a lot of operational excellence both investments and also processes that were inaugurated in the company, including using AI for different purposes of operational use. And that is driving our -- not just our operational profitability but also our gross profitability up. And this is the first quarter that we see this kind of expansion in both the gross profitability and the operational profitability. Including -- on top of that, we are also doing CapEx investments, which are yielding fruits. As we discussed many times in the past, the ERP system that is fully operational, the one ERP system that is fully operational in the company and also robots and cobots that we are also using now mainly in the ammunition and munition factories. And on top of that, if I can summarize everything, we can see that we have our advantages to the size, which with the increase in revenue, we are doing better conversion to profits. Ellen Page: Great. That's very helpful. And how do we think about the impact of less operational disruptions assuming the ceasefire hold. Is that an opportunity for another step up from here? Yaacov Kagan: So we see that -- we are very happy with the ceasefire, of course, and that is -- we prayed, everybody here prayed for that after 2 years of that -- this conflict. And we all hope that this quiet will be maintained here in Israel. And of course, in -- for the company, it allows us to regroup, people to come back for mobilization, and to get back to normal business which is, as you know, Elbit is mainly predominantly working outside of Israel, that this is our strength of doing around 70% of the business outside of Israel. It allows us to invest more in the business outside of Israel and to focus, of course, more about doing the ordinary business as we did before this 7th of October conflict. And of course, this is an opportunity for the company to receive more opportunities and more new business to strengthen our backlog. Operator: I'm passing the call to Daniella Finn. Please go ahead. Daniella Finn: Thank you, operator. We have a couple of questions from [indiscernible] from Excellence. [indiscernible], thank you very much for your questions today. The first one is, has there been any update to the company's profitability target for 2026, 10% operating profit following the expansion of the order backlog and the improvement in gross margins in the current quarter. Yaacov Kagan: Thank you, Daniella and [indiscernible]. We -- as you know, we're not giving specifically targets and providing guidance. Saying that, we will still maintain our internal targets to continue to improve our profitability. And this is, of course, a strong target in the company as well as the cash conversion, which is a very -- is the principal target in the company to continue the improvement in cash conversion in the company. Daniella Finn: Thank you, Kobi. And the second question from [indiscernible], how does Elbit plan to generate added value from the significant expansion in the U.S. DoD's budget. Specifically, is there a concrete plan to pursue an M&A transaction in the U.S. and/or to expand into verticals such as drone swarms or border protection applications? Bezhalel Machlis: Thank you, Daniella and [indiscernible]. The U.S. market is very strategic to Elbit. We see the U.S. as our home market. And we are -- I'm very pleased with our performance in the U.S. The last two positions we made, the night-vision activity and Sparton, the sonobuoys activity. Both of them are very successful, both of them are growing. And we certainly look for opportunities, for acquisitions in the U.S., we are exploring the market. I would like to say that in the past, we delivered a system to the CBP for border protection, and our system is deployed along the borders. And we are -- certainly, we believe that the current need for additional systems along the borders are very relevant to us, and we are planning to pursue it. And we have -- the rest of our activities in the U.S. are very successful as well. Our avionics activities are growing, and our Active Protection System is doing very well in the U.S. on top of the Bradley [ light ] tank, and we see -- we will continue to invest in the U.S. We will continue to recruit additional people, and we would like to expand our position in this very important market forward. Daniella Finn: Thank you, Butzi. Operator, if there are no more questions, we can wrap up. Operator: Before I ask Mr. Machlis to go ahead with his closing statement, I'd like to remind participants that a replay of this call will be available 2 hours after the conference ends. In the U.S., please call 1 (888) 782-4291. In Israel, please call (03) 925-5900; and internationally, please call (972) 3925-5900. A replay of the call will also be available at the company's website, www.elbitsystems.com. Mr. Machlis, would you like to make your concluding statement? Bezhalel Machlis: I would like to thank everyone on the call for joining us today and for your continued trust and support of Elbit. Have a good day and goodbye. Operator: Thank you. This concludes the Elbit Systems Ltd., Third Quarter 2025 Results Conference Call. Thank you for your participation. You may go ahead and disconnect.
Operator: Good day, and thank you for standing by. Welcome to the T1 Energy Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Jeffrey Spittel, Executive Vice President, Investor Relations and Corporate Development. Please go ahead. Jeffrey Spittel: Good morning, and welcome to T1 Energy's Third Quarter 2025 Earnings Conference Call. With me today on the call are Dan Barcelo, our Chief Executive Officer and Chairman of the Board; Evan Calio, our Chief Financial Officer; Jaime Gualy, our Chief Operating Officer; and Otto Erster Bergesen, our SVP of Project Development. During today's call, management may make forward-looking statements about our business. These forward-looking statements involve significant risks and uncertainties that could cause actual results to differ materially from expectations. Most of these factors are outside T1's control and are difficult to predict. Additional information about risk factors that could materially affect our business is available in our annual report on Form 10-K filed with the Securities and Exchange Commission and our other filings made with the SEC, all of which are available on the Investor Relations section of our website. With that, I'll turn the call over to Dan. Daniel Barcelo: Thanks, Jeff, and welcome, everyone, to our third quarter earnings call. Let's turn to Slide 4, please. Many of you may be new to the T1 story this quarter, so we'll begin today with a brief look at our current position in the U.S. solar market. With 5 gigawatts of annual capacity at G1_Dallas, T1 is the largest American manufacturer of silicon-based solar modules, and we are the second largest American-owned solar module producer in the U.S., but we're just getting started. As we'll discuss on today's call, we are advancing our plan to start construction of the first 2.1 gigawatt phase of our U.S. solar cell fab, G2_Austin, before year-end. G2 is the centerpiece of our strategy to build the first end-to-end domestic polysilicon solar supply chain in the U.S. This strategy is intended to competitively differentiate T1 and to align the company with the growth dynamics in U.S. power markets. Now let's move to Slide 5 for a closer look at the big picture developments, which underpin our strategy. Today's theme is powering America. With U.S. electricity demand growing faster than it has in decades, we are positioning T1 as a homegrown enabler of 3 increasingly evident macro trends: accelerating U.S. AI development, onshoring of advanced American manufacturing and strengthening American energy security. These 3 trends are the thematic pillars of T1's investors' case. Energy is key to unlocking the future of AI. New data centers now routinely require gigawatts of electricity, and they are growing exponentially more compute and energy intensive. Energy has emerged as the leading checkpoint for AI growth. The U.S. has the natural resources and talent to debottleneck the AI equation, and T1 plans to contribute by bringing the capability to produce leading-edge solar technology at scale domestically. T1 intends to power American AI by investing in American advanced manufacturing. The reshoring of manufacturing is another trend that is driving electricity demand growth and presenting T1 with the opportunity to strengthen critical U.S. energy supply chains. We have ramped up domestic PV module production in G1_Dallas. We are advancing towards the expected start of construction at G2_Austin, our U.S. solar cell fab, and we are expanding our U.S. supply chain through our recently announced partnerships with Hemlock/Corning, Nextpower and Talon PV. We have entered an era when control of digital intelligence and AI infrastructure will determine the fate of nations. This underscores the strategic value of domestic energy capacity, and we believe T1's plan to build a domestic PV solar supply chain will contribute to U.S. energy security. In addition, standing up a domestic end-to-end polysilicon supply chain should strengthen our national ability to produce semiconductors, advanced materials and grid and space technologies, all of which involve common inputs and production processes. Turning to Slide 6. Let's drill down into the AI power theme. If the U.S. is to maintain its lead in AI, we need more electrons and we need them now. Leaders from the technology industry have suggested the U.S. must double the 2024 pace of electricity additions to 100 gigawatts per year to close the widening electron chasm between AI-driven demand and power availability. At T1, we are proponents of U.S. energy abundance, and we endorse the strategic merits of adding new natural gas and nuclear power capacity to our grid, but those technologies can only play a limited role in the near term due to swollen order backlogs, permitting red tape and construction cycle times for new generation facilities. Solar, coupled with battery storage, is the obvious choice to bridge this gap as a rapidly deployable resource at scale. The dawn of the AI age is a company-making opportunity for T1. We have available capacity at G1_Dallas, where we recently eclipsed the daily production record equating to an annualized rate of 5.2 gigawatts. As we look to 2026 and beyond, our plans to integrate upstream of G1 will position T1 as the first company that can offer hyperscalers and their partners a high domestic content, polysilicon-based TOPCon solar module. Now let's move to Slide 7 for an update on T1's business. Shortly after we announced our preliminary third quarter results in October, we closed 2 successful equity capital markets transactions. T1 raised $72 million in gross proceeds from a registered direct common equity offering with high-quality new and existing institutional equity investors. And as previously disclosed, T1 entered a $100 million commitment for the issuance of preferred and common stock to certain funds and accounts managed by Encompass Capital Advisors, LLC in connection with T1's acquisition of Trina Solar's U.S. manufacturing assets. Last month, T1 elected to make the second and final draw of $50 million pursuant to this $100 million commitment. This infusion of equity capital positions T1 to begin the first phase of construction at G2_Austin during the fourth quarter of 2025. Although we initially intended to focus on raising debt prior to an equity tranche to partially fund the first phase of construction at G2_Austin, these 2 transactions enable us to raise capital at attractive terms while we engage with prospective debt investors and advance the traditional project financing. The additional trading liquidity from a higher share count and market capitalization also provides opportunities for us to add new shareholders who were previously unable to trade in our stock. At T1, we are focused on shareholder value and as equity owners ourselves, we are highly sensitive to dilution. So we'll continue to use equity judiciously to fund growth CapEx while we optimize our capital stack. Our capital formation progress positions us to add G2 to our expanding domestic polysilicon solar supply chain, which now encompasses a growing network of American partners. In August, we announced an expanded polysilicon supply agreement to include production of American-made solar wafers with Hemlock/Corning. And in October, we signed a framework agreement with Nextpower for the provision of domestic steel frames, and we made a strategic minority equity investment in Talon PV LLC, which is building a U.S. solar cell fab in Texas. These partnerships are foundational to T1's mission to build the first integrated American polysilicon solar supply chain. Our expanding partnership network and the domestication of our supply chain are also key elements of T1's policy playbook. As we highlighted on the second quarter call, our team continues to advance the de-FEOCing process to maintain T1's eligibility for Section 45X tax credits in 2026 and beyond due to requirements in the OBBB. Moreover, our commitment to invest in advanced American manufacturing and critical domestic energy supply chains are consistent with some of the administration's top priorities. Turning to operations. We continue to ramp production and sales during the third quarter at G1_Dallas, our state-of-the-art solar module facility. During the fourth quarter, we expect to generate significantly higher sales and EBITDA as we ship modules under previously booked merchant sales agreements and as we sell down inventory to customers who are clearing out 45X eligible modules before year-end. As a result, our 2025 EBITDA guidance of $25 million to $50 million is unchanged. While we build our business in the U.S., we continue to advance our goal to generate value from our legacy European assets, which are attracting interest for repurposed data center applications. We look forward to providing updates on this initiative as warranted by our progress. As we do on each quarterly earnings call, we have a rotating guest speaker from T1's management team to expand on an important topic. Since this quarter's theme is Powering America, I'd like to introduce our SVP of Project Development, Otto Erster Bergesen, to provide an update on G2_Austin, which will be the centerpiece of T1's domestic supply chain and where we are approaching the start of construction. Otto? Otto Erster Bergesen: Thank you, Dan. Let's turn to Slide 8. After months of work, we have a great design developed and Tier 1 partners contracted to help us move ahead with G2_Austin. We are ready to enter full execution shortly. We're pursuing a 2-phased approach to reach more than 5 gigawatts of capacity of solar cell manufacturing. Phase 1 will be a 2.1 gigawatt fab, which we plan to follow with a 3.2 gigawatt Phase 2. If offtake level permits, we can expand the second phase. The basis of design is Trina Solar's more than 100 gigawatts of solar cell fabs in general and their 5-gigawatt state-of-the-art Huai’'an fab in particular. We have customized this design together with JFE Engineering in China and later with SSOE as our U.S. engineering firm. We have been working very closely with Trina, JFE, SSOE and other companies over the past 10 months to leverage their project and operational experience while securing U.S. compliance and tailoring to U.S. conditions. Yates Construction has been selected as our general contractor. We have worked with Yates since May to provide preconstruction services, focusing on constructability and engagement of global and local subcontractors. Laplace has been selected as our EPC turnkey partner for the production line equipment. In August, we began working with Laplace on detailed design and preparations for equipment manufacturing. Laplace was a first mover on TOPCon and has extensive experience in the TOPCon space. They have been part of solar cell fabs for more than 400 gigawatts of capacity. T1 has great confidence in their ability to deliver top quality and to achieve according to their performance guarantee under the contract. The past few months, we've been working closely with Laplace and Yates to engage critical subcontractors to identify and address long lead items. We are pleased to report that the project has been very well received in the market and that we are currently contracting with subs to support the project schedule. For example, we have secured a very beneficial mill roll contract that enabled us to start erecting steel in March 2026. We have also secured favorable terms on long-lead electrical equipment like switchgears, generators and transformers. Finally, we have built a strong team, combining Tier 1 partners with a solid in-house project management and engineering team. If you take one thing from our portion of today's presentation, I want it to be that we have a world-class team with the experience and technical expertise to execute the G2_Austin project successfully, and we look forward to breaking ground before year-end. With that, I'll turn it back over to Dan. Daniel Barcelo: Thanks, Otto. Let's turn to Slide 9. While we move towards the expected start of construction at G2, production and sales continue to ramp at G1, our state-of-the-art U.S. module facility. We have produced more than 2.2 gigawatts of modules year-to-date, and we are on track to meet our unchanged 2025 production plan of 2.6 to 3 gigawatts. And in October, we achieved a daily production record of 14.4 megawatts, which equates to an annualized run rate of 5.2 gigawatts. In less than 1 year, the T1 operations team has brought G1 from the start of production to a daily run rate that exceeds nameplate capacity, which speaks to the talent and dedication of our people. During the third quarter, T1 generated record net sales of about $210 million, and we expect sales to continue growing meaningfully in the fourth quarter as we start deliveries of previously booked merchant sales and we liquidate finished goods inventory that is eligible for 45X credits before year-end. This near-term sales pipeline and our continued operational progress underpin our unchanged 2025 EBITDA guidance of $25 million to $50 million. As we look forward to 2026, our supply chain team is focused on sourcing non-FEOC cells to G1 during the bridge year to the anticipated start of production at G2 in Q4 2026. We have already identified a meaningful supply of these cells for next year, which will be the primary driver of G1 production and sales before G2 is up and running. And now I'll turn the call over to Evan to walk you through the financials. Evan Calio: Thank you, Dan. Let's move to Slide 10 for a summary of our unchanged guidance. As detailed in this morning's release, our 2025 EBITDA guidance of $25 million to $50 million based on a 2025 production of 2.6 to 3 gigawatts is unchanged. In the fourth quarter, we anticipate a significant ramp in production and sales related to higher production levels, delivery of previously booked merchant sales as well as some liquidation of finished goods inventory before year-end. We expect fourth quarter production and module sales to exceed combined production and sales in the first 3 quarters of 2025 as we've now ramped the facility to average 4.5 gigawatt run rate in the fourth quarter. In our October release of preliminary third quarter results, we also introduced annual run rate EBITDA guidance of $375 million to $450 million for an integrated production of G1_Dallas with the first 2.1 gigawatt phase G2_Austin. The guidance is based upon G2_Austin achieving full run rate production and sales of 2.1 gigawatt and an annualized G1_Dallas run rate production sales of 5 gigawatts, supplied by 2.1 gigawatts of G2 cell and the remainder through a combination of non-FEOC foreign cells. Any U.S. sales procured potentially through Talon represents upside. Now let's turn to Slide 11 for a summary of T1's financial condition. Bringing the first phase of G2_Austin online to deliver a step change in T1's profitability and cash flow generation. The recent capital markets transactions Dan highlighted have advanced that future. Even prior to the equity transactions, our cash position built significantly as we anticipated in the third quarter. We ended 3Q with cash, cash equivalents and restricted cash of $87 million, $34 million of which was unrestricted. We added $118 million of cash in October. In addition, we accrued $93 million of Section 45X production tax credits through 3Q, and we expect to monetize those credits in the fourth quarter. We are currently exchanging term sheets. Aligned with our 4Q production and sales ramp, we expect to generate a similar amount of 45X credits in the fourth quarter that we expect to monetize in 1Q '26. On capital formation, we're building on the momentum of the recent equity transaction with potential G2 offtake contracts and debt investors. We also expect the recent equity raises will yield additional benefits for T1 shareholders. Our improvement in our capital -- our market capitalization and daily trading volume should further expand T1's eligibility for inclusion in passively managed index funds, and we are receiving a noticeable increase in inbound inquiries from active managed institutional funds who were previously unable to invest due to our trading and liquidity constraints. Now I'll turn the call back to Dan for closing remarks. Daniel Barcelo: Thanks, Evan. Turning to Slide 12. Let's conclude with an overview of T1's top priorities. In the near term, our focus is on preserving T1's eligibility for Section 45X credits by completing the de-FEOCing process as well as raising the capital required to complete the