加载中...
共找到 39,819 条相关资讯
Operator: Welcome to Vecima Networks' First Quarter Fiscal 2026 Results Conference Call and Webcast. [Operator Instructions] The conference is being recorded. [Operator Instructions] Presenting today on behalf of Vecima Networks are Sumit Kumar, President and CEO; and Judd Schmid, Chief Financial Officer. Today's call will begin with executive commentary on Vecima's financial and operational performance for the first quarter fiscal 2026 results. Lastly, the call will finish with a question-and-answer period for analysts and institutional investors. The press release announcing the company's first quarter fiscal 2026 results as well as detailed supplemental investor information are posted on Vecima's website at www.vecima.com under the Investor Relations heading. The highlights provided in this call should be understood in conjunction with the company's unaudited interim condensed consolidated financial statements and accompanying notes for the 3 months ended September 30, 2025 and 2024. Certain statements in this conference call and webcast may constitute forward-looking statements within the meaning of applicable securities laws from which Vecima's actual results could differ. Consequently, attendees should not place undue reliance on such forward-looking statements. All statements other than statements of historical fact are forward-looking statements. These statements include, but are not limited to, statements regarding management's intentions, beliefs or current expectations with respect to market and general economic conditions, future sales and revenue expectations, future costs and operating performance. These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict and/or are beyond our control. Vecima disclaims any intention or obligation to update or revise any forward-looking statements as a result of new information, future events or otherwise, except as required by law. Please review the cautionary language in the company's first quarter earnings report and press release for fiscal 2026 as well as its annual information form dated September 25, 2025, regarding the various factors, assumptions and risks that could cause actual results to differ. These documents are available on Vecima's website at www.vecima.com under the Investor Relations heading and on SEDAR at www.sedarplus.ca. At this time, I would like to turn the conference over to Mr. Kumar to proceed with his remarks. Please go ahead. Sumit Kumar: Thank you. Good morning, and welcome, everyone. Thank you for joining us. Please excuse my voice as I'm just getting over a cold today. Fiscal 2026 got off to a strong start with multiple achievements in the first quarter. I'm going to start today with an overview of the quarter's highlights. Judd will follow with a review of our financial results, and then I'll return to discuss our outlook before we take your questions. To start, I'm pleased to report we delivered another quarter of sequential quarterly revenue growth. Our consolidated revenues were up 3.4% quarter-over-quarter for Q1, building on the 7.5% sequential growth we achieved in Q4. Importantly, we paired this higher revenue with stronger gross margin performance as our product mix returned to a more favorable balance and we experienced less foreign exchange-driven volatility. Combined with our steadfast commitment to operating discipline, we achieved adjusted EBITDA of $11.5 million, an excellent result and up 71.2% as compared to Q4. Notably also, adjusted EBITDA margin increased to 16.2% from 9.8% in the fourth quarter. In our Video and Broadband Solutions segment, we delivered another quarter of strong performance as operators continue their transition to next-generation DAA platforms using Vecima's Entra solutions. By the end of the first quarter, our customer engagements for Entra had increased to 140 from -- up from 123 a year ago. To date, 68 of those customers have purchased Entra from Vecima. Our revenues, meanwhile, are coming from many different parts of the Entra portfolio, underscoring the depth and breadth of our industry-leading cable and fiber access solutions. One of the newer contributors in Q1 was our Virtual Cable Modem Termination System or vCMTS. As you know, we recorded first revenue for vCMTS in Q4, and we built on that in Q1 as we continue to advance towards the program with our lead Tier 1 customer. We also significantly increased engagement with additional customers during the quarter, including adding a new customer win in Europe in Q1. While Vecima is still in the early stages of our vCMTS journey, this technology represents a transformative achievement and advancement, virtualizing and substantially improving traditional hardware-based CMTS and CCAP systems to deliver far greater scalability, flexibility and operational efficiencies. It also offers much greater cost efficiency, reliability and performance together with a cloud-native architecture built entirely in software. Dell'Oro Group forecasts that the annual vCMTS market will reach about USD 350 million by 2028. Vecima is now firmly positioned as one of just 3 vendors worldwide that can offer a vCMTS solution of the quality and sophistication that's demanded by Tier 1 broadband service providers. We see a very exciting future for this technology and product line as the most significant additions to our revenue profile are still to come. We also achieved strong contribution again in Q1 from our EN9000, the industry's only GAP node, which is gaining deep adoption with customers. The EN9000 is a future-proof platform capable of being upgraded with multiple successive generations of DOCSIS for fiber-to-the-home technology. I'm pleased to report that we also received initial orders for the new Entra EN3400 version of the GAP node, which is a more compact and condensed variant of the EN9000. While this new node shares the vast majority of the design DNA of the EN9000, it's specifically targeted to multi-dwelling unit and enterprise applications that demand a streamlined variant. Related to that, it also represents new and incremental use cases above the Residential Cable Access segment and is expected to generate meaningful incremental revenue annually. Q1 also included growth in the Remote MACPHY category with a network expansion with a large U.S. Tier 2 customer occurring. Additionally, we won a new customer for a shelf-based Remote MACPHY device in the EMEA region. And on the fiber access side of the portfolio, Q1 was another particularly successful quarter where we saw ongoing strength from Entra Optical. We also continue to successfully roll out our newer Entra Principal Core and Access Test Platform solutions during the quarter. Principal Core again, is a virtual orchestration technology that aims to enable operators to converge cable, fiber and even mobile networks into a single seamless access platform. The Access Test Platform and simulators allow operators to validate and deploy DAA software upgrades at scale, dramatically speeding time to market for next-generation rollouts. During the quarter, we announced an important customer win with Liberty Global for the Access Test Platform, and we see more to come for both the Entra Principal Core and the Entra Access Test Platform. Another product group I want to mention is our Power Holdover Modules, which have also been enjoying strong adoption since we first began to roll them out in Q4. We see growing contribution from these innovative new products through fiscal 2026 and beyond. And on the topic of innovation, I want to comment on Vecima's impact at this year's SCTE Tech Expo in late September, far and away the industry's premier annual event. We had a standout presence at the show, drawing major attention and excitement as we revealed multiple industry and world-first innovations. This included a demonstration of concurrent 50-gig PON and 10-gig EPON over the same optical port in a live setting. This is a world-first achievement, which will give broadband service providers the ability to add 50-gig PON when and as needed while continuing to scale 10-gig PON and preserving those investments. Also on the fiber access side, we demonstrated our Entra EXS1610 All-PON Platform and vPON Manager, which delivers scalable, open interoperable and vendor-agnostic PON deployments through our open network ecosystem or Entra ONE Platform. And we showcased leading advances in DOCSIS 4.0, including live demonstrations of the cloud-native Entra vCMTS, powering the world's first dual downstream service group, DOCSIS 4.0 Remote PHY device, the Entra ERM422. Without question, we cemented our reputation as an innovation solution and technology leader in the industry. The response was exceptional and served as a fitting culmination to an impressive first quarter. Looking at our other business segments. In our Content Delivery and Storage segment, we had an excellent start to the year with revenues of $11.2 million and a gross margin of 60.7%. This was up both year-over-year and quarter-over-quarter, driven primarily by increased managed IPTV expansions with our customers. Importantly, we also saw increased dynamic ad insertion or DAI sales during the quarter, kicking off the implementation with a key customer while also securing Phase 2 orders. Other highlights included the introduction of our DAI Ingest Manager, which streamlines the management of advertising file assets. We view DAI as an important growth driver for its ability to empower customers to further monetize video. We also continue to advance our Open CDN platform as we develop the platform and engagements. Open Caching again allows operators to monetize the millions of over-the-top streaming video packets that are crossing their networks for free today, while at the same time, greatly increasing viewing quality and reducing caching costs for content providers. We expect this technology will evolve into a material growth driver in the long term. Turning to Telematics. We had another profitable quarter, which included the rollout with a large mobile asset customer with over 1,300 vehicles that we won recently, and we added another 14 new customers for our NERO Asset Tracking Platform. By quarter end, the Telematics segment had over 120,000 assets under management, including over nearly 22,000 vehicles and over 100,000 asset tags. As always, Telematics was a strong performer with gross margins of 67.6%. So overall, it was a quarter marked by significant achievements that further strengthen the foundation for Vecima's future growth. I'll return to talk about what we see next for Vecima in just a few moments. But first, I'll pass the call to Judd to provide our Q1 financial review. Judd? Judson Schmid: Thanks, Sumit. Good morning to everyone who's with us on the call today. I'll be reviewing our first quarter financial performance in more detail. And for the purposes of this call, I'll assume that everyone has seen our Q1 fiscal 2026 news release, MD&A and financial statements posted on Vecima's website. Starting with consolidated sales. We generated first quarter revenue of $71.1 million, which is up $2.3 million or 3.4% from Q4 of last year. Our Video and Broadband Solutions segment first quarter sales for fiscal '26 accounted for $58 million on par with sales of $58.1 million for the fourth quarter of last year. Our next-generation Entra DAA products generated $55 million, slightly higher than the $54.6 million last quarter and 19% lower than the $68.3 million in Q1 of fiscal '25. Commercial Video contributed $2.9 million to the VBS balance for Q1 as compared to $3.4 million last quarter and $4.5 million in the same period last year. Results for this product line are keeping with expectations as they reflect the continued transition to next-generation platforms and as some of the newer DAA-driven commercial video solutions are being accounted for as part of the Entra family sales. In our Content Delivery and Storage segment, we experienced a significant quarterly revenue jump in Q1 of fiscal '26 to $11.2 million from sales of $7.2 million in Q1 fiscal '25 and $8.6 million in Q4 of fiscal '25, an increase of 55% and 30%, respectively. And as always, we note that quarterly sales variations are typical for the CDS segment. The year-over-year increase reflects a significant increase in product sales and slightly higher service revenue. Segment sales for the first quarter of fiscal '26 included $5.1 million of product sales and $6.1 million of services revenue as compared to $1.4 million in product sales and $5.9 million in service revenue in the same period last year. In our Telematics segment, first quarter sales grew 10% year-over-year from $1.7 million in Q1 of fiscal '25 and were 9% lower than the $2.1 million in the fourth quarter of last year, with the year-over-year gains reflecting the increase in the number of tags and assets now being monitored. Regarding gross margin, rebounding to our expectations, our reported first quarter gross margin increased to 42.1% from gross margin of 27.3% in Q4 of fiscal '25 and 41.7% in Q1 of fiscal '25. As adjusted for inventory reserves and warrant expense, first quarter adjusted gross margin increased to 43.9% from adjusted gross margin of 37.4% in Q4 and adjusted gross margin of 42.3% in Q1 of last year. The increase primarily reflects a more favorable product mix in this first quarter. Turning now to first quarter operating expenses. These decreased by $7.9 million quarter-over-quarter to $28 million from $35.8 million, which included a $6.9 million impairment charge related to our intangible assets and decreased by $1.6 million from $29.6 million year-over-year. Notable year-over-year changes in the first quarter of fiscal '26 are as follows: G&A expenses decreased to $6.6 million or 9% of sales from $7.7 million, also 9% of sales due to lower salary expense resulting from our Q2 fiscal 2025 restructuring. Lower fixed asset depreciation and lower subcontractor expenses also contributed. Sales and marketing expenses decreased to $8.8 million or 12% of sales from $9.4 million, also 12% of sales, reflecting lower salary expenses again from our Q2 restructuring as well as decreased commission expense and conference costs. Research and development expenses increased to $12.1 million or 17% of sales from $11.6 million or 14% of sales. This is primarily a result of higher amortization of our deferred development costs, additional research and development costs from our Falcon acquisition, partially offset by the savings of our restructuring program implemented last year. As we continue to note, some of our R&D expenditures are deferred until product commercialization. And so reported R&D expense in a period is typically different than the actual cash expenditure. Adjusting for this, our actual cash R&D investment was $14.4 million or 20% of revenues in the first quarter, down from $14.8 million or 18% of revenues in Q1 of last year as we continue to emphasize our investment in our innovation pipeline and future product developments. We continue to show that we can monitor and control our operating expenses to contribute to our bottom line results. And looking at our bottom line results, we reported first quarter operating income of $1.9 million compared to operating income of $4.5 million in the same period last year. The decrease of $2.6 million primarily reflects lower revenues from our VBS segment, combined with additional inventory allowances and an increase in the amortization expense just noted for our deferred development costs, these being partially offset by the reduction in operating costs as a result of the restructuring in Q2 of last year. Lastly, we reported a first quarter net income of $0.2 million or earnings per share of $0.01 compared to net income of $2.1 million or $0.09 per share in the same period of fiscal '25. Additionally, our adjusted EPS for the first quarter was $0.05 per share compared to adjusted EPS of $0.12 per share in the same period of last year. Turning now to the balance sheet. We ended the first quarter with $8.6 million in cash, up from $3.4 million at the end of last quarter. Working capital of $53.8 million increased from $51.2 million at the end of last quarter. As we discussed in our MD&A, the components of working capital can be subject to significant swings from quarter-to-quarter. Product shipments can be lumpy as they reflect fluctuating requirements of our major customers. Contract timing issues like those with greater than 30-day payment terms also affect working capital, particularly if shipments are back-end weighted for a quarter. Lastly, cash flow provided by operations for the first quarter decreased to $6.6 million from $24.4 million during the same period last year, primarily as a result of the changes in working capital components just noted. During the current quarter, we also closed on the second tranche of our EDC debt of $10 million. Despite this additional debt, our net debt position is down from a high of $92 million in Q3 of fiscal '24 to $60.7 million for the first quarter of fiscal '26. On a final note, the Board of Directors approved a quarterly dividend of $0.055 per common share payable on December 22, 2025, to shareholders of record as of November 28, 2025. It's important to note that this dividend will be designated as an eligible dividend for Canadian income tax purposes. Now back to Sumit. Sumit Kumar: Thank you, Judd. As we move forward into Q2, we're tracking towards continued strong financial and operational performance in fiscal '26, supported by our broad Era product rollouts in the VBS segment and growing demand for our IPTV and DAI solutions in the CDS segment. We expect to pair this with improved gross margins through the year, reflecting a more balanced product mix and continued normalization of foreign exchange volatility. We anticipate our VBS segment will lead our performance in fiscal '26. As our customers' network upgrades roll out, their existing inventories come into better balance and our new Entra products and platforms provide added revenue. I want to note, however, that we expect that recent industry consolidation activity is likely to lead to some timing lumpiness between third and fourth quarters, accepting the more powerful demand acceleration we've been anticipating into early fiscal '27. In our Content Delivery and Storage segment, we continue to see a stronger year ahead, supported by contributions from our new DAI solutions as well as continued IPTV expansions with new and existing customers. Although as we always know, quarter-to-quarter performance and lumpiness in this segment tends to be of a lumpy nature. And in our Telematics segment, we're anticipating steady and profitable performance from the Recurring Software Subscriptions business on vehicles and assets. Overall, we expect full year results in fiscal 2026 to include solid revenues, a steady improvement in gross margins and strong adjusted EBITDA performance, well above last year's levels. We're moving forward, highly confident in Vecima's future. We boast the industry's broadest and deepest portfolio of innovative interoperable cable and fiber access products. And we have multiple growth engines supporting our momentum as global adoption of DAA ramps up and IPTV continues to expand. Our innovation and our significant achievements in both DAA and IPTV have laid the foundation for growth and increased profitability, not just this year, but for years to come. This concludes our formal comments for today. We'd now be happy to take questions. Operator? Operator: [Operator Instructions] Our first question today is from Steven Li with Raymond James. Steven Li: Can you comment on RDOF deployments? Like how is it going? And will that also be impacted by the industry consolidation you referred to? Sumit Kumar: Yes. No, thanks, Steven. I think RDOF has been a very successful program for the customers that are using Vecima's Remote royalties and our Entra Optical platform to penetrate and achieve those passings. And it's been a strong contributor of growth -- of growth for our customers, especially some of the larger Tier 1 customers we have. And that program has been a source of continued progress and commitment to the rollout. I think that the pace has been very steady and growing over the last several years. There's quite a bit left to do. So from the kind of influence of the consolidation activity, I don't think we see that as having any influence on the RDOF program considering that it's such a valuable expansion for our customers. Operator: [Operator Instructions] As there appear to be no further questions, this concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.
Operator: Good morning, and welcome to Q3 2025 Financial Results Conference Call for HLS Therapeutics. At this point, I would like to turn the call over to David Mason, Investor Relations, for the introductory remarks. Please go ahead. Dave Mason: Thank you. Good morning, everyone, and thank you for joining us today. With me on the call is Craig Millian, Chief Executive Officer; John Hanna, Chief Financial Officer; and Brian Walsh, Chief Commercial Officer. Earlier this morning, we issued a news release announcing our financial results for the 3 and 9 months ended September 30, 2025. This news release, along with our MD&A and financial statements, is available on HLS' website and on SEDAR+. Please note that slides accompanying today's call can be viewed via the webcast, a link to which is available in our earnings press release and at our website on the Events and Presentations page. Certain matters discussed in today's conference call or answers that may be given to questions could constitute forward-looking statements. Actual results could differ materially from those anticipated. Risk factors that could affect results are detailed in the company's annual information form, which has been filed on SEDAR+. During the call, we will refer to adjusted EBITDA. Adjusted EBITDA does not have any standardized meaning prescribed by IFRS. Adjusted EBITDA is defined in our press release and annual filings that are available on SEDAR+ and on our website. Please note that all financial information provided is in U.S. dollars, unless otherwise specified. I would now like to turn the meeting over to Mr. Millian. Please go ahead. Craig Millian: Thanks, Dave. Good morning, everyone, and thank you for joining us. On our call today, I'll review quarterly and year-to-date highlights, along with progress against corporate priorities. Brian will go into further detail on product performance, along with an update on launch preparations. And then John will follow with a detailed look at the numbers. Following John, we'll hold a Q&A session. I want to start by highlighting the progress we've made over the past 2 years, improving profitability and cash flow and strengthening our financial position. We believe these improvements were essential to set the stage for future growth. I'll start with adjusted EBITDA, which was $4.9 million in the third quarter, up 19% year-over-year and $13.9 million year-to-date, up 25% over the same 2024 period. With the progress we've made year-to-date, we are on track to reach our target adjusted EBITDA range for the full year. Following an inflection point 2 years ago in the third quarter of 2023, we've demonstrated steady quarterly improvement in adjusted EBITDA, excluding royalties. And in the third quarter, we continued that positive trend. In that 2-year window, adjusted EBITDA, excluding royalties, has increased by more than 85%. This performance is a result of the operational improvements we've made over the past couple of years, focusing on the key performance drivers for our promoted products, while significantly reducing operating expenses and delevering our balance sheet. Financial discipline we've instilled across the organization is generating results with strong operating cash flow and continued debt reduction. John will provide more details on our financial position in his section. On the revenue side, while Canadian product sales have grown 2% year-to-date in local currency, we have faced several headwinds throughout 2025. And in the third quarter, revenues were down 4%. Let's start with Vascepa. With an eye towards strengthening commercial capabilities for both Vascepa and ahead of the bempedoic acid launch, we made substantial and purposeful changes to the sales force this year. In 2025, more than half of our territories turned over as we proactively recruited, upgraded and onboarded new talent. Those geographies are now filled with highly experienced and motivated sales representatives who are building momentum in their territories. With a fully deployed customer-facing organization, this completes the transition that began late last year with our exit from the Pfizer promotional services agreement. Even with the scope of these changes, Vascepa has managed to grow prescriptions at a substantial rate of 24% year-to-date, and the third quarter was its most profitable quarter since launch. That said, Vascepa prescription growth is below the ambition we set for the year. Based on year-to-date results, we now expect Vascepa revenue growth on a percentage basis in the mid-teens for the full year on a local currency basis compared to our prior range of 18% to 26% growth. We are optimistic that with a fully trained and deployed sales team, we will continue to grow Vascepa in 2026 and beyond. Turning to Clozaril. We had an ambitious plan to grow our patient numbers this year across Canada. And while we still see many targeted growth opportunities ahead, they are taking longer to realize than anticipated. We have adjusted our guidance and now project a decline of 4% to 5% for the Canadian Clozaril business in local currency for the full year. We estimate that about 1/3 of the projected revenue decline is due to fluctuations in inventory at some hospital-based accounts, which had the effect of shifting revenue into 2024. We expect these inventory effects to impact 2025 comparisons to 2024, but not beyond. Clozaril also recently faced increased competitive pressure in Ontario, where we maintain a very high market share. Earlier this year, a number of hospital accounts in Ontario were in play due to a large buying group contract that was up for a multiyear renewal. We successfully defended the vast majority of Clozaril business in Ontario, where a satisfied patient base, differentiated CSAN services and innovative Pronto offering helped support the Clozaril value proposition. Despite the increased competitive activity in Ontario, overall Clozaril numbers in Canada are down less than 1% versus prior year, and this is due to sizable gains we have achieved in other parts of the country, particularly the Western provinces. Taking a slightly longer view, Clozaril patient numbers in Canada are actually up about 1% since the end of 2023. In addition, our U.S. Clozaril business has shown resilience and is currently outperforming expectations for the year. This stable U.S. performance represents a meaningful improvement over the historical trend. So to summarize our outlook for the rest of the year, profitability remains strong, and we expect to grow adjusted EBITDA to meet our guidance range of 17% to 23% growth, which translates to $19.5 million to $20.5 million. Based on our updated product sales guidance, we are now providing a consolidated revenue estimate for the year of $55 million to $56 million. Looking toward 2026, we expect to grow both top line and adjusted EBITDA next year. Although we saw some recent increased competitive activity against Clozaril in Ontario, we have successfully grown our existing patient base over the past 2 years and expect business to stabilize in Canada. For Vascepa, now that our sales force is fully staffed, we're starting to see the positive impact, including recent increases in new-to-brand patients. This makes us optimistic for growth prospects. And of course, we're preparing to expand our cardiovascular portfolio with a second quarter launch of bempedoic acid, which will contribute to revenue in 2026. We'll provide a more detailed financial outlook for 2026 when we issue our year-end results in March. While we manage the near-term objective of profitably growing our existing product portfolio, I want to emphasize how excited we are about the growth opportunity ahead of us as we build HLS into a leading cardiovascular company in Canada. The introduction of bempedoic acid will help address a large and growing patient population of more than 0.5 million Canadians who could benefit from additional LDL-cholesterol lowering. This novel medicine will represent an important addition to the clinical armamentarium as there is a need for treatments beyond statins and ahead of the expensive injectables currently available. And we are excited to leverage powerful operational and platform synergies with Vascepa to position HLS as the leader in delivering novel cardiovascular risk-reducing oral therapies to the Canadian market. Brian will provide more details on our launch preparations and the commercial opportunity. But I want to underscore that this launch represents a pivotal moment for HLS and will drive growth for years to come. Even as we set the stage for future growth, we plan to largely hold the line on operating expenses in 2026. As said previously, we've built a cost structure that can support both our existing portfolio and the new product launches without significant incremental investment. The financial foundation for HLS is solid with improved profitability and cash flow. Our new credit agreement announced in the third quarter with favorable terms, further strengthens our financial position. The agreement has a new syndicate of lenders and provide stability, lower interest expense and greater flexibility to pursue strategic growth opportunities to expand our portfolio. With that, I'll turn it over to Brian to discuss our commercial performance and launch preparations. Brian? Brian Walsh: Thanks, Craig, and good morning, everyone. I'll walk through our Q3 and year-to-date product performance and provide an update on our bempedoic acid launch preparations. Starting with Clozaril. Our U.S. Clozaril business has performed well, and year-to-date sales were up 1%. This is a meaningful improvement over the historical trend and as a result of a durable established patient base coupled with targeted new patient growth through our specialty pharmacy partnership. For Clozaril in Canada, as Craig noted, we continue to drive strong growth in the West, including 11% patient number growth in British Columbia that was offset by expected patient attrition in Quebec and some competitive pressures at select accounts in Ontario. And while we have experienced some unit impact from the pressures in Ontario, we have successfully defended our value proposition in the vast majority of accounts while maintaining our net pricing integrity, which preserves the foundation for a healthy, sustainable business moving forward. Despite these pressures, our patient numbers are down less than 1% at the end of Q3 versus the same time last year and up 1% versus the end of 2023, demonstrating the solid fundamentals underpinning our Clozaril franchise in Canada. Importantly, clozapine is significantly underutilized across Canada as the only approved treatment -- as the only approved product for treatment-resistant schizophrenia. This context creates multiple pathways for our team to bring the life-saving Clozaril brand and our differentiated CSAN services to more patients across Canada. Looking at Vascepa, Q3 unit volume grew 22% and compared to Q3 last year and year-to-date unit growth was 24%. The key story with Vascepa this year has been our sales force rebuild, following the Pfizer transition and the ahead of our bempedoic acid launch. As Craig shared, we made many of these changes with the aim of strengthening our commercial capabilities for both Vascepa, but also before we launched bempedoic acid. But as a result, throughout 2025, more than half of our territories were opened for some period of time as we recruited and onboarded new representatives. At the end of Q3, we had reached full deployment across all territories and we are very excited about the talent that we have attracted to join HLS. And while everyone we hired as an experienced specialty sales representative, it still takes several months for a new representative to get fully trained and establish with their new customers. But we're seeing very good early signs that our new team members are becoming increasingly productive, which is evident by overall growth in new patient starts. For the first time this year, we grew new patient starts each month in the quarter versus the prior year. We are also seeing improved depth of prescribing by growing consistent prescribers, 5% versus Q2 of this year and 29% versus Q3 of last year. We expect this growth to accelerate in the coming quarters as our transformed sales team gains further traction, driving more meaningful impact on our full year 2026. The fundamental supporting Vascepa remains strong. The product remains prominent in the CCS treatment guidelines, and Vascepa maintains excellent formulary access across both public and private payers. And we continue to take proactive steps to streamline the reimbursement process and improving retention rates for patients that are covered by private plans. Now let me turn to the exciting upcoming launch of bempedoic acid. As mentioned previously, NEXLETOL and NEXLIZET are the commercial product names used in the U.S., but we expect a variation in the brand name for the monotherapy once Health Canada approval is finalized. The monotherapy is a daily oral nonstatin treatment containing the novel compound bempedoic acid. Its brand name in Canada will be Nilemdo, which is aligned to the brand name in Europe. The second product is the fixed-dose combination of bempedoic acid with ezetimibe in a single daily pill. And in Canada, it will be marketed as NEXLIZET, the same name as in the U.S. What makes these products differentiated is they add a second completely independent pathway to cardiovascular risk reduction alongside Vascepa's unique mechanism. These new products adjust a very large addressable market focused on LDL cholesterol reduction. LDL is the ultimate biomarker for cardiovascular risk. It's integrated into every clinical guideline and physician practice pattern. 