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Operator: Good morning, ladies and gentlemen. And welcome to the Ideal Power third quarter 2025 results conference call. At the end of management's remarks, there will be a question and answer session. Investors can submit their questions anytime within the meeting webcast by typing them into the Q&A button on the left side of your viewing screen. Analysts who publish research may ask questions on the phone line. For analysts to ask questions on the phone line, as a reminder, this event is being recorded. I would now like to turn the conference over to Jeff Christensen. Please go ahead. Thank you, Jenny. Jeff Christensen: And good morning, everyone. Thank you for joining Ideal Power's Third Quarter 2025 Results Conference Call. With me on the call are David Somo, President and Chief Executive Officer, and Tim Burns, Chief Financial Officer. Ideal Power's third quarter 2025 financial results press release is available on the company's website at idealpower.com. Before we begin, I'd like to remind everyone that statements made on the call and webcast, including those regarding future financial results and company prospects, are forward-looking and may be subject to a number of risks and uncertainties that could cause actual results to differ materially from those described on the call. Please refer to the company's SEC filings for a list of associated risks. We would also refer you to the company's website for supporting company information. Now I'll turn the call over to Ideal Power's President and CEO, David Somo. David? David Somo: Thank you, Jeff. I appreciate everyone joining us today. I couldn't be more excited to join you today for my first Ideal Power results conference call. As many of you know, my new role was announced last week. That said, I want to touch on a few things before handing the call over to Tim Burns. We look forward to your questions after our prepared remarks. I'd like to briefly discuss why I took the role at Ideal Power and then I'll discuss my approach and near-term plans. First, why did I take the CEO role here? Ideal Power has created a compelling and customer-validated solution addressing secular high-growth power applications emerging in the data center, industrial, and automotive markets where power efficiency, power density, and cost are key requirements. There is a multibillion-dollar addressable market for our B-TRAN technology. With the ongoing electrification of our society, we are commercializing our technology at an opportune time by delivering innovative and enabling power semiconductor solutions for a broad array of growing and B-TRAN enabled applications. Obviously, I have high confidence in Ideal Power, or I wouldn't have joined. I want to commend and thank my predecessor, Dan Brdar, for his leadership and strong contributions in guiding the company to where it is today. Second, I see Ideal Power as a technology innovator with its B-TRAN technology, that enables inherent advantages in delivering ultra-low conduction losses, improved power efficiency and power density, and bidirectionality. All on widely deployed low-cost silicon. These are competitive differentiators as we begin to commercialize our B-TRAN solutions with customers. Third, I believe I can help Ideal Power to accelerate its commercial opportunities. I know Ideal Power's markets from my more than thirty years of experience in the semiconductor industry spanning a variety of end-use markets, including data centers, industrial, and automotive. I plan on leveraging my extensive commercial experience and relationships to drive revenue growth in our target markets. Revenue is a priority. I'm sure you are wondering what I plan on doing. David Somo: What you should expect from me. Having joined Ideal Power just last week, and spending time getting my hands on the details of the business. Feedback from our customers during the next several weeks, I will be listening closely to distributors, suppliers, and the outstanding team here at Ideal Power. Because I like to be highly visible with customers, both existing and prospective, I'll be meeting with them to understand their priorities, opportunities, requirements, and listen to their feedback about our technology and their applications. I'll review our opportunities, progress, road map, and strategic initiatives. Those discussions will deepen my understanding of our business and enable me to fine-tune our vision and strategy going forward. Building on the strong foundation that is in place today. Upon completion of that process, I anticipate scheduling a call and webcast to share more detailed information and discuss certain topics in greater depth including my perspective for product commercialization. Before setting expectations, I want to take the necessary time to thoroughly understand the current state of our business. As an organization, we will strive to execute in all aspects of the business with rigor, discipline, and a strong sense of urgency. We will endeavor to execute on what we communicate not put ourselves in a position to have to reset expectations. Goes without saying that this is important to establishing and maintaining credibility. One thing is abundantly clear. With the strong foundation in place from which to drive our future growth, I'm not going back to the drawing board. We're well-positioned to drive long-term value creation for our customers, suppliers, employees, and stockholders. In closing, I look forward to partnering with Tim Burns, our CFO. I'd like to recognize the entire team for the third quarter progress and results. I'd also like to thank my predecessor, Dan Brdar, for assisting with the transition and providing a strong foundation for our growth. I'm thrilled to be joining Ideal Power at a time when the company has such exciting opportunities ahead. Now I'd like to turn the call over to Tim Burns to discuss our recent progress. Tim? Tim Burns: Thank you, David, and good morning, everyone. Since David just started last week, I'll share an update on our progress since the start of the third quarter. First, we secured a purchase order from Stellantis in late August for custom development in packaged B-TRAN devices targeting multiple electric vehicle applications. We successfully completed our first of five deliverables under the purchase order in late September. The remaining deliverables are expected to be completed next year. Second, we expect Stellantis to award us with a multiyear EV contactor program. As part of the program scope, Stellantis has told us they want to install B-TRAN based contactors in Stellantis test vehicles potentially as early as late 2026. We'll know more about the scope and timing specifics as we work through the program details with Stellantis in the coming months. This program has broad and substantial potential as Stellantis recently shared with us that they are evaluating the deployment of B-TRAN based contactors across all of their EV models and platforms. Third, we are engaged in early discussions with a sixth global automaker. This automaker is evaluating B-TRAN for next-generation high-voltage EV power switching and protection applications where bidirectionality and low conduction losses enable more compact, reliable, and efficient vehicle and charging architectures. We will share further updates on this opportunity as the engagement progresses. Fourth, our first design win customer has successfully completed tests of the updated solid-state circuit breakers that we provided them during the third quarter. We're currently working with them on the finalization of their product design as they prepare for end-customer sampling and production. Fifth, we shipped additional solid-state circuit breaker reference designs to large potential customers including a global power management market leader in Asia. Reference designs are an important part of our commercialization strategy as B-TRAN is a new technology and customers are eager to get hardware in their hands that demonstrates the advantages of B-TRAN in their target applications. Sixth, we increased the power rating of our discrete B-TRAN product by 50% and commenced shipment of these devices with a higher power rating and power density. Development has sparked greater interest from both existing customers and new prospects in our sales pipeline as it aligns well with the market moving to higher power architectures for many applications. Seventh, we continue to expand our global reach, adding our first direct salesperson in Asia. He's already conducting face-to-face meetings with current and prospective customers. Interest in B-TRAN is growing across Asia, which is the world's largest market for power electronics. Excited about the opportunity for B-TRAN in this region as Asian companies typically adopt new technologies faster than their European and American counterparts. Eighth, third-party automotive qualification in testing of B-TRAN devices is well underway with more than a thousand packaged B-TRAN devices from multiple wafer runs. Early test results are positive with zero failures to date. As a new semiconductor device without a long operating history, third-party reliability testing and the data it generates is key for both industrial and automotive customers as they evaluate and adopt B-TRAN for their applications. Moving on to the initial market for B-TRAN, the industrial markets, in particular, solid-state circuit protection for data centers, microgrids, industrial facilities, and grid infrastructure. Our first design win customer is one of the largest circuit-protected equipment manufacturers in Asia, serving data centers, industrial and utility markets, and renewable energy applications. As we have previously mentioned and based on the first design win customer's projections, initial product from this customer could translate to several hundred thousand dollars of revenue for Ideal Power in its first year sales with the opportunity to exceed a million dollars in revenue for us in the second year sales. Importantly, this marks only the beginning. The initial product is anticipated to be the first of multiple products from this customer that will incorporate B-TRAN into solid-state circuit breakers. This customer provides a variety of circuit breaker products across various power ratings, and it is expected that they could expand their portfolio to add a full family of solid-state circuit breakers in ratings similar to their current family of electromechanical breakers. Discussions of other B-TRAN enabled solid-state circuit breaker products have already started, and our team recently built the solid-state circuit breaker prototype with a higher rating to share with this customer. Looking briefly at innovation, we increased the power rating of our discrete B-TRAN product by 50% in commencement shipment of these devices with a higher power rating and power density. This development has sparked greater interest from both existing customers and new prospects in our sales pipeline. Our approach to power ratings of our products is deliberately cautious. An approach that has been well received by our customers as we bring new solutions to their markets and applications. As we accumulate more testing hours and go through additional reliability testing, including the ongoing third-party automotive qualification testing, we're finding that we have more than ample margin in our design to increase the power rating of our products. Elevated product ratings will expand our SAM to include additional applications. It will also strengthen our product's competitiveness in the marketplace as it translates to smaller, lower-cost OEM products for customers to choose B-TRAN as their power semiconductor solution. We previously mentioned that orders near term are not dependent upon the successful completion of automotive qualification. However, achieving third-party automotive qualification would provide additional confidence among industrial customers, regarding B-TRAN's long-term reliability. We would also provide evidence of the device's reliability under extreme conditions, such as high humidity and temperature, which exceeds typical industrial application requirements. Additionally, given that engineers tend to be cautious when adopting new technologies, achieving automotive qualification could help accelerate the adoption of B-TRAN based products by early adopters in our initial target industrial markets. Our B-TRAN patent estate continues to grow. Currently, we have 97 issued B-TRAN patents with 47 of those issued outside The United States. Our patent coverage spans North America, China, Taiwan, Japan, South Korea, India, and Europe. Representing our high-priority patent coverage geographies. As a result of our continued innovation, our list of pending B-TRAN patents is now at 73. To safeguard our intellectual property further, we treat the proven double-sided wafer process flow we developed to make our devices as a trade secret and do not disclose the identity of work under strict confidentiality with our wafer fabrication partners. Even if a competitor studied our patents, they wouldn't have the know-how to fabricate the device. Next, I'll discuss our financial results. Our third quarter 2025 cash burn from operating and investing activities was $2.7 million, up from $2.4 million in 2024 and up from $2.5 million in the second quarter of this year. Our Q3 cash burn was at the lower end of our guidance of $2.7 million to $2.9 million. Our cash burn from operating investing activities for the first nine months of 2025 was $7.4 million, up from $6.6 million in the first nine months of 2024. We continue to manage expenses prudently and aggressively. We expect fourth quarter 2025 cash burn to be approximately $2.5 to $2.7 million with a full year 2025 cash burn of approximately $10 million. This compares to a 2024 cash burn of $9.2 million excluding the benefit of warrant proceeds. The higher forecasted cash burn in 2025 compared to 2024 is due to increased semiconductor fabrication spending, and hiring. Cash and cash equivalents totaled $8.4 million at 09/30/2025. We have no debt, a clean capital structure. We recorded modest revenue for 2025 as customers continue to evaluate our technology. Initial orders from the large companies evaluating our products for potential inclusion in their OEM products will be small with order sizes increasing as customers start to prototype their OEM products, progress through their design cycles, and build inventory for the rollout of their B-TRAN based products. Operating expenses were $3 million in 2025 compared to $2.9 million in 2024 with the increase due to higher wafer fabrication costs at our second foundry. We expect operating expenses to increase modestly in the coming quarters due to recent and future hiring, and costs associated with our development and commercialization efforts. We also continue to expect some quarter-to-quarter variability in operating expenses particularly our research and development spending. Due to the timing of semiconductor fabrication runs, product development, other research and development activities, and hiring. The timing of equity grants and related stock-based compensation expense will also cause variability in our quarterly operating results. Net loss in 2025 was $2.9 million compared to $2.7 million in 2024. Considering our asset-light business model, no debt, and modest planned cash burn, we have sufficient liquidity on our balance sheet to fund operations through at least mid-2026. We'll potentially see several sources of funds over the next year such as product sales, development agreements, and other commercial agreements with upfront payments. Additionally, we are exploring strategic relationships with our well-capitalized and large global partners with these opportunities strengthening as we further advance these customer relationships. As a publicly traded company, we also have access to the capital as necessary providing us with additional financial flexibility. At the end of September, we had 8,511,403 shares outstanding, 824,760 options and stock units outstanding, and 653,827 prefunded warrants outstanding. At 09/30/2025, our fully diluted share count was 9,989,990 shares. In summary, we are thrilled to share that our first design win customer has successfully completed testing of the updated solid-state circuit breakers and are now finalizing their product design as they prepare for end-customer sampling and production. We're also delighted to announce that not only securing the purchase order from Stellantis for custom development, and package B-TRAN devices targeting multiple EV applications, but also completing our first of five deliverables under this purchase order. Overall, it is an exciting time at Ideal Power and I look forward to working with David to capture the significant market potential for B-TRAN as an ultra-low loss and bidirectional power semiconductor. At this time, I'd like to open up the call for questions. Operator? Operator: Thank you. At this time, we are conducting a question and answer session. Investors can submit their questions on the left side of your viewing screen. Analysts who publish research may ask questions on the phone line. For analysts to ask questions on the phone line, please. For anyone using speakerphone, we ask that you please pick up your handset before you press the keys. Our first question is coming from Casey Ryan of Park Capital. Casey, your line is live. Casey Ryan: Thank you. Good morning, gentlemen. David, welcome. Great to have you on board. Tim, thank you for this good update. So I just wanted to start with generally automotive. It feels like the opportunities are with EV platforms and the growth of those platforms. Generally. And so I just want to sort of confirm that for myself. Before we go a little further. David Somo: Yeah. Thanks, Casey. Glad to be on the call, and I appreciate the question. So automotive is one of multiple markets that we're able to sell our products into where there's a strong fit to the applications requirements. As you understand, automotive is also one of the longer development cycles and projects are typically multiyear programs. So we continue to work to I would say, move from the initial engagement through continued evaluation where we've made progress now in delivering enhanced products. To our customers. We've continued multiple stages of the development programs. And each of those is a necessary step in moving towards completing the R&D evaluation of the products and qualification then moving into series engineering and eventually landing into vehicles. On the EV side. Casey Ryan: Okay. Terrific. And then sort of on that EV track, what's driving the automakers to look for better solutions and say what they have currently or what they've had previously because, you know, generally, they must be facing some limitations with sort of existing solutions. Is it battery density or the power of the amount of electronics per vehicle? I'm sort of happy for Ideal Power, but I'm curious what sort of driving it and what sort of barriers they're running into with sort of their current solutions. And, of course, you guys are bringing a better solution to market. David Somo: Sure. Well, one of the fundamental trends in power electronics is a move to higher power architectures, and one of the fundamental ones in EV architectures is the adoption of 800-volt main battery systems. Which is driving redesign of the overall architecture and action inverter, charging systems, contactors, battery disconnect and so forth. So that's what's the reason for continuing to evaluate technologies that provide higher power efficiency, improved power density, and manage the cost. Casey Ryan: Okay. Terrific. And then sort of quickly on, like, charging stations, which I think is also a potential market for Ideal Power. I think charging stations are also moving to 800-volt systems, right, which might cause the same sort of trend where people would be interested in your solution. David Somo: Yeah. Fast DC charging stations actually continue to increase the power. To multiple kilovolts. Gets partitioned out across multiple terminals. So it does present an opportunity for us. Also, in some instances, particularly home charging, they're bi-involved where you can feed into the battery pack and then off hours feed out from the battery pack back in. That district power. So that's unique to the design of our B-TRAN technology. Casey Ryan: Okay. Terrific. That's really helpful. And then I wanted to ask about the Asian I think power management company is what we're talking about them as a customer. So it sounds like, and, Tim, you said sort of a couple $100,000 might be kind of a target range for potential revenues in year one. But what I wanted to ask was, is the product currently available for sale you know, hypothetically today, or will it start to go on sale to the commercial market sometime in '26? Tim Burns: Yeah. So it's not currently for sale. So they're finalizing their product design. We're working with them to do that right now. Don't know the specific timing whether it'll be here later this year or whether it will be next year. That's something we can cover here when we have the update call. In terms of timing. But have the updated prototypes. They've completed testing. It was successful. So those prototypes look good. And we're just waiting for them to share a little bit more on their timing specifics as it relates to their rollout plan. Casey Ryan: Yeah. Well, from my perspective, what's significant, right, is going from concept to testing to sort of turning into a commercial product as having completed cycle, I think, is really impressive. So, that's it for me right now. Thank you for the terrific update. Tim Burns: Thanks, Casey. Appreciate it. Operator: Thank you very much. I will now turn this call back to Jeff Christensen to read questions submitted through the webcast. Thank you. Jeff Christensen: Thank you, Jenny. Gentlemen, the first submitted question is any additional context around the CEO transition? Is this something that was planned for? Tim Burns: So, yes, Dan's retirement was planned. There was an extensive search that was conducted and led by our board. That Dan was involved with to identify our next CEO. And that resulted in us bringing David on board. And I'm actually really excited particularly because of his past experience in semiconductors and commercial expertise. Then it's a great time to bring him on because I think it will really help with what obviously is our priority and what's on investors' mind in terms of revenue generation. Jeff Christensen: Thank you. Our next submitted question is, how do you see the markets evolving? And this is a question for David. How do you see the markets evolving, including data centers, industrial, automotive? David Somo: Casey alluded to part of this question, but I'll give a more thorough answer here. Our B-TRAN enabled solutions from my perspective, it's Excel and high power applications delivering lower conduction losses for improved power efficiency. Smaller systems size for improved power density, bidirectionality, and an enabling lower systems cost. Power levels have continued to trend up, as I mentioned a moment ago, across these applications, including the AI data center, which is now planning a move to 800-volt rack architectures commencing sometime in 2027. Automotive EV with the adoption of 800-volt battery systems and fast DC charging. Terminals. As well as other industrial infrastructure applications that the power grid is enhanced to support these growing applications. In addition, grid to system and system to grid power transfer requires bidirectionality where there is also a growing trend to migrate from electromechanical to solid-state semiconductor enabled systems. Each of these major technology trends involve applications such as circuit breaking and protection, UPS, and battery disconnect system among others, that B-TRAN solutions excel at enabling. So in summary, we could see a continued trend towards higher power levels across these multiple applications looking for improved power efficiency, improved power density, and managing costs that are all strong fit for our B-TRAN technology. Jeff Christensen: Thank you. Our next submitted question is, do you expect the initial sales ramp and milestones to be achieved within 2025? David Somo: Having been in the seat here, a total of eight days, I'm currently spending my time deepening understanding of the details of our business. Once I've been through that process, including the opportunity for face-to-face meetings with key customers, to understand thoroughly the details of the engagements that we have with them. I anticipate scheduling a call and webcast to share more detailed information and discuss certain topics in greater depth. Including my outlook for product commercialization. Revenue is a priority, and I plan on leveraging my go-to-market experience achieved in my thirty-plus years in semiconductors across many end sectors and customers to drive revenue growth in our target markets. Jeff Christensen: Thank you. We have several investors that have submitted questions, and please submit your questions using the ask a question button. And as you think of questions, submit them. Don't, you don't need to accumulate all your questions and submit it at one time. Our next submitted question is, what is Ideal Power doing to expand the sales pipeline? David Somo: Yeah. So as discussed in our prepared remarks and shared by Tim, we have added direct sales in Asia, and are already conducting meetings with current and prospective customers. And we're excited about the opportunity for B-TRAN in the region as Asian companies generally adopt new technologies faster than their North American and European counterparts. While we continue to expand the sales funnel, we have a strong focus on closing the many opportunities available to us from current customer engagements. So having the additional sales capability on the ground in Asia is important to us. We view it as a market that can actually move faster in the adoption of new technology than some of the others. Jeff Christensen: Thank you. Would you compare B-TRAN to competitors, including silicon and silicon carbide solutions? David Somo: Yes. I think about it in this way. B-TRAN has two significant advantages. First, it has ultra-low conduction losses, meaning the higher power efficiency and improved power density. And second, it's bidirectional. These advantages translate to more power-efficient and compact customer products at lower cost compared to alternative silicon and silicon carbide power solutions that are in the market today. Jeff Christensen: Okay. Thanks. Can you provide us with any additional information on tier ones and OEMs besides Stellantis and the automotive? David Somo: Yeah. So we're engaged with several automotive OEMs and tier one suppliers as we've previously said. These prospective customers are considering a range of applications and include power switching, EV contactors, and battery disconnect units, charging systems, and inverters. With the auto industry increasingly moving to the 800-volt architectures, as I talked about earlier, my comments. The opportunity for us in this market is expanding. At this point, it also seems likely there'll be a replacement of electromechanical contactors with Solid State Solutions in EVs. Jeff Christensen: Okay. Thanks. Our next submitted question is when mentioning EVs with Stellantis, is either the drive train or contactor program likely to be included in hybrids? Tim Burns: Yeah. The way this program is really focused on vehicles, but our technology would bring the same benefits to hybrid electric vehicles. So we're obviously engaged with several global automakers, several tier one automotive suppliers, I assume once we start getting adopting EVs, hybrid is also a natural extension of that. So there's definitely an opportunity there for B-TRAN. Jeff Christensen: Thank you. Our next submitted question is a long one. Just to understand, you upgraded the power rating to 75 amps. You stated in the release that this maintains a significant design margin to a tested long-term continuous basis of 150 amps. What does that mean? How would you, at some point in time, increase to 150 amps or would you have to test it at above that at a safe design margin? Is there a standard margin that the industry uses, and how does the 75, 150 margin fit within the standard? David Somo: Sure. So I'll take that one. You can think about it in the following manner. Increasing our power rating enables customers to evaluate our B-TRAN solutions for a wider range of applications as well as increase the power rating while lowering conduction loss in existing applications their current designs. There isn't a specific industry guideline for safe design margin, however, we remain very conservative in rating the device at 75 amps we've tested it up to 150 amps. We want to ensure that we're providing the proper safety margin to our customers, and that varies by customer and by applications. But I would say that we have sufficient headroom to continue to scale the device up for higher power solutions as the trend continues in that direction. Jeff Christensen: Thank you. Our next submitted question is, please provide any color on where we stand with manufacturing. Tim Burns: Yeah. So we have two foundries as we've mentioned, one of them is in Europe. One of them is in Asia. We've been working with the Asian foundry for a little bit longer than we had the European foundry, so I'd say they probably are still ahead of the European foundry in terms of things like yield. But we're comfortable that we could utilize devices from either one for end product sales to customers. And we also have a great relationship with two packaging houses, one that we're using, we use primarily for production, that's actually in Asia and one here in the US that we also continue to do some development work with that we could use for production if necessary. For instance, if we received a government program that required US manufacturing. So overall, I'd say we're in really good shape. Right now, it's just about commercializing the technology. Jeff Christensen: Thank you. Our next submitted question is, what are the main barriers to closing sales? David Somo: Introducing B-TRAN with it being a new semiconductor technology and device structure begins with educating the customers. Engineers are generally familiar with IGBTs and MOSFETs, but B-TRAN features innovative and distinct architecture that functions differently from traditional semiconductor devices. So to help our prospective customers evaluate our products for their applications, we provide evaluation kits and reference designs to simplify this undertaking. Additionally, engineers often adopt a cautious approach, which can extend the evaluation period. Achieving automotive qualification, as we mentioned during our prepared remarks, will help to speed up adoption by demonstrating the technology's proven long-term reliability for their applications. Jeff Christensen: Thank you. Our next question is how should investors think about tariffs and trade policies on Ideal Power? Tim Burns: Yeah. We continue to see that the tariff situation is very fluid. But we anticipate minimal impact on our operations from tariffs in place today. And notably, power semiconductors are often exempt from many of these tariffs, which really limits the potential effect on us. While the situation continues to evolve, we're confident that we're well-positioned to manage and mitigate the impact of future tariff changes, trade policy shifts, and also supply chain disruption. Jeff Christensen: Thank you. That concludes our question and answer session. I'd like to turn the call back over to David Somo for closing remarks. David Somo: Thank you, Jeff. I want to thank everybody for participating in today's calls and for the good questions. As I mentioned earlier, we anticipate scheduling a call and webcast in advance of our year-end results call to share more detailed information and discuss some of the topics explored today in greater depth. Operator, you may end the call. Operator: Thank you. This concludes today's conference. All parties may disconnect, and have a great day.
Operator: Thank you for standing by, and welcome to Bitfarms' Third Quarter 2025 Earnings Conference Call. [Operator Instructions] I would now like to hand the call over to Jennifer Drew-Bear from Bitfarms' Investor Relations. Please go ahead. Jennifer Drew-Bear: Thank you, and welcome to Bitfarms' Third Quarter 2025 Conference Call. With me on the call today are Ben Gagnon, Chief Executive Officer and Director; and Jonathan Mir, Chief Financial Officer. Before we begin, please note, this call is being webcast with an accompanying slide presentation. Today's press release and our presentation can be accessed on our website, bitfarms.com, under the Investors section. Turning to Slide 2. I'd like to remind everyone that certain forward-looking statements will be made during the call, and that future results could differ from those implied in this statement. The forward-looking information is based on certain assumptions and is subject to risks and uncertainties, and I invite you to consult Bitfarms' MD&A for a complete list. Please note that references will be made to certain measures not recognized under IFRS and therefore, may not be comparable to similar measures presented by other companies. We invite listeners to refer to today's press release and our MD&A for definition of the aforementioned non-IFRS measures and their reconciliations to IFRS measures. Please note that all financial references are denominated in U.S. dollars, unless otherwise noted. And now turning to Slide 3. It is my pleasure to turn the call over to Ben Gagnon, Chief Executive Officer and Director. Ben, please go ahead. Ben Gagnon: Good morning, everyone, and welcome to Bitfarms' Third Quarter 2025 Earnings Call. We made strong, steady progress in Q3, building on the momentum from the first half of the year as we advance our transformation into a leading North American HPC and AI infrastructure company. Today, I'll walk you through our investment thesis, value proposition and key developments, including updates on our energy portfolio and site-specific advancements, all of which gives Bitfarms a competitive advantage to capitalize on the surge in demand for HPC and AI infrastructure. Turning to Slide 4. I would like to kick off today's call by outlining our market thesis, one that we believe differentiates us from our peers and best aligns Bitfarms with long-term investors in our transition to HPC and AI. Infrastructure is not a bubble. Since the invention of modern compute, the supply of compute has increased exponentially. As compute grows, so too does the data center industry that powers it. This is a trend that has a trajectory of over 20 years of exponential growth and an annualized growth rate of 8.8% behind it. This isn't a bubble. It's a reflection of a new paradigm that showed no signs of slowing down before AI and now as AI rewrites the rules of how humans interact with computers, the demand for data center capacity is accelerating. But the demand for compute and infrastructure has reached an impasse. Data centers that used to be measured in kilowatts are now being measured in megawatts and gigawatts. Racks that used to support 10 kilowatts are now being designed to support 370 kilowatts. The exponential increase in demand for power can no longer be met at the pace of the market demands. And as a result, the lease rates for data center infrastructure, which have grown at an average rate of 3% over the last 20 years, are now growing at an average rate of 12% since 2022, and we expect this trend to continue. Turning to Slide 5. Infrastructure is a bottleneck. As manufacturers continually introduce newer, more efficient chips and increase production every year, this trend continues to accelerate. Next year, NVIDIA alone is expected to be shipping somewhere between 10 and 15 gigawatts of GPUs. And that doesn't include, of course, AMD, Intel, Qualcomm and others who are also producing their own hardware with over 100 gigawatts of chips expected to be produced by 2030. While the supply of compute chips continues to increase, the growth in data center infrastructure is happening at a much slower pace. It is not silicon nor capital that will be the real bottleneck for continued growth in HPC and AI, but power and infrastructure. Over the next few years, the gap between the amount of chips that are being produced and the megawatts and the racks available to plug them in and operate them will continue to widen significantly. We strongly believe that as this dynamic continues to play out, the value and the economics will continue to move in favor of those who own the energy and data center infrastructure. We've watched this play out in the market with the contracts that have been announced in the industry to date. When Core Scientific and CoreWeave announced their landmark transaction in April of last year, the rates were contracted around $120 per kilowatt per month. As we've moved further along this curve that's shown on the slide, those rates have continued to trend upward. Most of the contracts over the past few months have been around $150 per kilowatt per month. As time goes on, this trend is expected to continue with analysts predicting a massive shortfall of nearly 45 gigawatts of power for data centers by 2030. Just within the last 2 weeks, Satya Nadella, the CEO of Microsoft, confirmed the shortfall when he publicly stated on a recent podcast that they have GPUs they cannot deploy. We believe that over time, the companies who've allocated and will continue to allocate billions of dollars into compute will be increasingly economically incentivized to pay rising prices in order to deploy their compute faster and with greater certainty, because every day they do not deploy is a day of revenue they will never recover and because their customers will simply move on to a competitor. With direct operating margins for new GPUs typically in the 80s or 90% range, this infrastructure expense is a modest cost driver for those who own the compute, equivalent to a low single-digit percentage of OpEx. If this cost were to double, it would not impact direct OpEx for the customer by more than a low single-digit percentage. These rates, which are largely inconsequential for the customer are very significant for Bitfarms as the developer. With OpEx costs that are largely fixed, every additional dollar earned in a lease goes to the bottom line. This is what Bitfarms is aiming to optimize for, not the fastest contract, but the highest value per megawatt and the greatest margins for the longest period of time with great customers. We believe this will be the primary driver of our multiple expansion and what drives shareholder value creation long term. Our investment thesis is clear and backed by decades of data. Our conviction is high, backed by consistent incoming demand. We don't want to cap our upside by signing leases prematurely. Instead, Bitfarms plans to optimize and achieve higher lease rates and margins through the following 3 strategic actions: one, prioritize infrastructure development first by minimizing the time between signing a lease and generating revenue for a customer, we will minimize the discount that would otherwise be applied to the lease rates and locked into multiyear contracts; two, take advantage of the increasing gap between supply of data center infrastructure and data center demand to lock in higher rates and greater margins under multiyear agreements; and three, while the industry is focused on NVIDIA GB200 and GB300, Bitfarms plans to leapfrog NVIDIA's Blackwell architecture and lead the industry in developing infrastructure for NVIDIA's next-generation Vera Rubin GPUs across 99% of our 2026 and 2027 development portfolio. With Vera Rubin GPUs expected to begin shipping in Q4 of 2026, and the infrastructure requirements to support them largely incompatible with facilities designed for Blackwell GPUs, we believe Vera Rubin infrastructure will be in the greatest demand and shortest supply in 2027 and will command significantly greater economics. Turning to Slide 6. We are able to take this approach because we have a robust balance sheet to fund development and know the value of what we own. While we don't have the largest portfolio of power among the public miners who are transitioning to HPC and AI, we do have the largest portfolios of power in each of the regions in which we operate, none of which are in Texas and all of which are either existing or emerging data center hubs. With consistent inbound demand for our sites, we have high conviction in the value of our unique energy portfolio, the demand for our power and our ability to develop next-generation HPC and AI infrastructure. We believe that not all megawatts are created equal. Our megawatts are strategically located in high-value areas that have multiyear waitlist to secure the power we have today. Our campuses are close to major metros and existing data center clusters, have ample access to major fiber trunk lines and undersea fiber optic cables and benefit from temperate climate compared to places like Texas. While Texas is undisputably a great energy market and arguably the easiest market to grow and develop megawatts in the U.S., there are, of course, trade-offs. The trade-off to short-term development efficiencies is long-term operating inefficiencies. It is no secret that besides power, the primary challenge with data centers is cooling and cooling is becoming an increasingly more difficult problem to solve as energy density continues to increase with every generation of new hardware. Building and operating data centers in a hot, arid desert climate like Texas as opposed to cooler northern climates like Pennsylvania, Washington and Quebec means more CapEx and OpEx for cooling. This isn't an opinion. It's math and engineering. If we built our exact same data center for Panther Creek with the same design, equipment and materials in Texas, it would have a PuE of about 1.4 to about 1.5. Whereas in Pennsylvania, Quebec or Washington, it would be about 1.2 to 1.3. That means for every megawatt we are converting, more of those electrons are going to compute, which is the revenue-generating activity for customers as opposed to supporting revenue generation through cooling. Simply put, our megawatts are harder to get in higher demand areas, produce more value for customers and are worth more per megawatt. In Pennsylvania, we have the strategic foresight to acquire our 3 campuses and submit our energy applications in 2024 before the HPC and AI demand really came into play in the state earlier this year. This has positioned us with secured power at Panther Creek and Sharon and at the front of the queue with very well-advanced power applications at Scrubgrass. In Quebec, new power allocations are almost impossible to get with numerous data center applications denied by the province in the past year. Bitfarms has 170 megawatts operating with some of the cheapest power rates for data centers in North America and 100% renewable. 100% of these megawatts are currently being utilized for Bitcoin mining. And just in the last month, we confirmed that we will be able to convert our Bitcoin megawatts for HPC and AI. This means our Quebec portfolio represents a unique and strategic opportunity to increase total data center megawatts in the province by 25% from about 700 megawatts today, while fulfilling 2 strategic national and provincial objectives, the scaling back of Bitcoin mining megawatts while increasing HPC and AI infrastructure and data sovereignty. In Washington, we have 18 megawatts of secured power in the largest data center cluster on the West Coast with the cheapest power in the U.S. for data centers and 100% renewable. Because of this, the area has a 10-year wait list for power. Everybody is looking to grow here, and it is nearly impossible to do so outside of secured megawatts like ours. This means that despite the relatively smaller scale of Washington, sites in the area are in high demand by both enterprise and hyperscalers alike. I'd now like to spend a few minutes discussing Washington and the news we issued this morning in more detail. Turning to Slide 7. Earlier this morning, we announced plans for the conversion of our 18-megawatt Washington site to HPC and AI workloads. We signed a fully funded binding agreement for $128 million for all the critical IT infrastructure and building materials to develop the full 18 megawatts of gross capacity with anticipated industry-leading energy efficiency between 1.2 and 1.3 PuE. The state-of-the-art facility will feature: one, validated reference designs, ensuring compatibility and performance with NVIDIA GB300s; two, modular infrastructure, enabling phased deployment and scalability, reducing the downtime of Bitcoin mining revenues and ramping up our time to HPC and AI revenues; and three, proven thermal and power management systems critical for HPC and AI operations. The construction team is in Washington today with the general contractor and are kicking off the conversion of the Washington site, which is targeted for completion in December 2026. Turning to Slide 8. I would now like to discuss monetization strategy at Washington. With decade-long wait times for new power and the cheapest power in the U.S. for data centers, we are actively pursuing colocation for both hyperscaler and enterprise, where we can capitalize on the long wait times as previously discussed. This morning, for the first time, we announced we are also pursuing GPU as a service or cloud. While our focus is on developing next-generation Vera Rubin infrastructure across most of our portfolio, we believe there are some compelling reasons to potentially go with cloud as a monetization strategy at Moses Lake specifically. One, GPU as a service would enable us to capture the benefit of the lowest cost power for data centers in the U.S. for ourselves and generate what we expect to be above-market margins and returns for cloud. Two, the relatively smaller scale makes cloud at this site easier to execute and finance. We have more than enough liquidity to consider the site and strategy fully funded today and are in active discussions with leading GPU manufacturers on GPU sourcing and financing, which we believe could be done on very attractive terms. GPU financing could materially reduce CapEx requirements and enhance expected returns. Three, we expect that by demonstrating our ability to execute across the entire stack, we will also be able to better understand customer needs, provide better quality service and negotiate better leases at our other facilities. Lastly, but most importantly, despite being less than 1% of our total development portfolio, we believe that the conversion of just our Moses Lake site to GPU as a service could produce more net operating income per year than we have ever generated with Bitcoin mining, providing the company with a strong cash flow foundation that would fund OpEx, G&A, debt service and contribute to CapEx as we wind down our Bitcoin mining business. I will now walk through the rest of our sites in a bit more detail, starting with Panther Creek. Turning to Slide 9. Panther Creek is our flagship HPC and AI campus in Eastern Pennsylvania. As we've discussed previously, we have 350 megawatts of secured power with PPL. This power is contractually obligated to be delivered with 50 megawatts at the end of 2026 and 300 megawatts at the end of 2027. The site has sufficient acreage for the development of the entire 350 megawatts with capacity to go beyond that. Additionally, we have $200 million remaining on our project facility with Macquarie that is intended to finance Phase 1 of the project as well as a few long lead time expenses for Phase 2. We also have some exciting news around potential further capacity expansion at Panther Creek. Lately, there have been a number of developments, including the recent 403 letter from the Department of Energy and commitments to deploy more natural gas energy generation in Pennsylvania that have given us line of sight to expand beyond the existing 350 megawatts of secured power capacity. We have received positive indication on converting our existing interconnection service agreement, or ISA 60 megawatts to a firm energy service agreement, or ESA, of 60 megawatts to expand power to 410 megawatts and on a recent load study to expand power capacity to over 500 megawatts of growth capacity. With these positive developments that could meaningfully expand capacity at this campus and in line with our investment thesis, we are modifying our original Phase 1 designed for Blackwell GPUs and planning a new Phase 3 and Phase 4. The entire campus will now be developed for NVIDIA's Vera Rubin GPUs and their greater energy density to accommodate our new expectations on future expanded power capacity. This is expected to delay the energization of Phase 1 marginally from December 2026 into the first half of 2027, with no anticipated impacts to Phase 2 time lines. We believe this will enable the company to achieve significantly higher economics in line with our long-term thesis and strategy. Turning to Slide 10. Moving on to Sharon, where we have 110 megawatts of power secured by an ESA with FirstEnergy and PJM under development. We are currently operating 30 megawatts of Bitcoin mining on site, but have started development on an additional 80-megawatt substation, bringing the total available for HPC and AI uses to 110 megawatts. We expect to have the full 110-megawatt substation online by year-end 2026. We recently closed on the purchase of the land for the site, effectively ending our lease and enabling us to move forward with our planned development of HPC and AI infrastructure. Similarly to Panther Creek, we will be working to develop the campus for Vera Rubin GPUs, targeting site completion and revenue in the first half of 2027 for the full 110 megawatts of gross capacity. Turning to Slide 11. In Quebec, we have 170 megawatts of low-cost hydropower currently operating across multiple Bitcoin mining sites, almost all of which are within a roughly 90-minute drive from Montreal. This is an incredibly attractive opportunity for hyperscalers who are following what's called a regional campus strategy. This is something that was pioneered by Amazon, where smaller sites can be directly connected with direct fiber infrastructure in order to reduce the latency between sites below 2 milliseconds, enabling many sites to be connected together to function as one larger site. As I mentioned, it's almost impossible to grow organically in the province. And in October, we confirmed the ability to convert over our Bitcoin mining infrastructure to HPC and AI with regulators and utilities in the region. With that pathway clear, we are accelerating our plans in Quebec. We will focus our development efforts on the city of Sherbrooke, where we have 96 megawatts, robust fiber connectivity, a strong and developed local labor force and ample support from the local energy utility and municipality. We will be applying some of the standardized engineering and design plans completed for our Washington site to Sherbrooke in order to convert these facilities from Bitcoin mining into next-generation HPC and AI infrastructure adapted for Vera Rubin GPUs. Similar to Washington, Quebec has a cool climate and some of the lowest cost energy in North America for data centers. With strong unmet demand for GPU cloud in Montreal, Sherbrooke also represents a potential opportunity to scale up a cloud business in 2027 with VR200s, a strategy that we will evaluate as we work through the engineering and development plans for Sherbrooke. The remaining 74 megawatts of Bitcoin mining in the province are earmarked for potential expansion in 2028, and we look forward to providing more detailed plans for Quebec in 2026. Turning to Slide 12. Last, but certainly not least, we have our Scrubgrass campus in Pennsylvania. This is about 30 minutes away from our Sharon, Pennsylvania campus on the western side of the state. With the exception of the new Panther Creek Phase 3 and Phase 4, which I spoke to a minute ago, this is the only power in our portfolio that is not 100% fully secured today. This is a very, very exciting development opportunity for Bitfarms. We believe this is the only campus outside of Texas for public miners converting to HPC and AI that has over 1 gigawatt of potential capacity. And while we have made great progress on developing the power story for this giga campus, there are still quite a few steps to be taken in order to contractually secure the power, which falls into 2 buckets. First, we have completed 3 conceptual load studies with FirstEnergy, starting with 250 megawatts, 500 and then 750 megawatts, thus moving over to what's called a detailed load study with FirstEnergy, which would eventually be converted over to firm service in an ESA. Second, we have made substantial progress on evaluating the potential to add additional generating capacity on site. This could be accomplished by building a 3- to 4-mile pipeline from our campus to the second largest natural gas pipeline in the U.S., the Tennessee Natural Gas Pipeline, which we have confirmed could supply up to 550 megawatts of natural gas, multiplying our generation capacity on site. We're still in the early stages of evaluating how we would expand the generating capacity, and we'll provide more details as we progress. Combined, the 2 buckets could potentially provide 1.3 gigawatts of gross capacity. And additionally, there is very good fiber infrastructure in the area with our 8 fiber infrastructure networks nearby and is in close proximity to Pittsburgh and Cleveland as well as the other data centers, which are starting to pop up throughout the state. The earliest time that we anticipate we could have additional power at this kind of scale implemented at Scrubgrass is around 2028. Though this is a longer lead time campus for us, we believe that with the forecast on power and demand for HPC and AI infrastructure, the timing for our giga campus will play-in well with the cycle, our investment thesis and our other development plans. Turning to Slide 13. To sum up, we believe that we are incredibly well positioned to execute against our investment thesis in 2026 and 2027 and maximize long-term shareholder value. One, we have a very unique portfolio of energy assets that we aim to fully convert to HPC and AI infrastructure. Two, we have announced our plans to convert our Washington site to HPC and AI workloads and lead the industry in the development of next-generation data centers for NVIDIA's Vera Rubin GPUs. Three, we are actively evaluating a potential cloud monetization strategy for our Washington site, which we believe would be a meaningful driver of cash flows and could eclipse any Bitcoin mining cash flows we have ever generated. Four, we are well capitalized to make our currently planned investments with a financial flexibility that exceeds $1 billion across cash, Bitcoin and our Panther Creek project facility with Macquarie, all of which are going to fund CapEx. As we continue to produce strong free cash flows from our Bitcoin mining operations that fund OpEx, G&A, debt service and contribute to CapEx with no further planned minor CapEx. And lastly, we continue to execute on our U.S. pivot with the anticipated sale of our Paso Pe facility and our full LATAM exit. Our transition to U.S. GAAP for Q4, the establishment of our New York City office and working towards a U.S. redomicile in 2026. We believe this would give us significantly greater index inclusion and meaningfully improve the institutional composition of our cap table. I now have the pleasure to hand the call over to our new CFO, Jonathan Mir. Turning to Slide 14. Jonathan, over to you. Jonathan Mir: Thank you, Ben, for the warm introduction. I'm excited to join Bitfarms at this pivotal moment in the company's transformation. My principal objectives as the new CFO are centered around capital allocation, capital sourcing and capital structure. I'm working hand-in-hand with the operations and development teams on the ground to ensure we implement financing plans that are appropriate for the company and its assets, efficient and support long-term shareholder value creation and that we are also allocating capital to its best possible risk-adjusted returns. With an extensive background in energy infrastructure strategy and financing, I believe there's an extraordinary opportunity to use our strong balance sheet, unique assets and the talents of our people to create value in the high-growth HPC/AI space. I look forward to working closely with the team to deliver on our strategy and capture the exceptional long-term shareholder value that would accompany our successful execution. Turning to Slide 15. Today, Bitfarms has the strongest balance sheet and most available capital in the company's history. In Q3, we were able to execute across several initiatives. First and foremost, we recently completed a very successful convertible note offering, where we were able to upsize the offering to $588 million while improving on pricing, preserving upside and minimizing potential equity dilution through a 125% capped call. Bitfarms chose to issue convertible notes because they allow us to access capital at a lower coupon than straight debt and with less dilution than straight equity. The cash settled capped calls we purchased allow us to offset economic dilution up until $11.88 per share, representing a significant premium to the share price today. It is also important to highlight that investor commitment to Bitfarms is strong. 100% of institutional investors that management met with during the marketing process participated in the transaction and invested their capital in Bitfarms. We're thrilled with the outcome of this raise, and it will allow us to advance our pipeline in tangible ways. Second, we converted our previously announced $300 million debt facility with Macquarie to a project-specific financing facility dedicated to the development of our Panther Creek data center. Moving the debt facility from a corporate level to the asset level materially enhances financial flexibility for the entire company. In October, we drew an additional $50 million from the facility in order to accelerate development of the site for a total of $100 million drawn to date. Finally, we maintained steady and efficient mining operations throughout the quarter, achieving approximately $8 million in monthly free cash flow after G&A. We expect to use this cash flow to support our HPC/AI development projects. Looking ahead, we anticipate continuing to use a mix of both corporate level and project level debt and equity financing as we advance our project milestones. On an ongoing basis, we will evaluate a wide range of opportunities and choose those that we believe support both a strong, stable balance sheet and realize the full potential shareholder value creation that would accompany the successful execution of our plans and fund milestone objectives. Turning to Slide 16. Let's focus now on our third quarter financial performance. In Q3, we achieved a total revenue of $84 million from continuing and discontinued operations. With the intention to sell the Paso Pe site in order to complete our Latin American exit, all revenue from that asset is classified as discontinuing operations. From continuing operations, we earned 520 Bitcoin and achieved revenue of $69 million, representing a year-over-year increase of 156% in revenue. For our continuing operations, our gross mining profit was $21 million, representing a gross mining margin of 35% and an average direct cost of $48,200 per Bitcoin mined. During the third quarter, we introduced a new program for digital asset management, Bitcoin 2.1, which is designed to offset Bitcoin production costs and achieve higher value per Bitcoin sold as a low-cost and low-risk funding mechanism for the energy infrastructure investments that define Bitfarms going forward. It is important to highlight that we are not a Bitcoin treasury company. The goal of this program is not to accumulate Bitcoin, but rather to offset the production cost of Bitcoin and by doing so, contribute to cost effectively funding our HPC/AI initiatives. This is a multi-strategy program that primarily sells both short and long-dated out-of-the-money covered calls on the Bitcoin and treasury as well as for Bitcoin production. During Q3, we incurred an all-in cost per Bitcoin of $82,400 from continuing operations. When considering our net gain of $13.3 million from derivatives against our all-in production costs, it would bring the effective all-in cost down to $55,200. Cash G&A for Q3 was $14 million compared to $20 million in Q3 2024. The improvement was largely driven by lower professional services costs. Operating loss from continuing operations was $29 million for the quarter, including impairment charge of $9 million of nonfinancial assets. As a result, net loss from continuing operations for Q3 was $46 million or $0.08 per share. For the third quarter, our adjusted EBITDA from continuing operations was $20 million or 28% of revenue, up from $2 million or 8% of revenue year-over-year in Q3 2024 and up from $9 million or 15% of revenue in Q2 2025. Turning to Slide 17. Before we begin Q&A, I'd like to reiterate our strong financial position and review our expected capital investment plans for the next 12 months. We are extremely well capitalized to fund our HPC/AI growth initiatives. We have a war chest of over $1 billion, comprised of roughly $820 million in cash and Bitcoin and the remaining $200 million available to draw from our Macquarie facility. With these funds, we expect to be able to fully finance the build-out of our Washington site and the initial phases of construction at our Sharon, Sherbrooke and Panther Creek sites. As we advance our development, the actual investment in our projects will be dependent on a number of factors. We are currently focused on executing on the initial phases of our projects, beginning construction and securing long lead time items to ensure our project time lines. We will continuously evaluate a wide range of financing alternatives at both the corporate and project level, maximizing shareholder value with accretive financing will determine our choices as well as the need for a healthy balance sheet. In closing, I'll underscore that Bitfarms is in the strongest financial position in the company's history, and we have a clear vision of how we are going to best utilize this capital to advance our HPC/AI build-outs in North America. The entire Bitfarms team is incredibly enthusiastic and engaged about the opportunities ahead. With that, I'll now turn the call over to the operator for Q&A. Operator: [Operator Instructions] Our first question comes from the line of Mike Colonnese of H.C. Wainwright. Michael Colonnese: Appreciate all the color on the HPC strategy this morning. First for me, Ben, you mentioned that infrastructure for the Vera Rubin GPU should command a premium to the Blackwell infrastructure. Can you share more on how you guys are thinking about economics there and the CapEx differences? Ben Gagnon: Thanks, Mike. Yes, happy to speak to that a little bit. There's kind of 2 driving forces there with our expectations on Vera Rubin economics. The first is that as the dynamic continues to play out where the infrastructure is going to be an increasingly greater and greater shortage, there's going to be a driver there that will drive the economics. And the second part of this is that the economics around supply and demand imbalance are really specific to GPU models. So if you look at H100s, H200s, the GBs, the 200s and 300s and then what's going to be the next series, the VR, there's a lot more infrastructure available to support those older GPUs, which have less specific requirements. And when you look at what's going to happen with the VR series, the energy density is going up from 190 kilowatts per rack with the GB300s to upwards of 370 kilowatts per rack with the VR200s. And so a lot of the infrastructure that's being built right now is not going to be compatible with the next generation. And as companies allocate all this money into those Vera Rubin GPUs, they're going to be very economically incentivized to deploy them. And what I spoke to with regards to our investment thesis earlier today, is that as this dynamic continues to play out, would you rather sit on your GPUs and not deploy them? Or would you rather pay a higher infrastructure expense in order to deploy them and start monetizing the asset. And really, the margins are so high on these GPUs, especially when the GPU is the newest, most cutting-edge state-of-the-art GPUs as the Vera Rubins will be in 2027, that the economic incentive to deploy those faster with very few options available should drive higher economics. We don't have a firm price point of exactly where that's going to lie, but we think the trend is abundantly clear that the economics next year and in 2027, they're just going to continue to get better and better, especially as the shortfall continues to get exacerbated. Michael Colonnese: Really helpful color there, Ben. And how should we think about the wind down of your mining operations in the coming years, specifically as it relates to the pace and timing of hash rate coming offline as you start to convert and make further progress in converting your data centers over to HPC/AI? Ben Gagnon: Yes, happy to speak to that. I mean the first area is the LATAM export that we've been working on. We obviously shut down our Argentina facility earlier this year. And I think one of the big areas here is the Paso Pe facility, which is an asset that's being held for sale. That represents around a little bit under 20% of our hash rate. And so that will impact the hash rate for the company rolling forward. But when we look at transactions like this, just like how we looked at the economics around shutting down the Argentina facility, we expect to pull forward a significant amount of expected free cash flow from those operations today so that we can reinvest them more immediately in the U.S., in North American HPC and AI infrastructure to greater effect. So while it should have an impact on the free cash flow from operations, really the impact is very mitigated by the fact that we're taking 1 to 2 years' worth of free cash flow from operations and bringing it forward for reinvestment now. And then we also have the derisking factor with regards to having less and less Bitcoin exposure or Bitcoin mining exposure, I should say. So as we move forward through 2026, the next sites that would be coming offline, would be coming offline as we develop the HPC and AI infrastructure and they would get replaced. Washington would probably happen sometime in the -- probably middle of the year, and that would be about 1 exahash and everything else will kind of come off slowly as we convert over the facilities to HPC and AI. So it would be a bit of an orderly transformation, and we'll continue to update the market as we announce those plans. Operator: Our next question comes from the line of Brett Knoblauch of Cantor Fitzgerald. Brett Knoblauch: Thanks for a lot of the color on the different sites throughout the call. I guess when it comes to maybe your PA sites and getting additional power, I feel like that's kind of like the biggest catalyst maybe over the near term. I believe Stronghold was kind of in queue before you guys went out and acquired it, which was probably, I don't know, over a year ago now. Do you have any idea on an update of when you expect to maybe expand the power capacity at both Panther Creek and Scrubgrass. Is that a couple of months thing? Within 6 months thing? How should we think about the timing there? Ben Gagnon: Thanks, Brett. Yes, it's a pretty exciting development there at Panther Creek because just over the last couple of weeks, we've received positive indications on the conversion of the ISA to an ESA as well as the expansion with an additional load study. It's a little too early to say exactly when that would come on to site. What we're planning here is an additional Phase 3 and Phase 4, which would come likely after Phase 2. But it's possible that the conversion of the ISA to an ESA could happen very quickly because all of the infrastructure is in place. There is no investments that need to be made. It's really just subject to the regulatory approval and signings and paperwork for all of that to be converted over. So I would think within the Phase 3, it's not really clear exactly when that's going to take place, but it could happen quickly. It could take several months. When it comes to a Phase 4, that's likely going to be a 2028 deal. Brett Knoblauch: Awesome. And then on the GPU cloud as a service, the CapEx figure that you've noted on, I guess, maybe converting that Bitcoin mining to host GPUs, that was not including the GPUs, correct? Ben Gagnon: Correct. That's not including GPUs and some of the construction costs associated with converting over the facility. So there will be additional expenses at the Washington site. We've had several conversations now with some of the leading GPU manufacturers, and we think that there's very attractive financing options on the GPUs as well that would really keep the CapEx requirement down to basically the infrastructure expense, and we'd be able to fund potentially up to 100% of the compute through these GPU manufacturers, which could be done on what we believe to be really attractive terms. And we also think that it would provide a significantly greater return profile on doing GPU as a service or cloud. Brett Knoblauch: And from a capital allocation, I guess, standpoint, what is your guys' preference? Obviously, the PA sites appear to be leaning more towards colocation, Washington site cloud. Do you guys expect to kind of grow both businesses at the same time? Is there a preference for one to kind of get online sooner than the other? Ben Gagnon: The expectation is that the Washington site will be the first site that's fully online. The Sharon site will probably be the second site that's fully online because Scrubgrass -- sorry, Panther Creek is split out into those 2 phases in 2027 with additional Phases 3 and Phase 4, which still needing to be confirmed. Our priority is managing the critical path and all the project management time lines that we have across our various facilities. But when we're looking at capital and how we'd allocate it across, it's managing the critical path, and it's also making sure that when it comes to looking at the opportunities around cloud, we're doing so in a way that makes sense and is affordable. And one of the benefits of doing it at Washington is a relatively smaller scale does make it very cost effective to do it. It's something that we could consider fully funded today. It's something that we could get financing for it at scale, whereas when you're looking at the really large campuses that we have in Pennsylvania, a colocation strategy is going to be a lot easier to finance. Operator: Our next question comes from the line of Stephen Glagola of JonesTrading. Stephen Glagola: On the $128 million critical IT supply agreement for Washington, can you clarify the counterparty to that agreement? Is that T5? Or is that another firm? And then additionally, just a follow-up to the last one on the GPU cloud model potentially at Washington and Sherbrooke. Can you maybe elaborate on what factors make GPU as a service compelling relative to standard colocation in these markets? And sort of how are you evaluating both potential GPU risk and your, let's say, return on invested capital IRR hurdle for the cloud opportunity? Ben Gagnon: Yes. Thanks, Stephen. When it comes to the supply agreement that we have for the Washington site, it's not with T5., it is with a large publicly traded American national company who serves and supplies data center equipment and data center services. The facility is really an attractive facility for both colocation and both cloud. But when you look at the opportunities that we have here to go fully up the stack and what that might mean for the company, both in terms of a free cash flow perspective as well as our ability to really demonstrate ourselves not only as a developer, but as an operator, I think there's a lot of tangible benefits there that will pay dividends in the long run. The conversion of the site according to our modeling and similar transactions that have happened in the market over the last couple of months, indicate that this one site could be worth significantly more than the entire Bitcoin mining business that the company has been operating for multiple years. And so that would provide us with a really strong free cash flow foundation as the Bitcoin mining business winds down. It will also enable us to better understand and better learn these facilities as we're looking to provide service and work with hyperscale and enterprise customers and neocloud customers on really large campuses. And so the benefit of doing it at the smaller facility is that we should be able to extract a lot of knowledge and value that we can apply to a lot of our other facilities as well. Operator: Our next question comes from the line of Mike Grondahl of Northland. Mike Grondahl: Ben, just curious, what would you describe as the 2 biggest challenges to maybe meeting your time lines for Washington, Sharon and Panther Creek? Like what's going to be the potential bottlenecks and how are you dealing with them? Ben Gagnon: Mike, I mean the potential bottlenecks in construction are a little hard to forecast. I mean construction is something that is changing every single day on the ground. I think that the key way that you mitigate potential risk in construction is having great partners with your owners rep, your general contractors, having a great team of project managers internally who are making sure they're on track of everything, every step of the way, and they're trying to think forward on all the potential problems in managing that -- those critical paths. It's not possible, I think, to identify what would be the key bottleneck or the key risk. But I think with the team that we have in place, the strategic partners that we have in place and the kind of groups that we're working with on the contracting side or on the owner's rep side, we're in a really strong position to execute. Mike Grondahl: Great. And then any rough guidelines or framework you can give us for sort of like 2026 CapEx? Ben Gagnon: So when we're looking at 2026 CapEx, we've outlined some of the numbers for Washington. We're still working on clear path forward as we're revising for Vera Rubin. The real challenge with providing full CapEx figures for 2026 is that the Vera Rubin infrastructure is so new that even NVIDIA hasn't completed their validated reference designs to support that equipment and that infrastructure. So that's something that's adjusting in real time and still moving forward. We should expect to have a better indication of what CapEx looks like in 2026 in Q1. From our conversations that we're having with the various different engineering firms and suppliers and partners of NVIDIA, NVIDIA is going to be producing the first Vera Rubin GPUs and taking them for their own purposes in probably Q2 of next year. And so sometime in Q1, the reference design should be relatively final, and we should be clear in terms of what the CapEx implications are for 2027 and 2026. Operator: Our next question comes from the line of Nick Giles of B.Riley. Nick Giles: Appreciate all the detail here. Ben, you mentioned the higher rack density of the Vera Rubin gen and that it could make the rack density suited for Blackwells obsolete. And it wasn't that long ago that 100 kilowatts per rack was the high end of the rack density. So how are you thinking about future proofing as this trend continues? And are there any contract structures that could protect you from the need to upgrade later down the road? Ben Gagnon: Thanks, Nick. It's a great question. The evolution of hardware is happening at a rapid pace, right? The GB200s were 150, the GB300s were 190 kilowatts per rack. And now the Vera Rubins are going to be over 370. And what that means is that your cooling needs to provide a lot more capacity in a very small footprint. It also means that your electrical distribution is very different. Most of the networking is more or less the same. But on the cooling and the electrical, it's a really big challenge. And one of the things that NVIDIA is looking at doing is increasing the voltage and even going to direct DC systems for the Vera Rubin technology. So they're looking at switching over to 800-volt DC. That doesn't mean that you necessarily have to go upwards of 800 volts or switch over to DC, but it does mean that as the increasing energy density continues to accelerate, you need to be rethinking your energy infrastructure and how you're actually building out these facilities. I think one of the ways that you try and do this is you try and build for the hardware at the time and then you try and lock that in with multiyear agreements, which help you to recover your investment and capitalize those investments over a long period of time. When you're signing an agreement for 5, 10, 15 years, most of the time, those agreements don't anticipate material upgrades to the infrastructure or any upgrades to the infrastructure. And so you're locking yourself in, the customer is locking themselves in with the infrastructure that they have in hand. And so I think the best way to mitigate those risks is to spread out your facilities, make sure you have a pipeline that exists over multiple years and make sure that you're building to the technology that's coming, not to the technology that already exists today because if you're building for today's technology by the time the facility is done, it's obsolete. Nick Giles: I really appreciate that perspective. That takes me to my next question. You mentioned the pipeline. Obviously, you have a lot of growth in front of you, but how much time are you spending on M&A opportunities? And where does that ultimately rank in terms of capital allocation? Ben Gagnon: Virtually none, Nick. Our focus as a management team is execution, execution, execution. We don't believe that there is a tremendous value that comes for our shareholders for looking at opportunities that are 2029, 2030 and these kind of long lead time items. We believe the value comes from executing against our existing portfolio. And we continue to get inbounds in terms of new opportunities and growth opportunities, but none of them seem to compare at all with what we already have in hand. And so I think the best opportunity for us is to continue to execute against our existing pipeline. There will be a time in the future where we're going to want to continue to expand that pipeline. But that's probably an easy year or 1.5 years out from today. Nick Giles: Got it. That's good to hear. Maybe one more, if I could, just for Jonathan. Sorry if I missed any commentary around this earlier, but how are you ultimately thinking about the Bitcoin treasury? Would you look to liquidate these holdings around the time that mining operations wind down? Or would those be separate time lines? Jonathan Mir: So to be -- first, it's nice to meet you. So we are definitely not operating as a Bitcoin treasury company, and we don't want to be one. What we're doing right now through programs like Bitcoin 2.1 is offset Bitcoin production costs and achieve higher value per Bitcoin sold in a low-risk, low-cost funding mechanism for the energy infrastructure investments that define Bitcoin going forward. The program primarily sells short and long-dated out-of-the-money calls on the Bitcoin and the treasury as well as for Bitcoin production. So our efforts are focused around maximizing yield and minimizing costs. And we expect the Bitcoin treasury to wind down into strength as we allocate it to CapEx. Operator: Our next question comes from the line of Martin Toner of ATB Capital Markets. Martin Toner: Congrats on all this progress, guys. My question is around the GPUs. What's your confidence in being able to acquire them on a timely basis? And would you go through a distributor that comes with the financing or who might finance them? Ben Gagnon: Thanks, Martin. Yes, happy to speak to that. We've had quite a few conversations with leading GPU manufacturers. As you probably know, NVIDIA produces GPUs themselves, but they also sell chips to a lot of OEM manufacturers. When you speak with those manufacturers, they often have finance programs in place, and those finance programs are -- can be pretty attractive, especially if you have the right infrastructure to ensure the quality and the lifespan of those GPUs. So going with an OEM manufacturer has a lot of benefits. They'll provide a full turnkey solution with regards to the servers themselves, and they can often come with financing. With our time line for end of next year on Washington, we're highly confident in sourcing our GPUs, and we believe that there's a lot of financing options out there that we are evaluating and could really juice up those return profiles. Martin Toner: That's great. Is there a good exahash number to use for Q4? Ben Gagnon: Our exahash should stay relatively consistent in Q4 when you're looking at our continuing operations. It's not possible right now to really forecast the impact or when the impact from the Paso Pe sale is going to happen. But the site continues to run today. It continues to hash. It continues to generate free cash flow. It's just not classified there under normal revenue according to IFRS standards, we have to hold that under discontinuing operations. But I think if you just look at the hash rate associated with our -- the rest of our portfolio, that will stay relatively constant -- it will stay constant throughout Q4, and then we'll make adjustments to it throughout 2026 as we execute on the HPC and AI development. Martin Toner: Fantastic. Can you give us a sense for initial conversations with customers of the GPU as a service product, reaction and confidence in being able to like contract them on a timely basis? Ben Gagnon: So conversations on the GPU front are really new for us because we've only started evaluating this in the last month or 2 as we've seen the market dynamic really take hold. I think the inbound demands that we've had across Washington and specifically Panther Creek is a lot. And when we're looking at what's the best way to service those customers, what's the best way to lock in long-term value under those agreements, there's a variety of different customers who are coming to us, and some of them want the GPUs included in there, and there's an associated premium that could be potentially extracted from that. So it's a little too early to indicate exactly what we would expect with economics, but we do believe the economics from our conversations and from the internal modeling that we've done and from the transactions that a lot of the companies in the space have announced in the last couple of months is very compelling, especially when we can execute it at a smaller site like Washington, which we can consider fully funded today. Operator: Our next question comes from the line of Brian Dobson of Clear Street. Brian Dobson: I guess more broadly speaking about Bitcoin mining, as more and more miners transition megawatts to HPC? How do you see the global hash rate evolving over the next few years? Ben Gagnon: No, interesting question, Brian. Personally, I think the hash rate is going to continue to evolve at the same rate that it has been evolving. But if Bitcoin price is not moving up meaningfully, that would be a major headwind to further growth. I think what you'll see more likely is that Bitcoin miners will continue to rotate out to lower and lower cost jurisdictions. And I think one of the big dynamics that is taking place is that the public miners represented almost 1/3 of the entire network, and they all seem very keen on moving over to the higher economics associated with HPC and AI. So that removes a lot of the available and current existing infrastructure for Bitcoin mining. So there could be some potential headwinds in exahash growth for the network. But I think what you'll see is it's just going to rotate off to different jurisdictions. We've seen huge growth in the Middle East, in Africa. I think Russia is a very large booming market for Bitcoin mining right now. And I think the best opportunity for most miners in the United States really is this transition to HPC and AI. And the economics are really going to drive that forward because the U.S. is the best market to invest in for HPC and AI, whereas Bitcoin mining is largely location agnostic. And it's happy to go to cheaper locations, higher-risk locations, more remote locations than HPC and AI is. Brian Dobson: Yes, excellent. And then just a quick follow-up. So as you're reviewing your portfolio, do you see an opportunity to engage in this type of megawatt redeployment in a broader sense? Ben Gagnon: When we're looking at whether or not we could redeploy our Bitcoin mining assets somewhere else, I think the opportunities are really few. And really, I don't think that's a great use of management's resources or time. I think the best opportunity is to basically bring forward what should be estimated free cash flow for mining operations today into cash and reinvest those into HPC and AI. Operator: Our next question comes from the line of Michael Donovan of Compass Point. Michael Donovan: Ben, you mentioned dollar per kilowatt trends. Can you quantify a premium on dollar per kilowatt that you're seeing for power secured in Pennsylvania or Washington versus Texas? Ben Gagnon: Yes, it's a good question. There's a few variables that go into dollar per kilowatt on these leases. One is obviously time line, one is location. Another one is risk factors that go into the development time line. And so it's not really possible to pinpoint an exact price per location because there's multiple factors which come into play when you're looking at what the total lease rates can accumulate to. I think if you look around at the transactions that are here and you look around at kind of what Bitfarms could secure today at Pennsylvania before it's even really broken ground at our Panther Creek site, which we plan to do next month, we could probably lock in $140 to $150 per kilowatt per month. But I think when you look at that rate, that rate takes into consideration the location. It also takes into consideration the shovel has not been put in the ground yet. And what we don't want to do is we don't want to lock in a lot of discounts that would be associated with the build time line and the uncertainties around the build time line into a 10-, 15-year agreement. What we'd rather do is we'd rather execute against our construction milestones utilizing the substantial war chest that we have today. And the closer we can bring that window down from signing a lease to actually generating revenue from a customer, the more that we should expect to get. It's hard to put an exact price, but I would think that if that window was shorter, we could probably get upwards of $180 per kilowatt per month if we didn't have the risk and uncertainty priced into the time line that would bring it down to $140 to $150 per kilowatt today. That's internal estimates and modeling. So there's a lot of factors that go into that. And we also think that as you execute against 2026 and as the gap between data center supply and data center demand continues to exacerbate, those numbers could get even better. And when we look at how does the margins work out for these contracts, you're largely looking at pretty fixed OpEx. And so the difference for the company between getting $140 per kilowatt hour, $140 per kilowatt per month versus $150 or $180 is not only a huge increase in terms of the top line revenue, but it's an even larger increase in terms of the profit margin, in terms of what your adjusted EBITDA is going to be. And then not that all translates out into that multiple expansion that we're targeting with this transformation, right? So if you're getting a significantly higher free cash flow out of that operation, that's what the multiple expansion is going to be based on. So we really want to make sure that -- we're not pricing in those discounts. We're trying to maximize the dollar per kilowatt per month in the lease, and that's going to be the way that we achieve the highest multiple expansion for shareholders in the long term. Michael Donovan: That's helpful, Ben. And you talked about connecting data centers to be one campus, and I was hoping you can unpack this a bit more. How can we think about distance between hauls or pods versus theoretical loss and performance for compute? Ben Gagnon: Yes. There's a strategy that Amazon pioneered. It's called the regional campus strategy, and they've effectively determined that somewhere around 300 miles is the cost-effective range to build direct fiber infrastructure. But the real thing is the latency that you could get between your sites. Now obviously, when you're looking at these facilities, you're even concerned about the latency in rack and in between racks or inside the facility to go from one rack to another rack on the other side of the facility. So that latency is becoming an increasingly bigger bottleneck as you're looking at performance on the high, high end of GPUs. But what we've seen is that most of our facilities in Montreal, where we'd be looking at this regional campus strategy, they're much closer than 300 miles. They're all within 90 minutes of Montreal. Many of them are 15-, 20-minute drive apart from each other. And so it would be possible to reduce the latency below 2 milliseconds with direct fiber. It would be pretty cost effective to do so. And you'd get a lot of benefits from doing that in terms of the scalability, given it's just so difficult to scale up new megawatts in the province. Operator: I would now like to turn the conference back to Ben Gagnon for closing remarks. Sir? Ben Gagnon: Thank you very much. I would like to thank everyone for attending our earnings call this morning. The management team is very excited. Our long-term investment strategy, we believe, is fully aligned with long-term investors. And we are really, really excited about the future of this company and what we're building at Bitfarms, and we appreciate your continued support. Thank you. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Good morning, ladies and gentlemen, and welcome to the DiaMedica Therapeutics Q3, 2025 Earnings Conference Call. An audio recording of this webcast will be available shortly after the call today on DiaMedica's website at www.diamedica.com in the Investor Relations section. After our speakers' remarks, there will be a question-and-answer session. [Operator Instructions] Before the company proceeds with its remarks, please note that the company will be making forward-looking statements on today's call. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected in these statements. More information, including factors that could cause actual results to differ from projected results appear in the section entitled Cautionary Statement Note Regarding Forward-Looking Statements in the company's press release issued yesterday and under the heading Risk Factors in DiaMedica's most recent annual report on Form 10-K and most recent quarterly report on Form 10-Q. DiaMedica's SEC filings are available at www.sec.gov and on its website. Please also note that any comments made on today's call speak only as of today, November 13, 2025, and may no longer be accurate at the time of any replay or transcript rereading. DiaMedica disclaims any duty to update its forward-looking statements. Following the prepared remarks, we will open the phone lines for questions. I would now like to introduce your host for today's call, Rick Pauls, DiaMedica's President and Chief Executive Officer. Mr. Pauls, you may begin. Dietrich Pauls: Thank you all for joining us for our Q3 2025 earnings call. I am joined this morning by Dr. Julie Krop, our Chief Medical Officer; and Scott Kellen, our Chief Financial Officer. We've continued to make meaningful progress across both our clinical programs since Q2, and I'm pleased to share our recent developments and upcoming milestones with you today. As most of you know, DM199 is our lead product candidate, is a recombinant form of the naturally occurring human tissue KLK1 protein. KLK1 enhances blood flow and vascular health by increasing levels of 3 key endothelium-derived vasodilating factors through activation of the bradykinin pathway. These are nitric oxide, prostacyclin and endothelum-derived hyperpolarizing factor. We believe that this mechanism is why DM199 is well suited to improve patient outcomes for preeclampsia, fetal growth restriction and acute ischemic stroke, indications associated with vascular pathology. Starting with the preeclampsia program. Meaningful progress has been made, since we announced the positive interim results in July from Part 1a of our investigator-sponsored Phase 2 trial being conducted in South Africa. We believe that these interim results validate the biological activity of DM199 and provide a strong basis for the expansion of this clinical study into the early onset preeclampsia and fetal growth restriction cohorts. Additionally, this data, which includes the confirmation that DM199 did not cross the placental barrier places DM199 in an unique position with respect to safety and reduced risk in this very vulnerable patient population. We're grateful for Professor Cluver and her team as their work helped us tremendously as we prepare for our planned upcoming U.S. trial. Just to briefly review the interim results Part 1a of the study was conducted in pregnant women with preeclampsia planned for delivery within 72 hours. We continue to believe that these interim results demonstrate that DM199 has the potential to be a first-in-class disease-modifying treatment option for preeclampsia. We based our assessment on 3 key factors: First, blood-pressure data from cohorts 6 through 9 demonstrated clear dose-dependent and statistically significant reductions in both systolic and diastolic blood pressure. Signaling DM199's potential to control maternal hypertension associated with preeclampsia. I would point out the importance of this, given the results of one of the more recent preeclampsia trials the PRESERVE-1 antithrombin study, in which approximately half of deliveries were initiated due to out-of-control hypertension. Suggesting that better control of blood pressure could have prolonged pregnancies in these patients. 2, improve placental perfusion. In Part 1a of our recent Phase 2 results, DM199 treatment produced a statistically significant reduction in the uterine artery pulsatility index, a doppler-based assessment of arterial resistance, suggesting improved uterine artery blood flow and enhanced placenta perfusion. And 3, we believe that these improvements were driven by improving endothelial function believe to be an on-target mechanistic response to DM199 therapy. By improving or restoring endothelial function (sic) [ dysfunction ], DM199 has the potential to reverse vascular injury caused by preeclampsia. Having the potential to control hypertension, improve endothelia dysfunction and improve placental perfusion, supports our belief in the potential for DM199 to be a first-in-class disease-modifying therapy for this life-threatening condition, which has no available treatment options. During the third quarter, Professor Cluver advanced and completed Cohort 10 of Part 1a, which dose participants at 2.5 micrograms per kg IV and 15 micrograms per kg subcutaneously and further initiated dosing in the expansion cohorts of an up to 12 additional patients at the expected therapeutic dose level. We anticipate completion of this expansion cohort in the first half of 2026. For Parts 1b and 2 protocol amendments are being implemented based on clinical learnings from Part 1a to refine the treatment regimen. Part 1b includes patients, who will be delivering within 72 hours. Part 2 will enroll women with early onset preeclampsia, who are cannabis for expected management or prolongation of pregnancy. Part 3, the fetal growth restriction cohort includes participants with fetal growth restriction, but who do not have preeclampsia, we anticipate screening to start in the coming weeks. We're also preparing to conduct a Phase II preeclampsia trial in the U.S. We completed an in-person pre-IND meeting with the FDA, where we believe we've had a productive meeting, and we look forward to providing an update after receiving the final meeting minutes. We anticipate the upcoming U.S. Phase 2 trial will be conducted in early onset preeclampsia patients. This treatment for this group is referred to as expected management, which is the preeclampsia patient population with the greatest unmet medical need. Turning to our stroke program. Let me ask Julie to provide an update. Julie Krop: Thanks, Rick, and good morning, everyone. We continue to make steady progress in operationalizing our Phase 2b/3 ReMEDy2 stroke trial. As the trial has progressed, it's become clear that current enrollment rates are lower than what we initially projected based on historical enrollment data. We believe this is primarily due to changes in stroke referral patterns driven by the adoption of technologies such as this AI and increases in the use of tele neurology. When patients present to smaller community hospitals and are not eligible for mechanical thrombectomy, they are currently more likely than in the past to remain at those hospitals rather than get transferred to the larger comprehensive stroke centers that typically serve as our research sites. As a result, our participating centers are now seeing fewer of our target patient population than they did 5 or more years ago. The team continues to develop and implement strategies to offset these challenges and support our clinical sites. Based on this information, we recently updated our ReMEDy2 enrollment forecast using actual enrollment rates from our current clinical trial sites in lieu of the historical rates we originally used. That said, there remains a lot of enthusiasm among the investigators, who are highly motivated to find additional treatment options for this high unmet medical need. We continue to make steady progress with enrollment. And as of today, are approaching 50% of our enrollment target for our interim futility analysis that includes a sample size reestimation. We now expect the interim analysis based on the first 200 patients to be completed in the second half of 2026. As a reminder, after reviewing safety data from the first 50 participants in the study, the independent Data Safety Monitoring Board reported no safety concerns and unanimously recommended that enrollment continue without modification. Dietrich Pauls: Thanks, Julie. I would like to now ask Scott to review the financial results for the quarter. Scott Kellen: Thanks, Rick, and good morning, everyone. As of September 30, 2025, our cash, cash equivalents and short-term investments were $55.3 million, this compared to $30 million as of June 30, 2025, and $44.1 million as of our prior year-end. Our current cash includes the net proceeds from our July private placement. We feel confident that our current cash position will fund our planned clinical studies and corporate operations into the second half of 2027. We used $21.3 million of net cash in operating activities for the 9 months ended September 30, 2025 compared to $15.6 million for the same period in 2024. This increase is primarily a result of the increase in net loss in the first 9 months of 2025 compared to the prior year period, partially offset by changes in operating assets and liabilities during the current year period. Our R&D expenses were $6.4 million and $17.9 million for the 3- and 9-month periods ending September 30, 2025. This was an increase from $5 million and $12.6 million for the same time periods in the prior year. Both increases were due primarily to cost increases resulting from the continued progress of the ReMEDy2 clinical trial including its global expansion, progress with the Phase 2 investigator-sponsored trial in preeclampsia and the expansion of our clinical team during the current and prior-year periods. These increases were partially offset by cost reductions related to manufacturing process development work performed and completed in the prior-year periods. Our general and administrative expenses were $2.6 million and $7.3 million for the 3- and 9-month periods ending September 30, 2025. These expenses increased compared to the same time period in 2024, which were $1.9 million and $5.7 million, respectively. The increases in both periods resulted primarily from increased noncash share-based compensation and increased personnel costs incurred in conjunction with expanding our team. Increases in investor relations, patents and professional fees also contributed to the increases in both periods. Overall, our net losses were $8.6 million and $24.0 million for the 3- and 9-month periods ending September 30, 2025. These are higher than the $6.3 million and $16.5 million reported during the same period in 2024. Now let me turn the call back over to Rick. Dietrich Pauls: Thank you, Scott. We'd like to now open the call for questions. Operator, if you could please introduce the first analyst. Operator: Your first question comes from Stacy Ku with TD Cowen. Stacy Ku: Congrats on the progress. So first, as we go a little bigger picture, maybe as we await the minutes from the pre-IND FDA meeting, can you talk about the work that you are doing with the preeclampsia KOL community and clinical trialists to increase awareness of what you've seen so far with the DM199 proof of concept. Specifically, when it comes to U.S. clinical development, maybe also talk about the key factors you're considering right now for trial sites. That's the first question. And then second, as it relates to the protocol amendments, maybe can you go into a little bit more detail what you are thinking maybe talk a little bit more about the doses and outcomes that you all are seeing so far. Just help us understand that piece. Dietrich Pauls: Sure. Great, Stacy. So starting off with the KOLs. So we've been doing quite extensive reach out with the KOLs really across the U.S. and also basically globally for that matter. And the feedback that we've been getting has been very encouraging. There hasn't been a drug in development for preeclampsia for a number of years. And I think, first off, the feedback we're getting is the fact that the drug is not crossing the placental barrier is just a very critical safety profile. And just to see that as very encouraging and immediate drops in blood pressure and the fact that we're seeing that very consistently amongst pretty much every patient. And then I think the upside is also encouraging, but still early is the signals of dilation of the intrauterine arteries. And so if this can consist into later-stage studies, I think, this is a clear sign of being disease-modifying. With regards to the protocol, changes that we're looking at. So first for the Part 1b, what we're looking at doing is IV only, in IV into delivery with the ability of the positions to adjust the dosing as needed. And it's almost to be able to dial in the blood pressure to where it needs to be ahead of delivery. And then for the Part 2, we're still working on some adjustments on that. Right now, we're looking at likely using Cohort 10 from the recently completed Part 1a of the study. In part -- in Cohort 10, we see very consistent and very clear drops in blood pressure as we've seen from cohort 6 to 9. Operator: The next question comes from Thomas Flaten with Lake Street Capital Markets. Thomas Flaten: Just a follow-up, Rick, on the Part 1b. You kind of wedged in this 12-patient expansion cohort from Part 1a, was that intended to kind of supplement what you had originally intended to do with Part 1b, where you were going to do basically a dose expansion cohort? I'm trying to understand the purpose about the 12-patient cohort given the changes you're contemplating for Part 1b? Dietrich Pauls: Yes, that's exactly it. So this cohort expansion we've done is at Cohort 10, so that's the highest dose we've gone to. And so I'd call this kind of additional work that would really replace what was previously planned for the Part 1b. And then when the Part 1b now will be IV only. Thomas Flaten: Got it. And then as you ramp-up towards a Phase 2 study here in the U.S., what is the trigger? What data are you waiting for from Dr. Cluver before you actually initiate the study here in the U.S. Is there anything in particular you're waiting for? Dietrich Pauls: No. We've been analyzing the data that we received up to date. We'll be continuing to dosing more patients before that study gets initiated and not just the efficacy and the safety data, but the PK data is also very important that we've been analyzing as well. So we feel we have the data that we need to proceed. But of course, if we get any additional data along the way, that could further help us to refine the -- that protocol is needed. And right now, the plan is for the -- that Phase 2 would be up to approximately 30 participants for the U.S. study. Operator: The next question comes from Chase Knickerbacher with Craig Hallum. Chase Knickerbocker: Maybe just first, Rick. Any more specifics you'd be willing to give on what you saw in Cohort 10 that kind of led to those additional 12 patients? And then that comment on potentially that being the dose we're going to take into Part 2, just any additional detail you'd be willing to give on what you've seen in the patients you've dosed in that cohort so far? Dietrich Pauls: Yes. I mean, I think what we're seeing, Chase is just very clear and immediate drop in blood pressure. Some of these patients in Cohort 10 and even in those that are in the cohort 6 to 9, these patients are all resistant hypertension. They've been on maximum tolerable alpha beta blockers, calcium channel blockers and they're refractory. They're not seeing any improvement. Some of these patients are coming in there on, they're on short-acting IV labetalol, and there's no change in blood pressure. And frankly, within minutes of getting DM199, blood pressure is coming down very, very rapidly. And so we're just really encouraged that pretty much every patient is seeing an immediate reduction in blood pressure. So it just gives us a lot of opening statement for this treatment. Chase Knickerbocker: And so you've seen an incremental dose response in that tenth cohort? And then just second, on stroke, if I can. I mean, can you just maybe walk us through Rick, kind of what your expectations for enrollment rate was and kind of where it sits today? And then if you could give us an update kind of where the site activation situation sits, including kind of OUS? Dietrich Pauls: Yes. As Julie had mentioned in the prepared remarks, the historical stroke enrollment rates we were looking at around 0.25 that we had previously using, and we're seeing a little less than this. And so we wanted to provide an update here revising the guidance. We currently have a little over 35 sites activated. We've got a number that are coming on board. We recently had regulatory clearance in the U.K. We believe we've got Europe coming on board as well here soon. And so I think it's important for us here now that in past instead of looking at historical rates, we're using specific rates that we're seeing at our current sites. So that gives us a little more comfort here in terms of the revised forecast today. Chase Knickerbocker: What is the enrollment rhetoric that you're assuming to get to the second half target at this point? Dietrich Pauls: We're not providing that at this point in time, Chase. Operator: The next question comes from Matthew Caufield with H.C. Wainwright. Matthew Caufield: Rick and team -- so as the progress is made towards the AIS interim analysis for reaching those target 200 patients, -- regarding the Modified Rankin Scale score, what would reflect the meaningful change there in your view at the time of the interim analysis? Dietrich Pauls: Sure. So we had initially the powering and really following what we saw in Phase 2. So in our Phase 2 trial, in the patients not pretreated with mechanical thrombectomy, there was a 15% absolute improvement in the MRS score of 0 to 1. And we also had made an adjustment to the protocol, excluding those with severe, severity stroke patients when they come in. And so when we exclude those patients, we saw a 19% -- but how the study is currently powered is that we see around that 15%, we'd be looking at 300 to 350 patients for the final sample size. Operator: This concludes the question-and-answer session. I'll turn the call to Rick for closing remarks. Dietrich Pauls: Great. Well, thank you all for joining us today. We greatly appreciate your interest in DiaMedica and hope you enjoy the rest of the day. This concludes our call. Thank you. Operator: This concludes today's conference call. Thank you for joining. You may now disconnect.
Operator: Good morning, and welcome to LPA's Third Quarter 2025 Earnings Conference Call. My name is Jeannie, and I will be the operator for today's call. [Operator Instructions] Please note that this call is being recorded. [Operator Instructions] Now I would like to turn the call over to Camilo Ulloa, Investor Relations. Please go ahead, sir. Camilo Ulloa: Welcome to LPA's Third Quarter 2025 Earnings Conference Call. My name is Camilo Ulloa with LPA's Investor Relations team. Joining me on today's call are Esteban Saldarriaga, our Chief Executive Officer; and Paul Smith, Chief Financial Officer. Before we proceed with a review of LPA's financial and operating results, please note that the information presented during this call is intended for informational purposes only and does not constitute an offer to buy or sell any securities. Forward-looking statements made during this call are subject to a number of risks and uncertainties, which are discussed in LPA's filings with the SEC. Our actual results, performance and prospective opportunities may differ materially from those expressed or implied in these statements. We undertake no obligation to update or revise any forward-looking statements after this call. We have prepared supplemental materials that we may reference during the call. We encourage you to visit our website, ir.lpamericas.com to download these materials. Please also note that all comparisons that we will discuss during today's call are year-over-year unless we note otherwise. Esteban will begin today's quarterly review. Esteban, please go ahead. Esteban Gaviria: Thank you, Camilo, and good morning, everyone. Thank you for joining our results call. Our international logistics platform continued to perform very well in the third quarter, delivering mid-teen revenue growth, driven primarily by Peru and Colombia, where domestic consumption remains healthy and leasing conditions highly favorable. Although not observable in our 3Q figures, just last week, we leased the remaining available space in our operating portfolio in Bogota to a now cross-border customer, one that is renting space in Costa Rica. This is another clear indication of sustained demand and customer preference for our high-quality logistics facilities and the benefit of our regional model. Also, we expect the leasing of our Bogota facility to take us to full lease status by the end of 2025. It's important to highlight that Mexico contributed to the 14.3% revenue increase in the third quarter, supported by our recent acquisition of 2 logistics facilities in Puebla, which are anchored by DHL under a 5-year dollar-denominated lease. This marks the first of many investments we expect to make in Mexico, both organic and inorganic as we systematically and thoughtfully expand into this large and attractive market. That expansion enables us to grow alongside our existing multinational customers while positioning us to win new ones that operate across multiple jurisdictions where we have a presence. As a reminder, we plan to grow in Mexico through strategic purpose-driven partnerships, such as our collaboration with Alas and the recent acquisition of the Puebla facilities. By combining our partners' deep local market insights with LPA's operational and institutional expertise, we can acquire mission-critical logistics assets in ideal locations and couple this with our development capabilities when supported by market conditions. In some cases, partners may also contribute land, similar to one of our latest developments in Costa Rica, a 750,000 square foot facility that represents a high-value project, the financing of which we arranged with local equity investors, thus enhancing LPA's rate of return while enabling us to continue serving customers that are growing in this market. We remain mindful of uncertainty stemming from evolving tariff policies in Mexico. However, recent data is encouraging. Vacancy levels in key northern markets such as Juarez have begun to abate. Closing rents remain resilient across most submarkets, especially in Mexico City, and net absorption continues to recover. Importantly, our investment strategy in Mexico is initially focused on submarkets driven by domestic consumption, the same resilient demand profile that underpins our success in LPA's foundational markets. We continue to find attractive opportunities where demand for premium logistics facilities remain strong and which we are continually assessing. Turning to the other markets in our asset portfolio. We are advancing several high-quality developments. Construction at Parque Logistico Callao in Lima, Peru is moving ahead efficiently with Building 300 already delivered on November 3 to one of the world's largest food and beverage companies. To our knowledge, this is the first LEED Gold logistics building in Peru and attests to the demanding specifications that only a company like LPA can credibly deliver on time and on budget. Without a doubt, this is a significant milestone in elevating the quality and sustainability of logistics infrastructure in the region where LPA is a leading operator in this compelling market segment. We're also progressing with construction of Building 200 on that same complex and where 75% of the GLA in both buildings is pre-leased under dollar-denominated contracts that will contribute to rental growth in 2026. Returning to our third quarter results. Revenue for the quarter reached close to $13 million, driven by higher leasing rates as we mark our portfolio to market by the addition of newly delivered facilities and also by robust occupancy. We ended the quarter with 98% of our GLA under contract, a testament to the strength of our markets and enduring customer relationships. Third quarter NOI was also gratifying, increasing 8.7% to $10.4 million compared to third quarter 2024. For the first 9 months of 2025, revenue and NOI grew 11.2% and 6.2%, reaching $36.4 million and $29.4 million, respectively. With leasing renewals for the next 12 months now completed across our operating portfolio, we have a solid operational foundation and strong visibility heading into 2026. We, therefore, continue to envision sustained double-digit revenue growth. On the cost side, we are pleased to highlight that SG&A decreased 5% year-over-year. We expect expenses to remain relatively stable, creating meaningful operating leverage as we further expand our property portfolio, roll over leases to market rates and thus bolster revenue generation. Before turning the call over to Paul, I think it is important to address the recent performance of LPA share price. Since the expiration of the 18-month lockup period on September 27, as explained in our filings and related to legacy shareholders from our business combination last year, our stock has faced notable pressure. While volatility can be expected around the lockup event, our focus remains firmly on execution. Moreover, our fundamentals, continued strengthening quarter-over-quarter and our strategy is delivering clear results. We're also actively enhancing our communication with the market to help ensure that investors see the depth of our operational progress, our growing profitability and the long-term value embedded in LPA's expanding international platform. Most importantly, we remain confident in the trajectory of our business. Even as we navigate industry and market headwinds that arise such as the slower-than-expected easing of interest rates and noisy political headlines, we are steadfast in advancing our strategic plans, and we are doing this from an advantageous position. And when monetary policy, especially in the U.S., eventually turns into an economic tailwind, we expect the underlying performance and strength of our company to be even more visible to the market. With that, I'll turn it over to Paul to discuss our third quarter financial results in more detail. James Smith Marquez: Thank you, Esteban, and good morning, everyone. Colombia and Peru drove the double-digit increase in our consolidated revenue, which was $12.9 million in the third quarter and in line with our forecast. Their rental revenue increased 17.6% and 16.9%, respectively, while Costa Rica decreased 1.5%. Mexico is now a reporting segment and contributed roughly $222,000 in rental revenue in the quarter. Revenue from Mexico is expected to grow significantly over time as we expand in this key market. The increase in our regional platforms revenue was mainly due to the stabilization of one building in Peru and another in Costa Rica during the year. Increases in rental rates this year, primarily in Colombia, also contributed to our revenue growth. The stabilization in Peru was Building 100 in Parque Logistico Callao back in February of this year. The related revenue growth was also enhanced by higher occupancy rates in our Lima Sur Parque. Stabilization in Costa Rica was Building 400 in Parque Logistico San Jose-Verbena in July of last year. The revenue increase of this was more than offset by a decrease in other revenue, adjustments to rent leveling assets and pursue vacancies during this quarter. The rental rate growth in Colombia was mainly due to lease rollovers that included U.S. CPI-linked escalations this year and to occupancy of previously vacant space. Consistent with our growth strategy, LPA's operating GLA increased 8.4% year-over-year to 5.6 million square feet with lease GLA increasing 4.2%. Our development GLA consisting of 2 buildings in Peru increased 187% to 478,229 square feet bringing total GLA to almost 6 million square feet, which was 14% higher than last year. This expansion sets the stage for significant NOI growth in 2026, irrespective of any properties that we might acquire. Average rent per square foot of our leased GLA was $8.14, representing an increase of 2.8%. Operating expenses were also in line with our projections, increasing 10.5%, mainly due to expected increases in credit loss provisions, higher utility and maintenance costs, increased property management fees as well as higher real estate taxes. Cash NOI increased 13.5% to $10.5 million in the quarter and increased 9% on a 9-month basis to $29.3 million. Esteban already covered SG&A, so I'll move to property valuation, which is determined by an independent appraiser. We reported a valuation gain of $7.1 million compared to a gain of $8.2 million in the third quarter of 2024. The 12.5% decrease in gain was mainly due to the stabilization of the mark-to-market rent appreciation that we saw in Colombia in the third quarter of last year, a valuation gain in our [indiscernible] and La Verbena parks in Costa Rica and the impact on valuation of our construction investment in our Callao Parque in Peru. Our financing costs were 15% lower than last year, primarily due to lower interest rates in Costa Rica and Colombia and the capitalization of interest related to the development of buildings in Parque Logistico Callao in Peru. Additionally, at the end of the quarter, LPA maintained a healthy debt profile with net debt to investment properties improving 70 basis points from the end of last year to 41%. That concludes our prepared remarks. Operator, please open the call for any questions. Operator: [Operator Instructions] Your first question comes from the line of [ Geronimo Cuevas ] with JPMorgan. Unknown Analyst: Congrats on the results. My question is regarding like the future strategy in Mexico. Are we looking to look into more JVs like the one with -- that was done with Alas or maybe looking into buying some of the Terrafina assets? Any color on that would be great. Esteban Gaviria: Thank you for joining the call. Regarding your question, we are constantly looking at growing through partnerships like the one we did with Alas. We think it's a way of really playing to our strength. So we are welcoming of that sort of strategy. We're also, I would say, prioritizing acquisitions right now. So we are constantly monitoring the market to see if there can be a portfolio that can come to market and that we can directly evaluate and acquire. So we -- I would say we are focusing right now on those 2 segments, and that's the way we're looking at the market right now. Operator: Your next question comes from the line of Amir Asgari with Saba Talent. Amir Asgari: My main question is on the new [indiscernible] investment, the deal that LPA has made with them, which, in my opinion, I just don't see the advantages. Can you please elaborate on that? Esteban Gaviria: Thank you, Amir, for that question and for joining our call. Look, this is a very customary arrangement. It's essentially preserving optionality for our firm. It's not yet effective. So it has not taken any effect. Because of the government shutdown, the SEC has not been able to review that filing and declare its effectiveness. What we're thinking about here is introducing something similar to an ATM or an equity line of credit just to preserve flexibility. It is discretionary at the company's choice when to apply it. The idea is to, again, put in place a set of tools in our toolbox to address potential acquisition opportunities and just have an additional funding mechanism. And that's the crux of it. So I don't know, Paul, if you want to address anything else or cover anything towards that new Circle arrangement. James Smith Marquez: No, I think you covered well all the basis here, Esteban, but we welcome any more questions from any other participant. Operator: Ladies and gentlemen, with that, we will be concluding today's audio question-and-answer session. We will take the webcast questions now. The first question comes from the line of [ Felipe Montessinos of Vulcan Capital ]. Do you expect to expand into the Chilean logistics market? Esteban Gaviria: Thank you Felipe. Chile is a very interesting market. It's certainly one where many of our multinational and global tenants have a presence in. And from that regard, we're constantly monitoring it. We have great relationships in Chile, and it is adjacent to our operations. Having said that, we are prioritizing our entrance into Mexico. So even though we want to monitor it, we want to keep an opportunistic eye on it in Chile, we think right now, the best course of action as we expand into Mexico and prioritize Mexico is to keep along that path. I think there's also another question regarding PE multiples. Paul, do you want to cover that one, please? James Smith Marquez: Absolutely. Thank you, Esteban. Yes, there was a question regarding PE multiple on the earnings per share. We didn't necessarily understand the question, but I would highlight that Note 14 on our financial statements has all the detail to determine the earnings per share. And yes, more than happy to respond to any further questions on our IR investor e-mail as well. Operator: At this time, there are no further webcast questions. I would now like to turn the call over to Esteban for closing remarks. Esteban Gaviria: Thank you, operator. A few takeaways before we end today's call. Our regional platform continued delivering strong revenue and NOI growth in the quarter. We also maintained a 98% occupancy rate while completing all lease renewals for the next 12 months. During the quarter, we closed our inaugural investment in Mexico, consistent with our growth strategy and business model, namely operating and the region's only cross-border provider of premium logistics solutions to global and regional companies. Through our expanding network of relationships in Mexico and our foundational markets, we continue identifying attractive investment opportunities, generally upmarket ones to selectively acquire and build institutional quality logistics assets in strategic locations with high barriers to entry. And essentially, we are regarding any existing assets that we might acquire as those that would bring tenants that meet our strict standards, among other demanding investment criteria that guide our decisions, our capital decisions. Similarly, no development projects will be spec built at this time. We are leveraging the strength of the LPA brand, and we always have a keen eye on capital efficiency and risk management. We will invest alongside select partners who bring complementary strengths such as local market know-how, strategic located land and a network of additive relationships. To conclude, we continue benefiting from the limited supply of premium, well-located facilities in LPA's markets, foundational markets, while also having established a beachhead in Mexico to further increase our growth optionality and the value of our diverse property portfolio. We look forward to updating you on our progress during our next earnings call. Have a good day, everyone. Operator: This concludes today's conference call. You may now disconnect.
Operator: Welcome to Nexxen International Ltd.'s Third Quarter Earnings Call. At this time, participants are in a listen-only mode, with a question and answer session to follow at the end of the presentation. This call is being recorded, and a replay of today's call will be made available on Nexxen International Ltd.'s Investor Relations website. I will now hand the call over to Billy Eckert, Vice President of Investor Relations, for introductions and the reading of the safe harbor statement. Billy, please go ahead. Billy Eckert: Thank you, Operator. Good morning, everyone, and welcome to Nexxen International Ltd.'s third quarter earnings call. During today's call, we will discuss our financial and operating results for the three and nine months ended September 30, 2025, as well as our forward-looking guidance. With us on today's call are Ofer Druker, Nexxen International Ltd.'s Chief Executive Officer, and Sagi Niri, the company's Chief Financial Officer. This morning, we issued a press release, which you can access on our IR website at investors.nexxen.com. During today's conference call, we will make forward-looking statements. All statements other than statements of historical fact could be deemed as forward-looking. We advise caution in reliance on forward-looking statements. These statements include, without limitation, statements and projections regarding our future financial and operating performance, market opportunity, growth prospects, strategy, and financial outlook. These statements also include, without limitation, statements regarding our partnerships and anticipated benefits related to those partnerships, anticipated benefits related to the company's intended growth and platform investments, forward-looking views on macroeconomic and industry conditions, as well as any other statements concerning the expected development, performance, and market share competitive performance relating to our products or services. All forward-looking statements are based on information available to us as of the date of this call. These statements involve known and unknown risks, uncertainties, and other factors that may cause our actual results to differ materially from those implied by these forward-looking statements, including unexpected changes in our business or unexpected changes in macroeconomic or industry conditions. More detailed information about these risk factors and additional risk factors are set forth in our filings with the US Securities and Exchange Commission, including, but not limited to, those risks and uncertainties listed in the section entitled "Risk Factors" in our most recent annual report on Form 20-F. Nexxen International Ltd. does not intend to update or alter its forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law. Additionally, the company's press release and management statements during this conference call will include discussions of certain measures and financial information in IFRS and non-IFRS terms. We refer you to the company's press release for additional detail, including definitions of non-IFRS items and reconciliations of IFRS to non-IFRS results. At this time, it is my pleasure to introduce Ofer Druker, CEO of Nexxen International Ltd. Ofer, please go ahead. Ofer Druker: Thanks, Billy. Nexxen International Ltd. delivered a strong Q3, generating 10% year-over-year programmatic revenue growth or 15% ex-political, driven by omnichannel strength, rising enterprise DSP adoption, and growing data demands. Throughout 2025, we have been leveraging the combined assets we have built and acquired over the years, strengthening and better showcasing the power and interconnectivity of our full stack to drive greater enterprise demand. Q3 results show this effort is paying off. Our SSD benefited from proprietary data assets like Nexxen Discovery, delivering stronger performance and greater market recognition. Our renewed and expanded data partnership also adds a long-term growth engine via exclusive ACR data and CTV media while enabling innovation like the industry's first solution for programmatic smart TV on-screen through the Nexxen DSP and SSS. SSD. This opens a new frontier for advertisers to reach send OEM media via high attention placement never before available programmatically. With an advanced enterprise DSP, proprietary data, and a unique and growing CTV and cross-device media footprint, Nexxen International Ltd. is creating a very impressive value proposition that sets the stage for meaningful long-term growth. We have continued investing in our omnichannel DSP, enhancing automation, performance, and user experience to bring more enterprise partners onto the platform and believe it can now compete directly with and win against top standalone DSPs. What truly depreciated is how it connects across and benefits from our full stack, combining text data, AI, creative, and media to deliver superior performance and efficiency to enterprise customers and independent agencies. Recent upgrades have not only enhanced the DSP itself but also strengthened the data, AI, and media engines that power it. In the DSP, we have improved buying algorithms and automated budget optimization, lowering media costs and increasing return of expense. Meanwhile, Next AI continues to elevate its performance and efficiency. The NextAI DSP assistant is helping users gain and act on powerful real-time insights faster, enhancing results and usability with customer satisfaction scores often above 90% and some reporting efficiency gains of up to 97%. We are also leveraging our data platform to strengthen the value proposition of our enterprise DSP. Nexxen Discovery, our proprietary insights and audience segmentation tool, is now central to agency and brand conversation and integral to pitching and winning new clients. It unifies cross-channel data sources, including exclusive Asia data, enabling advertisers to uncover, build, and activate high-performing audiences at scale while generating critical insights and reporting. We have enhanced discovery in our broader data platform through Next AI by improving our customers' first-party data connects with Nexxen International Ltd. and improving usability for users of all skill levels. This has resulted in greater adoption, expanded reach, more precise targeting, and measurable performance gains. Discovery has become a true competitive advantage that we believe will grow over time. Together, these advancements are driving stronger cross-channel performance across targeting, activation, optimization, media buying, and measurement. End-to-end users are achieving roughly two times higher retail of ad spend and 30% lower costs. Key reasons we are winning more in ad-to-ad USP evaluations. Our DSP's performance, connected to and driven by our full stack, has brought dozens of new enterprise customers on the platform in 2025, creating significant long-term growth potential. As more enterprise customers onboard, we capture greater direct demand, strengthen our end-to-end revenue opportunities, and reduce reliance on third parties, which is critical as major DSPs continue to tighten SPOs within their ecosystem and work directly with publishers. With a stronger DSP, more powerful and connected data solution, and deeper AI integration, we are now focused on capitalizing on strategic partnerships and scaling platform adoption. We believe this will further our end-to-end revenue opportunities, drive increased growth potential, and create greater resilience against evolving industry dynamics. In Q3, we announced our updated partnership with Vida, successfully renewing and expanding it through 2029, extending exclusive global access to the ACL data, and securing third-party ad monetization exclusivity on their North American media. This provides a durable advantage over peers lacking exclusive and unique assets. We believe we struggle to differentiate and drive value in the future. As advertisers need alternatives to walled gardens, Nexxen International Ltd. is well-positioned to fill that gap as an open, independent platform. Our ratio data cements us as a fundamental targeting and measurement data provider, fueling both platforms' spend and licensing opportunities. For example, our ACR audience segments recently became available for targeting in the Yahoo DSP, underscoring growing demand and paving the way for licensing growth in 2026 and beyond. Our media exclusivity also creates leverage to attract new partners and incremental spend through unique opportunities unavailable anywhere else. And as Vida's footprint grows, so does the value of our facilities. The new agreement is already powering breakthrough innovation. We recently launched the industry's first solution for programmatic smart TV on-screen activation that will be available exclusively through the Nexxen DSP. It provides direct access to native smart TV inventory via the Nexxen SSD across iSense CTVs and other CTV OM brands powered by Vida's operating system. This marks a major step forward for the CTV industry, unlocking previously inaccessible scaled OEM media for programmatic activation and creating exclusive eye attention placement that commands premium pricing. Advertiser interest has been strong, and this solution differentiates us as major competitors cannot offer similar capabilities. We believe this will become a powerful intermediate and long-term growth engine for Nexxen International Ltd., one that can accelerate DSP adoption, expand end-to-end spending, and reinforce our leadership in programmatic smart TV innovation. While we are encouraged by our momentum and strategic progress, we are disappointed to lower guidance due to near-term headwinds, including softness in select channels and a shift in our leading DSP customer reinforcing its SPO strategy. That said, our platform's interconnected advanced technology solutions, TV data, and robust omnichannel media footprint give us confidence we can navigate these dynamics and emerge stronger in 2026 and beyond. Our strategy is evolving, not changing, as we are doubling down on our DSP, discovery, and broader data platform to drive enterprise adoption, strengthen end-to-end revenue opportunities, and reduce third-party reliance. In 2026, we are releasing new DSP innovations, expanding infrastructure and capacity, and deepening new AI integration to enhance usability and performance. To insulate against disruptive open Internet trends, like LLM-driven traffic sheets, we are enhancing our CTV capability through innovative product launches like our first-to-market programmatic smart TV home screen activation solution. In addition, we are entering new scales mobile in-app partnerships. Finally, we are aggressively pursuing new sizable strategic commercial partnerships, leveraging our Vida exclusivities and first-to-market programmatic smart TV on-screen activation solution. These assets provide leverage with ecosystem partners, agencies, postcos, and data providers and can ask if you last spent commitments, greater enterprise adoption, and scale licensing opportunities. While Q4 presents near-term charges, our long-term outlook and conviction in our strategy remain strong. The actions underway, combined with continued investment in our enterprise DSP, cross-device capabilities, and data and AI innovation and integration, position us for a stronger 2026 and beyond. We are on a clear path to becoming a strategic and partner of choice for industry leaders, fueled by exclusive TV data, advanced tech, and innovative smart TV solutions unavailable anywhere else. With a solid foundation, expanding partnerships, and critical capabilities unique to Nexxen International Ltd., we are confident in our positioning to drive greater enterprise adoption and outsized long-term growth. With that, I will turn it over to Sagi Niri. Sagi Niri: Thank you, Ofer. In Q3, we delivered contribution ex-TAC of $92.6 million, a Q3 record reflecting an 8% increase year-over-year or 14% ex-political. Programmatic revenue also reached a Q3 record of $89.6 million, up 10% year-over-year or 15% ex-political. Growth was driven by data product self-service, desktop and mobile, alongside increases across our health, business, and finance verticals. In contrast, contribution ex-TAC from our non-programmatic business line declined roughly $1 million year-over-year. We also observed year-over-year decreases in CTV and display, as well as reduced spending within our government, retail, and education verticals. CTV revenue declined 17% year-over-year in Q3, or 13% ex-political, to $24.5 million. Results were impacted by decreased activity from select third-party deals, partners within our ONP and PMP channels, tariff-related spending reductions from certain customers, and more competitive CTV CPMs. Though these pressures have persisted in Q4, we continue to see significant CTV revenue growth opportunities in 2026 and beyond, particularly following the renewal and expansion of our strategic partnership with Vida. In Q3, desktop revenue increased 67% year-over-year, and mobile revenue rose 3% as our targeting tools continue to help advertisers find audiences across devices, while overall video revenue represented 70% of programmatic revenue. Contribution ex-TAC from PMP declined 4% year-over-year in Q3, and contribution ex-TAC from display decreased 2%. Despite headwinds across some formats and devices, we achieved record Q3 contribution ex-TAC, thanks to the benefits of our diversified omnichannel approach and continued momentum across focus areas we've invested heavily in over the past several years. In Q3, self-service contribution ex-TAC grew 11% year-over-year amid greater enterprise DSP adoption, while contribution ex-TAC from data products increased 164%. We generated adjusted EBITDA of $28 million in Q3, reflecting a 30% adjusted EBITDA margin as a percentage of contribution ex-TAC. We remain confident in our ability to expand margins over time through contribution ex-TAC growth, cost discipline, and anticipated benefits from our AI initiatives. In Q3, we generated $35.8 million in net cash from operating activities, compared to $39.9 million in Q3 2024. As of September 30, we had $116.7 million in cash and cash equivalents, no long-term debt, and $50 million undrawn on our revolving credit facility. Non-IFRS diluted earnings per share were $0.20 in Q3 compared to $0.27 in Q3 2024, on a post-reverse split basis. We repurchased roughly 1.8 million shares in Q3, investing approximately $18.1 million through our now-completed $50 million program and recently launched $20 million program. From March 2022 through 2025, we repurchased roughly 36.6% of outstanding shares, investing approximately $247.4 million. As of October 31, approximately $13.9 million remained under our authorization, and we intend to evaluate implementing a new repurchase program following completion of our current program. We invested $20 million in Vida in Q3, with an additional $15 million planned for Q3 2026, and we are also continuing to explore M&A opportunities focused on accelerating programmatic revenue growth and enhancing our data, CTV, and mobile in-app capabilities. With that, I'll turn to our outlook. Despite meeting our expectations for both Q3 and the first nine months of 2025, we are lowering our full-year 2025 guidance. We now expect contribution ex-TAC in the range of $350 million to $360 million, adjusted EBITDA in the range of $113 million to $117 million, for programmatic revenue to represent roughly 95% of total revenue. Our updated guidance now reflects full-year 2025 contribution ex-TAC growth of approximately 3% at the midpoint or 6% ex-political, and programmatic revenue growth of approximately 6% at the midpoint or 9% ex-political. Our revised guidance reflects several factors impacting Q4 performance. We have experienced lower-than-expected activity from certain third-party DSP partners in our OMP and TMP channels, which has impacted contribution ex-TAC within the Nexxen SSP. That said, demand generated directly through the Nexxen DSP to the Nexxen SSP has remained in line with expectations. The majority of softness within our ONP channels has been attributable to changes in spending behavior from one DSP customer. While the customer remains active on our platform, its activity to this point in Q4 has decreased significantly year-over-year following a sizable increase in spending during Q4 2024, partly driven by the 2024 U.S. Election cycle. We expect contribution impact related to this customer's reduced spending to be isolated to Q4 2025 and to not have a material impact on Nexxen International Ltd.'s performance in full-year 2026. In Q4, we've also observed more competitive CTV CPM as well as reduced spending from certain customers reflecting some macro softness, which we believe has been driven largely by tariffs. Additionally, we've experienced continued weakness in our non-core non-programmatic business lines for which we are actively evaluating all options. As Ofer mentioned, while we are disappointed with our reduced guidance, we are confident in the swift actions we've taken to address near-term headwinds in our long-term strategy and positioning. Our strategic shift towards revenue generators from our omnichannel self-service DSP and data products continues to gain momentum, supported by our unique data and media assets fueling greater enterprise adoption and growing end-to-end opportunities. Over time, we believe this combination will continue to attract new partners and increase spending, create larger growth opportunities, and drive more predictable and resilient contribution ex-TAC. We expect contribution ex-TAC from our Vida partnership to increase in 2026, supported by ACR data licensing revenue, exclusive third-party ad monetization opportunities, and the launch of our programmatic smart TV home screen activation solution. Adoption of Next.ai is strong and growing, and as usage increases, we expect it to be a driver of operational efficiency, adjusted EBITDA growth, and margin expansion over time. We will continue investing in AI, data, and technology to reinforce our platform advantages and depreciation. Through the actions we've taken to address Q4 challenges and continued execution on our long-term strategy, we are confident we will become a stronger, more resilient, leading platform well-aligned with where the industry is heading and better positioned for sustainable long-term growth and margin expansion. As always, thank you to our shareholders, employees, and partners for your support. Operator, we'll now take questions. Operator: Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press 1 again. If you are called upon to ask your question and are listening via speakerphone on your device, please pick up your handset to ensure that your phone is not on mute when asking your question. We do request for today's session that you please limit to one question and one follow-up question. Our first question comes from Matt Swanson from RBC Capital Markets. Please go ahead. Matt Swanson: Great. Yes. Thank you for taking my question. When thinking about this DSP headwind, Sagi, I think you mentioned that you do not expect it to be a material impact to 2026. Could you just talk a little bit about the steps that you're taking in Q4 to kind of help rectify some of these headwinds? The one thing I know we've seen from some of your SSP peers is leaning heavier into more DSP diversity, especially DSPs that may be set in the mid-market. I'm just curious if that goes into your strategy as well. Sagi Niri: Hi, Matt, first of all, and thank you for your question. We have a very clear path that we are taking, but we are going, of course, to accelerate according to what we are feeling in the market. The first thing is about CTV media. So a lot not far, like, the last month or so, we announced that we basically launched a new product that enables us to run programmatically TBS on the platform of the OS of the operating system of Vida and others. And this is very meaningful because the amount of media that you have on the CTV is massive. And basically, users are spending about ten to eleven minutes a day on a TV in front of the operating system, and we will have the opportunity to engage with them in a programmatic manner for the first time in the industry. So this is, like, something that we believe that also is resilient for the AI changes in the world and is supporting us. The second thing is, of course, when you mentioned about the DSPs, so what we feel is that we see that our sales team this year and in Q3 and also what we are seeing going forward is reaching their targets, which means that our offering is very compelling, and we are able to satisfy the needs of the clients with our technology and capabilities. And we are going, of course, to continue doing that. Our self-serve solution we are going to enhance what we did until now. We already see very good traction to that. It grew 14% in the first nine months of the year compared to last year. And it grew about compared to last year. Percent in Q3. Which is very nice numbers. And I think that with the push in resources and capabilities, we will be able to achieve even more. So we are going to do that in order to lower the reliance on third-party DSPs in the market. That's the reason that we made this investment a few years ago. We built the capabilities, and we believe that this is a unique capability that we got. And if we enhance it, we'll enjoy that in the future. On top of that, we are also adding one of the key things that we are doing all the time, which is like a differentiator, also, is the way that we are dealing with data. And the discovery tool that we basically acquired from the acquisition of Amobee, and we made it like a standalone platform that is attracting a lot of advertisers and partners. We are going to also add to this platform now mobile data that is coming from partners that we are talking to or already got agreements with. And this will enable us to put it side by side with our strong and exclusive data sets that we have from the agreement that we got with Vida. Which is super important. They share data globally and especially in the US and Canada, which is more related to us because more than 90% of our revenues are coming from the US. The last point that we feel is important to mention is also to add in-app mobile media to the mix because we tried in the middle of the year to understand what basically channels of media will be less affected by AI. We got into the resolution that basically also in-app mobile is less affected by AI, and we are investing in that. We already signed a few agreements around that, and we stopped moving resources into this channel of media. And we believe that everything that I just said, like CTV, the TV ads, native ads in the operating system, in-app mobile media, and data that we are adding, moving resources to the self-serve solutions that we are basically already showing and demonstrating growth year over year. All of that, including the fact that our sales teams are able to reach their targets with our offering, give us optimism and the belief that we can continue next year with full power. Matt Swanson: That's really helpful. You mentioned AI a couple of times. One of the big points of emphasis at your Investor Day earlier this year was talking about the power of your AI platform once you've got all three pieces, right, working kind of interoperability of being full stack with AI. I know we have a couple of products launched. Can you just talk about how close we are to getting that kind of full stack vision completed? Sagi Niri: So first of all, we keep, of course, the investment in AI. For us, it's already, like, a part of everything that we are doing. And basically, what we see is that if we are looking at, for example, the discovery tool and we mentioned it also in the script, basically, what we see is that sellers that are using the discovery plus AI, in the past, it took you, like, a few hours to issue a report. You need, like, an expert to do that. And people were like I will not say they were not tempted to use it so much. But now we see that people are using the AI, our discovery tool, and data segments. They are getting in a few minutes, like, a very good speech. It basically doubled the revenues that the seller that is using our tools is generating compared to a seller that is not. So, of course, it's encouraging us, and we keep pushing for this development. The second thing is that we release and we are getting really good feedback. Feedback is from the usage of AI on our in order to buy media, and it's helping buyers not just to buy smartly, but also more efficiently, and we see very good engagement around that. We now, as we mentioned before, are moving to the SSP side. I feel that early next year, we'll have, like, news also around that. Because this is the third element, as we mentioned, and you have a good memory, Matt, because this is the third piece that we are building, which will be around the SSD side. Building these capabilities, improving the way that publishers can interact with our media, with our data, and understand also their needs. And I think that then in the middle of next year, we will add the layer that will help us manage the full platform, meaning connected to all these three elements of the DSP, DMP, and SSD, and enable us to work much more fluently, much more effectively, and generate better results for our clients. Operator: Our next question comes from Jason Kreyer from Craig Hallum. Please go ahead. Jason Kreyer: Thank you, guys. So I just wanted to ask about the current trend line in CTV. We've seen a deceleration there over the last few quarters that culminated into a bigger decline in Q3. So just wondering if you could unpack that a little bit. My understanding is that the changes with this DSP partner are less attributed on the CTV side, but maybe you can talk about kind of what that trend line looks like and what's ahead for CTV. Ofer Druker: Thanks. Of course. Thank you, Jason. I think that our CTV strategy is solid, as I mentioned before. But in Q4, and also earlier this year, we felt softness in some of the categories that are basically usually supported by CTV in order to advertise their product, and it's, of course, affected us. The second thing is basically competition in the market that is very fierce in the last six months between some of the big companies in the market that are basically lowering their prices in order to attract advertisers. So the CPM in general, what we feel again at least is, went down. So people can deliver their results with less budgets, which was, of course, affecting companies like us because if a company used to spend $1 million in order to achieve certain results, maybe today, they can do that with a few dozens of percentage less in order to do that, and it's affecting the revenues of a company like us. And the last point that I feel is also the political element that last year in Q3 and Q4 was meaningful for us. And, of course, it's not existing almost totally this year. So all these things together I think basically affected us in the second half of the year. But when we are looking at 2026 and going forward, I think that what I mentioned before when I spoke to Matt, when I'm looking at that, this TVS, native ads that we are running, and the agreement with Vida, the investment that we did in order to kick in more TVs in the US, will give us more ground because we have also a full exclusivity on that media, which is growing. ISense and Vida is becoming a very big player in the market. Currently, like, number two globally in pushing new TVs to the market according to the last professional reports that we see. And when we are looking at the TV ads, and our ability to turn them in programmatically, I'm getting a lot of interest in the market from other publishers like Vida, which is OEMs, which need this solution in order to simplify the sale process and make it more competitive. And the second thing is, of course, to advertisers that it will be more like a commodity for them to buy this media than today that they need to deliver the campaign to the OEM in order to run it on this platform. And, of course, it's heavier and it's more difficult to run and to maintain. So I feel that the CTV part, we feel that in 2026 onwards, we start seeing the effect of that, and we will be able to return to growth on that piece of media. Jason Kreyer: Appreciate that, Ofer. Just one follow-up. So recently, one of your competitors announced a win with an advertiser you've worked with in the past. Just wondering if you could talk to that at all and maybe help us understand why that perhaps a more isolated event. Thanks. Ofer Druker: So, this specific client used to work with us for many, many years. Sometimes people want needs or want to change, which makes sense. We did it in good terms and all good. We are winning other accounts in the market as I just mentioned. Our self-serve grew in the first nine months by 14%. And I think that our offering we have a lot of advantages in our offering that we are even going to enhance now. Which is about data platform that we are connected to our DSP. Including exclusive TV targeting, TV data for targeting and measurements. That is very important. We see now, as we also integrated some of these data elements, but it's giving us a clear advantage in the market around data and TV, whichever is related to TV. And the second thing is the fact that we are an end-to-end solution and we can also generate revenues from them by media that can turn our offering to much more attractive and we are going to use this, of course, in the near future. So I think that overall, you win some, you lose some, you are trying to win more than you lose. And I think that we have a strategy that can support our growth. And we see the growth already in 2025 even that it was not an easy year because some of our clients are already using the platform. Even some of them lower a little bit their spend. But I see that we are winning, 14% in the last nine months growth compared to last year. 11% in Q3, and I'm optimistic that with more resources that we are shifting there, and with the capabilities that I just mentioned, we will see much more growth in 2026 and going forward. Operator: Our next question comes from Laura Martin from Needham. Please go ahead. Laura Martin: Yes. My first question is on, could you remind us how much of your total traffic is from a desktop browser? And you mentioned that traffic was you're seeing traffic down. How much was traffic down in Q3 for you? So that's my first question. And then my second question is on the DSP. So your three-quarter numbers were great, which means this DSP loss for the fourth quarter was a surprise, and I get presumably you didn't really have visibility until this quarter started. If you don't have visibility so I don't understand why this DSP spending less money doesn't affect next year at all. But even if that's true, you didn't have visibility for this, how can you have confidence that 2026 is gonna be okay since I don't think you're anticipating this DSP disappearing in April. Those are my two questions. Yeah. This will disappear. Ofer Druker: No problem, Laura. First of all, this DSP didn't disappear. It's there. It's buying media. We didn't close the DSP. A major one on our platform. They keep buying from us. There is a few issues with the big DSPs right now. Some of them changed the way that they are buying media. And they prefer more media that is basically related to their algorithm and to their SPO processes. And it's affecting the market. The second thing what I mentioned is that we are trying to lower the reliance on third-party DSPs. And we are increasing the resources and pushing forward our plans to enhance our self-serve capabilities, which we see that is growing and is making a very good effect on our revenues because it's not just the taxes that we are winning, but also these clients are shifting some of their budgets to our SSP. So this is a solution that basically helps us to mitigate risk that is coming from third-party DSPs. The second thing is that the fact that we are now adding really important pillars of CTV media. We already started discussions with big DSPs and partners in order to enhance their spend with us. Mainly on CTV because of this unique technology and unique capabilities. And we believe that it will compensate and even generate growth next year. We didn't mention in my conversation drop, but I said is that when we look at the market for the future, sometimes you need to plan ahead, of course. And what we understood the display that we invested in that in 2024, in the '25, we see that it's like a we don't feel it so much in our revenues. We see very, very small drop in revenues of DSP, but we feel that it will it can be a challenge in the future because of AI. And people are surfing some sites and so on and even mobile browsing. So we shifted more attention also to in-app mobile that is basically will grow our revenues and lower our dependency on media that can be affected by AI. Operator: Our next question comes from Andrew Marok from Raymond James. Please go ahead. Andrew Marok: Hi, thanks for taking my question. Another theme we've heard across some of your peers has been kind of leaning into performance objectives in kind of what are considered maybe traditional brand formats. I guess, you talk a bit about how you're positioned for that trend and maybe any advantages provided by things like the Nexxen Data Platform? And to the extent that you're able to capitalize on those types of trends, the type of potentially insulating impact it could have on '26? Thank you. Ofer Druker: Amazing question. Thank you, Andrew. I think that performance is now is the right time to basically push for that, and we are doing it in the last twelve months. Our DSP is built for performance and generating amazing results when it's being compared to other DSPs around measurement of performance. And that's also one of the key things that is helping us to win new accounts because when they run us head to head with another DSP or a couple of DSPs, we are generating most in most cases, better results. So it's helping us, of course. I think that also the combination with CTV, which was until now more challenging. And my background is performance for many, many years. It was the price of the CTV. Because when the price was the average price was a note of $15 to $20, it was very difficult to generate results from performance on CTV. But now when the prices are basically dropping, the volumes are growing, we can see that there is a bigger opportunity to combine basically performance with CTV and we are putting a lot of efforts on that. And we have also additional advantage with that because when we mentioned the PVS, this is basically PVS are getting a lot of attention from the clients because they can be alone on the screen for a certain time, we can basically achieve additional impact by using that. So I think that the near future, which is giving us opportunity because the lower CPM that I mentioned, that also reduced our revenues, will help us to basically enable us to do more things around performance and our DSP is basically built for that. It was we built a lot of algorithms that are helping the buyers to generate better results. And I think that in the past few years, we basically moved it to the level that now is one of the top DSPs that is related to performance in the market. Andrew Marok: Great. Thank you. And maybe a quick follow-up, if I could. On your non-programmatic business, you called that out as one of the potential headwinds to Q4. Just wondering, to the extent that it provides any benefit to the programmatic business, is it kind of completely in its own little silo, or are there some benefits that the programmatic business can realize from it maybe in terms of data sharing or something like that? That's all. Thank you. Ofer Druker: Thank you. No. There are totally silos. There is no relationship between this performance element and our core business. Basically, it's business units that we acquired in one of the major acquisitions that we did in the past with RhythmOne. That we basically inherited two business units that were not related to what we are doing today. They are in silos. We are not getting from them any benefit of data, as you mentioned, or around that, and it will not affect us when we will take these steps. And we kept them basically running as long as they were generating value for us. But now, as I mentioned, we as we mentioned, we are basically evaluating what we should do with them because they are not hitting their targets and, of course, cause us a loss of revenues in our forecast, which is meaningful. So not so meaningful, but still meaningful. And but there is no relationship to any of the other business that we are doing, and it will not affect us at all when we will basically take action with them. Operator: Our next question comes from Matt Condon from Citizens. Please go ahead. Matt Condon: Thank you so much for taking my questions. My first one is just on you guys announced in the press release a new data licensing partnership with Yahoo DSP. Can you maybe just refresh us on how The Trade Desk partnership is going and then how big Yahoo can be and then maybe overall just how big data licensing can be for you guys? Ofer Druker: Very good question also. So basically, there are a few elements for us to cooperate with partners around our data. The easiest way for us is basically to create segments and to send them to the DSP that basically wants to utilize them in order to contact targeting. That's what we are doing mostly with The Trade Desk and now with Yahoo. And it's growing. I cannot reveal numbers, but it's growing. And it's showing good signs, and we have a list of new DSPs that are showing interest in order to grow basically with us and embrace this technology and these capabilities. And we need to remember that, basically, the profit or the net revenues of this initiative are 100% because it's coming to utilizing our data that we own. And when we are looking at more advanced solutions, it's basically licensing this data for measurement, integrating raw data into DSPs or other DMPs, this is a very big this is even a bigger opportunity. And we tie it with, basically, the ability to utilize our discovery tool, which is the platform that enables clients to utilize the data but also enrich their data. Meaning, they can upload their first-party data into the platform, enrich it with our TV data, and get, like, unique reach, which changes sometimes their perspective about their audiences. And this is also something that we start selling and generating revenues. And I believe that in the near twenty-four months, we'll see these segments grow in our revenues. The licensing, and the licensing of data in segments, like I mentioned, but also even AVL platform like the discovery plus data that we are licensing to companies in order to utilize them on their platforms and in favor of their activity and their clients. Matt Condon: That's very helpful. And then maybe just a follow-up. You mentioned also in the press release just the potential to do more M&A transactions with smaller than what you did with Amobee. Just what are the key areas when you look at your business today that you think that you need to round out or different functionalities that you need to add on to? You know, via M&A. Ofer Druker: Okay. So I think that from a technology perspective, we have everything that we need. We have a very strong DSP, a very advanced and robust DMP, and a very powerful SSP. But I think that there are supposed to be now more opportunities to buy sometimes clients or verticals activity in verticals you are less exposed to or less working in these verticals and can enrich your technology. I think that also from an integration point of view, we are not interested right now to buy another DSP or another SSP or DSP or DMP because we have this platform, but also from an integration process. We did a heavy lifting in the last two or three years that we have we got to the point that we are really happy with the technology stack that we got. So what we are looking more is to buy activities for clients, as I mentioned, or knowledge or client-based or activity-based that we are not familiar with that we can integrate into our platform and generate additional revenues from them. Operator: Our next question comes from Barton Crockett from Rosenblatt. Please go ahead. Barton Crockett: Okay, great. Thanks for taking the question. I'd like to try and understand a little bit better the DSP impact being just a one-quarter phenomenon. In your guide. I guess the first thing I just want to understand around that are you saying that that's because whatever revenue you lose in the fourth quarter will come back to you in the first quarter, or is it because you see other revenue sources offsetting whatever the negative impact is that you see this quarter and next quarter being offset by new revenue sources starting by next year. Sagi Niri: Hey, Barton. Thanks for the question. I think that's what we are trying to say. You know? I think you answered your question by yourself. So it's like first of all, aforementioned a couple of times, like, all the actions we are doing in order to have our usual growth in 2026, you know, the in-app focus, the self-serve focus, the data focus, the Vida deal, focus. Which are our main growth engines going forward. The one DSP that's, like, you know, is part of the gap in Q4. It's something that we expected this DSP to do with us or to spend with us in Q4 because this is what it did last year, which some of it, of course, connected to the political spend. And this series is spending much less. It's not going with us into 2026 because we already acknowledge that this is the new base, and this is its level of spend. And we are not, like, taking into consideration that for some reason, he may spend more in 2026. Yeah. That's what So I think this answers your question. I hope. Barton Crockett: Okay. And so when you say your normal level of growth mean, you guys think of normal growth being double-digit. Sagi Niri: Yeah. I think that, yes, the lower double-digit, I think that according to the growth engine in front of us and, of course, we are already working very extensively on the 2026 budget. I think that we can achieve this growth of 10% in programmatic activity. Operator: Our next question comes from Tyler DeMatteo from BTIG. Please go ahead. Tyler DeMatteo: Great. Thank you. Appreciate the time. I wanted to start with on the double growth comments right there. When you think about the different product solutions and how you're trying to go to market, I mean, what physically needs to happen with the different business and product solutions to get you back to double-digit growth? Like what's the real needle mover to get you there? And can you just kind of unpack that for us? And then my second question here is I want to talk about the Vida partnership. How much of a contribution I think you kind of quoted this on an ex-TAC basis. How much of a contribution do you actually expect next year? And how is that going to flow through? Thank you. Ofer Druker: First of all, Tyler. I think that the main thing that will bring us growth next year will be the CTV part because, generally speaking, this is something that we put emphasis on it for a long time. We suffered from weakness in the last quarter and also, the last quarter was not a great one for CTV, as I mentioned. But I think that by integrating this solution, building relationships with a lot of buyers that are interested in this type of media will see a growth in that section from the feedback that we are getting in the market and from even additional publishers that are interested to integrate with big volume of media and so on can be very helpful. The second thing is again, in order to reduce the reliance on third-party DSP, in 2022, we acquired Amobee for that reason. We saw it coming. We knew that basically the big DSPs in the future will have to build their own end-to-end solution in order to increase their margin and so on. That's why we made we look for DSP that can add to us enterprise capabilities and can grow and can help us to grow in dependency. That's why we acquired Amobee, and we invested a lot of money and time in order to build and improve the technology, grow the talent, build the models, integrate them with data, not in silos, but as one piece. And we believe that the growth that we are seeing from the beginning of the year will continue and even emerge more next year. And will support our growth in the future. And the in-app that we are testing now is showing really good results. From the middle of the year, we are testing and running media on in-app, and we see that by utilizing our capabilities in the ecosystem of the programmatic world, we are able to drive meaningful revenue into the in-app. And we feel that also next year with the agreement that we already signed, and we will announce some of them soon. We will see that basically we believe that this sort of media will generate for us growth also in 2026 and going forward. And the last point is about data. It was tough in the beginning to educate the market, and to also to build the models for ourselves. As I mentioned before in the call, selling segments, selling raw data, or selling it as part of the discovery tool, and now we feel that the market is getting to the notion of how to work with us. Because we need to remember this ACR data and TV data is not common in the market. Most of the companies that we are looking at or other OEMs are keeping it in their gaze for obvious reasons, and we are one of the only ones that is basically willing to use it in order to build partnerships and to enhance cooperation between us and other partners. And this is, of course, with the full support of Vida. And we feel that this is unique and getting more and more attention from the market as we indicated the traders, the Yahoo, and other DSPs that are basically looking to work with us. To give you an exact number of net revenues of Vida, I think it's too early to say, but it will be much more meaningful, of course, than today because today it's very, very small. Operator: Our next question comes from Maria Ripps from Canaccord Genuity. Please go ahead. Matt Swanson: Hi. This is Matt on for Maria. Thanks for squeezing me in here. We just wanted to ask about the increasing focus on mobile and app. As we think about Nexxen International Ltd. scaling this channel further, how much of that is a function of building supply versus adding specific in-app targeting and measurement capabilities? And then just on supply specifically, based on an earlier response, it doesn't sound like, you know, M&A is in the works here in terms of scaling supply. So just could you just talk to why you feel ostensibly, I don't want to put words in your mouth, that a partnership approach is more appropriate here. Thanks so much. Ofer Druker: I didn't understand the last question. What you said about the attitude? The attitude is just trying to Matt Swanson: Yeah. I just just thinking trying to think through the puts and takes in terms of, say, you know, acquiring another SSP to sort of, you know, build out mobile and app supply versus, you know, partnering with other SSPs? Just trying to understand, you know, how you're thinking about those two options. Ofer Druker: Okay. So I will touch first on the last question because I think that it's easier to, you know, to give a quick answer. But basically, today, with all the SPO laws, if you want to regulations and practices, if you want to utilize your programmatic capabilities and footprint, you cannot basically jump between yourself and another SSP in order to drive media. You need to be connected directly to the in-app, and we are doing it by working with the SDK companies that basically we are connected to them, and then we can basically bring the app into the market and pay them directly. And maintain the SPO rules and get, like, more of a traction by the buyers. Which is you can audit it by pulling this media from another SSP. It will not work anymore. In the current market conditions. I hope that it's understood. If not, I can explain more. The second thing, your first question was about INAP. And acquisition. Basically, you don't need to buy an SSP in order to get connected to more SDK inventory. Basically, what we are doing is we are, as you mentioned, we are signing agreements, cooperation agreements, partnership agreements with SDK companies that allow us to monetize and interact introduce us to their clients in order for us to generate additional revenues from the apps that they own. And this is until now, we found it very successful and promising, and we believe that it could grow even further, of course. Operator: That concludes the question and answer session. I would like to turn the call back over to Ofer Druker, CEO, for closing remarks. Ofer Druker: Thank you. I think that, as we mentioned, we deliver a good Q3 numbers, you know, record in many fields, maybe not in CTV, but in revenues. And in growth year over year and so on. But when we are looking at the full year, of course, it's disappointing to reduce guidance. But even after reducing guidance, we need to remember that we are growing year over year around 3% to 6% in general, but six to 9% programmatically. If we are looking at that. And I think that the fact that we are more heavier in the US it's showing that the US lately was more of a challenge to grow the business than other markets. And we are, like, more than 90% in that market. So it affected us maybe a little bit more than others. But again, when we are looking at growth, we didn't shrink. We grew still even with a disappointing Q4. And what we saw until the end of September was a good result. In October, usually, from year to year, we see, like, an increase in demand. Coming from not just one DSP or other DSP, but from the market as a whole. And mostly. And now this year, we didn't see this wave of growth coming into the system. So we basically felt that we need to announce this guidance reduction because we didn't see this wave of growth coming and supporting our growth. It's usually from Q3 to Q4 statistically, is meaningful. So that's the issue, but we believe strongly in our strategy, in our platform, in our technology, in our talent, and we are willing to work hard in order, of course, to improve our performance in 2026 and going forward. So thank you very much, all of you, for your support. Thank you to our employees, our shareholders, stakeholders, and we are obligated to work hard in order, of course, to have a better 2026. Thank you. Operator: This concludes today's conference call. You may now disconnect.