first phase of G2_Austin through a combination of debt and cash deposits tied to anticipated customer offtake contracts. While we advance our capital formation and count down to compliance initiatives, we're also executing our plan for 2026, which we view as the bridge year to establish an end-to-end U.S. PV solar supply chain. Our top operational priority for the next year is to source a meaningful supply of non-FEOC solar cells to feed module production at G1 prior to the expected start of operations at G2 in Q4 2026. Concurrently, as we build the G2_Austin offtake portfolio, we intend to initiate and complete the capital formation initiatives required to fund and trigger the start of construction for the planned second phase of G2 sometime in 2026. In 2027 and beyond, we will be focusing on bringing T1's integrated U.S. supply chain online and completing the second phase of G2. We plan to achieve 5 gigawatts of integrated production between G1 and G2. And by virtue of our supply agreements with Hemlock/Corning and Nextpower, we should be producing modules of domestic content that comfortably qualifies our offtake customers for ITC stacking bonuses. Our ultimate objective at T1 is to generate shareholder value by establishing a differentiated competitive position as the first fully integrated U.S. polysilicon-based solar module producer. As we grow our operations and commercial enterprise, we will work to maximize returns on capital, sustainably reduce unit cost of production through software and automation upgrades and optimize T1's balance sheet. This is an exciting time for T1, our investors, employees, customers and partners. We are building something that doesn't exist in the U.S. today, an integrated secure, traceable polysilicon-based supply chain based on advanced solar technology. On behalf of T1's Board of Directors, thank you for your continued support in this journey as we position T1 to power America. And with that, I'll turn it back to Jeff to coordinate Q&A. Jeffrey Spittel: Thanks, Dan. Shannon, I think we're ready to open the line for questions. Operator: [Operator Instructions] Our first question comes from the line of Philip Shen with ROTH Capital Partners. Philip Shen: Congrats on all the progress you're making. Yes, I wanted to check in with you guys on your de-FEOCing process to see if you guys could give us more color on the progress you've made and the main next steps that you guys have to take that we can follow to monitor that progress. Daniel Barcelo: Thanks Philip for that. We actually have Andy Monroe, who is our Chief Legal and Policy Officer on the line. Andy, why don't you take that question? Unknown Executive: Sure. Thanks, Dan and Philip. We're well positioned for compliance with our domestic and non-FEOC supply chain plans. We have a solid compliance plan developed with the assistance of world-class legal and compliance experts and we're making real progress on executing that plan. So we're confident. We're not sharing full details on the compliance for competitive reasons at this point, but we are confident that with those factors in play that we will be compliant. Philip Shen: Okay. And then as it relates to the Q3 contract dispute, could you give us a little bit more context there? Could that dispute extend longer? What kind of impacts could that be? And then how big of a contract was it? It seems like with the impairment of $50-ish-plus million, it was quite meaningful. Daniel Barcelo: Yes. Thanks, Phil. Evan, why don't you take that? And as it relates to the size of the contract, we are limited to certain confidentiality on the contract. And as you can appreciate, if we are in negotiations -- or as we are in negotiations there, we have to be sensitive to the confidentiality required in the contract. Evan, would you like to add other parts? Evan Calio: Yes. I mean I would say that we had already calculated that in our guidance. So there isn't necessarily a guidance change as it relates to this contract, and we are continuing to execute other contracts. So in terms of the financial effect, it's been in our guidance for 2 quarters now. There was goodwill because it relates to a contract that was executed when we made the acquisition. That's why there's recording a goodwill, which we made a conservative interpretation to write off that goodwill. But as Dan mentioned, we remain in discussions with the contract party. We continue to assess all options, and we'll choose a path that optimizes the value to shareholders. I hope that's helpful. Philip Shen: Okay. And then one more here. You guys have made some interesting and useful -- well, interesting investments and partnerships with Nextpower and Talon here. So I was wondering if you might be able to describe more the integration of all these companies and relationships. So specifically Nextpower, what's the volume timing? When could initial modules with U.S. frames come off your line? And then as with Talon, would you expect to source cells from them to support your G1 facility? And then finally, if there's an update with Corning and Hemlock, that would be great as well. Daniel Barcelo: Thanks, Phil. We are very committed to both an integrated -- vertically integrated supply chain and solar industry. So a lot of these projects are related to that. The second part of this is that domestic content. Frames are an increasingly large part. And as we go into the future, there will be a higher requirement for domestic content. A lot of the strategy around Nextpower was meeting that domestic content. As you know, beyond cells, we're basically looking at glass, at frames, at glues, at J-Boxes, et cetera. So this, to us, was a very strategic step to partner with a great company like Nextpower. I think also the Nextpower aspect was about scaling. Nextpower is a very confident partner in their products and how they scale. And we felt that having a partnership with Nextpower for these steel frames allows for the expression of that scaling from Nextpower that we could benefit through having a better customer experience from our modules. So that was another dimension of this beyond just the quality of that. In terms of volumes and timings of that, we'd expect to use that increasingly over into, if not '26 into '27, but we haven't disclosed the volumes there. Those are confidential under the contract. So we prefer to -- we'll make future disclosures on the volumes we're doing for Nextpower. As it relates to Talon , Talon was an opportunity to invest a small quantum, not disclosed in a minority position, where it would allow us to begin to talk to and look at and work with Talon in more detail. Talon is looking to build TOPCon cells. And yes, there is a way for us to procure those cells in the future. And to the degree, we have mixtures of different options in terms of cell supply, we could sell the cells to third parties, also many different options. But we're trying to reinforce and build around us the domestic chain that we really believe in. Last part on Hemlock and Corning -- that, as we've disclosed, we have optionality to convert our polysilicon to wafers. We're excited about those wafers to come from Michigan right into our G2 facility. I would comment too that our G2_Austin facility is discrete from Talon. These are 2 different projects. We're excited about our project, and we're excited about our minority investment in Talon. Philip Shen: Great, Dan. Looking forward to seeing the full results of your integrated supply chain. Daniel Barcelo: Thanks. Philip Shen: One more, if I may. This is from an investor. He's asking how is T1 claiming or planning to claim the 45X credits in terms of stacking when they produce cells in one site and modules at another site when the OBBA says they have to be at the same facility? Daniel Barcelo: Andy, do you want to take that, please? Unknown Executive: Sure. Without getting into all the details, there are provisions in the Act that allow for the election of unrelated party transactions, and those provisions have not been changed. That was in the original Act and were not changed by the OBBA. Operator: Our next question comes from the line of Greg Lewis with BTIG. Gregory Lewis: Guys, I was hoping to get an update on kind of how we should be thinking about the event path for G2. Any kind of hurdle rates we should be thinking about in the next couple of quarters, just as we think about getting that facility up and running by the end of '26 to really set the table for '27 production. Daniel Barcelo: Thanks, Greg. I'll have Otto layer in here, too. We've been working very hard for the last year to design the right paths here. We have over a 30% design done. We have work packages out that are live. As you know, we did raise capital earlier this last month -- this month to unlock some capital in order to begin the first stages of construction. We are still on track to go and start production -- I'm sorry, start construction in the fourth quarter of this year. The paths really go to the site, the equipment, the machines, the early earthworks and concrete and steels packages. Those are the biggest time lines in terms of risks to the time line. As Otto mentioned in his remarks, the steel package was particularly important and some of the switchgear was particularly important. Beyond that, if we look at the equipment, the equipment is not on a critical path, but we wanted to advance those work packages and get those equipment orders as fast as possible also. Otto, do you want to talk about the cadence and how we're tracking toward the fourth quarter '26? Otto Erster Bergesen: Sure, Dan. So yes, so as you mentioned, really, it's all about getting started now, getting started with earthworks, preparing to erect steel in March and also securing the long lead items. So electrical equipment, we've talked about as well, there's air units, there's other utility systems like water and utility plants that needs to come in place. So it's all about getting started and execute those contracts that we have lined up and are negotiating now as soon as possible. So we're tracking towards our time line. Gregory Lewis: Okay. Great. And then just I wanted to go back to Slide 6, where you kind of outlined the -- clearly, what's going on in power -- power is cool again, right? And so as we think about that and kind of the acceleration and the potential for solar, if you go back and look, like no one -- I feel like no one's really -- you don't hear data centers talking about solar. I mean, last year, we installed 50 gigs in the U.S. I think it was a few gigs of natural gas. And just -- so as we look at meeting this increasing demand for power gen in the U.S. are we getting the sense that we hear a lot about behind the meter are hyperscalers pursuing this or other entities? Or do you think really the bulk of this solar growth that we're going to see in the U.S. over the next 5 to 10 years. Is that largely just going to still be with utilities? Daniel Barcelo: Yes. We're seeing tremendous interest from developers and it's a pass-through basically data centers, AI companies. The utility scale levels and the quantum of power that's needed, it's really only the things that solar, which we do and storage together are only thing that's going to deliver that until basically 2029, 2030 when natural gas gen hits or nuclear starts coming back. We fully believe in a combined industry that is supportive of multiple uses of energy and all of the above strategy, but solar is the only thing that's scalable right now. When we -- when the U.S. looks -- when you look at China, China has over a terawatt of manufacturing capacity across ingot wafer cells and modules, a terawatt of manufacturing capacity. First half of the year, China put in 256 gigawatts. So there is tremendous human intelligence and tremendous scope to really deploy it. And we do think that the United States has those elements of capital, has those elements of technology to start building that, and we'd like to see more of that develop in the U.S. But solar is the answer right now. I do think we've reached the tipping point in terms of the costs, in terms of particularly the storage costs and the adjacency to solar. And I think those 2 things are delivering. I do think that building these projects and designing them with either natural gas in mind or other longer-term grid access in mind is an important dimension. And the last part I'd say is I think a lot of these other places are really going to be about distributed energy resources, energy islands. The amount of power that AI needs and the ramp that AI wants, it's just too hard to do that at current grid and current connections. So we're very confident on the future of how solar is going to contribute into that energy. Operator: Our next question comes from the line of Sean Milligan with Needham & Company. Sean Milligan: Just a quick question. It looks like you mentioned that you've ramped up G1 now to over 5 gigawatts. I'm curious about how you see that sustaining into 2026. And then what you're seeing for demand in 2026 there? And then just looking forward, kind of what you're seeing for demand in 2027 as G2 comes online? And kind of the third part of that question is another publicly traded company made some comments about pricing on their call. So is there any kind of like pricing guardrails you can give us for kind of non-FEOC cells in '26, what you're looking at and then also 2027 with G2 online? Daniel Barcelo: Yes. Thanks for that. What we've seen in this year is that we've had a very, let's say, erratic market in solar with -- is the OBBB going to kill the IRA. It did not. You have demand looking at this 232 coming, what is the teeth it's going to be. So the industry has been dealing with inventory, a lot of sales uncertainty. This uncertainty has made for a very choppy 2026. I think that ties to a lot of how we have a back-end loaded volume in 2025. So that really explains the landscape of what we've had today. As we look into 2026, which is a bridge year for us, we will not expect to produce and we will not produce domestic cells. Those are expected to start coming on in the fourth quarter of 2026. So as those come out in the fourth quarter 2026, that will be towards -- that will only be part of it. But for '26, we have to source non-FEOC cells. We feel confident that we have the ability to source quantums, but we are not yet coming out with our guidance there in terms of what we'd like to express. On pricing, it's complicated also because the pricing of those non-FEOC cells is also a question. So we'll be looking to come out with guidance for 2026 and give that pricing update and those volume updates for '26. When I look at '27, which is what we're very, very focused on, which is the domestic cell, that's where we're in active discussions with large utility scale type investors. And we do see demand. We do see strong interest there. There is strong interest in the domestic selling, domestic module, and that's what our focus is. As we get those offtake discussions or contracts done, we will, of course, be disclosing those in full. But the focus really is about how to start delivering in '27. Evan, do you add anything color to the pricing or to the volumes? Evan Calio: Yes. No, no. Look, I think you covered it, Dan. I mean, look, demand is high, right, for '26. It's going to break it up, right? And we're seeing early prices that are higher than current pricing, right? So several cents a watt higher than where we are currently in the fourth quarter. It's going to be cell availability that drives production levels more so than demand. As Dan mentioned, we've begun -- we have attractively priced non-FEOC cells in our inventory today, and we are working aggressively to procure those for 2026, which is our bridge year. But I think that's what's going to drive your value. And we'll provide production range here shortly. For 2027, that's where -- at least for Phase 1, right, Phase 1 of G2, you are in a lot of conversations with parties that have a demand that far exceeds our 2.1 gigawatt production, right? So -- and those discussions are for multiyear offtake contracts that are very attractive, okay? And so we expect to, over time, certainly by the time we're producing a facility to have most, if not all, of that volume contracted the 2.1 gigawatt. And then it becomes a question of how quickly can we convert excess demand for G1 into -- sorry, for G2 Phase 1 into an underpinning for G2 Phase 2, right, which, again, we think it's going to be driven by offtake demand, but we clearly see the potential for that following in some reasonable or short time period from financing on G2 Phase 1, right? The goal would be ultimately to put as many of the high-margin in-demand cells into G1 as possible as quickly as possible. I don't know if that gets... Sean Milligan: That's great. That's great. And then the other question was on the COGS side. So this year, I know you've been doing a lot with your supply chain. And then next year, you bring on non-FEOC cells. I'm just curious how you see COGS moving around this year and if that starts to normalize some next year as you kind of get up to scale more? Evan Calio: Look, that's a good observation. I think you'll see it in the fourth quarter, right? Obviously, when you're at scale at a level that's averaging 4.5 gigawatt run rate in the fourth quarter, your conversion costs come down significantly throughout the course of the year, and we see a forward path to a facility in its second year of operation to continue to make gains on those costs that we control. As it relates to procurement and pricing, again, we are seeing -- your cell is most of your cost, but throughout the [ BAM ] we continue to work to optimize that, and we expect to make improvements. Again, we were ramping a facility into a period that had unusual tariff volatility. So it was like you were less able to kind of optimize timing of costs and you were in a period where rising tariffs, you were hit by some of those tariffs. We think a lot of those risks will be mitigated even in an environment where 232 impacts the market, given we have a differentiated and advantaged supply chain. So we'll provide further quantification of like some of those improvements when we, in near term, put out our 2023 guidance, which we're again making traction on locking things in. Daniel Barcelo: Yes. I would just add to Evan that you touched on the polysilicon side. As you know, the cell is the bulk of the cost, and we work diligently to ensure very competitive cells. Our company, all of our polysilicon is from Hemlock. We take the polysilicon from Hemlock that's turned into wafers in Vietnam. We have control of the polysilicon side. And the reason I mentioned this is with the anticipation of what may come out of 232, we feel that we're very protected on that cost element. Again, we get the benefit of basically having a locked-in pricing on our polysilicon. So to the degree 232 does come out and does add cost to other non-American polysilicon or Chinese polysilicon, we think that we're in a very advantaged state as that feeds through into the cell costs. Sean Milligan: Great. That's great, Dan. And then on Section, the 45X tax credits. I know this year, you've built up a good amount on the balance sheet, and you said you're looking to monetize those currently. It's not like swapping term sheets. As we look forward, should we think about credit monetization being a more regular step in the process for you all? Or is it going to be kind of larger transactions single time like once a year? Or are we thinking multiyear type transactions there to help with liquidity? Daniel Barcelo: I think you're spot on the cadence, I'm going to let Evan cover some of the details. We came -- started fully commissioning full certificate of occupancy in the first half. We did get all of our first half volumes in terms of what was produced, and then we've been out in the market doing that right into the face of OBBB. So there was a lot of uncertainty around the world about those aspects. So I do expect on a go-forward basis, there will be a much more normal cadence on how we monetize 45X. And then on the other side of 45X direct pay versus selling through banks to third parties, that also is an element that we wanted to make sure we optimize in terms of the prices and the costs that we are trying to get there. Evan, do you want to talk about the timing of when we would expect to see 45X now? Evan Calio: Yes. Look, I mean, I think as I said in my comments, we expect to execute third-party sales in this quarter for all or almost all of the 45X that we generated in 2025. I think on a go-forward basis, yes, we're looking to enter into a quarterly cash settle within some number of days after the quarter with one or several parties for our volumes. I think '26 is -- it's a year that has newer requirements that are different from the past. So it might be a slower to develop year. So I think they will be more midpoint of the year and on. But kind of going forward, I think it will be more traditional of, again, quarterly cash settle on a third-party sale, right, versus direct pay. Sean Milligan: All right. Congratulations on the continued move forward. Evan Calio: Thanks, Sean. Operator: This concludes the question-and-answer session. I would now like to turn the call back over to Jeffrey Spittel for closing remarks. Jeffrey Spittel: Thank you, Shannon. Thanks, everybody, for the interest. We will be back on the road at conferences in New York next week. Please feel free to reach out with additional questions, and thanks for the interest and participation today. This will conclude the call. Operator: This concludes today's conference. Thank you for your participation. You may now disconnect.