40% of at-risk patients and half of high-risk atherosclerotic cardiovascular disease patients in Canada do not achieve their CCS guideline recommended LDL target. These elevated LDL levels put patients at significant risk to future catastrophic vascular events like myocardial infarction, stroke and cardiovascular death. The unmet need -- unmet medical need is significant, and we estimate more than 0.5 million Canadians could potentially benefit from these medicines. This gives us a clear, well-established entry point for these products into the Canadian cardiovascular [Technical Difficulty]. The clinical profile of these products is very compelling for physicians, patients and payers. We will launch Nilemdo with the results from the CLEAR-outcomes trial, a nearly 14,000 patient randomized double-blind cardiovascular outcome study that demonstrated a meaningful reduction in major cardiovascular events -- major adverse cardiovascular events, or MACE, in patients unable to take recommended statin therapy. Nilemdo and NEXLIZET provided novel oral pathway for LDL lowering while being less likely to cause muscle-related side effects that limit statin adherence and can be used alone or in combination with other LDL-lowering therapies. In terms of clinical practice, physicians typically start patients with a statin, then ezetimibe if additional LDL lowering is needed. If patients still aren't at goal, the current standard of care moves to PCSK9 inhibitors, which are injectable, expensive and general reserved for only the high-risk patients. Nilemdo and NEXLIZET slot in ahead of PCSK9s in this treatment algorithm, providing a simpler, lower-cost oral option for patients who need additional LDL lowering, but aren't appropriate candidates for injectable therapy. Our prelaunch preparations have accelerated since last quarter. We're finalizing our dossiers for pricing and reimbursement discussions. Our medical teams, who have been established for several years with our KOLs on Vascepa have started engaging with their customers on bempedoic acid on the bempedoic acid story this summer, and they have been met with a high level of enthusiasm regarding the significant unmet need that the product addresses. On timing, we expect to hear from Health Canada in Q4, which would put us on track for our Q2 2026 commercial launch. By that time, we expect to have product available and to have achieved meaningful coverage with private insurers. Our engagement on the public reimbursement will continue throughout 2026 with the goal of achieving favorable provincial listing agreements beginning in 2027. The strategic synergies with Vascepa are significant. The Canadian Cardiovascular Society Guidelines recommend both further LDL lowering for patients not at goal, and consideration of Vascepa treatment for patients with elevated triglycerides as a marker of increased cardiovascular event risk. With our expanded portfolio, we'll be well positioned as the Canadian leader in oral cardiovascular risk reduction, able to partner with physicians to address a much broader set of patients working to reduce their remaining risk. And our customer-facing teams are energized and ready to launch these new products. With that, I'll turn it over to John for the financial results. John? John Hanna: Thank you, Brian, and good morning, everyone. I'll focus my remarks on our Q3 and year-to-date financial performance, the continued strengthening of our balance sheet and our capital allocation approach. Starting with revenue. Total revenue for Q3 was $13.5 million compared to $14.1 million in Q3 last year. Year-to-date revenue was $40.3 million compared to $41.1 million in the same period last year. Craig and Brian have already covered off the key factors impacting revenue for the quarter and the year. Excluding royalties, revenue from Canadian product sales in local currency and revenue from U.S. Clozaril sales were both up on a year-to-date basis by 2.3% and 1%, respectively. The timing of orders can impact quarterly results. And for this reason, we view year-to-date revenue as a more relevant measure of the comparison of year-over-year revenue performance. Royalty revenue was $180,000 in Q3 compared to $195,000 in Q3 last year. Royalty revenue comparisons have normalized here in Q3 2025, following the sale of the Xenpozyme royalty in Q2 2024. HLS has one remaining royalty interest. Foreign exchange continues to be a headwind when translating Canadian dollar sales to U.S. dollars for reporting purposes. Year-to-date, foreign exchange has negatively impacted consolidated revenue by approximately $0.8 million. On the expense side, we continue to demonstrate strong operational discipline helping to drive increases in adjusted EBITDA and cash flow. Q3 operating expenses comprising sales and marketing, medical regulatory and patient support and G&A were down 22% compared to Q3 last year. Year-to-date, these expenses were down 20%. This performance reflects our focus over the past 12 to 18 months on operational efficiency and driving product profitability. Cost of sales have increased in the quarter and year-to-date periods, largely due to growth in unit volumes and net sales for Vascepa. As Craig mentioned earlier, adjusted EBITDA growth in Q3 and the year-to-date period was strong, increasing 19% and 25%, respectively. Similar to the discussion on OpEx, this is due to our efforts to optimize operations and drive product profitability. I want to highlight the consistent improvement we've made in our probability trajectory. As shown in the slide in our presentation, on a trailing 12-month basis, adjusted EBITDA excluding royalties, has shown consistent quarterly improvement since bottoming out in late 2023. Q3 continues this positive trend. As Craig mentioned, since Q3 2023, adjusted EBITDA ex royalties has grown by 87%. For the third quarter, the direct brand contribution from Clozaril to adjusted EBITDA was $6.3 million, while the direct brand contribution from Vascepa was $0.6 million. Year-to-date, contributions were $19.2 million for Clozaril and $0.7 million for Vascepa. Cash from operations in Q3 was $2.5 million, up 67% compared to Q3 last year. Year-to-date, cash from operations was $10.6 million, up 121% versus the same period last year. This strong operating cash flow performance reflects our improved profitability. Another driver of our cash flow improvement has been the reduction in interest expense. Year-to-date, we've reduced interest expense by 38%, saving $2.6 million. This reflects the significant progress we've made in paying down debt and lowering our effective interest rate. Turning to the balance sheet. At quarter end, the carrying amount of our term loan stood at $53.1 million, down $12.9 million or 19% from $67.4 million at December 31, 2024, and down $33.6 million or almost 40% since the end of 2023. As a result of our continued debt reduction, net debt stood at $43.5 million at quarter end compared to $50 million at December 31, 2024. Our deleveraging, combined with our improved operational performance has fundamentally strengthened our financial position and created greater flexibility for capital allocation. Further strengthening our financial position, in August, we successfully refinanced our debt facility, entering into a new Canadian denominated credit agreement with total borrowing capacity of $170 million. National Bank of Canada is the lead and syndicate includes TD Bank, RBC and Federal Credit Union. This replaces our previous U.S. dollar facility and extends our maturity to August 2029. The Canadian-denominated structure provides a natural hedge against our predominantly Canadian operations, while reducing foreign exchange exposure. We've achieved meaningful interest rate savings of 25 to 50 basis points on the spreads, plus over 100 basis points from favorable Canadian base rates. This should net us annual savings of approximately $1.5 million in interest expense. This enhanced financial flexibility supports our capital allocation priorities. Our outlook for capital allocation remains balanced and is focused on 3 areas: one, continued debt reduction; returning capital to shareholders through share buybacks; and three, strategic portfolio expansion. Importantly, we funded all 3 priorities, debt reduction, share buybacks and portfolio expansion through operating cash flow without requiring additional financing. In summary, we're delivering our profitability commitments, generating strong cash flow and continuing to strengthen our balance sheet. We've built a solid financial foundation that provides flexibility to invest in our portfolio while also returning capital to shareholders. With that, I'll turn it back to Craig for closing remarks. Craig? Craig Millian: Thank you, John. In closing, our consistently improving profitability demonstrates that the operational transformation we've executed is working. We're generating improved cash flow, significantly reducing our debt burden and building a more sustainable cost structure that can also support growth. The pending approval of bempedoic acid will transform our cardiovascular franchise in Canada and further establish HLS as a leader in delivering novel oral therapies to reduce cardiovascular risk. We remain focused on execution and are confident that our strategy, our team and our growing portfolio of important medicines will continue to deliver results and create value. That concludes our prepared remarks. At this point, I'll ask the operator to please provide instructions for asking questions. Operator? Operator: [Operator Instructions] With that, our first question comes from the line of Michael Freeman with Raymond James. Michael Freeman: Congratulations on all this progress. I think as a quick first one, I wonder if you could describe any interactions you've had with Health Canada on bempedoic acid. Craig Millian: Thanks, Michael, for the question. I'll turn it on over to Brian. Brian Walsh: Michael, we're progressing with the regulatory review. We've had very good engagement on bempedoic acid, and you were expecting to hear from them this quarter. So we're on track for a product launch in Q2 of next year. Michael Freeman: Okay. Okay. Now with the -- on the Clozaril business, you described as well some of these Canadian headwinds. I wonder what your overall plans for maintaining or growing this business, I guess, broadly, but specifically in Canada, you have very strong market share in Ontario that maybe competitors are nibbling away at. And then -- but there does seem to be quite a lot of headroom in other provinces in Canada. I wonder what your game plan is. Brian Walsh: Yes. Yes, it's a great question, Michael. And that's where for this brand, given the significant underutilization of Clozaril, we see a lot of pathways to growth. Over the last couple of years that we've reported on significant growth, double-digit growth in the Western provinces. We still have less than 1/3 of that those markets. So we still see significant headroom, good profitability opportunities in those markets. And we are -- we have been making subtle changes to shift resources to accelerate that growth. And even within Ontario, where there's some modest pressure, there's still significant population growth and growth throughout -- opportunities throughout the province. Craig Millian: And just to add, even in Quebec, where you may recall a year or so ago, a little over a year, we actually changed our model there to really focus on patient retention due to some of the challenges in terms of acquisition of patients in Quebec. And that's been a resounding success. We've been able to limit any sort of attrition in Quebec to low single-digit percentages and really patient-by-patient work to retain every one of our patients and the stickiness of that patient population in Quebec is quite remarkable. Often when there is attrition, it's due to reasons such as a patient passing away, for example, not necessarily due to a switch. So the strategy has worked in terms of maximizing our retention of patients in Quebec, defending our really dominant share in Ontario, and we have fantastic relationships at the major accounts there, the major mental health institutions and we think there are still opportunities to grow. But admittedly, it's certainly a competitive space. And then as Brian said, really a lot of headroom for growth out in the Western provinces. Michael Freeman: And I wonder if you could provide similar color on the -- on Clozaril in the U.S. Brian Walsh: Yes. So very different dynamic. It's more a very stable patient population, but a different share -- lower share, higher value per patient. Our regular -- the core business has been very stable. As accounts there, we tend to have more private pay patients. But we've been able to offset some natural patient attrition through targeted growth through a specialty pharmacy where we're able to offer financial assistance and educational support programs. So we continue to see that. We've achieved, I think, a level of stability with that business and we can see that continuing in the coming years. Michael Freeman: Excellent. And last one for me. On the -- there was some mention of pursuing business development as a result of you guys strengthening your balance sheet. Should we -- what should we expect in terms of sort of structure of in-licensing, perhaps the size of deal? Would we expect something similar to what we saw with bempedoic acid? Or are you scaling up your ambition? Craig Millian: It's a good question. What I would say is -- so we love the bempedoic acid deal. And obviously, there's other deals of that magnitude. We think it was -- this is going to create significant shareholder value. We think these are products that will generate tens of millions of dollars in revenue. And again, fits so beautifully with the infrastructure we already have in place and really building our positioning as a premier cardiovascular company in Canada. So obviously, the opportunity to continue to do deals like that are very attractive, albeit not necessarily an infinite number of those opportunities. So I do think with the strengthening balance sheet and the new debt facility that does, I'd say, widen the aperture in terms of the type of deals we can do. I think right now, our focus is on continuing to bring in assets that are materially significant that will add significantly material revenues to our top line. We think that's very important. We're not interested in things that are... [Technical Difficulty] Operator: And ladies and gentlemen, thank you for standing by. The presenter is now reconnected. Please go ahead. Craig Millian: So apologies. We're in a meeting room at a hotel and the Wi-Fi dropped here. So I'm not sure when the call dropped. I know we had a question from Michael. Dave Mason: Meeting the criteria. Craig Millian: Yes, yes. So I mean I'll just be brief. The answer is yes. We're looking at the deals, I think, similar in scope to what we've done, but I would say again, with the strength in the balance sheet and with the kind of the increased flexibility with the lending agreement, we're in a position, I think, to broaden the aperture. But looking for things that obviously fit with our model in Canada and that can easily be broadening, but that have significant sales potential. And obviously, we'll be opportunistic as well. I think we're looking at opportunities to expand our business as well in the U.S., recognizing that those will be maybe challenging to identify, but we're confident we can continue to build out our business there as well. So stay tuned. We're very active, and we're very committed to continuing to grow top line now that we've really put our financial house in order and have a cost structure that we think can support a lot more growth. Operator: [Operator Instructions] Your next question comes from David Martin with Bloom Burton. David Martin: First question, Vascepa scripts were up 22% in third quarter year-over-year, but the net sales were up only 2.1% in local currency. You mentioned inventory fluctuations. I'm wondering, are you seeing inventories more stable or even some restocking post Q3? And are you also seeing pressure on your net pricing? Did that feed into it as well? Craig Millian: Yes. I don't know, John, if you want to comment on this. I would say that -- and this is historically has been the case of -- obviously, the growth in demand outpacing growth in net sales. And this is really an artifact of having launched first into the private markets and then subsequently, launching into the public markets with the different economics of that. And so over time, we went from 100% of our business being private to now a blend. The good news is now we're starting to see stabilization as we've expected. But as we continue to grow in both segments, both channels, we continue to see more significant growth, I would say, on the public side. And so that drives -- that does drive an increase in rebates. And that certainly has some impact on gross to net. So the goal has been to stabilize that payer mix. And when that occurs, we believe we'll see a narrowing of that difference between demand growth and net sales growth, but we're not quite there yet. So I think probably the largest explanation for that, David, is payer mix. I don't know, John, if there's any other elements that you would... John Hanna: No, I wouldn't, Craig. I think you covered well. We did comment a little bit on inventory for Clozaril or Vascepa. It's really sort of the routine wholesaler orders that our biggest wholesalers have placed big orders and depending on where they drop, but there was nothing significant to comment on there for the quarter. Craig Millian: Yes. There is lumpiness for certain in terms of order patterns, which is why we -- especially with a limited number of products, any large order that takes place in one quarter versus another can influence year-over-year comparisons, which is why we tend to focus more on year-to-date versus a quarter because there is that variability. David Martin: Okay. Was there a large order that got pushed from Q3 into Q4? John Hanna: No. As I say, nothing specific to this quarter. David Martin: Okay. And then for Clozaril, the growth out West, is that mainly coming from taking share from competitors? Or are you seeing increasing overall usage of clozapine? Brian Walsh: It's both. We're -- the population growth and utilization of clozapine, but our share has been increasing steadily as well. And it's a population there like other places in Canada where there's this large installed population, and we're competing for the new starts, and I think we're competing even ahead of our market share in that dynamic portion of the market, so it's both. We're winning more in the new start population, but we're seeing the overall -- we're seeing an increase. David Martin: Okay. Great. And last question. You've obviously got good infrastructure to take on additional cardiovascular drugs. If you took on another psychiatry drug, would you need to build out your sales force? Or could that be layered onto the group you've got now? Brian Walsh: It would depend on the indication specifically. So -- but I think most of the opportunities would require on the neuroscience side requires some incremental build. We believe we still have capacity to bring in additional cardiovascular products within our existing footprint, just given the coverage and like even life cycle of the different -- of Vascepa. Craig Millian: Yes. We definitely have capacity, we believe, on the cardiovascular side. So that will certainly continue to be a focus. And we think we've got a really -- now with the upgrade in the sales force and bringing on some super talented folks, a really strong customer-facing organization in addition to our medical team. Similarly, on the Clozaril side, we have a very, very strong multidisciplinary team. As Brian said, there's some really strong foundational elements to that team and then -- which gives us the versatility to bring in a range of products that we could give them adapt accordingly. But that would require most likely some additional salespeople. We have a fairly light footprint. Operator: And we have no further questions at this time. I would like to turn it back to Craig Millian for closing remarks. Craig Millian: Well, thank you, operator. Thank you all for participating on today's call. We look forward to reporting you on progress in the coming quarters and speaking with you again soon. Thanks. Have a great morning. Operator: Thank you, presenters. And ladies and gentlemen, this concludes today's conference call. Thank you all for joining. You may now disconnect.
Operator: So ladies and gentlemen, a very warm welcome to Bilfinger's Third Quarter 2025 Results Conference Call. My name is Jasmin Dentz, and I'm joined today by Thomas Schulz, our Group CEO, and Matti Jakel, our Group CFO. As always, all documents related to our Q3 reporting have been made available on our website. As usual, we will start our webcast with a presentation of the quarterly highlights, the current market environment and our financials and then open the webcast for your questions. [Operator Instructions] The webcast will be recorded. And I will now hand over to our CEO. Thomas, please, the floor is yours. Thomas Schulz: Thank you. Hello, everybody. As always, we start with our highlights for the -- this time, the quarter 3 2025. We had quite a good stable development in a very volatile market. Our orders received increased by 1%, at least by 1% absolute and our revenue by 8%. Our EBITA margin is on 5.8%, and our earnings per share moved slightly up to EUR 1.47. Significant improvement close to 30%, we had in the free cash flow, which went from EUR 55 million to EUR 71 million. We updated our outlook and gave a new revenue outlook of EUR 5.3 billion to EUR 5.5 billion for the year and 5.4% to 5.6% EBITA margin. I would like to repeat what we said in the last few calls, we always hit the midpoint of the guidance, what we give. That's what we are after. And very important, and you are all invited, and we hope that you all participate, we will give new midterm targets on the upcoming Capital Markets Day in the area of Frankfurt on December 2 this year. Before we go more into market data and so on, as always, our ESG topics, and it is with a strong focus on safety. When you look here into that slide, on the left side, we have the total recordable incident frequency. It's based on 1 million working hours, and you see that we moved quarter-on-quarter from 0.88 to 1.01, which is a slight, yes, creating of a disadvantage. We work on to have 0 as a figure there. We put a lot of effort, time, actually emotions and money into it. With our current result and what we proved in the last few years, we are actually playing in the top league, not only in the industrial services segment. The other figure what we report on, which is quite important, too, is the lost time injury frequency on 1 million hours, too. And there, we have an improvement from 0.29 to 0.17, and there, we are, let's say, closer to the 0 and 0 means we have no accidents in whatever we do. And that in a company with more than 30,000 people is definitely an achievement if we come there. Out of that, we look into the market. And for us, we have one indicator what we show since several quarters, it's the production index. It's based on 2019, and it is for Europe, Middle East and North America. And we show our 4 biggest industries where we operate in, which means where we have more than 10% of our revenue line for a longer period of time. And when you see, it's the typical gap, the green line, which represents pharma, biopharma is still on a growth, which means this industry develops quite well. Whereas the other 3 like energy, oil and gas versus 2019 is slightly up in the production index and chemicals and petrochem is actually below 2019. When we then look into the specific industries, I just said that chemicals and petrochem is below 2019 in these areas for the base of -- for the production index, it's predominantly Germany, which lowers here the figures. When we look into the demand is on the side movement. Again, it's Germany, which has a negative impact here. It makes 23% of our revenue share, but the outsourcing potential, the potential where we can as Bilfinger can go to our clients to offer them to take over all the maintenance and for us to in-source, for them to outsource, to have a stronger efficiency gain if professionals like us, like Bilfinger is doing it is quite a good market, predominantly based on the pressure what our clients see in the global market for chemical and petrochem products. The second industry is energy, 23% of the revenue share. The demand is good, and the outsourcing potential is good. What we see especially and that for a longer period of time is the increasing demand for storage and transmission. The third one is oil and gas. There, we have a strong LNG demand, and we have lower refinery demand. It means 20% of our revenue share is in that part. Demand is good overall, and outsourcing potential is good. About pharma, I already said, where it comes from that they are on that good growth path for quite a while now, the demand is good and the outsourcing potential is good, and it makes -- made in that quarter 13% of our revenue line. Out of that, some selected orders to see what we really do on the client side, let us start with Germany in adjacent industries. Adjacent industries are all the industries we work in, which are not belonging to the 4 big ones, what I showed before. And here, it's about a semiconductor manufacturer in Germany where we got the order for prefabrication and installation of the wastewater treatment system, for, of course, efficient resource, efficient chip production. The second one is out of the area of energy in Sweden from the German client, E.ON. It's the prefabrication and assembly of heat accumulator to increase reliability and sustainability in district heating supply. I hope you remember that we, as Bilfinger, are a leading company in district heating solutions. It's all about liquids and gases, and there we are really great. Then the last one is oil and gas out of Kuwait. It's with our well-known KNPC client, and it's for the North Oil Pier. It is about a front-end engineering design service. And of course, the background is enhancing operational efficiency, which is the core of our offering. When we talk about core of our offering, we are on innovation. This time, we introduce to you the so-called DRIS 2.0. It is a system to inspect insulation during routine operations to describe where the challenge comes from. If you are in an area with low temperatures, northern part of Europe, for example, and you open the insulation on a pipe with a higher temperature, you always create moisture in between the insulation and the pipe. If you then close the insulation, you actually create a situation where rust and other damages can happen. That's the reason that in general, this kind of investigations and opening of insulation on these type of pipes are only happening during a so-called turnaround schedule. And the turnaround schedule means shutdown of that part of a plant or the whole plant. When you do that, shutdown of a whole plant or a part of a whole plant, then you can imagine it costs the customer a lot of money. So we worked on how to reduce the turnaround schedule. One part is that we can inspect and repair and work on the insulation in these weather conditions without harming the system, and we came up with a portable solution to do that. This kind of solution actually gives us a possibility to shorten the turnaround, the shutdown of the complete plant time by more than 10%. We see always more than 5% cost savings, and it helps the clients to do what we call case-based execution. It's another word for if they believe or if we see there could be a damage and we don't need to shut down the whole plant, we can do then the repair and everything during regular operation. This is a big advantage in a more efficient world. Out of that, I would like to look into the Bilfinger demand. You know our opportunity pipeline. The opportunity pipeline is that what we, as a Bilfinger Group, quote and work with inquiries and possible upcoming business in the market judged by, if it really will happen and how likely it is that we have a share as Bilfinger in that. And we go 2 years back, that means July 2023 is the 100. And when you look into, we actually have from last year, third quarter 2024 to this year's third quarter 2025, quite