Operator: Greetings, and welcome to the National Energy Services Reunited Corp. Third Quarter 2025 Financial Results Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone requires operator assistance during the conference, as a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Blake Gendron. You may begin. Blake Gendron: Thank you, Kate. Hello, and welcome to National Energy Services Reunited Corp.'s Third Quarter 2025 Earnings Call. With me today are Sherif Foda, Chairman and Chief Executive Officer of National Energy Services Reunited Corp., and Stefan Angeli, Chief Financial Officer. On today's call, we will comment on our third quarter results and overall performance. After our prepared remarks, we will open up the call to questions. Before we begin, I'd like to remind our participants that some of the statements we'll be making today are forward-looking. These matters involve risks and uncertainties that could cause our results to differ materially from those projected in these statements. I therefore refer you to our latest earnings release filed earlier today and other SEC filings. Our comments today may also include non-GAAP financial measures. Additional details on reconciliations to the most directly comparable GAAP financial measures can be found in our press release, which is on our website. Finally, feel free to contact us after the call with any additional questions you may have. Our investor relations contact information is available on our website. Now I'll hand the call over to Sherif. Sherif Foda: Thanks, Blake. Ladies and gentlemen, good morning, thank you for participating in this conference call. Today's call comes at a pivotal moment in the history of our firm. As our crews mobilized to deliver one of the largest projects in sector history, and company growth hits a new gear. Despite the transition of key contracts in the third quarter, I'm proud of the National Energy Services Reunited Corp. team for strong execution and cost control, with an unwavering focus on safety. As recently announced, National Energy Services Reunited Corp. has secured the winning position for the massive frac tender in Jafurah. This multiyear, multibillion-dollar award is a cornerstone achievement for the company, upon which we will continue to build beyond our revenue target we set ourselves. At the same time, we are also seeing a path activity inflection beyond Jafurah, with continued growth in Kuwait, return of additional rigs in Saudi, and increased activities in the majority of our countries. Our countercyclical investment strategy is allowing National Energy Services Reunited Corp. to capitalize on global weakness and boosting the company into a position of strength and operational readiness. While others are cutting, we are playing offense. I will dig into both Jafurah and our broader strategy later in the call. But first, I want to take a slightly different angle and discuss two, what I call mega themes, that have emerged from the recent FII event in Riyadh, followed by ADIPEC in Abu Dhabi. FII or Future Investment Initiative, known as Davos of the Desert, is one of the largest macro conference and leadership gatherings in the world. And ADIPEC is the largest oil and gas conference globally. Our participation was both timely with the Jafurah award and also crucial with the GCC at the epicenter of these two mega themes. From these events, the message was clear and crisp. Theme one, energy demand and GCC leadership in the AI revolution. Traditional energy is here to stay, and demand growth will be supercharged by the huge power demand of AI, data centers, and cybersecurity. The AI-powered demand commentary was nothing new, but the signals from both Saudi and UAE during this event suggest that the Middle East AI race is on, and significant investment is coming. Both countries presented a vision of becoming number three globally for AI after the US and China. What this means is that the region has moved beyond the concept of energy transition and is now focused on energy addition, in all forms, including more oil, more renewables, in particular, natural gas and solar. For National Energy Services Reunited Corp., this means that its established leadership in unconventional aligns completely with the upcoming AI race in the region. In fact, our largest customer formerly increased its sales gas growth target from 60% to 80% by 2030. This gas capacity for internal consumption will be critical to support AI ambition in the country, a strategy that is being discussed across MENA. Theme two, the Gulf Region geopolitically. The relationship between the US and Gulf States is clearly very strong. This has positive implications for both energy markets as OPEC expands production with an eye on materially higher demand by the 2030 time horizon. And, also, foreign investment as multiple IOCs make moves across the MENA region. Knowledge is power, and now power is knowledge. Cross-border cooperation on AI is at an all-time high between the US and the Gulf, with bilateral investment deals already announced. As the national champion of the Middle East, but also US NASDAQ-listed, National Energy Services Reunited Corp. is a company made for the current political moment. We have a role to play in the bridge-building between the US energy sector and the MENA national oil companies. We can point to Jafurah as a case study of how we can help US expertise navigate the region, leveraging technology and efficiency while empowering local content and human capital. We've talked about how this benefits our NOC partners, but it's worth noting that this also helps our IOC partners feel right at home in MENA. Which is a good segue to discuss our newfound position as the largest frac company in the Middle East. The Jafurah tender represents the single largest single service contract in sector history. And as the outright winner of the committed scope, our National Energy Services Reunited Corp. team has clearly earned its reputation for pushing the envelope on efficiency. It is a remarkable achievement, and we thank our dearest customer for the trust. Having started from zero in frac just five years ago, Jafurah is now as efficient as any leading Permian operation. A world-class case of science and data-driven shale development, orchestrated by Aramco. In the early days of National Energy Services Reunited Corp.'s involvement, this included our open technology platform approach. More recently, this has involved huge investment in infrastructure, logistics, best-in-class supply chain, across sand, water, chemicals, maintenance, and other dimensions across multiple product lines within this integrated frac project. We've driven substantial cost out of the system, initially on integration, efficiency gains, and agnostically, the use of leading technology from around the world. We challenged the status quo and brought fit-for-purpose and sometimes made-in-the-kingdom technology to have the best locally made, that includes site preparation, local sand, chemicals, coiled tubing, perforation, well testing, flowback. Now we are on a path to fully embed AI into our operation, predicting failures, and ensuring flawless delivery and another level of efficiency, breaking world records. But cracking the code on unconventional does not stop at sounding. The service delivery model that we've developed alongside our partners at Aramco is a blueprint that we can take across the MENA region to unlock additional unconventional development, particularly for natural gas. There are huge ambitions and potential in several countries that we operate in, and all of our top customers are coming to National Energy Services Reunited Corp. to fully understand how we can unlock their resources. Which brings me back to our broader growth strategy because National Energy Services Reunited Corp.'s success in Jafurah and across the region would not be possible without our aggressive countercyclical investment playbook. For decades, the oil service industry has matched investment, hiring, and R&D with the activity cycle. But now that the global cycles have accelerated and shortened, the traditional waiting-out-the-storm strategy no longer works. By the time the cycle turns, many companies are left behind. Which is why we've taken a different approach: invest during the downturn. It's been easier said than done, but as the only public MENA pure play, we benefit from the relative stability of activity in the region and agility of decision-making. Rig activity is largely decoupled from commodity price on oil because of focus on capacity building, and in gas, because of domestic needs. If any company is well-positioned to break from the pack and establish a countercyclical investment market position, it's National Energy Services Reunited Corp. And our customers value our bold approach, particularly since our NOC partners themselves are taking a longer-term view of oil fundamentals. As a company, National Energy Services Reunited Corp. is small enough to be agile, but large enough to scale. That is our window. While downturns expose weakness in our industry, they also reveal who's actually planning for the future. Our operational readiness is unmatched among our peers. Blake Gendron: And it's only possible because we are growing and investing Sherif Foda: while others are shrinking. To be honest, it's no walk in the park trying to convince some shareholders and board members of the strategy. Public companies in our sector often suffer from short-term pressure. Everyone wants results, cash, dividends, and they want them now. It is understandable, particularly in the lower oil price environment, and with tight risk mandates in public markets. We spent the last seven years since the founding of the company trying to convince the market that MENA upstream fundamentals are inherently derisked. And our financial results over the past few years have borne this out. Even in the current lower oil environment, the National Energy Services Reunited Corp. outlook only continues to improve. To be sure, we aren't growing for growth's sake. Our countercyclical investment strategy speaks to the fact that there is ample return accretive expansion still out there for National Energy Services Reunited Corp. This strategy perhaps isn't available for others with a more established and mature market position. And with that, I'll pass the call to Stefan to discuss the financials in detail. Stefan Angeli: Thank you, Sherif. Good morning to our audience joining from the United States, and good afternoon or good evening to those joining us from the Middle East, North Africa, Asia, and Europe. We are delighted to have you with us today. I'm pleased to present an update on our financial results for 2025 and to share perspectives on our outlook for the fourth quarter and the full year. In the three months since we last spoke, global macroeconomic volatility has persisted. Factors such as ongoing trade uncertainty, inflationary pressures, reduced subsidies in developing economies, fully supplied oil markets, and additional OPEC plus supply releases have collectively contributed to range-bound oil prices and lower reactivity in certain countries. As we also heard from our peers, these dynamics have weighed on the third quarter 2025 results across the broader oilfield service sector, making short-term forecasting increasingly challenging. Despite these headwinds, and as Sherif highlighted in his market overview, we continue to invest heavily, looking at our long-term vision with contract awards, and getting ready for the years to come. Now shifting to Q3 2025. Our overall third-quarter revenue was $295.3 million, down 9.8% sequentially and 12.2% year over year. Sequentially, revenue declined primarily due to the transition between the major contract in Saudi Arabia, partially offset by solid growth in Kuwait, Qatar, and Iraq. Year over year, revenue declined due to the transition between the major contract in Saudi Arabia, timing and lumpiness of product sales, and partially offset by steady growth in Kuwait, Oman, Egypt, Algeria, Iraq, and Libya. Adjusted EBITDA for 2025 was $64 million, representing a margin of 21.7%, which was in line with the second quarter 2025 levels despite lower revenues. Margins remained steady on strong cost discipline and improved execution across our portfolio. Adjusted EBITDA includes adjustments for certain charges and credits impacting adjusted EBITDA totaling $6.9 million, primarily relating to a loss on inventory and a fire credit loss provisions, costs tied to the remediation of material weakness, controls, which is expected to decline dramatically going forward. Interest expense for 2025 was $8.1 million, and the tax expense was $3.7 million after normalizing for a net release of uncertain tax positions and unrecognized tax benefits in two geographies totaling $9.2 million. As normalized, this corresponds to an effective tax rate of 29.9% for Q3 2025, and 24.8% year to date. Adjusted EPS for 2025 was 16¢. Adjusted EPS includes adjustments for certain charges and credits impacting adjusted EPS totaling $2.3 million, including the net release of uncertain tax positions and unrecognized tax benefits in two geographies described previously. Turning to cash flow and liquidity, areas that have consistently been among our most positive over the past several years. Third-quarter cash flow from operations and free cash flow came in below expectations, reflecting lower working capital efficiency driven by delayed collections, much of which was received in early Q4 2025. Consistent with our countercyclical approach, we continue to deploy CapEx tied to recent contract wins to enable rapid operational ramp-up. As of September 30, our gross debt totaled $332.9 million, net debt was $263.3 million. Our net debt to adjusted EBITDA ratio stood at 0.93, remaining below our target threshold of one time. On a trailing twelve-month basis, our return on capital employed or ROCE was 10.1%, reflecting the continued execution of our robust growth investment strategy. Looking ahead, we expect full-year 2025 revenues to be broadly in line with full-year 2024 levels. Based on this outlook, one can infer our Q4 2025 revenue expectation, which represents a record performance consistent with the start-up of the recently awarded contracts discussed earlier by Sherif. Both Q4 2025 and full-year 2025 EBITDA margin percentages are expected to be in line with Q3 2025 and year-to-date adjusted EBITDA margin percentages, reflecting continued operational discipline and execution consistency. Implied in our outlook is that we'll exit full-year 2025 at a revenue record run rate, positioning us for continued growth in 2026. We anticipate ending full-year 2026 with a revenue run rate of approximately $2 billion, supported by our expanding contract base and sustained execution momentum. For Q4 2025, we expect interest expense to be approximately $8 million and our normalized full-year 2025 ETR to remain in the mid-20% range consistent with prior guidance. Capital expenditures or CapEx for the full year are anticipated to be in the range of $140 to $150 million, in line with the previous guidance reflecting the positive outcomes of the recent tenders. We expect Q4 2025 cash flow from operations to be very healthy, driven by the seasonally high fourth-quarter collections. As a result, free cash flow for full-year 2025 is projected to be in the range of $70 to $80 million, which we view as robust given the significant CapEx investments made during the year to support our recent contract wins. These investments are expected to position us for a very positive free cash flow trajectory in 2026. Finally, we do not expect to be materially impacted by changes in global tariff policy. Now on to housekeeping topics. As noted last quarter, we have remediated all previously identified material weaknesses, and this update has been formally disclosed to the SEC. We continue to strengthen our internal processes and controls, which have played a vital role in supporting our financial health and operational discipline. The company is currently in the process of refinancing its debt facility and remains on track to complete the refinancing by the end of 2025 or early January 2026. This initiative is expected to further enhance financial flexibility. The remainder of 2025 and 2026, given the continued market volatility, the ongoing debt refinancing, and the capital expenditure commitments tied to new contract awards, including the start-up of the largest frac contract in the world, the company intends to deploy all excess cash flow exclusively towards debt reduction. This approach reinforces our commitment to balance sheet strength and financial discipline during this period of strategic investment and growth. Once these initiatives have stabilized by mid-2026, we will reevaluate our capital allocation program to maximize value for our shareholders. The outlook across the Middle East and North Africa region remains favorable. We expect these markets will lead activity recovery as market fundamentals move towards equilibrium, supported by sustained investment in oil capacity and ongoing gas expansion projects across several of our core geographies. National Energy Services Reunited Corp. remains focused on its core strategic priorities: delivering profitable revenue growth, enhancing execution efficiency, expanding our technology portfolio, maintaining disciplined debt reduction, and improving working capital efficiency, all of which are expected to drive sustainable financial performance going forward. On behalf of management, I'd like to thank our entire workforce for their outstanding efforts in delivering these results and awards, as well as our shareholders and banking consortium for their continued trust and support. The outlook for National Energy Services Reunited Corp. remains highly favorable, supported by consistent execution on our major contract wins, strategic investments, and growing market opportunities. I'll turn the call back to Sherif. Sherif Foda: Thanks, Stefan. Let me conclude. In short, a confluence of macro and industry trends are aligning to supercharge National Energy Services Reunited Corp. A wave of AI investment and fruitful geopolitical collaboration in the Gulf is fundamentally positive for National Energy Services Reunited Corp. As a key player in the unconventional gas renaissance, National Energy Services Reunited Corp.'s bold decision to invest and have a solid long-term strategy is working. As our unique position as the national champion of MENA and US NASDAQ-listed, we are in the best position more than ever to build on the appetite of the GCC capacity growth while securing long-term contracts. The Jafurah award elevates our profile significantly and puts the future firmly in our hands. And there are more awards to come and will be announced very soon. With oil activity inflection outside of Jafurah, continued growth in Kuwait, and North Africa, and all-time high activities across most of our countries translating into positive region fundamentals that match the equally positive position we have in the region, and we will capitalize on all those tailwinds. I'd like to close by thanking all of our employees and their families. They broke records, delivered flawlessly, and secured several billion dollars of contracts. We still have big ambitions for the future, not only in more contract awards but in innovation, sustainability, and technologies. Our success would not be possible without the steadfast support of our beloved customers, who we know very well and are honored to be their trusted partner. With that, we are ready to take your questions. Kate, please open the floor. Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press 1 on your telephone keypad. You may press 2 if you'd like to remove your question from the queue. We ask to please limit your questions to one question and one follow-up. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question from the line of David Anderson with Barclays. Please go ahead. David Anderson: Good morning, Sherif, and obviously, congratulations on the big win in Jafurah. The long run to get here. Great to see you guys rewarded for all the efforts you've done there on the unconventional field. Not surprisingly, those who didn't win the contract, of course, they wanted a price that no one else is willing to go to. Can you please respond to that and just sort of tell us how you're able to price this more competitively than others that you're still able to keep these margins at these great levels? How much of this is being a local player? What else is into this mix? Thank you, Sherif. Sherif Foda: Dave, thanks for the congratulations, and obviously, I wouldn't comment on others, but I just can tell you very clearly, as we tried to explain in great detail, we've been on this journey now for several years with our dear customer Aramco. And as we've been part of it, and we've been, you know, performing and, I would say, beating all the records in that domain, we understand exactly how the structure works, as we are very locally embedded with all the ecosystem. And as I tried to explain, we knew how to take the cost out of the system. And look at the future of that project being three times at least what it was before. So how you are going to operate in that new paradigm, your cost control, your new supplier and partners, you know, a lot of it is for the people that do not know. This is an integrated project. So, basically, we look at the sites, the water, the sand, the coiled tubing, the plugs, the flowback, the testing, in addition to frac. We knew exactly how to acquire equipment and use the weakness, if you like, of the US to take full advantage of that. We brought everything to the kingdom already. So we invested, as I say, countercyclically because we knew the downturn could play a very big benefit for us. And this will translate into maintaining our margins in this project going forward. Blake Gendron: So as we try to explain, this is Sherif Foda: it's gonna be much bigger and significantly bigger. So our target is to maintain the same profitability as we had today and as we had before. And the best thing to say is people have just to watch the results and the margins going forward. And that would be the best answer. David Anderson: Well, we've seen it so far. So it's great to see you continue on this journey here. So I was wondering, could you provide us a bit of a roadmap on the pace of development at Jafurah? How many crews are you gonna have in this coming fourth quarter? Where do you expect to be at the end of 2026? And just kind of ultimately, how many kind of wells or stages per month are you targeting? Any details around that you could provide, please? Sherif Foda: Yeah. So, obviously, I mean, I know all the details in great detail, but I will always leave this to my dear customer to say it. But I can tell you we prepared to send all the extra equipment and crews in this quarter. So then we are ready in Q4. So we started the contract November 1. So we didn't have to wait. Obviously, we had the transition, and in the business, and we started executing using our, today, two fleets that are running as we speak from November 1. And our plan is to deliver those stages that Aramco wants us to deliver using the crews and the additional crew that we the equipment that we already bought as well. And it's shipping to the kingdom. They will be there in November. So we would be ready with the additional crew. So our plan after that is in 2026, how to execute the number of stages with the least amount of crews based on the efficiency gain. We get, right, which is very similar to what you have in the US. So we believe that we can make, you know, addition, you know, in north of a thousand stages per month. Every month. And if they want us to increase to all the way to 1,500, we are ready to do it. Right? So that is our plan is to execute with the flexibility up and down as they like, and we have all the crews. We have all the people. Everybody is already there. So as I said, as we planned this extremely well, we did not release people. We did not shut down. So we kept investing. We hired our people. We had very good cost control. And if you do that and you have that flexibility, you will be able to deliver. So, really, Aramco's plan is very aggressive. I think you heard their earning call very clearly. They added the gas to 80%. They are really world-class in terms of planning, so they know exactly what to do. And we work very, very closely with them. We have a full team in their office. So we can be as flexible as they want us to be. David Anderson: Sherif, if I could squeeze in one last question. You've been you've had at least a crew or you've been working on Jafurah for, I think, as you said, about five years or even more now. But now Jafurah has taken this next step up, your company has taken up the next step of growth. Can you help us provide a little bit of a sense of the incremental EBITDA here? Stefan, I think you said can you just repeat what you said? I think you said $2 billion run rate by 2026. And if that's sort of the number incrementally, I come up with something like a $100 million incremental EBITDA. Something in that neighborhood. Is that low? Is that high? Am I in the range? Just trying to get a sense in kind of 26%. On incremental, that's approximately correct. Stefan Angeli: Right? For the full year, for the full year of 2026, I would use the same margin as the full year of 2025, right, as a total. Right? Total corporate. But the $100 million you're quoting is approximately correct. David Anderson: Awesome. Okay. Thank you, gentlemen. Congratulations once again. Thank you, sir. Operator: Thank you. Our next question comes from the line of Jeff Robertson with Water Tower Research. Please go ahead. Jeff Robertson: Thank you. Good morning. Sherif and Jafurah, can you talk about the ramp-up in activity over the next couple of years? Sherif Foda: Yeah. I mean, if you look at, I would say, from the big picture, right, you have a first gas at the end of this year, and you have one BCF in 2027, two BCF in 2030 with the condensate and NGL. Right? Which means then you have all the rigs running in Jafurah, and the other two Telgawar and North Arabia, which is all the unconventional in Saudi. Right? So if you take that up and you think about the ramp-up and the number of stages, anything between, you know, two times to three times what we used to do now. So it's a very significant project. A very significant number of wells, number of stages to be delivered. And as I try to reply again, there is a flexibility in the system. And Saudi will definitely decide if they want to do, let's say, 15,000 stages, 20,000 stages, 25,000 stages per year, and you have the flexibility and ability to go up and down with that based on what that demand and, obviously, based on productivity. And the national agenda. Right? So our role is to ensure that we have that flexibility ready, and ensure as well that we can add crew, release crew, or decrease crew or update as they like. To date, our plan is to have full four crews running all the time in a very, I would say, efficient way to ensure that you can deliver those number of stages that are required with the number of wells. Because now the wells are drilled extremely much faster than before. Obviously, again, they did, as I said, the science-driven approach to deliver those wells much faster than before, but in a very efficient way, very professional way. So now there is an inventory of wells. And most of the unconventional projects for people around the world to know, it's really about do you have the inventory of wells and the pads ready? So then you can plan your frac crews to get ready on those pads. Right? So you preintervene. You prepare those wells, and then you frac them, and then they put them online when they are ready. Right? So this project has, again, I keep saying it's the blueprint because it's very differently made than others. Right? Because it's well planned, very high in advance, was an exploration phase. And then, obviously, these wells were not hooked. Right? So they were fracced, but stopped, but then they're all hooked, and then now they're all in production. Right? So we plan to have at least three to four times what we used to have before. And, again, we are ready for the availability up and down as our client wants us to do. Jeff Robertson: Sherif, in the context of a blueprint, can you share some perspective on unconventional development over the next couple of years and where in other markets in the Middle East and North Africa and how National Energy Services Reunited Corp. is positioned to take advantage of that? And then if alongside that, is there any color you could share over the contract value of tenders that you all are working on that might have an impact in 2026 or 2027? Sherif Foda: So let me try to separate. So the unconventional, I mean, again, I'm talking here as well for the wider audience. If you look today on the Middle East, obviously, it's extremely rich in conventional resources. Right? You will never go and develop something that is expensive if you have something very easy to produce. Now because of the success of Saudi unlocking that unconventional play in a very cost-efficient and very professional manner, now people opened up and say, wow. Why can't I do the same in my because, obviously, if you have all these reserves, that means your source rock exists. But is it economical and do you need it? And that's why it's a bit opposite to the US. It's actually because they have a lot of oil but they want a lot of gas again, for what saying for their AI revolution, for internal consumption, etcetera. So now they are looking at all these plays and where are they? So, obviously, you know that Abu Dhabi as well is doing exactly the same, and they started this already. They have a development already on that unconventional play. Very successfully. Two clients already or you have EOG and veterinarians already there doing the same. So you have as well two separate international oil companies looking at unlocking this unconventional in UAE. And then the others are looking at it. So if you look at the basin, Algeria has an amazing unconventional resource. Ahenad Basin. And it's very similar to actually Vaca Muerte in Argentina. You have Libya that has resources. You have Egypt with Abu Rawash and Apollonia. So you have Kuwait now is even looking at it. Qatar as well. So there will be that's why I call it the renaissance. Basically, people will look into all these plays, and see if it's conventional, unconventional, how much does it cost to produce a barrel of gas? How much it's or unit of gas, and how much is to produce oil. If it is economical, they will do it, and then they will develop it. Because, again, the whole narrative changed totally in the world with you need a lot of traditional energy in addition to the others. Which means gives me to the point that you have to look into the unconventional. And I believe you are going to see this more and more in the coming years. Now on your other question was no. That you had another question. Jeff Robertson: Just can you share any color on the value of contracts that National Energy Services Reunited Corp. is currently working on or working to secure that could impact 2026 and 2027? Sherif Foda: So look. I mean, we are tendering huge contracts. Obviously, the biggest by far on a scale with Jafurah and this is done. We are bidding a lot of tenders in Kuwait and in other countries. And I would say it's $23 billion additional tenders we are running. So we are going to announce as we know the results of those. And, obviously, that will translate into all the additional revenue we were signing. So if you that's why I keep saying I mean, we I used to always say we're gonna double the growth of MENA. Now this is irrelevant because if MENA is gonna be, you know, 5%, let's say, we are gonna grow at least 30%, right, minimum. So definitely, now our growth profile and our additional is much higher scale than what the market gonna grow. Blake Gendron: Thank you. Operator: Our next question comes from the line of Shareef El Megrabi with BTIG. Please go ahead. Shareef El Megrabi: Hi, Sherif. Thanks for taking my question. I want to ask about the uncommitted work at Jafurah. Just to make it a two-parter, when could Aramco tender for that, I guess, and what are they looking for? And then also, on your side, what's it gonna take from an investment point of view over and beyond what you've already been able to build countercyclically? Sherif Foda: So okay. Let me clarify. This contract is already done. Right? So the Jafurah, the way it works is there is a tender, and we all participated. They have, what do you call it, winner for the 100% of the committed work, which is us. And then everybody else signed that contract. Right, or a similar contract. And that is what we call uncommitted. So that piece of the pie for Aramco, they decide as they like when to start, who takes it, they want to diversify. Everybody can operate in that. So this is not gonna be this is already done. Finished. And we basically, all the service companies, what they call, they sign these contracts. And, very similar to, by the way, what happened in the last month. So that scope could be big, and people would work. Anyone who was approved in that list and they were qualified and signed the contract can operate and execute that piece of the contract. Shareef El Megrabi: Got it. That's pretty helpful. Thank you. And Sherif Foda: what was the other part? Investment needed? So they invest I was ask Shareef El Megrabi: Go ahead, sir. I was asking about if there's any other rigs or equipment that you need to buy over and beyond what you've already got for this contract. Sherif Foda: Yeah. I mean, obviously, what we did ourselves is we purchased it's in our CapEx number already that Stefan explained. We purchased all the additional equipment that we need to execute on this contract. That's why we managed to start immediately the contract, November 1. Now as we go along, we will definitely keep adding equipment. Right? Because this for example, let's say, we are ready now with three fleets. Need a fourth fleet. We need additional equipment because this has surface well testing, coiled tubing, perforation, wireline, so be it. So we will definitely keep investing in that. Make sure that we can execute the contract professionally. The key for us and I guess the key for you and the investment community, is we said we are going to maintain our CapEx the same. So if we spend $140 to $150 million in 2025, we're gonna spend exactly the same in 2026 with the 30%, 40% growth revenue, which gives you that stability that we know exactly how much CapEx we need to spend and how much cash flow we're gonna get. Because we are, again, taking full advantage of the weakness of the outside market. Right? So the project, I would say, it's very well designed. From our side, we did a very good job and a very detailed work exactly what we need and what we don't need. We already front-loaded that in 2025 to ensure that we can execute flawlessly and deliver to the client without any hiccups in the future. Shareef El Megrabi: Great. Thanks again. Sherif Foda: Thanks. Operator: Our next question comes from the line of Jeff Robertson with Water Tower Research. Please go ahead. Jeff Robertson: Thank you. Sherif, can you share any updates on some of the NEDA projects you're working on? Especially with some of the water initiatives in Saudi Arabia? Sherif Foda: Look. We are doing so much in that, but, obviously, because of the, I would say, the significance, we decided to speak about it in the next one when we know the results as well. So as we said last time, we are on several pilots, on water mineral recovery, lithium. Those projects are in the pilot phase now. They are physically in the country. We are doing the test with our customer in several locations. We will be able to really give you a bit more color based on the results of all those pilots. So we're very excited about it. I am personally love the story because I believe that this can make something so different in the world that nobody did in the entire industry. In the universe, actually, where, basically, you're gonna start to say, I can produce oil and gas and I can produce a lot of other material that is good for the world, for the earth, for the climate, I am cleaning the water economically. I am bringing minerals, and I'm selling it to other industries. And the best would be if I can get lithium at an economical scale to make batteries, you know, and, you know, the narrative of the industry becomes extremely positive. Regardless if the ESG is out of flavor now or in. But I think our commitment is a long-term sustainability of our industry. And as they say, if the world needs all this oil and gas and energy, we have to make sure that we can do this sustainably. So we will be able to give you a bit more color in our next call based on the results of all those pilots. Jeff Robertson: Thank you. Operator: As a reminder, if you'd like to ask a question, please press 1 on your telephone keypad. You may press 2 if you'd like to remove your question from the queue. Our next question comes from John Ajae with Ottpam Press. Please go ahead. John Ajae: Yes. Hi. Curious on a couple of things. Can you give us a sense for the visibility and the confidence that you have in hitting the $2 billion exit run rate for 2026, what you think the growth rate National Energy Services Reunited Corp. looks like, you know, over the year or two that follow that. And the level of visibility and confidence you would have in that growth rate, and maybe what like, an 80% confidence level might be for a 2027 and or 2028 exit run rate? Based on that trajectory. Sherif Foda: Thanks, John. So if I will tell you on the 2026, level of confidence 99%, I would say. So those contracts are awarded and those contracts are signed. The work started. So I would say the level of confidence we have on the delivery and, you know, barring anything happening in the world, it should be kind of a very, very steady and very, very sure. Now if I look at our growth profile 2027-2028, definitely, it's gonna still growing because this contract, for example, and others are four, five years. We have a backlog of tenders that are very, very solid. So we believe we win our fair market share on that, at least with the growth that we see in Libya in Kuwait, that is more than the average of the 5% growth rate that the region will see definitely, we will have the continuation of that growth rate. It will not be obviously 30, 40% like we're gonna have in 2025, but you'll have a very good at least 10, 15% growth rate following that. Now if we are more successful in the tenders that are coming, which, obviously, that's our plan, and we ensure that we can secure those and deliver on them in a same way flawlessly that we're planning to do the Jafurah, then definitely we can opt for much higher growth rate in 2027 and 2028. In addition to that, we have obviously our technology and kind of out-of-the-box portfolio that the market that we're trying to create. So we have NEDA, which is our decarbonization arm, there is plenty of pilots, plenty of investment, a venture capital style as we have, on water, on emission, and definitely on the lithium story, if this cracks, I keep saying this our target is to have this segment that's $500 million. So now you need to make sure it's economical. So we don't have this in our plan. This is what I call all the add-on if we crack the code. And then you have, obviously, our technology on Ruya, which is the rotary steerable MWD, LWD, again, we need to commercialize it professionally. We are doing all the extensive testing. And we have a plan or our target internally for a much bigger market share. We don't have this again in the numbers. All this is add-on to our growth profile, and this will all translate, I would say, as revenue growth. That is significant would be, to answer your question, 2027, 2028, 2029, 2030. Right? Because now you know that these projects are economical, commercial, bigger in size, and can translate to significant revenue and margins. John Ajae: Yeah. That sounds great. Curious also, what type of margin do you have high confidence in for the next few years? Just, you know, without the water and you know, just kind of on what your high confidence baked-in growth is from existing contracts, what would you see as the multiyear margin evolution? Stefan Angeli: I'll take that. For 2026, as I said to David in a few questions before, we see the margin for 2026 being the same as 2025. So it'll be somewhere between 21-22%. Right? Plus or minus 1% on that. It's probably in the high 90% confidence levels. Right? Going forward in 2027 and 2028, right, we will use the same margins for our own internal model, but we'll try as efficiencies come more supply chain, greater revenues, so you have revenue efficiencies, overhead efficiencies, supply chain savings. We'll endeavor to try and get margin improvement. And, over time, we want to try and get back to the 23 to 25% level. Right? That's our goal. John Ajae: And how is ROYA progressing relative to what we might have thought at the beginning of the year? And what type of growth is embedded in that, you know, that $2 billion exit run rate? And you know, is this an area that could contribute above it? The $2 billion, if it goes really well, or is it kind of baked success there baked into that $2 billion? Sherif Foda: Yeah. So the our numbers straight is a very limited Roya in 2026. It's going from 2027 onwards, right, as a number, again, as a significant number to that ecosystem. Why? Because ROYA, rotary steerable, LWD, all this, what we call it, we do an extensive testing. To the technology to ensure it is working, and I commercialize it when we are happy. So, actually, it's the push-pull. So the clients are pushing us to do more work, and we are resisting that because we want to make sure it works perfectly. Right? So I would say it will contribute, and you will see it in the numbers in 2027-2028. They will it will be there in 2026, but it's not a significant number and it is included in our $2 billion exit rate. John Ajae: Great. Thanks a lot. Sherif Foda: Thank you. Operator: This now concludes our question and answer session. I would like to turn the floor back over to Mr. Sherif Foda for closing comments. Sherif Foda: Thank you very much. We don't want to take any more of your time. Appreciate all the support, and we thank again all our shareholders, employees, customers for their trust and looking forward to an amazing 2026. Thank you. Operator: Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines and have a wonderful day.