Hjalmar Ahlberg: Hi, and welcome to Redeye, and today's presentation of Gentoo Media's Q3 result, will be presented by the CEO, Jonas Warrer, and followed by Q&A moderated by me. And if you have any questions, please send them through on the website. With that, I'll leave over to you, Jonas. Please go ahead. Jonas Warrer: Thank you very much, and good morning all. So welcome to the presentation today for our Q3 interim report. We are Gentoo Media. I just wanted to say a little bit about that for those of you out there that are new to the business and to the industry. So what we do is that we work as an affiliate in iGaming. And that means in layman's terms that we connect operators with players. So what we say is when high-value players find the right brand at the right time, attention turns into action. And that's sort of the shape and the business that we shape. Why does iGaming affiliation matter? I think most operators would say that affiliates, they can drive high-intent traffic. We can also build trust to content and to the websites that we have. We can scale visibility fast. I think you can see as an operator that you can both do traditional above-the-line marketing, but you can also work with all of the websites that you have online, which is all of the affiliate websites that actually also creates a lot of visibility and brand awareness. We can also, in that sense, boost conversion and retention for the operators, keeping a presence of the brand online. And then we can reach niche audiences with the different type of websites that we have that target different niches and verticals in iGaming. I think if I dumb it a little bit down to explain more simplified, iGaming affiliation matters because we are the store that you find on the shopping street where players they go and look before they decide which operator to place a bet with. Going into our Q3 2025 executive summary. Q3 is the first quarter showing clear results from the strategic realignment initiated earlier in the year. If I have to highlight a few key words here, I would say, operational control and operational efficiency. This also means that we see EBITDA before special -- EBITDA before special items increasing quarter-over-quarter, reaching EUR 9.3 million in the quarter with margin improving to 41%. Developments, as said, are driven by the rightsizing and organization simplification resulting in a stabilized and efficient cost base. Revenue came in below expectations, partly due to weak September sports margins. We'll also touch on the next slide on a few other factors. Player deposit levels stayed -- developed positively year-over-year. Our organizational capabilities have been strengthened across the organization through improved delivery discipline and clear accountability. And I would say we entered Q4 with a more efficient organization with strengthened execution, ready to maximize the year-end peak season performance and accelerate growth into 2026. Post quarter performance is strong. October delivered 15% revenue growth compared to September and mid-November is trending even further ahead. Gentoo Media maintains our full 2025 guidance, but with better cash conversion. Free cash flow from operations is adjusted up to EUR 31 million to EUR 34 million from previous guidance at EUR 27 million to EUR 30 million. Okay. Going into the financial highlights. As said, revenue of EUR 22.7 million, down from EUR 29.5 million in Q3 last year and lower than previous quarter that came in at EUR 25 million. Revenue below expectations due to usually -- unusually weak September sports margins and also still immature market conditions. And we're still -- and then I will also say, with the partner and the portfolio optimization efforts that we have had in Q3, I think also that had a short-term effect on -- negative effect on revenue where we are more thinking about now the quality of revenue, and about the long-term sustainability of the revenue that we generate. Personnel expenses and other OpEx were EUR 7.4 million in Q3 compared to EUR 8.9 million in the previous year and also down 10% from Q2, from EUR 8.2 million in Q2 2025. And I think actually also if we looked in at Q1 when we started this year because this is sort of the starting point that triggered our strategic realignment. I think it was up at nearly EUR 9.7 million there. So we actually see that our cost base has been reduced and I would say is very much in control right now. And going back to the strategic realignment when we presented that, we presented certain targets, EUR 8 million to EUR 10 million in run rate savings. And I think when we look now at Q3 results, I think it's safe for us to say that we are trending ahead of those targets. I think that's a very important message for me to make. Marketing expenses at EUR 6 million in the quarter, and that's compared to EUR 8.4 million in the previous quarter. And what we did in Q2 was that we took a deliberate choice to increase a lot in marketing, to increase our player base and grow our player base. And we didn't see the full -- we didn't see the revenue effect of that coming, right? And then in Q3, in line also with the strategic realignment, we have taken the choice here to reduce marketing by quite a lot. But I think the highlight here to say is -- and we can touch upon that in some of the next slides that our player acquisition model is improving, meaning that we can generate players at a lower cost. And I think if we look, for instance, specifically paid, we have nearly halved our marketing investments, but we make 2/3 of the players if we do the same comparison, right? So we are getting more efficient at what we do here. And of course, that is a very important metric for us and also gives us comfort for the future. [Technical Difficulty] absence of major summer sports events, of course. But then what surprised us in this quarter was the very unusual low sports margins in September. And of course, we still see secondary effects from what I would call still immature market conditions in Brazil. And also mentioned, there is also a third factor here. This is simply the short-term effects from what we call our partner and website plus portfolio optimization initiatives, where we are thinking about the quality of revenue and about long-term earnings. Player intake and value of deposits. Despite the seasonal impact of no major summer sports events in this quarter compared to last year, player intake and deposit values remained on par with the prior year. So player intake reached 109,000 FTDs in Q3 and deposit value reached EUR 195 million in Q3 2025. And as you can see in the graph here to the right, this is very much on par with the prior year, and actually, for my part, very satisfied with that, considering that this was, as I said, a summer with no major sports events. Very important here to highlight, as I mentioned earlier, our player acquisition model was optimized in the quarter, meaning that we generate players at a lower average cost, and this is both compared to last year than it's compared to the previous quarter. Operational highlights from publishing. I'm not going to go into the details for the revenue. I think we touched upon that. Jumping straight into some of the more specifics here for publishing. WSN.com, our North American-facing asset continue to drive with high revenue growth quarter-on-quarter and year-over-year. Key enhancements were made to the AskGamblers platform to improve site performance, monetization and user engagement. We have done quite a lot to AskGamblers in Q3, but there's still also a lot of things to do looking ahead. Work on Gentoo Media's next-gen proprietary WordPress framework entered the final stages after more than 2 years of development with first websites to go live in Q4 and benefits to materialize in 2026. This as it says, this is actually a project we have been working on for more than 2 years, delayed as it often happens with tech projects. But looking very much forward to seeing the benefits materializing now. And I would say look very happy to see the developments we have done in Q3 and the strengthening that we broadly have done in our product tech and design team here also, which is some of the drivers for seeing the progress that we are seeing for this project. Paid revenue also same factors as we touched upon before. So just going to jump straight into the details here also. Following the expansion in Q2 where we decided to invest quite a lot more in growing our player base. The paid unit focused on controlled growth and operational efficiency in Q3. This is also what I'm talking about in the optimized player acquisition model. So compared to Q2, paid retained roughly 2/3 of our acquisition volume with half the marketing costs. Of course, very happy to see that. Growth initiatives launched in Q3 shows positive sign in Q4. And of course, also very happy to see that, that we have sort of managed to add another layer of new initiatives that are growing. And with an improved and more diverse acquisition model, paid is poised to grow in Q4 and beyond. Post quarter, October delivered plus 15% revenue growth compared to September and with November trending even further ahead. Q4 expected as a strong quarter, supported by a reduced cost base and restored EBITDA margins. Also, we've had the negotiation of the new terms on our RCF facility has been completed, which has created the room to explore the right financial structure for the business going forward. In summary, Q3 was a difficult revenue quarter with a combination of factors affecting performance and causing results to land below expectations. However, the quarter also marked the first clear effects of the strategic realignment initiated in the first half of the year. Decisive rightsizing actions have created a leaner, more agile organization with a healthier cost base and stronger ability to execute on growth opportunities. EBITDA margins have been restored with further upside as revenue develops. Post quarter performance is strong. October delivered plus 15% revenue growth compared to September and with November trending even further ahead. And as I said, Q4 is expected as a strong quarter, supported by reduced cost base and restored EBITDA margins. Gentoo Media overall maintains its full year 2025 guidance, but with better cash conversion, free cash flow from operations is adjusted up to EUR 31 million to EUR 34 million from previous guidance at EUR 27 million to EUR 30 million. Thank you very much. Hjalmar Ahlberg: And now we move over to the Q&A session. We're also joined by CFO, Mads Albrechtsen to answer questions. Maybe I can start with a question for you. I mean regarding your restated financials. I guess you worked a lot with that. Could you elaborate, I mean I guess a lot of different changes? Or if you can give some details on what has changed in 2024 and '25 as well? Mads Albrechtsen: I think first of all, it has been very, very important for us to be very transparent about it is what has been presented. Today, we issued a press release with all changes in separately for the sole purpose of actually addressing this theme. As you're also seeing in that press release, there is a lot of different movements in each of the FSLIs. I think the overall theme here is that we want to present our numbers 100% correct. When we did the audit last year, there was some unadjusted misstatements which we found immaterial. I think that's normal for a business like ours. Then we also find other areas in '25 -- went through all the accounts. And then the Board, together with me, of course, took the decision to clean everything up to present everything as transparent and open as possible. That's why we did -- as we did. Hjalmar Ahlberg: Got it. And I mean, looking at your process now on, how do you make sure that you don't have any big restatements again going forward? Mads Albrechtsen: Yes, I think that's an evident question. We have changed a lot, especially around finance and governance in general in the business. Of course, I joined back in March, and we came out of a year of so much growth and transformation and also the years before that. I think it's natural for a business like ours to feel growing pains at some point in time that you need to take this important decision to invest a lot in the infrastructure and the controls and governance. And I feel very much supported by Jonas, but also our Board to invest what's necessary for us to make sure that this has never happened again. Hjalmar Ahlberg: Sounds good. And moving over to the Q3 result there. You mentioned three things that impacted negatively that you did not expect maybe when Q2 was released, sports margin, Brazil and partnerships ending. Can you say anything the biggest effect? Or was it all three of them? Or if you can give us some information about that. Jonas Warrer: Now, of course, the sports margin in September was quite big, right. Also I think if you look at some of our peers, they also talked about this. And then, of course, the sports margins or whether -- if we look at Brazil specifically, the sports margins were low in September, and we also still see this sort of still immature market conditions where revenue and -- revenue share margins can be very up and down in the different months. So it's still a little bit of a market that's difficult to predict. So to what degree, what is what they are, but Brazil was, of course, also hit here in September, right, for both factors. And then -- and I think this is one that's maybe the most hard to quantify. Of course, when we go into this process about looking out about our portfolio, what to invest in and also what partners to work with thinking about the quality of revenue. Of course, you end in some debates and you end up taking some actions that have a short-term effect and difficult for me to put a value on it. But of course, there is an effect here. We are also in a process where we are discussing margins with our partners. And we have a sustainable business together, a very good discussions with a lot of our partners. And of course, at that time, it can also maybe be difficult to have that kind of discussion and then you're also selling, for instance, fixed fees because there is a timing for everything, right. And I think short term, there was an effect in Q3 from this portfolio and partner optimization initiatives that we are doing very dedicated now. Hjalmar Ahlberg: And you mentioned that Brazil continues to be challenging. Is it the market stable for you? Is it continue to decline? Or what do you think we should expect from here from that market? Jonas Warrer: I think it's still a very attractive market, but it's also, I would call it, a chaotic market for us. It's hard to predict what will happen next month, which, of course, there's always various discussions down there to what should happen to the market. So I would say we are optimistic about the market, but we, of course, also -- we are not letting the horses run free there. So we take, I would say, a controlled investment case down there right now. And of course, continuously assessing should we increase, decrease, just do what we do now and whatnot. But we hope, of course, that the Brazilian market will turn out to be great, and it's a market we are optimistic about with some caution, as I said. Hjalmar Ahlberg: And just following up, on