an increase of 15% of the opportunities. When we look more into detail into that, it is clearly that the demand for enhancing efficiency on customer side, no matter which industry is increasing, and it's a proof of that, what we said before, Bilfinger will perform if the market goes up or if the market goes down, and we have that mixed picture in the world between the center of Europe and, for example, the Middle East and North America and the growth part on the other side. Orders received is 1% up to EUR 1.36 billion coming from EUR 1.344 billion. For us, important in that is, of course, the development, as we always say, of the order backlog, that's 7% up. If we look year-to-date, we actually have a book-to-bill year-to-date of 1.1 which is good. We are in the order intake as revenue year-to-date because we are already in the mid of November, quite a growth as we predicted as midterm targets. Out of that, I would like to give to Matti, our Group CFO. Matti Jakel: Thank you, Thomas. Good afternoon, ladies and gentlemen. I guess, by now, you will have studied the material that we published earlier today or in the early hours of the morning. Let me add some comments to our financial performance for the third quarter 2025, which was the CEO said a good quarter, the CFO says it was a solid quarter. Thomas Schulz: Thank you. Matti Jakel: Important, if you look at year-to-date performance, it does demonstrate the progress that Bilfinger is making. Into the numbers, revenue up by 8%, 7% organically to almost EUR 1.4 billion for the third quarter 2025. You see the changes there. Contributors were all segments. Europe at plus 5%; E&M International at plus 8%. Organically, even 14% in International. However, you all know how weak the dollar has developed over the last few months, and hence, we have a foreign exchange effect here. Technologies up almost a quarter, 24% or 25%. And I'll come to the segments in a moment. Thomas talked about the movement and changes in our core industry. They are reflected in the 2 pie charts here. The share in chemicals and petrochemicals went down by 2 percentage points, 25% to 23%. Conversely, oil and gas went up from 17% to 20%. So we see a bit of a revival here in oil and gas is well known. However, it also demonstrates our strong position in oil and gas offshore in the North Sea on the Norwegian side as well as the British side but also increased activities in facilities for the production of hydrogen. Looking into profitability. The third quarter 2024 was very strong in terms of gross profit at 12.3%. This quarter, in absolute numbers, we are on the same level as last year, 11.3%. An interesting feature this year is that all 3 quarters now were above 11.0%, which means we have also, like you've seen in cash flow, leveled out the profit generation throughout the year. On the SG&A, we made some progress. The ratio went from 6.1% down to 5.8%. In absolute numbers, we went from EUR 78 million to EUR 80 million. That's due to the acquisitions that we communicated early on, the Rodoverken in Sweden and the nZero in the U.K. On the EBITA margin, also slightly down from 6.0% to 5.8%, in absolute terms, an increase of EUR 5 million, everything as we had expected and communicated earlier. A little bit on to the segments. If we look into E&M Europe, which is our largest segment, so what you see on the group number is also reflected here. Revenue grew by 4%, overall flat. And if you look at it organically, again, the 2 acquisitions added to the overall growth. Sorry, that was on the orders received. On the revenue, it's up 5%, 2% here, you can see the additions of the 2 acquisitions as well. So where do we see growth, in energy and oil and gas industries and chemicals, as we all know, petrochemicals remain challenging there. Profitability, slightly down by 0.2%, but absolute an increase of plus 2%. On International, quite some progress. Orders received up at 17% organically and 10% due to the U.S. dollar weakness, 10%, up to almost EUR 200 million for the quarter 2025. Interesting in the U.S. is that the business in the industry or for the industry, is very active, while the business that we have for the U.S. government and governmental entities has slowed down quite a bit due to DOGE activity of Mr. Musk earlier this year, but also due to the shutdown, which luckily for, I guess, a lot of people was finished or completed last night. So it will not release everything that was not done in the last few quarters immediately, but we will see some better numbers there in the future quarters. Revenue growth predominantly in the Middle East, but also in our maintenance business in the United States, again, here, plus 14% organically, including foreign exchange adjustments plus 8% to EUR 182 million and a book-to-bill of 1.05, indicating further growth. On the profit side, you may remember that we had an impact last year in the third quarter from an arbitration case, which was then offset at group level. But here for the segment, we've done quite well to 4% for the quarter, proving that especially the transition and transformation in the U.S. is taking good shape. In Technologies, order intake is flat, about EUR 270 million, plus 1% organically, that's the business where we see more of the larger projects. And we do see some volatility in the order intake, as you can see from the graph, but EUR 270 million is a strong quarter as was the quarter 3 in 2024 as well. Revenue up 24%, 25% to EUR 239 million. Very strong business in life science and nuclear, where we had received a good order intake in the last few quarters, now sort of in execution. On the profit side, plus 42%. So a good increase, not only in absolute terms, but also 90 basis points from 6.9% in to 7.8%. And again, operational excellence, derisking efficiency improvements, all of this is at work in the segment Technologies. Net profit for the quarter remained at EUR 55 million last year and this year. You can see that the tax rate increased from 21% to 25%. That's the impact of a change in law in Germany, where the corporate tax rate will be reduced by 1 percentage point per year until 2028 and thus lowering the value of our deferred tax assets. So that's a onetime effect in this quarter. The earnings per share is EUR 1.47 this time versus EUR 1.45. Why the difference? We have a smaller number of shares as we are progressing with our share buyback program. The number of shares is reduced. Cash flow. Free cash flow, operating cash flow, both benefiting from what you see on the right-hand side. The net trade assets or trade working capital over revenue as a percentage came down to 8%, which is the target that we have given ourselves, thus improving the free cash flow over and above what we generate in profitability. Positive contributions from all segments, and I think I now stop counting because it's the ninth consecutive quarter of positive cash flow. Maybe in -- or the fourth quarter 2025, we counted 10 and then we stop this. Thomas Schulz: Solid performance. Matti Jakel: Yes. Group net liquidity and leverage, nothing much to report here. Liquidity follows the free cash flow. Leverage at about 0.4, way below the threshold of 2, which then brings me to our outlook. Let's look at the segments first. This is based on the current performance or the year-to-date performance 2025, where we narrowed the bandwidth for E&M Europe on the revenue side from EUR 3.5 billion to EUR 4 billion, now to EUR 3.6 billion to EUR 3.9 billion. On the margin, 5.8% to 6.2% now. E&M International is unchanged, performing there as we planned. And with some of the uncertainty in the U.S., we've felt more comfortable to leave it as is. Technologies, as you saw, the very good performance. We increased revenue update or outlook from -- to EUR 800 million and EUR 850 million and profitability quite an increase to 6.8% to 7.2%. And then on the Reconciliation Group, some minor adjustments. Group totals. On the revenue side, EUR 5.3 billion to EUR 5.5 billion for the full year, targeting the midpoint. EBITA margin, 5.4% to 5.6%, targeting the midpoint. And free cash flow based on the good performance so far, quite an increase to EUR 300 million to EUR 360 million for the free cash flow, again, targeting the midpoint. So much from my side, and I turn it back to Thomas for the wrap-up. Thomas Schulz: The -- as you saw with that what we announced, we are always referring, of course, to the midterm targets, what we set ourselves at the beginning of '23, where we clearly see that we are on a good level to achieve that what we promised. And it's, of course, quite nice to see that we -- with the NTA, net trade assets, are already on 8% down, which is quite good. So to summarize that, let's say, solid performance with orders received fairly flat, revenue 8% up, EBITA margin 5.8% versus actually, the third quarter last year was the highest operating real EBITA for more than 15 years and longer, we couldn't look back. Earnings per share up to EUR 1.47. Cash flow close to 30% up in the quarter. We narrowed the guidance. And as we communicated quite often, we actually always hit and have in mind the midpoint of guidance range and there we are on a good way. And very important new midterm targets will -- which we then will talk a lot about for the coming 5 years on the Capital Market Day on December 2. And with that, Jasmin? Operator: Thank you, Thomas. Thank you, Matti. [Operator Instructions] So the first one comes from Michael Kuhn from Deutsche Bank. Michael Kuhn: I'll start with the opportunity pipeline. I think that number looked particularly strong compared with what we had over recent quarters. So interested in the underlying drivers and let's see where you see the most pronounced pockets of strength. Thomas Schulz: Yes. That's true. It is. And -- the -- of course, our acquisitions, what we did in the last few years. This year, it will be 3 acquisitions, for example, they are enablers and kind of unlocking more potential with the existing business, what we have to make it in more crisp wording, if we bid on a service contract and we got here and there some more additional competence, we actually can enlarge that what we bid towards the client with the whole base of the Bilfinger offering. This is part of our M&A strategy, and that works out. That's one part of the stronger opportunity pipeline. And the second one is, and we will talk more about when we come to the Capital Markets Day, we know what we have to, how to say, put on the next development step within the company to achieve more leverage in the different markets because we see quite a lot of growth in our existing markets, but we have to get more aggressive in sales. Michael Kuhn: Understood. Then one on E&M Europe, and I know it's a bit nitty-gritty because the margin was just down 20 bps, still we got so used to margin increases. Was there anything particular you would like to find out? Or is it just a normal fluctuation? Matti Jakel: Michael, this is Matti. I would say it's a fairly normal blip, which we see from quarter-to-quarter, 0.2 percentage point is not disconcerting at all. Sometimes the contract mix or product mix offers a different composition of margin generation. What we do see, although is we don't see sort of a harmonized picture. We see variances from quarter-to-quarter between the regions. So sometimes the German-speaking region is up, and United Kingdom is down, and the next quarter, it's different. I think it's also fair to say, Michael, that Technologies is operating in Europe exclusively. So if we combine or look together at the performance of the E&M Europe segment plus Technologies, which is the total of our European business, I think we're quite well underway. Michael Kuhn: That's for sure. And then I also wanted to actually ask about Technologies. Obviously, very strong year-to-date development also order-wise and that more and more translating into profitability. You pointed out some pockets of strength here, nuclear, life science. Could you give us an idea, let's say, in terms of percentage contribution of those particular growth drivers and let's say, what margin differentials you see within Technologies, so bandwidth in terms of what's the lowest margins you generate there and the highest and how the mix is evolving? Thomas Schulz: Yes. The -- we are generally not going too much into details within the segment. But actually, the thing is that we see regarding Technology that especially in the pharma, biopharma area was quite a lot of revenue growth in it. And oil and gas, some, energy keeps roughly the same level. It is fair to say that all the improvements, what we did in the last few years on the Technology segment worked out quite well. It's fair to say that our people there are doing a great job. But as Matti rightly said, it is actually part of Europe. And we are very much combined with that what we do in the E&M Europe segment, too. So both together is maybe a better view than to separate them. Operator: So the next question comes from Olivier Calvet from UBS. Olivier Calvet: First one, maybe on order wins. You showed an increase in opportunities, but orders received are flat organically. Can you comment on your order win rate perhaps? This is the first one. Thomas Schulz: Yes, I can comment that we will not give more further comments on that. But the thing is orders, what we see in the opportunity versus that what we already have then in the order intake. There is, of course, always a time delay in it, too. And the time delay is related with that what the clients are doing, permitting the whole thing what you have, number one. Number two, we always have this with the order intake and the opportunity pipeline. Last quarter, we had a very strong order intake growth. And we had to explain why it was strong. Now we explained why it was only, which is still a very good level, flat order intake. We have these movements in between the quarters. For us, more important in the order intake is actually the year-to-date order intake movement, the order backlog, and that's then in relation with the opportunity pipeline and then, of course, the hidden win rate and so on. And we see here in the year-to-date order intake was roughly 5%, is going exactly in the direction as we actually promised at the beginning of '23, where we -- what we said before, already could recognize that at the beginning of '23, our 2% industry growth, what we believed year-on-year for the next 5 years, was too high. We see actually in hindsight that the industry growth, which was realized in the areas where we are in '23 and '24 was not hitting the 0.4%. Despite that, we are in our 4% to 5% growth area, which shows that our self-propelled growth actually worked quite well. Olivier Calvet: Yes. That makes sense. Second one is on staff. I see employee numbers up 1% year-on-year. Just wondering if you're facing any issues in hiring and if that's a limiting factor for your growth going forward? Thomas Schulz: We are not seeing any real issues in that. You always have issues if you are in remote areas. I think that's obvious. If you are in an area with a lot of people living, it's easier to recruit. If you are more on the country side with low people living per square kilometer, it's, of course, tougher. But in general, we don't see that. We are, as Bilfinger, especially in the blue color range, very attractive. We have a good learning and development program. We can bring regular educated people up to engineering level and so on. So with that, we don't see that discussion what we always have in the newspaper that there's a shortage of staff. We don't have that in that way. Olivier Calvet: And then just on the U.S. shutdown and sort of government-related demand. Could you quantify the share of your revenues within E&M International that is directly impacted by the shutdown or by sort of government demand generally? And do you see any upside to your E&M International sales now that the shutdown is over? Matti Jakel: The share of revenue in International is about 20% to 25%, that we do for government entities across all levels within the United States, be it federal, state and sometimes municipal. Things that linger for months and months, even if a compromise has been found, will take a few more months until the administration goes back into normal working mode. So we're not expecting anything to change quickly. The U.S. is having Thanksgiving later this month, and then Christmas is around the corner. So I would think we see improvements starting in the second quarter of 2026 because that will take some time to get going again and then issue contracts and then we can get started on the work there. So more during the Q2, Q3 2026. Operator: So now that we've talked about the opportunity pipeline already twice. I also received a question on this behalf via the chat function. It comes from Nikolas Demeter from Bankhaus Metzler. And he says, looking at the opportunity pipeline, we see growth of around 15% compared to last year. While the order backlog shows organic growth of 7%. I have 2 questions on this. I recall you once mentioned that the current reported order backlog essentially reflects only the orders to be executed over the 12 months. With that in mind, has the total multiyear order backlog beyond this 1-year horizon increased more strongly than the 7%, which will support revenue growth in 2027? I think he means '26 and the years after. And second, what should we expect for Q4 in terms of order intake? Can we expect a solid level of new orders, given that the opportunity pipeline appears to be quite strong? Thomas Schulz: Yes. The order backlog -- at first, thank you for your question. I look, of course, to my solid CFO, the -- any comment on the order backlog development? Are we going that much in detail? Matti Jakel: Well, let's make sure that we all understand how we report contracts. On multiyear contracts, we only show the next 12 months as order backlog. On project contracts, which have a fixed duration, be it 6 months, 12 months or be it 24 or 36 months or any time, we show the full contract value. So only on framework contracts where the drawdowns, the call-offs are uncertain, we show the expectation for the next 12 months. Comparing the order pipeline and the backlog development is something that we do all the time. But it's not easy to find a correlation. The order pipeline includes anything from what we have heard is going to come, anything that is in assessment, anything that -- where there is a tender out there or anything that we're negotiating even without a tender with our clients. All of this goes into the pipeline. So there's a lot of judgment in the order pipeline. Internally, we certainly have rules, how to judge what's in the pipeline. And hence, that determines the development. So I think it would be wrong to assume that the development of the order pipeline is exactly then to be seen in the order backlog. Many things happen between an opportunity in the pipeline and then the contract award. So I would think that the relation of a 15% increase in the pipeline that converts into 7% order backlog growth is a very good conversion. Thomas Schulz: Yes. And to look -- when you look several quarters back where we showed a percent you see that actually very often our order intake development is on a higher percentage than the pipeline development. Just to say that we eat market share out of that is too simple. We have a lot of variables, as we call it, in the opportunity pipeline, but you have to have that because you forecast is actually that work happening, what means that the customer makes an order out of it. And second, is it -- which part is coming to Bilfinger and not only into the peer group. And third, the timing element. And you can imagine that a direct correlation is tricky, but it gives us the opportunity pipeline, a good view in the detail how to reestablish our resources for the future to be early enough aware of where we go up, where we go down and so on. And of course, it helps very much in the discussion with the single customers how the actually workload out of the industry -- in the whole serving industry is, which makes it easier for the clients to manage their timing too. We hope that was not too theoretical. I actually can talk for hours about it, but the -- it is a good indicator how we see opportunities for Bilfinger developing. But it's not a direct correlation to the order backlog development. Operator: Okay. Our next question comes from Craig Abbott from Kepler Cheuvreux. Craig Abbott: Yes, I'm trying to just understand a little bit more on the accounting impact on these acquisitions. I think you've done 3 to date. If we could maybe just like have a combined -- some combined figures here for sales and EBITA that have been realized so far and what do you expect them to contribute on a full year basis? Rough figures are fine, of course. And then also how much you paid for these? And if you could also point us to the line item in the cash flow because maybe it's just been folded up in a general line item. I didn't see it, but how much you've been paid -- you paid for these acquisitions? That would be my first question, please. Matti Jakel: Yes, Craig. Accounting impact of the acquisitions. We have made 2 acquisitions that are included in the year-to-date numbers of -- for the group. The third acquisition just closed on October 1. So nothing included in until the end of September. The top line figures are the contribution to order intake is about EUR 35 million to EUR 40 million. The revenue is about the same number. So compared to the group, it doesn't change or it doesn't move the needle much in terms of numbers, but it puts us into a much better position. Profitability wise, they do deliver what we said when we talk about M&A, it needs to be accretive, and they have added above-average EBITA margin year-to-date. And we expect this to continue throughout the fourth quarter. The third acquisition, Nordic Mechanical Solutions, which we did or closed on the 1st of October, will add a small portion again, but not move the needle much in terms of revenues and profits. In terms of purchase prices, we don't disclose those. And if you didn't find them in our publication, then that's not a surprise. The free cash flow is not impacted by our M&A. Craig Abbott: No, I know. But I was looking at the statement of cash flow in the Slide 27 and 28 of your quarterly statement. But anyways, we can follow up afterwards... Matti Jakel: Yes. please. Craig Abbott: Okay. Now the second question is just on the cash flow in general, obviously, we saw a very good trend in the first 9 months, and you obviously raised your guidance there on your target. So congratulations there. That's all obviously in the right direction. But I'm just trying to get a feel for how sustainable this is. I know there was a big swing in the trade payables and advanced payments there, about EUR 90 million was a big factor. Not to get like too nitty-gritty, it is just to get a feel for -- do you see this development as like being sustainable? Or were there may be some special factors there you'd like us to be aware of so that we don't like extrapolate this kind of development going forward? Matti Jakel: But as I said before, it's 9 quarters in a row that we are positive in cash flow. So I guess you can call that sustainable. So going forward, that should be the measure for us. This year is stronger than what we had expected, but it also includes, as we communicated earlier this year, a onetime payment from the arbitration settlement last year, which was a mid-double-digit number. That's not recurring next year to say that. With -- if you look at the midpoints and everything, then our cash conversion rate for this year will probably come out somewhere between 100% and 110%, which is higher than the above 80% that we're targeting. So in the long run, the plus 80% that we have set as midterm targets is what you should be expecting from us. Operator: So Nikolas from Metzler has another question regarding the E&M International segment. He says you mentioned that a larger M&A transaction in North America or the Middle East could be on the agenda if valuations were appropriate. That makes sense to me as these markets appear to offer strong growth and potential and improving profitability. I would, however, ask you to remind us why a large acquisition is considered necessary. Looking at the numbers, with order intake up 15% organically and organic revenue growth of 14%, the segment already appears to be performing very well, especially in the Middle East region and the 9-month figures also reflect solid momentum. It would be great if you could elaborate on this again. Thomas Schulz: Yes. Very good question. At first, thank you for the appraisal what we get here. But I make it like this 14%, 15% of very little is still very little. And our issue in North America and, to a large extent, in the Middle East, is that we are just subscale. Size matters in our business. If you have hundreds of people on a location or only 50 people on a location, if you are bigger, you are the one in the top position to get the big, quite profitable long-term agreements. If you are the small one, you are more like fast in, fast out supplier, which is not that stable and creates actually more internal work, more admin work. So out of that, we have to get bigger. We have 2 opportunities to get larger scale as we have it in our positioning, strategic lever. We do an organic run. That is what you see in the figures. But to have based on the timing with that good growth environment in North America as well as in the Middle East, we already said last year, it is necessary to look more into M&A, into unorganic growth, and that is what we will refer to on the Capital Markets Day more in detail, but it is necessary to do larger steps in that. Last thing what I have is when -- there is no definition on larger M&A. Our definition on larger M&A is we are conservative people, Matti and myself, and we are actually very proud of it. And we will not do anything which would put the company in any kind of risk. On the other side, an acquisition of a EUR 50 million revenue is not seen as a larger M&A. It's as a bolt-on M&A. So when you then look to the cash flow, our conservative positive approach in how we manage the company, I think it's clear that large for us is maybe not as big as for our bigger corporates. Operator: There's another question in the chat from Chaima Ferrandon from ODDO BHF, and it reads, regarding Germany, could you please give us a sense of the performance you have seen in Q3? And what to expect for the end of the year? Can you give us an update regarding the infrastructure, defense plan in Germany? Have you seen any signs of first orders towards your clients? Thomas Schulz: Yes. Let me start with the second one, infrastructure, defense. In defense, money is spent. Quite a lot goes into Ukraine, as you know. Some is going into infrastructure. Germany will be a kind of a logistic hub in a situation of self-defense to follow our German government wording. And as you know, compulsory service voluntarily and then a little bit with, let's say, additional motivation will come on the way. So there, money will be spent. Infrastructure just takes longer to get money into investment because we are blessed with not only Brussels regulation, we are blessed with Berlin regulation. And that makes investments into infrastructure quite a long-term item. So out of that, we don't see yet on our customers that they had additional top line through these -- through the infrastructure package. In defense, we are actually more or less not in. So out of that, as we said before, we don't believe that we would see something coming towards us from our clients who then got something before the end of '26. When we look in general into Germany, you saw most likely the announcement of the chemical industry in Germany. They are fairly under pressure. Utilization is low. Production is low. Costs are high. When you hear that, then you can get quite negative. We out of Bilfinger, for us, it's a call to support our clients more with enhancing the efficiency on the assets, what they have to get them best performing under the current situation. And in that respect, we think that, a, our strategy to be the one who delivers efficiency improvement to our clients is quite a good one. It pays off quite good. And last thing, what I have is, and that is what I learned on my own side out of by far more cyclical industries, if companies go through a tough recession, as some of our customers in Germany do and they survive with all the necessary activities, they are actually very competitive when that is over. So we are for the mid- to long term, not too negative. Operator: [Operator Instructions] And there is another in the chat. It comes from Metzler from Gerard O'Doherty, could I ask for 2 points of clarification, please. In the pipeline, you mentioned opportunities in the chemical sector. I assume this is outside Germany. In your comments at divisional level, you mentioned the jump in profits and Technologies was part due to derisking projects. Could you expand on this, please? Thomas Schulz: Yes. At first, with the pipeline, yes, we have quite a lot of chemical customers or customers out of the chemical industry outside Germany, too. And in some parts, there is actually the business going quite well. So Germany is in the chemical industry, actually very much the very far low end in the development. Matti Jakel: Yes, Gerard. On derisking, it's not about derisking projects. It's derisking sort of the contract profile that we have in not only Technologies, but also in the other 2 segments, Europe and International. What we have started 2.5 years ago with setting the updated strategy is looking at the entire contract portfolio and look at where we had larger and smaller risks or more significant risks in the past. We tried to stay away from lump sum turnkey projects, which was a part where Technologies had suffered quite a bit. We don't do those. We don't do those anymore, full stop. We talk to our clients. We ask them to award large projects in phases, an engineering phase or a design phase and engineering phase and then a construction phase so that everything is quite clear when things have to happen. We looked at long-term contracts, framework contracts, where we didn't make the margins that we think we should be making, and we renegotiated rates. Sometimes we walked away when the client wasn't willing to come to the table. So in that sense, we increased the level of profitability slowly piece by piece by piece. And you can see that in the margin -- gross margin development, but also profit margin development over the last 2.5 years. So it's not something that we did just in quarter 3 and not just in Technologies, but for the last 10 quarters across the entire group. Operator: So thank you very much, Thomas and Matti. There are no further questions at the moment. So thank you all very much for your active participation in today's call. And as mentioned twice already, but also from my end, our next event will be our Capital Markets Day on 2nd of December. And I'm really hoping to welcome as many of you in person there as possible. So please make sure to find your way to our Capital Markets Day. It will be worth it. And if there are any remaining questions, of course, as always, please reach out to me or the Investor Relations team. So thank you very much, and goodbye.