Operator: Good day, and welcome to the Chicago Atlantic BDC, Inc. Quarter Three 2025 Earnings Call. By pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touch-tone phone. To withdraw your question, please press star then 2. Please note this event is being recorded. I would now like to turn the conference over to Tripp Sullivan of IR. Please go ahead. Tripp Sullivan: Thank you. Good morning. Welcome to the Chicago Atlantic BDC, Inc. conference call to review the company's results. On the call today will be Peter Sack, Chief Executive Officer; Thomas Napoleon Geoffroy, Interim Chief Financial Officer; and Bernardino M Colonna, President. Our results were released this morning in our earnings press release, which can be found on the Investor Relations section of our website, and in our supplemental earnings presentation filed with the SEC. A live audio webcast of this call is being made available today. For those who listen to the replay of this webcast, we remind you that the remarks made herein are as of today and will not be updated subsequent to this call. Before we begin, I would like to remind everyone that certain statements that are not based on historical facts made during this call, including any statements related to financial guidance, may be deemed forward-looking statements under federal securities laws because such statements involve known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed or implied by these forward-looking statements. Encourage you to refer to our most recent SEC filings for information on some of these risk factors. Chicago Atlantic BDC, Inc. assumes no obligation or to update any forward-looking statements. Please note that the information reported on this call speaks only as of today, November 13, 2025. Therefore, you are advised that time-sensitive information may no longer be accurate at the time of any replay or transcript reading. And now I'll turn the call over to Peter Sack. Please go ahead. Peter S. Sack: Thank you, Tripp. Good morning, everyone. During the third quarter, the results continued to demonstrate that Chicago Atlantic BDC, Inc. is a uniquely positioned BDC with the experience and expertise to capture above-market returns while protecting principal. We remain the only BDC focused on and able to lend to cannabis companies, together with a focus on the lower middle market, commonly underserved by capital providers. We believe that this differentiation provides uncorrelated distinct credit opportunities. Net investment income per share was 42¢ for the 2025, demonstrating the potential of the business model to generate a 12.5% yield to book value. For the third quarter, we are excited to announce that we executed on our pipeline and funded $66.7 million to 13 new investments, of which seven were new borrowers. This improved diversification of the portfolio and allowed us to utilize our credit facility. I'm proud to say that's a new originations record for us. I believe we're all familiar with the issues that arise in the broader private credit markets, such as borrowers defaulting, interest rate sensitivity, dividend coverage, and in some cases, outright fraud. With our company seeming to trade as if these issues apply to us equally, it's worth pointing out some specifics when we say Chicago Atlantic is a differentiated BDC. The public BDC industry data point that I'm about to mention is taken from Oppenheimer's Equity Research Industry Update as of August 20, 2025, except for the average yield, which was taken from October. Our weighted average yield on debt investments as of September 30, 2025, was 15.8% compared to 11.4% for the average BDC. 99.5% of our portfolio is senior secured, compared to other BDCs with an average of 19.5% exposure to subordinated debt equity, and JV investments. The balance of fixed to floating interest rates in the portfolio has improved with 31% of the debt portfolio fixed and 69% floating, better positioning the company against a drop in interest rates. We calculate that a 100 basis point drop in rates only impacts 17% of the portfolio, demonstrating the impact of high interest rate floors. Our unique investment strategy is focused on underserved markets, providing no overlap in investments made by any other public BDC that we are aware of. We conduct full due diligence on new credits ourselves, instead of relying on underwriting conducted by banks or co-investors. We carefully monitor the performance of each of our companies ourselves. The portfolio is under-levered with only $11 million of debt as of quarter end, compared with the BDC average of 1.2 times debt to equity. Assuming full utilization of our $100 million credit facility during the year, we would still be well below industry averages. Lastly, we have no non-accruals compared with an average of 3.5% of cost. Today, we announced a 34¢ dividend marking the fifth consecutive quarter at that rate. This dividend is also well covered this quarter with net investment income per share of 42¢. As we continue executing our strategy, we will focus on further diversifying the portfolio, utilizing the credit facility, and managing interest rate sensitivity while maintaining the overall strength of the portfolio. Now I'll turn it over to Thomas to discuss the numbers in greater detail. Thomas Napoleon Geoffroy: Good morning. Thanks, Peter. I want to highlight our investor presentation that we filed with the SEC this morning that serves as our earnings supplemental. I'll start with the investment portfolio. We have 37 portfolio company investments. 24% of the portfolio is invested in non-cannabis companies, across multiple sectors. The average credit investment size is approximately 2.4% of our debt portfolio. 69% of the portfolio has floating interest rates, and 58% of these loans have already reached their respective interest rate floors. The gross weighted average yield of the company's credit investment portfolio is approximately 15.8%. And all loans are performing. As of September 30, 2025, the company had $11 million of debt outstanding. All of which was drawn from the new credit facility. As of November 12, 2025, the company had approximately $97.8 million of liquidity comprised of $92.5 million of borrowing capacity and $5.3 million of cash on the balance sheet. Which is available to deploy. This gives us ample liquidity to deploy additional capital over the remainder of the year while remaining relatively underlevered compared to other BDCs. Financial highlights for the third quarter were gross investment income, totaling $15.1 million compared to $13.1 million for the second quarter. Interest income included $1.9 million of onetime prepayment and make-whole fees from unscheduled repayments. Net expenses were $5.6 million which is net of the expense limitation agreement. Compared to $5.4 million of net expenses in the second quarter. Net investment income was $9.5 million or 42¢ per share, up from $7.7 million or 34¢ per share in the second quarter. Net assets totaled $302.9 million at quarter end and the net asset value per share was $13.27, up from $13.23 in the second quarter. At quarter end, there were $22.8 million common shares issued and outstanding on a basic and fully diluted basis. I will now turn it over to Bernardino to talk about our origination efforts. Bernardino M Colonna: Thanks, Thomas. During the third quarter, we funded $66.3 million in new debt investments to 11 portfolio companies. A record quarter for us. Seven of these investments are new borrowers to BDC. Of these new debt investments, 100% of them are senior secured and 84% are either fixed-floating rate loans at their respective floors as of quarter end. During the third quarter, we also had loan repayments and amortization totaling $62.7 million which included early principal payoffs of $59.6 million. As of the end of the third quarter, there was approximately $27 million in total unfunded commitments for the portfolio. To date in the fourth quarter, we have funded $5 million to one new borrower. We expect additional deployment activity between now and year-end but at a more measured pace than the robust gross originations activity we have seen in the last two quarters. The pipeline across the Chicago Atlantic platform as of quarter end which includes cannabis and non-cannabis opportunities, totaled approximately $610 million in potential debt transactions. The breakdown of the opportunity set includes approximately $415 million in cannabis opportunities and approximately $195 million in non-cannabis investments. As Thomas mentioned, we have approximately $98 million of dry powder to grow the portfolio, but we will maintain our high bar when it comes to underwriting and structuring investments that deliver above-market risk-adjusted returns. We've had to show patience in the past when the markets around us seem to underprice risk, and we will continue to adhere to that discipline when needed. Both the cannabis and non-cannabis verticals continue to show healthy performance in the portfolio and strong demand for new debt capital within the lower middle markets, where our focus lies. As Peter noted earlier, this is in contrast to some middle and upper middle market credit lenders which are experiencing growing credit issues where there is some overlap among lenders and even certain challenges maintaining existing dividends. At Chicago Atlantic, our focus has always been on building credit portfolios with attractive risk-adjusted returns. We believe our approach to lending is unique, and our results thus far have highlighted our ability to create alpha in the private credit market. As a result of our direct origination model, 84% of our portfolio company investments are agented internally. This model allows us to be highly selective. And not dependent on syndicated deals, which tend to have overlap among other public BDCs. Lastly, our rigorous approach to underwriting and structuring loans while maintaining pricing discipline has allowed us to craft a differentiated portfolio with strong credit metrics. Thank you for your continued support, we look forward to updating you again next quarter. Operator, we're now ready for questions. Operator: We will now begin the question and answer session. You were using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. Operator: First question comes from Pablo Zuanic with Zuanic and Associates. Please go ahead. Pablo Zuanic: Thank you, and good morning, everyone. Congratulations on deploying, you know, the large amount of new loans in the quarter I think it's at $66.6 million. I'd I guess the question is more about the repayments of loans in the quarter, you know, were they in line with your expectations, or were there some repayments that were unexpected And did that in a way, you know, force you to be more aggressive in lending in the quarter to show some book growth If you can comment on that, And then the second question, in the context of other lenders, they are sounding pretty bearish about the cannabis industry outlook. It seems to me that you have a more constructive view about the industry. And that's allowing you to increase your book. If you can comment on that. Thank you. Thomas Napoleon Geoffroy: Sure. Thank you, Pablo. You know, our pipeline is more longer takes a long time to develop. A long time to mature into deployment. These are relationships that are nurtured over many months and sometimes years. And so while we had a larger amount of repayments in Q3 than expected, that does not impact the pace of our deployment because our pipeline and deployment is simply not that reactive to liquidity for better or worse. I think we are extremely proud of our deployment. We executed 13 new investments. That's almost one investment per week in the quarter. To which seven were new borrowers. I think that's a testament to the work to build relationships and nurture relationships across the industry that goes back in time way long way before this quarter. With regards to our outlook on the industry as a whole, I think from the start of our involvement in the cannabis industry, we haven't viewed the industry as a monolith. The industry is challenging to speak as one national industry because it's really a collective of 40 or 41 different jurisdictions in which adult use and medical markets are active. And each of these reflects its own supply and demand dynamics, its own growth expectations, and its own competitive dynamics. And our focus within each of those jurisdictions evolves over time as certain markets are growing, certain markets are declining, certain markets are facing more difficult margin pressure, and certain markets are facing less difficult margin pressure or none at all. And so I think this is where the investment in a very fulsome originations platform, a very fulsome underwriting platform pays off. It's the ability to be able to pivot from challenging markets to less challenging markets, to be constantly developing relationships with the strongest borrowers possible, to maintain the broadest pipeline possible. And pipeline and relationships are the lifeblood of our industry. Ultimately, the quality of our deployments is determined by the quality of the relationships that we can garner at the beginning of the process in the development of that pipeline. Pablo Zuanic: Right. Thank you for that. And congratulations on all the deployment in the quarter. Look, this is again a bigger picture industry question, and I know the bill was only signed last night. But, some people have estimated the hemp derivatives industry to be north of $20 billion. I don't know if I totally agree with that number. But if that's the right number, you know, and that were to flow to the cannabis industry, that would be a big lift for the industry that we're all involved in. Right? Do you see it that way? Do you see a lot of that, with a lot of hemp derivatives being recombinized that type of volume flowing into cannabis players benefiting the industry? And I know that this has yet happened how do you think about that in terms of the industry outlook? Peter S. Sack: Mhmm. I think that part of price compression that we're seeing in many cannabis markets over the last year, while data is difficult to ascertain, I suspect that part of that price compression is driven by competition with the hemp derived THC markets. And so the closing of the hemp related loophole, I suspect, is going to support state regulated markets. Going to be a positive catalyst for most of our borrowers. I think on the flip side, there are some negatives that are worth recognizing. I think that the hemp derived beverage market in particular was successful in expanding the pie and the market of users of the THC ecosystem. I think it brought consumers into the THC ecosystem that were not consumers previously. And it is somewhat unfortunate that this area of the market that was not necessarily well served by dispensaries in the state licensed market will not exist anymore. But I think overall, this is an unequivocal positive for our target markets and for our investment base. Pablo Zuanic: K. And then one more, in terms of what you can share publicly, I know we've talked about two eighty many times before. What we are hearing is that Trulieve in their 10 Q disclosed that there's a penalty being charged by the IRS because of their uncertain tax provisions. And, of course, you are going to contest that. That's the only company that disclosed that so far. We are hearing that other companies are starting to negotiate terms on those long-term uncertain tax provisions with the IRS and they are beginning to pay them over time. Without interest, without penalties, but paying them over time. I don't know if you can comment in very general terms about what you are hearing in terms of how companies are starting to deal with paying back those long-term uncertain tax provisions that are in most companies' balance sheets. Again, it is the way you can share, Peter. Peter S. Sack: Sure. I think our outlook is a little bit different. In that we assume that uncertain tax liabilities, unpaid tax liabilities, we view them as indebtedness that ultimately will have to be paid. When and under what terms is difficult to forecast, but we view it in no uncertain terms as a liability and obligation of our borrowers. In our loan documents, we aim to limit the incurrence of such liability as it does add ultimate risk to the balance sheet. I'm not surprised by such articles and not surprised that companies ultimately do want to reduce the liabilities on their balance sheet because it leads to a healthier, more sustainable enterprise. But I don't have additional information beyond what you've been reading, Pablo. Pablo Zuanic: Right. Look. And apologies if there's more people on the queue here, but, I'm gonna ask a couple of more. You know what? Obviously, because of a BDC's structure, you are able to lend against cash flow and not just real estate backed loans. But a lot of these loans are to medium sized, maybe smaller private companies. Right? There's very few large public MSOs here. Obviously, Curaleaf is a large one. There's a new loan to Cresco. I'm looking here in the October. But in general, they are mostly smaller mid-sized companies in which we don't have a lot of visibility. I don't know if you want to comment on that. I mean, from my perspective, that would imply a little bit more risk, but maybe I'm interpreting it wrongly. Peter S. Sack: Mhmm. With smaller companies, we have more leverage and bargaining power to negotiate greater asset downside protection in our loans. And so with smaller companies, we find the ability to limit leverage, have greater negotiation power in structuring our loan documents, in structuring covenants, in structuring portfolio monitoring activities. And so we try to balance the risk of lending to smaller enterprises with lower leverage, with stronger portfolio monitoring characteristics. And with a very strong focus on the markets in which we are lending. Pablo Zuanic: Right. Understood. That's all for me. Thank you. Operator: Again, if you have a question, please press star then 1. This concludes our question and answer session. I would like to turn the conference back over to Peter S. Sack for any closing remarks. Peter S. Sack: You, Pablo, for your questions, and thank you to our investors for your support. We look forward to finishing out the year on a strong note and reporting earnings in the first quarter. Thank you. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Thank you for standing by, and welcome to Bitfarms' Third Quarter 2025 Earnings Conference Call. I would now like to hand the call over to Jennifer Drew-Bear from Bitfarms' Investor Relations. Please go ahead. Jennifer Drew-Bear: Thank you, and welcome to Bitfarms' Third Quarter 2025 Conference Call. With me on the call today are Ben Gagnon, Chief Executive Officer and Director; and Jonathan Mir, Chief Financial Officer. Before we begin, please note, this call is being webcast with an accompanying slide presentation. Today's press release and our presentation can be accessed on our website, bitfarms.com, under the Investors section. Turning to Slide 2. I'd like to remind everyone that certain forward-looking statements will be made during the call, and that future results could differ from those implied in this statement. The forward-looking information is based on certain assumptions and is subject to risks and uncertainties, and I invite you to consult Bitfarms' MD&A for a complete list. Please note that references will be made to certain measures not recognized under IFRS and therefore, may not be comparable to similar measures presented by other companies. We invite listeners to refer to today's press release and our MD&A for definition of the aforementioned non-IFRS measures and their reconciliations to IFRS measures. Please note that all financial references are denominated in U.S. dollars, unless otherwise noted. And now turning to Slide 3. It is my pleasure to turn the call over to Ben Gagnon, Chief Executive Officer and Director. Ben, please go ahead. Ben Gagnon: Good morning, everyone, and welcome to Bitfarms' Third Quarter 2025 Earnings Call. We made strong, steady progress in Q3, building on the momentum from the first half of the year as we advance our transformation into a leading North American HPC and AI infrastructure company. Today, I'll walk you through our investment thesis, value proposition and key developments, including updates on our energy portfolio and site-specific advancements, all of which gives Bitfarms a competitive advantage to capitalize on the surge in demand for HPC and AI infrastructure. Turning to Slide 4. I would like to kick off today's call by outlining our market thesis, one that we believe differentiates us from our peers and best aligns Bitfarms with long-term investors in our transition to HPC and AI. Infrastructure is not a bubble. Since the invention of modern compute, the supply of compute has increased exponentially. As compute grows, so too does the data center industry that powers it. This is a trend that has a trajectory of over 20 years of exponential growth and an annualized growth rate of 8.8% behind it. This isn't a bubble. It's a reflection of a new paradigm that showed no signs of slowing down before AI and now as AI rewrites the rules of how humans interact with computers, the demand for data center capacity is accelerating. But the demand for compute and infrastructure has reached an impasse. Data centers that used to be measured in kilowatts are now being measured in megawatts and gigawatts. Racks that used to support 10 kilowatts are now being designed to support 370 kilowatts. The exponential increase in demand for power can no longer be met at the pace of the market demands. And as a result, the lease rates for data center infrastructure, which have grown at an average rate of 3% over the last 20 years, are now growing at an average rate of 12% since 2022, and we expect this trend to continue. Turning to Slide 5. Infrastructure is a bottleneck. As manufacturers continually introduce newer, more efficient chips and increase production every year, this trend continues to accelerate. Next year, NVIDIA alone is expected to be shipping somewhere between 10 and 15 gigawatts of GPUs. And that doesn't include, of course, AMD, Intel, Qualcomm and others who are also producing their own hardware with over 100 gigawatts of chips expected to be produced by 2030. While the supply of compute chips continues to increase, the growth in data center infrastructure is happening at a much slower pace. It is not silicon nor capital that will be the real bottleneck for continued growth in HPC and AI, but power and infrastructure. Over the next few years, the gap between the amount of chips that are being produced and the megawatts and the racks available to plug them in and operate them will continue to widen significantly. We strongly believe that as this dynamic continues to play out, the value and the economics will continue to move in favor of those who own the energy and data center infrastructure. We've watched this play out in the market with the contracts that have been announced in the industry to date. When Core Scientific and CoreWeave announced their landmark transaction in April of last year, the rates were contracted around $120 per kilowatt per month. As we've moved further along this curve that's shown on the slide, those rates have continued to trend upward. Most of the contracts over the past few months have been around $150 per kilowatt per month. As time goes on, this trend is expected to continue with analysts predicting a massive shortfall of nearly 45 gigawatts of power for data centers by 2030. Just within the last 2 weeks, Satya Nadella, the CEO of Microsoft, confirmed the shortfall when he publicly stated on a recent podcast that they have GPUs they cannot deploy. We believe that over time, the companies who've allocated and will continue to allocate billions of dollars into compute will be increasingly economically incentivized to pay rising prices in order to deploy their compute faster and with greater certainty, because every day they do not deploy is a day of revenue they will never recover and because their customers will simply move on to a competitor. With direct operating margins for new GPUs typically in the 80s or 90% range, this infrastructure expense is a modest cost driver for those who own the compute, equivalent to a low single-digit percentage of OpEx. If this cost were to double, it would not impact direct OpEx for the customer by more than a low single-digit percentage. These rates, which are largely inconsequential for the customer are very significant for Bitfarms as the developer. With OpEx costs that are largely fixed, every additional dollar earned in a lease goes to the bottom line. This is what Bitfarms is aiming to optimize for, not the fastest contract, but the highest value per megawatt and the greatest margins for the longest period of time with great customers. We believe this will be the primary driver of our multiple expansion and what drives shareholder value creation long term. Our investment thesis is clear and backed by decades of data. Our conviction is high, backed by consistent incoming demand. We don't want to cap our upside by signing leases prematurely. Instead, Bitfarms plans to optimize and achieve higher lease rates and margins through the following 3 strategic actions: one, prioritize infrastructure development first by minimizing the time between signing a lease and generating revenue for a customer, we will minimize the discount that would otherwise be applied to the lease rates and locked into multiyear contracts; two, take advantage of the increasing gap between supply of data center infrastructure and data center demand to lock in higher rates and greater margins under multiyear agreements; and three, while the industry is focused on NVIDIA GB200 and GB300, Bitfarms plans to leapfrog NVIDIA's Blackwell architecture and lead the industry in developing infrastructure for NVIDIA's next-generation Vera Rubin GPUs across 99% of our 2026 and 2027 development portfolio. With Vera Rubin GPUs expected to begin shipping in Q4 of 2026, and the infrastructure requirements to support them largely incompatible with facilities designed for Blackwell GPUs, we believe Vera Rubin infrastructure will be in the greatest demand and shortest supply in 2027 and will command significantly greater economics. Turning to Slide 6. We are able to take this approach because we have a robust balance sheet to fund development and know the value of what we own. While we don't have the largest portfolio of power among the public miners who are transitioning to HPC and AI, we do have the largest portfolios of power in each of the regions in which we operate, none of which are in Texas and all of which are either existing or emerging data center hubs. With consistent inbound demand for our sites, we have high conviction in the value of our unique energy portfolio, the demand for our power and our ability to develop next-generation HPC and AI infrastructure. We believe that not all megawatts are created equal. Our megawatts are strategically located in high-value areas that have multiyear waitlist to secure the power we have today. Our campuses are close to major metros and existing data center clusters, have ample access to major fiber trunk lines and undersea fiber optic cables and benefit from temperate climate compared to places like Texas. While Texas is undisputably a great energy market and arguably the easiest market to grow and develop megawatts in the U.S., there are, of course, trade-offs. The trade-off to short-term development efficiencies is long-term operating inefficiencies. It is no secret that besides power, the primary challenge with data centers is cooling and cooling is becoming an increasingly more difficult problem to solve as energy density continues to increase with every generation of new hardware. Building and operating data centers in a hot, arid desert climate like Texas as opposed to cooler northern climates like Pennsylvania, Washington and Quebec means more CapEx and OpEx for cooling. This isn't an opinion. It's math and engineering. If we built our exact same data center for Panther Creek with the same design, equipment and materials in Texas, it would have a PuE of about 1.4 to about 1.5. Whereas in Pennsylvania, Quebec or Washington, it would be about 1.2 to 1.3. That means for every megawatt we are converting, more of those electrons are going to compute, which is the revenue-generating activity for customers as opposed to supporting revenue generation through cooling. Simply put, our megawatts are harder to get in higher demand areas, produce more value for customers and are worth more per megawatt. In Pennsylvania, we have the strategic foresight to acquire our 3 campuses and submit our energy applications in 2024 before the HPC and AI demand really came into play in the state earlier this year. This has positioned us with secured power at Panther Creek and Sharon and at the front of the queue with very well-advanced power applications at Scrubgrass. In Quebec, new power allocations are almost impossible to get with numerous data center applications denied by the province in the past year. Bitfarms has 170 megawatts operating with some of the cheapest power rates for data centers in North America and 100% renewable. 100% of these megawatts are currently being utilized for Bitcoin mining. And just in the last month, we confirmed that we will be able to convert our Bitcoin megawatts for HPC and AI. This means our Quebec portfolio represents a unique and strategic opportunity to increase total data center megawatts in the province by 25% from about 700 megawatts today, while fulfilling 2 strategic national and provincial objectives, the scaling back of Bitcoin mining megawatts while increasing HPC and AI infrastructure and data sovereignty. In Washington, we have 18 megawatts of secured power in the largest data center cluster on the West Coast with the cheapest power in the U.S. for data centers and 100% renewable. Because of this, the area has a 10-year wait list for power. Everybody is looking to grow here, and it is nearly impossible to do so outside of secured megawatts like ours. This means that despite the relatively smaller scale of Washington, sites in the area are in high demand by both enterprise and hyperscalers alike. I'd now like to spend a few minutes discussing Washington and the news we issued this morning in more detail. Turning to Slide 7. Earlier this morning, we announced plans for the conversion of our 18-megawatt Washington site to HPC and AI workloads. We signed a fully funded binding agreement for $128 million for all the critical IT infrastructure and building materials to develop the full 18 megawatts of gross capacity with anticipated industry-leading energy efficiency between 1.2 and 1.3 PuE. The state-of-the-art facility will feature: one, validated reference designs, ensuring compatibility and performance with NVIDIA GB300s; two, modular infrastructure, enabling phased deployment and scalability, reducing the downtime of Bitcoin mining revenues and ramping up our time to HPC and AI revenues; and three, proven thermal and power management systems critical for HPC and AI operations. The construction team is in Washington today with the general contractor and are kicking off the conversion of the Washington site, which is targeted for completion in December 2026. Turning to Slide 8. I would now like to discuss monetization strategy at Washington. With decade-long wait times for new power and the cheapest power in the U.S. for data centers, we are actively pursuing colocation for both hyperscaler and enterprise, where we can capitalize on the long wait times as previously discussed. This morning, for the first time, we announced we are also pursuing GPU as a service or cloud. While our focus is on developing next-generation Vera Rubin infrastructure across most of our portfolio, we believe there are some compelling reasons to potentially go with cloud as a monetization strategy at Moses Lake specifically. One, GPU as a service would enable us to capture the benefit of the lowest cost power for data centers in the U.S. for ourselves and generate what we expect to be above-market margins and returns for cloud. Two, the relatively smaller scale makes cloud at this site easier to execute and finance. We have more than enough liquidity to consider the site and strategy fully funded today and are in active discussions with leading GPU manufacturers on GPU sourcing and financing, which we believe could be done on very attractive terms. GPU financing could materially reduce CapEx requirements and enhance expected returns. Three, we expect that by demonstrating our ability to execute across the entire stack, we will also be able to better understand customer needs, provide better quality service and negotiate better leases at our other facilities. Lastly, but most importantly, despite being less than 1% of our total development portfolio, we believe that the conversion of just our Moses Lake site to GPU as a service could produce more net operating income per year than we have ever generated with Bitcoin mining, providing the company with a strong cash flow foundation that would fund OpEx, G&A, debt service and contribute to CapEx as we wind down our Bitcoin mining business. I will now walk through the rest of our sites in a bit more detail, starting with Panther Creek. Turning to Slide 9. Panther Creek is our flagship HPC and AI campus in Eastern Pennsylvania. As we've discussed previously, we have 350 megawatts of secured power with PPL. This power is contractually obligated to be delivered with 50 megawatts at the end of 2026 and 300 megawatts at the end of 2027. The site has sufficient acreage for the development of the entire 350 megawatts with capacity to go beyond that. Additionally, we have $200 million remaining on our project facility with Macquarie that is intended to finance Phase 1 of the project as well as a few long lead time expenses for Phase 2. We also have some exciting news around potential further capacity expansion at Panther Creek. Lately, there have been a number of developments, including the recent 403 letter from the Department of Energy and commitments to deploy more natural gas energy generation in Pennsylvania that have given us line of sight to expand beyond the existing 350 megawatts of secured power capacity. We have received positive indication on converting our existing interconnection service agreement, or ISA 60 megawatts to a firm energy service agreement, or ESA, of 60 megawatts to expand power to 410 megawatts and on a recent load study to expand power capacity to over 500 megawatts of growth capacity. With these positive developments that could meaningfully expand capacity at this campus and in line with our investment thesis, we are modifying our original Phase 1 designed for Blackwell GPUs and planning a new Phase 3 and Phase 4. The entire campus will now be developed for NVIDIA's Vera Rubin GPUs and their greater energy density to accommodate our new expectations on future expanded power capacity. This is expected to delay the energization of Phase 1 marginally from December 2026 into the first half of 2027, with no anticipated impacts to Phase 2 time lines. We believe this will enable the company to achieve significantly higher economics in line with our long-term thesis and strategy. Turning to Slide 10. Moving on to Sharon, where we have 110 megawatts of power secured by an ESA with FirstEnergy and PJM under development. We are currently operating 30 megawatts of Bitcoin mining on site, but have started development on an additional 80-megawatt substation, bringing the total available for HPC and AI uses to 110 megawatts. We expect to have the full 110-megawatt substation online by year-end 2026. We recently closed on the purchase of the land for the site, effectively ending our lease and enabling us to move forward with our planned development of HPC and AI infrastructure. Similarly to Panther Creek, we will be working to develop the campus for Vera Rubin GPUs, targeting site completion and revenue in the first half of 2027 for the full 110 megawatts of gross capacity. Turning to Slide 11. In Quebec, we have 170 megawatts of low-cost hydropower currently operating across multiple Bitcoin mining sites, almost all of which are within a roughly 90-minute drive from Montreal. This is an incredibly attractive opportunity for hyperscalers who are following what's called a regional campus strategy. This is something that was pioneered by Amazon, where smaller sites can be directly connected with direct fiber infrastructure in order to reduce the latency between sites below 2 milliseconds, enabling many sites to be connected together to function as one larger site. As I mentioned, it's almost impossible to grow organically in the province. And in October, we confirmed the ability to convert over our Bitcoin mining infrastructure to HPC and AI with regulators and utilities in the region. With that pathway clear, we are accelerating our plans in Quebec. We will focus our development efforts on the city of Sherbrooke, where we have 96 megawatts, robust fiber connectivity, a strong and developed local labor force and ample support from the local energy utility and municipality. We will be applying some of the standardized engineering and design plans completed for our Washington site to Sherbrooke in order to convert these facilities from Bitcoin mining into next-generation HPC and AI infrastructure adapted for Vera Rubin GPUs. Similar to Washington, Quebec has a cool climate and some of the lowest cost energy in North America for data centers. With strong unmet demand for GPU cloud in Montreal, Sherbrooke also represents a potential opportunity to scale up a cloud business in 2027 with VR200s, a strategy that we will evaluate as we work through the engineering and development plans for Sherbrooke. The remaining 74 megawatts of Bitcoin mining in the province are earmarked for potential expansion in 2028, and we look forward to providing more detailed plans for Quebec in 2026. Turning to Slide 12. Last, but certainly not least, we have our Scrubgrass campus in Pennsylvania. This is about 30 minutes away from our Sharon, Pennsylvania campus on the western side of the state. With the exception of the new Panther Creek Phase 3 and Phase 4, which I spoke to a minute ago, this is the only power in our portfolio that is not 100% fully secured today. This is a very, very exciting development opportunity for Bitfarms. We believe this is the only campus outside of Texas for public miners converting to HPC and AI that has over 1 gigawatt of potential capacity. And while we have made great progress on developing the power story for this giga campus, there are still quite a few steps to be taken in order to contractually secure the power, which falls into 2 buckets. First, we have completed 3 conceptual load studies with FirstEnergy, starting with 250 megawatts, 500 and then 750 megawatts, thus moving over to what's called a detailed load study with FirstEnergy, which would eventually be converted over to firm service in an ESA. Second, we have made substantial progress on evaluating the potential to add additional generating capacity on site. This could be accomplished by building a 3- to 4-mile pipeline from our campus to the second largest natural gas pipeline in the U.S., the Tennessee Natural Gas Pipeline, which we have confirmed could supply up to 550 megawatts of natural gas, multiplying our generation capacity on site. We're still in the early stages of evaluating how we would expand the generating capacity, and we'll provide more details as we progress. Combined, the 2 buckets could potentially provide 1.3 gigawatts of gross capacity. And additionally, there is very good fiber infrastructure in the area with our 8 fiber infrastructure networks nearby and is in close proximity to Pittsburgh and Cleveland as well as the other data centers, which are starting to pop up throughout the state. The earliest time that we anticipate we could have additional power at this kind of scale implemented at Scrubgrass is around 2028. Though this is a longer lead time campus for us, we believe that with the forecast on power and demand for HPC and AI infrastructure, the timing for our giga campus will play-in well with the cycle, our investment thesis and our other development plans. Turning to Slide 13. To sum up, we believe that we are incredibly well positioned to execute against our investment thesis in 2026 and 2027 and maximize long-term shareholder value. One, we have a very unique portfolio of energy assets that we aim to fully convert to HPC and AI infrastructure. Two, we have announced our plans to convert our Washington site to HPC and AI workloads and lead the industry in the development of next-generation data centers for NVIDIA's Vera Rubin GPUs. Three, we are actively evaluating a potential cloud monetization strategy for our Washington site, which we believe would be a meaningful driver of cash flows and could eclipse any Bitcoin mining cash flows we have ever generated. Four, we are well capitalized to make our currently planned investments with a financial flexibility that exceeds $1 billion across cash, Bitcoin and our Panther Creek project facility with Macquarie, all of which are going to fund CapEx. As we continue to produce strong free cash flows from our Bitcoin mining operations that fund OpEx, G&A, debt service and contribute to CapEx with no further planned minor CapEx. And lastly, we continue to execute on our U.S. pivot with the anticipated sale of our Paso Pe facility and our full LATAM exit. Our transition to U.S. GAAP for Q4, the establishment of our New York City office and working towards a U.S. redomicile in 2026. We believe this would give us significantly greater index inclusion and meaningfully improve the institutional composition of our cap table. I now have the pleasure to hand the call over to our new CFO, Jonathan Mir. Turning to Slide 14. Jonathan, over to you. Jonathan Mir: Thank you, Ben, for the warm introduction. I'm excited to join Bitfarms at this pivotal moment in the company's transformation. My principal objectives as the new CFO are centered around capital allocation, capital sourcing and capital structure. I'm working hand-in-hand with the operations and development teams on the ground to ensure we implement financing plans that are appropriate for the company and its assets, efficient and support long-term shareholder value creation and that we are also allocating capital to its best possible risk-adjusted returns. With an extensive background in energy infrastructure strategy and financing, I believe there's an extraordinary opportunity to use our strong balance sheet, unique assets and the talents of our people to create value in the high-growth HPC/AI space. I look forward to working closely with the team to deliver on our strategy and capture the exceptional long-term shareholder value that would accompany our successful execution. Turning to Slide 15. Today, Bitfarms has the strongest balance sheet and most available capital in the company's history. In Q3, we were able to execute across several initiatives. First and foremost, we recently completed a very successful convertible note offering, where we were able to upsize the offering to $588 million while improving on pricing, preserving upside and minimizing potential equity dilution through a 125% capped call. Bitfarms chose to issue convertible notes because they allow us to access capital at a lower coupon than straight debt and with less dilution than straight equity. The cash settled capped calls we purchased allow us to offset economic dilution up until $11.88 per share, representing a significant premium to the share price today. It is also important to highlight that investor commitment to Bitfarms is strong. 100% of institutional investors that management met with during the marketing process participated in the transaction and invested their capital in Bitfarms. We're thrilled with the outcome of this raise, and it will allow us to advance our pipeline in tangible ways. Second, we converted our previously announced $300 million debt facility with Macquarie to a project-specific financing facility dedicated to the development of our Panther Creek data center. Moving the debt facility from a corporate level to the asset level materially enhances financial flexibility for the entire company. In October, we drew an additional $50 million from the facility in order to accelerate development of the site for a total of $100 million drawn to date. Finally, we maintained steady and efficient mining operations throughout the quarter, achieving approximately $8 million in monthly free cash flow after G&A. We expect to use this cash flow to support our HPC/AI development projects. Looking ahead, we anticipate continuing to use a mix of both corporate level and project level debt and equity financing as we advance our project milestones. On an ongoing basis, we will evaluate a wide range of opportunities and choose those that we believe support both a strong, stable balance sheet and realize the full potential shareholder value creation that would accompany the successful execution of our plans and fund milestone objectives. Turning to Slide 16. Let's focus now on our third quarter financial performance. In Q3, we achieved a total revenue of $84 million from continuing and discontinued operations. With the intention to sell the Paso Pe site in order to complete our Latin American exit, all revenue from that asset is classified as discontinuing operations. From continuing operations, we earned 520 Bitcoin and achieved revenue of $69 million, representing a year-over-year increase of 156% in revenue. For our continuing operations, our gross mining profit was $21 million, representing a gross mining margin of 35% and an average direct cost of $48,200 per Bitcoin mined. During the third quarter, we introduced a new program for digital asset management, Bitcoin 2.1, which is designed to offset Bitcoin production costs and achieve higher value per Bitcoin sold as a low-cost and low-risk funding mechanism for the energy infrastructure investments that define Bitfarms going forward. It is important to highlight that we are not a Bitcoin treasury company. The goal of this program is not to accumulate Bitcoin, but rather to offset the production cost of Bitcoin and by doing so, contribute to cost effectively funding our HPC/AI initiatives. This is a multi-strategy program that primarily sells both short and long-dated out-of-the-money covered calls on the Bitcoin and treasury as well as for Bitcoin production. During Q3, we incurred an all-in cost per Bitcoin of $82,400 from continuing operations. When considering our net gain of $13.3 million from derivatives against our all-in production costs, it would bring the effective all-in cost down to $55,200. Cash G&A for Q3 was $14 million compared to $20 million in Q3 2024. The improvement was largely driven by lower professional services costs. Operating loss from continuing operations was $29 million for the quarter, including impairment charge of $9 million of nonfinancial assets. As a result, net loss from continuing operations for Q3 was $46 million or $0.08 per share. For the third quarter, our adjusted EBITDA from continuing operations was $20 million or 28% of revenue, up from $2 million or 8% of revenue year-over-year in Q3 2024 and up from $9 million or 15% of revenue in Q2 2025. Turning to Slide 17. Before we begin Q&A, I'd like to reiterate our strong financial position and review our expected capital investment plans for the next 12 months. We are extremely well capitalized to fund our HPC/AI growth initiatives. We have a war chest of over $1 billion, comprised of roughly $820 million in cash and Bitcoin and the remaining $200 million available to draw from our Macquarie facility. With these funds, we expect to be able to fully finance the build-out of our Washington site and the initial phases of construction at our Sharon, Sherbrooke and Panther Creek sites. As we advance our development, the actual investment in our projects will be dependent on a number of factors. We are currently focused on executing on the initial phases of our projects, beginning construction and securing long lead time items to ensure our project time lines. We will continuously evaluate a wide range of financing alternatives at both the corporate and project level, maximizing shareholder value with accretive financing will determine our choices as well as the need for a healthy balance sheet. In closing, I'll underscore that Bitfarms is in the strongest financial position in the company's history, and we have a clear vision of how we are going to best utilize this capital to advance our HPC/AI build-outs in North America. The entire Bitfarms team is incredibly enthusiastic and engaged about the opportunities ahead. With that, I'll now turn the call over to the operator for Q&A. Operator: Our first question comes from the line of Mike Colonnese of H.C. Wainwright. Michael Colonnese: Appreciate all the color on the HPC strategy this morning. First for me, Ben, you mentioned that infrastructure for the Vera Rubin GPU should command a premium to the Blackwell infrastructure. Can you share more on how you guys are thinking about economics there and the CapEx differences? Ben Gagnon: Thanks, Mike. Yes, happy to speak to that a little bit. There's kind of 2 driving forces there with our expectations on Vera Rubin economics. The first is that as the dynamic continues to play out where the infrastructure is going to be an increasingly greater and greater shortage, there's going to be a driver there that will drive the economics. And the second part of this is that the economics around supply and demand imbalance are really specific to GPU models. So if you look at H100s, H200s, the GBs, the 200s and 300s and then what's going to be the next series, the VR, there's a lot more infrastructure available to support those older GPUs, which have less specific requirements. And when you look at what's going to happen with the VR series, the energy density is going up from 190 kilowatts per rack with the GB300s to upwards of 370 kilowatts per rack with the VR200s. And so a lot of the infrastructure that's being built right now is not going to be compatible with the next generation. And as companies allocate all this money into those Vera Rubin GPUs, they're going to be very economically incentivized to deploy them. And what I spoke to with regards to our investment thesis earlier today, is that as this dynamic continues to play out, would you rather sit on your GPUs and not deploy them? Or would you rather pay a higher infrastructure expense in order to deploy them and start monetizing the asset. And really, the margins are so high on these GPUs, especially when the GPU is the newest, most cutting-edge state-of-the-art GPUs as the Vera Rubins will be in 2027, that the economic incentive to deploy those faster with very few options available should drive higher economics. We don't have a firm price point of exactly where that's going to lie, but we think the trend is abundantly clear that the economics next year and in 2027, they're just going to continue to get better and better, especially as the shortfall continues to get exacerbated. Michael Colonnese: Really helpful color there, Ben. And how should we think about the wind down of your mining operations in the coming years, specifically as it relates to the pace and timing of hash rate coming offline as you start to convert and make further progress in converting your data centers over to HPC/AI? Ben Gagnon: Yes, happy to speak to that. I mean the first area is the LATAM export that we've been working on. We obviously shut down our Argentina facility earlier this year. And I think one of the big areas here is the Paso Pe facility, which is an asset that's being held for sale. That represents around a little bit under 20% of our hash rate. And so that will impact the hash rate for the company rolling forward. But when we look at transactions like this, just like how we looked at the economics around shutting down the Argentina facility, we expect to pull forward a significant amount of expected free cash flow from those operations today so that we can reinvest them more immediately in the U.S., in North American HPC and AI infrastructure to greater effect. So while it should have an impact on the free cash flow from operations, really the impact is very mitigated by the fact that we're taking 1 to 2 years' worth of free cash flow from operations and bringing it forward for reinvestment now. And then we also have the derisking factor with regards to having less and less Bitcoin exposure or Bitcoin mining exposure, I should say. So as we move forward through 2026, the next sites that would be coming offline, would be coming offline as we develop the HPC and AI infrastructure and they would get replaced. Washington would probably happen sometime in the -- probably middle of the year, and that would be about 1 exahash and everything else will kind of come off slowly as we convert over the facilities to HPC and AI. So it would be a bit of an orderly transformation, and we'll continue to update the market as we announce those plans. Operator: Our next question comes from the line of Brett Knoblauch of Cantor Fitzgerald. Brett Knoblauch: Thanks for a lot of the color on the different sites throughout the call. I guess when it comes to maybe your PA sites and getting additional power, I feel like that's kind of like the biggest catalyst maybe over the near term. I believe Stronghold was kind of in queue before you guys went out and acquired it, which was probably, I don't know, over a year ago now. Do you have any idea on an update of when you expect to maybe expand the power capacity at both Panther Creek and Scrubgrass. Is that a couple of months thing? Within 6 months thing? How should we think about the timing there? Ben Gagnon: Thanks, Brett. Yes, it's a pretty exciting development there at Panther Creek because just over the last couple of weeks, we've received positive indications on the conversion of the ISA to an ESA as well as the expansion with an additional load study. It's a little too early to say exactly when that would come on to site. What we're planning here is an additional Phase 3 and Phase 4, which would come likely after Phase 2. But it's possible that the conversion of the ISA to an ESA could happen very quickly because all of the infrastructure is in place. There is no investments that need to be made. It's really just subject to the regulatory approval and signings and paperwork for all of that to be converted over. So I would think within the Phase 3, it's not really clear exactly when that's going to take place, but it could happen quickly. It could take several months. When it comes to a Phase 4, that's likely going to be a 2028 deal. Brett Knoblauch: Awesome. And then on the GPU cloud as a service, the CapEx figure that you've noted on, I guess, maybe converting that Bitcoin mining to host GPUs, that was not including the GPUs, correct? Ben Gagnon: Correct. That's not including GPUs and some of the construction costs associated with converting over the facility. So there will be additional expenses at the Washington site. We've had several conversations now with some of the leading GPU manufacturers, and we think that there's very attractive financing options on the GPUs as well that would really keep the CapEx requirement down to basically the infrastructure expense, and we'd be able to fund potentially up to 100% of the compute through these GPU manufacturers, which could be done on what we believe to be really attractive terms. And we also think that it would provide a significantly greater return profile on doing GPU as a service or cloud. Brett Knoblauch: And from a capital allocation, I guess, standpoint, what is your guys' preference? Obviously, the PA sites appear to be leaning more towards colocation, Washington site cloud. Do you guys expect to kind of grow both businesses at the same time? Is there a preference for one to kind of get online sooner than the other? Ben Gagnon: The expectation is that the Washington site will be the first site that's fully online. The Sharon site will probably be the second site that's fully online because Scrubgrass -- sorry, Panther Creek is split out into those 2 phases in 2027 with additional Phases 3 and Phase 4, which still needing to be confirmed. Our priority is managing the critical path and all the project management time lines that we have across our various facilities. But when we're looking at capital and how we'd allocate it across, it's managing the critical path, and it's also making sure that when it comes to looking at the opportunities around cloud, we're doing so in a way that makes sense and is affordable. And one of the benefits of doing it at Washington is a relatively smaller scale does make it very cost effective to do it. It's something that we could consider fully funded today. It's something that we could get financing for it at scale, whereas when you're looking at the really large campuses that we have in Pennsylvania, a colocation strategy is going to be a lot easier to finance. Operator: Our next question comes from the line of Stephen Glagola of JonesTrading. Stephen Glagola: On the $128 million critical IT supply agreement for Washington, can you clarify the counterparty to that agreement? Is that T5? Or is that another firm? And then additionally, just a follow-up to the last one on the GPU cloud model potentially at Washington and Sherbrooke. Can you maybe elaborate on what factors make GPU as a service compelling relative to standard colocation in these markets? And sort of how are you evaluating both potential GPU risk and your, let's say, return on invested capital IRR hurdle for the cloud opportunity? Ben Gagnon: Yes. Thanks, Stephen. When it comes to the supply agreement that we have for the Washington site, it's not with T5., it is with a large publicly traded American national company who serves and supplies data center equipment and data center services. The facility is really an attractive facility for both colocation and both cloud. But when you look at the opportunities that we have here to go fully up the stack and what that might mean for the company, both in terms of a free cash flow perspective as well as our ability to really demonstrate ourselves not only as a developer, but as an operator, I think there's a lot of tangible benefits there that will pay dividends in the long run. The conversion of the site according to our modeling and similar transactions that have happened in the market over the last couple of months, indicate that this one site could be worth significantly more than the entire Bitcoin mining business that the company has been operating for multiple years. And so that would provide us with a really strong free cash flow foundation as the Bitcoin mining business winds down. It will also enable us to better understand and better learn these facilities as we're looking to provide service and work with hyperscale and enterprise customers and neocloud customers on really large campuses. And so the benefit of doing it at the smaller facility is that we should be able to extract a lot of knowledge and value that we can apply to a lot of our other facilities as well. Operator: Our next question comes from the line of Mike Grondahl of Northland. Mike Grondahl: Ben, just curious, what would you describe as the 2 biggest challenges to maybe meeting your time lines for Washington, Sharon and Panther Creek? Like what's going to be the potential bottlenecks and how are you dealing with them? Ben Gagnon: Mike, I mean the potential bottlenecks in construction are a little hard to forecast. I mean construction is something that is changing every single day on the ground. I think that the key way that you mitigate potential risk in construction is having great partners with your owners rep, your general contractors, having a great team of project managers internally who are making sure they're on track of everything, every step of the way, and they're trying to think forward on all the potential problems in managing that -- those critical paths. It's not possible, I think, to identify what would be the key bottleneck or the key risk. But I think with the team that we have in place, the strategic partners that we have in place and the kind of groups that we're working with on the contracting side or on the owner's rep side, we're in a really strong position to execute. Mike Grondahl: Great. And then any rough guidelines or framework you can give us for sort of like 2026 CapEx? Ben Gagnon: So when we're looking at 2026 CapEx, we've outlined some of the numbers for Washington. We're still working on clear path forward as we're revising for Vera Rubin. The real challenge with providing full CapEx figures for 2026 is that the Vera Rubin infrastructure is so new that even NVIDIA hasn't completed their validated reference designs to support that equipment and that infrastructure. So that's something that's adjusting in real time and still moving forward. We should expect to have a better indication of what CapEx looks like in 2026 in Q1. From our conversations that we're having with the various different engineering firms and suppliers and partners of NVIDIA, NVIDIA is going to be producing the first Vera Rubin GPUs and taking them for their own purposes in probably Q2 of next year. And so sometime in Q1, the reference design should be relatively final, and we should be clear in terms of what the CapEx implications are for 2027 and 2026. Operator: Our next question comes from the line of Nick Giles of B.Riley. Nick Giles: Appreciate all the detail here. Ben, you mentioned the higher rack density of the Vera Rubin gen and that it could make the rack density suited for Blackwells obsolete. And it wasn't that long ago that 100 kilowatts per rack was the high end of the rack density. So how are you thinking about future proofing as this trend continues? And are there any contract structures that could protect you from the need to upgrade later down the road? Ben Gagnon: Thanks, Nick. It's a great question. The evolution of hardware is happening at a rapid pace, right? The GB200s were 150, the GB300s were 190 kilowatts per rack. And now the Vera Rubins are going to be over 370. And what that means is that your cooling needs to provide a lot more capacity in a very small footprint. It also means that your electrical distribution is very different. Most of the networking is more or less the same. But on the cooling and the electrical, it's a really big challenge. And one of the things that NVIDIA is looking at doing is increasing the voltage and even going to direct DC systems for the Vera Rubin technology. So they're looking at switching over to 800-volt DC. That doesn't mean that you necessarily have to go upwards of 800 volts or switch over to DC, but it does mean that as the increasing energy density continues to accelerate, you need to be rethinking your energy infrastructure and how you're actually building out these facilities. I think one of the ways that you try and do this is you try and build for the hardware at the time and then you try and lock that in with multiyear agreements, which help you to recover your investment and capitalize those investments over a long period of time. When you're signing an agreement for 5, 10, 15 years, most of the time, those agreements don't anticipate material upgrades to the infrastructure or any upgrades to the infrastructure. And so you're locking yourself in, the customer is locking themselves in with the infrastructure that they have in hand. And so I think the best way to mitigate those risks is to spread out your facilities, make sure you have a pipeline that exists over multiple years and make sure that you're building to the technology that's coming, not to the technology that already exists today because if you're building for today's technology by the time the facility is done, it's obsolete. Nick Giles: I really appreciate that perspective. That takes me to my next question. You mentioned the pipeline. Obviously, you have a lot of growth in front of you, but how much time are you spending on M&A opportunities? And where does that ultimately rank in terms of capital allocation? Ben Gagnon: Virtually none, Nick. Our focus as a management team is execution, execution, execution. We don't believe that there is a tremendous value that comes for our shareholders for looking at opportunities that are 2029, 2030 and these kind of long lead time items. We believe the value comes from executing against our existing portfolio. And we continue to get inbounds in terms of new opportunities and growth opportunities, but none of them seem to compare at all with what we already have in hand. And so I think the best opportunity for us is to continue to execute against our existing pipeline. There will be a time in the future where we're going to want to continue to expand that pipeline. But that's probably an easy year or 1.5 years out from today. Nick Giles: Got it. That's good to hear. Maybe one more, if I could, just for Jonathan. Sorry if I missed any commentary around this earlier, but how are you ultimately thinking about the Bitcoin treasury? Would you look to liquidate these holdings around the time that mining operations wind down? Or would those be separate time lines? Jonathan Mir: So to be -- first, it's nice to meet you. So we are definitely not operating as a Bitcoin treasury company, and we don't want to be one. What we're doing right now through programs like Bitcoin 2.1 is offset Bitcoin production costs and achieve higher value per Bitcoin sold in a low-risk, low-cost funding mechanism for the energy infrastructure investments that define Bitcoin going forward. The program primarily sells short and long-dated out-of-the-money calls on the Bitcoin and the treasury as well as for Bitcoin production. So our efforts are focused around maximizing yield and minimizing costs. And we expect the Bitcoin treasury to wind down into strength as we allocate it to CapEx. Operator: Our next question comes from the line of Martin Toner of ATB Capital Markets. Martin Toner: Congrats on all this progress, guys. My question is around the GPUs. What's your confidence in being able to acquire them on a timely basis? And would you go through a distributor that comes with the financing or who might finance them? Ben Gagnon: Thanks, Martin. Yes, happy to speak to that. We've had quite a few conversations with leading GPU manufacturers. As you probably know, NVIDIA produces GPUs themselves, but they also sell chips to a lot of OEM manufacturers. When you speak with those manufacturers, they often have finance programs in place, and those finance programs are -- can be pretty attractive, especially if you have the right infrastructure to ensure the quality and the lifespan of those GPUs. So going with an OEM manufacturer has a lot of benefits. They'll provide a full turnkey solution with regards to the servers themselves, and they can often come with financing. With our time line for end of next year on Washington, we're highly confident in sourcing our GPUs, and we believe that there's a lot of financing options out there that we are evaluating and could really juice up those return profiles. Martin Toner: That's great. Is there a good exahash number to use for Q4? Ben Gagnon: Our exahash should stay relatively consistent in Q4 when you're looking at our continuing operations. It's not possible right now to really forecast the impact or when the impact from the Paso Pe sale is going to happen. But the site continues to run today. It continues to hash. It continues to generate free cash flow. It's just not classified there under normal revenue according to IFRS standards, we have to hold that under discontinuing operations. But I think if you just look at the hash rate associated with our -- the rest of our portfolio, that will stay relatively constant -- it will stay constant throughout Q4, and then we'll make adjustments to it throughout 2026 as we execute on the HPC and AI development. Martin Toner: Fantastic. Can you give us a sense for initial conversations with customers of the GPU as a service product, reaction and confidence in being able to like contract them on a timely basis? Ben Gagnon: So conversations on the GPU front are really new for us because we've only started evaluating this in the last month or 2 as we've seen the market dynamic really take hold. I think the inbound demands that we've had across Washington and specifically Panther Creek is a lot. And when we're looking at what's the best way to service those customers, what's the best way to lock in long-term value under those agreements, there's a variety of different customers who are coming to us, and some of them want the GPUs included in there, and there's an associated premium that could be potentially extracted from that. So it's a little too early to indicate exactly what we would expect with economics, but we do believe the economics from our conversations and from the internal modeling that we've done and from the transactions that a lot of the companies in the space have announced in the last couple of months is very compelling, especially when we can execute it at a smaller site like Washington, which we can consider fully funded today. Operator: Our next question comes from the line of Brian Dobson of Clear Street. Brian Dobson: I guess more broadly speaking about Bitcoin mining, as more and more miners transition megawatts to HPC? How do you see the global hash rate evolving over the next few years? Ben Gagnon: No, interesting question, Brian. Personally, I think the hash rate is going to continue to evolve at the same rate that it has been evolving. But if Bitcoin price is not moving up meaningfully, that would be a major headwind to further growth. I think what you'll see more likely is that Bitcoin miners will continue to rotate out to lower and lower cost jurisdictions. And I think one of the big dynamics that is taking place is that the public miners represented almost 1/3 of the entire network, and they all seem very keen on moving over to the higher economics associated with HPC and AI. So that removes a lot of the available and current existing infrastructure for Bitcoin mining. So there could be some potential headwinds in exahash growth for the network. But I think what you'll see is it's just going to rotate off to different jurisdictions. We've seen huge growth in the Middle East, in Africa. I think Russia is a very large booming market for Bitcoin mining right now. And I think the best opportunity for most miners in the United States really is this transition to HPC and AI. And the economics are really going to drive that forward because the U.S. is the best market to invest in for HPC and AI, whereas Bitcoin mining is largely location agnostic. And it's happy to go to cheaper locations, higher-risk locations, more remote locations than HPC and AI is. Brian Dobson: Yes, excellent. And then just a quick follow-up. So as you're reviewing your portfolio, do you see an opportunity to engage in this type of megawatt redeployment in a broader sense? Ben Gagnon: When we're looking at whether or not we could redeploy our Bitcoin mining assets somewhere else, I think the opportunities are really few. And really, I don't think that's a great use of management's resources or time. I think the best opportunity is to basically bring forward what should be estimated free cash flow for mining operations today into cash and reinvest those into HPC and AI. Operator: Our next question comes from the line of Michael Donovan of Compass Point. Michael Donovan: Ben, you mentioned dollar per kilowatt trends. Can you quantify a premium on dollar per kilowatt that you're seeing for power secured in Pennsylvania or Washington versus Texas? Ben Gagnon: Yes, it's a good question. There's a few variables that go into dollar per kilowatt on these leases. One is obviously time line, one is location. Another one is risk factors that go into the development time line. And so it's not really possible to pinpoint an exact price per location because there's multiple factors which come into play when you're looking at what the total lease rates can accumulate to. I think if you look around at the transactions that are here and you look around at kind of what Bitfarms could secure today at Pennsylvania before it's even really broken ground at our Panther Creek site, which we plan to do next month, we could probably lock in $140 to $150 per kilowatt per month. But I think when you look at that rate, that rate takes into consideration the location. It also takes into consideration the shovel has not been put in the ground yet. And what we don't want to do is we don't want to lock in a lot of discounts that would be associated with the build time line and the uncertainties around the build time line into a 10-, 15-year agreement. What we'd rather do is we'd rather execute against our construction milestones utilizing the substantial war chest that we have today. And the closer we can bring that window down from signing a lease to actually generating revenue from a customer, the more that we should expect to get. It's hard to put an exact price, but I would think that if that window was shorter, we could probably get upwards of $180 per kilowatt per month if we didn't have the risk and uncertainty priced into the time line that would bring it down to $140 to $150 per kilowatt today. That's internal estimates and modeling. So there's a lot of factors that go into that. And we also think that as you execute against 2026 and as the gap between data center supply and data center demand continues to exacerbate, those numbers could get even better. And when we look at how does the margins work out for these contracts, you're largely looking at pretty fixed OpEx. And so the difference for the company between getting $140 per kilowatt hour, $140 per kilowatt per month versus $150 or $180 is not only a huge increase in terms of the top line revenue, but it's an even larger increase in terms of the profit margin, in terms of what your adjusted EBITDA is going to be. And then not that all translates out into that multiple expansion that we're targeting with this transformation, right? So if you're getting a significantly higher free cash flow out of that operation, that's what the multiple expansion is going to be based on. So we really want to make sure that -- we're not pricing in those discounts. We're trying to maximize the dollar per kilowatt per month in the lease, and that's going to be the way that we achieve the highest multiple expansion for shareholders in the long term. Michael Donovan: That's helpful, Ben. And you talked about connecting data centers to be one campus, and I was hoping you can unpack this a bit more. How can we think about distance between hauls or pods versus theoretical loss and performance for compute? Ben Gagnon: Yes. There's a strategy that Amazon pioneered. It's called the regional campus strategy, and they've effectively determined that somewhere around 300 miles is the cost-effective range to build direct fiber infrastructure. But the real thing is the latency that you could get between your sites. Now obviously, when you're looking at these facilities, you're even concerned about the latency in rack and in between racks or inside the facility to go from one rack to another rack on the other side of the facility. So that latency is becoming an increasingly bigger bottleneck as you're looking at performance on the high, high end of GPUs. But what we've seen is that most of our facilities in Montreal, where we'd be looking at this regional campus strategy, they're much closer than 300 miles. They're all within 90 minutes of Montreal. Many of them are 15-, 20-minute drive apart from each other. And so it would be possible to reduce the latency below 2 milliseconds with direct fiber. It would be pretty cost effective to do so. And you'd get a lot of benefits from doing that in terms of the scalability, given it's just so difficult to scale up new megawatts in the province. Operator: I would now like to turn the conference back to Ben Gagnon for closing remarks. Sir? Ben Gagnon: Thank you very much. I would like to thank everyone for attending our earnings call this morning. The management team is very excited. Our long-term investment strategy, we believe, is fully aligned with long-term investors. And we are really, really excited about the future of this company and what we're building at Bitfarms, and we appreciate your continued support. Thank you. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the Alvotech Q3 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, Benedikt Stefansson, Vice President of Investor Relations and Global Communications. Please go ahead. Benedikt Stefansson: Thank you, and welcome to our listeners. Yesterday evening, the company issued a press release announcing our financial results for the first 9 months and third quarter of 2025. A presentation accompanying today's earnings call was also published under our investor portal, investors.alvotech.com, under News & Events. Our press release, presentation and statements that we make on the call today may include forward-looking statements. Please see our disclaimers on Slide #2 of the presentation. These statements do not ensure future performance and are subject to risks and uncertainties that are outlined in company filings with the Securities and Exchange Commission. Any risks and uncertainties could cause actual results to differ materially from forward-looking statements that are made. Presenting on today's call are Robert Wessman, Chairman and Chief Executive Officer of Alvotech; Joseph McClellan, Chief Operating Officer; and Linda Jonsdottir, Chief Financial Officer. Also with us on the call is Balaji Prasad, Chief Strategy Officer. Robert will begin today's presentation with a discussion of the status of our pending biologics license application with the FDA and facility inspection and present some business highlights. Joseph will discuss the status of our development pipeline. Linda will conclude with a discussion of our financial statement and full year guidance. Following the introductions, our team will be happy to take your questions. And with that, I would like to turn the call over to Robert Wessman. Robert Wessman: Thank you, Benedikt, and thanks to everyone for joining us here today. Please turn to the Slide #4 in your deck. We are now approaching the end of very eventful year, marked by increased pipeline development, successful product approvals across multiple markets and growing licensing and products revenues. Alvotech has come a long way in its 12-year history. We have invested approximately $2 billion to build a global pure-play biosimilar company with integrated R&D and manufacturing under one roof. We commercialize globally through a network of nearly 20 partners, reaching over 90 countries worldwide. After launching our first biosimilar in 2022 and second biosimilar in 2024, we entered the U.S. market last year. The 2024 global launches drove a 420% revenue growth in that year, and we are guiding approximately 20% growth for 2025. With exclusivity expiring on dozens of originator biologics each year and the regulators waiving costly efficacy trials, the biosimilar market is set for explosive growth. With resources and strong focus on developing and manufacturing biosimilars, Alvotech is well positioned to lead the charge. In fact, we proactively responded to anticipated changes in regulatory guidelines by expanding our research and development initiatives approximately 2 years ago. More recently, we have further enhanced our R&D capabilities with the establishment of an operational base in Sweden. The result is already evident in our growing pipeline: 5 approved biosimilars, 12 other disclosed development programs and already developed cell lines for additional 15 valuable targets, in total, targeting greater than $185 billion of originator markets. Now let me touch upon a few key points that I will discuss today and described on the following slide. This includes an update on the FDA process, our pipeline, a comment on the revised outlook for the year and update on our marketed products. So let's turn to the next slide. As announced last week, we received a complete response letter, or CRL, from the FDA for our BLA for the proposed biosimilar to Simponi. The sole reason noted in the CRL concerns unresolved issues identified by FDA during the inspection of our Reykjavik facility, which concluded in July of this year. Let me make it clear. This CRL did not change the status of Reykjavik manufacturing facility, which continues to be an FDA-approved site that produce and will continue to produce our current marketed products in U.S. Also, the site is approved to manufacture for global markets and continues to get approvals for our new product launches. The facilities referenced in our regulatory application, including our Reykjavik site, are of course regularly inspected by several global regulatory agencies as a routine part of the review process. For example, both the European Medicines Agency and Japan's PMPA inspected our Reykjavik site earlier this year in support of our new product approvals in these markets that will occur in third and fourth quarter. Leveraging several successful inspection by many regulatory authorities, including recent inspection by FDA in the third quarter of 2024 which yielded only 2 minor Form 483 observations, we remain committed to continuous improvement of our manufacturing operations. To support consistent and effective leadership at the site, we have expanded the responsibility of Joseph McClellan, current Chief Scientific Officer, by appointing him as Chief Operating Officer. In his role, Joseph will be responsible for technical operations as well as research and development, supply chain and project management. Before joining Alvotech in 2019, Joseph held positions of increased responsibility at Wyeth and Pfizer in the United States over a span of 17 years. During his tenure at Alvotech, he has played a key role in advancing and strengthening our high-performing research and development organization and its pipeline. His commitment to uphold best-in-class quality standards and operational excellence will position Alvotech to address any concerns raised by FDA at our facility. Although we are disappointed by the approval delay resulting from the CRL, we remain committed to promptly resolve any outstanding matter relating to the facility. Once FDA provides clarity later this month on the specific issue identified during the inspection, we will address those in a timely manner. Once we respond to the CRL, we anticipate the approval of our BLA may be granted as early as the first half of 2026 in accordance with 6 months statutory review periods. With this review timing, we still anticipate being one of the first, if not the only approved biosimilar to Simponi in U.S. and other global markets. Of note, we have already received approval in Japan and U.K. with the EMA approval expected shortly for our biosimilar to Simponi. So please turn to the next slide addressing our revenue growth. Later in the call, Linda will discuss our third quarter financial results and full year guidance in detail. When we reported our full year guidance in March, we signaled that the first half and second half of the year would be relatively balanced, while the fourth quarter would be the strongest of the year due to anticipated product approvals and launches which were occurring later in the year. Following the receipt of CRL from FDA, we revised our outlook for full year to $570 million to $600 million top line revenues and adjusted EBITDA of $130 million to $150 million. We believe the costs incurred on temporary loss in product revenue a necessary investment in our future growth and will make the company stronger as we continue to expand our portfolio of products and launch into additional global markets. As you can see on this slide, Alvotech's revenue growth has been extraordinary or 127% on average per year from 2021 to year-end 2024. With the latest guidance we have given, we are projecting a compounded average growth rate of 94% from 2021 until end of this year. As we are launching 3 more biosimilars this year, this contributes to both licensing and product revenues, and our strong pipeline and increased R&D will allow license revenues to continue to be a significant revenue contributor. We are very pleased to say that we are seeing very strong global interest in our enhanced product portfolio. We continue to sign numerous contracts with our partners globally, which will continue to deliver strong milestone revenues and secure strong market share globally going forward. So please turn to the next slide. Now I will turn to how the markets for the existing products have evolved. In the U.S., we continue to hold the second largest market share in the Humira biosimilar segment and our products remain the fastest-growing Humira biosimilar. The originator share is eroding and expected to fall below 50% of its original volume by year-end, with most volume continuing to shift to biosimilars and much smaller portion transitioning to novel therapies. In Europe, our partner, STADA, continues to grow volumes for Hukyndra. We have seen average quarter-on-quarter growth of 12% the last 4 quarters. Hukyndra now holds the top position in several of the 10 largest EU markets, including Austria and Sweden, and has reached 10% share in France, competing against 9 other biosimilars. In Canada, SIMLANDI, marketed with JAMP Pharma, remains the fastest-growing Humira biosimilar. With respect to our biosimilar to Stelara in U.S., our partner, Teva, continues to secure formulary coverage, and we are among the top 3 biosimilars on the market for this reference product. In Europe, we were first to launch Stelara biosimilar. And while the competition has increased, we are still holding a leading position in the European markets, where we have launched our product with about 10% share of the total Stelara market and 25% share of the biosimilar segment. We expect 50% of Stelara's European market to transition to biosimilars by year-end. With that, I will hand the call over to Joseph McClellan, who will discuss our portfolio, including the near-term launches. So over to you, Joseph. Joseph McClellan: Thank you, Robert. As described on the next slide, our products, AVT06, a biosimilar to Eylea; AVT05, a biosimilar to Simponi; and AVT03, a biosimilar to the dual products of Prolia and Xgeva, are scheduled for launch in Europe this quarter. AVT06 has received approval in Japan, the U.K. and the European Economic Area. Last week, the U.K. High Court rejected Regeneron's and Bayer's requests to stop Alvotech's manufacturing of its Eylea biosimilar in the U.K. This ruling enables us to manufacture in anticipation of commercial launches after the Eylea supplementary protection certificates expire on November 23 of this year. We are prepared to launch AVT06 prefilled syringes and vials across Europe post expiry of exclusivity and look forward to entering the market with strong partners. AVT05 has already received approval in Japan and the U.K. and we are expecting a favorable decision from the European Commission for the EEA in the later part of November, following the EMA's CHMP recommendation early this summer. We intend to proceed with the launch properly after approval, anticipate being the sole biosimilar to Simponi available on the European market for several months. In Japan, we have secured the necessary rights and plan to initiate launch activities during the first half of 2026. For AVT03, which has been approved in Japan, European Commission approval for the EEA is anticipated in the second half of November, following EMA's CHMP recommendation this summer. The intention is to ship launch supplies to our commercial partners in Europe during this quarter. It is expected that AVT03 will be among the first products available with established partners supporting its market introduction. Turning to our development pipeline on the next slide. We are pleased to report ongoing growth and advancement across our programs. In collaboration with partners, Kashiv and Advanz, we have submitted a biosimilar candidate to Xolair in the EEA and previously filed for approval in the U.K., where the review process is ongoing. The development of AVT29, a biosimilar candidate to high-dose Eylea; as well as AVT16/80, a biosimilar to Entyvio for both intravenous and subcutaneous administration, is proceeding towards regulatory submissions targeted for 2026. Progress continues on our candidate to Keytruda in partnership with Dr. Reddy's, including completion of manufacturing for clinical supplies. Additionally, we have initiated clinical manufacturing for our candidate to Cimzia with positive developments underway. Our investment in the early-stage pipeline remains strong. Today, we are announcing 2 new molecules, biosimilar candidates to Hemlibra and Imfinzi, which are currently in process development. Further, we have over 15 cell lines completed for future development within our expanding portfolio. At this point, I invite Linda to deliver the financial overview. Linda Jonsdottir: Thank you, Joe, and good day to everyone who has joined us on the call today. Today, I will take you through the financials for Q3 and the first 9 months of 2025. The earnings deck is more detailed than usual, and we hope you appreciate the additional insights into the quarterly results provided in the next few slides. As Robert mentioned, Alvotech has delivered strong CAGR growth in the past 4 years since launching our first biosimilar, and there is continued momentum and demand appetite for our on-market products of biosimilars to Humira and Stelara. Turning to the next slide, which highlights our Q3 financial performance. As we communicated, as part of our Q2 results, we were expecting Q3 to be a soft quarter followed by a strong Q4. This was primarily driven by lower product revenues and product margins, which were impacted by the timing of orders, portfolio mix and temporary loss in product revenues related to facility improvements, as Robert noted earlier. In Q3, licensing revenues were at the high level of $81 million, supporting a strong gross margin of 69%. We also finalized the integration of Ivers-Lee into our financials that were acquired in July. Ivers-Lee is a Swiss-based assembly and packaging service provider and will increase our capacity for finished product assembly and packaging. Adjusted EBITDA was $14 million or 13% of revenues and was impacted during the quarter by costs associated with improvements in operations to support new launches. Operating cash flow is then a function of our revenue collections in the quarter, down from a very strong quarter in the second quarter of '25, and outflow driven by inventory build in support for upcoming launches. And looking at the year-to-date on the next slide. Alvotech delivered total revenues of $420 million for the first 9 months, which represents strong 24% growth year-on-year. This shows our strong commercial momentum following the launch of our biosimilar to Humira in the U.S. and the early traction for our biosimilar to Stelara in both Europe and the U.S. Gross margin was at 59% and underscores the strength of our licensing model while product margin of 27% reflects quarter 3 softness. Adjusted EBITDA in the first 9 months was $68 million or 16% margin. When compared to prior year, it is important to note that 2024 included very high licensing revenues tied to 3 biosimilar submissions and the U.S. launch of our biosimilar to Humira, along with the launch of our biosimilar to Stelara in Europe. Cash balance at the end of September was $43 million and reflects outflows connected to inventory buildup ahead of product launches, CapEx investments and M&A activity. If we then double-click on the revenue and EBITDA trends on the next slide. Our revenue model as a B2B company naturally leads to quarterly fluctuations related to timing of orders from our partners. However, despite these fluctuations, we delivered strong double-digit growth in revenues both in the quarter and in the first 9 months, up 11% and 24%, respectively, with a trailing 12-month run rate of $571 million in revenues. Adjusted EBITDA margin for the first 9 months 2025, however, was at 16% compared to 26% last year. This was driven by higher R&D investments to accelerate pipeline expansion as well as higher D&A costs to scale operations and infrastructure to be able to drive operational efficiency across the organization. Finally, I would like to highlight that we continue to diversify geographically with growing contributions from Europe as market share in Europe and other markets outside of the U.S. continues to grow. Moving to cash flow on the next slide. As I touched on earlier, cash flow in the quarter was a function of lower revenue collection due to timing and planned inventory buildup in support of upcoming launches. We also continued strategic investments in CapEx and intangibles to expand capacity to support new launches and our growth plans. New working capital option of $100 million will be used to capture swings in working capital. Cash is impacted by the costs associated with acquisition of Ivers-Lee and interest payments since from June '25, we are paying cash interest on our loans. Next, I would like to quickly touch on the balance sheet on the next two slides. Our asset base remains strong, supported by recent bolt-on acquisitions and continued investment in R&D to drive future growth. Current assets are stable overall with expected shifts in inventory and trade receivables during the period. Looking into the equity and liability side, a couple of things to mention here. Our equity position strengthened by $236 million driven by profit for the period and the inflow of capital contributions from our most recent Swedish listing. Derivative financial liabilities decreased by $167 million, mainly due to fair value change on earn-out shares. And lastly, the overall contract liabilities decreased due to recognition of licensing revenues. If we then turn to the next slide featuring our revised full year outlook. On November 4, we revised our outlook following the CRL from the FDA. We updated our outlook for the full year to a range of $570 million to $600 million in revenues and adjusted EBITDA range of $130 million to $150 million. This revision reflects actions taken to respond to any issues identified by the FDA inspection, impacting production efficiency in 2025. Some of the licensing agreements for pipeline assets that were expected at the end of Q4 are now shifting to 2026. Despite these short-term headwinds, we expect a strong finish to the year, especially with licensing revenues that translate directly to EBITDA. At the midpoint of the guidance, we are targeting to deliver 19% year-on-year revenue growth and 30% EBITDA growth. Fundamentals remain strong. We expect margin recovery and accelerated revenue contribution will follow new launches and continued geographical diversification. More importantly, we continue to see growth in markets outside the U.S. which helps balance our revenue profile. Based on the committed orders we have for our new launches in markets outside the U.S., combined with the growth momentum we are seeing with our currently marketed products, we are well positioned to deliver top line and EBITDA growth in 2026. Management will provide new future guidance no later than with the Q4 '25 results. Our strategic focus for the next 18 months is on focused execution to unlock long-term growth, advancing the pipeline, realizing multiple global launches to deliver solid sales growth and diversification of revenues across geographies and products. At the same time, we will drive cost optimization and operational efficiencies to support margin expansion. Working capital management will also be our key focus to achieve positive free cash flow and support our growth trajectory. This brings me to my final slide. I think it's always good to look a bit backwards and see where we're coming from, where we are today and where are we heading. Alvotech's journey from its 2013 foundation to today reflects the transformation into a leading biotech company with one of the industry's most valuable biosimilar pipelines. From 2013 to 2023, the focus was on building a vertically integrated platform, investing in R&D and talent and establishing global partnerships to enable successful launches of Humira and Stelara biosimilars. And 2024 to 2025 period marks a major inflection point, multiple global approvals, including those referencing Humira and Stelara in the U.S., accelerated pipeline development and fivefold revenue growth from '23 to '24. We achieved positive EBITDA in '24 and are targeting around 30% growth in 2025 on EBITDA level. Looking ahead to 2026, our priorities are diversification and scale, advancing our pipeline, executing multiple global launches and critically adhering to regulatory standards and ensuring FDA compliance as a cornerstone of success. With a $20 billion addressable market for upcoming biosimilars, we are positioned to deliver sustainable growth and long-term shareholder value. I'll now turn the call back over to the operator for Q&A. Operator: [Operator Instructions] We will now take the first question from the line of Ash Verma from UBS. Ashwani Verma: So yes, I wanted to just get back to the focus on the CRL. So can you kind of explain this, what are the observations this time that are different from the last time? And I think you mentioned that you've effectively taken actions to resolve them. Just give us a status of where we are on that. Joseph McClellan: This is Joe McClellan, Chief Operating Officer for Alvotech. We have been in a situation where we have done a significant number of improvements since the inspection has concluded. The observations were not repeat observations. Let me say it clearly. There were no repeat observations in the deficiencies identified in the Form 483 from the FDA at the conclusion of the inspection. And so it's a number of things that we have to improve about the facility associated with some of our aspects associated with manufacturing, control of our facility, documentation, investigations. We have committed to the FDA to complete more than 180 different changes to address all of their observations plus more so that we will not be in the situation again. In doing this, we have now completed 93% of these commitments and we have communicated them to the FDA. We're in the process of completing additional actions that we will continue to keep the FDA updated on. Ashwani Verma: Got it. And just as a follow-up. So I know this Form 483, you have 10 observations. And even for Humira back a while ago, I think you ultimately climbed up to 18. Just taking a step back on the manufacturing facility, if this has been a little bit of a challenge, has that made you think about the strategic value of keeping the manufacturing in Iceland? I'm just trying to understand, is there something that is driven by less of an availability of pharma talent or anything of that regard, and whether if you would not have it at that location or at some other place, then it might ultimately solve the problem in the long run. Robert Wessman: Yes. Thank you for the question. Robert Wessman here, CEO. Overall, I mean, the concept and the vision and the strategy around the business is to keep everything in-house, both R&D and manufacturing. We think creating a platform like we have is extremely important. We can say that in U.S., we are around 18 months into being a commercial company, if you will. We have gone through 3 FDA inspections over the 18 months. And the first two, which was early '24, was only one 483. And then late last year, we had a general GMP inspection, which we only got 2 minor 483s. So overall, I would say it was very disappointing to get this CRL and unexpected. But the company has continued to grow and strengthen further the quality systems, and we have full intention to absolutely stay and be best-in-class when it comes to GMP and quality. And I mean, that's reflected. We have gone through successfully 5 EMA inspections. We have gone through at least 4 inspections from different global health authorities and now 2 successful FDA inspections. So as Joe explained in detail, we took this very seriously. And I think overall, we have done a substantial improvement. And Joseph himself has shown amazing success in R&D and brought all of our 5 currently approved or marketed products to a success and the 12 products which are in late stage in R&D. And he has extensive experience, as I mentioned in my part, from Pfizer. And he lives in Iceland. And that is a big factor, to have the core team living in Iceland to take charge. And I have great expectations with those changes that all future deficiencies hopefully will be behind us. But saying that, of course, we are in pharmaceuticals. We are seeing that companies, whether it is big pharma or biotech or biosimilars or small molecules, there are unfortunately FDA's 483s or even CRLs coming up on a very regular basis. So it's a kind of moving target and we will continue to move with it, if you will. Ashwani Verma: Got it. Okay. I have just one more question. So I guess just for the 3 products that you've tried to pursue now with the FDA approval, you've gotten 2 CRLs. I mean, I'm trying to understand what type of impact does that create when you're having the conversations with your customers effectively. Is that something that you faced like when you were launching Humira, and now that you have seen this at the time of Stelara, then how do you think that might impact the conversation when you're trying to contract it out? Robert Wessman: Yes. I think it's a very appreciated question, if you will. I mean, we continue to see a very strong interest in our products. I mean, we definitely have the broadest portfolio of all biosimilar companies in the industry, and that is our strength. What is of interest, of course, leave aside 11, 12 successful inspection from EMA to U.S. FDA to other health authorities in the world, our clients are doing also inspections or audits on ourselves. So our customers are very much aware of the status of the facility. And overall, we have not seen any reduction of interest in our products. And we keep our key clients up to date, what we are doing to continue to evolve the quality system, if you will. And we highly appreciate that for all of our portfolio of products, there are usually more than one or more than 2 which are showing strong interest in those products at any given time. Operator: We will now take the next question from the line of Thibault Boutherin from Morgan Stanley. Thibault Boutherin: Just a couple of questions on the revenue impact of the CRL in Q4. Our understanding is that the lower revenue is related to fixing the manufacturing process, so basically revenue loss. Should we think about this as a phasing of shipment into next year after the issues are resolved? So is it just a sort of phasing? Or should we understand this as lost revenues? And does that mean that your commercial partner may face supply interruption impacting the revenues? So I'll start there, and I have another one after. Linda Jonsdottir: Okay. It's Linda Jonsdottir here, CFO. If I understood your question correctly, it's about the change in guidance that we announced on November 4. I would say it's twofold. The revision is about like actions taken to respond to any issue. So that is slowing us down on the production side and impacting our revenues in 2025. But we are also seeing some of the licensing agreements for pipeline assets that were expected at the end of Q4 are now shifting to 2026. That's just like a timing impact but has sizable EBITDA impact in Q4 since it's like licensing revenues that flows directly into EBITDA. However, like if I also comment a bit on 2026 and our comfort levels there, if I look into the committed orders we have for new launches in markets outside of U.S. and in combination with growth momentum noted in currently marketed products, we are in a very good position to deliver top line and EBITDA growth in 2026. Thibault Boutherin: And can you just confirm that you are confident on how long the operations are going to be impacted in terms of having visibility on how long it's going to take to fix it regardless of the answer you're expecting from the FDA? Or could this change depending on what you get from the FDA? Robert Wessman: No. Robert here again. I think we have a pretty clear visibility on that. And the drug product part of the facility is undergoing some minor adjustments as we speak. And we will then close the drug substance for a particular period in December for both general maintenance and adjustments. So I think as Linda said, we have most of the orders which are in the order book to be delivered end of this year produced. They still need to be -- some of them are sample to pack, but mostly they have been produced. And we have a pretty good visibility how the year-end, we believe, and comfort level, how that will end. And as you can imagine, based on the guidance we gave and based on year-to-date EBITDA, it's fairly easy to see how strong the fourth quarter will be. And it's a good, as Linda said, good momentum with order book. So based on what we are seeing, we are fairly confident on growth, both top line and EBITDA for '26, no matter what. Operator: [Operator Instructions] Our next question comes from the line of Arvid Necander from DNB Carnegie. Arvid Necander: So going back briefly to the CRL and the slowdown in production you anticipated after it came. Could you be as concrete as possible? What amendments did you do to the ongoing production lines? And you touched on this a little bit, but is it fair to say that you're more or less back to operating at full capacity for the approved products? And secondly, on the R&D spend. At the beginning of the year, I think you were expecting R&D spend of roughly $160 million to $165 million for the full year. It seems to be trending higher than this. Do you anticipate a meaningful step down for Q4? I'll start there. [Technical Difficulty] Operator: One moment, please. Your conference will resume shortly. Joseph McClellan: Okay. If I continue. So as I was saying, observations around putting in manufacturing controls, improving the way we do investigations, laboratory controls, documentation practices, those kinds of aspects. So we committed to doing over 180 different actions to the FDA, things such as ensuring that we have the microbial controls by putting measures in to prevent actions that could be considered. Because it's clear that the FDA made observations, for example, around our manufacturing controls that may lead to lack of sterility, but not that actually it was observed, right? So we did things to then strengthen that, putting practices in terms of how we do, say, for example, visual inspection, how we make sure that our air flow is correct to make sure that our procedures associated with changing and gowning are all improved, right? So we did all of those improvements over the last few months since the 4th of July. Since then, we have begun manufacturing. The product that we are delivering in the fourth quarter is product that has been manufactured in both the third and the fourth quarter. So there are actions progressing. We are manufacturing. As Robert said, there's always going to be the need for minor actions for maintenance. Those things are taken into account, and we make sure that we improve those. But in general, we are manufacturing and delivering product that for this quarter that we have recently manufactured since the slowdown we referenced in the press release. Linda? Linda Jonsdottir: Yes. And to touch on your cost question, like on the R&D side, we had elevated levels on R&D both in Q2 and in Q3. That's also related to timing of clinical and manufacturing activities as well as launch preparation for our upcoming launches. In Q3, we also had impact in R&D related to the improvement Joe was covering. And we are expecting that also to touch our R&D numbers in Q4. But I can confirm that like we're still expecting lower R&D in Q4 than both in Q2 and Q3. Operator: We will now take the next question from the line of Thibault Boutherin from Morgan Stanley. Thibault Boutherin: Just a question on the impact of the change in regulation you mentioned with the lower requirement for Phase III trial. Can you talk a little bit about how that impacts your plan for your earlier stage biosimilars, in particular, thinking about Keytruda and Cimzia where the timelines could move based on your decision to run an efficacy study or not? Robert Wessman: Yes. Robert Wessman here again. I will hand this over to Joseph, but I just want to underline. So we anticipated this change over 2 years ago. And based on that, we changed our approach to R&D, if you will. And as we have already stated on this call and the previous calls, we have all in all, between marketed products, approved products, late-stage development, early-stage development, over 30 products in the pipeline. So we think we have used the time very well and taking advantage of the changes which are coming now by kind of assuming and expecting this to come. So we are already bearing the fruits of that vision we had back in time. But for the detailed answers maybe, Joe, if you take that. Joseph McClellan: Yes, absolutely. So this is Joseph. For sure, right, we are doubling down on our strategy. We have a proven development engine. We are leveraging that. As Robert said, we forecasted and anticipated that the need to do patient efficacy studies was going to go away from a regulatory perspective. It has. And because we made the bets over 2 years ago, we are now in a good position to take advantage of that. And we are doing that for products as we're developing them, right? So you can imagine that, yes, Cimzia would be one of those as well. Operator: Thank you. There are no further questions at this time. I would like to hand back over to Benedikt Stefansson for closing remarks. Benedikt Stefansson: Yes. Thank you. So on behalf of the Alvotech team, I would like to thank everyone who called in and listened to our call today. And we look forward to speaking with you again, and wish you a good rest of the day. Robert Wessman: Thank you. Linda Jonsdottir: Thank you. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Good morning, and welcome to Marpai Third Quarter 2025 Earnings Webcast. [Operator Instructions] Please note that this conference is being recorded. I would now like to turn the conference over to Steve Johnson, Chief Financial Officer. Please go ahead. Steve Johnson: Thank you. Good morning, and thank you for joining us for the Marpai Third Quarter 2025 Earnings Release Webcast. With me this morning is Damien Lamendola, Director and CEO of Marpai; and Dallas Scrip, President and Chief Operating Officer of Marpai. Before we begin, I'd like to draw your attention to the forward-looking statements included in this presentation. Damien, the floor is yours. Damien Lamendola: Thank you, Steve. Employers have 2 basic options when considering the health benefits for their employees. Fully funded with a traditional insurance company are self-funded where the employer takes on the funding responsibilities for their health insurance benefits. Given the continued high rate of health care inflation, many more companies are choosing to self-fund their benefit programs and use a third-party administrator. Generally, just by moving to a self-funded plan, it reduces overall cost by 10% or more. As more and more employers are quickly moving over to self-funded plans, the demand for TPA services has been increasing significantly. I'll turn it over to Dallas now, who, as Steve said, is our President and Chief Operating Officer. Dallas Scrip: Thank you, Damien. Marpai has a national footprint, allowing us to serve employers with multistate locations with ease, which many of our regional competitors really struggle to do. Marpai also offers significant cost savings programs and our relaunch of MarpaiRx will be a game changer for us. As a leading independent TPA, we put our clients first with a robust arsenal of services, Marpai assists with benefit plan design and aggressively negotiates on behalf of our clients to help manage their ever-rising costs. The TPA industry has a massive total addressable market of over $150 billion, and it's poised to grow 123% by 2031, according to the recent research published by the Insight Partners. The primary reasons for the growth, rising health care costs, growing employer-sponsored health plans, technology advances and further expansion of TPA offerings. I'll now hand it over to Steve to cover the third quarter results. Steve Johnson: Thank you, Dallas. Net revenues were $4 million for the 3 months ended September 30, 2025, which was $3 million or approximately 42% lower than the third quarter last year. Our operating expenses were $3.9 million or $1.2 million or a 24% improvement over last year third quarter. Operating loss was $3.5 million in the third quarter of 2025, $0.1 million or 2% improvement over the third quarter last year. Our net loss was $3 million for the quarter or $0.1 million, 2% improvement over the third quarter in 2024. And our basic and diluted loss per share was $0.20 for the 3 months ended September 30, 2025, an improvement of $0.10 per share from the third quarter last year. So we continue on our year-over-year progress and one of the things we wanted to highlight was our cash and capital planning. Our disciplined focus on efficiency has allowed us to substantially reduce the company's cash burn, leaving us with $450,000 in unrestricted cash on hand at the end of Q3. As we recently announced, we completed a $3.9 million private investment in public equity or PIPE transaction. This successful capital raise, we believe, delivers the financial strength needed to fully fund the final stages of our high-growth turnaround plan. We strategically partnered with long-term focused family office investors and committed insiders, a clear vote of confidence in Marpai's future potential. Looking ahead, we are driving new efficiencies by consolidating our claims processing into a single cutting-edge operating system. This key infrastructure upgrade is expected to unlock significant additional cost savings in our technology and infrastructure expense, further accelerating our path to profitability and fueling our next phase of growth. I will now hand it over to Dallas to discuss operations and sales developments. Dallas Scrip: Thank you, Steve. First of all, I want to say that I'm very excited to be part of the Marpai team. I joined back at the start of the third quarter, and we continue to make improvements and progress on a daily basis. We've shifted our operational emphasis towards retention and new business with clarity, alignment and focus. It's a client-centric approach that's led by metrics and KPIs. We believe in the continuous improvement mindset, adjusting processes and increasing self-service for 24/7 coverage and speed. As part of this initiative, I am pleased to report that the company will complete its rollout of the Empara client experience tool in Q4. As you may be aware, 80% of new business for health benefit plans follow the calendar year. So we are right in the midst of our busiest 2026 sales cycle. Currently, we have high double-digit new client deals already booked for January 1. This represents a substantial increase in our base business, and we believe there's much more to come before the end of the year. As an aside, the company does not report employee e-lives data for competitive reasons. One key highlight I can share is that our MarpaiRx program has been a differentiating factor in our ability to win new business. And I have previously led 2 other TPAs and MarpaiRx is a game changer for us. Now I'll turn it back over to Damien to share some final thoughts. Damien Lamendola: Thanks, Dallas. As Marpai's CEO, Director and largest shareholder, I continue to invest in Marpai, including $1.7 million in Q3 because I believe strongly in what we're building, smarter health care with better patient outcomes at significantly lower cost and a rapidly scalable platform that's disrupting a $5.5 trillion a year U.S. health care market. My personal commitment, both financial and operational, reflects my deep growing confidence in our experienced leadership team, our rapidly improving technology and our ability to quickly execute on a hypergrowth strategy that leads to an unmatched sustainable profitability. Our mission is not to develop a cheaper health care program. It is to show a more efficient U.S. health care system with healthier patients, allowing us to care for more Americans. Previously, I founded a $1 billion health care business 10 years ago. Marpai has already shown much, much greater significant potential. I am very proud of our team and organization. We've asked a lot from our employees, and they have delivered. We haven't forgotten that our members matter. As Dallas just outlined, through disciplined focus, we have stabilized our operations, fortified our financial foundation and effectively earning us the right to look forward. The entire organization is now aligned and energized having successfully navigated complexity, and we are strategically positioned to pivot from recovery to an aggressive sustainable growth phase. Our focus is squarely on leveraging our renewed efficiencies capture market share and deliver exceptional long-term value. At this time, I'll turn it back to the operator to open the line for questions. Operator: [Operator Instructions] It seems like there are no questions that came through. I will now turn the call over back to Steve Johnson for any closing remarks. Please go ahead, sir. Steve Johnson: Well, thank you. And again, thanks for joining us. For those of you who may have questions that weren't able to get through or on the line, please feel free to reach out to our Investor Relations website or to e-mail me with the contact information is available there for you at steve.johnson@marpaihealth.com. Again, thank you for your support and look forward to the next earnings call after the end of the year. Bye-bye. Operator: Thank you. The conference call has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Good morning, ladies and gentlemen, and welcome to Orbit Garant Drilling's Fiscal 2025 First Quarter Results Conference Call and Webcast. [Operator Instructions] Please be aware that certain information discussed today may be forward-looking in nature. Such forward-looking information reflects the company's current views with respect to future events. Any such information is subject to risks, uncertainties and assumptions that could cause actual results to differ materially from those projected in the forward-looking information. For more information on the risks, uncertainties and assumptions relating to forward-looking information, please refer to the company's latest MD&A and annual information form, which are available on SEDAR+. Management may also refer to certain non-IFRS financial measures. Although Orbit Garant believes these measures provide useful supplemental information about financial performance, they are not recognized measures and do not have standardized meanings under IFRS. Please refer to the company's latest MD&A for additional information regarding non-IFRS financial measures. This call is being recorded on Thursday, November 13, 2025. I would now like to turn the conference over to Mr. Daniel Maheu, President and CEO of Orbit Garant Drilling. Please go ahead, sir. Daniel Maheu: Thank you, Julian, and good morning, ladies and gentlemen. With me on the call is Pier-Luc Laplante, Chief Financial Officer. Following my opening remarks Pier-Luc will review our financial results in greater detail, and I will conclude with comments on our outlook. We will then welcome questions. Our financial results for the fiscal first quarter reflect the impact of a few short-term issues. In Canada, we completed drilling activities on certain projects earlier in the quarter, and we gradually ramped up activity on new projects, which typically yield lower gross margin at this early stage of operation. In addition, customers temporarily delayed certain drilling project in Canada and South America during the quarter. These were company-specific decision that had nothing to do with our performance. For instance, one of our project in Chile was delayed due to an earthquake in the area. Fortunately, no personnel of Orbit Garant was injured, and this project resumed after a couple of weeks. Revenue for our first quarter declined by 3.7% compared to Q1 last year, reflecting the short-term impact. Adjusted gross margin was 17% compared to 20.2% in Q1 last year. We expect to benefit from the resumption of delayed projects in Canada and South America and the continued advancement of our ramp-up activities on newer projects in Canada in our fiscal second and third quarter. Demand for drilling services in both Canada and South America is increasing, supported by near record gold prices and elevated copper prices. Our bidding activities on new projects has increased significantly in the recent weeks. In addition, many current customers are informed us that the intent to increase drilling activities over the next 12 months. We have the operational capacity to accommodate this higher customer demand with minimal CapEx. Accordingly, we have an opportunity to expand profitability as demand pickups despite a highly competitive environment. I will now turn the call over to Pier-Luc to review our financial results for the first quarter in greater detail. Pier-Luc? Pier-Luc Laplante: Thank you, Daniel, and good morning, everyone. Revenue for the quarter totaled $46.7 million compared to $48.4 million in Q1 last year. Canada revenue was $33.7 million in the quarter compared to $35.4 million last year, reflecting lower drilling activity due to drilling project completions, client-initiated project delays and the gradual ramp-up of new projects. International revenue totaled $13.0 million, similar to Q1 a year ago as higher revenue in Chile was offset by lower revenue in Guyana. Growth in South America was constrained by client decisions to temporarily delay certain projects, as Daniel noted. Gross profit was $5.7 million or 12.1% of revenue compared to $7.6 million or 15.8% of revenue in Q1 2025. Adjusted gross margin, excluding depreciation expenses, was 17.0% in the quarter, compared to 20.2% in Q1 last year. The decreases in gross profit and adjusted gross margin were primarily attributable to drilling project completions and the gradual ramp-up of new projects in Canada and client-initiated project delays in both Canada and South America. Adjusted EBITDA totaled $3.7 million, down from $6.2 million in Q1 last year. The decrease was primarily attributable to lower operating earnings in our Canada and International segments for the reasons I just noted. Net earnings for the quarter were $0.3 million or $0.01 per share diluted compared to $2.9 million or $0.08 per share and diluted in Q1 last year. The reduction was due to lower operating earnings in both segments as discussed. Turning to our balance sheet. We withdrew a net amount of $5.3 million on our credit facility in the quarter compared to a net repayment of $0.5 million in Q1 a year ago. Our long-term debt under the credit facility, including an undrawn USD 5.0 million revolving credit facility, and the current portion was $19.3 million as at September 30, 2025, compared to $14.0 million as at June 30, 2025, our fiscal 2025 year-end. Our increased debt was primarily the result of our yearly shipments of equipment and inventory for our operations in Nunavut and Nunavik. We expect to be active in paying down debt on a net basis throughout the remainder of the year. On October 28, we announced that the Toronto Stock Exchange approved our renewed normal course issuer bid, which allows us to repurchase up to 500,000 shares over a 12-month period that began on October 31, 2025. Under our previous NCIB, which expired on October 30 of this year, we repurchased and canceled 68,916 of our common shares at a weighted average price of $0.82 per share. We continue to view the NCIB as a useful tool to enhance shareholder value when the underlying value of Orbit Garant is not reflected in our share price. Our working capital was $55.1 million as at September 30, 2025, compared to $50.4 million at the end of fiscal 2025. I'll now turn the call back to Daniel for closing comments. Daniel? Daniel Maheu: Thank you, Pier-Luc. We are confident in our business outlook for the remainder of fiscal 2026. The temporary issue that impact our first quarter results are rapidly being resolved. As delay projects resume and newer projects continue to ramp up, we are getting back on track, and we are well positioned to accommodate increasing customer demand. The current metal price environment provides strong support for the demand. Gold prices reach all-time highs last month, above USD 400 an ounce. The gold mining industry is generating very attractive margin and current prices, which remain above $4,000. Miners have a strong motivation to spend more on exploration and development to expand their reserve as much of their low-grade material has now become profitable to extract. Copper prices also hit record level earlier this year and are currently above USD 5 per pound. The supply-demand outlook for copper is favorable and support elevated prices going forward, which is positive for our Chilean operations. Demand for both senior and intermediate mining customers is increasing as we are encouraged by the recent increase in financing activities in the junior mining sector. While it has not immediately result in higher demand for our drilling services, we are optimistic that juniors will eventually deploy more capital on exploration. We plan to selectively pursue more businesses with juniors as demand rises. Our priority going forward remain the same: First, a strategic focus on senior and well-financed intermediate customers in Canada and South America. Second, our disciplined business strategy and finally, our continuous operational improvement program. By focusing on these 3 priorities, we intend to capitalize on opportunities in this period of elevated customer demand to deliver enhanced profitability on a sustainable basis and stronger returns for our shareholders. That concludes our formal remarks this morning. We will now welcome any questions. Julian, please begin the question period. Operator: [Operator Instructions] Our first question comes from [indiscernible] from Glacier Pass. Unknown Analyst: I was wondering if you could just follow up a little bit on some of the prepared remarks you had in terms of the overall market outlook. You talked about bidding activity increasing and your clients looking to increase their activity. Maybe I'd just be interested versus the first half of the year, how many tender opportunities are you seeing now? And then it would also be great to get some color on what your existing customers are saying. In the beginning of the year, there were estimates that exploration budgets could be increased by up to 20% year-over-year. That obviously kind of has not come to fruition, but do you think we might see that with the delay? So yes, I'd appreciate your thoughts. I had 2 other questions afterwards as well. Daniel Maheu: Okay. Thank you for the question. Actually, what we saw, our customers are in processing of doing their exploration budget for calendar 2026. So there are requests directly for increasing on some contracts that we have with major and intermediate customer here in Canada to increase by 1, 2 drill in 2026 calendar. Is that possible for us? And we -- for sure, we have a great opportunity because we have rate of activity of roughly 56% of our drills. So for sure, we have -- it's easy for us to increase our activity with these actual customer. For your second question, yes, we saw since a few -- let's say, in the last 6, 8 weeks, more request for bid for -- from major customer in Chile, in Canada and also intermediate customer. And recently, in the last few weeks, smaller junior request for bid. So that's something positive for us. Unknown Analyst: Okay. I appreciate that. And then maybe just 2 more technical questions. During the quarter, you talked about the negative change in working capital for moving equipment. Just for the full year, I was curious, do you expect the working capital to be a source or a use of cash? Pier-Luc Laplante: Well, for the year, yes, we expect -- but we think that the -- for us, the main -- one of the main courses that we have about that is in summer, we have to send equipment to our northern projects, equipment and inventory. And that's because the barges have to leave before the -- and come back before the ice forms. So we have to send most of the equipment needs for the next year and most of the inventory needs for the next fiscal -- well, this fiscal year, fiscal year 2026. Unknown Analyst: I appreciate it. It's just... Pier-Luc Laplante: It should stabilize in the next coming months and the rest of the quarters. Yes. Unknown Analyst: So for full year, working capital will be kind of flat? Pier-Luc Laplante: Yes. Unknown Analyst: That's helpful. And then just kind of a last question. Just looking at Q2, you mentioned that you're seeing benefit of a ramp-up in new activity. I was just wondering, do you think the issues of Q1, like have they fully played out? Or do you think they might leak into Q2 as well? Or should Q2 be more of a normalized quarter? Pier-Luc Laplante: We expect some of them to remain in Q2, and we anticipate that some of them we have resolved. We think that some of the client delays, most of them have resolved right now, but some of them will resume in January of 2026. Operator: We have no further questions. I would like to turn the call back over to Daniel Maheu for any closing remarks. Daniel Maheu: Thank you to everyone for participating today. We look forward to speaking with you again soon. Operator: This concludes today's conference call. You may now disconnect.
Operator: Good morning, and welcome to Element Fleet Management's Third quarter 2025 Financial and Operating Results Conference Call. [Operator Instructions] And you are reminded that this call is being recorded. [Operator Instructions] Element wishes to caution listeners that today's information contains forward-looking statements, the assumptions on which they are based and the material risks and uncertainties that could cause them to differ are outlined in the company's year-end and most recent MD&A and annual information form. Although management believes that the expectations expressed in the statements are reasonable, actual results could differ materially. The company also reminds listeners that today's call references certain non-GAAP and supplemental financial measures. Management measures performance on a reported and adjusted basis and considers both to be useful in providing readers with a better understanding of how it assesses results. A reconciliation of these non-GAAP financial measures to IFRS measures can be found at the company's most recent MD&A. I would now like to turn the call over to Laura Dottori-Attanasio, Chief Executive Officer. Please go ahead. Laura Dottori-Attanasio: Good morning, everyone, and thank you for joining us. Q3 was another strong quarter for Element with double-digit net revenue growth year-over-year and record financial performance across key metrics. This outcome underscores the ongoing success of our strategy and the commitment of our team to deliver meaningful outcomes for our clients and shareholders. We deepened relationships with existing clients and won new mandates across all regions, adding 38 new clients in the third quarter and expanding share of wallet with 278 new service enrollments. As more clients turn to Element to unlock efficiencies, our strategic advisory services team delivered by identifying $349 million in fleet cost savings opportunities this quarter, 46% of which were actioned demonstrating the tangible value that strengthens client loyalty. We continue to accelerate our digital transformation and deliver a more connected client experience. Earlier this year, we launched a new Element mobile app, simplifying fleet operations and enhancing the driver experience. Pilot feedback has been extremely positive, and we're preparing for a broader rollout in the coming months. Our new digital ordering platform is also progressing well marking an important step in automating key client processes. Since establishing Element Mobility, our division focused on next-gen fleet solutions, we've advanced partnerships that showcase our technology leadership. For example, we announced a new partnership with InDrive, one of the world's fastest-growing ride-hailing companies to help optimize their fleet operations globally. This collaboration demonstrates how Element's digital capabilities and partnerships are shaping the future of intelligent mobility. Additionally, our technology platform, Autofleet earned industry recognition as Fleet Management Solution of the Year in the 2025 AutoTech Breakthrough Awards, a well-deserved honor highlighting our team's innovation and impact. We passed the 1-year milestone of our Dublin leasing center that was launched in August of 2024, and the results have been strong. By streamlining processes and automation, we've achieved greater efficiency and scalability in our leasing operations, enhancing the client experience and contributing to strong net financing revenue in recent quarters. This is a clear example of how our strategic initiatives like Dublin and Autofleet are driving financial benefits and service improvements. In summary, we made exciting progress on the digital front, improving client experience and financial performance, all thanks to the dedication and collective effort of our global Element team. Our third quarter achievements put us on solid footing to close out 2025 with continued strength. And with that, I'll now turn the call over to Heath to cover our financial results. Heath Valkenburg: Thank you, Laura, and good morning, everyone. Q3 marked another quarter of strong performance for Element and highlights the solid progress we've made on our strategic priorities in 2025. Notably, in the quarter, we delivered double-digit growth in net revenue, adjusted operating income, earnings per share and free cash flow per share and once again produced record results in each of these important metrics. With that, let's turn to our Q3 financials, which I'll speak to on an adjusted basis. Net revenue reached $306 million, up 10% from last year, supported by strong contributions across all revenue categories. Services revenue was up 6% year-over-year, reaching $156 million. This growth is attributable to higher utilization from new and existing clients and solid growth in all of our geographies. Net financing revenue grew 12% year-over-year to $130 million due to the combination of higher net earning assets in the U.S. and Mexico and the solid performance of our leasing portfolio. Results were further bolstered by funding efficiencies in the quarter, which absorbed a higher cost associated with our preferred share redemptions and Autofleet acquisition. Continuing the momentum that has been demonstrated in 2025, our core NFR yield, which excludes gain on sale, expanded to 4.85% in Q3, up a further 8 basis points quarter-over-quarter and 41 basis points year-over-year, highlighting the strong execution of our leasing business and funding initiatives. We syndicated $632 million of assets this quarter, down 37% from last year. Despite the reduction in volume, syndication revenue totaled $20 million, an increase of 20% year-over-year. Our syndication yield of 3.2%, expanded more than 150 basis points versus last year, a reflection of the demand for our syndication products, favorable mix and the benefits from the reinstatement of 100% bonus depreciation in July. We originated $1.7 billion of assets in the quarter, in line with the results from Q3 2024. The sequential dip in originations reflects normal seasonality tied to OEM retooling ahead of a new model year production in the U.S. and Canada. Importantly, originations in Mexico were at a record level of $342 million in the quarter, a clear reflection of the strength of our franchise in the country. Our momentum in vehicles under management resumed in Q3 with VUM increasing 1% quarter-over-quarter and 2% year-over-year, led by growth in service-only category. This increase is expected to further support services revenue in the coming quarters. As Laura mentioned, new client acquisitions in the quarter were steady to last year, reflecting stable underlying demand that we expect will translate into higher order volumes ahead. Adjusted operating expenses remained well contained at $129 million, flat quarter-over-quarter and up 9% year-over-year or 6% excluding Autofleet. The year-over-year increase reflects continued investment into our business to advance our intelligent mobility ecosystem, enhance digital capabilities and maintain our leadership position in the industry. This resulted in an adjusted operating margin of 58% and earnings per share of $0.33, with these key metrics expanding by 30 basis points and 14% year-over-year, respectively. We remain focused on driving internal efficiencies and sustaining positive operating leverage as our business continues to scale. In Q3, we generated an adjusted return on equity of 18.8%, up from 16.9% in 2024, demonstrating the continued progress of our capital-light strategy. With respect to capital management, we returned $61 million to shareholders through dividends and share repurchases during Q3. Year-to-date, we have repurchased 4.1 million common shares, representing $87 million of capital deployed. Looking ahead, we intend to renew our normal course issuer bid in 2026 reaffirming our commitment to returning capital to shareholders. These actions were underpinned by continued strong free cash flow generation with adjusted free cash flow per share of $0.42, up a robust 17% year-over-year. Our ability to consistently generate growing free cash flow continues to support our reinvestment into the business and the ability to deliver meaningful return of capital to shareholders. As of September 30, our debt-to-capital ratio stood at 75.7%, well within our target range of 73% to 77%. In summary, we delivered strong financial results this quarter, consisting of robust revenue growth, positive operating leverage and record profitability. We are entering Q4 with positive momentum and a clear line of sight to finish 2025 at or above the high end of our guidance ranges in all metrics with the exception of originations as was communicated last quarter. We look forward to providing our 2026 financial guidance and dividend outlook alongside our Q4 results release in February. Thank you. Operator, we are now ready to take questions. Operator: [Operator Instructions] And your first question comes from Stephen Boland with Raymond James. Stephen Boland: I've said this a couple of times. I guess to know Jeff Kwan, people move up the list here a little bit. So just the first question is, Laura, you usually pretty good about giving new client wins. You mentioned in the -- I think you said in the deck, the conversions of self-administered fleets. I'm just wondering if you can give a little more detail. Laura Dottori-Attanasio: Yes, absolutely, Steve. Thanks. As I mentioned, this quarter, we did see some great commercial traction once again with 38 new clients and share of wallet, we had 270 new enrollments. We continue to go after the various segments that are in the self-managed space and winning market share. And I'd say, once again, this quarter, it's pretty evenly mixed where we're winning market share. So it's about 50-50 again this quarter from winning market share and self-managed fleet. So we're feeling good about not just what we've won, but the opportunities that are before us as well. Stephen Boland: Okay. Great. And the second question is really on syndications. A great return on the yield. I'm just curious about how you managed the syndication volumes this quarter. I mean in the first half, you talked about deferring for the bonus depreciation to kick in. So could more have been done this quarter? I mean are you managing the amount that you're doing right now? And should we expect a similar yield in Q4 and maybe volumes? Heath Valkenburg: Yes. Steve. So we -- our approach to syndication remains unchanged. Primarily, we use syndication as a tool to manage our balance sheet. And with our debt-to-capital metric coming in at 75.7%, which is well right in the middle of our targeted range, we've syndicated enough to manage our balance sheet. And then what we do is we look to focus on optimizing economic value. And you can see that with an increase in the yields in the assets that we hold on book with the core yield being up 8% this quarter. And then also, as you said, really strong syndication yields on the assets that we have syndicated. In terms of what's driven this -- the higher yield, the demand for our product is still very, very strong and the return of the bonus depreciation coming in clearly gave us an uptick on the yield, which we expect will continue on. And then there was also some product mix benefit that we had in the quarter. Operator: And your next question comes from Jaeme Gloyn with National Bank Financial. Jaeme Gloyn: Yes. Good results on the net financing revenue yield. Just wanted to get maybe some of your perspectives on the sustainability. Can it continue to tick higher from here? Or this is, I think, almost, if not the all-time high for this net interest margin effectively. Just trying to get a sense as to where that could potentially go with some of the moving parts. Heath Valkenburg: Jaeme. So you're correct in that the net financing revenue we delivered for the quarter was a record and the yield is -- or on the core yield is a record. Excluding the impact of any gain on sale, we do see that there is further increase that we can drive through that number. The leasing business that we set up to maximize our returns continue to perform well. And then on the financing side of things, we continue to see opportunity for us to decrease our cost of funding as we continue to mature our platform. And then the Mexico business that grew strongly in the quarter had some strong yield as well, which drove that up. So really pleased with the result. And we expect that there is more to do on that line. Jaeme Gloyn: Okay. Great. And then in terms of the order backlog shrinking this quarter, your commentary in the press release suggesting that you have pretty high confidence and client momentum coming back. What are some of the underlying, I don't know, metrics or drivers or conversations you're having that gives you that confidence that we'll see order volumes pick up in the upcoming quarters? And is it -- is that sort of timing like a 2026 event? Or are you already seeing that flowing through today? Heath Valkenburg: Yes. So in terms of the client order backlog, the reduction in Q3 is cyclical. So we always see a reduction in Q3 with strong originations higher than orders. And that's with the OEM model changeover. So we always see a drop in the auto volume during that period in Q3, and then it does pick up in Q4. In terms of why we're confident of that to continue to expand, it's the comments from Laura at the top in terms of the new client wins. We saw VUM return to growth this quarter with a 1% increase in the quarter, 2% increase year-over-year. And the -- those things will combine to drive higher orders or set that are to pick up in Q4. Operator: [Operator Instructions] Your next question comes from Graham Ryding with TD Securities. Graham Ryding: Maybe I could start with just Autofleet. Anything you can quantify around the potential impact here of that InDrive win, either revenue or just would you expect this to build over time? And then maybe just commentary Autofleet broadly, are there some tangible sort of revenue contributions coming in from that acquisition now that you're -- you have that in the business more than 1 year? Laura Dottori-Attanasio: Sure, Graham. Happy to take that one. So I won't comment specifically on revenue per client, which we wouldn't normally do that. But it is, I'd say, a great sign for us. I mean, from where I said, it's like a proof point of how Element Mobility that we talked about last quarter is really going to allow us to, I'm going to say, broaden our scope beyond traditional fleet management. And so this will help strengthen us as a global leader in intelligent fleet management. So from where I said it's going to help amplify, I'm going to say, our digital moat. So that is good with InDrive, we expect to see more of these types of things with Element Mobility or Autofleet. And for Autofleet, it's been just a little over a year now that we acquired the team. It really has been a home run for us. Not only did we pick up, honestly, phenomenal team and a great tech platform. We are going to be able to drive things, and we've seen it. So for Element, we have been able to really move forward with more speed, more cost efficiency. So it's been great as it relates to decreasing our cost of technological digitization, automation advancement. So that's a positive. And then for Autofleet on its own. It's doing really well, not only with win like InDrive but others that it is profitable on its own. And so we are very happy with where we're at and feeling very confident about where we can go together. Graham Ryding: Okay. Great. And then maybe I could pivot to just the Services revenue growth. You flagged that higher utilization in the quarter was driving some growth, but it seemed like growth from sort of VUM and penetration on the services side is not there right now. So maybe what do you see the business needs to do to sort of get that back to double digits like you were previously? Heath Valkenburg: Yes, Graham. So the first thing I'd say is on a year-to-date basis, excluding FX and one-off items, revenue is up 10%. So we are still driving double-digit growth. Specifically for Q3, while we saw an uptick in the VUM, a lot of those vehicles are actually onboarded in September. So the revenue they contribute for Q3 was relatively modest. And we expect that those vehicles that we onboarded will see an uptick in Q4 as long as -- as well as rather additional VUM we expect to bring in Q4. So last quarter, I raised 1 large client win that we had that represents approximately 1% of VUM growth. That's actually not in our Q3 numbers. So we'll likely see that come into Q4. So 1% VUM growth in Q3, minimal impact to service revenue, but we'll see that come through in Q4, plus additional clients that we're onboarding in Q4 will set ourselves up to continue to grow our service revenue. Operator: This concludes the question-and-answer session. I would like to turn the conference back over to Laura Dottori-Attanasio for closing remarks. Laura Dottori-Attanasio: Thank you, operator, and thanks, everyone, for joining us today. Looking ahead, our strategic priorities remain clear. So that's to provide exceptional value to our clients, advance our digital leadership and deliver sustainable growth for our shareholders, all while we stay true to our purpose and to our values. And so I really want to take this time to thank our global team members for their commitment and to thank our shareholders, our analysts and our stakeholders for your continued support. We look forward to speaking with you again on our next quarterly call in February. Operator: This brings today's conference call to a close. You may disconnect your lines. Thank you for participating, and have a pleasant day.
Operator: Good morning, and welcome to the LiqTech International, Inc. Reports Third Quarter Fiscal Year 2025 Financial Results Conference Call. After today's presentation, there will be an opportunity to ask questions. To submit a question, you may type it into the ask a question box on the webcast screen. Please note this event is being recorded. I would now like to turn the conference over to Robert Blum, with Light and Partners. Please go ahead. Robert Blum: Alright. Thank you very much, and good morning, everyone. As the operator indicated, thank you for joining us today to discuss LiqTech International, Inc.'s third quarter 2025 financial results for the period ended September 30, 2025. Joining us on today's call from the company are Fei Chen, the company's Chief Executive Officer, and David Kowalczyk, the company's Chief Financial and Chief Operating Officer. Before I turn it over to management, I do want to remind everyone that there will be a Q&A at the end. To ask a question through the webcast portal, again, simply type your question into the ask a question feature in the webcast player. Before we begin with prepared remarks, we submit for the record the following statement. This conference call may contain forward-looking statements. Although the forward-looking statements reflect the good faith and judgment of management, forward-looking statements are inherently subject to known and unknown risks and uncertainties that may cause actual results to be materially different from those discussed during the conference call. The company, therefore, urges all listeners to carefully review and consider the various disclosures made in the reports filed with the Securities and Exchange Commission, including risk factors that attempt to advise interested parties of the risks that may affect our business, financial condition, operations, and cash flows. If one or more of these risks or uncertainties materialize or if the underlying assumptions prove incorrect, the company's actual results may vary materially from those expected or projected. The company, therefore, encourages all listeners not to place undue reliance on these forward-looking statements, which pertain only as of the date of the release and the conference call. The company assumes no obligation to update any forward-looking statements to reflect any events or circumstances that may arise after the date of the release and conference call. With that, I'd like to turn the call over to Fei Chen, Chief Executive Officer of LiqTech International, Inc. Fei, please proceed. Fei Chen: Thank you, Robert. And good day to everyone on the call. There is a lot of optimism for the future based on the execution during the third quarter. Not simply because of the growth in revenues, improvement in gross margins, and reduction in operating expenses, but also due to the strong order books during the third quarter, which sets the stage for a nice fourth quarter. A key driver during the quarter was the strength within our water treatment systems business, led by our swimming pool vertical, which achieved its highest quarterly revenue to date. Equally important is that the new bookings received during the quarter indicate a continuation of this positive trend. It is clear that the market is increasingly recognizing the unique attributes of our ClariFlow filtration system and the competing alternative it offers to traditional media filtration systems used in commercial pools. Beyond the swimming pool vertical, we are making progress in a number of other applications which leverage our robust silicon carbide membrane technology, including water for energy, industry applications, and the marine industry. The increased order flow and interest is the direct result of the numerous successful pilot programs we have implemented over the past two years, showing the success of our systems in real-world examples. We have long emphasized that this transformation would take time, and we now believe that we are on the verge of broad adoption of our systems across multiple market verticals. Where system sales are the ultimate measure of success, we have spent considerable effort rightsizing the business and electing operational efficiencies to drive down costs, both from an OpEx perspective as well as from a manufacturing side. During the quarter, our contribution margin was one of the highest levels we have seen over the past five years, and the gross profit was at 19.6%, also at an improved level. Further, our operating expenses are at their lowest levels in many years. Let me circle back on a few of the key activities during the quarter, starting with the swimming pool vertical. As mentioned, we delivered systems to six customers during the quarter, totaling $1,000,000 in revenue. The systems delivered were much larger in size than many of our historical systems, and it really highlights the progress we are making within the larger swimming pool systems. The orders delivered during the quarter were fulfilled through our partners Boundary and Total Pool in the UK and Oxidime in Spain. These partners have been instrumental to our success, particularly as we have strengthened our collaborations in the past three years. During the quarter, we continued to expand our pipeline within our key markets, including systems in the UK, Denmark, and Holland. This really shows the depth of what we have accomplished in the past few years, building these relationships, but also the internal team's role in helping move projects forward and showcase what is possible with our solutions. Another key development within our swimming pool solutions has been the development of the modular design system, which allows for ease of deployment. Since I took over, we have worked hard to move away from many customized solutions, which often take too long to create and cost too much money. Further, it created too much confusion among customers. This theme of creating a modular design system and driving down costs is not just applicable to our swimming pool vertical but across other applications as well. To that point, we are working with our joint venture partners in China to reduce the cost of components and assembly of our marine water treatment systems, making them more competitive in the market. We will continue manufacturing the silicon carbide membrane in Denmark, but we are also exploring the potential to leverage our Chinese assembly and sourcing capabilities to drive cost reductions across our systems and applications. Another exciting development we are seeing in our China joint venture has been the receipt of two first orders for marine dual-fuel engine water treatment systems. The marine CP industry is moving towards cleaner, fuel-efficient applications, with most new vessels equipped with dual-fuel engines that require reliable water treatment for exhaust gas recirculation systems. According to published data, approximately 400 new vessels are on order with ISO EGR solutions planned between 2024 and 2027. One of the two marine dual-fuel engine orders is scheduled to be delivered here in the first quarter, with the other set for delivery in early 2026. We believe more opportunities are on the horizon. Transitioning from China to the US, we have talked about this for a while now, but the water for energy market is rapidly growing within the US. We have worked with partners such as Resubac Direct and Renewal Resources lately to build a presence in the US. For this reason, we have moved forward with the opening of a dedicated service center near Fort Worth, Texas. The new facility is being launched in partnership with Hydro Systems and opened a few weeks ago. For those not familiar, Hydro is an industry service provider with extensive experience in energy, oil and gas, and industry sectors. They specialize in equipment servicing, maintenance, and field support. The center will strengthen support for our water for energy business segment, offering deployment of certified service technicians, availability of critical spare parts, remote and on-site technical support, and system maintenance and repairs. As we scale our operations in the US, this new service center allows us to respond faster and support customers with deep local knowledge and reflects our strategy to offer fully integrated filtration solutions, from engineering and commissioning to lifetime service. On the topic of new system deployment, we are actively engaged with several end customers and hope to have updates to share soon. Taking a step back, I think it is important to remind everyone of the number of new systems that we have deployed during the past couple of years. Since the beginning of last year, we have deployed nine pilots or commercial systems across a wide range of industry applications, from multiple oil and gas industry systems to lithium brine production, plastic removal from a US petrochemical company, MEG recovery, tomato processing, the broader marine industry, and the most recent order of an advanced membrane-based filtration system to treat oily wastewater to BlueScope Steel, a major US-based steel producer. We are establishing a consistent cadence for large system deliveries each quarter, alongside our base business, including swimming pools, plastics, and DPF filters, bringing us closer to revenue levels that approach breakeven and profitability. This has been our goal, and I am very pleased with the progress we have made. Let me now turn the call over to David to review the finances in more detail. I will then make a few closing comments and look to open the call for your questions. David Kowalczyk: Thank you, Fei. And good day, everyone. Let me take some time diving into the financial results in a bit more detail and add some color to what was in the press release. So let's start with revenue. Revenue for the quarter came in at $3,800,000, up from $2,500,000 in the year-ago third quarter. Broken down by verticals, sales for the third quarter were as follows: Water system sales and related services of $2,000,000 compared to $700,000 in the same period last year. CPF and ceramic membrane sales were $800,000, down from $1,100,000 in Q3 last year. And finally, plastic revenue came in at $1,000,000 compared to $700,000 in Q3 last year. The key takeaways for the quarter include strong year-over-year improvement in water systems, driven by a combination of multiple swimming pool orders and the remaining portion of the industrial order for the steel industry. Growth in plastics, which was up 54% due to strong external interest, especially within food processing and the upgrade of our production facility in Q3 last year. And stabilization of DPFs and ceramic membranes sequentially but still off the year-ago quarter. Looking ahead to Q4 of 2025, we anticipate revenue to be between $4,600,000 and $5,600,000, which would equate to a 38% to 67% increase from Q4 2024. For the full year 2025, we expect revenue to be between $18,000,000 and $19,000,000, representing a 23% to 30% increase compared to 2024. We do want to note that we do want to be cautious and provide a slight change to guidance solely driven by timing in purchase orders in our systems business. The visibility we have to receive formal purchase orders for two systems during 2024 are likely shifting to 2026. Turning to gross margin, as we continue to be below our optimal revenue level, we continue to have fixed production costs that are not being fully absorbed. Those lower the normalized gross margins. That said, for the third quarter, gross margins were much improved from the year-ago period, coming in at 19.6% compared to a negative margin of 8.5% in the year-ago period. We had previously reported on a contribution margin basis, which excludes the impact from our fixed overhead. This margin for the quarter was significantly higher. The gap between gross margin and contribution margin will narrow in the coming quarters, driven by cost improvements and volume growth. Turning to OpEx, total operating expenses for the quarter were $2,100,000 compared to $2,400,000 in Q3 last year and compared to $2,600,000 in 2025. As we look to the future, our breakeven target, measured on an adjusted EBITDA basis, measured at EBITDA adjusted for amortization, reduced assets, cost of stock-based compensation, continues to be a quarterly revenue of approximately $6,000,000. The one caveat I will state is that there's a product mix component to it. Concluding on the P&L, net loss was $1,500,000 for the quarter, compared to a $2,800,000 loss for the comparable period of 2025. A substantial improvement driven by revenue growth, improved gross margin, and reduced operating expenses. And finally, from a cash perspective, we ended the quarter with $7,300,000 in cash. Everything else was very much in line with our normal operating procedures from a balance sheet perspective. And with that, let me turn it back to Fei. Fei Chen: Thank you, David. Can you hear me? Robert Blum: Yes. Please proceed, sir. Fei Chen: Okay. Thank you, David. To close things out, before I turn the call over to questions, our proprietary silicon carbide filtration technology stands as a foundational element in tackling the planet's most urgent ecological issues. These cutting-edge ceramic membranes deliver exceptional results in the toughest water treatment scenarios, spanning from produced water in oil and gas operations to pool filtration systems. By helping industries comply with rigorous environmental standards, we are cutting down on water and energy use, resolving vital purification problems, and advancing true sustainability. Recent achievements, like landing record orders for swimming pool systems, major contracts for treating produced water, marine applications, and industry applications such as that for the steel industry, highlight the rising worldwide appetite for our innovative solutions. The potential moving forward is immense, fueled by escalating water shortages and tough global regulations. Through key client alliances, we are broadening our impact with application-oriented, ready-to-deploy solutions. Such partnerships enhance our capability to offer complete systems that guarantee regulatory adherence, streamline operations, safeguard assets, and lower costs for customers. In the years to come, we are dedicated to advancing and expanding our filtration solutions to seize these vast possibilities. Again, thank everyone for your support of LiqTech International, Inc. With that, Robert, we would be happy to take any questions. Robert Blum: Alright. Fantastic. Thank you very much, Fei and David, for your prepared remarks. Again, to everyone listening on the webcast player there, if you have a question, you can type it into the ask a question feature on the player there. We do have a few questions submitted already. We'll begin here. Besides swimming pool systems, which segments are seeing the most sustained order momentum? Fei Chen: As mentioned in my speech, we have very much momentum in the water for energy segment as well. And we are also starting to get orders from the marine industry. But I would say compared to the marine industry, it's just that the water for energy is getting momentum. Robert Blum: Okay. Very good. Next question here. Is the uptick in gross margin sustainable? Where do you see gross margins trending over the next few quarters? David? David Kowalczyk: Yeah. Sure. Thanks for the question. I would say, yes, this is very much sustainable, and with expected higher revenues, we will see also further increases in the gross margin. There's a strong link between the size of revenue and really the gross margin. So talking about a defined level, I think it's hard, but we will see increases with an increase in revenue. Robert Blum: Okay. Very good. Next question here is how is your capacity utilization trending? Are there any metrics you can provide there? David Kowalczyk: Yeah. Obviously, we have different matrices for capacity and also different sites. But I think, in general, it's fair to say that we have spare capacity, which is also why we provide the insight on the difference between gross margin and contribution margin. We have plenty of capacity to support growth with very, very limited investments. Robert Blum: Alright. Very good. Again, final reminder here, if you have a question or would like to submit a question through the webcast player, please go ahead and submit that now. Barring any further questions coming in, the last question here is what would be a reasonable target for 2026 revenue growth? Fei Chen: That's a very good question. We're actually in the process of making our budget for 2026, so we cannot say any concrete number yet, but we definitely believe and see a very strong growth trend in 2026. Robert Blum: Okay. Very good. I am not showing any further questions at this time. So with that, I will turn it back over to you, Fei, for any closing remarks. Fei Chen: Thank you, everyone. I would like to thank you all very much for being with us today. We look forward to communicating with you soon. Thank you. Operator: Thank you. The conference has now concluded. Robert Blum: Thank you for attending today's presentation. You may now disconnect. Operator: Thank you.