looking at your regional development, I mean you comment that Americas is, of course, soft due to Brazil, but then you actually saw some growth in Nordics. Was that something that you -- is it a trend or something that for this quarter that was there? Or if you can elaborate a bit on that. Jonas Warrer: We have pretty good rankings in the Nordics right now for some of our sites and some of our markets. So very happy. It's what we started out doing right many, many years ago. That's where we started. I think I'm very happy to see that we can actually still grow that market despite some people would call it a legacy market, a market that's declining. That's not what we are seeing, and we can still gain market share by taking even more rankings there. And I think we have done that in the last period. And very happy to see that. If we can manage to grow in what you would call probably one of the most like mature markets, we should also be able to grow in some of the new emerging markets. Hjalmar Ahlberg: Good. And also a few questions coming in from the audience here around the guidance. I mean if you look at what have you done this far, Q4 is implied to be a pretty strong quarter. And seasonally, I guess, it usually is, but can you give some -- I mean, you did say that October was 15% better than September. But what do you expect in terms of the monthly development? Are you hoping a lot for a strong December to be able to reach that guidance? If you can give some input on that? Jonas Warrer: Yes, of course, we are hoping very much for a strong December and have also expected that in the numbers we are seeing and in the guidance we have given. December is always the best month in the year. We also expect it to be this year. But November is trending really good compared to October, and October is up, as I said, very strongly compared to September, right? So optimistic here right now about numbers. And of course, December is normally a month where you have both strong earnings in casino and in sport. So this is why it works very well for us, hopefully. Hjalmar Ahlberg: And can you comment anything about -- I mean, October 50% up versus September. I guess some of that is the reversal of the low sports win margin in September. Is that a large part of the growth? Or is it different things in there? Jonas Warrer: No, I would more call it different things. Actually, we've been discussing a little bit whether we would see this effect from players having won so much money that they would just go even wilder. I don't think really that's the effect we have seen here, I would call it more broadly growth across the line. Hjalmar Ahlberg: And a question for you, Mads, regarding free cash flow. I mean, you increased your free cash flow guidance here, strong operating cash flow, partly driven by some working capital changes. Is that something you see you can sustain from here? Or is it something that can fluctuate going forward as well? Mads Albrechtsen: No, I think it's a fair level we are now. We are always focused on our cash flow, but I think that we have improved that side of the business a lot over the last couple of quarters. We are always ambitious in terms of that. But I would say the levels we have now are suitable for our size. So what we should keep in mind, obviously, of course, as Jonas is also saying the quality in our revenue. So the revenue actually turned out to be cash as well. And we can actually utilize all the digital tools and automating processes we have implemented around a much better environment for issuing invoices and collecting cash. That's the sole purpose of why we see such a strong cash conversion in the business. Jonas Warrer: Yes. Yes, if I can say -- I think now with Q2 and Q3 completed with what we have seen now with the solid operational control and efficiency. Of course, naturally, now we move focus towards growing the top line, towards growing revenue but added with this like quality of revenue. Because I think if you look at Q3 last year and look at how much more we generate in the revenue and then you compare the free cash flow from the operations, that's not that big of a difference, right? So I think going forward, revenue growth but with this extra quality in it and then, of course, translating into growth in the free cash flow from operations. Hjalmar Ahlberg: And following up on that on the balance sheet, maybe for both of you. I mean, you said that you're evaluating the optimal structure of the balance sheet, I think maybe starting you, what does that mean? I mean, do you look to refinance the bond or anything else that you could look forward to? Jonas Warrer: That's a very specific question. No, we are, of course, looking into what would be the best sort of financial structure for us going forward. I don't think I'm in a position right now to say anything more detail about that. And of course, a debate that we are having with the Board and really looking forward to having now also after there has been created this sort of stability around our RCF situation, right? Mads Albrechtsen: If I can comment a little bit about that. I would say like there is two sides of it. One thing is our liability side, of course. The short-term liability side is very much impacted of a quite big tax liability, which is not in reality, a liability, but in terms of how we had structured our setup, it's turned out that in our accounts. We will clean that up to show more accurate picture around that. We have also added a narrative around that in our report, how you should actually look at that net liability. The other element is, of course, it's evident that our bond is maturing by the end of the year. So of course, it's natural for us to look what we should do. It's also -- we should also keep in mind that we inherit the financial structure for the old Gaming Innovation Group post -- and post the split, of course, we need to evaluate what is suitable for specifically our business and our strategic goals going forward. Hjalmar Ahlberg: And then just maybe a final one on the cash flow generation. I mean, you had a lot of acquisitions, deferred payments coming in. Can you remind us, I mean, how much is left on that? And do you think more of the cash flow we will go to you, not from acquisitions. Mads Albrechtsen: We have a little bit above EUR 6.5 million left. Hjalmar Ahlberg: All right. Sounds good. Jonas Warrer: So that has been reduced by quite a lot this year also, yes. Mads Albrechtsen: Going out of this year, I think we have spent roughly EUR 40 million related to prior year acquisition, investments, et cetera. So of course, that put a certain burden cash flow wise on us. Hjalmar Ahlberg: And looking at the OpEx levels, I mean, you did a really good job by coming down after your cost optimization program. What do you see from here? Do you think this is the new level where you stabilize from, and will we see more optimizations from here? Jonas Warrer: I would call it around this level right now. There's probably still a few things to do in the organization in terms of executing faster in a more predictable manner. But cost-wise, I think we are where we are, should be right now. I think more I would put the focus towards revenue growth and growing top line. Of course, I think what we have learned here in the last few quarters is that there is actually a lot of potential in the organization when you start to think about doing things better in a more structured and controlled manner. And of course, that is then a learning that we, of course, always need to also do that in the future. And I think if we look back at '24 there was far more focus on revenue growth there, right? And we probably took some missteps there in that process in terms of letting the organization grow and the processes maybe not being the most efficient and so on. So I think clear learnings from this year and something we should take into the future of Gentoo Media, of course. Hjalmar Ahlberg: Yes. And looking at what can drive growth. I mean your products, recent Google update, you mentioned, I mean, some ups, some downs. It sounds like usual, but could you say some more about that? AskGamblers has been kind of sideways declining? Do you see that stabilizing from here or... Jonas Warrer: Yes, I would say growth in broad sense, we can either optimize how we acquire traffic, how we convert traffic or how we monetize traffic. I think we are very good at acquiring traffic. I think we can optimize how we convert the traffic and also I think we can optimize how we monetize the traffic also with this sort of quality revenue perspective on it. So things like conversion rate optimization, getting that more installed into the organization, having a stronger product portfolio that converts better with more user features that creates retention towards users. We can definitely also, of course, we work with so many different partners. And that has been a metric for us in the past with diversification. I think what we are saying now is that we, of course, looking at all of the different partners we work with and want to see that we work with partners that also invest in us, where we have a healthy sort of margin together. So that, of course, also means that there's work to be done here, and there's things to optimize here. So I would say, traffic part, of course, we can always rank for more. And we are, of course, working very hard on that. But I think if I look at our skill levels, what we can do better is probably more the conversion part than monetization part. Hjalmar Ahlberg: All right. And also a few questions here on the audience. From AI search, you mentioned as well in your report that you are doing some to mitigate the impact from that. Can you both talk about, I mean, what impact you've seen from this far and also more about what you're doing to -- I mean, I guess, benefit from this in some sense? Jonas Warrer: Yes. I think impact is still discussing with and what they see. There is some sort of impact, but I think it's hard for us to quantify still also notably within iGaming. We still have a lot of people that prefer coming to our sites to actually see what a human has sort of reviewed and chosen and recommended for them. I think also that then talks into what are we doing about it. I think, of course, our website made by humans for humans, but also with strong product features, adding loyalty programs, being more sharper with offers, what we promote to the user, so it matches what the user is searching for. I think there's still a lot of things to be done here. And I think if you look at iGaming and affiliation overall, you have been able to get away with having very simple sites that essentially are just top lists, and maybe the bar has been raised there. And maybe that's also fair enough. It's also for the better of the user and then for the better of our customers, the operators. So maybe it is a good thing right now that we are raising the bar, and we can definitely also raise the bar and we are doing that. Hjalmar Ahlberg: Another hot topic, I mean, if you look at the mostly -- maybe the U.S. market, the prediction markets. Is that something that you are generating traffic to or revenue from? Or is it only a small... Jonas Warrer: Very small still. But, of course, the market we are interested in. I think a market that's evolving quite fast right now. It feels like it's a bus that's driving, and we are trying to jump on it notably in publishing, of course. If you decide to do something, it just takes a few months before we start to see an effect from it, right? Otherwise, it comes with too high risk. So I wouldn't say that we see notably results there, but of course, something that we would like to see growing also. Hjalmar Ahlberg: And another on U.S., I mean sweepstakes has seen some regulatory changes, I guess you can say. Is that something that you see in your business as well? I don't know how big sweepstake is for you, but... Jonas Warrer: It's a growing market for us, vertical. And of course, one of the drivers behind what we see in the U.S. with WSN.com. That being said, of course, there is some risk here from a regulatory point of view, right, with the discussions that have been going on there. So I would say use the opportunity that's there now, but we shouldn't go all in on sweepstakes. And I'm happy that it's still not a big part of our business in that sense because, of course, it would be nice to get clarity on what will happen in the U.S. over the next years when it comes to sweepstakes, which is a bit of undecided right now. . Hjalmar Ahlberg: Got it. And a few more from the audience here on the cash generation. I mean you're seeing higher cash generation, upgraded guidance. When do you think you can do share buybacks? Or is that something you're looking at? Mads Albrechtsen: It's a valid question we're getting every time. And I think that the answer is still the same. That, of course, that's Board decision ultimately. But right now, we need to fix the balance sheet we have. We need to clean that up and make sure we are presented as smooth and operate as smooth as possible. If that require a little bit of more investments for us, we need to do that for secure -- for the good for the business in the long run. Then of course, we need to fix the bond. We need to fix the elements before we are going out and doing that. That will be natural. But of course, it's an element we are discussing all the time. Hjalmar Ahlberg: Got it. And also maybe you kind of answered this, but I'm just testing anyway. I mean, looking at your guidance, I mean, you came in a bit soft in Q3. Wouldn't it be prudent to kind of lower your guidance a bit if you can give some flavor on why you not did that? Jonas Warrer: No, we see Q4 developing very positively. I think that's the short reply. Hjalmar Ahlberg: Got it. And also, I mean, a few general question here, if you can give some kind of trends. I mean you've mentioned AI search and so on impacting prediction market [indiscernible]. But can you see some broad trends maybe globally in North America, Europe? What's happening with affiliate marketing in the next few years? . Jonas Warrer: I think broad trends, we have seen -- I think I also talked about earlier, we have seen some smaller decline in margins here, right, when we work on revenue share earnings. And that's something we are very focused now on discussing with our partners. I think we work with more than 300 partners where we are in more than EUR 10,000. So we have a lot of partners to work with. And diversification has been a big theme for us. But I think going forward, we also, of course, want to work with the partners, where we continue to see that we have the margins that we have been used to and where we have a fair partnership. And I think I would assume that's also a trend for the other affiliates out there. We see -- at least we see broadly across our different partners and are now discussing with some of them, what does this mean, what does it mean for the future. There are a lot of partners to work with. Some of them are doing amazing in some markets, and some of them are doing less amazing in some markets. And I think going forward, this sort of the partner optimization aspect becomes more and more important. Hjalmar Ahlberg: Okay. Perfect. Thank you very much for joining. Jonas Warrer: Thank you very much.