Operator: Good day, and thank you for standing by. Welcome to the Kneat Third Quarter 2025 Earnings Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Katie Keita, IR Lead. Please go ahead. Katie Keita: Thank you, operator, and welcome, everyone, to Kneat's earnings conference call for the third quarter of 2025. Today's call will be hosted by Eddie Ryan, Kneat's CEO; and Dave O'Reilly, Kneat's CFO. Please note the safe harbor statement on Slide 2 and the forward-looking statements disclosure at the end of the earnings release, informing you that some comments made on today's call contain forward-looking information. This information by its nature is subject to risks and uncertainties, so actual results may differ materially from the views expressed today. For further information on these risks and uncertainties, please consult our relevant filings, which can be found on SEDAR and on our website, www.kneat.com/investors. Also during the call, we may refer to certain supplementary financial measures as key performance indicators. Management uses both IFRS measures and supplementary financial measures as key performance indicators when planning, monitoring and evaluating the company's performance. Management believes that these non-IFRS measures provide additional insight into our financial results and certain investors may use this information to evaluate our performance from period to period. For your reference, we have filed our unaudited consolidated financial statements and MD&A on SEDAR, and they are also available on our website. I will now pass the call to Eddie Ryan, CEO of Kneat. Edmund Ryan: Good morning, everyone, and thank you for joining the call today. I will take you through an overview of the quarter and the year so far, what we are seeing and what we are planning. Then Dave will share a high-level recap of the financials. After that, we will open the call for your questions. The third quarter of 2025 reaffirmed Kneat's resilience as the market leader in digital validation. We continue on an expansion journey with our existing customers and continue to sign new logos at a strong pace. As a result, our SaaS revenue grew 33% year-over-year, well ahead of the average for companies our size. This demonstrates the continued demand for our platform even in a more complex investment environment for the life sciences industry, who also have to deal with uncertainty around trade, pricing and funding. While these dynamics are extending buying cycles somewhat, customers ultimately continue to invest in their digitalization journey. As such, our sales team continue to manage a robust pipeline into quarter 4 and beyond. Kneat wins because it delivers compelling value for its customers. Our validation workflow platform, Kneat Gx, is configurable and absolutely no coding is needed. It supports all validation workflows, and it meets strict data integrity requirements. That Kneat has been able to address what our customers need to do the way they want to do it has earned Kneat our excellent reputation as the leader in digital validation. This market leadership was underscored this past quarter by the software review and comparison platform, G2. Its full report on pharma and biotech software awarded Kneat a satisfaction score of 98 out of 100, a full 20 points higher than the second-ranked company's score of 78. We strive to expand this competitive lead by making the platform better all the time. Our engineering team continues to innovate in line with customers' needs and our strategic vision. Our AI strategy is unlocking new possibilities for speed, intelligence and insight while maintaining the highest standards of compliance and integrity. Recent advancements include AI capabilities that enhance usability and global reach with upcoming near-term solutions designed to streamline content creation, content review and data-driven decision-making. Based on the significant opportunity that lies ahead, we will continue to invest strategically in R&D and go-to-market in parallel with our focus on profitability in the year ahead. I will now hand it off to Dave, who will address the financials in more detail. Dave O'Reilly: As I take you through the numbers for the third quarter, just a reminder that the figures are all in Canadian dollars, unless otherwise noted. I'm pleased to report that Kneat's healthy growth continued in the third quarter with annual recurring revenue up 37%, total revenue up 26% and gross profit up 25%. Starting with revenue. For the quarter ended September 30, 2025, revenue came in at $16.1 million, up 26% from $12.8 million for the third quarter of 2024. $15.2 million of that was SaaS license revenue where growth accelerated to 33% over the $11.5 million of SaaS license revenue in Q3 of 2024. The revenue from services of $0.9 million in the quarter compared with prior year services revenue of $1.2 million. This decline indicates partners are stepping up to do more in services, allowing us to focus on our software. These Q3 results take us to $46.3 million in total revenue for the first 9 months of 2025, which is up 31% over last year. SaaS license revenue of $43.2 million for the first 9 months was up 35% year-over-year. Cost of revenue in the third quarter of 2025 was $3.9 million, up 31% from $3 million in the same quarter a year ago. Gross profit for the quarter was $12.2 million, 25% higher than the $9.8 million in Q3 of last year. Gross margin for the period was 76% compared with 77% for the same period last year. For the first 9 months, cost of revenue was $11.5 million, up 31% from the prior year comparable period. Gross profit for the first 9 months of 2025 grew 32% over last year's first 9 months to $34.8 million, bringing gross margin for the 9-month period ended September 30 to 75%, which is even with the same period in 2024. Operating expenses grew 43% in the third quarter of 2025 to $14.3 million versus $10 million in Q3 of 2024. R&D expense growth was 47% year-on-year, net of capitalized R&D. Sales and marketing expense was up 45% year-over-year, and G&A expenses were up 32% year-over-year. Looking at operating expenses year-to-date through September 30, total operating expenses grew 34% over the first 9 months of 2025 to $42.3 million compared to $31.5 million for the first 9 months of last year. R&D expense net of capitalized R&D grew 27% to $16.1 million for the first 9 months. Sales and marketing expense grew 38% to $17.0 million for the comparable period last year. And G&A expenses were $9.1 million, up 42% compared with the first 9 months of 2024. We ended the quarter with total annual recurring revenue, or ARR, of $68.6 million, up 37% from $49.9 million as at September 30, 2024. And our cash position as at September 30, 2025, was $59.8 million. So all in, a solid quarter that sets up for a strong finish to 2025. And with that, I will turn the call over to our operator for your questions. Operator: [Operator Instructions] And our first question comes from the line of Doug Taylor of Canaccord Genuity. Doug Taylor: Congratulations on another quarter for new customer signings, a strong quarter. I'd like to start by, I mean, asking you about both the macroeconomic headwinds that you referenced in your prepared remarks and in your disclosure and also the reference to some increased competition that you talked about in your materials. I just wanted to unpack those a little bit. So first, starting with the macroeconomic, the challenges you speak about as it relates to tariffs and trade uncertainty. I mean, can we talk about the directionality of that in this quarter? Is that improving or getting more challenging? And perhaps you can speak to the pipeline for expansions as you discuss that with some of your installed base? Edmund Ryan: Doug, good question. Yes. So speaking to the pipeline, first of all, I guess, to date, we have -- we are ahead of where we finished last year from a new company customer perspective. So that speaks to our competitive strengths that I'm really proud of in the marketplace today. Looking at the -- looking back over the last 9 months and looking at the macros, I would say there's definitely been an impact there around customer budgets and uncertainty from that perspective and where they do their investments and all of that. I believe from recent information that you know that it's beginning to stabilize from that perspective, especially around the tariff side of things. And there's a lot of optimism, especially state side in the U.S. around new spending and additional spending on new facilities and expansions. And of course, a lot of those customers that are in that space are our customers. So I expect we'll benefit from that as we go forward as well in the coming years. So while it's not huge, the macro, it has had an impact, and we have seen some deals moving out a little bit, still there in the pipeline, still working on them, not closed out or anything like that. So, yes. And we have a very robust -- when I look at the pipeline ahead, we're been very robust on the pipeline ahead as well. Doug Taylor: And so just to maybe go one step further with that, would you say that those macro and the deal slippage, I mean, it clearly doesn't appear to be related to new customer signings. So is that more about expansion plans? And maybe you could tie in your recent changes to some of your pricing models around delayed growth in the initial deal signings in relation to that? Edmund Ryan: Yes. So the initial deal signings, I think you're referring to the incentives around the ARR, which is the leading indicator. I would say that has -- Dave can talk a bit on that as well, but that has come down, and it remains similar to what we would have sort of messaged to the marketplace over the last number of months in the single mid-digit type territory from that perspective. So on the -- what was the question on the macros again, Doug? Doug Taylor: Well, I mean, let me -- I think I got the answer I was looking for there. So let me just circle back then on the competition comments you made in your disclosure overnight here. I believe you're referring to Veeva, maybe some new market entrants or perhaps ValGenesis. I mean maybe you could expand on why you included that, what you're seeing and whether that's impacting -- it doesn't seem to be new customer signings, but is there a pricing impact? Is it impacting expansion plans to any significant degree? Edmund Ryan: No, not to any significant degree. There is definitely new entrants coming into the marketplace. Veeva is looking to get traction with its technology. But by and large, Kneat is still winning all the key deals. There is a bit maybe competition has the ability to slow deals down a little bit, but they still -- Kneat is still winning them in general. So nothing significant there. But yes, for sure, something that I would be concerned about or not concerned about or would be vigilant about into the future. Operator: Our next question comes from the line of Erin Kyle of CIBC. Erin Kyle: I just wanted to follow up on one of the questions that Doug asked there, just on expansions. I think I believe last quarter, we mentioned -- you mentioned the deferral of some expansions out of the quarter and ARR growth of 37%, while strong, it was still below our expectations for the quarter. So maybe you can just comment on whether you've seen more deferrals in customer expansions or just what you're seeing in that context? Edmund Ryan: Yes. I think I missed the first part of your question, Erin, but I can speak a to the latter part, at least. So as I said, the -- we would have seen -- if we look back over the 9 months, we would have seen some slowdown in budgeting and that type of thing, but it's nothing significant. We -- the customers continue to expand, and we're working -- we typically end the year with stronger expansions. And I'm optimistic that will happen again this year. We don't know the end of the year yet. So yes, there's nothing unusual there. Just we have to continue to expand our customers, and they are on that journey with us. They just -- deals, move around from quarter-to-quarter. It can be lumpy. Erin Kyle: The first part of my question there was just whether there were any deferrals out of Q3 specifically? Edmund Ryan: Deferrals out of Q3. I don't have -- Dave, do you have an answer to that? Dave O'Reilly: It's more so have any deals that were due to close in Q3, have they moved into Q4. I think the answer is to that is... Edmund Ryan: Yes, that's true. Correct, Dave. There would have been some deals that would have moved into Q4. Erin Kyle: Okay. And then I just wanted to also follow up on any FX impact on ARR and revenue in the quarter. If you can quantify that, that would be helpful. Dave O'Reilly: I'll step in on that one. So from a quarter-over-quarter perspective on ARR, we have a tailwind of approximately $1 million on our ARR, but the impact on revenue is a lot less in the quarter, the revenue impact is a tailwind of about $130,000. Operator: Our next question comes from the line of Gavin Fairweather of Cormark. Gavin Fairweather: Maybe just to start on the product. I know a big initiative has been to build in agile processes and workflows into the product. Curious if you're starting to see some adoption in your existing customers on those approaches and how you think about that as a driver for 2026 expansions? Edmund Ryan: Yes. We think it's very important going forward. And especially when we're bringing on other technologies, Gavin, around the AI and all of that to have a very robust agile data-centric platform underpinning it all. And that journey continues, and that is something that will take a number of releases. And I would say we're going to see -- the customers are -- early customers are using it and giving feedback on it, and there's iterations on it and -- but it's coming through very strong at the moment, and we're really excited about what it's achieving. Gavin Fairweather: That's helpful. And then maybe just on the G2 report and related to competition. I mean, really nice to see you ranking so well compared to some of your peers. But you did kind of call out increased competition in the MD&A. But so it kind of begs the question. Do you think that your technological edge with all the R&D you're doing is widening? Or do you think that it's stable or shrinking? How would you characterize where your platform sits versus competition? Edmund Ryan: I think we sit in a very good place, Gavin. And I think the plans that we have and what we're bringing through on the platform are also going to be very, very innovative and it's going to put further distance between us and the competition. Notwithstanding that competition have their own journeys and they're working on their things. One of the key things about Kneat is I keep reiterating, Kneat is a platform. On that platform, you can configure multiple workflows, and if you look at all feedback from the marketplace, including the G2, all you're going to see is happy customers, people who love using Kneat, easy to use, easy to set it up, easy to get the business value and everyone actually articulates that business value to us. So it's a huge competitive advantage, the fact that users love using Kneat and that it's really a strong market product fit. So yes, I'd be very upbeat about what we're doing. It's hard to see it in real time, but it takes time for it to materialize. But I believe what we're doing is very positive and very powerful as we go forward, and we'll continue to put -- to reinforce our leadership position. Gavin Fairweather: Appreciate that. And then lastly for me, just on the sales and marketing expense line. It is up a decent amount year-over-year. So can you just discuss where you're investing more in terms of the team and the marketing spend? And how should we think about the time lines to productivity on that increased spend and driving some additional ARR growth? Edmund Ryan: Yes. So on the sales and marketing front, we would be expanding from sales account managers would be responsible for expanding existing customers, sales directors and sales support functions, including internal salespeople. So that's where the investment is going there. And that is continuing to give return, and we've seen more of it going into '26. The other thing to say is R&D. And from that perspective, we would put in strategic hires. And we have a strong journey ongoing around AI and doubling down on that data and agile capabilities of the platform. So there's a lot of work ongoing there, along with addressing ongoing customer requests for features as we go along. So when we talk about these additional things like the data centricity, we've also got to keep the product working very well for other areas of the business. There's multiple products in our platform, as you know. So -- and when I look back at the numbers for sales and marketing and R&D, we're tacking down relative to revenue, and we expect that to continue through '26 as we focus in on profitability and cash flow breakeven later in '26. Gavin Fairweather: Congrats on the results. Operator: Our next question comes from the line of Justin Keywood of Stifel. Justin Keywood: Just on the margins, the adjusted EBITDA was up quite substantially year-over-year. And assuming the growth continues into 2026, that could suggest substantial operating leverage, assuming OpEx moderates. I'm just wondering if we're able to get some bookends on what the margin profile could be going into next year? Dave O'Reilly: I'll give you a high level. Yes, the adjusted EBITDA margin has improved. We expect it to continue to improve. Where we see that going is to a kind of typical SaaS type company profitability, late 20s, early 30s type range. That kind of coincides with our overall view of breakeven from a cash flow perspective on a full year basis. Justin Keywood: Just to clarify, did I hear 20% to 30% adjusted EBITDA margins could be a target for next year? Dave O'Reilly: The next 18 months, I would say overall periods, yes. Justin Keywood: Okay. Still very healthy expansion. That's helpful. And then just on capital allocation. Obviously, the balance sheet remains in very strong shape, net cash position. Are you able to outline the capital allocation priorities, be it M&A, share buybacks or other uses? Edmund Ryan: Yes. Thanks, Justin. So there's no plans to spend any of that balance sheet right now. I mean, as I said, the goal right now is to continue on and target profitability for next year. And as we go into the new year, we will -- we're constantly looking at our options and all of that. But right now, we believe a strong balance sheet is a very positive thing, especially when you're dealing with the large customers and the large partners that we are dealing with. But there's nothing on the short-term horizon, but there's always a discussion around these things. Operator: [Operator Instructions] And I'm showing no further questions at this time. I'll now turn it back to Eddie Ryan, CEO, for closing remarks. Edmund Ryan: Thank you. Kneat was founded with a single mission to help life sciences develop, manufacture and deliver therapies to their patients to the highest safety standard. While we have come a long way since our founding, we are still in the early innings, and our customers remind us of this every day. We are energized by their enthusiasm, and we are grateful for your support as we continue on our journey. Thank you very much. Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.
Operator: Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Generali Group 9 Month 2025 Results Presentation. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Fabio Cleva, Head of Investor and Rating Agency Relations. Please go ahead, sir. Fabio Cleva: Hello, everyone, and thank you for joining our call. Here with us today, we have the Group General Manager, Marco Sesana, the CEO of Insurance, Giulio Terzariol; and the Group CFO, Cristiano Borean. Before opening for the Q&A. Let me hand it over to Marco and Cristiano for some opening remarks. Marco Sesana: Hello, everyone, and good morning, and thanks for being with us today. So today, this set of results confirm the Lifetime Partner 27 driving excellence plan is starting on a very strong footing, thanks to, in particular, to the excellent performance of our P&C business. implementation of the strategy and of its work stream is the key focus of the entire group. One of the most relevant changes that we made in this strategic plan is reinforcing the role of the center in orchestrating more organically strategic business initiatives. Each management -- each group management committee member is sponsoring one of the planned strategic initiatives with the key head office function working in close cooperation with our business unit. We are reaping the benefits of being a group. As part of this approach, the whole GMC is very focused in sharing best practices and scaling up local initiatives. I could list many exciting developments I've seen over the past 9 months as part of this interaction, but let me just highlight 3 that I found particularly compelling. First, sophisticated Nat Cat modeling in major countries such as Italy, France and Czech Republic. So we developed a machine learning model for wind storm, severe convective storm combining internal claims data with external weather data through machine learning systems. And this approach will be soon be scaled to other countries. Second, claims automation in Austria. A great example of automation and speed of automated health claims reimbursement, which have now reached 56% of automation for invoice processing, and pharmacy invoices are settled in just 18 seconds. And finally, our group Geospatial platform. This provides advanced geospatial capabilities for underwriting purposes. This is already live in Italy, France, Spain and across the world in our global corporate and commercial business with further expansion in other business units planned for 2026. When I see this initiative on the ground, delivering tangible results, I'm very confident in our journey of delivering excellence. So let's now focus on our 9 months results. P&C continues to show positive momentum in terms of both top line up over 7% and margin expansion with the undiscounted combined ratio improving by over 2 percentage points compared to last year. At the beginning of the year, we told you that we were very confident about our development, thanks to the combination of larger volume coming through and sharp portfolio repricing in an environment where frequency is declining and claims inflation is under control. As you can see, we are very much on the right track to achieve our undiscounted combined ratio target well ahead of schedule. The top management team is thinking strategically about cycle management to ensure a continued improvement in the combined ratio, supported by our historical and reinforced technical excellence and to make today's underwriting margin resilient in the future. You can see this in the discipline we apply to underwriting. You can see this in our country-specific pricing approach and you will increasingly see this in the benefit we expect to generate across the P&C value chain from new digitalization and automation. In this quarter, as Cristiano will later explain, you can also see this in an even more conservative approach to initial loss peaks and clearly even more visible in the prior year development. What we see is an insurance sector that has been disciplined and continues to be disciplined. I want to reassure you that as part of the sector, Generali will be a force of discipline as the cycle progresses. Our P&C top line is continuing to grow and is mostly driven by the price effect, which we measure as the improvement of the average annual premium for the retail and SME segment. This pricing effect remained very significant at 9 months at plus 6.4% for motor and plus 5.2% for non-motor retail and SME. Looking at the technical margin. We achieved continued improvement in the average earned premium in comparison with that of the risk premium resulting from the combination of claim frequency and claim severity. In Motor, which represents around 1/3 of our P&C portfolio, the average earned premium increase for our top 10 market exceeded 10% at 9 months while the risk premium rose around 1%, thanks to decreasing claims frequency in most of the countries, coupled with well-contained claims inflation. In non-motor, the industrial KPIs point to a movement in the current year attritional loss ratio of around 1.2 percentage points very much spread across the majority of the business unit. At 9 months '25, the non-motor combined ratio is at 91.4%. These dynamics are at the core of a significant improvement in our P&C profitability and will continue to drive the improvement in the combined ratio. I thought it was helpful to provide you this context, and we are happy to help you bridge the P&C industrial KPI with our reported combined ratio in the Q&A. Now moving to Life. Let me remind you of our target together between EUR 25 billion and EUR 30 billion of cumulative Life net inflow in our Lifetime Partner 27 plan. We have exceeded EUR 10 billion at 9 months with a very good result for Protection & Health with EUR 3.7 billion and hybrid and unit-linked with EUR 4.7 billion. The improvement in the Life net inflow is a function of both the effectiveness of our distribution and the evolution of our product offering. Life net inflow also improved, thanks to the reduction of surrenders. Just to give you a sense, surrenders at 9 months compared to the same period of last year, were down by almost EUR 2.6 billion in Italy and by over EUR 500 million in France, consistent with our previous comments on the improvement in lapses. In the first quarter call, we gave you a new business margin guidance for the remainder of the year between 5.25% and 5.75%. In the second quarter, we had 5.64 new business margin. And in this quarter, we recorded a 5.74 new business margin. This demonstrates we have done quite well, not only in terms of volume but also in terms of margin. You will have noticed that at 9 months, the growth of new business value has also turned positive year-on-year. In addition to volume and marginality, let me also confirm the underwriting discipline of this new business with some key data points on the quality. Over 73% of our new production has no guarantees compared to 66.4% in the same period of last year. The share of new production coming from capitalized products is close to 85%. So to summarize, we continue to have a strong net flows with improving margin and confirming our underwriting discipline to ensure long-term resilience of our in-force book also thanks to the ongoing quality of the new business. Now moving investment portfolio. As you know, we have an allocation to private market, there is more limited that one of our main peers is around 18%. We do see value in a diversified portfolio. And therefore, we continue to aim at increasing our allocation to alternatives in a disciplined way. Our portfolio of alternative is balanced with strong safeguard to ensure it meets our strict criteria. When you look at the private debt portfolio of around EUR 19 billion, almost half of it is in real estate debt and infrastructure debt, both having a high-grade credit quality. Around 3/4 of our private debt portfolio is secured by collateral and our exposure to single borrowers is very limited. The allocation to direct lending, which has been the focus of the market recently is around half of our private credit portfolio and is therefore less than 3% of our general account. Also, the vast majority sit in Life portfolio with policyholder participation and very low guarantees. Only 23% of our private debt portfolio is in the U.S. And thanks to our strict investment guideline, we have had hardly any exposure to credits, which have been in the news recently. Given this strong framework, we are very comfortable with our portfolio. We continue to believe that there is value in gradually diversifying our government bond exposure into credit as I explained to our Investor Day in January. Our strategic asset allocation move is also well informed by the trends we are seeing in the government debt market, where there were also some downgrades recently. So to summarize, a very strong start of our strategic plan, coupled with the prudence we are exercising across the board, provide us with confidence that this trajectory will be maintained and will prove its resilience to a volatile external context. Thank you for your attention. And let me now hand over to Cristiano. Cristiano Borean: Thank you, Marco, and hello, everyone. Let me provide you some additional color on our financial performance as well as some indications about the direction of travel in the fourth quarter. Let me start with P&C. As Marco described, the business performance has been very good and we are working to make sure that the strong margins you see in the current attritional combined ratio today will continue to improve in the future. In the last couple of years, the insurance industry and Generali have had a severe Nat Cat experience. Our 2023 and 2024 Nat Cat impact before insurance were well above the expected yearly losses. As you have seen, historically, the second and the third quarters are the most relevant in the terms of Nat Cat seasonality in our portfolio. So far, 2025 has been quite benign and well below our ex ante 2.8 percentage points Nat Cat budget. In light of this, we thought it appropriate to exercise an even stronger prudence on our reserving, always within the range of reasonable best estimate. This translated in a much lower prior year development as well as even more prudential -- prudent initial loss peaks for both the attritional and the Nat Cat component. Therefore, we further strengthened our balance sheet, making Generali very resilient in future years. Together with the accelerated trajectory observed in our P&C performance compared to the plan. This approach increases our confidence to exceed the Lifetime Partner 27 driving excellence key financial target. There is an old saying in financial markets. The income statement is your past, the balance sheet is your future. Having a balance sheet with a low debt solid solvency, high quality of capital and reserving makes me very comfortable that Generali is well positioned to prove its resilience. The fourth quarter Nat Cat experience has been benign so far, too. If this continues until the end of the year, in the fourth quarter, you should expect a prior year development pattern similar to this quarter. This would imply a full year 2025 P&C operating results of around EUR 3.6 billion. A more dynamic interplay between Nat Cat and prior year development is in our mind, the sensible thing to do when managing the business for the long term. Therefore, looking ahead in 2026 and beyond, we will calibrate our prior year development dynamically, always within the boundaries of the best estimate approach. I hope this clarifies the very low prior year development contribution this quarter and provide you a perspective on our thought process, which will always prioritize long-term sustainability of results versus short-term impacts from volatile components. This approach also enhances earnings predictability and mitigate P&L volatility. Let me now move briefly to the Life business. When looking at the 9 months 2025 results compared to last year, the 1.8 percentage point growth of the operating result should be read as a 4 percentage points of growth after accounting for the stricter discipline on cost allocation from nonoperating to operating result for around EUR 30 million. And excluding the lower investment income from Argentina. As of the end of September 2025, the group enjoyed strong new business volumes and positive economic variances, both supporting our CSM development. This was only partially offset by some operating variances in the region of EUR 200 million due to a tax regulation change in Germany affecting health business profit sharing and some model refinements. Looking ahead, as I've mentioned to you previously, during the fourth quarter, we performed the full annual review of all actuarial assumptions on longevity, morbidity, lapses, expenses as well as model refinements. The discussion on these are ongoing and will be finalized by year-end. Just to give you an indication, I would expect negative operating variances for less than 1% of our reported Life system stock. Moving to nonoperating results. Let me anticipate to you that we expect additional restructuring charges in the fourth quarter, and we may also see some impairments on real estate portfolio. This will be partially compensated by a lower tax rate as we have some positive tax one-off expected in the fourth quarter. When you take all these one-off effects into account, I think that with the information available as of today, an adjusted net result projection for year-end '25 of around EUR 4.25 billion would probably be a good ballpark. Moving to our capital position. The group solvency ratio remains solid at 214%, thanks to our healthy normalized capital generation and already fully embedded the EUR 500 million share buyback program. Looking ahead, let me share with you some of the key factors that we expect to impact our solvency in the fourth quarter. In addition to the standard review of the actuarial model assumption, First, the acquisition of MGG is expected to have a minus 2 percentage point of solvency impact. Furthermore, as we stated in our half year presentation, and should already known that in the fourth quarter, there will be a temporary effect related to the loss of the internal model application for Spain as part of the Liberty integration, which is a reverse merger, as we said with an impact of around minus 4 percentage points. This is expected to revert in 2027 being completely temporary. In the fourth quarter, you should also factor in noneconomic variances of around minus 1% or minus 2 percentage points impact on solvency, mainly stemming from the ongoing implementation of the SAA optimization, which Marco was referring. In addition, the rating downgrade of the Republic of France that occurred in October is expected to reduce our group solvency ratio by almost 1 percentage point. Regarding subordinated debt movements, the EUR 500 million redemption in November will be offset by 500-ish million issuance of our inaugural restricted Tier 1 bond. Before closing, let me summarize. We manage the business for the long term with a focus on sustainable value creation for our investors, also reflected in an EPS that is growing 16% year-on-year. The Lifetime Partner 27 driving excellence plan has started very well and the whole management team is focused on building on this momentum with a clear objective to do our best to exceed all our key financial targets. Thank you for your attention. Operator: [Operator Instructions] The first question is from David Barma, Bank of America. David Barma: Firstly, on P&C, could you come back, please, on the average gap between written premium growth and loss trends? I'm not quite sure I got the numbers that you gave in the opening remarks, Marco, and if you could highlight the main country drivers within that, it would be great. And then staying on P&C, on the expense side and particularly on the administration expenses. Could you give some color on how that developed in the quarter and whether you expect some of the measures that Marco, you discussed in the intro to already benefit the expense ratio in 2026, please? And then lastly, on the Life business. So sales were obviously really strong and the mix too, you're getting close to your 2027 new business margin target already. Are expenses, the main piece missing to get you to bridge that to 6%? Cristiano Borean: Thank you very much, David. The first question, of course, is for Marco. The second one is for Giulio, and the third one is for Cristiano. Marco Sesana: I go back to what I said during the speech. So what I mentioned was the growth of nonmotor average premium at 7%. And the growth of the risk premium was at 1%. So let me just give a word to clarify what we mean when we say when we give these measures. So we are measuring in motor, what we see coming through as the average premium of the single risk, right? So that's the -- that's what we see showing up and we measure the risk that we have in the portfolio. So when we give these 2 measures, what is important is to see that there is a margin gap between how much the risk is growing and how much the average earned premium is growing. In this case, 6% is very significant in terms of spread and in terms of margin. That means that in the portfolio that we have in the different business unit, there is an underlying potential to deliver more improvement in the loss ratio. So where do we see this? I would say we can go into the different details. But I would say that this is very spread across the top geographies. In some cases, it's more I would say, it's more pronounced. In other cases, it's less pronounced, but I hardly see any cases where we are not in this situation. So I could mention 2 geographies that I think are interesting. One is Germany because we focus -- like in the last 3 years, we really focused during this call in showing how much we were repricing the portfolio and the effort done by the German business unit is really significant, which, by the way, I want to thank the colleague for this. So we have done 3 consecutive years of double-digit price increase and I think the results are showing up, and we do see a significant improvement in the portfolio. The other geographies, clearly, Italy, which is going really well in terms of repricing versus the increase in risk. And also there, we see a margin into the portfolio that is really significant. So if you want, then we can go on more detail. But this is the picture that we see for motor. And I think this is what I mentioned. And I think it's a really positive news for the future. Giulio Terzariol: Thank you, David. On the question regarding the expenses. Maybe let's start from the expense ratio. The expense ratio for the 9 months is going up 50 basis points. Here, we need to keep in mind that we have the impact of the purchase price allocation coming from the Liberty acquisition and also that we made some reclassification of expenses from nonoperating to operating. So if you adjust the expense ratio basically the expense for these impacts. The expense ratio is flat. Now to your question about the admin expense ratio, we are measuring the GEX ratio, which is basically the component of the expense ratio, which are not commissioned or incentive and that number is going down by 50 basis points. So that's an improvement. We don't see the same improvement in the expense ratio because of a little bit of mix, but also there is some conservative provisioning from the business units. So moving forward, we'd like to see clearly a better alignment between the improvement of the admin expense ratio. And also the end of the year anyway, we are going to report also the admin expense ratio so that you can see the development of the KPI. And then clearly, we are going to provide you also some more transparency about the movement or the other line items going into there. But from an efficiency point of view, we are definitely improving, there's going to be also a driver of improvement as we think about 2026 and 2027. Cristiano Borean: David, regarding the Life sales and the driver. I would say, at the first 9 months already, higher growth compared to the acquisition cost is impacting 16 basis points onto this improvement. But the further way to project forward should embed also the focus on our protection business, which is something running at almost double-digit present value new business margin, and this is supporting a much better marginality. And this together with product features where you can even simply improve the features adding extra value not only managing on the part of the cost is driving it. But we are already on that trajectory. There will be also an extra focus on this topic, but it will not be the only driver to get there. Operator: The next question is from Michael Huttner, Berenberg. Michael Huttner: I just had 2. One is on the solvency, there are so many negative numbers. I came away with the conclusion, which I didn't add them up, but clearly, it will be down quite a bit. So let's say it's down 10 points. I mean, just rounding it. And I just wanted to hear, can you remind us are there any positive offsets? So clearly, operating capital generation, probably 5 points a quarter. And then I have no idea maybe you can say whether some of this resiliency or prudency you're building in, whether that's in the -- included in the operating capital ratio or not? And then, of course, the Solvency II review. So just a little bit would be lovely. Then on cash, I always like cash in here. Everything is doing so nicely, I'm just wondering whether Switzerland is returning your EUR 400 million now. And then the final one is on net inflows, which is an outstanding number, even [ Poste ] doesn't have such a good number. I just wonder whether you can talk a little bit about what's driving this and what it could mean for earnings growth going forward? Because clearly, this isn't in earnings, it's in OCG, but not in earnings. Fabio Cleva: Thank you very much, Michael. The first question on the solvency movements and the one on the Switzerland remittance are for Cristiano while the one on net inflows is for Giulio. Cristiano Borean: So first of all, I think I start from a point. What happened already is the Spain from October 1, 2025, has lost temporary I already said, up to 2027, the internal model eligibility. It is a 4 percentage point solvency group impact, which was already signaled at half year so it's not new. And I see also the projection by all of you for the year-end are pretty much embedding all what I already said. I think the 2 points of MGG were already signaled also in the press release is something known. I don't -- I think the only point, which I repeat in 2027, Spain will reverse this 4 points. Probably the downgrade of France, which is slightly less than 1 percentage point is something not in. But this has already happened. And if I just look at November 10 solvency ratio, which was the last updated number, we are basically 210%, and this is already embedding both the MGG acquisition, both the France downgrade and the 4 points of Spain. Clearly, what I was highlighting is you need to take 1 to 2 points on the SAA for the asset allocation improvement for the year to come. So it's not a huge number, and I think you are perfectly in line, and I think given the November is giving you. Let me speak a little bit about the Solvency II also review going forward. And one of the things which I think it is relevant for the Solvency II review, as we always said, is that we were between the 10 to 15 percentage points of benefit. I would say that the latest version of the delegated act, which has been approved and still needs in any case, a discussion with the college of supervisors on very minor topic, which has some uncertainty bring us I would say, on the top end of this range of the 10% to 15%, which is, I would say, positive also to allow us implementing our EPS accretion investment. Speaking about cash for Switzerland. For Switzerland, we both are extremely focused, you and me and not only you and me and many people in our company on this, I can confirm you that in the plan, we are going to start seeing a repatriation of excess capital, including remittances and capital support done, it