Operator: Good day. Thank you for standing by. Welcome to Spectrum Brands Holdings Fourth Quarter 2025 Earnings 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. You will then hear an automated message device when your hand is raised. Please note, today's conference is being recorded. I will now hand the conference over to your first speaker today, Jen Schultz, Division Vice President, Financial Planning Analysis and Investigations. Please go ahead. Jen Schultz: Welcome to Spectrum Brands Holdings Q4 2025 Earnings Conference Call and Webcast. I'm Jen Schultz, Division Vice President of FP&A and Investor, and I will moderate today's call. To help you follow our comments, we have placed a slide presentation on the event calendar page in the Investor Relations section of our website at www.spectrumbrands.com. This document will remain there following our call. Starting with slide two of the presentation, our call will be led by David Maura, our Chairman and Chief Executive Officer, and Faisal Cutter, our Chief Financial Officer. After opening remarks, we will conduct the Q&A. Turning to slides three and four. Our comments today include forward-looking statements, which are based upon management's current expectations, projections, and assumptions and are, by nature, uncertain. Actual results may differ materially. Due to that risk, Spectrum Brands encourages you to review the risk factors and cautionary statements outlined in our press release dated 11/13/2025, our most recent SEC filings, and Spectrum Brands Holdings' most recent annual report on Form 10-K and quarterly reports on Form 10-Q. We assume no obligation to update any forward-looking statements. Our statements reflect our expectations regarding tariffs, which are based on currently known and effective tariffs and do not reflect tariffs that have been announced or delayed or other additional tariffs which could result in additional costs. Also, please note that we will discuss certain non-GAAP financial measures in this call. Reconciliations on a GAAP basis for these measures are included in today's press release and 8-Ks filing, which are both available on our website in the Investor Relations section. Now, I'll turn the call over to David Maura. David Maura: Good morning. Thank you, Jen. Good morning, everyone. I want to welcome everybody to today's fourth quarter earnings update. I appreciate everybody taking the time to join us today. For today's call, I want to begin with a few big picture opening remarks. First, I'm delighted and thankful to our teams for navigating the most difficult year. And I am excited to let you all know that we believe that the worst of the tariff and economic disruptions to our businesses are now behind us. Secondly, we expect our two highest value businesses, Global Pet Care and Home and Garden, to return to growth in 2026. Our adjusted free cash flow of $171 million or approximately $7 per share beat our own expectations in fiscal 2025, and our strong free cash flow generation will continue into fiscal 2026 and beyond. Fourth, our balance sheet is strong with $124 million in cash at the end of the year, zero drawn on our revolver, and we ended the year with just 1.58 turns of net leverage after returning approximately $375 million to shareholders throughout the year through buybacks and dividends in fiscal 2025. Last, but certainly not least, we are hell-bent on improving the profitability and competitive positioning of our HPC appliance business, and as the headwinds dissipate, we are excited to work towards a strategic solution for this business once again. We are also highly confident that we are well-positioned within our industry to be the consolidator of choice within the pet, and home and garden industries. As we wrap up a very challenging year, navigating through headwinds largely outside of our control, I again want to start this call by simply saying thanks. Thanks to every one of our global team members for battling through tough times, thank you to our vendors and retailers for your in addressing the macroeconomic conditions that we collectively continue to face. And lastly, thank you to our investor base for your continued trust. I know this year has been tough, but I am proud of how we have proactively and decisively reacted to these outside forces, and I believe that actually it's creating a competitive advantage for us as we look forward to the future. If I could have everyone now turn your attention to slide six, during the year, we saw a significant decline in the macroeconomic environment, which impacted overall consumer sentiment. Not just here in the US, but globally. Trade policy uncertainty and volatility led to softening demand in the US starting in the second quarter and impacted global markets more noticeably in 2025. When tariffs were at their highest point earlier this calendar year, we were looking at an annualized tariff exposure of approximately $450 million. This exposure is now approximately $70 to $80 million on an annualized basis. And the good news is thanks to the diligence and the incredible efforts of our global supply team, we are extremely happy to report to you that we have offset substantially all of this exposure through a combination of vendor concessions, painful internal cost reductions, supply base reconfiguration and diversification, and lastly, pricing actions. I shared this with you last quarter that we had implemented a number of cost reduction initiatives that would result in over $50 million of savings in fiscal 2025. This included a reduction in force that spanned all three of our business lines and our corporate functions. While it's never easy to take these kinds of actions, we know that the impact has been tough on our employees. We also know, however, that it was necessary to rightsize our cost structure and to protect the health of the businesses. We have also made significant progress in diversifying our supply chain to increase both its resiliency and its flexibility. Heading into fiscal 2025, we had approximately $300 million of our sourced product coming into the United States from China. We have since reduced these Chinese sourced products to the US market by nearly 50%. Further diversification will remain a priority for us going forward. We expect to only have approximately $15 million to maybe $20 million of direct spend in China for our two most highly valued businesses, Global Pet Care and Home and Garden, by the end of fiscal 2026. We will also continue to move product out of China within our home and personal care businesses when it's the right financial decision to do so and when it does not sacrifice the standards that we have for our quality. I would also like to take the now to thank our agile global supply chain team who have worked tirelessly to navigate this volatile environment and to make sure that our supply chain going forward is much more resilient and flexible to whatever challenges may arise. Earlier in the year, I emphasized that with all this uncertainty, we would control what we could control. And one of the priorities when we pivoted our operating strategy was to maximize cash flow generation and deliver to you over $160 million in free cash flow in fiscal 2025. And in fact, we over-delivered this number. We delivered $170 million plus in free cash flow through disciplined CapEx management, and better working capital improvements. We ended the year with net leverage of 1.58 times well below the stated goal of two to two and a half, all while continuing to reward our shareholders with approximately $375 million of capital returns split between share repurchase and dividends in fiscal 2025. During just the recently completed fourth quarter, we repurchased an additional 700,000 shares of stock and we continue buying during our pre-earnings quiet period through a 10b5-1 plan put in place in June later which was amended by our board in September to increase the cap on that to $100 million. In fiscal 2025, we repurchased approximately 4.4 million shares for roughly $326 million. And since the close of the fiscal year, we have purchased approximately 0.4 million shares, roughly $21.5 million in total. Since the close of the HHI transaction, we have returned over $1.37 billion of capital to our shareholders through our various share repurchase programs, and reduced our share count by approximately 44% since the close of that deal. I can now everyone turn to slide seven. I'll give you a quick overview of fiscal 2025 results. As I mentioned earlier, it was a challenging year for the businesses. We're faced with a variety of external headwinds. The volatile trade policy landscape not only impacted consumer demand, but it also led to a temporary pause in shipments from China into our US businesses when the tariffs were at their highest point. In fact, we paused all incoming and inbound traffic from China for about six to eight weeks, and that impacted our ability to fill orders throughout the second half of the fiscal year. Overall, fiscal 2025 net sales declined 5.2% compared with fiscal 2024. Actually, and this was after actually starting the year off with top-line growth as you remember, in 2025. And while our fourth quarter net sales also declined by 5%, we're actually encouraged that consumer demand was stabilizing during throughout the quarter in our key markets and our categories as trade policy has become a little less volatile and the supply shortages we experienced in the second half of the year are now behind us. Largely behind us, I should say. We have been relentless in addressing the top-line declines by initiating further cost reduction initiatives and cost savings. In addition to the fixed cost reductions, with the elimination of permanent salary headcount, we have also been reducing selectively our advertising and marketing spend in light of category softness and we have significantly reduced our office and distribution footprint as well. All these actions are mitigating some of the EBITDA declines in the various macroeconomic headwinds. We can now look to slide eight, and focus now on our strategic priorities for this upcoming year of fiscal 2026. The fundamentals of our business are actually strong. And I'm confident the decisions we've made over the last six to nine months actually make us a stronger, more focused business. And that brings me to the first key element of our strategic focus. We will continue to be good financial stewards of the businesses as we navigate the current macroeconomic landscape. The actions we took in fiscal 2025, while difficult, were quite necessary to address the external headwinds we were faced with. And with that said, the hard work is not over. We have to continue to be diligent and we actually need to be more efficient with our spending and investing profile. We need to demand and we will demand better returns on our investments while continuing to reduce the overall complexity of our businesses. The teams are now focused on fewer, bigger, better initiatives to maximize the impact of our investments. As you've heard me say before, we believe that the strength of our balance sheet sets us apart from our peers. We will continue to remain disciplined in managing working capital, while at the same time maintaining high fill rates supported by our best-in-class supply chain team. The second element here is continued focus on operational excellence, by leveraging technological advances that we're building for the future. As you know, we've been on a multi-year journey to upgrade and implement the new ERP system, SAP's S/4HANA. This is a project that's been underway for the last several years. And it started off with a successful implementation in our Global PetCare North America business at the end of 2024, and it was shortly therefore followed up by a successful go-live in our Home and Garden business, which is mostly a North American business. Over the last few months, we've also started now to move portions of our international business over to the new platform. While no new ERP implementation program is flawless, we have been incredibly pleased so far with the progress we've made by implementing this without any or trying to minimize any sort of disruption to our customer base. We've also made the decision to extend the implementation of our S/4HANA to our Home and Personal Care business. Our third key element is centered around our people. While we've had a challenging year and made a lot of difficult decisions, particularly around human capital that's impacted our employees, I am proud of our team, and I believe that their focus and resilience are critical components of driving the next chapter of growth. Our last key element is around transformation. Our continued plans to focus on becoming the pure play global pet care and home and garden business that we've set out a few years ago. Starting with global pet care, under Ori's new leadership, the team is embracing a new data-driven approach that has already yielded small wins and is resulting in improved operational trends. The innovation pipeline is strong, with fewer, bigger, better new product launches on the horizon, that are grounded in consumer insights. I'll continue to push this team to go faster, because I believe in the strategy, and I'm excited about the future of pet. Moving to the home and garden business, as you may recall me saying before, we've been on a bit of a turnaround over the last couple of years since Javier joined the team. Javier has set the right tone for a high-performing team with a culture anchored around growth, development, and employee engagement. We have had some highly successful innovation launches I'm really pleased with the progress the R&D team has made here. And if these products have landed well with the consumer, and we're expecting this momentum to actually continue and build with exciting new product launches planned for fiscal 2026. I remain optimistic about the evolving M&A landscape. We expect to continue to pursue acquisition opportunities in both our global pet care division and our home and garden businesses as additional assets become available at better price points. Lastly, on home and personal care, the most impacted of our three businesses by the latest trade policy volatility, the team has stepped up to the challenge. They've made meaningful changes to address our current reality. While we had a tough fiscal 2025, we are committed to maximizing the business' value and we expect an improvement to overall profitability in fiscal 2026. We remain committed to the vision of finding a strategic solution for our HPC business. If I can now everyone turn to slide nine, I'm gonna give an overview of our high-level 2026 earnings framework. We expect net sales to be flat to up low single digits versus the prior year. The external headwinds that suppressed consumer demand for the vast majority of fiscal 2025 are expected to continue particularly in the first half of our fiscal year. Despite these external pressures, we believe Home and Garden and Global Pet Care are both positioned to resume growth in fiscal 2026, offsetting an expected decline in our home and personal care business as we navigate through category softness and supply chain simplification initiatives that will reduce the product portfolio in North America. From an adjusted EBITDA perspective, we are targeting low single-digit growth primarily driven by continued expense management. Cost improvement initiatives and favorable FX offsetting lower volumes. The additional cost of tariffs are largely mitigated through a variety of actions including pricing. And lastly, for adjusted free cash flow, we expect another strong year ahead at approximately 50% conversion of adjusted EBITDA. Heading into the fiscal year, we are seeing signs of improved predictability in the macroeconomic environment, giving us the confidence to reinstate our earnings framework. We are focused on delivering on our goals to our investors. We believe this framework provides a challenging but achievable financial goal to the team as we look forward to a stronger fiscal 2026. Before I turn the call over to Faisal, I'd like to sincerely thank our outgoing Chief Financial Officer, Jeremy Smeltser. He's been a tremendous asset to me and the company and helped us navigate some really challenging times. I'm confident that Faisal will continue to drive strong execution and financial discipline in the years ahead and I'm already enjoying my new partnership with him as my CFO. With that, I'll turn the call over to Faisal to share more on the financials and additional business unit insights. The call is now yours, Faisal. Faisal Cutter: Thank you, David. Turning to slide 11. And a review of our Q4 results from continuing operations. Beginning with our net sales. Net sales decreased 5.2% excluding the impact of $10.5 million of favorable foreign exchange. Organic net sales decreased 6.6% primarily driven by supply constraints as a result of our decision to pause purchases from China for the US market during the third quarter and continued category softness in our global pet care and home and personal care business. These headwinds were partially offset by a delayed start to the season for our home and garden business that benefited current quarter results. Gross profit decreased $31.4 million and gross margins of 35% decreased 220 basis points largely driven by lower volume, unfavorable mix, inflation, and higher tariffs. Partially offset by pricing, cost improvement actions, and favorable effects. Operating expenses of just over $227 million decreased 14.6%, due to lower spend in advertising and marketing, and general expense management in light of category softness. As well as lower restructuring-related project spend. Operating income of $29.4 million increased by $7.5 million due to the lower operating expenses, partially offset by a decline in gross profit. GAAP net income and diluted earnings per share both increased, primarily driven by a one-time tax benefit for the quarter resulting from a tax entity realignment initiative. Lower share count, and higher operating income. Adjusted EBITDA was $63.4 million, a decrease of $5.5 million driven by lower volume and reduced gross margins partially offset by lower operating expenses. Adjusted diluted EPS increased to $2.61 driven by a one-time tax benefit that I referenced earlier. And the reduction in shares outstanding partially offset by lower adjusted EBITDA. Turning to slide 12. Q4 interest expense from continuing operations of $7.9 million increased $1.2 million due to higher average borrowing on our cash flow revolver in the current quarter. Cash taxes during the quarter decreased $10.2 million from the prior year. Depreciation and amortization of $23.9 million decreased $1.7 million from last year. And separately, share-based compensation increased to $5.8 million from $4.6 million in the prior year. Capital expenditures were $13.2 million in Q4, essentially flat to last year. Cash payment towards strategic transactions restructuring-related projects, and other unusual nonrecurring adjustments were $7.3 million versus $10 million last year. Moving to the balance sheet. We had a quarter-end cash balance of $123.6 million and $492.3 million available on our $500 million cash flow revolver. Total debt outstanding was approximately $581.4 million consisting of $496 million senior unsecured notes and $85.3 million of finance leases. We ended the quarter with $457.8 million of net debt. Turning to Slide 13 and an overview of our full-year results. Net sales decreased 5.2% and organic net sales decreased 5.3%. Sales performance was driven by category softness in light of macroeconomic conditions and supply shortages, from the six to eight weeks pause previously mentioned. These had been significantly impacted results both in our global pet care and home and personal care businesses. Despite strong performance by our key brands, sales in the home and garden business were modestly down driven by unfavorable weather conditions. Full-year gross profit decreased by $77.4 million and gross margin of 36.7% decreased 70 basis points driven by lower volume, higher inflation, increased tariff costs, and unfavorable mix. This was partially offset by cost improvement initiative pricing, and favorable FX. Adjusted EBITDA decreased to $289.1 million excluding investment income of $52.7 million in the prior year, Adjusted EBITDA decreased $30 million or 9.4% primarily driven by lower volume, and a decline in gross profit, partially offset by a reduction in operating expenses. Adjusted free cash flow was $170.7 million, or approximately $7 per share. $7 cash per share. Exceeding the $160 million free cash flow framework previously provided. During the year, we prioritized the health of our balance sheet through active management of CapEx investments, and improved working capital. Now let's get into a review of each business unit where I'll provide you more details on the underlying performance drivers of our operational results. I'll start with our global pet care business. Which is slide 14. Reported net sales decreased 1.5% and excluding favorable foreign currency impact, organic net sales decreased 3.3%. Sales in Aquatics increased high single digits offset by mid-single digits decline in companion animals. North America, companion animal brands continue to trend favorably. Our brands maintained or gained market share driven by innovation and successful commercial activations. With our retail partners in spite of category softness. In aquatics, we successfully mitigated category declines and delivered improved results. Driven by distribution gains in pet specialty and mass channel. Comparisons for the quarter in both companion animal and aquatics were impacted by a strategic pull forward of orders by retailers in the prior year in preparation for our S/4HANA ERP implementation. Resulting in an approximately $10 million headwind for the quarter. Also as expected, our decisions to pause shipments for a six to eight weeks period when tariffs were at their highest point during the third quarter led to continued supply shortages during the current quarter. Our inventory levels are now generally healthy, and shortages are not expected to be a significant headwind heading into fiscal 2026. Conversely, results were favorably impacted by our decisions in the third quarter to stop shipment to a key retailer as tariff pricing negotiations stalled. By the end of the third quarter, negotiations were complete but it did result in shipment delays benefiting our fourth quarter results. In EMEA, companion animal sales increased driven by the continued strength of our Good Boy brand, market share gains, in the UK, and expanding further in Continental Europe. Net sales also increased in our dog and cat food led by our Eucanuba brand. Aquatic sales also increased with the TETRA brand gaining shares in key markets mitigating category softness. Our innovation continues to resonate with the consumer. And is largely focused on further expansion into adjacent categories. Green Bone Collium, you may recall we recently launched a product that focuses on health and wellness benefits for pets. We also continue to launch new innovations in the treats categories, as our Good and Tasty product launches continue to perform well with further plans of expansion and more unique innovations, coming in the coming months. Our investments in Nature's Miracle also continue to yield results as the brand is gaining share and new points of distributions. In the fourth quarter, Nature's Miracle grew across pure play online, mass, food, dollar, and drug channels. Our Good Boy brand is the number one brand in dog shoes in the UK, and it's the fourth largest brand in overall pet and continues to grow market share driven by consistent innovation. The brand's expansion across Continental Europe continues to perform really well. Most recently becoming one of the top five treat brands in The Netherlands. In dog and cat food, we are continuing to expand IMs into more markets. And recently launched a refreshed portfolio on Yukonuba. This quarter's adjusted EBITDA of $49.6 million is $5.3 million higher than the previous year. An adjusted EBITDA margin was 16.6% compared to 14.6% last year. The improvement to adjusted EBITDA was primarily driven by expense management through cost savings initiatives announced earlier in the year lower investment spend due to category softness, and pricing. These actions more than offset the lower sales volume, higher tariff cost, and inflation experienced in the quarter. While GPC's fiscal 2025 sales fell short of the prior year due to macroeconomic and category headwinds, we believe the business is well-positioned heading into fiscal 2026. And we expect to return to modest growth as underlying category fundamentals and macroeconomic trends begin to stabilize. With generally healthy levels of inventory, we continue to be optimistic about our performance in the category. With the recent wins in product distribution and placement, together with the positive pace of sales and consumer acceptance of our innovation, we believe we will continue to outperform the category. While consumers continue to be challenged, we are encouraged by the overall resilience strength of our brand. I'll now move to our home and garden business, which is on slide 15. Net sales increased 3.2% in the quarter, reflecting a delayed start to the season that pushed volume from the third quarter into the fourth quarter. While July experienced favorable weather conditions leading to an improved POS, and strong retailer reorder patterns, unfavorable weather conditions across key regions in the latter half of the quarter negatively impacted POS and shipments. Net sales and controls, which is our largest category in home and garden, were up high teens as Spectrocyte continues to outperform the category. With a strong finish to the quarter in home insect control and herbicides. Household pet, hotshot also gained share with the positive POS while the overall category was flat. We are particularly pleased with the recent innovation launch of our flying insect traps that continues to outperform the rest of the category. Repellent sales were down mid-single digits with softness at key retailers driven by unfavorable weather conditions. Net sales in cleaning were also down for the quarter. As weather patterns evolve, and shift POS into the fall, our late season program continues to gain incremental support from our key account partners with activations for the quarter at four times the number of stores as compared to last year. Our Big Bet innovations are gaining support from our retailers and resonating with consumers. Exceeding our expectations. This year's innovation launch, the Spectracide wasp, hornet, and yellow jacket trap, was a hit with consumers and quickly gained penetration within the category. Earning one of the highest penetrations of any new item in overall pest control. POS performance was above expectations, with additional PAMs to expand distribution and capacity heading into fiscal 2026. The Hotshot flying insect trap launch also performed very well with its strong value proposition. We're excited to see expanded distribution on this new product as well in fiscal 2026. Adjusted EBITDA was $16.9 million compared to $19 million last year. And the adjusted EBITDA margin was 12.1%. 200 basis points lower than the prior year. The decrease in adjusted EBITDA was driven by unfavorable mix, inflation, tariffs, and incremental brand-focused investments partially offset by pricing, productivity improvements, higher sales volume as our innovation continues to resonate with consumers. As we look forward to fiscal 2026, we believe retailer inventory levels are generally healthy, and we expect reorder patterns to closely align with POS. Our sales team will continue to work closely with our retail partners to understand consumer demand expectations and what it means to our production and shipment plan. Expect our category will continue to be well supported by our retail partners, and the strength of our brands will continue to drive share growth. While weather is unpredictable, early indications are that our retail partners expect a normal weather pattern for fiscal 2026. Precipitation and temperatures expected to go back to historical level. Most of the POS for our home and garden business comes in the second half of our fiscal year, with the first half largely focused on preparation and staging for the seasonal business. As a result, timing of inventory builds can vary and impact quarterly results. Our fiscal 2025 first quarter benefited from an earlier than normal seasonal inventory build as well as a pull forward of orders in advance of our S/4 go-live by certain retailers that we would not expect to repeat in fiscal 2026. Overall phasings of net overall phasings net sales in home and garden are therefore expected to be similar to fiscal 2024. And finally, moving to home and personal care, which is slide 16. Reported net sales decreased 11.9%. Excluding favorable foreign exchange, organic net sales decreased 13.4%. Net sales in the personal care category were down low single digits this quarter while sales in home appliances were down double digits. Organic net sales in EMEA were down double digits with softness in both home appliances and personal care. Lower consumer confidence continues to be a headwind in European markets. Impacting both personal care and home appliances categories. We have also seen an influx of Chinese competitors targeting the region in response to the higher tariffs in the US. We continue to be nimble and evaluate new strategies to ensure our brands, remain relevant to our consumers in the current environment. As the consumer moves increasingly to digital markets, our near-term focus is increasing our digital shelf space and ensuring our presence in all relevant channels. In addition, one of our retailers experienced high inventory levels following a major sales event that negatively impacted replenishment orders within the quarter. North American sales decreased around 25% driven by lower sales from appliances. Much like GPC, HPC's fourth quarter results were impacted by inventory availability constraints from the six to eight weeks pause on Chinese sourced products to the US when tariffs were at their highest point. Our inventory levels are now generally healthy, and shortages are not expected to be a significant headwind heading into fiscal 2026. Overall share was also impacted by pricing taken to offset cost of tariffs. May recall last quarter, that we were one of the first to negotiate pricing with our retail partners. And thus, our product was among the first to see tariff-related price increase hit the shelves. We expect that this will normalize in the coming months as pricing goes into effect across the categories. Personal care appliances sales increase in both brick and mortar and e-commerce channels, benefiting from a softer prior year comparison. Organic net sales in LatAm grew high single digits with growth in both categories driven by new product launches in personal care, and distribution gains in the cooking category within home appliances. On the commercial side, you may recall we recently launched the PowerXL Air Max at Walmart, and our ad campaign is seeing strong consumer engagement. We also recently launched our Remington gloss collection exclusively at Target stores target.com. The new line of styling tools is designed to deliver high gloss results and offer a wide variety of styling tools. In LatAm, our Remington brand, saw record quarterly sales in the fourth quarter, after brand refresh initiatives resulting in distribution gains. LATAM continues to be a compelling market for our HPC business. And we are excited about our plans to introduce our Russell Hobb brands to the market in the coming month. We continue to be pleased with our launch on TikTok in the UK. Where our products are resonating with consumers, closing the year with another record month. We plan to build upon the success we're seeing in the UK and take these best practices to other markets in the near future. This quarter's adjusted EBITDA was $15.7 million compared to $19 million in the prior year. The adjusted EBITDA margin was 5.3%. The decline in adjusted EBITDA was driven by lower volumes, unfavorable mix, and tariffs. These significant headwinds were largely offset by pricing lower brand-focused investments in light of tariff supply issues, reduced distribution costs, and expense management as we actively address our fixed cost structure. As we look forward to fiscal 2026, we expect softness in global consumer demand for durables to continue. Compared to the prior year, this is expected to be most impactful to our first quarter results. In North America, tariff-related disruptions are expected to reduce sales volume as we prioritize our overall financial health and right-size the business. HPC will continue to evolve as we reduce our US queue count to simplify our chain and diversify our supply base, while maintaining overall profitability through increased scale on a smaller subset of product offerings. In EMEA, our largest market, we expect category softness and increased competition to continue while we expand our presence in the direct-to-consumer channel helping to partially offset consumer confidence headwinds. Now turning to slide 17, our expectations of fiscal 2026. We expect net sales to be flat to up low single digits compared to the prior year. While we expect growth in both our home personal by in our global pet care and home and garden business, our home and personal care business is expected to decline due to continued category softness and our supply chain simplification initiative the North American market. Adjusted EBITDA is expected to grow low single digits driven by the return to sales growth in our global pet care and home and garden business continued expense management, continuous improvement initiatives, and FX favorability, offsetting lower volumes in home and personal care. Tariffs are expected to be largely offset through the various mitigation actions which we have taken. Including pricing. I do want to point out that in our model, we have fiscal 2026 corporate at approximately $66 million, up from $54 million in fiscal 2025. As you will recall, in fiscal 2025, we had a little over $20 million in TSA cost reimbursements from our sale of HHI that do not repeat in fiscal 2026. We have mitigated approximately half of the cost headwind thus far and intend to address the remaining $10 million during the coming quarters. From a phasing perspective, we expect the first quarter to be the most challenged, primarily due to the shift in consumer sentiment in the middle of the prior year prior fiscal year. We also expect retailer reorder patterns will generally more closely align with POS, which is expected to be most impactful to our home and garden business given the earlier buy-in of inventory in fiscal 2025. And lastly, adjusted free cash flow conversion as a percentage of adjusted EBITDA is expected to be around 50% as we continue to prioritize the strength of our balance sheet. Depreciation and amortization is expected to be between $115 million and $125 million. Including stock-based compensation of approximately $20 to $25 million, cash payments towards restructuring, optimization, strategic transaction costs expected to be between $25 million and $35 million. Capital expenditure expected to be between $50 and $60 million. Cash taxes are expected to be between $40 and $50 million. For adjusted EPS, we use an effective tax rate of 28%, including state taxes. To end my section, I want to echo David and thank all of our global employees for their hard work during these very challenging times. Back to you, David. David Maura: Hey. Thanks, Faisal. Let's look at slide 19. Thanks, everybody, for joining us today on the call. Again, I'll take a few minutes just to recap the key takeaways findings on slide 20. Fourth quarter financial results conclude a very challenging year for us. We took decisive actions, as I've mentioned. They were necessary to protect the company and the balance sheet. But it did have short-term impacts on the P&L, and that's reflected in the numbers we reported today. We will continue to be good stewards of the businesses going forward. We'll be disciplined in our actions while utilizing a strong balance sheet. As you know, earlier in the year with all the macroeconomic uncertainty, we made the strategic pivot and started running this business to maximize free cash flow. I'm proud that this decision paid off. We were able to deliver over $170 million or roughly $7 per share in free cash flow to our investors. And these actions are now embedded, quite frankly, in our DNA and we're gonna continue to focus on this going forward. We're really excited to report, quite frankly, that both the global pet care and home and garden businesses, which are two most highly valued businesses, they're going to return, we're expecting them to return to growth in fiscal 2026. We're excited about that. We believe in the categories, and we believe in our teams in these businesses. Our new product development pipeline is strong, and we're gonna continue to focus on launching fewer, bigger, better initiatives. For successful commercialization as we move this company forward. I also continue to be optimistic about the evolving M&A landscape. We expect additional assets to become available at better price points, and with that said, we will remain disciplined in our process as we look for highly assets while being mindful of maintaining our lower leverage. We are confident that despite the current headwinds, that were largely outside of our control, we are a stronger, more focused company as we move the business forward in its strategic transformation. We will continue to be good stewards of this appliance business, focused on overall profitability improvement as we navigate a challenging environment we remain committed to finding a strategic solution for this asset. As trade policy stabilizes and consumer sentiment improves, we believe synergistic growth opportunities are on the horizon, with a higher probability of consolidations in this space. Which we believe, frankly, is long overdue. We are committed to executing on our operational goals, delivering improved business performance and driving value to our stakeholders. Again, I think the good news today with today's call, we believe that the worst of the tariff and economic disruptions to our business are behind us. Expect our two highest value businesses, Global Pet Care and Global Home and Garden to return to growth in fiscal 2026. We're gonna continue generating a lot of free cash flow as we go forward. The balance sheet is strong. And we're gonna continue returning lots of capital to shareholders through buybacks and dividends as we move this business forward. I'll turn the call back over to Jen, and we'll be very happy to take your questions. Jen Schultz: Thank you, David. Operator, we can go to the question queue now. Operator: Certainly. Star one one on your telephone and wait for your name to be announced. To withdraw your question, simply press 11 again. Please stand by while we compile the Q&A roster. The first question coming from the line of Chris Carey with Wells Fargo Securities. Your line is now open. Chris Carey: Hi, everyone. Hello. Morning. Can we just get updated thought process around the various options for the HPC business? Both strategic, but also, you know, fundamental as you continue to run the business. I realize you've had comments in the press release and the prepared remarks around still looking for strategic alternatives, but can we just dig a bit deeper into the potential outcomes that you're seeing, you know, weather changing and tariff backdrop evolves those potential outcomes and just any sort of update on how you see the past year? David Maura: I mean, the short answer is no because I'm not gonna discuss M&A or opportunities on a live public call. A more broad response to your question would be, it's pretty obvious when you're dealing with $450 million of tariff headwinds that it will sideline a process, with strategic parties for completing a synergistic, you know, merger, if you will. And so we had a very robust process, you know, about a year ago at this time. That got derailed by trade policy out of the United States. We pivoted to run the business to maximize cash. We're taking the fixed expense base of that business down to base deal with the realities of the current economic situation. We've materially diversified the supply chain there, made it more resilient and less reliant on China. We're gonna improve the profitability of appliances in fiscal 2026 as we move the company forward. And we're telling you that as the trade situation becomes less volatile moving forward and macroeconomic headwinds subside, we are excited to resume strategic discussions around finding a strategic solution for the business, which we believe there are many. Frankly, this industry is littered with small competitors that are subscale. Barely profitable, and most of them over-levered, and some of them will go bankrupt. Intend to capitalize on that because we're the strongest player in the space. Chris Carey: Helpful. Thank you. Just on, you know, follow-up on the pet category. You've worked through a period of intense competitive activity including from some large private label competitors. You know, where are we, you know, in the journey of the pet business? And, you know, I think you've sounded a bit more confident about shelf placement and some stabilization and go forward potential and return to growth. So can you just maybe help us understand the journey and how you see the next twelve months? David Maura: Yeah. Really happy. Thank you for that question. And, you know, I'll turn it over to Faisal when I'm done for any additional remarks. But look, we are thrilled because we've infused that business with some new talent. It's got some new direction. It's got a higher level of energy to it. The team is embracing a more data-driven consumer insight. I would tell you geographic, category, specific, analysis of that business. In terms of your comment on private label, yeah, we saw some competition there. You know, post-COVID, the entire pet industry has kinda been in a recession. We were able to kinda reset some mods and some shelf space with some major players just a few months ago. We're seeing much better trends now with that done in terms of takeaway, POS, and frankly, shipments been improving pretty consistently. So that's why you hear a much more bullish outlook for the business looking into 2026. But more importantly, you know, there were branded ankle biters that entered into this space. Anybody that had access to, you know, social media and the Chinese product could kinda come in here and nibble at you. We are seeing people go by the wayside. And we are seeing products like Nature's Miracle really take a lot of market share because the product actually works, does what it says, and a lot of competitive products simply does not. So, look, I think it's still early innings. We're making incremental progress, but, you know, we are launching a lot of new product. We are getting a better response from the retail customer and consumers seem to be buying our product at a greater rate. And then quite frankly, I think this is gonna be a fantastic M&A platform. My vision of getting us to $3 billion of revenue and $500 million of EBITDA in PAD is unchanged from the prior call. And in fact, I'm seeing more and more assets come to market at better price. We have missed on a few of them because we simply refuse to overpay. But we will find highly synergistic businesses that complement this platform from both a cost synergy and revenue synergy standpoint. And I'm really looking forward to that opportunity to capitalize on it. Appreciate the question. Faisal, did I miss anything? Faisal Cutter: Well, I think you've covered it. The only thing I'll add is just if you look at our performance through the year, you kinda see the signs of stabilization and how our Q4 certainly seem to be heading in the right direction for the global pet care business. And we do feel that's the one business that returns to growth faster just based on where the category stands. And to David's point, how our products have recently done in each of the categories that we play in. And we also have expansion opportunities like we referenced in our prepared remarks about expanding into adjacent categories. There. So a lot of opportunity for the global pet care business. Chris Carey: Okay. Thanks, guys. Faisal Cutter: Thank you. Thank you. Operator: Thank you. Our next question coming from the line of Bob Labick with CJS Securities. Your line is now open. Bob Labick: Good morning. Thanks for taking our questions, and congratulations on solid execution in a obviously, really tough year. David Maura: Hey, Bob. How are you doing, man? Bob Labick: We're well. Thank you. Yeah. No. Good. As I said, nice job. It's good to chat again. To start. I know this is a kind of a category and product basis question, so maybe we can dig in a little. And the question is, how much is pricing going up at retail, you know, for your categories, products, etcetera, in kind of in aggregate? And when do you expect to get clarity on consumer acceptance of that? And, you know, how has that been playing out so far? David Maura: Yeah. Great question. Look. I'm kinda stunned at how little pricing we actually had to take. You know, I thought, you know, February, March, you know, when I was hardly sleeping, staring at $450 million of challenges that we have to take a lot more pricing than we actually did. But, you know, that resulted in us having to take a lot of internal pain and make some very difficult decisions to remain competitive at shelf. We had to take down, you know, fixed cost salary headcount, and that's not fun to do. You know, it But we've done it, and it's in the past. We'll continue to address the fixed cost structure of the company going forward, strictly corporate overhead, and we're gonna be aggressive on that as we move through 2026 and complete the S/4HANA implementation in Europe. But, you know, again, you know, in my opening remarks, I thanked our supply base. You know, we've worked really hard with our suppliers to remain competitive particularly given the consumer landscape. And our retailers and so it's really those three levers. Right? Working really hard with your vendor base. Frankly, taking out internal costs and being more efficient with what you have and then taking a little bit of price at retail. The greatest price increases came on the durable side on appliances. We were the first to move there, believe it or not. And, you know, I don't think anybody in that space actually knows their numbers. I think you're still figuring out elasticity of demand, particularly in the North America market. I think we took our pain early. And, frankly, I think we're gonna capitalize on that now going forward. But we got our work cut out. I appreciate your comments saying that we executed pretty well. I'm not pleased with the performance yet, but I'm sure looking forward to getting into 2026 and seeing how we do. So appreciate the question. I'll turn it to Faisal if I missed anything. Faisal Cutter: No. I think you covered everything, and I think I'll just reiterate the point that we took our medicine early for our HPC business. And that's where we saw a lot of the impact of price elasticity, which should play in our favor going forward as the rest of the market kinda come up because I think everyone will have to eventually take price there. Bob Labick: Okay. Great. And then just, you know, for my follow-up, and what do you see as the keys for you? And maybe you addressed it earlier, I guess, with new products a little bit, but maybe dig into, the keys to returning to above category growth over the coming years because I know that's, you know, been how you've operated in the past and generally as a goal. So maybe know, what's it gonna take to get back there? Above category growth in your categories? David Maura: No. It's a great question. Look. We still have to do a better job on the commercial side. And that's what we're trying to do here. And that's quite frankly, that's where in the early innings of, I think, in PET, and, hopefully, that story can evolve the narrative that I think it can be, which is, look. We have phenomenal products. We need to do a better job, and it's in process right now. It's what I'm most excited about, about letting the consumer know that. And the most effective way we can do that is by making claims that resonate with the consumer and get a better packaging and communicate that on shelf is always gonna be our better best market. And we've gotta continue to drive digital. We gotta continue to drive social media. And that's omnichannel. And, you know, we are seeing early success there. It's still early innings, but Bob, that's, you know, away from operational excellence. Supply chain management, working capital management, fill rates, all the rest of that we've taken three years getting right. We have still not gotten to the level that I wanna be at from a commercial standpoint. And it's innovation, it's advertising and marketing, and it's really getting efficient returns on that spend. We over the last couple of years, we've allocated a lot more resource to R&D, marketing, advertising. This year, the teams are challenged to figure out hey. Look at all those line items, guys, and get more on the spend you're making and figure out where the deadweight is and get rid of because, you know, it's you gotta do more with less in this market. So we're gonna be more efficient with it. We're gonna get more out of it, but it is an exciting opportunity for us. We're not there yet. Bob Labick: Got it. Super. Alright. Thanks. Faisal Cutter: Thank you. Operator: Our next question coming from the line of Ian Zaffino with Oppenheimer. Your line is now open. Ian Zaffino: Hi. Great. Thank you very much. You know, just want to ask you on the tariff side and how you're thinking about it if we move back to a no tariff or kind of a pre-liberation day. Tariff scenario, is there get back to price? Can you keep anything? How do we think about that as because I know you've taken a ton of different actions. And so I want a little color on you know, how it would play out if things do get overturned. Thanks. David Maura: Hey, Ian. I can only deal with the facts in front of me. You know, don't mean to be aggressive with the answer, but been a Super Bowl year. I've dealt with, you know, 16 different tariff rates all at, you know, weeks apart. We've been really aggressive in responding to all that. I have no belief that tariffs will go back to zero at all. And, you know, if they do, I'll deal with it then. I really that's how I see it. Ian Zaffino: Okay. And then, you know, just maybe as a follow-up, looks like aquatics you know, held in, you know, relatively well. And this has really been in kind of a category that's just been, you know, somewhat tough for you guys, especially on the hard good side. You know, are you noticing any changes in the consumer or maybe is has anything driven that? Is that just coming off of a very low base? Maybe any kind of color you could give there. Thanks. David Maura: Man, we're the world's largest player in Tetra. We have the best brand. You know? It's recognized without having to advertise. Right? You don't need any awareness. We've got a great product. Frankly, I'm excited about the new leadership in Pet because I think we have a price pack architecture issue. And I think we have a lot of opportunity there. We're doing better in Europe than we have in North America. Kids like to live on these iPhones all day long. You know, they don't like taking care of fish tanks. The hobbyist community has been the install base. Need to do a better job communicating that kids actually love aquariums. Taking care of fish teaches responsibility, and it's actually a very therapeutic thing to do with the family, and it's an enjoyable thing to have in your household. Ori's got a big task in front of him. He's addressing it. But we are the leaders, and we are responsible for changing the narrative in that space. And driving growth no matter what the external environment is. Doing a decent job in Europe. We gotta get a better job going here in North America. Hope to achieve that during fiscal 2026. Ian Zaffino: Alright. Thank you very much. David Maura: Thank you, sir. Operator: Thank you. Now last question are coming from the line of Steve Powers with Deutsche Bank. Your line is now open. Steve Powers: Great. Thank you, David, Faisal, good morning. Couple of cleanups. Last quarter, I think you exited with about $20 to $25 million annualized in tariff headwinds that related to the EU and Southeastern Asian markets that you hadn't mitigated at the time? Just maybe an update on any steps you've taken to address those costs and whether you feel like you have addressed them going into 2026. You know, maybe start there. David Maura: No. I think we've eliminated most of them. I think there's two different numbers that we're giving you. Right? We're giving you the gross exposure was $450 million. You know, if that was at $145 out of China plus all the other countries. Right? Then we're giving you an updated one because China rates lower and so apples to apples, that's, like, $70 to $80 million. But we're telling you we've mitigated the vast majority of it. And then we're also telling you that, you know, look, you know, things move around so much, man. I used to have $120 million of exposure out of China just on pet. I think I just told you on this call that my gross exposure on it global purchases for my two most high-value businesses, which is Global Pet and my home and garden business are somewhere between $15 to $20 million by the end of 2026. I mean, we've really worked this thing down to nothing. And, you know, we'll continue to flex it around whether it's Cambodia, Nam, US, where we can do it. But that's where it economically makes sense for us today. Faisal, if I mess the messaging up please clean up what I said. Faisal Cutter: You're exactly right. And we have for the most part, we've taken most of the actions including pricing actions everywhere. There's a little bit more to do getting into next year, but we'll do that with a combination of, again, cost reductions supply base changes, supplier concessions, as well as pricing. But the majority of it, the vast majority of it is fine. Steve Powers: Perfect. Thank you. And so two other if I could. Just one is just your category growth expectations in '20 relative to your call your own call for low single-digit top-line growth, just you know, how you think, like, end market demand compares to your top-line expectation. And then separately, you know, as you think about rolling out S/4HANA to I think you've mentioned moving that into HPC, David. Just any implication there on your ability to pursue strategic solutions there while that's in flight? You know, just you know, does that delay you know, or cause any impediment to moving strategically as that business as that is project is underway? And then are you able to implement it in such a way that it's sort of modular enough to potentially carve out if a separation is the ultimate solution. Thanks. David Maura: No. It's a great question. Appreciate you answering I'll take the second one. Faisal will touch on the first one. Look, the whole goal of S/4HANA is to get those single source truth and quit using, you know, 10 different systems all over the place. And run the company more efficiently and then liquidate, quite frankly, corporate costs. Right? You know, AI, the whole movement's to be more efficient. Period. End of story. We're basically done with that in North America. We still have to get the synergies for it. Europe is rolling that out. You know, HPC is on a bunch of different platforms. You know, it's been a series of acquisitions over twenty years. You know, putting that on a single source of S/4HANA is actually gonna create a lot of efficiencies and create a platform there that enhances the business. It will in no way slow down anything that we have on the table now or in the future for strategic solution. We will pursue that. And if we find something great, we're gonna execute it, and you'll hear about it then. But in the interim, it actually will make that business more valuable to any potential partner in the future because it will have a more dynamic operating infrastructure that can actually be more plug and play, which is, quite frankly, where the industry needs to go. There are way too many subscale players selling product from the same supply chain. There are way too few retailers. That space makes no sense in its current configuration. And, again, I think S/4HANA will be not only a great enhancement to the operating income and efficiency of the company that is in existence today, but will actually enhance it as an M&A partner for future combinations. That's my opinion. Faisal? Faisal Cutter: I'll just maybe address the category question. So I think the home and garden category remains strong, but it's weather dependent. Like we said, we expect a more normalized weather year next year, and that automatically gives you growth over this year. On the global pet care categories, aquatics, I think we're seeing signs of bottoming out, and it's kind of flattening and turning around. Same with our companion animal area. I think we're starting to see the category stabilize. Our growth is also dependent on just expansion in our own portfolio, including in adjacent categories. As well as just gaining market share. We're actually seeing our products perform and our brands perform better in the marketplace. Home and personal care is the one category that remains under pressure. It will be for both Europe and North America going into next year. We have to see what the market does from a pricing perspective. I think our competitors will come in the market with the price, and then the next few months, we should see all that play out. So that should in the second half of the year, play out to our advantage. But in the short run, that category remains very challenging for us. Steve Powers: Okay. Perfect. Thanks for all that. Appreciate it. David Maura: Thank you. Operator: Thank you. And that's all the time we have for the Q&A session. I will now turn the call back over to Jen for any closing remarks. Jen Schultz: Thank you. With that, we have reached the top of the hour, so we will conclude our conference call. Thank you to David and Faisal. And on behalf of Spectrum Brands, thank you for your participation this morning. David Maura: Thank you. Everyone have a good day. Operator: This concludes today's conference call. Thank you for participation. You may now disconnect.
Operator: Good morning, and welcome to our third quarter 2025 earnings call. As a reminder, this call is being recorded. A webcast replay of today's conference call will be available on our website at lanternpharma.com shortly after the call. We issued a press release before the market opened today, summarizing our financial results and progress across the company for the third quarter ended September 30, 2025. A copy of this release is available through our website at lanternpharma.com, where you will also find a link to the slides management will be referencing on today's call. We would like to remind everyone that remarks about future expectations, performance, estimates and prospects constitute forward-looking statements for purposes of safe harbor provisions under the Private Securities Litigation Reform Act of 1995. Lantern Pharma cautions that these forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those anticipated. A number of factors could cause actual results to differ materially from those indicated by forward-looking statements, including results of clinical trials and the impact of competition. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements can be found in our annual report on Form 10-K for the year ended December 31, 2024, which is on file with the SEC and available on our website. Forward-looking statements made on this conference call are as of today, November 13, 2025, and Lantern Pharma does not intend to update any of these forward-looking statements to reflect events from circumstances that occur after today, unless required by law. The webcast replay of the conference call and webinar will be available on Lantern's website. On today's webcast, we have Lantern Pharma's CEO, Panna Sharma; and CFO, David Margrave. Panna will start things off with introductions and an overview of Lantern's strategy and business model and highlight recent achievements in our operations, after which David will discuss our financial results. This will be followed by some concluding comments from Panna, and then we'll open the call for Q&A. I'd now like to turn the call over to Panna Sharma, President and CEO of Lantern Pharma. Panna, please go ahead. Panna Sharma: Good morning, everyone, and thank thank you for joining us to hear about our third quarter 2025 results and corporate progress. As many of you have heard me say in the past, computational and AI-driven approaches are increasing their presence and usage at both large and emerging pharma companies for all facets of drug discovery and development. Lantern's leadership in the innovative, efficient and pragmatic use of AI and machine learning to transform the process of developing precision oncology therapies should yield significant returns for investors and for patients as our industry matures and adopts an AI-centric data-first approach to drug development. This past quarter has been transformative in many respects for Lantern Pharma, a quarter where we have met many clinical, regulatory and validation milestones. And we have also significantly advanced the commercial availability and launch of our AI modules. The third quarter of 2025 represents a pivotal inflection point for Lantern Pharma. We've made significant advancements across our clinical stage portfolio, while simultaneously expanding the capabilities of our proprietary AI platform, RADR. And we've also set up the future of our CNS-focused subsidiary, Starlight Therapeutics. These achievements position us well for multiple value-creating catalysts in the coming quarters and years. Let me share with you some of the more notable achievements this past quarter. Let me start with what I believe is our most significant milestone to date clinically. Our LP-184 Phase Ia clinical trial successfully achieved all primary endpoints, demonstrating a 48% clinical benefit rate in evaluable cancer patients who received doses at or above the therapeutic threshold. What's particularly exciting is that we observed marked tumor reductions in patients harboring DNA damage repair mutations, specifically in CHK2, ATM, and STK11/KEAP1 genes. This validates our AI-driven precision medicine approach and the hypothesis of synthetic lethality and DNA damage repair that guided this program from the start. On the regulatory front, we completed a productive FDA Type C meeting for our subsidiary, Starlight Therapeutics, a company is focused entirely on CNS cancers. The agency provided clear guidance and pathway clarity for our planned pediatric CNS cancer trial targeting an ultra-rare brain cancer, ATRT. Importantly, the FDA confirmed our strategy to combine LP-184, which we will call STAR-001 in this indication with spironolactone based on our preclinical synergy data. We also made important progress across our broader pipeline. Preliminary Phase II data from our LP-300 HARMONIC trial were presented at the 66th Annual Meeting of the Japan Lung Cancer Society. We're planning a more comprehensive data update via webinar this December. For LP-284, our non-Hodgkin's lymphoma program, we showcased clinical data at the 25th Annual Lymphoma, Leukemia and Myeloma Congress. The presentation generated interest from both biopharma companies and clinical investigators, and we've initiated several discussions around combination therapy opportunities. Building on the Phase Ia results from LP-184, we're now positioned to advance LP-184 into multiple targeted Phase Ib, Phase II trials. Our precision biomarker-driven strategy will focus on 4 high-value indications, triple-negative breast cancer, non-small cell lung cancer with KEAP1 or STK mutations, bladder cancer with DNA repair deficiencies and first recurrent GBM. Collectively, these indications represent a combined annual market potential exceeding $7 billion. To provide additional insight into the LP-184 data and our development plans, we're hosting a KOL-led scientific webinar on November 20 at 4:30 Eastern. Dr. Igor Astsaturov from Fox Chase Cancer Center will join us to discuss the clinical results and what they mean for the future of this program. Beyond our clinical programs, we demonstrated the commercial readiness of our RADR AI platform at the inaugural AI for Biology and Medicine Symposium. We showcased several platform modules as deployable, highly scalable web accessible AI tools that can be licensed to biopharma partners and research centers. It's an important step in our strategy to monetize the technology that powers our drug discovery efforts. Finally, I want to emphasize our continued commitment to disciplined capital management. As of September 30, we had approximately $12.4 million in cash, cash equivalents and marketable securities. Based on our current operating plans, we expect this provides runway into approximately the third quarter of 2026. Before we turn to the financials, let me provide some color and details around our programs, both our drug programs and our growing program of AI modules, which we believe have the market potential of several hundred million on their own as AI tools and services. First, some context on the Phase Ia trial. This is a first-in-human study that enrolled 63 patients, a fairly large number given that we started at a very low dose and escalated upwards. This was in advanced solid tumors who had exhausted all standard treatment options, which is fairly normal for Phase I studies. These are heavily pretreated cancers, oftentimes in very difficult to treat tumors. The trial, which you can find on clinicaltrials.gov as NCT05933265, successfully met all of its primary endpoints. The headline number that I want you to focus on is this. We observed clinical benefit with 48% of evaluable patients who were treated at or above the therapeutic dose threshold. In a Phase Ia trial in heavily pretreated patients with advanced disease, that's a unique and promising signal of activity. But what's even more compelling is where we saw that activity. The data validated our core hypothesis about synthetic lethality. Patients whose tumors harbor specific DNA damage repair mutations, particularly in CHEK2, ATM and also STK/KEAP1 and actually also BRCA showed marked tumor reductions. This is what exactly what our RADR platform predicted well before starting this trial. And seeing it play out in actual patients is tremendously validating, but also very uplifting for our team where we can see how AI is being used for good and having a real-world impact on improving and changing outcomes. For us, this also gives us a very clear safety standpoint. LP-184 demonstrated a favorable profile with minimal dose-limiting toxicities. This is critical because it gives us flexibility. We can now pursue both monotherapy approaches and combinations with agents that we have identified as synergistic such as PARP inhibitors and immunotherapy, also spironolactone. Both -- these all have been predicted through our AI platform, again, as I note, before the trials even began. Let me give you a few clinical examples that really illustrate the potential here. In recurrent GBM, one of the most aggressive in treatment-resistant cancers, 2 out of 16 patients showed disease stabilization despite prior exposure to multiple therapies such as TMZ, lomustine and radiation. In GBM, as you will learn during our webinar on the 20th, we have the flexibility to modulate and enhance the efficacy of LP-184 by a factor of 3 to 6x, a potentially game-changing improvement. Even more encouraging, 2 patients at a dose level 10 have now maintained disease control for over 8 months and remain on treatment today. This is much more durable than has been expected for most Phase I studies. We also saw durable clinical benefit in other notoriously difficult tumor types, gastrointestinal stromal tumors and thymic carcinoma. These aren't common cancers, but they're devastating when they occur and options are extremely limited. Our work in these rare cancers has also encouraged us to double down on our desire to transform the world of rare cancers and develop an open access tool for rare cancer drug development, codenamed withZeta, which I'll talk about a little later this morning. Transitioning to clinical expansion. So the obvious question is this, what do we do with these results? And this is where our AI-driven development strategy really shines and demonstrates its value. Rather than pursuing a traditional broad Phase II basket type trial, we're taking a precision medicine approach. We're positioning to launch in 4 targeted Phase Ib, Phase II trials. Each one focused on a specific biomarker-defined patient population, where LP-184 has the highest probability of success and the best synergy agent for that particular tumor indication. One of these trials in Denmark in recurrent advanced bladder cancer is an investigator-led study. We have made this molecule into a portfolio of opportunities using data and precision oncology approaches. So let me walk through these quickly. The first one is in triple-negative breast cancer. It's our largest market opportunity, almost $4 billion. We're pursuing 2 parallel approaches, one in monotherapy with DNA repair gene mutations and a combination study with a PARP inhibitor, olaparib, specifically in BRCA-mutated patients. We've already received FDA Fast Track designation, which will expedite our development time line. We expect to enroll approximately 60 patients across both arms upon full enrollment. Second, non-small cell lung cancer with KEAP1 or STK11 mutations. This is a genetically defined subset of lung cancer who typically have very poor responses to immunotherapy. We're combining LP-184 with nivolumab and ipilimumab, 2 checkpoint inhibitors in patients with low PD-L1 expression. This represents, we believe, just in the U.S., close to $2 billion and probably closer to $3-plus billion globally. Again, we have an FDA Fast Track designation submission in process, and this trial will enroll approximately 34 patients. Third, an investigator-led trial in bladder cancer, recurrent advanced bladder cancer. This is being led by Dr. Pappot at Rigshospitalet in Denmark. It's focused on patients with advanced urothelial carcinoma who have specific markers indicating DNA repair deficiency. This represents, we believe, about a $500 million-plus global market opportunity, and we expect to enroll about 39 patients. Finally, first recurrent GBM, which we're pursuing through Starlight Therapeutics. Here, we're combining LP-184, which we will call STAR-001 and CNS indications with spironolactone. This combination showed synergistic activity in our preclinical models. We have both FDA Fast Track and Orphan Drug Designation for this indication. This trial will use a Simon 2-stage design with 2 separate arms based on IDH mutation status. We expect to enroll about 38 to 40 patients and represents what we believe is about $1 billion in U.S. market and probably closer to $2 billion globally. When you add up these indications, they represent a combined market opportunity exceeding $7 billion. And critically, each trial is designed with biomarker-driven enrollment criteria that increase our probability of success. In fact, as you've probably heard me say in the past, biomarker-driven cancer trials increased the success by 4 to 12x. Now rather than pursuing broad basket-like development, we're taking a very directed approach investing our resources exclusively in patient populations where the Phase I data and our AI-driven RADR insights predict meaningful clinical benefit and where there is real commercial opportunity and patient need. This is precision oncology at its best, using AI to identify the right patients in the right indications with the right combination drugs. And it all flows directly from what we learned in the Phase Ia trial, which was also heavily supported and predicted by the in silico AI work of our team and with multiple publications prior to that. Now let me turn to our LP-300 program and the HARMONIC trial, which addresses a significant growing need in lung cancer, lung cancer and never smokers that have progressed after treatment with TKIs. This is an important distinction. In Asia, never smokers represent 33% to 40% of all cases compared to only about 15% to 16% in the U.S. and Europe. This demographic reason is one of the reasons why we expanded this trial into Japan and Taiwan. It gives us access to the patient population, and it gives access to pharmas who want to develop therapies for this population. The market opportunity here is substantial globally, approaching $4 billion annually, and there are no current therapies approved for this patient population. But it is a space that more companies are interested in and are developing interested -- and are developing interest and are trying to approach it with various targeted combination opportunities. There's a real white space here that we're going after and the potential even to get to an earlier line of treatment. We completed enrollment in Japan this past quarter at 5 clinical sites, and we presented data at the 66th Annual Meeting in the Japan Lung Cancer Society, which was presented by Dr. Jonathan Dowell from UT Southwest. Now the preliminary data from this trial, which we've already shared publicly, showed 86% clinical benefit rate, which is very encouraging. And we have one patient who has demonstrated a durable complete response with survival continuing for nearly 2 years, a remarkable outcome. I think we have another patient, which is now approaching a year. Now we're planning a more comprehensive webinar in December before the year closes where we'll present additional patient follow-up data and clinical readouts from both the Asian and U.S. cohort. This will give us an opportunity to discuss the data in much greater depth and provide regulatory strategy insight and positioning moving forward. I should also mention that during the third quarter, we made a strategic change in our clinical operations in Asia. We transitioned our CRO services in Taiwan with a specific focus on cost reduction and operational efficiency. In Japan, we supplemented our team by bringing more activity in-house. This is part of a broader commitment to disciplined capital management and efficiency while maintaining the quality and integrity of the trial. The strategic positioning of Harmonic also opens doors for potential regional partnerships in Asia and co-development opportunities where the never smoker population is most prevalent. Now let me turn to LP-284, a program targeting recurrent non-Hodgkin's lymphoma, which has generated interest from clinical communities and also from biopharma to approach combination approaches. This is our first in-human trial for LP-284, which we expect to enroll about 30 to 35 patients with aggressive recurrent non-Hodgkin's lymphoma, including mantle cell and high-grade B-cell, where we have orphan indications for both. This represents a global market opportunity of about $3 billion and with patients who have failed multiple prior lines of therapy and have very limited options. In fact, in October, we presented clinical data from this ongoing trial at the 25th Annual Lymphoma Leukemia Myeloma Congress in New York City. The cornerstone of that presentation was a heavily pretreated patient with aggressive grade 3 B-cell lymphoma, specifically DLBCL, who had exhausted standard therapies, and we saw a complete metabolic response with LP-284 as monotherapy after 2 doses, 2 cycles. This is exactly the kind of signal we're hoping to see and validates many of our preclinical hypothesis for this drug. It also validates the mechanistic insight, and we saw complete metabolic response and the lesions around the hips and spine completely went away. This patient has now remained cancer-free since we initially reported this result in July Q2 of this year. LP-284 has a novel mechanism of action. It demonstrates particular lethality in cells with DDR, a targetable vulnerability that's common in non-Hodgkin's lymphoma. This mechanistic differentiation is what's driving interest from partners. Now following this presentation, we've started discussions with investigators and companies around opportunities for combination therapy development with existing FDA-approved agents, post-immunotherapy treatment strategies and leveraging the 284 mechanism where current therapies are failing, especially in what's exciting indications beyond lymphoma. Based on preclinical data, we're evaluating 284 and rituximab as a potential alternative to cyclophosphamide and methotrexate in lupus, systemic lupus SLE. Our preclinical models showed that 284 reduced urinary microalbumin and kidney damage -- which is a key marker of kidney damage in lupus by approximately tenfold and depleted B cells by fourfold when combined with rituximab. We saw even greater B-cell depletion when both agents were used together. This suggests LP-284 could become a next-generation B-cell depleting therapy in a number of autoimmune diseases, which would dramatically expand the commercial opportunity for this asset. LP-284 also benefits from strong intellectual property protection. We have composition of matter patents granted in U.S., Europe, Japan, India and Mexico, providing exclusivity through at least 2039. The molecule, as I mentioned, also has Orphan Drug Designation in mantle cell and high-grade B-cell lymphomas. We're now focused on recruiting additional sites with a focus on non-Hodgkin's lymphoma and high-grade B-cell lymphomas. The momentum we're seeing with LP-284, both clinically and in terms of partner interest reinforces our view that this asset has significant opportunity, both stand-alone as a wholly owned program or as part of a strategic collaboration. And we're very open to those discussions, both again in combination in non-Hodgkin's or in other autoimmune categories. Now transitioning to our AI platform discussion. As I mentioned earlier, I want to shift gears and talk about what I believe is an increasingly important value driver for Lantern, our RADR AI platform and the commercial opportunities it represents independent of our drug development programs. For those less familiar with RADR, it's our proprietary AI and machine learning platform. And it's not just a tool we use internally. It's now a commercial asset with its own revenue potential, which is growing. The platform has demonstrated over 80% prediction success across multiple use cases, and now it's been validated in natural clinical trials through programs like LP-184, LP-284 and also with Actuate Therapeutics. In all cases, it's correctly predicted biomarker responses and in many cases, combination synergies before we've even actually enrolled a patient. We've developed 8 distinct AI-powered modules that address critical pain points in oncology drug development. And we've developed cases for these pain points, which we're now developing into modules for the broader drug development community. In October, we showcased the commercial readiness of 2 RADR modules at the inaugural AI Biology and Medicine Symposium. We demonstrated that our AI platform, PredictBBB achieves a 94% accuracy for BBB permeability prediction and can screen 200,000 molecular candidates in under a week. To put that in context, our algorithms currently hold 5 of the top 11 positions on the therapeutic data comments, and that's a best-in-class performance. We also presented our LBx-AI liquid biopsy platform, which has achieved 86% to 90% accuracy in predicting treatment response initially in non-small cell lung cancer, which will be very useful for us. And now we're extending it through collaborations with research centers into other indications as well. Both of these opportunities, we believe, are significant. Blood-brain barrier technology market alone is predicted to be close to $1 billion. And when you consider a very few percentage, 2% to 6% of the molecules actually cross the BBB, there is a need for better predictive tools, one that don't take weeks or months and end up destroying animals. So the need there is obvious and urgent. The interesting thing, PredictBBB is it also gives us access to a lot of other molecular characteristics of that compound, and we can predict a lot of other drug-like features that are important, both for drug manufacturing and also predicting potential drug activity once delivered internally. Now let me introduce Zeta. It's our multi-agentic AI platform for rare cancers. Very excited about this and what connects directly to our experience with both LP-184 and 284 in rare tumors like gastrointestinal and thymic carcinoma. It's our newest initiative. We're calling it withZeta. It's a multi-agentic co-scientist. Now here's the fundamental challenge. In rare cancer research and drug development, which often comes after molecule developed that often comes much later, the critical insights in rare cancers are scattered across disconnected data sources. A researcher or a clinician trying to understand treatment options for a patient with a rare sarcoma or a rare pediatric brain tumor has to manually search through clinical trial databases, PubMed genomic databases, drug interaction databases, molecular feature databases. It's fragmented, time-consuming and inevitably incomplete. For drug developers, this fragmentation slows discovery, increases cost and often means that promising connections between existing molecules or indications and rare cancer vulnerabilities are [Audio Gap]. What Zeta does is a multi-agentic AI system. Think of it as a co-scientist that addresses this problem head on or actually a series of co-scientists. We've integrated curated rare cancer databases and ontologies across over 500,000 clinical trials, 250,000 publications with over 1.2 million knowledge objects into an agentic large language model architecture that uses recursive reasoning loops to transform fragmented biomedical knowledge and insights into an interconnected investigational platform. And it interacts with you in plain English. So -- and it's an AI system that thinks like a scientist, connects dots across disparate data sources and can answer complex questions in minutes about rare cancers. These are things that would otherwise take researchers weeks or months to investigate manually. We'll dig into more of the details about Zeta in the coming days, and we'll have more information as -- but the key is that it will help you design and improve and optimize molecules that can target vulnerabilities or mechanisms across these hundreds of rare cancers. So you can ask questions to Zeta like what existing molecules with blood-brain barrier penetration have shown activity against mutations commonly found in a specific pediatric brain tumor and will search, reason and provide evidence-based answers with citations, and you'll be able to have it quickly pick potential combination regimens as well for that rare cancer benchmarked against successful and not successful trials across drug classes that you can help Zeta understand. And it can actually also predict potential efficacy in subtypes of that rare cancer and give you considerations that can then be taken to the lab. From an industry and business value perspective, withZeta delivers several things: Speed, smarter decision-making, novel discovery and potential for improved patient outcomes faster and most importantly, massive cost and time savings across the rare cancer drug development cycle. I'd like to think about withZeta strategically is that we're positioning Lantern as a unified team of AI co-scientists, always available, always updated for rare cancer research and drug development, a unified AI interface for complex scattered data and models that accelerates and improves novel therapy discovery and trial design. This is a tool that can shorten development timelines by months and years, particularly in rare cancers where that data is sparse and every delay means challenges and time and lives lost. By making Zeta available to researchers and clinicians over the next month, we'll establish Lantern as a central hub for rare cancer drug development and insights. This creates network effects, brings more users and data into our ecosystem and positions us as a trusted partner when those researchers need to take the next step, whether it's preclinical development, biomarker validation, clinical trial design or co-development. Now we believe our AI tools and services in the future can represent several hundred million dollars in stand-alone market potential and will attract a lot of interest in the broader big tech community, and but most importantly, lower the risks and costs associated with creating cancer drugs. And that's a very powerful complement to our drug development strategy. Now I'll turn over the call to our CFO, David Margrave, who will provide details on our financial results for the quarter. David Margrave: Thank you, Panna, and good morning, everyone. I'll now share some financial highlights from our third quarter ended September 30, 2025. Our R&D expenses were approximately $2.4 million for the third quarter of '25, down from approximately $3.7 million for the third quarter of 2024. The decrease was primarily due to decreases in research study and materials expenses relating to the conduct and support of clinical trials as well as decreases in consulting expenses and in payroll and compensation expenses. Our general and administrative expenses were approximately $1.9 million for the third quarter of 2025 compared to approximately $1.5 million in the prior year period. The increase was primarily attributable to increases in business development and investor relations expenditures as well as increases in other professional fees and increases in patent costs. We recorded a net loss of approximately $4.2 million for the third quarter of 2025 or $0.39 per share compared to a net loss of approximately $4.5 million or $0.42 per share for the third quarter of 2024. Our cash position, which includes cash equivalents and marketable securities was approximately $12.4 million as of September 30, 2025. We believe our cash, cash equivalents and marketable securities on hand as of the date of this earnings call will enable us to fund our anticipated operating expenses and capital expenditure requirements into approximately Q3 2026. We will need substantial additional funding in the near future, and one of our key objectives is to pursue additional funding opportunities. In July of this year, we entered into an ATM sales agreement with ThinkEquity as sales agent, pursuant to which Lantern may offer and sell up to $15.53 million of its common stock from time to time in at-the-market offerings to or through our sales agent. During the quarter ended September 30, 2025, we sold 212,444 shares of common stock under the ATM for gross proceeds of approximately $989,000. Between October 1, 2025, and the date of this earnings call, we've sold an additional 144,204 shares of common stock under the ATM for gross proceeds of approximately $634,000. As of September 30, 2025, we had 11,040,219 shares of common stock outstanding with outstanding options to purchase 1,218,828 shares and no warrants outstanding. These outstanding options, combined with our outstanding shares of common stock, give us total fully diluted shares outstanding of approximately 12.26 million shares as of September 30. And I'll now cover some near-term milestones that we think will accelerate value for investors. And these are several value-creating catalysts that we see in the near future. In the immediate near term, in this November, and Panna talked about this earlier, and we're very excited about this discussion. Next week, November 20, at 4:30 p.m. Eastern, we're going to have a KOL-hosted scientific webinar on LP-184 Phase Ia details from the clinical study and clinical development strategy. And in December of this year, we'll be giving for LP-300, an interim patient follow-up and additional clinical data. And then also in this upcoming quarter, we'll be discussing continued commercial developments for the AI platform modules, including the multi-agentic system that Panna discussed about withZeta for rare cancer development. And I'll now turn things back to Panna for some closing remarks. Panna Sharma: Thanks, David. As you know, we've had a number of catalysts and objectives that continue to '26, which you can see on the slide, but we'll be talking about those in follow-up meetings with investors as well. But as you can see, by integrating our capabilities in AI and bringing them to the public, we're not just building better tools. We're actually fundamentally reimagining what's possible in precision oncology, an era that I call the golden age of AI in medicine. As we advance into 2026, we're laser-focused on executing our dual engine strategy. We got really 2 powerful engines of the company. One is the ability to generate new molecules that are very precise and focused on very unique cancers. And the second engine is the engine of our AI platform that we're now ready to commercialize and make available. So we're advancing our clinical assets while simultaneously scaling our platform for commercial deployment. So I want to thank our exceptional team, our partners, our shareholders for their continued support. Together, we're lighting the way toward precision oncology solutions, solutions that can improve outcomes for cancer patients while very importantly, transforming the economics of drug development. With that, I'd like to open the call to questions and also thank our team for helping to prepare us for these calls and preparing the content. Panna Sharma: So we've a question in about tracking toward an interim event analysis for LP-300 trial. At the December webinar, we do not believe we'll be at the 31 events, which is good news because that means that patients are coming off of the trial. So the positive news is that patients are on the trial longer, but we will report out data, clinical data and insights that have resulted. We expect 31 events right now, we're tracking to be sometime in early '26, which we think is actually a very positive news. We do expect to see the Denmark trial. There's a question for the Denmark trial. That has now been approved. IRBs are set. project manager has been assigned. We expect that to start sometime either in late December or early January at one site, which is investigator-led in Denmark. Another question is that we've guided for an IND submission for the pediatric CNS program. Yes, now that the FDA is kind of back in business and looking and renewing new INDs, we're already prepared to submit that, and I expect that submission to happen here in the next few weeks. In terms of when we anticipate initial patient dosing, hard to say. We're already beginning discussions with sites, but I expect that to be sometime in early '26. There's a question about the withZeta portion of our AI platform. We will have additional news next week on withZeta, which is very exciting. Like most software, we expect the early rollout to be interesting and bumpy. We'll learn a lot from it. We've already begun using it internally. And in fact, we'll talk about this next week, but we've got a number of really exciting programs that have already been designed and are now being tested as a result of withZeta. But it will be available as select demo to collaborators and select partners. And so December will be a lot of demo and learning and broader rollout throughout January and February and Q1. Next question is for 184. Yes, for the indications, we do plan on figuring out what is the best of those indications where we're getting the biggest impact and move that into larger scale trials ideally with partners. As I mentioned, [ Boris ], all those indications are very exciting indications, and we've had interest from pharma companies. Of course, they want to see some of the early Phase Ib, Phase II data, but all of those are potentially partnerable. Next question is Zeta. Yes, Zeta was initially developed as a culmination of our internal efforts to develop drugs initially 184 and 284 for rare cancers. We wanted to go after categories where there was no therapy approved, categories there was high need, categories where we thought the mechanism would work and could be exploited. As we did that and we gathered information about some of these cancers, we said, well, we can do it for all rare cancers. There's no tool out there. In fact, when we talk to other rare cancer experts, many of the cancers we're pursuing, it was scattered. Papers were hard to get, hard to get in front of experts, hard to get data. Trials were oftentimes took way too long and standards of care often changed or the best drug often changed. And we said, this is part of the frustration in these cancers, and that's why they take time or too much money. What if you could actually have one source and then train that source to think in the way that a drug developer thinks. So yes, it was an internal effort, and now it's going to be a front-facing natural language interface tool. And I'm happy to give you [ Boris ], if you'd like peek at it and even early demo, happy to provide that to you. Another great question on STAR-001 trial design for pediatric brain tumors. Yes, I do believe that the trial design allows for inclusion of other pediatric high-grade gliomas. Yes, we designed it to allow for that, including specifically diffuse midline gliomas. Okay. If there are no further questions. I want to thank everyone for joining and very importantly, for listening in this morning. We know it's a little past the market open. So I appreciate all of you staying online. Thank you very much for your time, and I appreciate everyone's effort and also more importantly, your support as Lantern Pharma continues to transform drug development in oncology. David Margrave: Thanks a lot.