Operator: Good morning, ladies and gentlemen, to a conference devoted to talking about the results of the KGHM Group for the third quarter of first 9 months of 2025. We have President, Anna Sobieraj-Kozakiewicz with us; Mr. Zbigniew Bryja, Deputy Manager for Development; Piotr Krzyzewski, Deputy Board President for Industrial; and Mr. Laskowski, Deputy Board President for Investment and Investor Relations Director. The meeting is broadcasted online, and you will be able to send your questions to -- during the conference and afterwards, and all the answers are going to be published either during the conference or afterwards. And now Mr. President, over to you. Andrzej Szydlo: Welcome, ladies and gentlemen, and apologies to the investors who are watching us from the Western Hemisphere. Apologies for atypical time of the meeting. But due to the tight schedule, we needed to move the time of the conference a little bit back. Due to also the tight schedule I mentioned, I will try to make it very brief today not to get into the competence of further speakers today. So to give you the bird's eye view of our situation, I'll start with an anecdote. But yes, this slide and the trends that we have been seeing for many months about KGHM and influences its results. I think I can jokingly say that maybe LME -- copper prices on LME should be in Polish zloty because what does this slide show us? 5% copper price in terms of USD year-on-year. So 9 months -- first 9 months of 2024. The exchange rate for -- between USD and PLN is minus 4% year-on-year, which gives us the stable results, unchanged results. So the status quo is unchanged. So if the stock market would be in Polish zloty, this chart would be much more predictable. And then average copper price for 9 months were at the level of $9,556 in dollars and PLN 36,257. We see a marked increase in terms of silver price, which is a very important product of KGHM. Let me remind you, we are the second top producer of silver in the world. And here, we have 23% of increase in terms of zloty and 29% of increase in terms of dollars. Of course, that influences our results. However, this increase of copper prices in dollars happened by the end of the reporting period. And strengthening of zloty has been observed throughout 2024. Let me just remind you that at the end of last year, the dollar versus zloty was PLN 4, PLN 4.08, PLN 4.10. Next slide, please. In reference to the previous slide, we see a minus 1% in terms of adjusted EBITDA in KGHM Group. And in KGHM Polska Miedz S.A., we have minus 1%. So almost the same year-on-year, of course. And judging by the fact that the copper prices remained unchanged and in the first half of the year, we had a major renovation in Glogow smelter, so a decreased production year-on-year compared to 2024 by 20,000 tonnes of electrolytic copper. The drop of revenues by 1% can be treated as only 1%. Then adjusted EBITDA of KGHM Polska Miedz plus 5% compared to 2024, and plus 16% in terms of adjusted EBITDA in KGHM Group. And then net profit, a bit of deja vu because the first 6 months -- throughout the first 6 months we had the same results. So it's worse than first 9 months of 2024, both in terms of KGHM Polska Miedz and consolidated. Key production indicators, as I said, 20,000 tonnes of electrolytic copper less. And it is due to planned maintenance on smelter infrastructure in Glogow smelter. So in KGHM Polska Miedz S.A., that was 421,000 compared to 441,000; better results in terms of Sierra Gorda, as you can see, plus 14%, which is almost 8,000 tonnes of copper more in Sierra Gorda. And in KGHM International, a little less than 5,000 tonnes less, which is minus 11%. I think Ms. President will talk about the reasons of decreases in Robinsons mine -- in Robinson mine. So again, I'm not going to precede her part of the presentation. We see a constant trend, about 66%, 67% of payable copper in national, domestic assets comes from own concentrate, KGHM, 1/3 that would be purchased metal, either imported or scrap. This is no surprise. It's a stable level. And we do hope that this stability won't move towards lower production from own concentrate towards purchased metals. And here, we have the production results in terms of other assets. So Sierra Gorda and KGHM International. Silver production slightly higher, plus 1%. TPM production, minus 6%. And molybdenum production markedly higher, plus 95% better efficiency and better molybdenum concentration in Sierra Gorda. And to finish up, what I would like to emphasize, the results are really good, especially the EBITDA. The exchange rate differences affect the net result. And we are very happy that -- with what we've been commenting on for many years -- for many quarters, the cost discipline, because the increase of costs that we had in the previous years, systematic increase due to the cost of work or cost of energy, we have managed to stabilize it. I'm pretty sure that President Krzyzewski will talk about it. There is no increase, even decrease of C1 cost in foreign assets, international assets, domestic assets, the increase of C1 cost is minimal. And if we look at C1 without the tax, we even are dealing with a decrease. Okay. Now Professor Laskowski. Miroslaw Laskowski: Yes, let me give you a bit of details in production. In terms of production results in all the segments, ore extraction, production of copper and concentrate, production of electrolytic copper and metallic silver production, we are within or even above the budget. And the Q3 of 2025, is one of the best production quarters compared to other -- previous year's period and compared to the other -- the previous 5 quarters. So metallic silver, as you can see, plus 1.5% year-on-year. And Q3, as I said, of 2025, 330 tonnes, and this is one of the best results across these 5 quarters that we compare it with here. Electrolytic copper, in Q3, we returned to the production level of 149 tonnes. These are the amounts that we got in Q3, Q4 last year. The President Szydlo talked about the maintenance in electro refinery department in Glogow II smelter, this would contribute to the lower production results of the first 2 quarters of 2025. And in terms of production -- in terms of ore extraction, it's similar to 2024, over 23 million tonnes. And Q3, that would be a level of extraction of 6 -- 7.8 million tonnes, the highest in comparable periods. And production of copper in concentrate, it is slightly, but still higher than the compared 2024 year-on-year. So again, 304,000 tonnes, the highest level of production in compared -- with compared periods. These are really good results. And I need to emphasize that we had unfavorable production calendar. 2024 was an off year, and February had 29 days, 1 production day more for KGHM S.A. is 100 tonnes -- 100 more tonnes of extraction, more concentrate, 1,000 copper in concentrate, 1,700 electrolytic copper or 1,000 tonnes of wire copper. So this is one more day only in our production results. So -- and then one more thing about Zelazny Most reservoir. We have safe level of filling it, 6 million cubic meters of water. This is what we mean by safe. To compare in summer last year, when we got to KGHM, the filling of the reservoir of the main and southern part reached dozens of cubic meters. And one more important thing in terms of Zelazny Most, we have obtained all the agreements and permits to the level of 205. So that gives us a couple of -- or more than a dozen years of safe work in KGHM. Anna Sobieraj-Kozakiewicz: And in terms of production results of international assets, another very good year for that sector in terms of payable copper production. In Sierra Gorda for 55 assets, the level of payable copper production was 64,900 tonnes by -- it's an increase by 14% year-on-year, an increase of the production results. This result is due to the higher grade copper ore as well as higher recovery despite the lower volume of ore produced. Very good results in line with our budget assumptions. It's worth emphasizing that, thanks to the optimization activities, we have stabilized production in Sierra Gorda, and we see more predictability of production, both in terms of copper and molybdenum. In terms of molybdenum production, here, we can boast almost 100% increase of molybdenum production year-on-year. In Q3, that was over 2 million pounds. And so by the end of September, we have 4 million pounds in total. And then molybdenum production starting from May -- end of May, actually, we see a marked increase of that. And this is due to higher concentration of molybdenum in the ore as well as higher recovery despite the lower volume of ore processed. And what we need to emphasize here, molybdenum production in Q3 was one of the highest in the history of Sierra Gorda. In terms of silver and gold production, we see slight decreases, but this is due to lower volume of ore processed. In terms of gold, compared to the budget of this year, we see that we are still higher than our budget expectations, which, thanks to high prices of this metal and good TCRC premiums, contributes to a very good level of C1 below $1 per pound. Next slide, please. When it comes to the production results of KGHM International, the production of payable copper after 9 months is 40,600 of tonnes of payable copper, so a decrease of 11% compared to the reference period, and this is the result of the lower content of copper, lower volume and yield of metal. But here, we need to highlight that we are referencing to the previous year where the results were record high. And this year, the production of ore goes into liberty which has lower parameters of ore. However, we can see that we are within the budget when it comes to the production of copper of 75% of the production. When it comes to the production of the gold in Robinson, we are above the assumptions for the given year. And I was referencing to Robinson mine. Ladies and gentlemen, we can see that the production results of international assets are very good, which transfers to the good financial condition of international units. So at the end of September, we had $240 million, from which $210 million was paid by Sierra Gorda and $30 million KGHM International, and those are payments from guarantees, loans and provision of other services. So I can say that this is a very good year for international assets. Thank you very much. Zbigniew Bryja: So Professor, right now, when it comes to the advancement of development initiatives, we have similar parameters compared to the previous year for the given period. So when it comes to the development plan, it was 62%. Right now, we have 63%. So we can compare those values at the end of the year. In accordance with the conversations that we had with the departments, we can say that we've completed our tasks when it comes to investments and the execution would be at a similar level. So 96%, which is a very good result. Let me remind you, the investment plan, so PLN 3.800 billion, also the reserve that we will not be touching, will not be moving the assets. When it comes to the distribution divisions, as mentioned during the previous conferences, mining industry when it comes to the development spending is PLN 2.492 billion from which PLN 2.406 billion is for financing; leasing, PLN 86 million. So let me tell you 3/4 of 80% is the spendings for mining. When it comes to division for tasks of recreation development, it's 35%. In total, it's not what we would like to see, but this is something that we can do because the recreation and maintenance are very important components that provide us with the chance to survive, and we cannot -- those cannot suffer because of our investment plans. So we need to divide those assets so that every party is happy with the values they receive. So let's go to the next slide right now. Okay. This slide, the circular slide that we can -- this pie chart. So we can go to the segments. So PLN 2 billion -- of the execution, PLN 2.492 billion, 2.019 billion is mining. So of course, outfitting of the mines because we are mentioning that this is a type of activity that every day we are extracting every part of the deposit, let's say, so a part, we should also prepare for the excavation for every other day. So that's why maintenance of the mining region, so the construction of conveyor belts and stuff like that is important. Also, for the construction of the transformer station, those are all basic tasks. There are plenty of basic tasks that make our work in the industry mining -- in the mining industry profitable. So we need to have active mining department. Another very important item in here is replacement of machine park. And we undertaken plenty of actions in here in accordance with the regulations that are in force to rationalize the purchase of machines. And this year, right now in -- for 3 quarters, we have 201 machines, and the goal is 256 machines. And this is the approximate number because every year, depending on the needs, it's always the approximate. So 5 -- plus/minus 5 to 10 machines. And so that's why we shouldn't be mentioning any delays because this is a result of the previous year. So 256 machines. This is something that we want to purchase until the end of the year. The next item, mine dewatering. So we know the problem. So the water in Polkowice-Sieroszowice. So for example, the anti-filtration barrier needs to be prepared under the shaft SW4, so PLN 187 million. The development of the Zelazny Most tailings storage facility, and we are referencing to that because it was all related to Q3 to get all the acceptances, permits for the exploitations, for the construction, the environmental authorizations and licenses as well, so we can proceed with the construction of the storage. So we need to be consistent and go step by step, but this is also complemented by the investment in the construction of the so-called barriers surrounding the reservoir. So in order to decrease the pressure, and this is the so-called -- so those also -- some wells, special wells, relief wells in order to relieve the area. Also, the next part, so the replacement of mines and tailings divisions. So different types of modernizations of conveyors, shafts, ACs, ventilations in the hydro facility, hydrotechnical facility. So for example, pipes, the network of pipes because as you can probably recall, one of the reasons of gathering a substantial amount of water when we arrived to KGHM was exactly that. So the infrastructure of pipelines was not good. So we are removing this downside. And right now, we can maintain the safe level of water of Zelazny Most, and we can proceed. So exploration, this is not significant, so PLN 86 million. And the next year due to the entrance of Bytom Odrzanski, we will be drilling new holes in order to get some more exploration within that region, and this is in perspective. Maintenance of shafts, those are mostly -- so PLN 56 million, and this is mostly for the SW4 shaft complex. So step by step, we need to remove the salt and move the infrastructure. And the biggest part, so deposit access program, so 34% for all investment -- mining investments. And on the first slide, we have 35%. We have development. So this is, in fact, this position, this item plus exploration, of course. So it's still mining and mostly prepared for north, for shafts because a shaft without the possibility of connecting to the mining system becomes a well, and we are not constructing wells. So that's why we are very much interested in the intensification of work for Retkow, [ GG-2 Odra ] and Gaworzyce. And for the plant areas, the gallery areas that we have, for Q1, we have 32.4. So within the plan and the execution is not endangered in here, and we are right now going back to the situation from a year ago. So the excavations were underwater. And right now, they are well prepared and accessible. So we are sort of like trying to get the time back. But the excavations are not everything. And for example, we need conveyor belts for those. We need to prepare roads. Those need to be limited because, of course, we need to prepare the proper conveyor belt systems for that. And it's all when it comes to the basic inflows, and this is also a slide that shows the scope of our works for the upcoming years. And in green, we have the upcoming shafts that we will be constructing in the future. And please pay attention that in June 2023, we have the deconstruction of the shaft. We have been noticing the increase, and it all transfers into the ton of excavation of yield. So right now we have a stabilization of Glogow. So those amounts are not so relevant anymore. But when it comes to the construction of the following shafts, so GG-1 and on the surface and the equipment of the facility, we have the reinforcement prepared for the shaft and anti-weight in -- for one of the machines, so machine 1. And we are also preparing for the construction of the target cage. We are also increasing from 33 to 34 when it comes to AC of megawatts, but it will be given for the exploitation in September '29. And -- so PeBeKa 2 units from our group, so the general contractor for the surface works, so the liquidation of the temporary facilities and Bipromet, so a company that plays a role of the so-called engineer of the contract will be overseeing the progress of work. When it comes to GG-2, apart from the planning work for the municipality because we need to get the permits because as you know, in some other words, the GG-2 will be in different place as compared to what was planned before. And the works are going in accordance with the schedule when it comes to the transformator station. So the first hall is done already. So there will be no dislocation and the shaft will be there. When it comes to Gaworzyce shaft, we have everything prepared. We are preparing for the geological drills right now. So it's all when it comes to the shaft. Let's proceed to the next slide when it comes to the execution in metallurgy. So it's PLN 358 million, and the main investments and the point of interest of ours at the end of the year. There will be a renovation, Cedynia mine conducted. But in general, we are preparing for Glogow 2 that will be taking place next year. So the first contracts, purchases as well, and those are the main points of interest when it comes to metallurgy. When it comes to ZWRs, it's modernization of mills, crushers, ball mills and press fillers -- filters, sorry. And we are counting on ending the Legnica smelter as well. So the new technology without no caps, no cap -- and until the end of the next year, this installation will be accessible and available. So that's all when it comes to the investments, the basic info. Thank you very much. Andrzej Szydlo: I will digress for a moment here. Such detailed presentation by President Bryja results from 2 things. First, his passion; and secondly, the importance KGHM puts on investment and development and providing long-term efficiency of our facilities. Thank you very much, President. You can see -- we can see your enthusiasm and heart, but time is running out. So let's move on. Piotr Krzyzewski: Thank you. So let's move on to financial results. Piotr Krzyzewski. Yes, it's good to be last because I can start from a summary. So I will borrow some of the words that my predecessors used. So to summarize, the Q3, but also all 3 quarters of this year, we've observed and have been observing good production levels with good cost discipline. At the same time, we're using our opportunities. In consequence, we have good financial results and creation of additional value for shareholders and stockholders. This is what we focused on, and you can see that after these 9 months. Before we move on to the presentation, 3 key aspects I would like to emphasize. If I started from finances, I would say the first important element here, President Szydlo mentioned that is the exchange rate. We discussed a lot about tariffs. They are important. However, through the prism of our results, we are able to manage our trade activities so that tariffs do not affect us so much. But the exchange rate affects us just like all the other European economy and all the other industries in Europe. And this is a great challenge in terms of competitiveness for the industrial -- from the European industry. In Poland, it's particularly important because zloty is also very strong right now. So as the President said, on one hand, the copper prices raised by 5%, and our currency also raised by 5%. So at the end of the day, all the national assets, the price of copper in dollars