will be gradual. And I think you should see this more coming in the end of the plan from 2027 onwards. There will be some positive 2026 potential expectations supporting our cash flow, but it is a gradual process. The company is fully focused now to increase the business results, and that will be further supportive out of this. Giulio Terzariol: No. Thank you, Michael. Your question about the net inflows. Yes. Actually, the development is pretty good, and it's better compared to our plan because we were not planning to cross the EUR 10 billion threshold this year. But now, as you see in the 9 months, we're already about EUR 10 billion, so you can imagine also that we are going to have positive inflows in the last quarter. From a composition and inflows point of view, we see basically growth across all the different lines of business. From a geographical point of view, I can tell you, Italy is up EUR 1.3 billion, EUR 1.4 billion compared to last year. What we see in Italy actually is not so much the premium up. It's more than the surrender down significantly. In France, we are about EUR 300 million better. Also here, we have a similar situation. So from a premium point of view, we are relatively flat, but surrender much down. And in Germany, we're also up here, we have growth in premium and less surrender. So we see a similar dynamic in the different markets. If you look at the last quarter also, there was a good dynamic on the inflows. So quarter-over-quarter, you can see also that the present value in the business premium in the third quarter was ahead compared to last year. So we went from negative growth in present value new business premium to positive growth. Also the new business value is going into positive number. So really working in the right direction. From a profit point of view, you know the concept of the tab of Cristiano that if you feel the tab, you're going to get more profit. So basically, this is going -- this is reflecting anyway in a better composition between the release of the CSM and what can be the increase of the CSM due to new business also how the lapses are going down. Remember that last year, we had negative variation, negative experience variances due to lapses and this year, the negative variances due to lapses are nonexistent. So that's a positive that translates into better CSM release eventually. Michael Huttner: Just one thing. I love the explanation. France, what was the figure? You said something lower 300 or 900? Giulio Terzariol: France is about EUR 300 million plus of inflows, EUR 300 million plus of the inflows coming from hybrid and unit-linked products. That's what we say basically in France and protection is also a nice contributor. Operator: The next question is from Iain Pearce of BNP Paribas. Iain Pearce: Just one for me. I think in the introductory remarks, you mentioned some benefits from frequency, I was just wondering if you could elaborate what you're seeing on frequency sort of if you're seeing some different trends by market and also if you are viewing this as a long-term lower frequency trend or if there's anything abnormal in what you're seeing in frequency at the moment. Fabio Cleva: Thank you very much, Iain. The question, of course, is for Marco. Marco Sesana: So let's start with the general picture. We do see the decrease in frequency very broad in the different markets. So we -- I couldn't pick one single market that is an outlier. So this is really showing off in every single market. So whether this is a trend that we are going to see in the future, it's a different question. So let me elaborate. So I do think that we are going to see this again in the future, but let me explain you why. So we have 2 set of drivers, I would say. So the first is frequency is historically coming down in every market. So we are seeing a long-term trend of decreasing frequency in all the Western European markets. And I would say it's also Eastern European market. So it's consistent. And so therefore, I think this is going to happen in the future. There is a second driver, which I think is really important to mention because sometimes we always think that frequency is an external factor, but we have worked a lot on the quality of the portfolio. We have worked a lot on a few initiatives. One is loss prevention. So we are trying to put on the ground tools to make sure that we evaluate correctly every single risk that we take. The second one is pruning. So we have cleaned the portfolio from all the tail part of the portfolio that were unprofitable or as a prediction would look unprofitable. So this is something that we have driven that we think is going to give us benefit in the future in terms of frequency. And so when we think about frequency, you should always think a long-term trend, but also the type of active work that we have been doing over the past month in the quality. By the way, if you want a proof point of this, you could look at the trend of the man-made losses that really came down in the last quarter, thanks to all the initiatives we have done. That's it. Iain Pearce: If I could just quickly follow up. Do you have a view of how much the combined ratio is benefited at 9 months from lower frequency versus your expectations? Marco Sesana: So I would say in terms of industrial KPIs. So as we said, it's always -- there is always a link between the industrial KPI and the financial KPI. But clearly, then we -- you need to look at the different prudence that has been taken and everything, probably in the risk premium that we have, this has been the main factor of benefit that we see in the risk premium. Operator: The next question is from William Hawkins of KBW. William Hawkins: I've got 3 questions. I hope I can be brief. Thank you already, Cristiano, for what you said about the conservatism in your loss picks. I get the idea of what you're saying. I'm still not quite clear in the 9 months attritional combined ratio, how much -- how many percentage points of conservatism was there in that pick? Because before PYD, obviously, that ratio improved. It just would have improved more if you haven't been prudent. So I'm not quite sure the percentage point drag from the prudence. Secondly, please, now that you're very clear that you're managing your combined ratio, I think it is a reasonable question to ask, therefore, how many -- how much is it expected to improve per year because you're clearly managing so as you said, it will improve per year? And I don't know if we're talking 20, 50 or unlikely 100 basis points? And adjunct to that, how are we ever going to know when the underlying environment is making that improvement less sustainable because it's great that you're now managing the number, but I'm not quite clear how I'm going to know when you're losing the capacity to manage the number in the future. And then thirdly, please, the -- you've already talked a lot about the great Life new business results. I'm still not quite clear the thing that stands out to me is the present value of new business premiums seemed seasonally very, very strong in the third quarter. Normally, everyone is on holiday so that number dips 10% or even 20%. This time, it only dipped about 5% from the second quarter. And that can't be anything to do with surrenders because it's PVNBP. So what was the explanation for that? And is this the new normal? Is 3Q now going to be a lot stronger than it's been in the past few years? Or should we go back to seasonal dips in the future? Fabio Cleva: Thank you very much, William. The first question on the conservative business is for Cristiano. The second one is for Giulio, while the third one on the levy business again for Cristiano. Cristiano Borean: Thank you, William. So clearly, as we didn't exactly mathematically disclose the conservativeness of the prior year, but you can reverse back it yourself in any case. I try to answer with a different angle. The industrial development that Marco is seeing has an improvement, which is 0.4 percentage points better than the one you see in the accounts, which is a way to try to second guess your question, I think, to help you extracting at this point. I go to the second one, Giulio. Giulio Terzariol: Thank you, William. Your question about the improvement in the combined ratio, first of all, from a price environment point of view, we think that next year, clearly, the gap between the price change and what we call the risk premium is going to narrow but is not going to vanish completely. So we might still have a little bit of room in Motor, potentially also in Motor, where we see also that the frequency tends to go lower, which is a consequence also of the action they were taking. So we might still have a benefit there, which is not going to be as strong, clearly, as what we are seeing right now. But let's say, there is still a little bit of way to go. Then the other improvement should come over time from the initiative that we have on the claims side. You remember, we discussed that also in January that we have initiative on the efficiency and the effectiveness in claims. And here, we have all the work we do on the network's theory, on anti-fraud, all these kind of elements. Price sophistication might help also to get more granular on some pricing. And then one driver moving forward of improvement in the combined ratio, that's going to be definitely something where we need to focus is the space ratio. So we go back to the improvement of the expense ratio that we are already seeing from an admin point of view, and we want this improvement to continue in the next years and reflect also in the total expense ratio that you see. So it's a combination of still some way to go some additional -- I think also about, by the way, the work that we are doing in Switzerland, Switzerland is, at the moment, having a combined ratio of 100% is not going to be the future. So also, we're going to have some improvement on some turnaround, some improvement coming from claims initiative than the expense ratio. So let's say that's our journey to improve our marginality, which is already very strong, is not finished. Cristiano Borean: Just to clarify, I was speaking about the basis, not the delta, the basis before the 2 in order that you get that we increase this basis to answer to your first question. The question on the PVNBP. First of all, the third quarter is still compared to other quarters. I know that in the third, as you said, people should stay on vacation on the summer component. But I would say still weaker than the previous quarter. I've seen 3 major drivers of improvement, which are geographically aligned in especially France, where you had a very strong third quarter, and I think it is related to the very positive and stable return you can get from the saving component of our hybrid products, and that was clearly also linked not attractive anymore [ levy ] return given to the, let's say, low afferent to retail. On top of this, we had a small kickup from a new distribution agreement, which is opening up in Portugal with our postal partner Bank CTT. Together with the strong growth, which you've seen our basically all over the board and it's not generally specific, but we are seeing in both Hong Kong and Mainland China, which is a kind of market trend. Operator: The next question is from Farooq Hanif at JPMorgan. Farooq Hanif: First question, you kind of partially answered that, but you gave the average premium versus risk premium numbers for full year -- sorry, for 9 months, what is it in 3Q? We are already seeing a closing? That's my first question. Secondly, given everything that's gone in Italy, are you willing or able to talk about the bancassurance opportunity for you now in your Life business? You've been very quiet about that. Obviously, stuff happened -- stuff could have happened and didn't happen, just wondering whatever you feel like you can say about that? And the last question on nonoperating. So you're indicating a slightly higher restructuring cost, which will limit your adjusted net result. But I remember back at the CMD, you talked about how the nonoperating kind of holding expenses line is too high and will come down over time. How should we think about that going forward? Because it's obviously a big component of your adjusted net result. And I think we don't -- all of us especially me, spent a lot of time thinking about it. Fabio Cleva: Thank you very much, Farooq. The first question is for Marco. The second is for Giulio while the third one is for Cristiano. Marco Sesana: Yes. So let me say that, yes, we have disclosed the number for the 9 months. What we see in the third quarter is broadly in line with what we see in the 9 months. Clearly, again, we could go in much bigger detail on the different geographies. So there are some specific. So for example, when we -- I can tell you about Germany, where you have renewal of the portfolio that is clearly in the first part of the year, the third quarter looks a little bit how can I say, weaker in terms of development, and that is fine. So historically, that is the case. So I would say we tend to give the 9 months result because we think over the year are more stable and are more indicative of the different development so that's about it. So Italy is still very strong. Probably in France, we had to do some pruning. So the average premium, it's probably weaker, but overall in line with the development of the year. So I couldn't spot in the third quarter, anything that is like normal or it's diverging from the trend that we have shown on the 9 months. Giulio Terzariol: So your question about bancassurance. First of all, as you know, we are very proud of our footprint from a tight agency point of view. So that's clearly the bread and butter, but this does not mean that we don't do bancassurance. So we have a few cases Cristiano was just referring to the new agreement in Portugal. We have a joint venture now in India with the bank. So we are going to push bancassurance also in India, we have a successful relationship with bancassurance in Spain, and you should not forget Banca Generali, which is also a bancassurance relationship. And clearly, if there are other opportunities in Italy, we're going to look at that. So there is -- our belief is if you have a business model centered around bancassurance that can be a little bit tricky. But if bancassurance is clearly selectively use it can enhance the franchise value and also the scaled operations. So from that point of view, if we find the right partner, we are very happy to engage with these business partners. Cristiano Borean: So going to the nonoperating part. First of all, I confirm you that by year-end 2025 versus year-end 2024, EUR 80 million of nonoperating costs will be -- there has been already 60 because it's pretty linear throughout the year, evenly split between Life and P&C will be booked in the operating and have already been booked into operating result from the nonoperating like it was last year. So -- and this is done and is going already to reduce the expected project, the nonoperating charge going forward from the next years. In this quarter specifically, there has been one effect, and as Giulio was referring to Portugal, I'm referring back to India where probably you read, we set up a joint venture with our partner, and the cost of this setup was having a one-off charge related also to set up the marketing effect of around EUR 60 million, which is clearly related to a specific business development. Having said that, speaking about the restructuring costs. And by the way, this is a PV take. So it's one for now and not anymore what I was referring in India because it's taking the full charge projected in PV. So with regards to the restructuring charges, we are in a year where we have already exploited Germany restructuring, which will allow to better improve the GEX ratio, general expenses ratio for the future years and allow the improvement and digitalization of the company with the relative efficiencies. On top of that, we are in the process of implementing the Liberty integration, and we are in advance towards that. So that's why we can see something more in the fourth quarter, together with other countries where we are accelerating potential restructuring. That's why I was mentioning the fourth quarter with further restructuring charges, clearly, these will be counterbalanced by a much better tax rate because of some one-offs. So I would say there are 2 kind of form of one-offs, but the first one is forward-looking projecting the restructuring acceleration to have a better trajectory, and I confirm you that the nonoperating charges are materially going down for the next year. Operator: The next question is a follow-up from Michael Huttner, Berenberg. Michael Huttner: It's -- so here is my difficulty or my challenge. So your earnings are -- I look at your consensus sheets and look at what you're saying it's like it's the same number, right? Or I mean, there are small variances but it's -- there's a lot of accuracy here. But listening to you guys, it's like you're bubbling with excitement and stuff. And for me, the difference is, I think with Giulio you were trying to explain to remind me of is there's a difference between IFRS, which is CSM, which is incredibly slow. You have to fill the bathtub and wait for ages for the tap -- the water to come out. And then local GAAP, which is not IFRS. Now the reason I ask this is always cash. So is there more upside potentially in the cash than we're seeing in these numbers at the moment? Fabio Cleva: So Michael, of course, this question is for Cristiano. Cristiano Borean: So Michael, let me say, related to the CSM bathtub point that you were mentioning, not necessarily a higher life production materializes in a better CSM versus a local GAAP because, as you know -- sorry, a better local GAAP versus CSM because CSM sometimes has a revenue recognition and this revenue recognition is a pro rata temporary, sometimes in the new approach, you forget about the acquisition cost when you do many business and you have them immediately to be paid on the cash side. So clearly, on the CSM, this is amortized for the revenue recognition. This is called contractual service margin because you amortize it for the time of the service you give to the client. So the point is the CSM is a present value, while the local GAAP takes into account of the actual amount that you are usually paying. So it's a slightly more prudent in the Life. What -- so there is a gap usually negative between the service -- contractor service margin result and cash in a growing business. Clearly, if you are just making a company to run off, which is not the case of Generali, you can have the opposite but that is a different business model, especially for other integrators or run offers, let's call them. But what regards the cash element, the positive trend should come, in my opinion, you should read it from the acceleration of the P&C trajectory versus what we were projecting in the plan. And that because one thing I always report to the Board is the exactly almost equivalence between finance expenses discounting at this level, these 2 noncash item of the operating results, P&C, P&L, are canceling each other. So the results you are seeing is cash. That will be a better driver together with the improvement on some, let's say, cash trap as our favorite Switzerland topic. Operator: [Operator Instructions] We do have a follow-up question from Michael Huttner, Berenberg. Michael Huttner: Really sorry, it's a tiny question. In the past, you've always mentioned Argentina as a kind of negative adjustment as it were. And I think this morning, I don't think -- I'm not sure you mentioned it in your introductory remarks but when I was speaking to your wonderful IR, really wonderful IR. They did mention, and it sounds like Argentina is now turning to be a positive. Is there something there? Cristiano Borean: Michael, I think in the third quarter, you observed a fluctuation. There was a positive contribution from, I think you are referring to the P&C component for Argentina. And instead of having a negative delta in the investment result, you had a small EUR 7 million positive in this quarter. Be mindful that Argentina is extremely, let's say, volatile in nature because of the way it does not follow the basic financial textbook rules but we know last year. First of all, when you manage Argentina P&C business, you have basically, in your investments, all inflation-linked because you need to be able to carry up -- catch up with the cost of your liabilities. And so the investment are mainly inflation linked in that environment. Last year, we had a huge spike of inflation, huge -- materially huge. I'm talking about something in the order of 200%. And that was getting to a point where the exchange rate was not following the international official party. So we were having massive positive contribution of inflation-linked component in the investment result without having a deep equivalent depreciation that basic finance should tell you should be followed. That's why we had this push up, okay? When you look at this topic into isolation and you isolate investment results versus the other part of the P&C, you can get things which could be completely offsetting, but you are seeing a very huge number on one side and on the other. If I take the P&C operating result at 9 months of Argentina, it's EUR 14 million. So I hope this helps for you to better understand. But last year was a very, very peculiar year because of that effect. By the way, the movement of the excess capital from Life in Argentina in the fourth quarter '24 that we made is affecting us in the Life investment operating result EUR 39 million this year on a like-for-like basis. So it was not an immaterial effect due to this, let's say, paradox or nonrational movement between inflation and FX rate. Operator: The next question is from Elena Perini, Intesa Sanpaolo. Elena Perini: Yes. I've got only one actually. Considering that you are improving your P&C trajectory, and you mentioned that some further cash can come from this improvement. Are you going to use part of it to make other, I don't know, bolt-on acquisitions to strengthen your presence in some markets? And then can you elaborate a bit on what could be the potential targets? Fabio Cleva: Thank you very much, Elena. Giulio, would you like to take one? Giulio Terzariol: First of all, really the good thing is to add the capital, to add the liquidity from an M&A point of view, I'll just tell you, right now we don't see much in the pipeline. So from that point of view, clearly, we can find a good target. We would definitely look into that. As you know, our preference is to do acquisition where we can realize cost synergies. We can strengthen the franchise. Tell you, Liberty is a great example of an acquisition where we can really create value. As of now as of the moment, I tell you there is not really much happening. On the question between then, clearly, every time we do an M&A, we are measuring the M&A against the buyback. And when we say we are measuring the M&A against the buyback, it's not just a comparison of the IRR because, as you know, the IRR can be very dependent on the terminal value but that's really about the EPS accretion that we get 3 or 4 years, let's say, 4 or 5 down the road. So if we find anything which is interesting, we're going to go for that, making sure that we can create real value. But at the moment, there is not much. Operator: There are no more questions registered at this time. Fabio Cleva: So thank you very much for dialing into today's call. Should you need any follow-up, please feel free to reach out to Investor Relations. Have a nice day. Bye-bye. Operator: Ladies and gentlemen, thank you for joining. The conference is now over, and you may disconnect your telephones.
Operator: Good morning, ladies and gentlemen, and thank you for standing by. My name is Kelvin, and I will be your conference operator today. At this time, I would like to welcome everyone to the Bragg Gaming Group Third Quarter 2025 Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to Stephen Kilmer, Head of Investor Relations for Bragg Gaming Group. Please go ahead. Stephen Kilmer: Thank you. Good morning, everyone, and thank you for joining us for Bragg Gaming Group's Third Quarter 2025 Earnings Call. My name is Stephen Kilmer, and I recently came on board to manage Bragg's IR function. I'm not quite in-house at Bragg, nor would I say that I work for an external agency. I think the best way for me to describe myself, is that I'm a Bragg fractional Head of IR. I've been running that function for technology companies since the mid-'90s. And before that, I worked for one of the top full-tech newswires as well as an investment adviser at what eventually became Merrill Lynch Canada. My contact information is at the bottom of today's press release, and I hope to get to know many of you as well as we move forward. With that said, some housekeeping for this call. If you're connected to our online webcast today, you should see our third quarter earnings presentation on your screen, and you should have control to flip the slides yourself as you listen to this call. If you have joined by telephone, please note that you can find our third quarter earnings presentation as well as financial results press release, financial statements and MD&A on our website at investors.brag.group. Please note that certain statements on this call may constitute forward-looking information or future-oriented financial information. A full explanation of risk factors is available on the second slide in our third quarter 2025 earnings presentation titled Forward-Looking Statements as well as in the recently filed press release and other public filings. Bragg disclaims any obligation, except as required by law, to update or revise any forward-looking statements, whether because of new information, future events or otherwise. And forward-looking statements made on this call speak only as of the date of this call. On this call, Frag Reman Group's CEO, Matevz Mazij; and CFO, Robbie Bressler, will discuss the company's third quarter performance, followed by a question-and-answer session. I'd now like to turn the call over to Matevz. Matevz Mazij: Thank you, Stephen. And good morning, everyone. Thank you for joining us for Bragg Gaming Group's Third Quarter 2025 Earnings Call. We're Bragg, dual listed on the NASDAQ and the Toronto Stock Exchange, and we are a specialist supplier of games and technology to the regulated iGaming market. We create and deliver cutting-edge online casino games, both from our own in-house studios and from top-tier in-demand partner studios. We empower online casino, sports betting and lottery operators to launch, run, scale and optimize their apps and websites. And through everything we do, we enhance the end-user experience by leveraging advanced analytics and AI to drive engagement and smarter, more efficient iGaming operations. During the third quarter, we continued to see high double-digit growth in our focus markets of the U.S.A., where we saw 86% year-over-year revenue growth; and in Brazil, which saw revenue growth of 80% compared to the same period last year. The U.S.A. was a key driver of the 35% year-over-year growth overall that we have seen in proprietary content revenue. And we continue to roll out strong titles from our proprietary game studios, which include Wild Streak Gaming and Atomic Slot Lab. Overall, revenue growth when factoring out the Netherlands, a jurisdiction which I'll discuss further later in this call, was 20% up compared to the third quarter of last year, demonstrating the continued demand for Bragg's products and services in regulated iGaming markets around the world. During the quarter, we continued to showcase our games development expertise with the rollout of 2 new bespoke online casino games developed for our partner, Hard Rock, in the United States, among many other game launches. We secured a Tier 1 credit line with the Bank of Montreal, underscoring Bragg's creditworthiness. We continue to be focused on optimizing our cost structure, which allows us to deliver operational leverage. And as Robbie will now go into in more detail, we are pleased to be reporting revenue, gross profit and adjusted EBITDA in line with our expectations for the third quarter of the year. I'll be back to discuss some of these points in more detail after you have heard from our Chief Financial Officer, Robert Bressler, who will now discuss the third quarter financials. Robbie? Robert Bressler: Thank you, Mat. In the third quarter of 2025, revenue was EUR 26.8 million, up 2% year-over-year. Excluding the Netherlands, revenue grew a strong 20%, underscoring continued execution of our diversification strategy and the strength of our high-growth markets. As expected, the Netherlands remains impacted by regulatory changes with revenue down 22% year-over-year. The region now represents a smaller share of our total revenue as our business outside the Netherlands accelerates. Much of the underlying growth was led by North America and Brazil, which together accounted for 22% of our total revenue for the quarter, up from 12% a year ago. Our other markets, primarily across Europe, delivered 4% growth, supported by steady performance from our content aggregation and turnkey solutions. From a strategic point of view, the quarter reflects clear progress towards our goal of building a higher-margin, more diversified business. We continue to shift our revenue mix towards proprietary content, which grew 35% year-over-year in Q3 and remains our best performing margin contributor. This transition is a key driver of our expanding profitability profile. Our gross margin continues to trend upwards, supported by the growing contribution from proprietary content. In Q3, gross profit increased 5% year-over-year to EUR 14.7 million, with gross margin improving 115 basis points to 54.7%, reflecting sequential improvements versus Q2. Adjusted EBITDA also grew 9% to EUR 4.4 million, with adjusted EBITDA margins rising 100 basis points to 16.6%, benefiting from actions to optimize processes and realize efficiencies, which kicked off in the prior quarter. We expect these operational leverage benefits to continue into Q4. Moving to the balance sheet. We remain focused on maintaining a strong and flexible balance sheet. As Mat noted, during the quarter, we successfully completed our new working capital revolving credit facility with Bank of Montreal. This facility enhances our liquidity position, supports continued investment in high-growth, margin-accretive initiatives and significantly lowers our borrowing costs. Finally, we are seeing the benefits of a more margin-accretive revenue mix, continued discipline in optimizing internal processes and structures and profitable growth from our expanding footprint in North America and Brazil. Our strategy is delivering. We are becoming a more efficient, diversified and higher-margin business, and we remain confident in our ability to deliver sustainable long-term growth and shareholder value. Going into 2026, we are very focused on continuing to optimize our product mix and optimize our internal processes and structures, and we believe that there are significant opportunities to refine and improve our margins and cash flow. With that, I'll pass the line back to Mat. Matevz Mazij: Thank you, Robbie. We've been talking about the growing vertical of proprietary casino content at Bragg and how we have made a strategic focus because it's a high-margin product, which supports growing gross profit and EBITDA margins. Online casino content that we own also delivers compounding recurring and long-term revenues. We talked about our 35% year-over-year increase in proprietary content revenue. What is especially encouraging is that half of our proprietary content revenue in the third quarter of this year came from the United States, making the U.S. our strongest market for our fully owned casino game IP. And the U.S. market continues to grow. According to H2 Gambling Capital, the U.S. online casino market will grow from around USD 10 billion in 2025 to over USD 30 billion in 2030, a compound annual growth rate of 26% over the next 5 years. By the end of the third quarter of 2025, we have launched 35 new proprietary casino games, and that's just so far this year. We have been building our portfolio of games for several years now, and 70% of all proprietary content revenue in the third quarter of 2025 came from games that we released before 2025. So we're demonstrating longevity, our strong player retention in industry terms. And we are delivering long-term recurring revenues from our growing mountain of fully owned IP. As I mentioned earlier, third quarter 2025 revenues in Brazil are up 80% compared to the same period last year, which was pre-regulation, highlighting a successful regulated market entry this year for Bragg. We are on target to see 10% of revenues coming from this important jurisdiction in the full year of 2025. Now I want to touch on why we're talking about our performance in terms of the Netherlands and non-Netherlands revenue. The Netherlands continues to be an important market for Bragg, and we are proud to be a market-leading iGaming supplier in the jurisdiction, with approximately 30% of the entire regulated market gross gaming revenue running through our products and technology. This market share has been stable for us for several years now. However, with increasing and well-documented headwinds facing regulated operators in the Netherlands, including our customers, we're especially interested and proud of the growth we're seeing in regulated markets outside of the Netherlands, such as the United States and Brazil. Our 20% year-over-year growth in other markets, over 80% in some, shows what we can achieve when factoring out the unusual market conditions currently seen in the Netherlands. Our geographic diversification has consistently improved over the past 4 years, with non-Netherlands revenue rising from 51% of all revenues in 2022 to a projected 68% of all revenues in 2025. And as our industry continues to grow and evolve, we expect to continue this trend of diversified growth. Newly regulating jurisdictions such as Finland, which has announced the launch of its regulated iGaming market in January 2027, offer great potential ahead for companies like Bragg. As we have previously communicated, we expect one of our customers in the Netherlands, BetCity, to migrate off the Bragg PAM in H1 of next year. And also as previously communicated, we expect the impact on the bottom line post migration next year to be minimal due to the margin profile of that particular customer. Our PAM and full technology and content portfolio remains in strong demand in the Netherlands as well as in regulated jurisdictions around the world. And we look in particular to those markets outside of the Netherlands to continue to drive our revenue and margin growth in 2026 and beyond. Bragg is well placed to capture significant value in the world's most attractive regulated iGaming markets. We saw a record third quarter revenue in focused growth markets, 86% up year-over-year in the United States and 80% in Brazil. We continue to release more proprietary games, and this fully owned IP continues to deliver recurring higher-margin revenue for us. Proprietary content revenue increased 35% compared to the same period last year and now makes up 16% of all revenue when split by product mix. When factoring out the Netherlands contraction, which I discussed earlier, we are pleased to see 20% revenue growth year-over-year across our other markets. And as we continue to diversify our revenue streams, we're on track to book 68% of all revenue from non-Netherlands markets in 2025. As we keep our focus on improving product mix, processes and margins, delivering operational leverage and having delivered on-target third quarter overall revenue growth of 2% and adjusted EBITDA growth of 9%, I can confirm we are maintaining our full year 2025 guidance. We project full year 2025 revenue of between EUR 106 million and EUR 108.5 million and adjusted EBITDA of between EUR 16.5 million and EUR 18.5 million. Our combination of rapid growth in the United States and Brazil, the increasing contribution of our high-margin proprietary content and the resulting margin expansion positions us strongly for the future. Thank you. Robbie and I are now available to take any questions you may have. Operator: [Operator Instructions] Your first question comes from the line of Jordan Bender of Citizens. Jordan Bender: Nice flow-through in the quarter. Guidance for the fourth quarter also implies nice flow-through margin expansion. I do want to touch on some of the cost buckets here without kind of getting into guidance for next year. It sounds like proprietary content, we can see it here, is trending pretty nicely, growing strongly. How should we think about that progressing and the impact that it has on margins into next year? And then kind of the second cost bucket question here. Your SG&A looks like it has picked up pretty substantially year-to-date. Anything to call out there? Robert Bressler: Thanks for the question, Jordan. I'll start with the second question. In terms of our run rate compared to 2024, as you're seeing, we do think there is opportunity for structure and process optimization. We started that process in Q2, continued it through this quarter, and we're going to continue it into 2024. So we do think there's opportunities to, as Mat mentioned, realize operational leverage next year through optimizations of structures and processes. Second question in terms of proprietary content, we do believe that there is lots of opportunity for growth, especially in the U.S. We -- in terms of cadence of titles that are going out and investment, that should continue through 2026. We will be coming out with more comments on 2026 performance and guidance probably early in the new year. But we do think proprietary content and actually, we're very confident that proprietary content is going to be a key accelerator in driving better margin performance and cash generation. And as a reminder, only 12% of the U.S. population is underregulated iCasino. And also, iCasino is growing substantially in the jurisdictions where it is legalized. And I noted just anecdotally, DraftKings mentioned that they were up 25% on their iCasino performance for Q3. So iCasino in the U.S. is really humming, and we're well positioned to capitalize on that. Jordan Bender: Great. And I do just want to follow up on BetCity here for a second. Is that going to be a complete roll-off all at once? Or is it going to happen over time? And then the earnings impact being minimal, is that a gross impact? Or is that net of any mitigation that you might do throughout the year? Robert Bressler: It definitely would be net of mitigation. Like the opportunity for us to either redeploy resources or optimize resources will be present with a customer like that rolling off. In terms of them actually migrating off, we're still working with [ Entain ] to solidify that plan. And as mentioned, this will be something that most likely will occur in the first half of the year. We're exploring opportunities and ways to make sure that, that process happens extremely smooth and is beneficial for both sides. Operator: Your next question comes from the line of Gianluca Tucci of Haywood Securities. Gianluca Tucci: First question, could you perhaps walk us through a couple of the growth drivers in the U.S. and Brazilian markets? And how are you thinking about these markets as we enter a new year? Robert Bressler: Thanks for the question. So in terms of Brazil, we continually get more and more market share from an aggregation point of view. So we're quite happy with the level of coverage we've been able to achieve in Brazil. Our strategy has always been the aggregation is a lead into pushing our proprietary and exclusive content and benefiting from relationships we have such as the partnership with RapidPlay. So we see our opportunity into the future is to increase our concentration of revenue coming from more margin-accretive products in Brazil. So we're very -- we're quite happy with the growth we've seen, well into the 80% range year-over-year. Our focus will be now getting a better share of that revenue coming from more margin-accretive products. And again, I think we're well placed for that. We have good relationships with operators. We're feeding a good distribution network, and we have a good relationship or partnership with a studio that's based in that region and can deliver titles that should be quite well received into that market. Gianluca Tucci: Okay. And perhaps one final queue from us here. Congrats on the BMO facility and getting that over the finish line. On the balance sheet, are you comfortable how it stands today? And -- or are there more things coming from a balance sheet optimization, I guess, perspective, Robbie? Robert Bressler: Yes. Thank you. And yes, we are happy to have gotten that facility over the line. It provides us with much less lower cost of borrowing and gives us good liquidity for our needs. I do think there's opportunity, as we mentioned, to optimize and become more efficient with our cost structure, which we're actively looking at and believe there's much more to come on that. So in terms of strengthening our liquidity, I think that's going to come from improved margins and better cash flow off of our operations. Operator: Your next question comes from the line of Michael Shelton with [ FRC ]. Michael Shelton: I was wondering if you guys could tell me what's keeping Bragg from earning a regular and consistent operating income. And then secondly, what do you expect the stock price to be in 3 years? And what type of systems and strategies and structures are you going to put in place in order to achieve that number? Robert Bressler: Thanks for the question. I'll start with the operating income portion. I assume you mean from an IFRS perspective, we do have a fairly significant development costs that gets amortized. There also is some purchase price amortization that's occurring from our acquisitions that we've done. Things like brand and other have a bit of a tail. So we do have a lot of amortization and depreciation that puts us in a loss position. I think we're getting better and better. And I think what we look at from our performance and how we gauge our performance is looking at our adjusted EBITDA less our CapEx. And that's very key for us to make sure that we are actually generating cash from our operations. So we're focused on that, and we are positive on that this quarter. We think that ratio can continue to improve. And we think at full efficiency, we could be 30% to 50% in terms of having that cash conversion ratio occur. In terms of future-looking stock price, I can't comment on that. We're focused on operating as strong as we can, providing the best results that we can, optimizing our structure, producing solid cash flow and margin improvements. And we are confident that with the path that we're on, we're going to increase value for shareholders. Operator: There are no further questions at this time. And with that, I will turn the call back over to Robbie Bressler, CFO, for closing remarks. Please go ahead. Robert Bressler: Thank you, and thank you, everyone, for joining the call today. We look forward to updating you on our progress as it continues. Appreciate everyone's support, and have a great day. Operator: Ladies and gentlemen, this concludes today's call. We thank you for participating. You may now disconnect your lines.