Operator: Greetings, and welcome to the Ardent Health Third Quarter 2025 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Dave Styblo, Senior Vice President of Investor Relations. You may begin. David Styblo: Thank you, operator, and welcome to Ardent Health's Third Quarter 2025 Earnings Conference Call. Joining me today is Ardent President and Chief Executive Officer, Marty Bonick; and Chief Financial Officer, Alfred Lumsdaine. Marty and Alfred will provide prepared remarks, and then we will open the line to questions. Before I turn the call over to Marty, I want to remind everyone that today's discussion contains forward-looking statements about future business and financial expectations. Actual results may differ significantly from those projected in today's forward-looking statements due to various risks and uncertainties, including the risks described in our periodic reports filed with the Securities and Exchange Commission. Except as required by law, we undertake no obligation to update our forward-looking statements. Further, this call will include a discussion of certain non-GAAP financial measures including adjusted EBITDA and adjusted EBITDAR. Reconciliation of these measures to the closest GAAP financial measure is included in our quarterly earnings press release, which was issued yesterday evening after the market closed and is available at ardenthealth.com. With that, I'll turn the call over to Marty. Martin Bonick: Thank you, Dave, and good morning. We appreciate everyone joining the call and webcast. Ardent finished the quarter with 2 contrasting realities. On one hand, our performance reflects a continuation of growth momentum we've experienced across our business, driven by robust demand, improving surgical trends and disciplined execution. Year-to-date, adjusted EBITDA is up 30%, and we've made meaningful progress on margin expansion, cash flow and our balance sheet with lease adjusted net leverage improving 1.5x since our IPO last summer. On the other hand, our earnings performance this quarter did not meet our expectations. As noted in our release, we've revised our full year adjusted EBITDA guidance to $530 million to $555 million, reflecting persistent industry-wide cost pressures, particularly those around professional fees and payer denials that have proven more durable than anticipated. We view this revision as a prudent recalibration grounded in a pragmatic assessment of current conditions and establishing a reset baseline from which we can build. These pressures are not demand driven and our revenue guidance remains unchanged, but our earnings pull-through has been impacted and we are taking decisive actions to address it. Through our IMPACT program, we've already launched targeted initiatives to further optimize cost and strengthen margins. These actions have been building momentum and are expected to begin contributing in the fourth quarter and will continue to ramp through 2026. With strong demand across our markets and a solid balance sheet, we remain confident in our ability to deliver sustainable growth and long-term shareholder value. To frame today's conversation, I'm going to focus my comments on 3 key areas. First, I'll walk you through our 3Q results and the strong demand environment. Second, I will provide color on the industry headwinds that are impacting 2025 earnings more than previously anticipated. And third, I will provide details of how we are already working to address and mitigate these challenges. Let's start with our third quarter performance. At a high level, we generated strong volumes and revenue growth driven by improving surgical trends and sustained strength in industry demand. Our markets are growing 2x to 3x faster than the national average and are further bolstered by rising care complexity, structural trends that reinforce our long-term growth thesis. Ardent's leading positions in these growing midsized urban markets give us a durable advantage, and these demand dynamics provide a strong foundation for continued strategic inpatient and outpatient growth. Our strong platform combined with initiatives to improve capacity and efficiency drove admissions growth of 5.8% in the quarter. This is a continuation of the favorable trends we've observed in the first half of 2025 with year-to-date admissions growing 6.7%, well above the 2% to 3% population growth we see across our markets. Additionally, adjusted admissions increased 2.9%, landing near the top end of our 2025 guidance range of 2% to 3%. Surgical volumes also improved with total surgeries up 1.4% in the third quarter, reversing a small decline of 0.4% in the first half of the year. Turning to financial performance. Revenue grew 8.8% in the quarter or 11.7%, excluding a onetime revenue adjustment that Alfred will detail later. Adjusted EBITDA increased 46% in the third quarter to $143 million, with margins expanding 240 basis points to 9.1% and further lowering our lease-adjusted net leverage from 2.7x to 2.5x. Of note, third quarter adjusted EBITDA included approximately $15 million to $20 million of earnings we previously expected to realize in the fourth quarter. Excluding this timing benefit, underlying third quarter adjusted EBITDA was below our expectations, which we factored into our updated guidance. That's a good segue to the second topic of today's discussion: industry headwinds. While our revenue growth has been strong, earnings did not reflect the level of pull-through we anticipated. First, professional fee expense growth. This has been a persistent challenge across the industry for several years now. For Ardent, growth peaked at over 30% in 2023, moderated to 12% in 2024 and was expected to moderate further this year. Instead, professional fees increased 6% in the first quarter, 9% in the second quarter and accelerated to 11% in the third quarter. We now expect second half growth in the low double digits versus the high single digits previously assumed. This accounts for roughly half of the 2025 adjusted EBITDA guidance reduction. Payer denials were the second factor impacting our adjusted EBITDA guidance outlook. After a sharp increase in denials beginning in the second quarter of 2024, trends largely stabilized through the first half of 2025 consistent with our outlook. However, these payer pressures moved higher again in the third quarter and our updated adjusted EBITDA guidance reflects the development of this trend throughout the second half of 2025. In summary, our updated outlook prudently assumes these industry headwinds observed in the third quarter will persist at elevated levels in the fourth quarter. While these dynamics are industry-wide, we are taking decisive action to mitigate their impact and strengthen our performance, which brings us to my third and most important takeaway, what we are doing to close the earnings gap. We are taking swift and decisive action to improve our near-term earnings profile while maintaining a disciplined approach to strategic investments that support long-term growth. Immediate priorities, including contract renegotiations and targeted staffing adjustments are already underway with additional initiatives ramping in early 2026 that are expected to drive measurable impact across revenue cycle, labor and supply chain performance. Under our IMPACT program, we have launched an expanded set of margin enhancement and efficiency initiatives. As an example, we've renegotiated terms of an exchange plan to secure meaningful rate improvement with an additional step-up in 2027. We've recently completed a targeted reduction in workforce, and we revised the key agency labor contracts to lower base rates and reduce premium pay. These 3 actions will phase in during the fourth quarter and reach full run rate benefit in early 2026, generating an expected annual benefit of more than $40 million. Beyond these near-term actions, we are executing on initiatives to build momentum in 2026 and beyond under the leadership of our Chief Operating Officer, Dave Caspers. These include precision staffing to better align patient care resources with real-time volumes, optimizing contract labor and accelerating speed to hire. We are also driving supply chain discipline and savings through vendor consolidation, commodity standardization and tighter inventory management. In our operating rooms, our OR excellence program is focusing on improving case mix and evaluating additional service line rationalization opportunities to ensure the right surgeries happen at the right time in the right setting. While payer headwinds remain an industry-wide challenge, we are taking proactive steps within our control to drive sustainable improvement. We've mobilized a multidisciplinary team that combines expertise in clinical operations, contracting and revenue cycle management to respond with an integrated strategy. This team is leveraging innovative processes and advanced analytics to reduce denials and aligned payer contracting to maximize net yield. Early results are promising, and we anticipate broader impact as these initiatives scale in the near term. We are also taking steps to rightsize professional fees. We are renegotiating certain vendor contracts, particularly in anesthesia to introduce more flexible cost structures that better align with patient volumes, helping to eliminate excess fixed costs in our business. Additionally, given our increased scale, we are strategically replacing [ locums ] with more cost-efficient full-time hires. Collectively, these initiatives are strengthening the organization and will better position us for future earnings growth. While industry headwinds remain, we are confident in our ability to execute with discipline and deliver long-term shareholder value. With that, I'll turn it over to Alfred to provide more detail on our third quarter financial performance and outlook. Alfred Lumsdaine: Thanks, Marty, and good morning, everyone. I'll focus my comments on third quarter performance, detail the 2 nonrecurring items we noted in our release and elaborate on our outlook for the business. Building on Marty's comments, we again delivered strong volumes during the quarter. Third quarter admissions growth was 5.8%, driven by double-digit increases in exchange and managed Medicaid, and 8% growth in non-exchange commercial. Inpatient surgery growth was 9.7% in the third quarter while outpatient surgeries declined 1.8%. Total surgeries grew 1.4% in the third quarter, which is continued improvement from a 0.7% decline in the first quarter and a 0.2% decline in the second quarter. Adjusted admissions increased 2.9% in the third quarter and are up 2.4% year-to-date, consistent with our 2025 outlook of 2% to 3% growth. Now turning to financial performance. Third quarter revenue increased 8.8% to $1.58 billion compared to the prior year, driven by adjusted admissions growth of 2.9% and net patient service revenue per adjusted admission growth of 5.8%. Excluding a nonrecurring adjustment that I'll discuss in a moment, revenue growth was 11.7%. Adjusted EBITDA increased 46% in the third quarter to $143 million compared to the prior year, and adjusted EBITDA margin increased by 240 basis points to 9.1%. Year-to-date through the third quarter, adjusted EBITDA grew 30% and margins expanded 150 basis points to 8.7% compared to the prior year. The largest driver of the third quarter margin improvement was in salaries and benefits. As a percentage of total revenue, salaries and benefits improved by 90 basis points to 42.9%, or by 200 basis points when excluding the onetime revenue adjustment. Inside of this dynamic, we're pleased with our contract labor improving to 3.5% of salaries and wages in the third quarter down from 3.8% in both the first and second quarters of this year and down from 3.9% in the same prior year period. Moving on to cash flow and liquidity. We ended the third quarter with total cash of $609 million and total debt outstanding of $1.1 billion. Our total available liquidity at the end of the third quarter was $904 million. Cash flow from operating activities during the third quarter was strong at $154 million compared to $90 million for the third quarter of 2024. Capital expenditures during the third quarter totaled $59 million, and we'd expect a modest increase in capital spending the remainder of this year. At the end of the third quarter, our total net leverage was 1.0x, and our lease adjusted net leverage was 2.5x, which is an improvement from 2.7x at the end of the second quarter. As Marty outlined, our third quarter adjusted EBITDA did not grow as fast as we previously projected due to the elevated level of professional fees and worsening payer dynamics. As a result, we're revising 2025 adjusted EBITDA guidance to $530 million to $555 million, which at the midpoint implies growth of 9% and 20 basis points of margin expansion. However, we're maintaining our previous revenue guidance of $6.2 billion to $6.45 billion or 6% growth at the midpoint. Before concluding, I'd like to elaborate on the 2 nonrecurring items we recorded in the third quarter. First, we recorded a $43 million revenue reduction as a result of a change in accounting estimate during the quarter. This change in estimate reflected our transition to the Kodiak RCA net revenue platform. As many of you may know, Kodiak is an industry-leading revenue cycle platform with more than 2,100 hospital customers, including public, private and not-for-profit health care systems. At the simplest level, this is a change in methodology to one that recognizes reserves earlier in an account's life cycle, all other things being equal. This transition reflects a strategic move from an internally developed model to an efficient and scaled system with enhanced real-time reporting capabilities, all of which are important as we grow in scale. As we indicated in our earnings release, the $43 million adjustment reduced total revenue for the third quarter, but is excluded from adjusted EBITDA. Second, we recorded an increase to our professional and general liability reserves of $54 million, fully attributable to our New Mexico market. This reserve change primarily relates to adverse claims development for a single provider who Ardent has not employed for several years as well as overall social inflationary pressures in the New Mexico market. The $54 million adjustment was recorded within third quarter other operating expenses but is excluded from adjusted EBITDA. I want to be clear, we consider both of these items isolated matters, and they were not a factor in revising our 2025 adjusted EBITDA guidance. So as we think about the business on a go-forward basis, we remain encouraged about our ability to drive durable top line growth. Our volumes have been quite strong, and we continue to execute on initiatives to optimize demand to our system. From an earnings perspective, we have a number of opportunities that we can control to drive improvement of our adjusted EBITDA base. As Marty already mentioned, many of the revenue and earnings enhancement initiatives under our IMPACT program are well underway with others expected to begin in the near term. Execution with discipline and urgency is paramount and a top priority for our entire organization. Our strong balance sheet and liquidity position give us the flexibility to invest through cycles, pursue strategic growth and support operational transformation without compromising financial discipline. We're continuing to support future growth with our outpatient build-out. In the second half of 2025, we will have opened several urgent care and imaging centers. And in 2026, we expect to open 2 ambulatory surgery centers, 4 more urgent cares and 1 freestanding emergency department. Further, our strong cash flow generation and balance sheet give us the flexibility to support strategic growth into new markets. Collectively, this positions us well to deliver long-term shareholder value, grow adjusted EBITDA and expand margins over the next several years. With that, I'll turn the call back to Marty for concluding remarks. Martin Bonick: Thank you, Alfred. I want to leave you by reinforcing 3 key takeaways. First, we operate in a strong and durable demand environment. Our markets continue to grow 2x to 3x faster than the national average, supported by demographic tailwinds and rising care complexity, structural trends that reinforce our long-term growth thesis. Second, we've prudently adjusted 2025 guidance to reflect industry pressures. And importantly, we've already begun implementing decisive actions to mitigate these challenges. Under our IMPACT program, we are harvesting operating efficiencies through initiatives in labor, supply chain and revenue cycle that will strengthen margins and position us for sustainable growth. Third, we remain financially strong and strategically positioned to create long-term shareholder value. Our balance sheet and cash generation gives us flexibility to invest through cycles and deploy capital to support long-term growth. Looking ahead, these fundamentals position us to expand margins and grow adjusted EBITDA over the next several years. Before I turn the call over for questions, I want to take a moment to thank our 24,000 team members and 1,800 affiliated providers across Ardent. As the health care industry continues to evolve, we are deeply grateful for their continued commitment to our purpose, caring for people, our patients, our communities and one another. Their resilience and focus enable us to adapt and improve how we work while continuing to deliver exceptional care to our patients. With that, I will turn the call over to the operator for our question-and-answer session. Operator: [Operator Instructions] And our first question comes from the line of Jason Cassorla with Guggenheim. Jason Cassorla: Great. It sounds like the payer denial and professional fee pressures are going to spill over into next year. There doesn't seem to be much incremental DPP development in your markets at this juncture, but there's the rural transformation fund to consider. You've discussed $40 million of annual run rate benefits from the IMPACT program next year, and demand in your market seems durable at this point. I mean your volume growth speaks to that. So maybe just stepping back, I know it's early, but for 2026, could you just help frame the headwinds and tailwinds that we should be considering a bit more? And then ultimately, if you would expect to grow EBITDA next year? Martin Bonick: Jason, this is Marty. I appreciate that. Yes, as we -- you've covered a lot in that question. As we think about where we're at, we're going to wait until our fourth quarter call in February to provide that '26 guidance, so we'll have a more complete view of pro fees and payer dynamics and progress on our income -- or our IMPACT program and the economy. And so there's a lot of things in there. But yes, you framed it right. We see strong durable demand as we go into next year. Our markets are growing. We're well positioned in those markets, and we're still executing on our outpatient development program. So a lot of positive tailwinds as we look at the growth side. Our IMPACT program, we do expect to -- it is ramping, and we expect that to continue to provide benefit, but it's a little bit too early to give definitive guidance in terms of what that growth is, where we do expect to see our long-term growth thesis continue and both EBITDA growth and margin over the next several years. Jason Cassorla: Okay. Got it. And maybe just as a follow-up. Even with the EBITDA headwinds this year, you're still producing solid free cash flow. You talked about the M&A environment, the pipeline you have, the puts and takes on how that's materializing in this volatile backdrop. Your leverage is in a solid spot. You've got $900 million of available liquidity. You've got growth opportunities ahead of you. There might be some IPO or other ownership nuances to consider. But are there discussions around the consideration of implementing a share repurchase program at this juncture? Or any thoughts around that? Alfred Lumsdaine: Jason, it's Alfred. It would be premature. We wouldn't want to speak to the Board. But I think management and the Board are committed to optimizing shareholder value. And so over time, I'm confident the Board will look at every option to optimize shareholder value. Operator: Next question comes from the line of Whit Mayo with Leerink Partners. Benjamin Mayo: I just wanted to go back to the malpractice development and why you think that this won't lift your recurring accruals given that the frequency is higher and the size of the claims is higher, and why we shouldn't also expect that your revenue yield is impacted on a go-forward basis with this payer denial issue? Or I'm sorry, not payer denial, but the revenue cycle change. Alfred Lumsdaine: Sure. Thanks, Whit. This is Alfred. There's obviously 2 questions incorporated there. I'll speak first to the New Mexico medical malpractice charge. As we indicated, 100% of that charge relates to the New Mexico market where we have seen significant social inflationary pressure in medical malpractice cases the past several years. So this is not new. There has been an increasing dynamic year-over-year of increasing premiums, increasing costs in the New Mexico market. The amount recorded in our charge represents our best estimate for Ardent's liability for this market, for the adjustment for those pressures. And for an individual provider who was with Ardent between 2019 and 2022, and who is no longer employed by Ardent and for whom the statute of limitations has expired. So I guess the short answer to your question is, yes. We do believe the environment we're in. This is a headwind to the business and has been for a number of years. This adjustment was specific to the specific set of facts around a single provider and a single market. Moving to the AR charge. I would say at the simplest level, we -- this is a change in accounting estimate. Our current net revenue model, the one that we've moved to under the Kodiak platform reserves for an account earlier in its life cycle as compared to our internally developed model, which had utilized a 180-day cliff at which time an account became fully reserved. So I would say the difference is reserve timing between the 2 models, and it results in a reduction in net revenue just upon implementation. And that reduction is essentially attributable to the fact that Ardent is a growing company. And so it's adding reserves to that, call it, that growth layer, and it's a onetime adjustment. Going forward, the models would essentially produce the same results. So we would not expect going forward, any difference between the existing or the model that we've moved to under the Kodiak platform and our previous internally developed model. Benjamin Mayo: Okay. And I think I heard -- maybe it was Marty that referenced maybe $15 million of a benefit in the third quarter that was favorable versus expectations? Maybe I got that number wrong. If you could just maybe provide a little bit more detail on that? Alfred Lumsdaine: Yes. This is Alfred again. Marty noted that we, in third quarter, we had roughly $15 million -- somewhere between $15 million and $20 million of benefit that we previously had expected in Q4. So when you think about the reduction in guidance, it's relatively evenly split between Q3 and Q4, maybe a little bit more weighted towards Q4 simply because we still are not -- until we see tangible evidence of the turn in pro fees and payer behavior, we're still expecting a little bit of an acceleration of those dynamics. Benjamin Mayo: But what exactly was the $15 million? Was it DPP or something? Alfred Lumsdaine: There was a DPP component in that. Operator: Next question comes from the line of Scott Fidel with Goldman Sachs. Scott Fidel: Just to just put a bow on Whit's last question. So just on the $15 million to $20 million, just so we make sure that we're modeling 4Q correctly. So it sounds like -- is that just all in revenue per adjusted admission and pricing in terms of how we should be thinking about that $15 million to $20 million? Or are there other line items on the expense lines that are affected as well? Alfred Lumsdaine: No, I think that's fair. This is Alfred. I think it's fair to say it's all in the [ rev per. ] Scott Fidel: Okay. And then I guess my real question would be around the payer denials and I guess sort of how you maybe think about the exit rate in terms of where that sits. I know that you gave us sort of the details in terms of how much of the guide down it reflects. Just thinking about, I guess, as you try to address this, how widespread first would you say that those -- the ramp in denial activities are across your key payers? Is it 1 or 2 of maybe who we would think to be the most likely suspects or is it more broad-based? And then I guess you're thinking about '26, and I know you're not ready or comfortable yet to provide guidance. But how will you, I guess, contemplate that level of payer denial sort of pressure, I guess? What would you sort of think about sort of just taking the 4Q and annualizing that and then sort of try to work off of that and see what you could improve and that could be upside? Or do you think that you'll be able to implement initiatives that could start to bring that down in '26 relative to the 4Q run rate? Martin Bonick: Scott, this is Marty. I'll start, and I'll let turn it over to Alfred for the second half of your question. But yes, as we look at the payer denials, we saw that initial step up in the second half of last year largely stabilized and then started to drift up and accelerated as we went into this third quarter. It's largely across the managed payers, and we've got some good data statistics to show that, which is informing how we are changing our response. Clearly, we're delivering the care. We know that the services we're providing are necessary and warranted and the payers, through policy changes and impacts are either just downgrading claims, denying claims or slow claims, all of which have had an impact, which we're describing here. The managed care -- the managed products, Medicare, Medicaid health exchanges are the culprits, and it's fairly uniform across all of those different categories. We've ramped up our contracting. We've integrated how we are approaching this from an internal perspective in terms of our teams coming together, working with our revenue cycle partner, working with our legal team, ramping up our litigation efforts and demand letters as a result because we know that these services were warranted and provided and taking steps to get more aggressive in our response and action for their behavior and push back on us. Alfred Lumsdaine: Yes. And just taking off on Marty's point, again, obviously, we're not prepared to speak to 2026 but -- in terms of financial details. But in terms of the things we're doing, Scott, as we mentioned, putting a finer bow, final denials in Q3 were up 8% over the first half of the year. So we are expecting this. We think it's prudent to continue to expect this level of denials for the immediate future. But in terms of the actions that we're taking, and we've significantly stepped up the number of appeals we're filing, I think we're up in terms of -- over the prior year, like 60% in terms of appeals. Appeal turnaround time by the same token is down 25%. And then just taking off on Marty's point on recent organization -- recent organizational changes, that has resulted in us filing 60 demand letters with payers with delinquent adjudication just in the last 90 days with an expectation of somewhere of a $15 million benefit. These are just some of the actions that we're taking. So to your point, I mean, I think it's prudent to not expect that payer behavior is going to change in the foreseeable future. And we're focused on what are the things we can do to improve the throughput and to get paid for the work that we're doing fairly. Operator: Next question comes from the line of Kevin Fischbeck with Bank of America. Kevin Fischbeck: I appreciate that you're not interested to talk about next year. I don't think almost any hospital company has talked about next year. But you have said a few times that the second half is creating a base up of which you think you can grow. Can you just help us think a little bit more about how you view this change of guidance and how if you were to pro forma the 2025 base, how we should think about that? And then we can make our own decisions about how that grows next year. Is that like the current guidance but annualized the [ 50, 55 ] And then maybe add back [ 40. ] Is that like a good way to start about 2025 on a normalized basis? Or is there something else that we should be thinking about the timing of the $15 million to $20 million? How to think about that as I try to think about what a core base '25 looks like? Alfred Lumsdaine: This is Alfred, Kevin. Thanks for the question. Yes, obviously, like you said, given the policy uncertainty and exchange uncertainty, it would be imprudent to speak to 2026 at all. But as we think about the exit run rate for 2025, again, we think it is prudent to think about the current headwinds. We think an appropriately prudent reset, which is what we've done to incorporate that is the right thing to do. And again, it would be too optimistic to think that pro fees are going to take a turn in the other direction and payer behavior. At the same time, we've already articulated some of the things that we're doing. Marty talked about the impact initiatives and the $40 million, which is actually simply incremental efforts that we've made recently that should fully manifest in the run rate next year. And there's a lot of other things we're doing from an IMPACT perspective. It's focused, I would say, in 7 buckets around revenue integrity, productivity, payer disputes, supply chain, management, purchase services, revenue cycle management and professional fees. And so we have strategies across all of those buckets. The things we can do that are in our control to combat these headwinds. Again, we think as we forecast out, it's appropriate not to believe that things are going to change fundamentally, but then what are the actions that we can take to tangibly offset that. So we would expect that $40 million to grow next year in terms of the potential offsets in IMPACT program. Again, would be preliminary to actually quantify all those dynamics for 2026. Kevin Fischbeck: Yes. Okay. That makes sense. And I guess just my second question would be, yes, you guys are growing very well. I guess though we've seen another company kind of grow by shrinking, if you will, and focusing on high-margin businesses. I just wonder, is there any scenario where some of the margin pressure that you're seeing is because of some of the volume growth that you're pursuing? Or do you believe that the cost issues are really kind of separate from that? Just trying to think through if there was another option or opportunity to improve margins in a different way. Martin Bonick: Thanks, Kevin. This is Marty. Yes, as we think about our IMPACT program, this is part of that. That IMPACT stands for improving margins, performance, agility and care transformation. And so we've talked a lot about our service line rationalization efforts and we're seeing the pull-through of growth, 9%, 9.2% growth in surgeries, strong adjusted admissions growth. We're growing that outpatient platform. And through our transfer centers, we've seen robust inpatient growth better than most of our peers. And so yes, as we look forward, we are looking at those conversations to make sure that we're maximizing the opportunities to bring the right acuity cases in there into the hospital, into our platform and making sure we can service those patients well. So yes, that's definitely part of our thinking as we continue to rationalize our services, rationalize the programs and focus on that high acuity growth. So that is part of the IMPACT program that we'll be expecting to see continued progress on as we go into next year. Alfred Lumsdaine: And this is Alfred. I would just add to what Marty said. We are committed to expanding our margins. We're not -- again, we're not speaking to 2026 as we sit here, but we continue to believe that we have a platform that can deliver mid-teens EBITDA margins, and we are focused on creating shareholder value, not just through growth but by also growing margins. Operator: Next question comes from the line of Matthew Gillmor with KeyBanc. Unknown Analyst: This is [indiscernible] on for Matt. I just wanted to ask on the professional fees. It seems like they stepped up pretty quickly. I just was asking kind of what drove this? Was this tied to any one specific contract? Any additional color that you could provide just kind of what transpired during the quarter would be helpful. Martin Bonick: Thanks, Matt. This is Marty. As we look at the last several years, we sort of detailed out how these fees have grown, and they are moderating, just not quite to the extent that we anticipated. But what gives us a little bit more confidence is this has gone in cycles, and we've seen the rise in ER, anesthesia. This year, we've seen a little bit more pressure on radiology. And so as we lap through these contract renewals, we've got better visibility with the terms in which we're negotiating. We've got preferred partners in most of these specialties now that are giving us the ability to pool our resources across markets and make sure that we can demonstrate strength and visibility in terms of these trends. And as we've lapped through now, most of these specialties that gives us better visibility that we will continue to see moderation as we go forward, hopefully at a slower pace than what we've experienced thus far. But yes, this year, the radiology step-up accounts for a lot of the increases that we've seen. Unknown Analyst: Helpful. And then just as a follow-up, I wanted to touch on the partnership with Ensemble. I guess are they seeing similar payer denials across their network? Or is this more isolated to your partnership? Martin Bonick: Yes. So as we look at the national statistics, we're still outperforming sort of the national benchmarks with Ensemble. So they've been a strong partner to us, and we've seen a step up and that step-up is seen across the industry. We're not -- I'd say we're growing the trend of denials inside of that and still better than average across the industry, but more than we had expected. So they've been a strong partner for us. We know they're investing a lot in their capabilities just to continue to make sure that we've got clean claims going out the front door and taking away those opportunities for denials to happen. And we can see that in that and the payers have just gotten more aggressive at unilaterally either down quoting claims or flat out denying claims to [indiscernible] is an example that stands out as continued pressure across the industry. So those are -- Ensemble is performing very well, better than the average. It's just that the entire environment has gotten more difficult. Operator: Next question comes from the line of Raj Kumar with Stephens. Raj Kumar: Maybe just kind of touching on the EBITDA margin expansion still targeting mid-teens. Kind of given the rebasing of 2025, that would kind of imply instead of $100 million to $200 million of core margin expansion, that's like 200, 300 now. Does that change the time line of achieving that mid-teens EBITDA target? Or do you think that over '26, '27 and '28, that time line still stays intact? Alfred Lumsdaine: Thanks, Raj. This is Alfred. No, good question. And I think it's -- it would, again, be early to give specificity. I mean, it is fair to say, right, that with these headwinds that there is near-term pressure that wasn't expected and that all things being equal, that it would extend the time line out. And as we've said, we are focused intensely on accelerating and increasing the volume of the impact programs to offset these headwinds. So I think when we come to 2026 guidance, we'll be in a better position to frame those time lines out a little bit better and put additional quantification around the IMPACT programs. But again, the message I would want you to take away is that the we are intensely focused on increasing the aperture of offsets given these headwinds and are accelerating those -- that intensity in order to, as much as possible, stay on the time line. Raj Kumar: Got it. And then kind of as my follow-up, just looking at the exchange markets, it seems like kind of one of your core states, New Mexico is looking to kind of fully fund the enhanced subsidies up to 400% of FPL, kind of do internal means next year. So it seems like a kind of cushion to the potential headwind on the enhanced subsidy side. And then you talked about your contracting dynamics in Texas. So maybe just kind of any updated framing you can provide on that front in terms of -- I know maybe not a -- probably not a number given that uncomfortability on 2026 framing, but just any kind of gives and takes on that front would be helpful. Alfred Lumsdaine: No. Good question. And again, I think, I mean, great to call out that there will be the individual states are not going to sit by and a lot will obviously still depend on what is the ultimate outcome of the exchanges, still very much in the air and anybody's guess into where it ultimately land is. But I your example of what New Mexico has come out is a good one that -- and again, it's one of the reasons why it would be very imprudent to forecast. What we have obviously said and our exposure to exchange lives is lower than many in the industry. And although it has been the single largest driver of growth among our payer mix this year. So important to us. But as we continue to say, not an extremely highly profitable segment of our business. And yes, we're keeping a close eye on all those dynamics within the states. But again, good call out on the New Mexico land. Operator: Next question comes from the line of Craig Hettenbach with Morgan Stanley. Craig Hettenbach: Just going back to the IMPACT program. Is this really kind of an acceleration of pull forward in terms of time line? Or do you think over time, you could expand that program further? How do you think about that? Martin Bonick: Craig, this is Marty. It's both. These efforts don't just produce immediate value. There's a number of things in line, and we sort of bucket them into the revenue cycle, supply chain and SWB. And so all of those things have various initiatives underway, that's what give us confidence that we'll see these things continue to provide benefit, and it starts to provide more benefit in Q4 and then continue to ramp as we go through the year. And we're adding to that. This is really a focused effort across the organization, led by our COO, Dave Caspers, and his focus in getting all of our teams marching in the same direction around these IMPACT initiatives. And so we've got good conviction that as these things continue to ramp that it's spurring more opportunities and presenting more levers for us to continue to pull, but it does take some time for this to get going, and we can start to see that momentum building, and we'll continue to build. So that's the way in which we're looking at that going forward. Craig Hettenbach: Got it. And then just a follow-up, Marty, just given some of the challenges near term on profitability. How does that, if at all, kind of influence some of the growth initiatives that you have? Like can you kind of handle some of this and still kind of march forward? Or do you pause a little bit? How are you kind of planning around that? Martin Bonick: Yes, no. I mean it doesn't impact our focus on growth. This -- we went public last summer with a thesis around growth starting in our core markets, and we've continued to execute on that. As Alfred referenced, we've opened more urgent cares. Next year, we'll be opening 2 ambulatory surgery centers at least that those are already well underway and continuing to build out that outpatient platform. Our Chief Development Officer has been very active since he began several months ago, building interest in our partnership model, both to continue the expansion of growth within our core markets as well as looking for new market opportunities. We've got the balance sheet to support that growth. And we don't -- we are not deterred by this short-term headwind. When we look at it, we're still showing with this guidance, 9% EBITDA growth. That's nothing to be ashamed about not as robust as we anticipated, but certainly strong growth helping us to delever the balance sheet and putting us in a position to continue to capitalize on these trends across the industry. So no, not deterred at all. Operator: Next question comes from the line of Ben Hendrix with RBC. Benjamin Hendrix: Great. I believe you mentioned in your prepared remarks the one exchange contract renegotiation, and I know you've called out elevated denial activity in exchanges on the second quarter call and potential to renegotiate or even maybe exit some contracts. I'm wondering just how much of this denial activity headwind you believe you could address in the near term from kind of shrinking your already small footprint in exchanges and exiting certain contracts or renegotiating. Martin Bonick: Yes, that's a great call out, Ben. Yes. And the one contract that we cited in prepared remarks is just one example of the tangible things we're doing, and we put that into the revenue integrity bucket under our impact initiatives. And it is an example that -- to the earlier question, we're not just going to grow to grow from a top line perspective. We have to see profitable pull-through. And the changes we've made from an organization structure to create alignment between our revenue cycle and our payer operations should continue to yield more opportunities in this area. It does take time. It does take time to say, put out an early termination. And then hopefully, that can yield a renegotiation of appropriate terms. The example that we cited here was one where we were seeing a significant margin erosion in this contract from payer denial activity. We turned it, payer came back to the table, we negotiated a better rate and better terms to prevent the denial activity that we were seeing. And so again, just a tangible example, but a good call out of things that we are doing and accelerating from an offset perspective. And again, we'll be incorporating the strategies into our 2026 view. Operator: [Operator Instructions] And we'll take our last question from Benjamin Rossi with JPMorgan. Benjamin Rossi: Just following up on the negotiations and just where your commercial negotiations stand for 2026, 2027, and maybe now even 2028. I believe last quarter, you said you were about 55% for 2026. How are those conversations coming along? How much of those contracts have been negotiated at this point? And how do those contracts compare to the last couple of negotiation cycles? Alfred Lumsdaine: Sure. This is Alfred. Good question. Compared to when we last spoke, we're about -- we're close to 3 quarters contracted for 2026. I would say the headline rates are -- have hedged down from historical levels. It is a tougher environment. You've heard it in all the payers. We're getting closer to what I would call the traditional type of increases. And we're very focused, not just on that top line rate, but also creating the things that lead to better yield under our contracts to stem some of the denial activity. So it's not just a -- it's important not just to think about a top line number, but more important to think about the ultimate yield under our contracts. And I would say that is a much greater focus than in past renewal cycles. Benjamin Rossi: Got it. Appreciate the color. I guess just as a follow-up maybe on why you're seeing higher denials here. I guess just on your rates, were your rates here higher than the industry average in your markets? You've noted that your [ NJ ] pricing is the highest in the state? Or is there any particular states where your denial activity was higher or maybe where you're overindexed? Martin Bonick: Ben, this is Marty. No, I wouldn't characterize it exactly that way. For the most part, we arethe value-based provider in our markets. While we have leading shares #1 or #2 in the majority of our markets, from a payer perspective, we're still a little bit behind a lot of those trends. And so our managed care team has been working to bridge that gap, but I wouldn't say that our rates are particularly higher in our markets, the activity across the payers, and I think that the pain that they're seeing is trickling down into the provider segment. So we know that we've still got opportunity to continue to bridge that gap and to strengthen our performance. But again, it's not just headline right, as Alfred was talking about. It's getting to the terms because more and more increasingly, we're seeing the sort of technical denials or payment slowdowns because of policy changes that are outside of the contract. And so we're trying to button down the hatches to make sure that, again, whatever that top line increase that we are able to negotiate with payers is translating into bottom line yield. Operator: That will close the question-and-answer session. I would like to turn the call back over to Marty Bonick for closing remarks. Martin Bonick: Thank you. As we conclude, I just want to thank the investor community for their interest in Ardent, and thank our teams across the company for their continued commitment and resilience in fulfilling our purpose. As we've talked about, we operate in a very strong and durable demand environment. And while these industry pressures have impacted near-term earnings, we've taken decisive actions to mitigate those challenges and continue to strengthen our performance. Our IMPACT programs are ramping and delivering meaningful efficiencies and our financial strength is going to give us that flexibility to continue to invest in our -- and pursue strategic growth. Looking ahead, we're very confident that these fundamentals position us to expand margin and grow adjusted EBITDA over the next several years. So thank you all for your continued support, and this concludes our call. Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining in. You may now disconnect.
Miranda Hunter: Good morning, and welcome to Fidelis Insurance Group's Third Quarter 2025 Earnings Conference Call. With me today are Dan Burrows, our CEO, Allan Decleir, our CFO, and Jonathan Strickle, our Group Managing Director. Before we begin, I'd like to remind everyone that statements made during the call, including the question and answer section, include forward-looking statements. Management's comments regarding expectations, projections, targets, and any future results are based on current assessments and assumptions and are subject to a number of risks, uncertainties, and emerging information developing over time. It's important to note that actual results may differ materially from those expressed or implied today. Additional information regarding factors shaping these outcomes can be found in Fidelis' SEC filings, including our earnings press release issued last night. Management will also make reference to certain non-GAAP and proprietary measures of financial performance. The reconciliations to US GAAP for each non-GAAP financial measure, as well as our descriptions of proprietary financial measures, can be found in our earnings press release available on our website at fidelisinsurance.com. With that, I'll turn the call over to Dan. Dan Burrows: Thanks, Miranda. Good morning, everyone, and thank you for joining us on our call today. Our excellent third quarter performance is a reflection of three key points that we hope you will take away from this call this morning. Firstly, we delivered outstanding results. This performance demonstrates the strength of our portfolio and the success of our underwriting strategy. Our combined ratio for the quarter was 79%, our best as a publicly traded company, and an improvement of more than eight points from the same quarter last year. Our annualized operating ROAE was 21.4%, which represents an increase of five points year over year. We also grew diluted book value per share by $1.25 in the quarter. Secondly, we expect to continue driving profitable growth. We delivered strong top-line growth of 8% for the quarter, in line with our target range of 6% to 10% for the year. This performance reflects our leadership in lines of business with more pronounced verticalization. We are leveraging our deep relationships and unique market access to continue broadening our distribution network and creating attractive growth opportunities in a prevailing hard market. That brings us to our third key message, which is our ongoing focus on dedicated capital allocation and expert risk selection. That means we strategically determine the best risk-reward opportunities, balancing profitable growth with returning capital to shareholders through share repurchases and dividends. It also means working with our growing network of underwriting partners to select the optimal risks in line with our strategy. Turning to performance across each of our segments, within insurance, we delivered 4% growth on gross premiums written in the quarter. As we continued to strategically deploy capital into areas of opportunity and margin, we saw strong performance from our property and asset-backed finance, portfolio credit books, and our overall RPI remained broadly flat, reflecting our differentiated position, business mix, and product diversification, as well as our ability to effectively navigate market conditions and capitalize on cross-selling opportunities. As a reminder, RPI reflects price, terms, and conditions. Our direct property book grew 9.5% for the same period year on year, driven by new opportunities at compelling pricing. Given the pronounced verticalization of the property market, we are able to leverage our deep multiline relationships, meaningful line size, and unique access to secure attractive rates, terms, and conditions. We also continue to benefit from a strong flow of new business moving from the admitted markets to the E&S market. For example, in the quarter, we identified a flow of new high-value homeowners business opportunities. Our client and business retention rates continue to be strong, and we delivered an RPI that was broadly in line with the previous quarter. Even though rates have decreased in certain areas, our portfolio continues to deliver pricing which produces attractive margin, enhanced by our ability to capitalize on favorable pricing dynamics in the facultative market. Additionally, terms and conditions in the property market have significantly improved following the substantial changes achieved during the hard market over the past seven years. As a result, we are able to maintain attractive margins in this important line of business. Asset-backed finance and portfolio credit have remained key drivers of growth. We are converting on our pipeline of strong opportunities, including through our new underwriting partners. This business is highly bespoke in nature, and buying motivation is driven by capital relief or underlying transaction facilitation. These bespoke offerings are largely unaffected by traditional insurance pricing cycles. As a leader in this space, we execute on our terms. Across other major lines of business within the insurance segment, performance has remained consistent with expectations. In the aviation hull and liability sector, we're beginning to see encouraging signs, and let me remind you that this is a highly verticalized market. As a leader, we set pricing at the top of the market ranges as well as other differentiated terms. We will remain cautious in this line and will continue to monitor trends throughout the balance of the year, selectively deploying on opportunities where we believe price adequately reflects risk. In marine, we're again seeing signs of widening verticalization. We continue to leverage our ability to offer leading capacity across all the major subclasses to balance our portfolio in line with appetite and maintain overall margin. New builders' construction opportunities continue to support growth in the portfolio. Turning to reinsurance, we delivered 20% year-on-year premium growth, driven by enhanced pricing at seven one. We capitalized on attractive post-wildfire opportunities, which presented significant price increases supporting our renewal book as well as the ability to add new business. Overall, the RPI in reinsurance for the quarter was positive, supported by double-digit increases on the US book driven by post-loss pricing. While we saw more pressure across international pricing, we continue to see margin across the portfolio following prior year increases. Our focus is on maintaining coverage and structure, taking a disciplined stance to pricing as we evaluate the portfolio. Pricing dynamics continue to develop in the lead-up to January the first renewals. We are leveraging the interplay between our inwards portfolio and outwards reinsurance to enhance overall portfolio efficiency. We believe that current dynamics will provide attractive opportunities to further strengthen our protections. As a reminder, we use proportional reinsurance as a valuable tool to create underwriting leverage, which, depending on peril and/or territory, can be up to 60%. This supports our gross-to-net line size strategy, enabling us to deploy as a leader with meaningful capacity, working with our core partners across our portfolio. We are pleased to have renewed our whole account quota share with Travelers for 2026. They continue to be a valued and strategic partner. With that, I will turn it over to Allan to discuss our financial results in more detail, and then Jonathan will cover our underwriting risk selection strategy. Allan Decleir: Thanks, Dan, and good morning, everyone. Taking a closer look at our quarterly results, we had an excellent third quarter with operating net income of $127 million or $1.21 per diluted common share, resulting in an annualized operating return on average equity of 21.4%. We also continued to grow our book value per diluted common share to $23.29. Including dividends, this is an increase of 8.3% since year-end. In the third quarter, we grew our gross premiums written by 8% to $798 million, bringing our year-to-date gross premiums written to $3.7 billion, also an increase of 8% versus the same period last year. In the insurance segment, gross premiums written increased by 4% in the quarter to $606 million. We saw continued growth from new business in our asset-backed finance and portfolio credit line of business. Meanwhile, in the reinsurance segment, gross premiums written grew to $192 million for the quarter, compared to $159 million in the prior year period. The increase relates to new business opportunities, including from loss-impacted accounts following the California wildfires. Our net premiums written increased by 8% versus 2024, in line with our growth in gross premiums written. Our net premiums earned decreased by 5% versus 2024. The decrease was driven by business mix, as a result of higher gross premiums written in lines of business with longer earnings patterns, such as asset-backed finance and portfolio credit. On a year-to-date basis, our net premiums earned have increased by 7%, which aligns with our gross premiums written growth of 8% for the same period. Our excellent underwriting performance resulted in a combined ratio of 79% for the quarter, our best as a publicly traded company, and more than eight points better than 2024. I'll break down the components of the combined ratio in more detail. During the third quarter, our attritional loss ratio continued to trend positively, improving to 23.2%. This compares to 24.7% in 2024, reflecting the continued strength of our portfolio. For the third quarter, our catastrophe and large losses were $57 million or 9.6 points of the combined ratio, an improvement compared to the same period last year where our losses were $92 million or 14.4 points. We recognized net favorable prior year development of $16 million for the quarter, compared to $10 million in the prior year period. Of the $16 million recognized in the quarter, $3 million was in the insurance segment and $13 million in the reinsurance segment, which was driven by positive development on prior year catastrophe losses and benign prior year attritional experience. Turning to expenses, policy acquisition expenses from third parties were 29.9 points of the combined ratio for the quarter, compared with 31 points in the prior year period. While we may see movements quarter to quarter, policy acquisition expenses are in line with expectations. We continue to anticipate our annual policy acquisition expense ratio to be in the low thirties for insurance and in the mid-twenties for reinsurance, in line with our year-to-date results of 30.4 points in insurance and 26.1 points in reinsurance. For the quarter, PFP commissions accounted for 14.5 points of the combined ratio, compared to 15.3 points in 2024. This decrease was due to underwriting profits from TFP not meeting the required 5% annual hurdle rate in 2025. Therefore, we have not accrued any profit commission as it is calculated based on annual performance. Finally, our general and administrative expenses were $27 million versus $23 million in 2024. Our year-to-date G&A of $72 million continues to trend below our expected $26 million per quarter as a result of lower accrued variable compensation. Moving on to our investment results, our net investment income for the quarter was $46 million, compared to $52 million in the prior year period. In addition to our net investment income, we have net unrealized gains on our other investments of $5 million as a result of our strategic deployment of assets into alternative investments, including a hedge fund portfolio which began in 2024. As of September 30, the average rating of our fixed income securities remains very high at A+ with a book yield of 5%, reflecting the steps we have already taken to optimize our portfolio. Average duration remains consistent with year-end at 2.7 years. Turning to tax, our effective tax rate for the first nine months of the year was 18.8%, compared to 14.6% in the same period of 2024. This rate reflects a greater proportion of pretax income generated in higher tax rate jurisdictions. To reiterate what I said on the last call, we expect our full-year effective tax rate to remain in the 19% range given the expected mix of profits and losses across our three locations. Looking at our capital management strategy, as Dan mentioned, our focus is on being best-in-class capital allocators. Our approach begins with deploying capital into the most attractive underwriting opportunities. We also use outward reinsurance as a strategic and fungible tool to support growth and optimize our capital structure. We remain committed to returning excess capital to shareholders through a mix of dividends and share buybacks. Our focused and disciplined approach ensures we are well-positioned to maximize value for our shareholders while maintaining the financial strength and flexibility to support our long-term strategic objectives. We continue to view share repurchase as a highly accretive use of capital given our current share price. In the third quarter, we repurchased 1.8 million common shares for $32 million at an average price of $17.40 per share. Subsequent to September 30 and through November 7, we repurchased an additional 820,000 common shares for $15 million at an average price of $18.25 per share. This brings our shares repurchased for 2025 to 9.6 million common shares at an average price of $16.46, and thus highly accretive on both a book value and earnings per share basis to our shareholders. In conclusion, our results this quarter demonstrate the strength of our portfolio, the effectiveness of our approach to investments and capital management, and our commitment to delivering returns to shareholders. I will now turn it to Jonathan, who will discuss our underwriting partnerships and market outlook by line of business. Jonathan Strickle: Thank you, Allan. As Dan mentioned earlier, our third quarter results reflect positive contributions from the continued expansion of our underwriting partnerships. Today, our total number of underwriting partners has grown to the mid-single digits. While we don't break out the individual collective contributions of these partnerships, they remain a strategic priority and play an increasingly important role in our growth and differentiation as we shape the future trajectory of our business. Building on Allan's comments about capital management, our top priority is allocating capital to underwriting strategies offering the best risk-reward dynamics, and then determining the best partners to help us execute. Our cornerstone relationship with the Fidelis partnership provides consistent access to a leading, well-established book of specialty business. We have exclusive access via our right of first refusal on all business written by the Fidelis partnership. Under our ten-year rolling agreement, only business that is not within our underwriting strategy and which we decline to support is then available for the Fidelis partnership to place with other capital providers. Importantly, our agreement gives us significant flexibility when it comes to allocating any additional capacity we wish to deploy. This allows us to choose the most suitable underwriting partners in a particular area, whether that's the Fidelis partnership or other partners in our network. Our robust pipeline of new partnership opportunities with top-tier underwriters provides valuable complementary growth prospects. Our focus remains on risk-reward, margin, and pricing adequacy. As a market leader, we are disciplined in maintaining underwriting standards, even as we see competition increasing in certain lines. It's important to remember it remains a highly attractive underwriting environment following several years of compound rate increases that have significantly improved margins, structures, and terms and conditions. Taking a closer look at opportunities we're seeing across our segments, property insurance continues to deliver compelling loss ratios that reflect both our ability to risk select and to achieve differentiated pricing. We've maintained high retention rates, and we've complemented our portfolio by allocating capital to new business opportunities through a growing set of distribution channels. As a leader in a verticalized market, we continue to underwrite business with attractive margins across the portfolio. In other traditional specialty lines, we continue to exercise strict underwriting discipline and capitalize on areas with the most attractive rate and margin. For example, in marine construction, new business opportunities have allowed us to continue to grow in an area that remains well-priced. And as we noted last quarter, we're seeing signs of improvement in areas of aviation pricing following recent loss events. Outside of our traditional specialty lines, a significant portion of our insurance business is largely unaffected by the broader market cycle, particularly where placements are linked to the facilitation of underlying transactions or provide significant capital relief for our clients. In structured credit, we continue to see attractive opportunities from a risk-return standpoint, supported by our long track record and strong client relationships. We have built a robust suite of products and established a track record of customization in this space. These lines of business have been a consistent outperformer and differentiator for us over the past decade. Our current focus is on introducing these capabilities to an ever-increasing client base. We are monitoring a strong pipeline heading into year-end and are actively structuring programs for both new and existing clients. Turning to reinsurance, even if pricing moves back towards levels seen in the last couple of years, remember these years represented one of the best trading environments we've experienced in the past two decades. As a result, we remain in a prevailing hard market and are still seeing significant margin in property cat reinsurance. Our priority is to maintain discipline, particularly in upholding coverage, terms, and conditions, and continue to capitalize on the most compelling opportunities. At the same time, we are further enhancing our outward reinsurance, combining traditional reinsurance protections and alternative risk transfer mechanisms such as cat bonds, to achieve optimal portfolio protection. For these reasons, we remain confident in our ability to deliver compelling underwriting margins across our segments. I will now turn it back to Dan for closing remarks. Dan Burrows: Thank you, Jonathan. Let me leave you with a few final thoughts before we take your questions. As this excellent quarter demonstrates, we are delivering results through expert risk selection, strategic capital allocation, and a growing network of underwriting partners. We just reported our best quarterly combined ratio as a publicly traded company, and we are driving consistently higher diluted book value per share. In a prevailing hard market, our lead positioning in highly verticalized lines of business is a clear differentiator and a competitive advantage. This enables us to continue driving profitable growth and preserving strong margins even if rates become pressured in certain pockets. Our strong balance sheet gives us significant flexibility to shape our future. We are focused on striking the optimal balance between underwriting growth and other strategic uses of capital to ensure every dollar we deploy delivers attractive returns for our shareholders. With that, operator, we will now open the line for questions. Operator: We will now begin the question and answer session. Again, to ask a question, please press star followed by one. Before we take your questions, I'd like to kindly ask everyone to please limit your questions to one primary question along with a single follow-up. If you have any further questions, please rejoin the queue. With that, our first question comes from the line of David Motemaden from Evercore ISI. David, please go ahead. Your line is now open. David Motemaden: Hey, thanks. Good morning. Just had a question, Dan, just in terms of how you're thinking about you obviously saw the good growth in reinsurance this quarter. How are you thinking about just the one-one renewals both from an inwards and outwards perspective and know, sort of expectations, I'd be interested if you guys think just holistically, you guys can do the same sort of top-line growth for the company as you did this year in 2026? Dan Burrows: Thanks, David. It's a really interesting question. It's Dan here. So I think fundamentally, we're still bullish about the market. We still think, as others have commented, that we're in a prevailing hard market. In many lines of business, we're still very much very near the kind of peak of market that we've seen, you know, the best market conditions in the last twenty years. So I think that gives us confidence that, a, the portfolio performed really well in the quarter, and, b, that there are opportunities to grow. And I think when we look at that, looking forward, that will be with both the Fidelis partnership and now importantly through our network of new underwriting partners. So I think, you know, we're looking for best-in-class A property MGA in California, and we built a really strong mic Partnerships. We onboarded in Q3. pipeline moving into head to one-one. That's really building on the strong relationships that we have in the industry. So I think we're really excited about executing on that strategy. We do see growth opportunities across the book. Very verticalized market. You've heard us mention that. In previous calls and in the script. That that is broadening. Rates, term, and conditions really are becoming more differentiated by carrier. Really depends now where you sit in the food chain. We're a lead market. We get leverage through that. We have over a 100 lines of business that we set terms, conditions, and we execute on those. So we have a differentiated outcome, and I think that plays through the result. In our APIs and our ability to grow moving forward. I think the second part looking at outreach reinsurance yet, very important interplay between inwards and outwards aligning coverage, looking for efficiency next year in our retro session programs. We do use proportional, to gross our lines up. That's a really important part of being a leader. The gross to net strategy. I think we'll be looking to broaden cover, look for efficiency in the outwards program, If you remember last year, when we commented on the one-one outwards program renewals, we did actually see that market as the most competitive. And I think we'll see more of the same moving into one-one. There's more supply obviously, across, you know, insurance and reinsurance. We do expect more demand as well, but we think that's going to be a really competitive market. David Motemaden: Got it. Thank you. And maybe just following up, just it sounded like the RPIs that you disclosed were generally stable this quarter versus last quarter. Yep. Was that I mean, it sounds like there's still pressure particularly in some of the property lines. So I'm wondering, that just less this quarter? Were you did you put more outwards on at favorable terms that kind of offset that? Because I know that's included in the RPI. Just hoping to get some color around that as well. Dan Burrows: Can you ex Exactly right, David. I think there is definitely more pressure in certain lines, proper direct is certainly one of those. And then, again, that's why it's important to be able to deploy meaningful capacity as a leader. Also, you know, cross-class selling. If you're offering multi-class capacity to a client, to a broker, it kind of gives you that leader leverage. We've got really strong retention rates in the book. Really strong margins that built up over compound increases for the last five to seven years. It's been an incredibly strong performer. Our direct property book is running at 40% loss ratios, and we're still seeing a flow of business from admitted market into the ENS market. You know, when we think about the quarter, we also on some hot new high-value homeowners business. There are opportunities out there just got to work a lot harder and, you know, when we think about RPIs, you're right, David, it's not just price terms, conditions, and, you know, what we're seeing is coverage structures, retentions, are holding firm. They're pretty robust. And the pressure is more on pricing. But even saying that, there's plenty of good margin in the book. David Motemaden: Got it. Thanks. And maybe if I could just sneak one more in. So it sounded like the direct property group sorry, direct property book grew 10% in the quarter. You know, just given what sounded like elevated competition there, it sounded like some new home owned business helped that. I'm wondering if there you know, any sort of tailwind that you guys might seen or or you guys think might be coming just from some of the construction of data centers, if that's a line that you guys are in in terms of providing capacity on those, on those deals. Jonathan Strickle: Hey, David. It's Johnny here. I'll take that one. Mean, I think that's a great example of our strategy to be proactive in responding to changing risk landscape mean, you look at that type of risk, there's really large insured values there. It's difficult to be meaningful on that type of placement unless you've got a large line size. It's one of the benefits of the structure we have here at Fidelis. So through our right first refusal with the partnership, we can take the line size that we'd want to deploy on that type of opportunity and then align up other capacity providers behind us to have an overall larger line size for them to go to market with. That then lets them be meaningful in the placement so they can negotiate pricing terms and conditions and we can benefit from the leverage of that without having a line size that would unbalance our portfolio. So, yeah, we're really excited by that opportunity it's something that I think would be more difficult to on unless you have the structure that we have. David Motemaden: Got it. Thanks, guys. Operator: Thank you. The next question today comes from the line of Meyer Shields from KBW. Please go ahead. Your line is now open. Meyer Shields: Thanks so much. I was hoping to talk a little bit about verticalization because just wanna make sure I understand it. Should we think of this as a typical soft market phenomenon? Dan Burrows: Hi, Meyer. It's Dan. Actually, it's a phenomenon that is prevalent in both you know, both hard and a softening market. So we see it across a cycle. I think in more recent cycles, it's actually been exaggerated. Now we're seeing a more differentiated position as there's a bit more competition. So as I said earlier, being a lead you sit at the top of the food chain you see risks first, you can set terms, conditions, can execute even before others see it. So brokers bring you the opportunities say say new business and growth, and we can execute on that. So there's a real difference between market makers and the market takers here. Or price takers. I think it's very important, you know, that you we continue to back leaders that have track records over many decades in the market. That can manage through the cycle. Richland and the underwriters at TFP have demonstrated that. When we look for new partners, we want track records. We want them to be able to trade through different markets cycles. And we're really excited about the pipeline we built there as well. Meyer Shields: Okay. Thank you. That's helpful. Second question, there does seem to be a little bit of disruption in The US wholesale market, and, you know, it seems to be just the implications of how in building a retail platform. I was wondering if there's an update in terms of how the, really the challenges and opportunities that that presents. Dan Burrows: Yeah. Interesting question. It's Dan again. I think the short answer to that is can definitely say we've seen some opportunities coming out of that. But I wouldn't really wanna comment anymore on how the strategy and what that means to the market other than we are seeing opportunities because of that. Meyer Shields: Okay. That's good, man. Thanks so much. Operator: Thank you. The next question today comes from the line of Leon Cooperman from Omega Family Office. Thank you. Let me first congratulate you on a good quarter. Know, and excellent results. I still get mystified, you know, I'm a I'm not an insurance expert, I do look at numbers closely. We have superior profitability to the primary insurance carriers. And the reinsurance peers. Yeah. We sell a very significant discount in our multiple there something you're hearing about our business prospects? That would suggest we deserve to sell a discount multiple? Dan Burrows: Yes. Thanks, Lee. Appreciate the question. It's Dan here. Yes. Look, we just had our best quarter our best combined ratio since IPO. I think to unlock value, we really need to be consistent and deliver strong underwriting results quarter on quarter. Agree with you. Think we're undervalued. You know, especially given results like this. Our opportunity to grow profitably. And sustainably, And now we're, you know, with a very strong balance sheet, that we've built over the last couple of years, we can grow not only with the TFP but other best in class underwriters. Richard sets a very high benchmark and anyone we're considering would have to meet or beat that. But they do exist, and that gives us confidence that we continue to grow, continue to deliver good combined ratios and good ROEs that will unlock the value. But, yeah, fundamentally, we agree with you We are, you know, we're undervalued at the moment. Leon Cooperman: Well, basically, in the last call, talked about 12 to 16% return on equity. And we're now running over 20. Are we over earning or would you raise the target of being sustainable 20% ROE is realistic to where you're running the business. Yeah. Good question. I think you know, we state our financial metrics as being through the cycle. I think we're comfortable where we are now. But it does obviously demonstrate the strength of the underlying portfolio. Dan Burrows: So if I took the dollar 20, whatever the number was in the third quarter, multiply it by four, that would not be out of line with what you're thinking for next year? Leon Cooperman: Yeah. It's a good question. I think if we can continue to deliver quarter on quarter, then that's where we're heading, Lee. Dan Burrows: The stock is showing you, like, five times earnings. Doesn't make any sense. We're doing the right thing and it's freaking the cap. Leon Cooperman: With we'll see what happens. Dan Burrows: Yep. We're working hard later to develop deliver value to every shareholder. So, you know, all we can do is continue to deliver quarter on quarter. Allan Decleir: Thank you. Operator: Next question today comes from the line of Brian Meredith from UBS. Please go ahead. Your line is now open. Brian Meredith: Yes, thanks. A couple of them here. Just first, any exposure to some of the Caribbean losses in the quarter from the hurricane? Dan Burrows: Yeah. Thanks, Brian. Look. Firstly, obviously, a tragic event the island of Jamaica and like many others, our thoughts are with all those people. We do have some exposure with respect to loss impact for us. It's just too early. Give detailed numbers on that. I would say based on our initial analysis, we would expect any, you know, net losses would fall within our expected cat load. To be honest, Brian, that's about as much as I can say at the moment. Brian Meredith: K. Thanks. And then second question, I'm just curious. Could you talk maybe a little bit about your, you know, either some of the partnerships or capabilities to kind of take advantage of whole data center construction you know, build out and all the insurance opportunities there? Jonathan Strickle: Hey, Brian. It's Johnny here. Yeah. I'll take that one. I think as we were saying earlier, it's really about having a meaningful line size to be able to participate on those programs in the first place. And an even bigger line size than would normally be deployed in order to be meaningful enough to drive pricing terms and conditions on it. So that's the core of the strategy. Now, we would choose reinsurance to gross our line size up anyway. If we take 50% reinsurance, for example, a line of business, that means we can double the gross line we put out and still be happy with our net position. So that's one part of our strategy to help deploy in a more meaningful way on this type of program. And the other one really comes from our structure. So, with the structure with the Fidelis we can put down the line that we would like, they have other capital providers that can then come in and put more capacity behind that. They can go with that combined proposition and negotiate as one and get terms and conditions that benefit all. So for us, I think the strategy of deploying in a meaningful way is key across our portfolio. No doubt. I think that's one of the big drivers in terms of price differentiation. But on this type of opportunity, it lets you get in there first, be meaningful, and really lead the market. Brian Meredith: Makes sense. Thank you. Operator: Thank you. The next question today comes from the line of Alex Scott from Barclays. Please go ahead. Your line is now open. Alex Scott: Hi. I just wanted to ask about TFP setting up a Lloyd's syndicate and you all not participating is that a sign that you're getting more selective they're feeling the need to to go elsewhere because you're know, maybe refusing a little more of the business that's coming your way. I'm just trying to understand how to interpret that. Jonathan Strickle: Hey, Alex. It's Johnny here. I'll take that one. I mean, just sort of as a reminder of how the agreement works. We've got exclusive right of first access over all business that the Fidelis partners sit originate, and that's under our ten-year rolling agreement with them. So we get the first pick and anything that's not within our appetite, they're free to go with elsewhere. As I talked to a bit on the data strategy, often that's a win-win. It means that we get to fill up the line size we want. They've got access to plenty more, so other capital providers can take a share there and everyone benefits. But to be clear, agreement's working exactly as we intended. To. We get to take the bits that we want. There's still an attractive portfolio remaining outside of that and that enables them to deliver results for other providers. Dan Burrows: Yeah, I'll just add there. If you think about growth for the year today, it's 8.4%. Most of that has come from the partnership. So we're very aligned to them. We see opportunity with them. But as Johnny said, it's a really great example of the binder agreement working exactly as intended. They're matching the right capital with the right risk. Alex Scott: Understood. Okay. And then second question is I wanted to just ask a bit about the process for bringing on new partners You've had one big partner and very integrated into TFP. You know, what what is the tech platform look like and and diligence look like when you're bringing on these new partners, and we have the same kind of visibility you get into what you're underwriting through TFP. Dan Burrows: Yeah. I'll start, and then I'll pass on to Johnny. Lee, it's Dan here. So obviously, you know, we're looking for a very high benchmark before you even consider any complementary partnerships. Now the TFPRX Lite, excellent underwriting out and with that's demonstrated in know, the strength of our results in this quarter. But we do have access to other good underwriters, best in class that will complement the portfolio. And a lot of that is relationship driven. Myself, the COO, got something like approaching eighty years of experience in the market. So we know who the good underwriters are out there. We know how they're motivated, why they buy, who they want to deal with. But we're looking for continuity of partners. We want to grow with them. So we won't be headlining hundreds of different partners It will be a considered approach but we do see opportunity. In terms of the more technical framework around it, Johnny, Jonathan Strickle: Yeah. I mean, how we think about it is we really start with our underwriting and risk strategy. So there we're trying to work out where do we allocate capital based on the best risk-reward dynamic as we see it in the market at the time. Our agreement with the partnership gives us flexibility in how we do that. So we can choose the most suitable and drying partner to execute in a particular area Now, the Fidelis partnership continued to execute really successfully over a wide range of classes of business and product, and leaders in the market, great track record. They've been fundamental to the great combined ratio we've had in this quarter. But as we keep building out our network of relationships outside of that, we're finding complementary opportunities that sit there that we can execute on with other partners. I think the pipeline there continues to grow It consists of market-leading underwriters and they're writing business in lines of business that we see as a great risk-reward dynamic right now. Operator: Thank you. The next question today comes from the line of Michael Zaremski from BMO Capital Markets. Please go ahead. Your line is now open. Michael Zaremski: Hey, good morning. It's Dan on for Mike. My first one is maybe just on property reserve release level. So given the strength of the releases coming from property this year in both segments, can you maybe help frame what percent of reserves sit in IBNR and how that could compares to a year ago so we could better gauge the durability of these reserves over the next twelve to eighteen months? Jonathan Strickle: Hey. It's Johnny here. Yeah. Thanks for the question. Mean, if I think about how we set our reserves especially for those lines of business, that's not something that we've changed in a meaningful way over the past five years really. So think we've been pretty consistent. What we have seen is increasing strength in the underlying underwriting portfolio. So the business is just running at a lower loss ratio. Which has fueled some of that PYD that we've seen pretty consistent in those lines of business over the last three or four years. So then I don't think there's any change to the approach other than you seeing more clearly the underlying profitability. What I would say is we really expect a lot of that PYD to come through in the first two quarters. So property PYD for us comes through within about six months typically. So by the time we get to Q3, Q4, in either direction, I'd expect to see less coming through and it's really the first half of the year that's going to determine our PYD position. Michael Zaremski: Okay. That's very helpful. Thanks. And then maybe just on aviation, it seems like that's seeing encouraging signs now. That's a pretty big swing versus your comments in the second quarter. You just talk about what changed there this quarter? Maybe how far away are current prices from meeting your hurdle for so we could see Fidelis jump back into writing that line? Dan Burrows: Yeah. Good question. And, yeah, I think the theme is really very much around more of the same. We disclosed, as you said on the last earnings call, that it's probably the most challenged part of the portfolio, and I think it continues to be that. We've seen much more competitive landscape. And when you consider the impacts of a number of losses that have happened over the last year and a half or so, including the most recent UPS which I'm pleased to say didn't fall within our underwriting appetite, so we declined that. The market hasn't really corrected in the way that we want to, so we're very cautious around aviation. Have seen some improvement in hull and liabilities. And we'll continue to watch the segment. But we definitely see it as a line of business that has the most competition is the most challenged. So, again, it's about picking away through that market. We will not renew business that doesn't hit our risk return metric. I think it's really important that you keep a discipline and focus on margin. So, yeah, I think you've read it right. We talked about it actually for probably two quarters now. So this will be the third If we see opportunity, you know, we're nimble. We will be opportunistic. For the right deal. At the moment, it is a challenged landscape. Operator: Thank you. The next question today comes from the line of Andrew Andersen from Jefferies. Please go ahead. Your line is now open. Andrew Andersen: Hey, thanks. Maybe a similar question on marine. I think it's a bigger line relative to aviation for you guys, and I think it's first half weighted. But maybe you could just talk a bit about what seeing in the pricing environment there and opportunity for growth in '26? Dan Burrows: Thanks very much. What we're seeing actually is probably a flatter RPI, and that's mostly because we are a leader across all the subclasses in marine. We leverage our position. So if we're riding the cargo, the hull, the war, etcetera, etcetera, etcetera, But then they're also being able to look at maybe are we a property participant on their program and using all that leverage as a leader getting us a differentiated position. So I think we're more comfortable with marine than we are with aviation. Were also we talked about before, seeing good opportunities in the construction line set. So we're seeing new business which, again, is helping on your book and kind of stabilizing RPIs. But, you know, we're much more comfortable with marine. Andrew Andersen: And then when you were talking about the strong flow of business from admitted into E and S and property, it sounded like you're really highlighting the homeowners piece. Are you still seeing flow on the commercial property side Or or maybe it's still coming in, but you're not really just hitting the same bind rates? Maybe just some more color on on E and S property. I was I still saying Dan Burrows: yeah. Thanks. Sorry to cut you off there. It's Dan again. We're still seeing opportunity on the commercial side. I mean, I think the DNF is more competitive, but we're seeing opportunity because we can deploy meaningful capacity. You know, we built up strong relations with both brokers and clients. We're relevant. We get to see the business first. We're kind of a go-to market. But yeah, are seeing opportunity across those two occupancies. Andrew Andersen: Thank you. Thank you. Operator: Our next question today comes from the line of Pablo Singzon from JPMorgan. Please go ahead. Your line is now open. Pablo Singzon: Hi, good morning. Maybe first off for Allan, You had referenced the longer earnings pattern for asset-backed business affecting NPE this quarter. I was wondering if you could quantify how much NPE would have been had you written just regular annual renewal business. Right? Just trying to size much of a potential drag we should account for in the next three to four quarters. I suppose after that, it should be a tailwind. Right? Because it won't show up in MPW. But, anyway, deserve, like, frame and size that drag which showed up this quarter. Allan Decleir: Yeah. Hi, Pablo. It's Owen. Yeah. I think important to remember that our net premium earned for the year to date has grown 7%, which is in line with the growth premium premium Britain of 8%. So it is in line year to date. A little bit more noise in the current quarter, and can fluctuate quarter to quarter. As I mentioned, it's largely due to business mix As you mentioned, asset-backed finance and portfolio credit. But I think for now, the trend that we've had year to date is more in a way to look at how to earn a pattern. How to earn our premium going forward. But we'll certainly let you know if as this evolves over the next few quarters. Pablo Singzon: Understood. Okay. And then second question, the third quarter was light on catastrophes for the overall industry. So this is more of a hypothetical, I suppose, right? I was curious if you had some perspective on how much better you, you know, or how your performance would have been, right, in a more normal storm season recognizing that, you you've been historically underwritten in the Southeast US anyway But any perspective on, you know, how much the this actual period helped or detracted from a normal quarter for you. So Jonathan Strickle: Hi, Pablo. It's Johnny here. I'll take that one. Thanks for the question. I think for us, it's important to remember that we can bind large losses with cat losses. So we'd also have fire type losses, events like that coming through on our property DNF book as well as man-made marine losses as well. And we've had a couple of those as we disclosed in the quarter. So if you look at our cat overall for the insurance pillar, yeah, it's better than we would have guided to before, but not that significantly. It feels like it's slightly better than normal quarter in insurance overall. Reinsurance has had a great time and that's been the driver of the fantastic low loss ratio we've seen on that and a real helper towards our combined ratio in the quarter. Certainly on that, it's been a light cooler in terms of cat experience and you can see if that was lifted up to a more normal level, what that would have done to the result. But it still would have been well in line with our long-term guided levels. Pablo Singzon: Great. Thanks, Johnny. Operator: Thank you. Our next question today is a follow-up question. From Leon Cooperman from Omega. Please go ahead. Your line is now open. Leon Cooperman: Yeah. I'm still somewhat confused. And I gotta admit, you know, your evaluation just seems out of line with what makes sense. And does your makeup as a company sufficiently different than the industry? It would discourage anybody from coming to look at us? Dan Burrows: Thanks, Leon. They stand here. No, I don't think it's any different. In fact, we would argue it's kind of more efficient as we're able to pick out the very best of the underwriting in the market. Leon Cooperman: We were supercharged in an environment. I would be shocked you know, with your multiple at five. In the industry for insurance industry. Multiple ways. You know, almost twice that. And it wouldn't be the beneficiary of somebody coming to try and consolidate with us. Dan Burrows: Sorry, I can't quite hear you. Leon Cooperman: What I'm saying is, you know, we're in a slow-growing world. And companies are looking to grow and Yeah. The revenues. You have a nice spare for the revenues in the insurance business. Selling at a valuation far below your peer group And I don't know where we could see a peer group. With the reinsurance peers or the primary insurance carriers. They're more selling a significant multiple premiums to us. Dan Burrows: Yes. Thanks, Lee. Got it. So I think it's Dan, it's an interesting question. You know, obviously, given some of the activity in the M and A market, for us, you know, the focus will remain on executing the current strategy. Building building on this quarter, delivering strong courses, you know, consistently, I think, is really important. Getting a strategy narrative out there that people are familiar that we're centered on underwriting. We can deliver organic growth. And, really, we're all about building long-term value for the shareholders. We're monitoring the M and A world. Obviously, there's been a lot of noise, especially in the last quarter. We're aware of industry development, but we've really got to focus on our plan if that's of interest, fair enough. But I think you know, we're expanding a partnership. We're expanding with new relationships. That will deliver excellent results, which we think is the best part of sustainable growth. But it's interesting. It's been an active quarter. Do monitor it. But we just gotta focus on what we can do, what we can control. Leon Cooperman: How do you compare the relative attraction of your stock? Repurchase versus writing new business? Dan Burrows: Totally. Leon Cooperman: You see me be attractive? Yeah. I think we all feel our valuation we're undervalued, but we understand it takes time delivering consistent results demonstrating good underwriting, demonstrating good capital management, increasing book value. If you can continue to do that, the valuation will find a level that we think. Should be trading at, which is above book. I mean, look at the quartets. Fantastic quarter, 79% combined. Not 21.4 ROAE, well ahead of our target metrics as you pointed out. So I think that that's really important. Allan Decleir: Yeah. And I think just Talander, just to point out, we have added value through our buyback program. Since inception. Of our buyback program in 2024, we've repurchased $248 million of shares and added 83¢ to our book value per share as a result of those activities, We as Dan says, we have great capital base that allows us to grow. As well as buy back shares We have purchased another $15 million post quarter end and still have a $153 million remaining under our share buyback program. So we continue to add value through our capital management as well as our growth strategies, and we'll continue to do that in the current environment. Leon Cooperman: Good luck. Excuse me. You're on the right track. Dan Burrows: Thanks, Lee. Thanks for the question. Operator: Thank you. Our next question today is a follow-up question from Michael Zaremski BMO Capital Markets. Please go ahead. Your line is now open. Michael Zaremski: Just wondering how the the combined ratios of coming from the new underwriting partners are relative to the Fidelis partnership and and to the relative, mid to high eighties combined target? Thanks. Allan Decleir: Yeah. Thanks, Mike. As we've mentioned before, it's when we enter these relationship with this network of underwriting partners, in addition to the Fellows partnership, it's it's a high hurdle. And we we certainly make sure that the combined ratio expectations are at least as high as the TFP. It's early to early doors in terms of the results of those, but so far, everything's looking good. And, certainly, they're meeting the combined ratio hurdles that we had expected. Through the first nine months of the year. Operator: Thank you. That concludes today's question and answer session. I'd like to turn the call back to Dan Burrows for closing remarks. Dan Burrows: Thanks. We appreciate everyone joining us today. Thank you very much. And of course, if you do have any additional questions, we're here to take your calls. We thank you for your ongoing support. And hope you have a great day. Operator: This concludes today's call. Thank you all for your participation. You may now disconnect your line.