then calculated -- recalculated into zloty has the same value, even though it increased in general. In terms of trade, again, the last quarter was very dynamic. On one hand, spread between LME and CME grew by PLN 3,000 almost. And then we had the 2nd of August when we finished the claim based on Paragraph 232 in the States, and the decision was made of not imposing tariffs on semi-finished products, but raw materials were tariffed -- were taxed. So again, it did not affect us so much. We were able to rechannel our goods and the flow of our goods. So thank you very much for the commercial team and our clients, our logistics department. So we -- there was a lot of time pressure there. But as you can see, the results are impressive. And energy aspects. Again, very volatile, first transactions, first PPAs in the history of the company. We purchased 110-megawatt hours, 2 big wind farms that will provide energy for us next year. To give you the bigger picture, this is 5% of the purchased energy a year. And if we look at it from the perspective of the infrastructure, it's like Legnica will be covered by 72% by wind energy. And from the perspective of ESG, it's like in Scope 2, we reduced Scope 2 by 5% next year. So energy transition is important, but I also have to emphasize the fact that this is a very efficient financial instrument, and it will contribute very well to lower cost of purchasing energy in the next year and years to come. Moving on to the presentation now. In terms of group revenues, it's 1% lower. But as President Laskowski mentioned, it has its reasons. President Szydlo, the maintenance on electro-refinition at Glogow was responsible for that. I will show you what it means. We produced less, but we managed to earn more. And this is something we focus a lot. It's not about production volume, but we want to produce as efficiently as possible in terms of finance. Operating costs, also lower by 1%. What was mentioned during our first quarter conference, we focus on cost discipline. Cost optimization program is working very well. And then if we take into -- exclude depreciation, then it's minus 2%. So this is something we will be doing in the coming periods, as you will see. So the adjusted EBITDA, as you can see, is plus 16% year-on-year. But again, keep in mind the fact that in 2024 for 9 months compared to 9 months 2023, EBITDA -- adjusted EBITDA was plus 43%. So very, very high dynamics of growth. So we're raising the bar. In terms of the contributions, as you can see, over PLN 1 billion higher EBITDA, out of which Sierra Gorda, PLN 7 million, then KGHM Polska Miedz, and KGHM International, also strong contributors as well. President also mentioned Sierra Gorda here. What we do in our domestic assets, we also do in international assets. So we focus on one hand, fulfill our cost discipline. And in Sierra Gorda, it's a low-grade mine. This is the most important aspect. So the financial lever is very important here. And we've made a lot of changes here, both personnel and managerial, minus 1 level, relations with our partners, so far T2 is also doing very well. So the team of the President also contributes in many areas to Sierra Gorda. And the cooperation between the assets is also very good, and we see very positive results of that here. Here, looking at group sales revenue, the first is, yes, the renovation in electro-refinition. You can see the sales -- changes in sales volumes is copper and this is due to the maintenance in electro-refinition. So by 16% own contribution, own concentrate and 4% only in foreign inputs. So it shows how well we are able to adjust. A great thank you for the smelter departments. So we're looking at production through the perspective of finances. And the results are really, really well. The other positions should be connected. So position 2, 3 and 4. If we combine them, we have PLN 800 million plus. So this is how efficiency and management looks like, risk management looks like. This is plus PLN 800 million. To remind you, last year, we have generated PLN 670 million plus. In this year it's over PLN 100 million. And again, our strategies work in a way that they can allow us to participate in exchange rate increase. So this contributed positively to the result. Here, we have the expenses by nature. Again, we're getting very close to the inflation levels, 4%, both in terms of capital group and similarly on domestic assets, again, again, plus 4%. The biggest value positions here are well, tax, unfortunately, plus 10%. In terms of value, I would say, cost of -- labor costs, PLN 300 million, in the capital group in Poland, PLN 200 million. Also here, we have the reserve for the pension expenses. And let's take a look at the use of materials here. It's also going -- it's still going down. And a great work -- a great achievement of the capital group here. Energy and energy factors here, the quantity decided here, the price is lower, but we used more energy, less gas. This was also a result of some of the maintenance activities on steam and gas blocks. So I would say the budget of gas plus energy keeps being optimized, and that contributes to very good results. And that -- that gives us the image we see. So C1 unit cost. In the capital group, we have minus 6%, but if we exclude the tax, the decrease is minus 13%, which is a very good result. And that here is a result of both production efficiency and cost regime. Taking a look at some particular clusters of assets in Poland, plus 2%. But again, if we exclude the tax from that, that would be minus 4%. So from that perspective, again, great cost discipline and all the factors that we could influence determine the fact that C1 go down. And then C1 is recalculated and dependent on the USD rate. So if we exclude that as well, then that would place us on the level of minus 9% almost. So this is the real value if we eliminate both the tax and the exchange rate from our analysis. Then taking a look at KGHM International, as the President mentioned already, good levels of production, both on Robinson mine and TCRC is supporting us here. Logistics costs got down mostly. All that contributed to the fact that C1 in KGHM International got down by almost 40%. And Sierra Gorda marked decrease of almost 50%. And here, TPMs are very, very important. And the facts that were already mentioned, TCRC, molybdenum, all the opportunities on the market we have used. And that is showed in C1. And then the financial results. The first column, let me just mention that it's without -- Sierra Gorda excluded. So KGHM International and domestic assets, positive contribution. And what was mentioned by President Laskowski, I would like to thank the mining departments that contributes very, very well in both assets. And as the President said, the last quarter in Poland in terms of ore extraction is very good in Poland. And we see that this tendency is being continued also now. So these perspectives are really good. Second parameter that contributed positively would be our loans and loans also sent to Sierra Gorda. And the biggest negative element, exchange rate differences. To give you the picture. These are the exchange rate differences resulting from our loans granted to Sierra Gorda. And because of that, the change of exchange rate, the result is around PLN 1 billion. And part of our debt, part of all the bank liabilities we have is also denominated in dollars that contributed positively, gave us PLN 200 million plus, but then we are still minus PLN 800 million -- minus. That influenced detrimentally the financial result of the group. Last thing, cash flow, also very important, if not the most important because cash is what matters in the end. Looking at operational cash flow, comparing it with investing activities, we are very close to financing our investing activities with operating activities. And here, I would like to point one thing to your attention. EBITDA positive -- contributes very positively. But then stock, something that will be connected with the maintenance in Glogow smelter. We have some last corrections on our budget for the next year. We don't want it to influence our cathode production. So we are calculating right now how many anodes we need to create to make it in time without this smelter to provide stability of the company. So by the end of September, in semi-finished products, you probably observed that it's over PLN 1.4 billion semi-finished product, mainly anodes that we are producing right now for stock. We have it very well calculated and it pays off, I have to assure you. It will cost us some of the current assets. But still by the end of the day, it will positively contribute to our results. So I think on the annual conference, we will show you that and this element is going to be growing. It's going to be increasing. One more thing that I would like to mention in the last days, to conclude, the cash flow. We will be emitting our bonds in December. This is a planned transaction that contributes to the strategy, that writes in the strategy of stable financing. One of the important elements apart from bank financing would be bond financing. We have the whole program written down. We already emitted bonds once. Right now, we will refinance that emission and that issuance, we want to prolong the refinancing terms, and we want to use the positive situation, market situation. So this is something that you will be shown by the end of the year for sure. Thank you very much. Operator: I would like to thank the Management Board for the presentation of results. Now feel free to ask the questions. And due to time limitations, please focus on the questions for this presentation today. Do we have any questions from the room? No questions from the room. Janusz Krystosiak: I think I have a question from the Internet, from the web. Jakub Szkopek, Erste. It's pretty long. When it comes to 2 years ago when the Management Board was taking job at KGHM, they were basing their actions on the assumed copper prices. Right now the copper prices are 11,000 increase the prices of gold and silver, increase tax on excavation. When the Management Board will test again and reverse the -- and write-offs, and to reverse the write-offs. Piotr Krzyzewski: Yes. So to answer those questions, when I remember from PLN 8,000, PLN 8,250, right now, we are close to PLN 11,000. We need to add one more parameter. Back then, the exchange rate was PLN 4.10. Right now, it's PLN 3.60. It's a very important element when it comes to the increase because it's not high when it comes to Polish zloty, but some other aspects as well because as I understand, the matter of the change when it comes to the taxation, the tax for the balance date, we'll be talking to the auditor, to the supervisor, and this is an aspect that was -- is being analyzed by us, whether there is a reason for that. So we need to have a broader look, not only through the prism of the copper price itself. Thank you very much. Janusz Krystosiak: And to continue with the questions via e-mails, I think it's for Ms. President and for Mr. President, Piotr Krzyzewski. So 2 questions from Morgan Stanley. Number one, when can we expect an update on the Sierra Gorda development? What areas are the feasibility studies conducted for? Anna Sobieraj-Kozakiewicz: So ladies and gentlemen, we are trying to have a very detailed approach when it comes to investments for Sierra Gorda. At the current stage, we are in the preparation of the feasibility study. For which, the end date is at the end of this year or the beginning of the next year. And only then we'll have the full package of information that will be the basis for our decision. And we can -- we will be able to talk about the further investment decisions. Right now, the gathering information stage is in progress. Janusz Krystosiak: Question number 2 from [ Janusz ]. What part of the turnover capital -- working capital can be reversed in Q4? Piotr Krzyzewski: So as mentioned, the key element will be the matter of the construction of the optimal state of semi-finished products. So -- and what will be the burden of the turnover capital? And we are working on some other elements as well to free up the capital as well, and this is something that you can observe too. So it's very difficult for me to provide the details when it comes to the numbers. But just to add on what Ms. President was saying, our strategy from the very beginning was for our assets to be developed, and we are focusing on what you can see right now, and we have agreed with our partners that, first, the assets need to be produced effectively, the goals, the results need to be reached, and then we can talk about the investments. The first one is executed, reached and needs to be continuously reached. But right now we can talk about the investments. And I think that this aspect is very complex because from the perspective of the fourth line, for green line, this aspect is much more complex. So we are making the drills in the concession area. So the mineralization is in the neighborhood. And the layout, the exact layout of Sierra Gorda, this is something that we are having discussions over. And we are considering all the assets that are developing in terms of operations, and we are looking at the investments from the financial efficiency. Andrzej Szydlo: So I'll just add on this. From the very beginning, so for a longer period of time right now, we have been saying that, first and foremost, the international assets should be organized and optimized, and this is something that is being done. And secondly, not so long ago we had a problem of the due date of loans, [ so Doosan ]. And this problem was resolved too. The third thing, this year, Ms. President was referring to the payment of loans. And it's good that it's happening. So this will also be contributing to -- for us to protect us from the proper levels of the pay of the loans when it comes to the exchange rates. And the last thing, the most important one, the CapEx that are pretty relevant when it comes to the off-sites and the fourth line. And to be truth with you, the burden of the investments, when it comes to the group, we all know it, and we have been signalizing it as a Management Board. The biggest challenge when it comes to the investment is at KGHM S.A. And of course, the project that can be attractive, so increase of the -- increasing the Sierra Gorda production capacity when it comes to the fourth line, provided that it's going to be effective, efficient, can go hand-in-hand with what we are planning when it comes to the finances for KGHM. So for example, if we consider this to be very efficient with relatively short return rate, we need to remember that fourth line is working negative -- in a negative manner for the so-called loans. And we are turning this capital well, it's working well. So when it comes to the answer, we need to search for the proper balance for the investments. First, we need to proceed with the ones that are the most important. So for example, the ones that we need to execute, then we need to proceed with the ones that are the most profitable ones. Anna Sobieraj-Kozakiewicz: So just to add on that answer. The last sentence from me, we would like to focus on the production to be at a foreseeable level, and this is something that we are putting a lot of effort into right now. We're talking about the Millennia CapEx, $700 million for the fourth line of Millennia. So this is something that we need to keep in mind. And what was stated before, the international assets are contributing positively to EBITDA. So right now, 46% of corrected EBITDA. But at this CapEx, we need to be sure that the return rate will be proper. Andrzej Szydlo: So just at the very end, to remember, for Sierra Gorda, the decisions are made with our partners. So we are -- we have 50% of shares, but this is not a monopoly for the decision. So we need to agree upon those and we are co-referencing and searching for proper solutions. Piotr Krzyzewski: I would like to add one more sentence when it comes to financing because ladies and gentlemen, this is something that we have been communicating and saying to you. We are trying to separate the international assets from the banking perspective. So for example, $500 million for Sierra Gorda, there's a bigger option in here to get more financing. KI is getting more financing for different assets as well with our support from the substantial part. So I would like to say that we are not defining the risk of cannibalization of CapEx because I think there is no risk as such. But when it comes to the loans and changing the philosophy not to generate additional loans, yes, this is something that we have been focusing on from the very beginning, and we have been -- so we will be providing the financing from the operational standpoint, but for respective assets. Unknown Analyst: If I can just ask President, Krzyzewski, you said that we produced less but earned more. So at KGHM, Q4 usually was the biggest sales. So what is the prediction for the future that in Q4 we produced more and we sold more and earned more. Is that possible for the future for Q4? Piotr Krzyzewski: A very good question. But I have to answer when it comes from the sort of like the back office perspective. And I think that this is actually publicly available when it comes to the European market. So the benchmark, so [indiscernible] for cathodes is 40% higher compared to this year. So I will not comment on that. But for sure, we will be optimizing that in the long perspective. The company earns as much as possible on its products, of course, depending on the availability of the items on the market. And this is something -- we also need to remember about the geopolitical world. So we are responsible for the 50% of the copper in Europe. So this technological tract is dependent on us in Europe, depending on the partners, depending on the availability of the product and raw materials, too. Janusz Krystosiak: Thank you very much. One more question from mBank from (sic) [ for ] Mr. President, Bryja. When it comes to -- what will be the profile of the expenses for new 3 shafts in time? So the CapEx will be divided in even amounts. Are there any more intensive -- intense periods? Zbigniew Bryja: When it comes to the construction of the shaft, the most expensive part is the deepening part and then equipment of the shaft when it comes to GG-1 and Retkow is of different purposes. And this is transferring to the -- providing proper equipment for the shafts because we need to remember that any additional equipment is sort of like limiting the amount of air within the shaft. When it comes to the first hole drilled in Retkow, we are just waiting for 2 more, the construction of the freezing units, so 44 holes need to be drilled the whole installation. When it comes to the deepening of the hole, we are assuming at 2028, 2029. When it comes to the shaft, it will be deepened and evened out in accordance with our schedule around 2036. And this is the most important part for Retkow, but all the remaining shafts within the period of 2 or 3 years will be going after that shaft. So that will be the concentration of the period from 2034 to 2040. So those will be the expenses in different parts of time for 3 shafts. So Retkow will be finished in 2040, the next one in 2042, and the next one in 2044. So if we are talking about the deepening as being the most expensive part, and then providing the proper infrastructure for the shaft is the 30s, but it's very difficult to indicate a specific year because we haven't started the deepening period yet. So it's a matter of a year or 2 years. So thank you very much. Janusz Krystosiak: Thank you very much. So do we have any questions from the room? If not, then it's... The last question, a bit technical, analytical from me. I will try to answer that and maybe Mr. President will -- so Adam Milewicz from PKO BP. Why in Q3 of this year, why is it the income tax CIT, corporate income tax, is so high? Piotr Krzyzewski: So last year, we've been observing the return of CIT from the previous years, and this is sort of like distorting the analytics part of this tax. And this one that we have right now is a standard level. So please consider that for -- in terms of the previous periods as well. Operator: Right. Thank you very much for attending this conference and feel invited to the next one that will be happening next year. Thank you very much. [Statements in English on this transcript were spoken by an interpreter present on the live call.]