József Váradi: Welcome to this event. So this is reporting the first half results of fiscal '26. Could we move to the next slide, please? So I would say that we start seeing some sunshine and certainly good decisions for the future waiting to see the impacts coming through. So with regard to the sunshine, I think what the first half results demonstrate is that under circumstances when we are near efficient, actually, the business produces very strong results in terms of operating KPIs, in terms of financial output. We are still not fully efficient given the groundings of aircraft, some of the inherent inefficiencies in the system, but we did a lot better than in previous years. As a result, you can see a significant increase on capacity, passengers, revenue and profit. In terms of decisions made, we're seeing that we have affected the major challenges of the business for a structural reset. We have communicated the closing of Wizz Air Abu Dhabi that effectively has been happening. It is pretty much a done deal. Then we communicated that we would be seeking a reset with regard to the aircraft delivery stream with Airbus, that deal is now in place. It has been decided, and I think it's a good deal. It is appropriate to addressing a number of things. One is the deliverable growth rate of the business, taking some risks out of the profile of the setting, reducing the growth rate to around 10% to 12%. And let's not forget that 10% to 12% still makes Wizz Air the fastest-growing airline in Europe and which we are proud of. But it is a more manageable magnitude of growth than previously set. And very importantly, it takes into account the cycle of the Pratt & Whitney groundings and ungroundings because that created a significant hiccup to the fleet count of the airline, which we had to reset. Also, we addressed the XLR exposure. That program is descaled very significantly, I would even say that exited to a large extent, and now this is narrowed to the U.K. AOC. So the XLR is seen as a Wizz Air U.K. initiative no longer as a corporate initiative for the airline. Also, we have made commitments on aircraft finance. This is one of the significant differences to our competitors, and you will start seeing a more balanced way of financing our aircraft delivery program going forward. Now with regard to growth, I think this is important, and you have a prime interest in that. We are looking at capacity growth of around 10% to 12% to be delivered through the recovery of the GTF engines, the new aircraft delivery streams and the way we are managing capacity. Now what it really means is that we will still have some short-term challenges in front of us arising from capacity because effectively, the choice we have on hand is either being fully efficient and fully deployed capacity, but that would create an excessive growth rate, which would become highly dilutive to revenue production or carry on some inefficiencies on the fleet, but set the growth in accordance with what actually we can deliver. We opted for the second. So you're going to be seeing a moderated growth level from here on, but it will take a little time to suck up the inefficiency created. We have been shifting a lot of focus in terms of markets. We have been talking about this to Central and Eastern Europe. If you look at Central and Eastern Europe, it is now kind of bearing fruits in terms of market share. We are expecting our market share to be around 29% going into the first half of calendar '26. This is up from 25%. Of course, we have been adding significant capacity by opening new operating bases and also enhancing our incumbent footprint. With all this, we are expecting a stabilized, more resilient revenue production and a longer-term lower cost production of the business and also the strengthening of the balance sheet. Maybe with that kickoff, I would hand it over to Ian, and I will take it back after that. Ian Malin: Thank you, Jozsef. Next slide, please. Right. So in terms of H1, I would say that pleased with the outcome. And so we don't want to dwell on it too long, but at least we're here to report on it, so I'll talk about it, but then we want to make sure we look forward into H2 and beyond that. So revenue, up 9%, nominal off of 8.9% ASK growth. RASK was roughly flat year-on-year, EUR 0.0498. So a strong RASK production, flat load factor. So that was -- and yield was up around 0.9%. So ultimately, I think a good top line number, helped also by fuel. Fuel was down 2.1% despite the 8.9% volume increase, benefiting from the fuel efficiency and the fuel price and the impact of our hedging. EBITDA was nicely up 19% with a 29% EBITDA margin and operating profit was up 25% with a 13% EBIT margin. So across the board, I think a strong result. We did see some things below the line that eroded some of the net profit, even though we still generated a positive year-on-year net profit production. And none of this was unexpected. So we have the tax charge with regards to the deferred tax asset that we created last year and the unwind that happens as the aircraft start delivering into that entity in Malta, which we restructured and set up last year. Ultimately, I think where we're looking at is a satisfying result. And as Joe says, as we continue to build operational performance and operational resilience into the business, you can start to see the benefits of those flow through into the P&L. These are structural. These are things that we've invested a lot of time and effort into. And so last summer was a rather disruptive summer, and that's where you see the benefit coming into this year. You'll see less of that benefit in Q3 and Q4 just because we had better performance. But we can expect, as we're continuing to grow that operational performance to deliver a more robust cost position and ultimately, a more beneficial revenue environment because you'll start to deliver operational performance, which drives better revenue quality. So we're excited about the structural changes and the resilience coming into the business. So into the winter and into the cost base, if you could just go to the next slide, please, we will see transitional inefficiencies. Now on the cost side, I would say we're pleased with the results. The cost picture really improved in Q2. And you can see that, that was driven by fuel. So fuel was a tailwind there. The disruption costs, as I mentioned, the operational efficiencies generated roughly EUR 29 million of savings in terms of disruption costs. So that was helpful. We also managed to shed some of the structural wet lease costs. So we were down EUR 76 million in terms of wet lease costs. Still have -- we still do incur wet leases, but these are not structural. These are one-offs. And actually embedded within those wet leases is also some of the short-term engine leasing that we do in order to make sure that we can operate the fleet efficiently and reliably to be able to support that better on-time performance and the avoidance of disruption costs. We also managed to deliver strong results even with lower sale-leaseback volumes. You can see that we actually were EUR 27.5 million short on sale-leaseback gains year-on-year. So had we had that, that would have been an even better picture. So those were the tailwinds. We continue to see elements of cost creep through the business. And like I said, none of this is a surprise. So there's nothing new based upon what we were expecting at the full year when we said that this year was going to be a challenging cost year. This is just simply the translation of some of our actions into the results, which will then wash through and move on going forward. So you can see that, for example, airport and on-route are up. Actually, handling came down, but where the biggest pressure came from was on on-route, where we saw an increase in the tariffs year-on-year. And for example, places like Germany on recharges were up 29% year-on-year. So those really hard to unwind some of those. Maintenance is an area that we see a lot of cost pressure. But as we explained at the full year, there's a number of things happening there. So we are seeing the retirement of ceos now in that period. We think there were 9 ceos that went back. And so as you put those into return conditions, you have to incur incremental costs, not normal operating costs. And so you see some of that flow through. You also are seeing pressure in terms of the vendor base. So component support contracts are increasing. And so some of that is inflationary coming through the cost line. There is an element of Abu Dhabi wind-up costs coming through the entire cost structure. In terms of Abu Dhabi costs, we remain comfortable that there won't be an adverse impact on the full year to winding up Abu Dhabi. So while you will see cost increases across all the cost lines associated with the wind up, the benefit of not operating Abu Dhabi from September onwards will offset that so that it should be at least breakeven, if not maybe slightly better, but we'll know that when the entire business is wrapped up. We thank the team for all their efforts in terms of that operation as well as what's happening to shut that down. Distribution was up slightly, but that was consistent with the Q1 results in that we have a return to growth. And so as you do push more volume through the business, you are incurring more costs associated with that. And so that was expected. And like I said, there are -- there's a bunch of cost increases happening in the others line associated with the return to growth. So there's things like crew training, crew accommodation, recruitment, things like that. Abu Dhabi costs flow through that to some extent as well. And there was also a reduction, if not even an elimination in some limited cargo revenue that we had in prior year that we didn't have this year. So that's what explains the others line within the other cost and income line. I will ask to go to the next slide. Just quickly touching on Q2. So again, operating margin of 21.5%, 35% higher year-on-year. We saw less benefit on FX in the quarter versus prior year due to the now continued ramp-up of our overall lease liability hedging profile and risk management profile. And we saw a very strong disruption cost reduction, again. So most of that disruption improvement came through in the second quarter, and that's despite some of the challenges we have in Q2, such as the suspension of Israel operations, which resumed in August. We also had the overfly challenges around Iran, and then we had actually a lot of volatility around Abu Dhabi as we worked to come to the end of that operation at the end of August, early September, beginning of September. There were some tapering off of the operations there, and that caused some additional disruption and costs. So notwithstanding all those things, a very strong Q2 and something that we're proud of, but we're not going to rest there. So in terms of where we're going, we have obviously some guidance numbers that Joe will share at the end. And that puts us in a position where I think we're comfortable with where consensus is currently. And so we do expect there to be a higher cost position in Q3 and Q4. Like I said, nothing that's a surprise. And that's driven by a number of factors. If you look at things like the maintenance line, we're going to see older aircraft costing more to maintain. There's going to be continued retirement of ceos in that period, which drive the costs up. Depreciation is going to see some pressure because in H2, we should be 35 more neos this year versus last year H2, and that translates to roughly 20% fleet growth, whereby in that period, we should only be growing around 10% in terms of ASKs. And so our nominal depreciation will grow faster than our volume growth, and that is why you'll start to see some pressure on that. We also have in the second half a distortion when it comes to the year-on-year comparable in maintenance. In fiscal year '25, we had a one-off maintenance accrual release, which was rather material, close to EUR 80 million, and we're not going to see that again. And so that's why you see some of the cost pressure flowing through. But Joe will comment on why that is necessary and why the actions that we take and the costs that come with those actions set us up for not just the performance that we're delivering next year, but also the overall reprofiling of the business. I'll ask to go to the next slide, please. In terms of cash flow, I would say, consistent at the end of the day, consistent with what we've been seeing. So we ended the year right -- sorry, ended the half around EUR 2 billion in cash. And that puts us in a strong position going into the winter. We managed to generate a reduction in net leverage ratio, so down from 4 to 3.6. We maintain our target of 30% to 35% liquidity, actually made it to go up, which is good. And that's also in anticipation of our January bond repayment, which we plan on at this point, treating the same way we have the previous repayment. We are pleased with the Airbus developments and that comes with pros and cons. Obviously, as you defer aircraft, you generate fewer sale leaseback gains, but you also generate fewer lease liabilities as you defer CapEx, which means that, that should be benign in terms of leverage at the end of the day, but it also releases -- has a benefit of releasing PDP obligations as we now no longer need to fund the development of those aircraft. And as I'm sure some of you have noticed, we've managed to sell a few aircraft as part of a deal with one of our related party airlines, and that also takes further pressure off the CapEx side of things. But overall, nothing to be -- nothing jumping out in terms of this chart. And as we move into Christmas period into the Easter into March, we'll see that unfunded liability line start to build again as we've seen in prior periods. And so we're comfortable with the liquidity position of the company. We -- I will note that we rolled over our ETS facility. We had a EUR 279 million facility that rolled over like we did in the prior year. And due to the changing prices of the emissions credits, we were able to slightly upsize that. Next slide, please, and I'll hand the floor back over to Joe. József Váradi: Okay. Thank you. Well, this is, I guess, a very important chart that kind of gives you a picture on fleet growth and this translation into capacity growth. So you recall that we are having 334 aircraft on hand to be delivered, originally set for a stream ending in 2030. Now this is extended to 2033. So effectively, that affects a 91 aircraft reduction in the original delivery period and put that across into the extended period. Of the 91, 3 aircraft are sold outright and 88 are deferred into '31, '33 deliveries. Now what it does is it creates a more predictable picture for future growth. In terms of volume of growth, we are targeting around 10% to 12% annual growth. This is taking into account some of the issues of recent experience that given the -- some of the inefficiencies associated with the Pratt & Whitney groundings. We want to make sure that we are derisking the profile of the business, not only in terms of market footprint, but also in terms of challenges arising from growth. And we think that the 10% to 12% growth is a more derisked profile for the company than 15% originally targeted. And taking into account the Pratt & Whitney GTF cycle of grounding and ungrounding, you appreciate that the new fleet delivery program has to take that kind of a recovery cycle into account and recovery cost into account. So if you look at it in nominal terms, effectively short term, we don't take new aircraft deliveries representing 10% to 12% growth. It's a lot less than that because we are taking into account the recovery of the current grounded aircraft engines. We think that this is a fairly well outlined model mathematically to program the growth or deprogram the growth against a lower risk profile of execution. I'm very pleased with that. And it was a long negotiation. So you can imagine that this is very thorough, not only in terms of setting or resetting the delivery stream, but also in terms of protecting the commercial terms of the deal. Again, just for recalling it, this deal was actually put in place in 2017 in Dubai under very different supply chain circumstances, very different commercial and financial needs of the OEM. And obviously, that gives continuously a structural benefit for Wizz Air versus the rest of the market. But we're seeing that now it is not going to become a burden when it comes to executing the aircraft order. In 2029, effectively, we are becoming an all-neo operator. That's good because by the time, I think you should be reasonably expecting technological maturity coming through. By the time the GTF advantage will be delivered. I mean that's a significant technological step-up and an industrial step-up on durability and reliability on the engines. And the other important issue here is the XLR program, which is now taken down -- rescaled and allotted to Wizz Air U.K. no longer to the European AOCs. Next slide, please. So decisions have been made, are being made and now we are expecting the impacts coming through. So the critical decisions, as I said before, the closure of Abu Dhabi. You heard from Ian that we expect that decision to be executed against a fairly benign financial platform. So we are not expecting any adverse impact in the current financial year. As a result of that and as of the next financial year, we are expecting significant upsides coming through. Just discussed the Airbus order reset, again, this is very important for longer-term predictability of the business and also discussed the XLR program, which we effectively exited other than Wizz U.K. Now there are next to this ongoing work streams. Network improvement, churning the network for profit. That's probably the most important ongoing priority of the company. We are shifting capacity into Central and Eastern Europe against high brand awareness, against a very solid financial performance and against a backdrop of disproportionately higher GDP growth in that region relative to Western Europe. And we are already seeing some of the early results by opening new bases, deploying more aircraft, how quickly the market is picking up on Wizz Air. We are optimizing the technological platform. Maybe it's a small equation we have been discussing, but I think you should understand that when we are talking about the GTF or any new technology is the same for the CFM LEAP. There is a trade-off. And the trade-off is you get fuel burn benefit from heat in the core of the engine. So basically, the way fuel burn benefits are derived is through the higher temperature in the core of the engine. What it means is that higher temperature is more sensitive to durability of the core engine of the whole engine. So that may result in more maintenance costs. So this trade between fuel burn versus maintenance. So it's not like that you just get fuel burn as a gift. And of course, there is another element of technology improvement and that comes from the capital cost. It is simply more expensive than previous technologies. So please just understand this trade because when you look at ex-fuel cost and fuel cost, you're going to be seeing that, okay, we are delivering a lot of improvements on fuel cost, but not as much on ex-fuel cost. But there is a trade here. So what you see coming through the fuel cost, you're going to get some of it as a penalty on non-fuel cost. So you really have to look at the 2 combined. I mean, of course, we do the breakdown and we act on the breakdown. But intellectually, I think you need to integrate those 2 if you want to fully capture that. But we're seeing that the technological benefit is important because once the GTF is matured, the industry has no doubt that this is going to become the best engine available in the marketplace. It is kind of painful at the moment going through this cycle, but we are hopeful that one day, actually, we're going to be pacing the day when we decided to offer this engine. And unparking the aircraft, that's a critical priority for the company. We have been discussing this. We are targeting to on ground the entire fleet by the end of '27. We are working with Pratt & Whitney. We have an understanding. We have a deal with that regard that covers induction slots that covers spare engine purchases and that covers OEMs capacity in terms of parts and in terms of shops and engineering to support that recovery program. And this is aligned at the highest level at the company, not even at Pratt & Whitney level, but at Raytheon level over there. So a lot of ongoing issues happening, but I think all for the better. So next slide, please. I think Ian has started alluding to this that if you look at fiscal '26, it is almost like 2 halves for 1 year. So a somewhat shining first half and somewhat challenging second half. So in terms of capacity, we are looking at mid-single-digit seat capacity growth, somewhat less on ASK. You recall that we eliminated quite a number of long routes operated too hot and harsh. So that's why the ASK numbers are somewhat different from the seat numbers. So mid-single-digit capacity growth. This is in line with our ongoing growth ambitions of the company. Really, the option we had available to us here was we are growing 30% with efficiency in terms of unit cost. Or we are going 15% with efficiency for revenue, but with some compromise on unit cost. These were the 2 choices to make. And we opted for the second one because we think that we should be allotting capacity against demand in the marketplace as opposed to allotting capacity and trying to find demand for that capacity. But that will bear some kind of a challenge in terms of short-term cost to the unit cost to the business. Load factors, I think we are trending well on load factors. The performance is strengthening. We are expecting some upsides on load factors coming through. So with regard to RASK, again, I mean, we are too early into the winter to really make a firm position here, but we are expecting some pressure. I mean, 15% is still significant growth in the business. It's a lot ahead of the growth of other airlines. And this is the off-peak period, the kind of the weaker half of the financial year from a demand perspective. So we might be expecting some pressure on RASK capacity, although we are also seeing some good positive signs on that. So we shall see, but this is our kind of early indication. So how would that translate into CASK performance of the business? Obviously, fuel will continue to do well, given the current fuel price in the marketplace and given the transition to neo technology and the benefit of fuel burn coming through the GTF engines. Ex-fuel cost, will be temporary on the rise as a result of this kind of capacity inefficiency we carry in this period. But over time, this is going to be sucked up. If you look at fiscal '27 when we are taking down the new aircraft deliveries and contemplating some recoveries of GTF engines in that period, this kind of inefficiency is going to be sucked up. So all in, so it is a challenging first half -- sorry, second half, what we are into, although some of the good things, good decisions we carry through this period. And certainly, you're going to be seeing more benefits materializing in the next financial year. I think with that, I would turn it over to questions, please. Jaime Rowbotham: Jaime Rowbotham from Deutsche Bank. Two for me to kick off. Maybe first one for Jozsef. On-time performance was, I think, 60%-ish, up from 50%. So a good improvement, clearly helping your disruption costs, but that's still very low versus, I think, your pre-COVID standards and industry standards. So why is that? And where do you think you can get that to 1 year out, please? And then secondly, maybe for Ian, the situation you find yourself in, as you described on the cash flow bridge, saw the net CapEx positive EUR 190 million in H1. Now you've got the Airbus deal done. Is there more clarity you can give us on what the full-year equivalent of that number might look like? Or is it still very contingent on engine sale and leasebacks, et cetera? József Váradi: All right, maybe I'll start with on-time performance. So yes, it is a significant improvement. I think the difference is that we are just up against a very different supply chain context. ATC remains to be a challenge. It was less so this summer than in previous years. So we have to admit the progress what they have made, but that doesn't mean that they are virgin. So there are still lots of issues coming through ATC. Our performance relative to industry completion, we are the best airline in Europe. On-time performance, we are right in the middle of the pack. So is this good? Yes, relative to the industry's performance, I think it is good. Relative to our expectations and historical performance, we want to see improvement coming through. But I think we need to see more improvements coming through the supply chain as well. Now the issue what you have, and you probably appreciate this. So you are in the summer period when demand is almost unconstrained. The more compromises you make on your operating model, what compromises do you make? I mean you may compromise on sparing more capacity. So that will take down utilization. I mean you are running the airline at low utilization rate in the middle of the peak demand period. This is going to be defeating your financial performance. So you have to kind of strike the balance here and find that kind of a sweet spot that benefits your operating program against the revenue and demand upside of the business without really screwing it up completely operationally. And I think previous years in previous summers, we might have booked it overly for trying to get more commercial upsides from the business and on the mining operational resilience. So I think we put more efforts into the balance now that we're going to have commercial upside, but at the same time, we want to protect operational resilience as well. I mean that's how well we could have done, but we need to see some improvements in the supply chain, to be honest, to have significant upside here. But we are not underperforming versus the industry. Ian Malin: Thanks, Jamie. With regards to cash flow, so the Airbus news is new, right? We announced it this week. And we are in the process of trying to identify when the right time is to do a Capital Markets Day to walk you through the longer-term strategic direction on all these exciting topics, particularly with regards to aircraft financing, engine financing and things like that. As I mentioned earlier, we should be 35 A321neos in higher count this second half versus last second half. And then there's also going to be an element of engine sale leasebacks that happen in there. These are the contractual obligations that we have. So we're not doing anything above and beyond at this point other than upholding our contractual obligations. And so other than the 3 aircraft that were sold, I believe there's only 1 aircraft that was deferred out of fiscal year '26. So the Airbus impact is very limited to fiscal year '26 and in fact, fiscal year '27 because there's not much you can do. So that's why we're having to manage the capacity through, as Joe said, utilization and things like that, which come with its drawbacks, which we're very utilization focused. So we need to balance the revenue dilution with regards to the capacity, management. But in terms of the cash flow for the full year, so you will see cash flow benefits coming from the delivery of those aircraft. You will see cash flow benefits coming from the delivery of those engines because we still do a form of sale leaseback, whether it's an operating lease, where you get the upfront gains that go into the sale leaseback line or whether you do a JOLCO or a finance lease where you also do a sale leaseback where you don't get the same P&L impact. You get the cash benefit but a different P&L impact. Roughly 20% of our deliveries right now are being financed through a form of ownership like JOLCO or finance lease. That's effectively an ownership structure, even though there is a lease structure behind it. We plan on taking the next step, as we mentioned before, into looking at an acquisition-based -- more sort of conventional acquisition-based approach. We're running the numbers now based on the order book to optimize where we think the earnings profile we'll get to over the next -- over the rest of the decade, and that will then calculate how many incremental aircraft we need to buy, and then we'll look at the financing sources, whether it's a lease like a JOLCO or whether it's some sort of acquisition either with cash or some sort of other kinds of financing. That's part of the Capital Markets Day exercise. But what that will do and what these acquisitions do is take away sale leaseback gains, which are very chunky upfront and it will spread it out in line with the depreciation and interest costs you take over the life of the asset. And there's trade-offs to that. But ultimately, we've determined that over the long term, it is beneficial from a shareholder perspective, but it comes with a near-term impact, and that's what we're trying to balance is that we continue to do a bit of both to smooth out the earnings profile of the business ultimately towards something that's beneficial and giving a better shareholder return. Alexander Irving: Alex Irving from Bernstein. Two from me, please. First of all, on your revised CASK ex-guidance for the year. So full year results, you said up slightly. Now we're saying up mid-single digit. Can you help me understand how much of that is the mechanical impact of taking your expected capacity growth from 20% to 10%? And how much of that is, say, an underlying variance versus your prior expectations and planning? Second, you've launched a euro-based product recently. Is this sort of a no regret move that if it doesn't work, we can just sell the middle seat anyway? Or is there a real revenue opportunity that you're expecting to get from this? And if so, could you quantify that, please? Ian Malin: Sure. You want me to take the first one on the CASK? József Váradi: Yes, please. Ian Malin: So the answer is, as I said before, there's no surprises this year in terms of the CASK number. So it's really more a matter of the capacity impact, where we're basically growing half of what we expected. We had sized the business and budgeted the business for a bigger business and the business that involved Abu Dhabi and things like that, we've now changed it dramatically. But still trying to manage through these costs. And so there's nothing that's caused any sort of variation on that. We do need to maintain cost discipline, and that's our focus. But it goes -- as I mentioned earlier, there's distortions and all sorts of other things that are putting pressure on that. So there's no surprises on that front. József Váradi: So I think the middle seat is surely a revenue opportunity. I mean, at the moment, effectively, we don't get the middle seat occupied. So if you look at the numbers, it's almost like no one is paying for that. Now, we want people to pay for that. Harry Gowers: It's Harry Gowers from JPMorgan. First question, maybe just how to think about growth into next year in March 2027. I think you said or mentioned that obviously, the deferral of deliveries is quite back-end loaded. So how much you're expecting to grow next year? And anything you can say directionally on costs yet for March '27? Second question, with the Abu Dhabi exit, Vienna base closure as well, is this the end of quite major airport or market movements? Or do you have any more exits or big exits in the pipeline? And then last one, just on the medium-term growth. I mean, when you were negotiating down on the deliveries, how did you settle on like the 