Operator: Good day, everyone. Welcome to the Stran & Company, Inc. Third Quarter 2025 Earnings Call. At this time, all participants have been placed on a listen-only mode. The floor will be open for questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Alexandra Schilt. The floor is yours. Alexandra Schilt: Good morning, and thank you for joining Stran & Company, Inc.'s 2025 Third Quarter Financial Results and Business Update Conference Call. With us today are Andy Shape, Chief Executive Officer, and David Browner, Chief Financial Officer. Yesterday, we issued a press release detailing our results, which is available on our website at ir.stran.com. Before we begin, please note that today's remarks may include forward-looking statements that involve risks and uncertainties as described in our SEC filings. With that, I will turn the call over to Andy Shape. Please go ahead, Andy. Andy Shape: Thank you, Alexandra, and good morning, everyone. Taking a step back for a minute, those who may be new to the Stran story, it began over thirty years ago when we went door to door helping local businesses promote their brands through creative high-quality merchandise. What started as a small two-person operation has grown into a national platform serving many of America's most recognizable brands, all built on the same foundation: customer service, innovation, and trust. We have grown from that small startup into a publicly traded leader in the promotional marketing industry. I am proud that the same leadership team that built Stran continues to guide us today with that entrepreneurial spirit, and I am excited for the future of Stran. Our client base includes over 30 Fortune 500 companies and some of the largest brands in the world. These companies chose Stran because we deliver creative, high-impact marketing solutions that drive engagement, loyalty, and measurable results. We are not just a distributor; we are a strategic marketing partner helping these brands connect with people in powerful, authentic ways. Our corporate motto is driving brand awareness and affecting behaviors through visual, creative, and technology solutions, and we continue to work tirelessly to deliver the best products and experiences to our customers. Now moving on to our financial results. The third quarter was another strong and productive period for Stran, one that underscores the power of our platform, the resilience of our operating model, and the disciplined execution of our team. Sales increased 29% year over year to $26 million in Q3 compared to the prior year, and sales reached $87.3 million for the first nine months of 2025, a 56.7% increase from the same period last year. Importantly, we achieved this growth while driving continued improvement in profitability. Year to date, our EBITDA improved by approximately $2.8 million compared to the same period last year. Our clear indicator that our strategy to scale responsibly while managing expenses is delivering results. We have had many nonrecurring expenses over the past eighteen months and are happy that we are now able to concentrate on our business, both top-line and bottom-line growth, especially as we are now in Q4, which is historically our strongest quarter of the year. Both of our business segments contributed meaningfully to our results. The Stran segment achieved nine-month revenue of $60.3 million, up from $52.2 million last year, driven by deeper client relationships and new enterprise wins. The Stran Loyalty Solutions (SLS) segment, which includes the Gander Group business acquired in August 2024, delivered $26.9 million in revenue compared with $3.5 million last year. The Gander business has become an important contributor to our results, with momentum and tremendous opportunity ahead. The integration of Gander has gone well as we continue to identify synergies and cross-selling opportunities while we deliver end-to-end loyalty and incentive programs that strengthen Stran's position across casino, gaming, and the hospitality market. At the same time, our core Stran business continues to experience strong growth. This segment remains the cornerstone of our brand, representing decades of trusted relationships with leading organizations that rely on us for creative design, efficient fulfillment, and continuous marketing support. We have deepened client partnerships, expanded digital ordering capabilities, and delivered measurable results for our customers. We are continuing to execute on initiatives to streamline operational efficiencies. Operating expenses grew only 30.3% year over year for the first nine months of 2025, while sales grew 56.7% during that same period in 2024. As a result, operating expenses as a percentage of sales declined to 31.3% during the first nine months of 2025 from 37.7% during that same period in 2024. This contributed to the $2.8 million improvement in EBITDA from negative $3.2 million for the first nine months in 2024 to negative $384,000 for the first nine months of 2025. As we grow, we continue to benefit from efficiencies that come with scale, improving our purchasing leverage, streamlining logistics, and enhancing fulfillment capabilities. These advantages not only strengthen our margin but also create a competitive edge that smaller regional players cannot easily replicate. During the third quarter, elevated tariffs led to a meaningful increase in product costs for direct import orders, especially with our SLS segment. While we were able to pass on some of those costs to our customers, not all could be offset, which compressed our margins. Just as importantly, the uncertainty surrounding tariffs created buyer hesitation, particularly in the loyalty and casino segments, impacting both top-line activity and profitability for the quarter. Despite these temporary headwinds early this year, demand remains strong, and our client base continues to show confidence in our capabilities. We also continued our share repurchase program during the third quarter, buying back approximately 267,000 shares of common stock at prices between $1.45 and $1.81 per share, totaling about $408,000. With no debt and $11 million in cash and investments, we remain well balanced to fund growth initiatives, pursue acquisitions, and continue opportunistic buybacks. Stran continues to actively evaluate acquisition opportunities as strategic M&A remains a key pillar of our growth plan. We are executing a disciplined roll-up strategy in a fragmented industry, identifying smaller distributors that complement our business and integrating them efficiently into our shared infrastructure. This model provides low-risk, high-synergy growth and gives us powerful margin expansion potential through economies of scale. Our focus is now also on transformative acquisitions, the kind that can move the needle and accelerate our long-term growth trajectory. Finally, we are proud of our progress that's been recognized externally. This past quarter, Stran was named by the Promotional Products Association International (PPAI) as one of the greatest companies to work for in 2025. It's an acknowledgment of the environment we've built, one that empowers employees, fosters collaboration, and drives creativity across every aspect of our business. Our people are the foundation of our success, and this distinction is a direct reflection of their talent, dedication, and shared commitment to Stran's mission. After several years of investing in our growth, technology, and infrastructure, we are now entering a new phase, one focused on driving consistent profitability and margin expansion. With our systems, talent, and scale in place, we are well-positioned to translate our operational foundation into sustainable earnings growth. Overall, I am very encouraged by how we are executing against our strategy, balancing growth, profitability, and shareholder value creation. With that, I'll turn the call over to David Browner, our CFO, to review the financial results in greater detail. David, please go ahead. David Browner: Thank you, Andy, and good morning, everyone. I'm pleased to provide a detailed overview of our financial performance for the three and nine months ended September 30, 2025. For the financial results for the three months ended September 30, 2025, sales increased 29% to approximately $26 million from approximately $20.1 million for the three months ended September 30, 2024. Sales by our Stran segment increased to approximately $17.6 million for the three months ended September 30, 2025, from approximately $16.7 million for the three months ended September 30, 2024. Sales by our SLS segment, which consists of the former Gander Group business, increased to approximately $8.3 million for the three months ended September 30, 2025, from $3.5 million for the three months ended September 30, 2024. For the Stran segment, the increase in sales was primarily driven by higher spending from existing clients as well as business from new customers. The SLS segment's increase in sales was due to the acquisition of the Gander Group assets in August 2024. Gross profit increased 18.8% to approximately $7.1 million or 27.2% of sales for the three months ended September 30, 2025, from approximately $6 million or 29.5% of sales for the three months ended September 30, 2024. Gross profit margin decreased to 27.2% for the three months ended September 30, 2025, from 29.5% for the three months ended September 30, 2024, primarily due to the acquisition of the Gander Group business in August 2024, which operates at a lower gross margin than the Stran segment. Operating expenses increased 8.8% to approximately $8.9 million for the three months ended September 30, 2025, from $8.2 million for the three months ended September 30, 2024. As a percentage of sales, operating expenses decreased to 34.1% for the three months ended September 30, 2025, from 40.4% for the three months ended September 30, 2024. Net loss for the three months ended September 30, 2025, was $1.2 million compared to a net loss of approximately $2 million for the three months ended September 30, 2024. The financial results for the nine months ended September 30, 2025, show sales increased 56.7% to approximately $87.3 million from approximately $55.7 million for the nine months ended September 30, 2024. Sales by our Stran segment increased to approximately $60.3 million for the nine months ended September 30, 2025, from approximately $52.2 million for the nine months ended September 30, 2024. Sales by our SLS segment, which consists of the former Gander Group business, increased to approximately $26.9 million for the nine months ended September 30, 2025, from $3.5 million for the nine months ended September 30, 2024. For the Stran segment, the increase in sales was primarily due to higher spending from existing clients as well as business from new customers. For the SLS segment, the increase in sales was due to the acquisition of the Gander Group assets in August 2024. Gross profit increased 49.3% to approximately $25.4 million or 29.1% of sales for the nine months ended September 30, 2025, from $17 million or 30.6% of sales for the nine months ended September 30, 2024. Gross profit margin decreased to 29.1% for the nine months ended September 30, 2025, from 30.6% for the nine months ended September 30, 2024, which was primarily due to the acquisition of the Gander Group business in August 2024, which operates at a lower gross margin than the Stran segment. Operating expenses increased 30.3% to $27.3 million for the nine months ended September 30, 2025, from approximately $21 million for the nine months ended September 30, 2024. As a percentage of sales, operating expenses decreased to 31.3% for the nine months ended September 30, 2025, from 37.7% for the nine months ended September 30, 2024. Net loss for the nine months ended September 30, 2025, was approximately $1 million compared to a net loss of approximately $3.6 million for the nine months ended September 30, 2024. As of September 30, 2025, we had approximately $11.8 million in cash, cash equivalents, and investments. I'll now turn the call back to Andy for closing remarks. Andy Shape: Thank you, David. As we close out the third quarter, I'd like to take a moment to reflect on where we stand. Over the past year, we've made steady progress across every part of the business, improving execution, strengthening operations, and positioning Stran for consistent, sustainable performance. Our focus has remained the same: serving our clients well, managing growth responsibly, and ensuring that every initiative we take on creates measurable value. Looking forward, we believe Stran is entering its next phase of maturity, scaling our operations while delivering steady profitability. We see a clear path to long-term margin improvement driven by continued operational leverage, technology investments, and disciplined execution. We have built a strong foundation, designed not just for growth, but for lasting value creation. Looking ahead, our priorities are clear: one, deepen and expand client relationships. We are working to drive measurable results for our clients and build long-term partnerships rooted in transparency, service, and reliability. Two, increase operational efficiency. We will continue to simplify processes, invest in automation, and apply data to improve margins and execution speed. And three, maintain financial discipline. We aim to keep a balanced approach, investing where it strengthens our business while preserving a solid balance sheet, and allocating capital where appropriate. Thank you for joining us today and for your continued support of Stran. With that, I will open the call to questions. Operator? Operator: Certainly. The floor is now open for questions. If you have any questions or comments, please press 1 on your phone at this time. We ask that while posing your question, you please pick up your handset if listening on speakerphone to provide optimum sound quality. Please hold for a few moments while we poll for questions. Your first question is coming from Greg Womack. Please pose your question. Your line is live. Greg Womack: Hi. First question, how are tariffs accounted for from an accounting perspective? Does that pass on to adding more revenue? Andy Shape: Yeah. Hi, Greg. Thank you for your question. Yeah. Tariffs, in terms of the tariffs, increases were unprecedented as we all knew, and it did affect us for some of our orders that were in production, that were essentially at our factories, that were on the water in production. And when we were charged those tariffs, we had the opportunity to go to some of our customers and ask them if they could pay more. Some of them were agreeable to it, some were not. And, as a result, if we were able to pass on the tariffs, it increased revenue slightly. But more importantly, with our cost increase at a greater pace than we were able to charge more. So the analysis that we've done shows a direct impact is a seven-figure amount, just over a million dollars for direct costs that we were not able to pass on to our customers. It also does not include some of the buyer hesitation that I mentioned in the call in April and May, but now we are seeing in Q3. Greg Womack: That buyers were uncertain. Typically, when there are tariffs involved, we have time to go increase prices because it's over time. But when we are in the middle of production of merchandise and with time-based events that we need to give them out, we did not really have a choice. So it was a very short window, and that answers your question. Greg Womack: Yeah. So I've got one other question too. I guess, do you guys feel like you're still gonna be positive net income for Q4? Or how are you feeling about year-round cash flow positivity? Are you feeling confident about that? Andy Shape: Yeah. I mean, historically, Q4 has always been our strongest quarter for the Stran segment, Stran promotional segment, just because of end-of-year holidays. So we are also very excited about Q4, as it's always been heavy sales. So, yeah, I mean, we obviously do not give guidance, but we feel good about where we stand. Again, like I've said in the earnings script, we are concentrating on continued growth while keeping an eye on managing expenses. So, yeah, that's our plan. Our plan is to have sustained profitability moving forward, which includes Q4. Appreciate it. Operator: Once again, if you do have remaining questions or comments, please press 1 at this time. Please hold one moment while we poll for any additional questions. You have a question coming from Vlad Cat with Freedom Call LLC. Please pose your question. Your line is live. Vlad Cat: Thank you, guys, and congrats on a great quarter. Looking forward to Q4 results in a few months. How should we think about potential contraction in the economy? How does the business typically perform during contractions? Andy Shape: Yeah. Great question. So, first, yeah, we're satisfied as a business with the growth that we've seen. We do want to increase our profitability. We know that. So, you know, we want investors to know that although we accomplished a lot in the third quarter, we need to be more profitable. We know that, and we're making efforts to do that, and we plan every intention on doing that moving forward. So appreciate the positivity, and we like that, but we have some work to do, and we know it. And we will. In terms of your question surrounding the macroeconomic trends. So one thing with our business is there's not a lot of capital expenditure. The majority of our costs are human capital and overhead. And if our business shrinks or if the economy shrinks, first and foremost, we can pivot fairly easily to that. And secondarily, a lot of the business that we have isn't necessarily discretionary. It may seem like it is, but it isn't. A lot of the programs that we have customers that have this integrated in their marketing initiatives, whether it's for new employees, whether it's for new customer acquisition, whether it's creating loyalty. As well as we're spread around multiple verticals, whether it's the casino and gaming, if the economy goes down, that goes well. Beverage and alcohol, the spend goes up as well. So we try to potentially be in our client base so that we can address any macroeconomic trends. And then finally, we think that the strength of our balance sheet provides us also with a competitive edge over our competition. If the economy does falter, it gives us the opportunity to look at additional potential for acquisitions as well as compete against people who may not be able to have the resources and the capabilities that we do. So, you know, we're conscious and aware of the recession in the economy. It doesn't scare us because we've been in business for thirty years, and we've seen it go up and down. And we know how to react to it pretty well. Vlad Cat: Clear. Thank you for that insight. One follow-up question, if I may. Andy Shape: Yes, sure. Vlad Cat: What is the methodology that you use to find acquisition targets? Andy Shape: Sure. So, the industry, as some of you may know, is about 25,000 to 30,000 distributors within our industry. Stran is ranked number 12, so we're already a leader. We're well known within the industry as being one of the only few public companies out there. The only one that's core on core the only publicly traded company on a major exchange in the US, but that's the core business that we do, and that's all that we concentrate on. So we're well known within the industry. So we get a lot of inbound inquiries. I would say dozens a month, if not more. Secondarily, I attend quite a bit of industry events as somewhat of an expert in adding value to your business, how to do that, as well as how to establish exit plans. And as a result, I'm introduced to quite a bit of people who want advice and then say, would you be interested in acquiring our company? So there's a lot of people now within our industry that don't necessarily have a succession plan for their business, and that's where we come in and help them plan for that with Stran as their exit and their succession. That makes financial sense both for us and for them. To make a win-win going forward. So, you know, we really look at that, but we're being a little bit more scrutinizing of our acquisitions moving forward than we have in the past potentially because we just wanted to make a little bit bigger of a difference and also know, we want those resources to work as soon as possible. Vlad Cat: Clear. Thank you. I appreciate your focus on creating shareholder value. Happy holidays. Andy Shape: Thank you. Likewise. Operator: Thank you. There are no additional questions in queue at this time. I would now like to turn the floor back over to Andy Shape for closing remarks. Andy Shape: Great. Thank you, everyone, for joining and your continued support of Stran. As mentioned, I think we're entering a new phase of Stran where we've built scale. If I continue to say to everyone that I speak to investors and anyone else in the business that you go back and you read our initial S-1 when we filed to go public, we've delivered on what we said, which is to continue to create scale through growth. Invest in our infrastructure, and really create a leader in the industry. And we've done that since we've gone from about $35 million in revenue to almost $120 million in trailing twelve months revenue. So we're excited about what we've done. We recognize that now that we've hit that scale, we can start turning some dials to really drive that profitability and create even greater shareholder value. And in all honesty, as the second largest shareholder, the value means just as much, if not more, to me than anybody else in the world. So I have very specific motivations to see the company really progress and do very well. And I'm determined to do it. So thank you everyone who believes in Stran and who's committed to us. And we look forward to finishing up the year strong and reporting our results at the beginning of next year. Thank you, everyone, and happy holidays. Operator: Thank you. This does conclude today's conference call. You may disconnect your phone lines at this time, and have a wonderful day. Thank you for your participation.
Operator: Thank you for standing by. Ladies and gentlemen, welcome to the Seanergy Maritime Holdings Corp. Conference call on the third quarter and nine months ended 09/30/2025 financial results. We have with us Mr. Stamatios Tsantanis, Chairman and CEO, and Mr. Stavros Gyftakis, Chief Financial Officer of Seanergy Maritime Holdings Corp. At this time, all participants are in a listen-only mode. There will be a question and answer session at which time if you would like to ask a question, please press 11 on your telephone keypad. You will then hear an automated message advising that your hand is raised. Please be advised that this conference call is being recorded today, Thursday, 11/13/2025. The archived webcast of the conference call will soon be made available on the Seanergy website www.synergymaritime.com. To listen to the archived audio file, visit the Seanergy website following the webcast and presentation section under the Investor Relations page. Many of the remarks today contain forward-looking statements based on current expectations. Actual results may differ materially from the results projected from those forward-looking statements. Additional information concerning factors that can cause the actual results to differ materially from those in the forward-looking statements is contained in the third quarter and nine months ended 09/30/2025, release which is available on the Seanergy website again www.synergymaritime.com. I would now like to turn the conference over to one of your speakers today, the Chairman and CEO of the company, Mr. Stamatios Tsantanis. Please go ahead, sir. Stamatios Tsantanis: Thank you, operator, and welcome, everyone. Today, we are pleased to present another quarter of strong performance for Seanergy. Underlying our consistent profitability, disciplined strategy, and the continued success of our focused Capesize and Newcastlemax platform. A model that we expect will deliver superior earnings capacity versus most peers. Following the strong momentum established in the second quarter, Seanergy delivered a profitable third quarter driven by our large vessel exposure and the ongoing strength in the Capesize market. Net revenue reached approximately $47 million, adjusted EBITDA was $27.5 million, and net income totaled $12.8 million, demonstrating Seanergy's superior earnings capacity and operational leverage. Over the first nine months of the year, we generated net revenue of $108.7 million, adjusted EBITDA of $52.8 million, and net income was $8.8 million. In line with our dividend policy, we declared a cash dividend of $0.13 per share for the quarter, bringing total 2025 distributions to $0.23 per share and reaffirming our commitment to regular shareholder returns. The expiration of our Class E warrants removed legacy dilution and further strengthened our capital structure, fully aligning long-term performance with shareholder value. With a fleet of 20 large Capesize vessels and Newcastlemaxes, and a fleet loan-to-value ratio around 45%, Seanergy is very well positioned to benefit from a robust Capesize cycle. Moving on to fleet developments, we continue our disciplined fleet renewal strategy. In October, we placed our first-ever newbuilding order, a 181,000 deadweight Capesize at Hengli shipyard, marking the next phase of a large vessel strategy focused on efficiency, scale, and modernization. The vessel is priced at approximately $75 million with delivery scheduled for 2027, offering a strategic delivery window ahead of most comparable projects. This decision reflects attractive newbuilding economics versus surging secondhand values and positions Seanergy to capture stronger long-term returns from a modern, fuel-efficient fleet. The project's timing aligns with the expected upswing in iron ore and bauxite trade through 2027 and thereafter. In parallel, we sold and delivered the vintage Capesize ship for $21.6 million, releasing approximately $12 million in net liquidity and further optimizing our fleet composition. Our vessels continue to secure premium employment with top-tier charterers, supported by index-linked charters that preserve full market exposure. This disciplined structure, complemented by selective FFA hedging, ensures resilience across cycles. Our time charter equivalent has consistently outperformed the BCI, confirming the strength of our larger vessel commercial model and positioning us for sustained earnings momentum heading into 2026. To conclude the first part of this call, our focus on larger Capesize and Newcastlemax vessels continues to differentiate Seanergy. These assets deliver superior earnings capacity and long-term value compared to smaller bulk segments. Our boutique platform is built on scale where it matters: vessel size and operational performance, maximizing value creation per share. With a modern, efficient fleet, prudent leverage, and consistent dividends, Seanergy remains very well positioned to lead in shareholder value among listed drybulk companies. I will now pass the floor to Stavros to discuss our financial update. And I will conclude later with our comments on the market. Stavros, please go ahead. Stavros Gyftakis: Thank you, Stamatios. Welcome to everyone joining us today. Let me walk you through the key highlights of our financial performance for the third quarter and the nine-month period ended 09/30/2025. The third quarter delivered another period of solid profitability and balance sheet strength for Seanergy, underscoring our disciplined financial management and focus on capital efficiency. For the quarter, net revenue reached $47 million, representing a 6% increase year over year, while adjusted EBITDA came in at $26.6 million, broadly in line with last year's performance. Net income and adjusted net income for the quarter were $12.8 million and $14 million respectively, translating to earnings per share of $0.61. For the first nine months of 2025, net revenue amounted to $108.7 million with adjusted EBITDA of $52.8 million. Net income for the period reached $8.8 million with earnings per share at $0.42. While these figures are below last year's levels due to a softer market during the first half, we expect profitability to strengthen meaningfully in the fourth quarter, supported by fixtures already secured at higher levels. Turning to our balance sheet, our cash position strengthened to approximately $37 million at the end of the quarter, equivalent to $1.8 million per vessel. This reflects our disciplined approach to cost management, as outflows related to vessel acquisitions earlier in the year were effectively offset by the net proceeds from the sale of our older Capesize vessel during the third quarter. In parallel, we continue to fund building distributions and an extensive dry docking program, underscoring the company's ability to invest in its fleet while maintaining robust liquidity. This healthy cash position provides financial flexibility, enabling us to pursue attractive opportunities and support our newbuilding project with confidence. Notably, our financial performance and stability have enabled us to declare nearly $5 million in cash dividends so far this year, despite the challenging conditions of the first half, reaffirming our commitment to consistent shareholder returns. As of quarter-end, our total debt stood at approximately $292 million. Based on the current market value of our fleet, this corresponds to a loan-to-fleet value ratio below 45%, reflecting a healthy and conservatively capitalized profile. On a per vessel basis, our debt stands at roughly $14.6 million, which is nearly $18 million below the average market value of our ships, highlighting the strong asset coverage supporting our balance sheet. In terms of financing activity, this quarter we maintained a measured pace following an exceptionally active first half of the year during which we executed transactions totaling $110.6 million. Nevertheless, we are now in the final stages of concluding a highly attractive financing package for our newbuilding, featuring a competitive structure and compelling interest margin. We expect to be in a position to disclose additional details on upcoming financings soon. The constructive shift in the finance environment, offering multiple options across both bank and leasing markets, has been an important consideration in the decision to pursue newbuildings at this stage. At the same time, we continue to assess opportunities to optimize our capital structure and expect to report additional progress in the coming months. It is also worth noting that we have a clear debt maturity profile through 2026, with no balloon repayments before that period. This provides valuable flexibility in that we can time our future financing strategically without pressure. Finally, as of 09/30/2025, total shareholders' equity reached $271 million. With both Class B and Class C warrants now fully eliminated, Seanergy's capital structure is stronger, simpler, and fully aligned with shareholder interests. That concludes my overview. I will now hand the call back to Stamatios, who will provide insights on the Capesize market and broader industry fundamentals. Stamatios, over to you. Stamatios Tsantanis: The Capesize market continued to show sustained strength in Q3, with average rates of about $24,600 per day, the highest levels in recent quarters. This performance was driven by a 2% increase in ton-mile demand against only 1.3% growth in available tonnage, reflecting a very tight market balance. Iron ore remained the main catalyst. Australian exports recovered strongly from early-year weather disruptions, while Brazilian record volumes surged, supported by Vale's output increase and long-haul routes that amplified ton-mile demand. Looking ahead, the upcoming Simandou project in West Africa, combined with steady steel production and iron ore demand in China, underpins a solid multiyear outlook for the Capesize trade. Bauxite continues to be another key growth driver, with shipments rising more than 15% year over year in Q3 and 20% for the nine-month period. This trend, coupled with Atlantic Basin cargo growth, is expected to support high utilization levels going forward. Coal flows were also supported, led by an eight-month import high in China and increased demand across South Korea, Japan, and Southeast Asia. On the supply side, 2025 marked a record low year for Cape deliveries, with less than 1.5% fleet growth. Only 38 newbuilding orders were placed, the lowest since 2020, while 7% of the fleet is above twenty years and 30% is above fifteen years. With global shipyard capacity effectively booked through 2029, supply growth will remain structurally constrained for several years. Overall, the combination of rising Atlantic-based trade, a historically low order book, and limited yard availability supports a sustained high earnings environment for Capesize vessels. To conclude, Seanergy's pure-play Capesize and Newcastlemax focus continues to differentiate our platform. These larger vessels generate superior earnings capacity and long-term value compared to smaller bulk segments, reinforcing our boutique model based on scale where it matters: vessel size and operational performance. Our strategy remains focused on three priorities: capital returns, maintaining a consistent dividend policy, and pursuing share buybacks when accretive; fleet renewal and growth, enhancing fleet efficiency and environmental performance through disciplined high-return investments; and financial health, preserving balance sheet strength and prudent leverage, ensuring flexibility throughout market cycles. We are executing on all three fronts and remain confident that Seanergy will continue to deliver industry-leading value per share as the Capesize market enters another strong phase. On that note, I would like to turn the call back to the operator and receive any questions you may have. Operator, please take the call. Thank you. Operator: Thank you. As a reminder, to ask a question, you will need to press 11 on your telephone and wait for your name to be announced. Please standby while we compile the Q&A roster. Our first question comes from the line of Liam Dalton Burke from B. Riley Securities. Please go ahead. Your line is open. Liam Dalton Burke: Thank you. Good afternoon, Stamatios. Good afternoon, Stavros. Stamatios Tsantanis: Hello, Liam. Good morning. Liam Dalton Burke: Stamatios, you have been very active in the fleet renewal program with the ordering and even with the sale of older assets. If I look forward, you have the financial flexibility. How do you anticipate growing the fleet? Would it be to add new builds or to mix in some secondhand vessels? Stamatios Tsantanis: We are constantly in the market seeking opportunities both in more modern and secondhand ships, as well as a few newbuilding vessels that we believe could add value to the company. We want to avoid having the so-called debt capital, you know, invest money in advances, you know, while the ships will be delivered in 2030 or whatever. So we have to be very selective, and the reason why we chose that particular shipyard is not only its quality, but also the fact that it is basically going to deliver the ship in a year and a half from today. So that eliminates that issue. We are constantly looking for both. I cannot give you an answer right now because there are a few opportunities that we are getting closer to. So in the next few weeks, I will be in a position to discuss more. Liam Dalton Burke: Great. Thank you. And just taking a look at the macro, it looked like you have the best of all worlds here. You know, as we end the year, it looks like China's steel production will be down. If I flip the narrative and say China's steel goes back to its historical growth rate of one or 2%, does that even increase your optimism for '26? Or is that sort of baked in in how you look at the demand side of the Capesize equation? Stamatios Tsantanis: We were never worried about the demand side even when we were downplaying China and its ability to keep up with the housing crisis and the real estate problems. We are very optimistic about demand for iron ore, coal, and bauxite. The Simandou starting now in November and December is going to pick up a lot of long-haul demand for high-quality iron ore, and this is going to ramp up in '26 and '27. So demand is not going to be an issue. What is very interesting to note is the fact that about 23%, 24% of the global Capesize Newcastlemax and VLOC fleet is older than sixteen years. And that gives you a sense while the order book is, of course, at the lowest point. So that gives a sense of, you know, potential supply squeezes getting into '26-'27. So that makes us feel way more optimistic than the demand narrative. Liam Dalton Burke: Great. Thanks very much, Stamatios. Stamatios Tsantanis: Thank you. Nice to hear from you. Thank you. Operator: Our next question comes from the line of Mark Reichman from NOBLE Capital Markets. Please go ahead. Mark Reichman: Thank you, and always great to see another strong quarter. Just really two questions for me on this new build contract. The five installment payments, can we just think about that as, you know, the $41.25 million or 55% paid on the fifth payment, and then the balance of the $33.75 million spread over the first four payments? And what quarter do those payments begin? Stavros Gyftakis: Hi, Mark. This is Stavros. Yes, I mean, your assessment is correct. We expect the 45% to be paid over the next twelve months and then at delivery, which is, you know, approximately one year and five months from now, the remaining 55%. Based on the financing that we are contemplating for this unit, we would be liable from our own cash reserves for approximately 25% of the contract price. And these installments, we expect to be paid in 2026. Everything else will come from debt. Mark Reichman: Okay. And then just a second question. On the commercial updates, I was just kind of curious about the tenor going into maybe some of these renewals. I mean, do you feel like you have more pricing power? I mean, I noticed that in some instances, the daily hire is based on a revised premium over the BCI, and I was just wondering if that premium went up. Stavros Gyftakis: Well, we tend to agree on the extensions for a period of about twelve to fourteen months. This is what we like, and that is what the charters are comfortable about. We have no concern about renewing them thereafter. So it is not going to be an issue. And we have proven to be in a position to renew our ships consistently with very high-quality charters all the way until we become close to 20 or sometimes above 20 years old. So we see no issue in renewing anything for longer periods. We like it the way it is right now. And that provides flexibility on both sides of the transaction, both for us and the charters, and we like it like this. Mark Reichman: Okay. Just to go back, I mean, in terms of the pricing power, is that even something that you think about? Or, I mean, do you have greater leverage in this market? Or could you even comment on the revised premium over the BCI on some of those contracts? Stamatios Tsantanis: Yes. The way that we obtain this premium, the way we achieve this premium is with the conversions that we do. So whenever we feel the time is right, and the forward rate is above the BCI, that is when we trigger certain conversions. We feel comfortable about securing certain cash flows. And I am not going to say coincidentally, but in most cases, that leads us to the premium over the BCI. In certain cases, of course, we may not be able to get the full extent of that. But we like that we hedge the downside. We feel way more confident and comfortable having a certain stream of cash flows even if we lose a couple of thousand from the upside. We feel better off by securing the downside risk in certain quarters that might be weaker throughout the year. Mark Reichman: I see. Thank you very much. That is very helpful. Stamatios Tsantanis: You are very welcome, and nice to hear from you. Operator: Thank you. Our next question comes from the line of Tate H. Sullivan from Maxim Group. Please go ahead. Tate H. Sullivan: Hi. Thank you. Congratulations on the new build and consistent with how you have been talking about the market for the last at least two years. Was there a specific secondhand transaction in the market that made you decide to go the new build route? Or at what point did the S&P prices increase to a level where new builds are more attractive, please? Stamatios Tsantanis: Good morning, Tate, and thanks for the question. Yes. I mean, there comes a time where we have triggering events. We were chasing a couple of secondhand acquisitions, and, you know, we missed on those because the higher bidders paid more than 20% or ten, fifteen, 20% than what we had anticipated or what we consider to be the fair value of that asset for that particular time. So when you see this kind of abrupt increases in prices of secondhand vessels, which are not, like, really modern—I mean, we are talking about close to 15 years old or 12 years old or 13 years old—then it kind of drives you, the decision automatically gets, you know, taken. So that is how the triggering events happen. Tate H. Sullivan: And how were you able to secure a 2027 delivery? Was it the last slot in the China shipyard or one of the last slots? Did you consider other countries as well, too, please? Stamatios Tsantanis: Well, quality above all. So we are not going to sacrifice any delivery for inferior quality, as you can understand. So we found this—I mean, we have been in discussions with various shipyards for quite some time. We chose that. We might be seeking other solutions as well at similar other shipyards of high quality in China. So we will not sacrifice the quality of this vessel for early delivery. In this particular case, we kind of had a win-win situation where we had prompt delivery, kind of prompt delivery, and at the same time, very high quality. So we felt comfortable with that. We have certain good connections with a lot of people in the Far East. So we believe we will be able to source some other deals as well. Tate H. Sullivan: Okay. Well, yeah. You mentioned that earlier too. We will look out for those. And then Stavros, on the cost of your debt, your interest rate going forward, I am sorry if I missed it. What do you think you are now at about the 7% interest rate level or even lower with where floating rates have gone? Stavros Gyftakis: It is lower than that. I mean, look. The financings that we have concluded recently, the margins are at around 2%. And as we move forward, the ones that we are negotiating now, a couple of packages in connection with a new building and some of the financings that we want to do, are even lower. I mean, from quarter to quarter, you might see variations because there are certain fees that are being paid in order to break financing or get into another financing, which sometimes are charged under the interest expenses. But overall, judging where SOFR is today, I would estimate the average cost to be closer to 5.5%, below 6%. Tate H. Sullivan: Okay. Thank you very much. Stavros Gyftakis: Thank you, Tate. Operator: Thank you. That is star one and one to ask a question. There are no further questions. This concludes today's conference call. Thank you for participating. You may now disconnect. Speakers, please stand by.
Operator: Thank you for standing by. This is the conference operator. Welcome to the Ballard Power Systems Third Quarter twenty twenty five Results Conference Call. As a reminder, participants are in listen only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. I would now like to turn the conference over to Sumit Kundu, Investor Relations. Please go ahead. Sumit Kundu: Thank you, operator, and good morning. Welcome to Ballard's third quarter financial and operating results conference call. Joining me today is Marty Neese, Ballard's President and Chief Executive Officer and Kate Igbolodi, our Senior Vice President and Chief Financial Officer. Before we begin, please note that we will be making forward looking statements that are based on management's current expectations, beliefs and assumptions concerning future events. Actual results could be materially different Please refer to our most recent annual information form and other public filings for our complete disclaimer and related information. I'll now turn the call over to Marty. Thank you, Sumit, and welcome everyone to our third quarter earnings call. Today, alongside our quarterly financial and operational highlights, and updates on our market verticals, Marty Neese: I'll share progress on our recent restructuring and strategic alignment. Discuss our path toward becoming cash flow positive and provide updates on key developments across our global organization. I'll begin with an overview of our business and markets. Overall, I'm pleased with our performance in the quarter. We continue to progress on pace with order delivery resulting in 120% year over year revenue increase largely from our deliveries to the bus and rail segments. Representing more than 70% of this quarter's revenue. Net order intake was approximately $19,000,000 and we achieved a positive gross margin of 15%. Reflecting meaningful progress in reducing product costs and a net reduction in onerous contract provisions. While this margin result may not represent a new ratable baseline, it demonstrates the progress of our product cost improvements and overall profitability trajectory. Our revenue makeup highlights the importance of the bus market. A market we expect to continue growing in the coming years. I recently had the opportunity to attend Bus World and meet with bus OEMs and transit operators. What was truly eye opening was the interest in electrification for buses has grown substantially with combustion engines, largely absent from the show and an almost exclusive focus being on electric alternatives. Including fuel cells. This is not surprising when considering that nearly 60% of new bus sales are now zero emission. In this electrified space, the advantages of fuel cells to serve a wide variety of routes short refueling times and the increasing infrastructure costs in face of grid constraints is becoming ever clearer. As the market attractiveness and technical and competitive merits of fuel cell buses grow, so too is the competition in the fuel cell bus engine space. With new entrants coming in, it is more important than ever for us to continue to differentiate ourselves as the fuel cell industry leader. Here, we believe that our decades of innovation and hundreds of millions of delivered kilometers positions us well. Having the most experienced and most durable reliable products with the lowest demonstrated total cost of ownership sets us apart. We are also ready for the next generation of buses At Bus World, we launched the FC Move SC, and initial feedback from OEMs has been very positive. Customers recognize the potential benefits of higher power density simpler and more integrated functionality a smaller lighter footprint and higher operating temperatures. These are all features that lower their total cost of ownership. Further, we continue to improve our core stack life and industry leading durability. Taken together, our customers are excited with these innovations. In terms of timing, product availability is expected to line up well with OEM timing for homologation into their next generation of vehicles. Additionally, we are enhancing our product cost leadership and long product life with a more comprehensive focus on delivering best in class service. We are complementing our products with additional services including digital operations and maintenance services, extended warranties, spares management, and on-site and virtual technician training and support. Our strong balance sheet and commitment to long term service and support sets us apart and our customers are eager to engage with us further to enhance these offerings. Moving briefly to our Rail and Marine segments. We continue to see momentum for freight and passenger rail locomotives. Recently in a milestone for sustainable transportation, Stadler's Flirt H2 hydrogen powered train officially entered service in San Bernardino, California. Another important step towards carbon free public transit. The train sets a new benchmark for clean, efficient and passenger passenger friendly rail travel in the region that we are proud to be powering. In the Marine segment, during the quarter, we recorded our largest order ever to the marine market with our order totaling 6.4 megawatts to ECAP and Samskip. These are both interesting markets for Ballard though I would add that both these markets remain at early stage of development and customer adoption. For the stationary power market, let me address the topic that is particularly hot at this time. AI data centers. It is clear that the rapid growth and the need for data centers and related is creating challenges for local grids and there's a shift to evaluate potential sources of off grid power as well as address CO2 emissions rules and noise requirements in many jurisdictions. This applies for both backup and primary power sources. Ballard's stationary solutions to date have demonstrated that we can supply kilowatts to megawatts of power. Our near term product offering for this market is focused on backup power solutions to replace diesel generators. Unit volumes in our forecast continue to increase as does our product evolution. From hundreds of kilowatts to multi megawatts. We are leveraging these factors to innovate further with our stationary power and data center customers. Our FC Move XD product enables us to increase power densities today to 500 kilowatts and up to two to three megawatts in a small form factor module in the near future. This leading power density in a compact footprint opens the door to potential additional use cases. Hydrogen supply partnerships are essential and we are actively working on collaboration opportunities in this area. This is an exciting area of product innovation. We will continue to provide updates as customer engagement engagements develop further. Turning to our strategic realignment. We are making meaningful progress as we work toward cash flow positivity. On the cost side, our recent restructuring actions are delivering tangible benefits. With significant reductions in cash operating costs and total operating expenses excluding restructuring charges. On margin and revenue, we remain focused on driving down product costs in the expanding our order book and total order back. Backlog. Building out our order pipeline is taking additional time as we work with current customers to secure more sustainable Sumit Kundu: contract terms Marty Neese: and some orders have shifted to Q4 twenty twenty five or Q1 twenty twenty six. We believe this extra time is well invested to ensure long term sustainability and appropriately balanced commercial agreements. Looking ahead to 2026 and 2027, we anticipate further improvement in gross margins supported by ongoing pricing and growth initiatives. Additional product cost reductions and the initial sales of our FC Move SC product. In addition, we expect further growth as we reenter the material handling market. We are seeing interest in our extended durability stack offering which more than doubles current material handling stack lifetimes available in the market today. Customers see this product as an excellent way to increase their delivered value and lower their overall cost. Especially related to stack service and maintenance. As mentioned, as we further refine our product offering, for the stationary power market, we expect growth in this market as well. For both material handling and stationary power, we'll provide more details on pipeline and order book conversion efforts as these potential opportunities mature. Taken together, these efforts are critical in moving us towards our goal of cash flow positivity. While there is still work to be done to achieve long term sustainability, we are taking the right steps to grow our business in areas that make strategic sense all while maintaining a strong balance sheet for our long term resilience and in support of our customers. Moving to two other items of note for Ballard's global operations. First, due to changes in funding options and updated capacity outlook, we have decided not to pursue the Texas Gigafactory development. Our analysis shows our existing global manufacturing capacity with minor adjustments will meet forecasted volumes. This decision underscores our commitment to capital discipline and focus on efficient execution. And second, as part of our strategic focus, we are further reducing our involvement in the way Ballard joint venture in China. Allowing us to concentrate resources on North America and Europe. Before I pass the call to Kate to review our financials, I would summarize this quarter as showing progress on our turnaround efforts. Year over year growth in shipments and revenue progress on margin expansion, executing disciplined capital spending and launching compelling new products and services that deliver lower costs and more value to our customers is a really good start. There is much more to do to further transform the company and get to cash flow positivity and we are committed to this overarching goal. With that, I'll turn the call over to Kate for a detailed review of our financial results. Sumit Kundu: Thanks, Marty, and good morning, everyone. Kate Igbalode: For the 2025, Ballard delivered revenue of $32,500,000 an increase of 120% year over year driven primarily by the bus and rail deliveries. Gross margin improved to 15%, compared to negative 56% in Q3 twenty twenty four. A 71 improvement. This reflects lower manufacturing overhead, continued product cost reduction, and a net reduction in owner's contract provisions. This reduction in owner's contract provisions coupled with a higher margin one time off road sales transaction contributed to the outsized gross margin performance in the quarter. Without these one time benefits, our gross margin would be slightly negative, still illustrating a marked year on year and quarter on quarter improvement. As Marty highlighted, we continue to make measured progress towards gross margin expansion and expect this to be reflected in our 2026 outlook. Total operating expenses were 34,900,000.0 down 36% year over year or 55% lower when excluding restructuring costs. Cash operating costs declined 40% year over year as the benefits of restructuring actions flowed through to our results. The rightsizing of our corporate cost structure, while never easy, was critical for our long term sustainability and financial health. Adjusted EBITDA improved to negative 31,200,000.0 compared to negative $60,100,000 in the prior year. Cash used by operating activities was 22,900,000.0 an improvement from $28,600,000 in 2024. We ended the quarter with 5 and $25,700,000 in cash and cash equivalents no bank debt, no near term financing requirements. Our strong balance sheet and firm hand on prudent capital allocation is a amongst peers key differentiator and provides us with business flexibility and resilience in this dynamic macro environment. Looking ahead, consistent with prior practice, are not providing specific revenue net income or margin guidance given the early stage of market development. We continue to expect revenue to be back half weighted for the year and total operating expenses excluding restructuring charges are expected to be below the low end of our 100,000,000 to $120,000,000 guidance range. Including restructuring costs expenses are expected to be towards the high end of the guidance range. We now expect capital expenditures of 8 to $12,000,000 down from our prior guidance of 15,000,000 to 25,000,000 reflecting disciplined capital allocation and deferred facility investments. Operator: Looking to 2026, Kate Igbalode: you can expect us to maintain our lean organizational cost structure and continue to demonstrate capital discipline. Maintaining a healthy balance sheet and accelerating our pathway to profitability is critical for our success and to deliver value to our shareholders. With that, I'll turn the call over to the operator for questions. Sumit Kundu: Thank you. Operator: We will now begin the question and answer session. We ask callers to kindly limit themselves to one question and one supplemental. The first question comes from Rob Brown with Lake Street Capital Markets. Please go ahead. Sumit Kundu: Hi, good morning. Marty Neese: Just wanted to get your thoughts on the growth kind of Rob Brown: rates in the bus market. Are there additional kind of growth order activity that you're pursuing? And get a successful kind of conference activity. But just wanted to get your sense on the growth rate in the bus market going forward? Marty Neese: Yes, would answer that Rob. By saying that the reception at Bus World was tremendous. The The new product is being very well received. And that's by both existing OEMs and some OEMs in development. If you will. Sumit Kundu: Further, the Marty Neese: constraints I mentioned around infrastructure pinch points per battery electric charging infrastructure if you will is starting to change the dynamics for fuel cells where we look much more compelling than previously outlined if you will relative to battery electric. So I would say that that's a a good news for fuel cell story and starts pointing towards larger fleet size adoption Rob Brown: especially where Marty Neese: the infrastructure constraints can be overcome by adopting fuel cell buses. So in general, I would say Europe is making steady and improving progress and adoption rates for fuel cells North America is essentially flattish year over year and that's that's where I'd leave it. Rob Brown: Okay. Thank you. Then quickly on gross margin, I think you talked about slightly negative sort of adjusted out. Is that the baseline you expect to grow from or improve from going forward? Marty Neese: The short answer is yes. But Kate maybe you provide some more details on the gross margin bridge. Rob Brown: For Marty Neese: Q3 and then kind of what you're out looking from there? Kate Igbalode: Yes, absolutely. So you're spot on, Rob, in that in our remarks we did highlight that without this kind of one time pieces in the quarter, would be slightly negative. That's kind of where we expect to close out in Q4 as well. Looking into 2026, again, I think you can expect Sumit Kundu: low to mid single digits on our gross margin. Kate Igbalode: We don't provide margin guidance, but I think you do expect us to see incremental progress going forward from here on out. Rob Brown: Okay. Thank you. I'll turn it over. Operator: The next question comes from Jeff Osborne with TD Cowen. Please go ahead. Sumit Kundu: Thank you. I was going to ask on the former Project Ford in the Texas facility, some of the targets that were laid out for the restructuring there. Jeff Osborne: Are those still achievable without the Texas facility? Can you remind me how important that was as it relates to getting gross margins higher than what Kate just mentioned? Marty Neese: Yes. Would say Project Forge is primarily automation and materials efficiency And that is in fact still in flight yielding well heading in the right direction and not dependent on Texas in any way shape or form. Texas was more of an integrated view for a complete stacks and modules with Project Forge and the automation being a core attribute. But that's being done in Canada as we speak. So we're good on that front. Jeff Osborne: Good to hear. And then Marty, you mentioned reentering the material handling space. I think from memory, years ago, you were just in the liquid cooled side for the ride on units versus I think the smaller pallet jack lifters were air cooled? Are you doing both? Or are you just doing the liquid cooled? Can you just further detail what specifically the strategy is on material handling? Marty Neese: Yes. The near term interest we're seeing is for air cooled. And so air cooled with additional durability is resonating well with a handful of new customers And when I say additional durability, I mentioned at least 2x the state of the art as we see the market today. That really is attractive when you think about the service obligation for customers over the long run. And so different customers are really valuing that in a more thoughtful way as they get more and more experience servicing and managing a long lifetime fleet. And so that durability equation is starting to show economic clarity for them. Jeff Osborne: Got it. Thanks for the detail. Operator: The next question comes from Craig Irwin with ROTH Capital. Please go ahead. Sumit Kundu: Hey guys, it's Andrew on for Craig. One quick one for me. So Congrats on the signing your largest marine order to date with the Samskip vessels I know you've been working with this partner for a couple of years now, think since 2021. So can you kind of talk about the just evolution of this agreement, how it came about and maybe what you can take away from it and learn from -- for other customers? Marty Neese: Yes. I might pass that to Kate for additional clarity. But the headline is we have been developing this opportunity for a couple of years. And the product, FCwave product is [ DNB ] certified for a marine application. And so that took a good bit of time on certifications and standards bodies, but we were the first ones to do that. And after that heavy lift was complete on the [ certs, ] then we started seeing an adoption rate like the Samskip order. Noteworthy is that FCwave product has additional use cases beyond marine, and that certification of DNB, if you will, for the marine application, provided a lot of comfort to other customers in using that product and the approach that we use relative to that product. So that's kind of what I know from a background or context standpoint. If there's more relative to the contract evolution, Kate, that you want to add, feel free. Kate Igbalode: No, I think those are excellent points, Marty. And I think I'm glad you asked about this, Andrew, because I think there's a number of key learnings, not only on a technical basis, but also commercial and contractual with how we work with customers. I mean these are large projects. They take years to develop and form. And I think for me, one of my big takeaways was how are we listening to our customers in terms of what's important to them from a technological point of view and how we're using that to inform our next generation of product development. And then I think the other piece, too, is understanding their entire ecosystem around how they're getting hydrogen supply at a cost that is affordable to them. So it's kind of looking at the whole holistic view of what it really takes to get these projects across the ball line. And it's a very collaborative effort for us with our technical teams, our commercial teams, and also on the after care and service piece is incredibly important in these types of applications, which really require very high reliability and ease of maintenance. So I was really happy to be involved on this across the last number of years, and I'm thrilled to see it coming to fruition. Operator: This concludes the question-and-answer session. I would like to turn the conference back over to Marty Neese for any closing remarks. Please go ahead. Marty Neese: Thank you, everyone, for participating in today's call. Really appreciate it, and we look forward to providing additional updates in the future. Operator: This brings to a close today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.