Operator: Good day, and welcome to Palladyne AI's Strategic Update Conference Call and Webcast. [Operator Instructions]. Please note, this conference is being recorded. I will now turn the call over to Brian Siegel, Senior Managing Director of Hayden Investor Relations. Brian Siegel: Thank you, operator. Today, I'm joined by Ben Wolff, Palladyne's AI's President and Chief Executive Officer; and Trevor Thatcher, Palladyne's Chief Financial Officer. On this call, Ben will discuss the details of the strategic transformation announced in this morning's press release, followed by a Q&A. Any forward-looking statements made during today's prepared remarks or in the question-and-answer session, whether general or specific in nature, are subject to risks and uncertainties that may cause actual results in the future to differ materially from those discussed on today's call. These risks and uncertainties include, but are not limited to, specific risks and uncertainties disclosed in Palladyne AI's periodic SEC filings. The company assumes no obligation to update any forward-looking statements or to update the factors that may cause actual results to differ materially from those that are discussed on today's call. Please note that today's press release and this presentation will be available on the Investor Relations page of Palladyne AI's website. They have also been filed on Form 8-K with the SEC. Now I'd like to turn the call over to Ben to discuss this morning's exciting news in more detail. Benjamin Wolff: Thank you, Brian. Good afternoon, and thanks for joining us. Today is a defining moment for Palladyne AI, an American company where artificial intelligence meets the physical world. We build embodied AI, systems that don't just analyze data, but sense, decide and act at the edge in real time. Our mission is to be America's first multiplier, whether for the Department of War or industrial customers. Today, I'll cover how the GuideTech and the Crucis companies acquisitions, which for the latter, I'll refer to as Crucis in today's presentation and the launch of Palladyne Defense transform us into a fully integrated AI and defense technology company. Before we begin, a brief reminder. Today's presentation includes forward-looking statements that are subject to risks and uncertainties described in our SEC filings. With that said, let's begin the strategic review. Most people think of AI as something that happens in a data center, algorithms that analyze information and deliver insights. Embodied AI is different. It's intelligence that lives in the real world. Again, we enable physical systems that can sense, decide and act at the edge in real time. That difference between intelligence that analyzes and intelligence that acts is where the next generation of capability will come from. The Department of War has made it clear, the future advantage lies not in analytics alone, but in autonomous systems capable of executing missions in complex contested environments. That is the world Palladyne is building for. Before this transformation, Palladyne AI was a pure-play embodied AI company, developing software that brings autonomy to the physical world. Our 2 core products, Palladyne IQ and Palladyne Pilot form the foundation of that capability. Palladyne IQ powers robotics automation, enabling intelligent, adaptive operation for commercial and industrial robots. Pilot provides advanced autonomous cooperation for unmanned systems, currently aerial and in the future, unmanned ground, space and maritime systems and will continue as one of our core commercial offerings. For defense and public safety, though, we've rebranded the pilot variant as SwarmOS, a specialized version designed for collaborative multi-agent missions and swarming behaviors. Together, IQ and Pilot extend our commercial reach, while SwarmOS positions Palladyne to lead in national security, one connected embodied AI ecosystem serving both domains. Palladyne's evolution has been defined by 4 major inflection points, each one building on the lessons of the past. We began with robotics, designing and building sophisticated machines. Then we moved into robotics plus software, embedding decision-making directly into those systems. In the third phase, we paused building hardware to focus exclusively on software, building the intelligence layer that could power any platform. Today, we enter our fourth inflection, one that unites artificial intelligence, aerospace design and American manufacturing into a single vertically integrated defense business. This is where Palladyne becomes more than just an AI company. We're redefining what it means to be a mid-tier defense technology company. With the closing of these acquisitions, we have formally launched Palladyne Defense, a new business focused on embodied AI for national security, including both defense and public safety missions. Palladyne Defense combines ethical autonomy, cost-effective mission capability and precision-driven design, all produced in the United States. Every system we build follows one rule, human oversight by design while reducing human cognitive load and letting humans and machines each do what they do best. This is intelligence that protects autonomy that serves national interest with control, precision and accountability. With the acquisitions of GuideTech and Crucis, we've evolved from a pure software innovator into a purpose-built vertically integrated defense technology business that is fully aligned with the priorities set by the White House and the Department of War over the past 6 months. We now bring AI intelligence, aerospace design and U.S. manufacturing together under one umbrella. For the Department of War, it means a partner that can design, prototype and produce not just code. GuideTech contributes deep engineering talent and rapid iteration of an optimal aerospace platform design. Crucis adds certified expandable manufacturing, capacity -- manufacturing capacity supporting flagship programs like the F-35 and the Tomahawk. Together with SwarmOS, they formed Palladyne Defense, a new American force built on speed, intelligence and sovereignty. We're not just making moves in a vacuum. The world has fundamentally changed, and the Department of War is reshaping its priorities around 3 forces that directly align with what we build and that are driving demand for what we build. First, the Department of War's focus on cost per effect. It's no longer about the largest platform or the most complex platform. It's about maximum operational impact per dollar. Second, reshoring and sovereignty. The National Defense Industrial strategy calls for rebuilding American production and supply chain resilience. Crucis is part of that national resurgence, a certified U.S. manufacturer already supporting legacy and next-generation programs. Third, AI and mission systems. AI is moving out of data centers and into real mission hardware into systems that think, coordinate and act at the edge. Autonomy is no longer theoretical. It is becoming a core operational requirement. These forces define the new rules of readiness, and they create the exact demand environment Palladyne Defense is built for. So why does Palladyne Defense exist? Because the market has a structural gap that neither start-ups nor large primes are designed to fill. Start-ups innovate quickly, but they're too small often to scale production, certify systems or deliver sustained readiness. Large primes, on the other hand, can scale but they sometimes move too slowly to keep pace with emerging threats and rapid iteration requirements. The Department of War is asking for something new with its replicator initiative, an agile, vertically integrated American defense company that can design, build and deliver advanced autonomous capabilities at speed and at scale. That's the gap Palladyne Defense is built to fill. We're the bridge between fast and small and big and bureaucratic. In short, we are the new mid-tier prime engineered for this era of embodied AI, rapid capability delivery and American production. Palladyne Defense is built around 3 core capabilities. First is SwarmOS, our embodied AI and autonomy core for defense and public safety missions. It brings the decision-making intelligence that autonomously coordinates unmanned systems in the field. Second is GuideTech, our aerospace design, avionics and precision low-cost attritable systems group. These are former prime contractor engineers who can take a new concept from digital model to working flight prototype in less than 6 months, a fraction of traditional time lines. Third is Crucis, a certified U.S. manufacturer with the ability to scale rapidly that is already supplying major defense programs like the F-16, the F-35, the Tomahawk, Harpoon and the Bradley Tank. Individually, each is already assisting large primes and defense tech start-ups in meeting the evolving demands of the Department of War. Together, we believe 1 plus 1 plus 1 has the potential to equal 10 as they will get Palladyne Defense one integrated stack, AI, engineering, components and American production, which is exactly the structure the Department of War has been asking for. GuideTech is the aerospace engineering nucleus of Palladyne Defense. As I just mentioned, the company is composed of former prime contractor engineers, veterans of missile, space and unmanned programs who know how to design and iterate at speed. GuideTech is already supplying avionics and design support to multiple defense contractors, proving its value in the field today. GuideTech is already supplying avionics and design support to multiple defense contractors proving its value in the field today. For the Department of War, that speed and responsiveness align perfectly with modernization directives calling for faster prototyping and deployment across unmanned and autonomous systems. GuideTech isn't just fast. It's built around a continuous design process from concept to field. Designs move from simulation to prototype to flight test and into initial production, all within the same integrated team. That's how you close the gap between an idea on a whiteboard and a system on station. This process is critical to the Department of War's modernization initiatives, including the push for accelerated capability delivery under the replicator program and related autonomy efforts. Palladyne Defense now has the structure to answer that call with the AI BRAIN, the engineering muscle and the manufacturing backbone to move faster than most others. Let's start with BRAIN, our mission-grade avionics architecture. It delivers the performance of legacy flight computers at roughly 1/10 of the cost, which is ideal for attritable and autonomous systems. BRAIN isn't just a concept. It's already being built into a tradable systems. The system is modular, programmable and capable of full integration with SwarmOS so that the same AI decision-making driving our autonomy can also run natively inside the airframe. In short, BRAIN gives us the intelligence hardware that connects our AI to the real world. Next is Banshee, a low-cost reusable precision loitering munition that demonstrates how embodied AI can transform mission economics. Banshee isn't a hobby drone or a repurposed quadcopter. It's a purpose-built system engineered for tactical and strategic operations with the ability to deliver multiple effects similar to much larger platforms, but a fraction -- at a fraction of their cost. Our plan is to integrate SwarmOS and BRAIN into Banshee, enabling coordinated swarming, target sharing and precision execution. The Department of War's modernization priorities, including cost per effect and scalable autonomous systems are directly addressed by this design. Banshee represents the shift from one-to-one weapon systems to one-to-many intelligent effects. Here is a quick video of a Banshee test where it is dropping ordinance within a designated target area. I think that's the wrong video. [Audio Gap] All right. So that gives you a good idea of what the Banshee platform is about. Now next, we will talk about the SwarmStrike platform. SwarmStrike takes that same philosophy to a higher tier of mission capability. It's a long-range intelligent loitering munition that delivers cruise missile reach at dramatically lower cost. SwarmStrike is designed to work individually or in teams with onboard autonomy that enables self-coordination and adaptive targeting. It's an example of how our embodied AI and avionics technology scales upward from tactical systems to strategic assets while keeping cost and complexity down. This is the future the Department of War is calling for, intelligent, adaptive systems that deliver operational effects affordably and at speed. Here is a quick video of SwarmStrike's first flight test. So you can see this is something tangible, not just a concept or something in a PowerPoint. [Audio Gap] And SwarmStrike isn't the only cruise scale loitering munition we're working on. GuideTech is already down the path of developing a near hypersonic long-range affordable mass strike vehicle for the U.S. Navy. GuideTech is far more than an acquisition. It's the core engineering and avionics BRAIN trust behind our defense components. It also provides the foundation for IntelliSwarm, the next-generation embodiment of our autonomy architecture. Here's how it evolves. SwarmOS, the defense and public safety variant of pilot that integrates unique capabilities specifically required for national security applications. And when you combine SwarmOS with BRAIN, you get IntelliSwarm, a unified intelligent autonomy system that merges AI, sensors and avionics into one cohesive operating layer. IntelliSwarm will be the connective tissue across our entire defense product line, the same AI that thinks, flies and fights. Pilot, our commercial autonomy product, continues to serve applications and use cases that don't need the full capabilities of SwarmOS. The second pillar of Palladyne Defense is Crucis, our new manufacturing and fabrication business. Crucis is a certified U.S.-based manufacturer supplying major defense programs, including the F-16, F-35, Tomahawk, Harpoon and Bradley. Among its customers are Lockheed, the Boeing Kratos teaming effort and more. It has a growing 18-month backlog exceeding $10 million and is expanding capacity to support both Palladyne Defense programs and external defense primes. Crucis is AS91000 -- 9100 certified and built for precision. For the Department of War, this acquisition aligns perfectly with the broader national strategy, reshoring production, securing supply chains and ensuring that critical components are built in America. What makes Crucis so compelling isn't just what it builds today, it's what it can build tomorrow. The companies have the physical space, the workforce and the tooling to expand rapidly from precision machining to full system integration. Together with the R&D and production space we have at Palladyne, we now have more than 100,000 square feet of production capacity. That means Palladyne will be able to take a concept from design to prototype to flight test to production and do it all in-house. It also means we can serve as a surge capacity provider for the Department of War, supporting modernization, readiness and reshoring initiatives that demand flexible American-made manufacturing. In every sense, Crucis gives Palladyne the backbone to scale. Crucis is the piece that completes our loop, AI, engineering and U.S. manufacturing under one umbrella. With Crucis, we have certified American production tied to programs like the F-35, F-16, Tomahawk and Bradley, work that's already flowing through its facilities today. We'll also look at how we implement Palladyne IQ on the shop floor to drive higher throughput and quality so the factory becomes smarter as we scale. Strategically, this aligns directly with the Department of War's industrial base modernization efforts, reshoring capacity, building resilience and reducing lead times with American suppliers. We're not waiting for others to build the future. We're building it here. This is the all-up picture. All the pieces you've just seen, SwarmOS, GuideTech and Crucis will now operate as one Palladyne Defense business. In practice, that means we are a partner and supplier to large primes, not a challenger to their core franchises. We provide software, avionics, components, complete systems and design capacity, which gives us multiple shots on goal across the value chain, and we only build proprietary systems when there is a clear capability gap. That model lines up directly with the Department of War's priorities, cost-effective autonomous capability that can be fielded quickly backed by an American industrial base. Financially, these transactions are disciplined, high leverage accretive transactions. For 2026, the combined acquisitions are expected to push consolidated Palladyne AI revenue to more than triple our 2024 revenue of about $8 million, with positive adjusted EBITDA contributions from the 2 acquisitions. Importantly, we are entering the next phase with a growing 18-month backlog of more than $10 million, including ongoing development contracts with U.S. Air Force and the U.S. Navy. Total consideration paid in these 2 transactions is approximately $31 million, consisting of stock, cash and assumed equipment and real estate debt, plus an earn-out over the next 5 years of up to an additional $25 million once revenues relating to GuideTech's products exceed $71 million. Assuming this hurdle is achieved, the payout will be more than worth it for Palladyne and our shareholders. In addition, we plan to invest $5 million over the next 12 to 18 months to take Banshee and SwarmStrike from TRL-6 to TRL-9. That investment is aimed at unlocking a much larger revenue opportunity while keeping our capital structure highly efficient. We've talked about the assets. Now let's talk about how the business will run. Coming out of these acquisitions, Palladyne AI now operates through 2 focused businesses that share one autonomy core. Palladyne Defense integrates SwarmOS, GuideTech and the Crucis companies, giving us mission autonomy, aerospace design, new products and U.S. manufacturing in a single stack. That lets us move from concept to prototype to production on time lines the Department of War is demanding. Palladyne Commercial continues to scale IQ and Pilot across manufacturing, logistics and aerospace. It remains a core business opportunity for us. The headline is simple. Defense is an expansion of our platform, not a substitution for our commercial business. 2 focused businesses, both strategically important, both powered by the same autonomy engine. Here's how the structure looks formally. Palladyne AI manages strategy, capital and our shared autonomy platform. Palladyne Defense combines SwarmOS, GuideTech and Crucis to serve government, defense and public safety customers. Palladyne Commercial scales IQ and Pilot across industrial automation and logistics. One platform, 2 focused businesses, each with distinct customers and strengths. Before we wrap up, I want to come back to where I believe a lot of our long-term upside sits, which is in Palladyne IQ. IQ is our original AI platform and the foundation of our embodied AI ecosystem. It was built to orchestrate complex multi-robot environments. And from that work, we drive pilot for unmanned systems. IQ delivers the intelligence layer for industrial and operational efficiency. Its focus is simple, enable robots and automated systems already working in manufacturing, logistics and infrastructure to perceive, reason and adapt instead of just repeating fixed preprogrammed motions. IQ is hardware-agnostic and enterprise-wide, so customers can standardize on one intelligence layer across many facilities and robot types. The business model is attractive, software licensing and services that can scale as customers add robots and lines. Before we talk about the road ahead, I want to anchor us in the fundamentals. We are executing from a strong financial foundation. For the quarter ended September 30, we closed with $57.1 million cash -- $57.1 million in cash and equivalents and used about $6.3 million in operating cash. That discipline gives us the runway to integrate GuideTech and Crucis and advance our autonomy products. We also announced a new U.S. patent covering key elements of our embodied AI and autonomous coordination capabilities. This IP directly supports SwarmOS and reinforces our role in edge autonomy. In parallel, we are advancing existing programs and pursuing new development work. For example, we think we are well positioned for an upcoming Department of War contract award. In addition to our relationship with Red Cat, we also launched a collaboration with Draganfly that reflects the type of ecosystem engagement we expect to grow. Finally, we further strengthened our leadership bench, specifically for defense and national security priorities with the additions of retired Lieutenant General Twitty who during his career, led roughly half of the U.S. Army to our Board; and Doug Dynes as President of Palladyne Defense, a former Presidential appointee and National Security Adviser to Senator Hatch and retired Major General Lee Levy, former Commander of the Air Force Sustainment Center, who will serve as Vice Chairman of Palladyne Defense. All 3 of these men complement existing Board member, retired Admiral Olson, the first Navy Seal to attain a 3-star Admiral rank and among his other distinguished roles was Head of SOCOM. Overall, we remain on track for 2026 that we expect will see a significant uptick in customer engagement across our portfolio. Stepping back, our investment thesis rests on 5 pillars: technology leadership, a proven autonomy architecture built for embodied AI at operational scale. Vertical integration, AI software, avionics, systems engineering and U.S. manufacturing in one stack. 