10% to 12% is the right number? So just kind of what's the thinking mathematically or strategically behind that? Why not 7% to 8%, for example? József Váradi: All right. So maybe I'll start with the last one, the 10% to 12%. So we always saw this business is structurally designed to deliver 15% growth at 15% margin. You remember that was sort of the model what we promoted. Now given all the issues and hiccups, we broke down on the delivery of the model, and we try to reinstate that model. But we're seeing that short term -- short-, medium-term, we need to ease the delivery of that model. So that's why we're seeing that addressing around 10% growth rate versus 15% is taking some of the risks out of the equation when it comes to capacity. Why not 7% or 8%? Because if you look at our focus markets, especially Central and Eastern Europe, Central Eastern Europe will demand more than that. So we have been modeling this. We have been looking at GDP growth expectations in the region and how that would translate over to airline demand and how we can translate it into our own capacity versus the competitive games we are into and our ambition to lead the market in -- continues to lead the market in Central East Europe. And we think that this is kind of the sweet spot. So the 10% to 12% is a bit of a sweet spot analysis from the perspective of demand in our core markets versus the deliverability of the program from an operational standpoint, how much financial distress we are putting on the system to ramp operations up against that target. With regard to Abu Dhabi, Vienna and others, I think the way I would see this is that while Abu Dhabi is a very structural decision, Vienna is less so. I think Vienna is seen as pretty much business as usual. Maybe the magnitude is reaching a bit higher than usually. But what happened in Austria, I mean, the Austrian government decided to put excessive taxes on the aviation system, effectively making Vienna prohibitive from a cost perspective for us certainly. But we are not the only guy acting. So clearly, this is not a Wizz Air issue. This is a bigger industry issue. But I would say that this is fairly exceptional in terms of magnitude. Now with regard to Vienna, I think what is easing the situation is the availability of Bratislava, which is pretty much next door. So this is kind of fairly easy. But churning the network for profit, I mean, that you should be expecting us to do on an ongoing basis. And of course, same thing goes for airport cost. So if an airport becomes excessively expensive, then we would be churning that capacity for lower cost execution. So I would say that these are ongoing priorities. But if you ask the question whether we have made the big decisions, I would say, yes, the rest would be pretty much refinement and business as usual. Do you want to take the growth? Ian Malin: Sure. So just on the growth side, right, like what we've done with the Airbus deal and what these other deals that we're looking at is give ourselves optionality at the end of the day. So we -- we're going to bring things down in the medium term, the 10% to 12%, but it doesn't mean that we're limited at 12%. We're still a growth stock. We're still a growth company. We're not afraid of growth. And we have 58 aircraft or so redelivering between fiscal year '27 and fiscal year '29. Most of those aircraft have extension options in them. And so if we see that there's more demand, we can exercise those extension options and capture that demand. So I want to make sure that we're not somehow thinking that we're constrained. We have optionality. That's what we've effectively negotiated for ourselves versus before we were committed to delivering -- deploying that growth. But in terms of fiscal year ' 27, I think it's still going to be a very challenging ASK and seat growth environment, closer to 20% still as we -- at least in the near term. And that's something that we're going to have to manage through in terms of the deployment of all that. It's -- it will probably end up having an impact on utilization. It will also force us to be more measured. But I think with the changes that we're doing around the network and the market share that we want to develop, it is, again, an investment. But I don't think it will have as adverse of an impact on costs as you might be thinking in terms of where you're going with this question. So looking at the cost side in fiscal year '27, we're not guiding. It's far too early to say. But I would say that the worst is behind us because we're still -- that growth will help us at the end of the day in terms of the costs. We think that the changes that we're making to the airport side, in particular, right, hard real changes will bring down the cost side of that. So I think that -- so looking at our cost structure, you'll see depreciation probably be the biggest benefit because we start to flush out some of these ceos if we don't extend them. And you're going to start to see -- you'll see maintenance still be one of the ones that see the most pressure because of the heightened activity associated with redelivering and the aging of the fleet. Everything else, I would not expect there to be any challenge in terms of bringing costs -- keeping costs flat or down, okay? So I think that overall, the cost creep is where we are now and you start to see improvement after that in fiscal year '27. József Váradi: I would just add one more perspective. I mean, none of our plans at the moment contemplate Ukraine. So Ukraine is kind of an outside chance for the business. If things turn in Ukraine, all of a sudden, discussion will be a change fairly fundamentally from our perspective. Because we would be looking at ourselves as a genuine kind of first mover to the Ukrainian market, and we would definitely go to market as a hometown airline for Ukraine. Don't forget that we were the largest non-Ukrainian airline in Ukraine prior to the Board with operating basis. So we would be looking at reinstating that presence. I mean, obviously, that would be through a transitionary period. But in terms of ambition, we would certainly go to Ukraine for market leadership. James Hollins: It's James Hollins from BNP Paribas. A couple of strategic ones, Jozsef. Maybe just run us through a bit more on the Western European strategy. Are we back to where we were when you listed 10 years ago? It's all about CEE? Obviously, Vienna was very specific on taxes. Or if it's easier, maybe sort of quantify how you're apportioning the 10% to 12% growth, how much is CEE, how much is Western Europe? Which leads us on to Abu Dhabi, which obviously you've closed as a base. Are you still going to fly quite a bit into Abu Dhabi? Was the demand actually there that you still see it as not a base, but somewhere you still want, so you still see enough demand? And then, Ian, I hate to be that person in the room, but maybe just help us on the other costs for the full year on sale and leasebacks and compensation, which we should be thinking about to get us or get you to around where consensus currently is? József Váradi: Okay. So with regard to CEE versus Western Europe, I mean, if I look at the picture today, what changed over 10 years is that we added Italy and London to our Central and Eastern European footprint. So it was more before. So we had Vienna, we had Abu Dhabi. You all understand the changes with that regard. But we are very upbeat on both London and Italy. As a matter of fact, looking into market shares next year, early next year, we're going to be the second airline in Italy. And that's quite an achievement given that we are a bit of a latecomer to the market. Nevertheless, if I take those 2 segments, we are still talking about like 70%-75% of the business being in Central and Eastern Europe, 25%-30% being in Western Europe. So with regard to focus, there is no change on focus. So focus will remain on Central and Eastern Europe. And you see that all these new base openings, adding aircraft on an ongoing basis to our key Central and Eastern European markets will just continue to fuel that strategy. And I don't think that you should be expecting much of a change with that regard. You may guide that we burned our fingers in Abu Dhabi, you're not going to do it again. Now with regard to flying to Abu Dhabi or the UAE, I think we maintain a few operations there. So where we think it makes commercial sense from a perspective of profitability, we continue to operate to Abu Dhabi. We continue to operate Dubai. We continue to operate Jeddah. That's a U.K. operation. We operate Marina in Saudi. So where it makes commercial sense, where we can make real money, we would continue to operate. But we are not planning on setting up basis or AOCs or anything like that. So I think we will remain somewhat opportunistic with that regard. Ian Malin: So in terms of H2 others performance, I would expect -- you could expect that to increase. So if we were at EUR 0.27 in unit cost benefit in this fiscal half, I would expect that to probably go up like 40%. So there's quite a lot of deliveries happening in that period. And until we inform you otherwise in terms of our financing strategy, our approach is to take advantage of the sale-leaseback market, we think that that's a very efficient way to translate the benefit of our purchase contract into shareholder return. And so there's no change there. That's simply part of how we approach this. Ruairi Cullinane: It's Ruairi Cullinane from RBC. Firstly, could you quantify the Abu Dhabi exit costs in the financial year? And secondly, it sounds like H2 RASK is perhaps resilient given the share of immature capacity and the capacity growth. Would you be able to talk about that at all, how that's performing across different markets or on new routes versus existing routes? Ian Malin: So I'll take the first one. On the exit costs, like I said, we don't expect there to be net a detriment in terms of exiting Abu Dhabi, both in terms of a P&L perspective, but also from a cash perspective due to the arrangements that we've concluded with the joint venture partner down there. But I can't specify exactly what those costs are or we're not in a position to. József Váradi: With regard to H2, RASK, I mean, we have been making a lot of new market investments in Central and Eastern Europe. I mean it still takes time to mature. It's a quicker and faster maturity curve than in Western Europe, let's say, but it still has to mature. So I think the RASK challenge in the current half of the financial year is mainly down to the maturity of new routes. But at the same time, you're going to take the benefit of that in next financial year. Andrew Lobbenberg: It's Andrew from Barclays. Can I ask around the fleet? Well done on getting down to 11 XLRs. That's a start. What do you do with [indiscernible] Europe, they're only with U.K., but I think you own with U.K., don't you? Then can I ask a question, I know you're not going to answer, but I'll ask anyway. What's going to be the financial impact of deferring the aircraft? What should we be thinking about the relation pricing? So how will that impact how we should be modeling the CapEx going forward? And then if I can be greedy and ask a third one, staying on fleet. You seem in a hurry to get rid of the ceos. But whilst you gave us a lot to the neos, the current fuel price, the maintenance burden against the fuel price makes ceos better aircraft than neos at this fuel price. And when you get rid of the ceo, you take a big penalty on the lease return costs. So why did you not go for more aggressive deferrals of new deliveries and keep hold of the ceos for longer? Ian Malin: I will point out, Joe, that Andrew did ask me the second question this morning directly, which I refused to answer. So just to... József Váradi: Okay. So you put the burden on me. All right. Okay. So let's go through this because I think these are all very important questions. I mean you probably -- I take the second question, which is going to be unanswered probably, but I just want to give perspective to that. You probably appreciate that when negotiations drag for 6 to 9 months, there is essentially one reason for that, and this is commercial. And what does commercial mean for aircraft procurement? This is pricing escalation, nothing more really. I mean that's the essence of the whole thing. So given that drag, that long-term settlement on that, you should be expecting that it is very favorable to Wizz Air. I cannot tell you more than that, but it is very favorable to Wizz Air. So I'm not sure I would be too much into CapEx with B2B that regard, just kind of take the linear line on what you are seeing at this point in time. So that's a good deal. So with regard to the XLRs, yes, I see the 11 is not going to be the final number, 11 is what we are taking deliveries of. But for a portion of that, we would be looking at market solutions. So we are not going to put 11 aircraft into Wizz Air U.K. It's going to be less than that. And we will see how we can kind of reconcile the gap with the market with that regard. But please don't ask more questions on this because I'm not going to be able to answer at this stage of the game because there are things happening in the background, but not yet at final closure. So there is still some kind of flexibility when it comes to the XLR matters. So ceo versus neo, that's a good question, Andrew. And I think the way to think about this, so that this is the way I think about this is that there is a distinct difference between the A320ceo and the A321ceo. So if you take the A321ceo versus the A321neo, given the current fuel price, you can argue that it's a wash. When you look at the economics of the 2 aircraft, it's pretty much a wash. So you have the fuel burn benefit on the neo, but that's offset by the higher capital cost and higher maintenance cost on the ceo. But this is something which can change. I mean, if fuel price comes down significantly, then the ceo start prevailing as an economic concept. If it goes back up again, then the neo becomes a better aircraft. But this is given the current maturity of the technology. The moment we get to advantage, we think the equation flips structurally. So there is no more debate on fuel price and who is better, which aircraft is better, ceo or neo, neo at that point will prevail. At the moment, you can argue that actually there is a way to compare the 2. And as we speak today, I would say that the economics of the 2 aircraft are pretty much the same. Now the A320ceo is a different animal. The A320ceo is 180 seats versus the 239 seats. So no way that we could come to the economics of the A321neo operation with an A320ceo. So if you take the redeliveries of aircraft, I think the right strategy for us is to preserve A321ceos as much as it makes sense, but still continue to get rid of the A320ceo. So we have no appetite for extending A320ceos. I think we will continue to evaluate the A321ceo versus the A321neo. So I don't know if that kind of gives you the answer, but I would definitely make a distinct difference within the ceo line between the A321 and the A320. Gerald Khoo: Gerald Khoo from Panmure Liberum. Can you talk a bit about how trading is going in the U.K.? Obviously, in base terms, you're losing at Gatwick. I think over the past 6-12 months, there have been some slots that have become available at those relatively slot-constrained airports. And I don't know whether it was an active decision on your part to not go for those slot opportunities or whether you lost out to new entrants. But what's your thoughts in terms of taking opportunities to put more aircraft into the London market, for example? József Váradi: Yes. Good question. And I think we have an increasingly nuanced view on how best to allocate capacity in London. So first of all, we remain very upbeat of the London market. We are very supportive of the growth and development of Wizz Air U.K. And Wizz Air U.K. is an ever-improving platform. So I mean we are seeing some very impressive financial improvements coming through the operation of the airline. So we remain highly committed and very supportive to the London market. Having said all of that, I think we have to look at differences between Luton and Gatwick. So the issues we are facing at Luton at the moment is capacity constrained structurally by passenger numbers. I mean that's a policy decision of the shareholders. And secondly, they have some short-term runway improvements that affect the short-term capacity we can put through the system in Luton. But I would say that in Luton, we are very interested in pretty much sucking up everything that becomes available. Gatwick, I think we have been overly focused on slots, as opposed to performance in the past. And we ended up operating also a slot portfolio that didn't make much sense from a commercial perspective. The slot portfolio became a burden as opposed to an opportunity on the business. Now certain parts of the slot portfolio are very favorable, not only operationally but also commercially. And we remain very committed to operate that portfolio. That's why we are rationalizing capacity allocation between the 2 airports. We focus on proper slots that translate into proper commercial opportunities at Gatwick, and we are pretty much sucking up everything at Luton, which becomes available. Conroy Gaynor: It's Conroy Gaynor from Bloomberg Intelligence. So I just want to touch on labor costs. Ian, you sort of alluded to the fact that maybe we shouldn't expect more cost creep in some of those type of items. And so the way I'm reading that is basically as you increase your capacity, you start to -- GTF issue starts to soften, there's some sort of productivity gain to be had that will offset things like wage inflation. Now -- but how do you -- given that there are so many moving parts, you're coming out of Abu Dhabi, putting capacity in different places, you're still going to have high capacity growth. How do you actually manage that transition and dynamic? József Váradi: Yes. So I think when it comes to labor cost, I would think of 2 fundamental issues. I would think of nominal inflationary pressure on pay. And I would think of productivity, how much productivity we are able to get out of the labor force what we have. Now if you look at the current situation, we are compromised on productivity. We are compromised because of the volatilities, the operational volatilities we are managing against the backdrop of the GTF groundings. I mean, simply, you cannot refine your model as such as we used to in the past that you really mathematically kind of figured out how to deliver the highest level of productivity against plannable foreseeable external factors. You are broken on that because we don't know how many engines we will have operationally available. So you have to have a slack. You have to have a slack with that regard. And also because you are losing engines and aircraft today, but you will recover tomorrow, you want to make sure that you actually have a crew, you have the pilot, also you have the cabin crew to operate that engine. So as a result of that, basically, our productivity has been somewhat dented versus where you would want to be ideally. Now with more predictability and more recovery of the GTF issues, the better we can plan on productivity and the more we can improve on productivity. So I think when it comes to labor cost, the improvements will come through productivity, not nominal inflationary resistance. Whatever the inflationary pressure is, whatever the market does, we have to do it. I mean we don't have a choice. I mean we pay according to market. If the market goes 3%, we go 3%. If the market goes 0%, we go 0%, if it's 10%, it's 10%. So we don't have much choice on that. But I think we have an opportunity to do better on productivity once we are putting more credibility and more predictability across the system when it comes to input issues like GTF and those sort of things. Operator: [Operator Instructions] The first question is from Jarrod Castle at UBS. Jarrod Castle: Three from me. Just want to get an idea, Jozsef, Ian, how you see capacity growth in the markets you're growing in over the next 2 to 3 years, if you exclude your capacity growth. So I guess, how do you see competition? Secondly, I don't think you answered it outright, but you've obviously sold 3 planes outright. It sounds like you might try sell some further 321 XLRs. But how many potentially could we see in terms of deliveries being recycled in outright sales? And then just lastly, on your net debt to EBITDA, nice to see the ratio falling. When do you think we could get back to 2x if you -- when you look at your kind of growth profile and budgeting? József Váradi: So with regard to the overall market growth and growth of competition, I think in Central and Eastern Europe, the fundamental question is not -- and I know that people like entertaining this tension in the market that to what extent do you think Wizz Air can grow in light of what the other guys are doing, et cetera. But that's not the question. The question is that you can assume reasonably that both of these carriers will continue to grow. But the question is what happens to the rest of the market. And you see very clear trends. So if you look at our market positions, as I said, now we are moving from 25% to 29% market share. The other guys are at 20%-21%. So basically, every second passenger flying in and out of Central and Eastern Europe is taking either us or the other guys, us more. And that number used to be like 30% a few years back. And I can tell you this number is going to be probably 60%, 70% in a few years down the line. So these 2 airlines will continue to take market shares in Central and Eastern Europe. And you're going to be seeing a lot of the incumbent national carriers or small-scale private carriers diminish in the marketplace. I think this is what you should be expecting. Will the overall market grow in Central and Eastern Europe? Definitely. I mean Central and Eastern Europe is a lot better place with that regard than Western Europe in terms of GDP development and standard of living is rising relatively higher in Central and Eastern Europe [indiscernible] economic convergence and standard conversions are taking place. And that will produce more discretionary spendings in those markets. So we think that is going to be increasing market demand, and that is going to be diminishing kind of small-scale competition in the marketplace. And I don't really care how much the other guy is growing because I think this is just going to affect more the rest of the marketplace. And to be honest that phenomenon has been the case over the last 10, 15 years. So there is nothing new here. You can go back to the history of Central and Eastern Europe. You can look at market share evolution. I mean this trend is not new. It's been happening and it's continued to unfold. So with regard to fleet, to what extent we would be pushing for more outright sales. I think I would consider this as a short-term phenomenon, not as a structural matter. So we don't have plans to sell the aircraft. I mean these aircraft are extremely well-priced aircraft, source of competitive advantage versus other airlines. We need to put that aircraft into work, and we need to make money on the aircraft by operating the aircraft, not by selling the aircraft. But as said, short term, we are under capacity pressure. So this is only a short-term phenomenon. And yes, I mean, you spotted that the XLR might be a candidate or some of the XLRs might be a candidate. And indeed, when we have news to spread, we will do that. But please don't look at outright aircraft dispossession as a strategy on a structural basis. This is only short term. Ian Malin: Yes. If I could just add to that. I mean, don't forget the inherent value of that order book and what it does for Wizz in terms of the company. That is something that we want to capture. We will capture. And we have different ways to translate that. And so that's not something that we want to impact. So that's still something that I think that the market doesn't quite properly give us credit for. In terms of your question, Jarrod, in terms of net debt, I'm not going to tell you when we're going to hit 2x. All I can tell you is that that's something that I'm extremely focused on. I think it's extremely good discipline in the business. We want to build a business that we want to work for, other people want to work for, you want to invest in. And to do so, we know that we need to bring the balance sheet into a certain condition. We see a path to get there. The #1 way to do so is to generate operating profits -- that will generate EBITDA. That will then help us offset the -- bring down the ratio, and that's our focus. So it's a target. It will be something that we talk about at the Capital Markets Day. It ties into our fleet plan. But ultimately, profitability is what will drive that ratio, and that's what we're focused on. Operator: The next question is from Stephen Furlong at Davy. Stephen Furlong: I was wondering, Jozsef, what's the North Star here? Would you think that FY '28 is the more normalized year? Or is it FY '29? And what would you see as the execution risks? I mean, is it the suppliers? Would you describe your relationship with your suppliers, meaning Airbus and particularly Pratt & Whitney, are they good now? I mean, obviously, the challenge of Pratt & Whitney has just been huge for the company. József Váradi: Look, I mean, it's a good question. I still think that the single biggest risk is around the supply chain, probably more around the OEM side than the immediate airline execution. I think they are improving. But at the same time, I mean, you kind of look at the bigger picture, you see that it is not only Pratt & Whitney customers that are out there with grounded aircraft, but CFM customers are also grounding aircraft. So this is not like one guy is broken and everyone else is doing great. Everyone is broken, if you want to put it that way. You can debate the magnitude of that, how bad is this guy versus the other one, but there are structural issues. I think there are structural issues with probably too quickly shortcutting technological developments. It was too much of a regulatory ease. So I'm pretty sure that the regulator will kind of toughen up with that regard. You can argue that the industrialization production have not been properly executed, and that will continue to pose risks to the operators, et cetera. So I don't think that this is going to turn any time quickly. I don't know how long this is going to take, but I personally -- what I would expect is that with the introduction of the advantage and kind of the rollout of that at industrial scale, probably we are still seeing a somewhat risky supply chain environment over the course of the next 2 to 3 years. And you recall when we started grounding at that time, everyone believed that all this powder metal issue is going to hit the industry for up to 18 months. Now this is more like a 5-year cycle. And now this is all compounded with kind of the childhood diseases coming through with premature technology. So this is going to take time. I think what it really means in the industry is that innovation will slow down. The investment cycle for OEMs will lengthen as a result of all these hiccups. I mean just look at how much money Pratt & Whitney has to spend on this recovery. I mean this is going to put burden on the recovery of the investment. So it will just extend that investment cycle. So I would say that long term, I'm confident that the supply chain is going to fix itself. OEMs will fix themselves. But short term, even I would say, maybe medium term, there are some risks associated with the operation of the OEMs. Operator: The next question is from Alex Paterson at Peel Hunt. Alexander Paterson: Two questions from me, please. Firstly, the GTF engine, what's your confidence that maintenance costs will be, what you think they will be? Have we actually had enough flying hours to establish, how these behave after the inspections? Is there a risk that actually it turns out to be a bit worse? And then just in terms of your RASK guidance for the second half, again, what's your degree of confidence that you can deploy the 35 deliveries, obviously, net of anything going back? And not -- because you're concentrating the deployments into Central Eastern Europe, Italy and London, is there a risk that actually you diluted a bit worse, a bit more than you're suggesting? József Váradi: Look, I mean, I will start with the second one first. All these aircraft have been deployed. So they are up for sale. Some of them have started operating. Some of them will start operating during the period. I think we, of course, still have uncertainty around how exactly revenue is going to play out. But I think we are fairly confident in what we are saying. So we are not optimistic in terms of the numbers or the perspective that we are presenting to you. Is there a potential upside to that? Maybe. But we're going to be on the kind of conservative realistic side of the equation. So I don't think you should be expecting a huge variability to our assumptions at this point in time. Ian Malin: If I could just also add to that, Alex. The number is not 35 deliveries in H2. That 35 is the year-on-year increase in number of neos at the end of Q4 this year versus Q4 last year. So just to make sure that it's that we're using the right data points. József Váradi: So with regard to the GTF, so the beauty, if there is such, in our case with regard to Pratt & Whitney is that we have a flight hour agreement. So effectively, we put the burden on Pratt & Whitney. Now of course, if there is no engine, there is no engine. So then you have to share the burden. But in terms of maintenance cost, the burden is on Pratt & Whitney. And that's a major difference between how CFM goes to market versus Pratt & Whitney goes to market. CFM doesn't stand behind the product. So basically, they say, look, we are 75% of the short-haul engine market, we have a very, very established market for purposes of engine maintenance, use the market for our own benefit. Pratt & Whitney is underwriting the performance of the engine. So effectively, we have outsourced the risks, the economic risk on engine maintenance. Now that sounds simple, and this is not as simple as that. But in essence, that's what it is. So if the maintenance costs on the engines turn to be higher than expected or assumed, the burden is going to be on Pratt & Whitney, not on us. But of course, we still need to have the engine available to us to operate and fly. Operator: And the final question is from Gabor Bukta at Concorde. Gabor Bukta: You may have heard that there are some rumors on the market that Lot may buy Smartwings, which has a significant exposure in the Czech Republic. And you may always see LOT as an efficient company like TAROM in Romania. And if such an acquisition were to happen, would you see any chance to increase your exposure in the Czech Republic? Or how would you look at this kind of transaction? József Váradi: I think it's a bad idea, but that's not my goal. Look, I mean, in my mind, LOT is an airline losing on the home ground and Smartwings have ever been losing in their homeland. So when you put those 2 together, I mean, what do you expect? I think the competitive environment in Poland is pretty tough for a national carrier. Maybe it's a little more benign in the Czech Republic that can change, especially given these dynamics. But look, I mean, this is really not our business. But I think strategically, probably both airlines will get weaker as a result of this because you are putting weaknesses together, not strengths together. All right. I think we are done. Well, ladies and gentlemen, thanks for coming. Thank you for your questions. I appreciate your interest. Thank you. Have a good day. Ian Malin: Thank you.