2 growth engines, IQ in the commercial and industrial sectors and our vertically integrated defense-focused businesses. Financial strength with roughly $50 million in cash post acquisitions, we have the runway to execute. And finally, strategic timing. Our structure and technology align directly with Department of Water priorities for rapidly fielded cost-effective autonomous capability as evidenced by our ongoing contracts with the Air Force and the Navy. This slide pulls the structure together visually. On the left, Palladyne Defense, SwarmOS, BRAIN Avionics, Banshee, SwarmStrike and the IntelliSwarm architecture powering AI-enabled mission systems. On the right, Palladyne Commercial, IQ and Pilot, delivering industrial autonomy for manufacturing, logistics and infrastructure. Both businesses share the same AI core. So innovation on one side accelerates the other. That's the advantage of a single autonomy platform supporting 2 complementary markets. So before I close, I'm going to show you a short video that helps realize -- helps you visualize our vision. [Presentation] Benjamin Wolff: In summary, I hope you come away from today's call with the understanding that Palladyne AI is now a fully integrated autonomy company serving national security customers through Palladyne Defense and industrial customers through Palladyne Commercial, all powered by embodied AI. Our technology is advanced. Our structure is aligned with the national security priorities, and our financial position gives us the runway to execute on near-term deployments. We're building an American company designed for this moment, 1 platform, 2 businesses and a significant opportunity ahead of us. Palladyne AI, America's cross-domain force multiplier. Thank you. Operator, we can open the floor for questions. Operator: [Operator Instructions] Our first question comes from Brian Kinstlinger from Alliance Global Partners. Brian Kinstlinger: Congrats on your transactions. In terms of BRAIN hardware from GuideTech, how much of that revenue is commercial versus government? Do they go-to-market as a prime generally or a subcontractor? And then maybe can you quantify the sales cycle, including the design win phase? Benjamin Wolff: Thank you for your question, Brian. So their customers are all in the defense sector. At least today, they are defense sector. They have also done some things in the space arena, and I think there's a lot of opportunity in space, not necessarily tied directly to Department of War. But the BRAIN sales today are focused on them being a supplier to other primes who are building the BRAIN into their aviation platforms or aerospace platforms. It is part -- to be able to win that business, it has to be part of a design win that ultimately the entire system gets sold to a defense customer, Department of War, one of the services, et cetera. So that is what they've been working on for the last couple of years, and they have got some great traction in that regard. Brian Kinstlinger: Great. And then prior to the GuideTech acquisition, did your drone partners have another third party they use for edge compute system. And so now the value is the drone manufacturer can come to you with one solution as opposed to using a variety of suppliers? Benjamin Wolff: So it is very common in the smaller drone space to have either NVIDIA or Qualcomm boards that are being used on those platforms. And today, our SwarmOS software is being implemented on both NVIDIA and Qualcomm boards. Depending on the size of the platform of the aviation or, I should say, aerospace platform, depending on what the mission capabilities are that are required, you might see the BRAIN being a supplement to an NVIDIA or Qualcomm board or in lieu of an NVIDIA or Qualcomm board. It just depends on what the mission requirements are. But yes, you can think of us as being a vendor now for that avionics or guidance a navigation system that gets put onto a new type of weapon system. Brian Kinstlinger: Great. And then is there anything you can share in terms of either installed base, the number of partners GuideTech has? Just any kind of information to help understand average deal size, how to think about their customer base? Benjamin Wolff: I hope to be able to give you more details after the first quarter. We're not at a point today that we're prepared to start talking about all of those details, Brian. But I think after the first quarter, we'll have some more information for you. Brian Kinstlinger: Two more. In terms of Crucis, first, address how this -- well, maybe how this addresses manufacturing concerns that prospective customers might have had about your ability to scale large programs. And then talk about the type of components they're manufacturing today and who their primary customers have been? I think you said [ F-15 ] and some vehicles, sorry. Benjamin Wolff: Yes, no problem. So whenever you talk about producing systems at scale, one of the concerns that potential customers have is, okay, great, you've got a good concept. Now can you actually execute on it? Can you produce it at scale because we're going to be a big customer. We want to buy a lot of these. We don't want to just buy a few. And that has always been a challenge for start-ups is to figure out how do you go from not just prototype and into first commercial article, but how do you scale it to volume, which is the kind of volume that the Department of War is going to look for. We decided to not try and reinvent the wheel, not try and go through all the aches and pains of scaling up manufacturing on our own, but to acquire 2 companies that were trusted and well proven, have been around for a long time, had adopted new innovative technologies to be able to have higher margins than the industry average and that could produce some of the most complex challenging parts and components that were needed by the aerospace industry. That is one of the things that I think startups and younger companies get criticized for is how are you really going to produce at scale. And so we decided to nip that in the bud in one fell swoop and be able to provide this consolidated vertically integrated package to our customers. Brian Kinstlinger: My last question is, can you talk about how opportunities with your 2 drone partners, Red Cat and Draganfly are tracking? I'm sure the government shutdown isn't helping, but maybe from a high level, talk about the procurement and the opportunities. Benjamin Wolff: I think both companies are doing some great things with opportunities with Department of War and the various services. We are engaged with -- we've been obviously engaged with Red Cat longer than Draganfly. Draganfly is a relatively recent announcement. They have airframes that have different mission sets than what Red Cat has. We get very excited about the idea of having our software that allows collaboration among different manufacturers platforms to be able to communicate and provide the war fighter with more information in the field. That's capability that the Department of War continues to talk about. So we're just getting going on our engagement with Draganfly. We just announced it a few weeks ago. So that's relatively early. But we expect to do the same thing with them that they've done -- that we've done with Red Cat, where we go out and jointly meet with customers, talk about what the basic air platform is capable of, why it's the best-in-class for a particular mission set and then educate the Department of War customer on what is the art of the possible when you start adding in collaborative autonomy that our SwarmOS platform provides. So it is more than just having to get a design win. You get a design win with a customer like Red Cat or Draganfly, but then you have to go convince the Department of War that it's worth spending the extra money for the additional capability set. Fortunately, for us, almost every time Pete Hegseth wants to talk about drones, he's talking about swarming and collaborative autonomy capabilities. So it is -- I think we're in front of the duck. We're in a good spot with this right now. Operator: Our next question comes from Michael Latimore with Northland Capital Markets. Mike Latimore: Congrats on the transactions here. Did you say that the -- a couple of the main customers for your acquisitions were the Air Force and Navy or those the 2 main sort of end customers? I know you sell the primes, but do they end up in those 2 categories? Benjamin Wolff: So we actually have direct contracts with the Air Force and with the Navy, where they are funding the development of capabilities that they want to deploy. So those are direct contracts. That's not where we're acting as a sub to somebody else. Mike Latimore: Interesting. And then as you think about the kind of revenue composition here, are we going to see sort of one revenue line? Or are you going to have hardware, software services? Just trying to think about how that will look. Benjamin Wolff: Yes, I expect we will -- we're still sorting through that, Michael, but I expect that we will be able to clearly articulate what's component sales, what services, what software sales. Mike Latimore: And how quickly can you get SwarmOS kind of embedded into the GuideTech development cycle and product lines there? Benjamin Wolff: Well, it can't happen fast enough. But since we just closed the deal today, I can tell you it's not today, but I expect -- if you look at what we did in terms of getting it on to the NVIDIA board and on to Qualcomm, it was a matter in those cases of a couple of weeks. So one of the things that our engineering team started talking about today was exactly what the path is to make that happen. I have not gotten an update on that conversation, but it's something that I do not think is going to be terribly cumbersome or time consuming. Mike Latimore: And then I think at the end there, you mentioned you're potentially expecting a Department of War contract award. I guess just what product category is that in? Or any more detail there? Benjamin Wolff: That will still relate to the SwarmOS capabilities. I don't want to say more about it than that because it's premature. But bottom line is we've got some good momentum with the Department of War following on the backside of some of the existing contracts that we have. Mike Latimore: And just last one. It seems like GuideTech is able to produce key systems in much more cost effectively. Can you just provide a little more detail on how they do that? Why are they so much more cost effective? Benjamin Wolff: Yes. One of the things that they did when they first started the company, which I think was 10 or 12 years ago now, and the founders came out of Raytheon Missile Systems, they put a fair bit of capital into developing their own internal software systems that they use as tools to what I think that is revolutionizing the way aerospace design and engineering occurs. They can go from concept to working prototype in less than 6 months. In the case of SwarmStrike, I believe that they had their first flight within 4.5 months after the original concept was conceived of. And that is in large part credited to their internal software tools that they have created. And I think that is one of the -- when I look at the crown jewels of GuideTech, it is the people first and it is the internal software systems that they've created as tools that allow them to conceive and validate designs far more quickly than I think occurs anywhere else in the industry. And that is why they have been very successful at having customers across the defense prime space. Operator: Our next question comes from James Kisner with Water Tower. James Kisner: This is James. Can you hear me? Benjamin Wolff: Yes, I can hear you. Thank you, James. James Kisner: Congrats on the transaction. I just wanted to double-click a little bit on the vertical integration and sort of the benefits of that and sort of the why behind the transaction. I think you said that it helps your scaling, but are there other benefits here like time-to-market or integration technology or maybe even some margin stacking that's eliminated that also are rationales for these ready transactions? Benjamin Wolff: Here's the way I think about it. The ability to control your destiny on both the hardware and software side to evolve them in tandem so that you can optimize both is something that you don't get the benefit of if you're just providing hardware or just providing software. You can think of a couple of great examples that I use as an analogy here. If you thought about Steve Jobs trying to come up with the iPhone and all, he was going to produce the hardware, not the software, it wouldn't be the hit product that it became. Vice versa, if he was only focused on software, not hardware, it may not have become the hit product it was. Take it into something that's a little more current. Think of the Tesla cars. If Elon had said, I'm going to build the frame and the physical instantiation of the vehicle, but I'm going to farm out the AI and the software to somebody else, it would not have been an optimized car that attracted the millions of customers that they have today. What we see in our opportunity set going forward is in those cases where there are gaps of capability that we think the Department of War wants, we now are bringing together our software and the hardware and the avionics and the components altogether vertically integrated, so that we can go faster in a way that demonstrates enhanced capabilities so that we can beat our near peer competitors worldwide to the punch. James Kisner: Very helpful. Just one other follow-up. I mean the shutdown, obviously just ended and you're kind of early commercialization, but have you seen any change in the tender conversations in the last couple of days, anything to report there? That's all I have. Benjamin Wolff: I will tell you this, I've been pleasantly surprised that there isn't any slowness in getting people reengaged now that they're back at work. We've been -- frankly, I've been a little surprised at it's like the spigot turned on and they are -- at least the people that we're dealing with and the narrow areas that we're focused on, I can't speak for the whole Department of War or the whole government, but I've been very pleasantly surprised at seeing almost instantaneous reengagement picking up right where we had left off. Operator: Our next question comes from Brian Kinstlinger once again with Alliance Global Partners. Brian Kinstlinger: Just a quick modeling question. Is there any seasonality that you see in the 2 acquiring -- businesses you're acquiring? I know often there's some seasonality in defense, at least with awards, but I'm not sure if there is on the revenue generation from your business. Benjamin Wolff: We have not seen seasonality that I'm aware of. I think that as you get towards the new budget cycle, that can always impact things when you're talking about the U.S. government as a customer. But I do not believe that either of these businesses have seen significant issues as a result of that. The slowdown resulting from the shutdown of the government definitely impacted the ability, for example, when you're asking a government customer to approve a first design or a first product and they're no longer in the seat to approve it. That created a delay, and you saw that across the sector. But just in terms of normal seasonality, I don't see anything there, Brian. Operator: [Operator Instructions] I will now turn the floor back over to Brian Siegel for any questions from our webcast audience. Brian Siegel: Thanks, Juan. I got a couple here. The first one is earlier this year, you described a roughly 12- to 18-month sales cycle and suggested you'd have more visibility in the back half of the year. I'm wondering whether the acquisitions along with the creation of Palladyne Defense have improved that visibility. Are you seeing any signs that these moves could shorten the sales cycle? Benjamin Wolff: So the 12- to 18-month sales cycle was primarily focused on the commercial side of our IQ sales. And I don't see any change there. And certainly, these 2 acquisitions don't really impact that. I do think what these acquisitions do is they give us more avenues to monetize our SwarmOS swarming software, a lot more customers that we can now tap into relationships that we can build and expand on. And so it's too early for me to say whether I think the sales cycle for that product on the defense side will be shorter, but I do know it increases significantly our shots on goal. Brian Siegel: One other question is, will you need to expand sales staff as you grow, let's say, over the next 6 to 12 months? Benjamin Wolff: We expect to do that. That's something that we budgeted for already, and that was true notwithstanding whether we did these acquisitions or not. One of the great things about these acquisitions, though, is that they have their own business development efforts. We will supplement that and fortify that. As I mentioned before in my prepared comments, Doug Dynes, comes over to us. He will be leading our defense business with a primary focus on generating revenues for the defense side of the house. And he has incredible relationships, and we've got -- we'll be building a team to support him. So bottom line is, as with -- when I've been asked that question in the past, as we understand more about what gets a customer to say yes, then we will put more resources into getting more customers to say yes. But we're not going to just start throwing a bunch of money at marketing and sales until we know what works until we've cracked that code. Brian Siegel: One last question. It's about the commercial business. When will the next version of IQ become available? And is it being tested currently at customer or potential customer facilities? Benjamin Wolff: We are testing the V2 of IQ in our own facilities now. As soon as we believe we've got it debugged and completely ready to go, then we will start placing it with customers. So we're not quite there yet. A lot of that, as I mentioned in my prior comments in past quarters or in our press releases, was focused on improving the user interface. User interface is never as easy as just putting a wrapper on the piece of candy. It actually requires integration with the way the software works, but we've never had an issue with the functionality of V1. What we had was an issue with the ease of use and making it so that we truly can have folks that are not software engineers able to interact with it and train robots the way very expensive computer programmers and software engineers typically do. So remember, our whole focus with IQ is to democratize the ability to program and manage industrial robots and to allow people that may only have a high school education to be able to do the kind of job that historically has taken people that are $225,000 or $250,000 a year graduate students that are able to do. So I think that we're close, and we're going through all the testing internally right now internally to make sure that it will be satisfactory for our customers when we release it out into the wild. Brian Siegel: Great. That's all the questions from the webcast. Juan, you can close out the call. Operator: Ladies and gentlemen, this now concludes our question-and-answer session and does conclude today's teleconference as well. We thank you for your participation. Please disconnect your lines, and have a wonderful day.
If the market pullback has you queasy, consider it an opportunity to take stock of your investments. Retirees have less wiggle room to weather volatility than younger investors, and it's important to make sure your portfolio can withstand the bumps.
If the market pullback has you queasy, consider it an opportunity to take stock of your investments. Retirees have less wiggle room to weather volatility than younger investors, and it's important to make sure your portfolio can withstand the bumps.
November's market weakness is driven by unwinding dispersion trades, tight liquidity, and unexpected macro pressures. Implied correlation remains low while S&P 500 dispersion is high, suggesting further downside until the spread contracts.
November's market weakness is driven by unwinding dispersion trades, tight liquidity, and unexpected macro pressures. Implied correlation remains low while S&P 500 dispersion is high, suggesting further downside until the spread contracts.
Margie Patel, senior portfolio manager and head of capital allocation at Allspring Global Investments, says she doesn't expect to see a large market correction, even as investors evaluate AI spends. She joins Caroline Hyde on “Bloomberg Tech.
Margie Patel, senior portfolio manager and head of capital allocation at Allspring Global Investments, says she doesn't expect to see a large market correction, even as investors evaluate AI spends. She joins Caroline Hyde on “Bloomberg Tech.
Austin King returns to Next Gen Investing to highlight the recent downturn in Bitcoin. While the cryptocurrency saw a rebound on Tuesday, it briefly hit levels below $90,000 before the opening bell.