Peter Dietz: I'm happy to lead you through today's call in which we will be presenting our financial results for the third quarter and the first 9 months of '25. After the presentation, we invite you to submit your questions via the Zoom Q&A function. Joining me on the call today are our CEO, Tobias Wann; and for the first time, our new CFO, Hansjorg Muller. As usual, Tobias will begin with an update on strategic highlights and relevant business developments. Afterwards, Hansjorg will guide you through the financial results in more detail. And of course, we'll also provide an outlook and look forward to answering your questions at the end. And with that, over to our CEO, Tobias, who will give you an update on the world of tonies. Tobias Wann: Thank you, Peter, and a warm welcome also from my side. Thank you for joining our earnings call. Today, we are looking back on a quarter that was eventful and even historical for tonies because we opened a new chapter by launching Toniebox 2, our biggest innovation since introducing Toniebox 1 back in 2016. We've done so very successfully and by staying true to our mission. Across the world, we have strengthened our position as the largest audio platform for kids. With Toniebox 2, we are not only redefining how children grow through listening, touch and play, we're also unlocking additional growth potential for tonies with new audiences and use cases. We also reached another milestone in the third quarter documented on this slide. We sold our 10 million Toniebox. Fittingly, it was a Toniebox 2. Overall, Tonieboxes have been activated in more than 100 countries with over 134 million Tony sold. In the third quarter, we not only expanded our reach with 282 minutes, our average weekly play time also remained on a high level. This is an important KPI. It shows the positive impact our screen-free product has on families and it's highly relevant for our business as it underscores a deepened engagement with our platform. Let's now take a look at our Q3 in financial numbers. We had an exceptionally strong third quarter, and we are very satisfied with our performance in the first 9 months as well. Q3 was not only historical, but also highly successful. We increased revenues by more than 52%, growing our year-to-date performance by 33% or EUR 322 million on a group level. And I'm pleased that all markets contributed to this increase. In DACH, we recorded double-digit growth. After 9 months, revenue was up 16%. North America continued its strong momentum with 36% growth year-to-date. And in Rest of World, revenue surged 80% compared to the first 9 months in 2024. As I said, the launch of Toniebox 2 was a key driver behind this strong performance, also accelerating our annual performance. Our sequential growth from Q2 to Q3 was obviously supported by phase-in effects as the first Tonieboxes 2 hit the shelves in September. But our new core device has also hit the Spirits of the Times, generating significant momentum across markets. We have seen impact both from upgraders, so that's households already owning a Toniebox as well as first-time buyers of a Toniebox 2. So we are on a good trajectory to continue our long-term platform growth. And we are not only on track to reach our long-term, but also our midterm goals. With Toniebox 2 off to a good start and a strong Q3 business performance, we are pleased to confirm our full year guidance for financial year 2025. More on that later, but let me already state that this underscores our resilience in a challenging macro environment. In the next few minutes, I'll dive a little bit deeper into our business update for Q3. Our strong performance is the direct outcome of several major steps forward that we took over the past few months. Today, we look at some highlights. After a deep dive into the launch and early performance of Toniebox 2, we'll cover relevant developments in our major markets and exciting new partnership. And naturally, Hansjorg will introduce himself. And what I want to reiterate, not only have we worked to drive immediate results over the past month, we've also focused on preparing the road ahead. Therefore, we are well positioned to deliver another strong Q4. We'll be taking a look at that as well. But now let's dive in. Toniebox 2 is the champion, leading the next chapter of our platform and growth strategy. Most of you are very familiar with Toniebox 1. For over 9 years, it set the benchmark for creative screen-free play, earning the trust of families in over 100 countries. That has made us the global #1. And Toniebox 1 never became out of fashion. It was a huge success among different cohorts selling as well as or in most cases, even better than in the year before for nearly a decade. Toniebox 2 is built on this unique success story. It has everything that made Toniebox 1 highly popular. But with Toniebox 2, we are adding new use cases, enhanced features and even more immersive interactive experiences. At the same time, Toniebox 2 unlocks entirely new possibilities to shape and expand our business with new verticals in a broader age group. In a nutshell, we carry forward our legacy while setting the stage for a future with more imagination and more growth. Toniebox 2 is both continuing and enriching the experience millions of kids and families have fallen. At its heart, it's a screen-free audio-first experience. But with Toniebox 2, it's becoming even more engaging. tonies has always said right at the intersection of tech, toys and content. All of that still holds true, but now we are adding something new to the mix, gaming. Alongside Toniebox 2, we've introduced Tonieplay, a whole new expanding product category that brings interactive games and quizzes to our platform. This hands-on experience perfectly complements our successful audio offering. The combination of Toniebox 2 and Tonieplay will be a key driver of our growth going forward. Let me explain why. We are expanding our platform, driving growth across a much broader target group with entirely new growth vectors. We are reaching families earlier, engaging children for longer and creating more opportunities for cross-selling and ecosystem participation. This broader appeal increases our total addressable market and strengthens our long-term growth trajectory. Specifically, Toniebox 2 unlocks 3 key growth vectors. Growth vector #1 are younger children. For the first time, Toniebox 2 is certified for use by children 1 and up. We've developed new age-appropriate content like My First Tonies, allowing us to welcome families into the tonies ecosystem earlier and build more loyalty from the very start. Growth vector 2 is our core target. The 3 to 6 age group remains central. And with Toniebox 2, they benefit from enhanced features while the familiar tactile play experience is preserved. In established markets, this also creates a strong upgrade incentive for existing Toniebox families. Growth vector 3 are older kids. We are now offering formats and interactive games designed for children up to age 9 or even older. By activating these 3 growth vectors, Toniebox 2 enables us to attract users at an earlier age, engage with them more deeply and retain them for longer. This expands our installed base, increases customer lifetime value and opens new opportunities for licensing partnerships and recurring revenue. In summary, Toniebox 2 is a catalyst for the sustainable growth. While it's still early, we are already seeing some very encouraging signals from our global community that our strategy is resonating. Those who already love the Toniebox are embracing the next generation. Early data shows that around 40% of Toniebox 2 buyers at launch are upgraders from our current platform that is owners of Toniebox 1. As we approach the holiday season, we expect this share to shift with Toniebox 2 increasingly becoming the entry point for new families replacing Toniebox 1. It's also clear that parents recognize that Toniebox 2 is a great toy even for the very youngest children. If we only look at Toniebox 2 activators that did not own a Toniebox before, nearly 1 in 3 have 1-year-old kids at home. At the same time, we are seeing that Toniebox 2 is appealing to older children as well, thanks to Tonieplay. Let's look at the DACH market where our new device has been available since September, which provides us with a more solid database. There are 55% of all households with kids 5 years or older that activated the Toniebox 2 have played at least one of our new games. Yes, these are early indicators, but these figures show that the design of the platform is working as intended also because we made a concerted effort to showcase our innovation. To celebrate the launch of Toniebox 2, we hosted events in Berlin, London, New York, Paris and Sydney. Our aim was to connect directly with our communities, inspiring those who already love or who are just now discovering Tonies. Having witnessed the event in Berlin firsthand, I can tell you seeing the excitement of kids and parents interacting with Toniebox 2 is one of the best parts of my job. But that was not all because both in New York and Paris, Tonies was on full display on oversized billboards even after our launch events had ended. These billboards were part of our first truly global multimedia campaign to strengthen our global brand equity. Brand and mission visibility are essential to bring our story to more and more hearts and minds in households around. In addition to our own channel, we also saw global buzz across major news outlets, confirming we introduced the right product at the right time. In total, media coverage on the launch of Toniebox 2 generated over 1 billion impressions worldwide. We are building on this momentum and continue to see new levels of excitement and attention across the global media landscape and also in the broader tech community because less than 2 months after launch, Toniebox 2 already won an award. It's a great honor for us that our new core device was named as CES 2026 Best of Innovation Award winner by the Consumer Technology Association. Global buzz in the media and from peers is important to reach even more families. However, what matters most is that the product truly resonates with those who we created it. The feedback from our community is what drives me and the team every day. The numbers speak for themselves. We are seeing a strong 4.6 average rating, nearly 9 in 10 users would recommend Toniebox 2 to a friend. And the volume of online conversations about Tonies has surged dramatically. But it's not only the sheer number, the sentiment is also overwhelmingly favorable. Parents tell us their children are absolutely loving the TB2 experience from its foundational promise of screen-free time to particular new features such as Tonieplay or the sleep timer. In true Tonies fashion, we even listened to our community and in turn, we've delivered to quote one of our customers, a really well-designed product. For us, this is fascinating feedback, but first and foremost, a source for inspiration to do even better. The launch was about making a strong first impression. And we've done exactly that by ensuring that families everywhere know about Toniebox 2 by creating excitement and by earning our customers' trust. Now the holiday season is about activating our platform at scale and turning that strong first impression into growth. We are entering the holidays with strong foundations, high demand and a platform that's already -- that's ready to perform. And this is particularly true for North America, where our Toniebox has been available for not even 6 weeks now. North America is a key engine for our growth, and we are fully prepared to keep the momentum going. We've secured exceptional visibility. In over 1,500 American Target stores, we are prominently placed with 12 feet of shelf space. Quite literally, no shopper can miss us. Tonies will be front and center this year for families as they browse for gifts. The same is true at Walmart, where over the past year, we've moved from the electronic section to the toy section. Our presence at our retail partners even goes beyond the shelves. We are honored to be featured in Walmart's holiday season video and TV spot alongside household brands like Apple and Nespresso. And here, maybe we can roll the video real quick, Peter? [Presentation] Thanks, Peter. Let's be very clear, this is no paid partnership. Walmart chose us putting our brand in the spotlight during the most important time of the year. With these and more initiatives in place, we are set to drive continued awareness, engagement and sales in North America as we close out the year. Another key to our portfolio's success are local heroes. That's also true for the U.S. A prime example for our ability to secure the hottest licensing content is the Ms. Rachel Tonie. Here's an example. With its launch, our approach and instincts were clearly validated again. Ms. Rachel is a true social media superstar in the U.S. with over 13 billion views and more than 17 million subscribers on YouTube. The response to launching a Tonies with her has been overwhelming. Restock sold out within just 1 single day and almost 130,000 customers signed up for back-in-stock e-mail notifications. The Ms. Rachel Tonie has enabled us to expand into new customer segments, especially households with kids between 1 and 3 years old. This clearly demonstrates how much of an impact securing the most relevant and authentic licenses has for the North American market. And we're moving on to DACH, which is not only our home, but also our continued growth market for Tonies. This year, we are up 16% revenue year-to-date, which shows just how much trust and excitement there is for Tonies in Germany, Austria and Switzerland. Our brand is as hot as ever. 82% aided brand awareness is a fantastic achievement. In addition, we are seeing encouraging feedback from retailers who are eager to promote the Toniebox 2 and their point of sale prominently as shown by the photo in the bottom right. And one recent example for this are our Christmas Tonies. The hype was real before Santa could even think about settling up his rain deer. Our Christmas Tonies have been flying off the shelves with sales doubling compared to last year. And our advent calendar sold out again in just a few hours. And we are not standing still on the channel side either, whether people prefer buying Tonies on the street or on social media, we are there. Turning to a strategic lever that is relevant not only in DACH but globally, partnerships. With Toniebox 2, we set up our platform to be more open than ever to partnerships also now in gaming. One area where we see special potential is bringing globally recognized brands and characters into the world of Tonies. For our partners, this is attractive because in turn, we are introducing the Tonies community to these brands, creating a win-win-win situation for families, for our partners and for us. In the past few weeks, we've taken a major leap forward into our partnership strategy, expanding our collaboration with Hasbro to Tonieplay. In the second quarter of 2026, we'll introduce 3 iconic Hasbro board games, including Monopoly in brand and new audio-first Tonieplay formats that only our platform can deliver. It's a perfect match, 2 trusted brands coming together to unlock new worlds of discovery, connection and joy for families everywhere. With that, I'll now hand over to Hansjorg, who will take you through our financials. Hansjorg, I'm very happy to have you on the earnings call for the very first time today, take it away. Hansjorg Muller: Thank you, Tobias. Excited to be here. Let me take a moment and briefly introduce myself to the ones who haven't had the chance to connect with me yet. I joined tonies as CFO on September 1. Prior to that and for more than 25 years, I held leadership roles in finance, strategy and operations across various global markets. Most recently, I was CFO of Netflix's APAC business. My positions before included roles at Electronic Arts and Procter & Gamble. In other words, I think I both know entertainment and digital platforms and business models as well as what it takes to bring a physical product to the shelf and the homes of consumers and customers while driving profitable growth. tonies is a special company with fantastic global growth potential. My first 2 months have been super inspiring. I've already had the opportunity to meet many of you and engage in valuable dialogue about the company's strategy and outlook. The openness that I've encountered in our discussions so far have really impressed me. So I'm super excited about what lies ahead and look forward to working closely with you as we continue to deliver our growth ambitions. Please do know, my door is always open for direct conversations and closing exchange. So please don't hesitate to reach out to me at any time. But with that, let's move directly into our results. Looking at our year-to-date performance, we've delivered strong growth across all markets from 16% to 80%, depending on market, a stellar result. For this, together with pulling off the Toniebox 2 launch, a big congrats to our teams. Our growth momentum has picked up considerably in Q3. As Tobias said, this was partly due to phasing effects as we prepared retail partners for the Toniebox 2 launch, obviously, already way before we introduced it to the broader market. This affected the DACH market in particular. Our 9 months revenues came in at EUR 322 million in constant currency, an increase of 33%. In DACH, we're continuing our usual double-digit growth track as we showed in full year 2024. And both North America and Rest of World performed strongly, too. Two other things I'd like to highlight here. First, on top line growth. We anticipated the strong phase-in in Q3. And as a result, our full year guidance remains unchanged. And second, regarding our market split. For us, it's really important to grow globally. So an important KPI here is our share of international revenues, those outside of DACH. And we're pleased to see that we continue to gain momentum here with an increase of 6 percentage points year-over-year to 59%. This confirms our international expansion strategy works, where we grow significantly ahead of the still double-digit growing DACH market. Overall, we're seeing a very healthy balance of growth across all regions with international markets clearly making up the majority of our business. Looking at the category split year-to-date on this slide, you remember -- you might remember that we saw a somewhat skewed mix in half 1 of the year due to the anticipated launch of Toniebox 2 and Tonieplay. The share of Tonieboxes sold at the time reduced a bit year-on-year simply because the launch created that temporary shift in sales patterns, which we already explained in August. In Q3, we've now seen that normalization as expected. And for year-to-date, we're back to our usual seasonality pattern. I'd also like to point out the performance of the Tonies category here, where we have seen a 36% year-over-year growth in revenues in constant currency, resulting a slight increase in overall share of the business. That is now developing exactly as we expected and how we want it to be. This disproportionate growth is the result of the successful extension of our portfolio. So particularly fueled by new products such as Tonieplay, Book Tonies, My First Tonies as well as the milestone launches like Tobias mentioned, Ms. Rachel or the Christmas Tonies. So in short, after some temporary shifts earlier in the year, our year-to-date overview shows that Q3 brought us back to our usual healthy balance with continued momentum coming from our growing content portfolio. So, picking up from what I just shared regarding our 9 months figures, let's zoom in on Q3 because this quarter really stands out. Looking at these growth numbers, you can clearly see how much momentum we had in the third quarter. Q3 was exceptionally strong across every region, every new product category helped us reach a new level of growth. And while it's fantastic to present such a performance in my first earnings call, it is an exceptional benchmark. It was partly driven by phasing effects, as mentioned earlier. But for now, it's great to see such a strong performance driven by our latest innovations and the excitement that they have created in the market. Now let's come back to something we've spent a lot of time on in our last call, how we're handling unpredictable macro effects, especially around U.S. tariffs. But today, we can say with confidence, we've got clarity for 2025. But more so, we've done our part to become more resilient. We have now sourcing flexibility across both figurines and box manufacturing, the latter of which we bolstered this year by opening a new production site in Vietnam already in April. Also in regards to foreign currency, we're in a good place, even with our international business growing because we are naturally hedged via our supply chain and other expenses. When it comes to consumer sentiment, our business model continues to prove resilient. We're seeing healthy demand, strong pricing power and support from our partners as we head into Q4. So I'm glad that resilience is something that's showing up in the numbers and how we're able to move forward largely unaffected by what's happening around us. Let me hand back to Tobias now, who will present our outlook for the full year. Tobias Wann: Thanks, Hansjorg. Building on the resilience we just talked about, you won't be surprised that this closing section in which we present our guidance is without surprises. And I say this with confidence also for us, the most important time is now. Traditionally, Q4 makes up close to half of our annual revenues with the holiday season and special commercial moments such as Black Friday and Cyber Monday being key to our performance. This year is no different despite some intra-year phasing effects that are quite natural when you have such a big launch as ours. Something that also hasn't changed is the fact that we are approaching high season, well prepared. Over the past years, we have learned to deliver at scale consistently recording more than 45% of our full year revenues between October and December. With 53% of our revenue target already in the books after 9 months, we are well on track to achieve our guidance and finish the year on a high note again. And as a result, we are reiterating our full year guidance for 2025. Profitable growth continues to be at the core of our story. We expect group revenue to grow by more than 25% this year in constant currency, taking us above EUR 600 million, with North America set to deliver over 30% growth in constant currency. For our adjusted EBITDA margin, we are guiding in a range of 6.5% to 8.5%. 2025 is shaping up to be another great year for Tonies. We are confident in our momentum and are well positioned to deliver strong profitable growth yet again. And with that being said, we are now happy and ready to take your questions. Peter Dietz: Thank you, Tobias. Let us now begin with the Q&A session. As a reminder, if you have any questions, please post in via the Zoom Q&A function and as I've seen, some of you already did. So, let's jump into the first question which we already received. Could you calibrate the Q3 growth rate versus the full year guidance? Does this mean that you will increase your guidance in the weeks to come? Tobias Wann: Happy to take this one. So, I hope it became also clear throughout the presentation. We have no plans to change our existing guidance for the year. And as communicated before, all impacts from TB2 tariffs and everything are already included in our guidance. I want to reiterate, Q3 was exceptionally good due to phasing effects from the TB2 launch and substantial retail preorders, especially in September. Q4 will be, for sure, again, our best quarter of the year with almost 50% of revenue share. We have always delivered on our promises since the IPO in 2021, and we are confident that this is going to be another successful year for tonies. Let me put it this way. Peter Dietz: Thanks, Tobias. The next question is an interesting one. Can you please give us a first indication regarding your expectations for '26? Will the growth dynamics be comparable to '25? Tobias Wann: Yes, it's a great question. But let's be clear, at this very moment, it's too early to provide you with any details regarding expectations for 2026. But I would like to frame this a bit because I'm getting this question a lot, and I can understand it. We have a very large and growing sticky installed base. And we have a resilient, highly scalable business model. So, we are absolutely confident that next year will be another year with substantial growth and higher profitability. So, we are not changing anything to our business. And that said, I think you and I, we wouldn't expect anything different there. So, I think what I want you to take home, we have all ingredients for a successful and exciting year ahead. We have an exciting innovation pipeline. Some of the elements we have already announced today, others will be announced later and next year, and I am personally very excited about that. We have a continued strong momentum in all our geographies. And as I said, we have a really, really, really good business model. So, we will give a detailed outlook for 2026 for sure, when we do our financial year 2025 review on April 14. And then I think also something you should put in your calendars at least pencil it in for Q2 next year, we are planning a Capital Markets Day. And during that Capital Markets Day, we will provide more details about the growth potentials, not only for '26 then, but also for all the years to come. Peter Dietz: Okay. Thanks. I hope that covers everything. I think we have the first question for Hansjorg now, and we can split it in 3 parts. So, how was your profitability in the first 9 months? That's the first part. And how do you think about EBITDA margin guidance now the tariff impacts are clear. And there's already a follow-up question in there. What will free cash flow be? So, Hansjorg, the floor is yours. Hansjorg Muller: Thanks, Peter. That's 3 questions for me. Thank you. Happy to take them. So, profitability year-to-date, I think you're aware, we don't provide information regarding profitability in our Q1 and Q3 announcements. But you have seen that we've been profitable for half of -- first half of 2025 on a comparable level to the prior year. And we are happy how this is developing further in Q3. We have -- also need to add, we do have a special year with the launch of Toniebox 2 and equally tariffs. But despite this tariff uncertainty at the beginning of the year, we have shown that we've managed the business with foresight. So, I mentioned previously, Vietnam production. And we have a toolkit at hand that now allows us to navigate this macro environment. And now thanks to the, call it, calmer environment with regards to tariffs, we believe we have sufficient clarity on our profitability for the remainder of the year, and that's why we are confirming our guidance, as I said before. So, coming out of these 9 months with strong confidence to achieve the guided adjusted EBITDA margin between 6.5% and 8.5% in fiscal 2025. And you had a question about cash flow. We don't guide or comment on free cash flow. But what I can say, positive free cash flow is inherent in our business model. And but then also second, given we operate this year in a broader inventory environment due to the launch, right? We're launching a new box. We're expanding the portfolio, and we're growing strongly plus the volatile macro environment, we've decided for more safety in terms of a higher inventory. So this will affect our free cash flow in this period. But we are confident for structurally strong cash flow generation in the years to come. And again, this year's decision, growth -- weighing growth decisions are of strategic nature to support our content and product expansion. I hope that clarifies? Peter Dietz: Thanks, Hansjorg. A different topic regarding the partnerships. Can you quantify your expectations for the extended partnership with Hasbro? When can we see the first impacts? Tobias Wann: I can't and I don't want to quantify them. I can share again my excitement, but I hope you understand that we cannot provide detailed figures for individual partnerships. But it's -- let me take this question as an opportunity to explain again how important partnerships like this one with Hasbro are for us. They are part of a multiyear portfolio and product planning strategy that we clearly have, but they are also clearly fueling our growth and our relevance as a brand in the next coming months and years. And this is because we are building a very -- continue to building a very diverse and engaging content with very interactive formats, both, by the way, in licensed and owned and now for children aged from 1 to 9 and even older. And I think I said this a couple of times, the partnership with Hasbro is a great example, and it's also one I personally find very, very exciting because I do like the games that we are going to tonify in 2026. We see a lot of economic potential clearly. But another thing that is important to me and also for my team is the fact that we are now also moving on the family table with the Toniebox and families, friends sitting around the Toniebox, playing with the Toniebox, multiplayer mode, single player mode, this is a complete new thing for us, and this is exciting, and I can't wait for this to happen. Peter Dietz: Okay. Thanks. One regarding the TB2 feedback. How do you assess customer feedback on TB2 so far? What do you say about the negative feedback related to TB2 launch one can find on the social media at some places? Tobias Wann: So, I mean, I've shared the numbers with you. The feedback on TB2 and Tonieplay has been overwhelmingly positive. It's nothing we are making up here. These are pure true numbers. So both, by the way, from consumers as well, importantly for us as well, from retailers, and you saw media as well. So the reviews that we are seeing are very promising. The sentiment that we are measuring is clearly on our side, by the way, both from upgraders as well as new joiners into the Tonies ecosystem. So, the first learnings we take from that is that we have, I think, done an excellent job to launch a flagship product that takes everything that's been great about our previous Toniebox 1 and improves it in many ways. Also very important, the play extension and with it, obviously, with Tonieplay and all the technical improvements we have done, sound quality, design, haptics, that's something I'm really, really proud about and also what the team has done here over the last couple of years. There's an important technical feature that excites me a lot, and I think, I guess, also a lot of you, we are going to take over-the-air updates in the future to continuously make the product better. So, this is already a fantastic product, has a lot of positive consumer sentiment and reception, but we are continuously working on new features, new exciting things that we are then going to launch over the next couple of weeks, months, even years to increase the interactivity of Toniebox 2. And yes, there is here and there also feedback that we are taking close to our heart that we want to continue and want to improve the box in its experience. There's one thing I want to take this opportunity because I've heard it so many times, the cable that is included with TB 2 and it's actually also the #1 critics, if you read it online, is very, very short. But no, we are not saving money on cable length. This is a regulatory requirement for the box to be 1 plus certified. And if we would have actually had a longer cable, we would have not gotten this 1 plus certification. We have probably -- we can improve the communication about this and explain to our consumers why the cable link is as it is, but it is certainly nothing we have done to save money or, yes, create frustration. So, for almost all of the feedback points, we are very confident that we will have solutions or that we are communicating better on it. The overall sentiment, the overall reception of Toniebox 2 and Tonieplay was absolutely overwhelmingly positive. Peter Dietz: Okay. One regarding consumer sentiment. How sustainable is the current demand trend into Q4? Are you seeing any changes in consumer sentiment in your core markets? Tobias Wann: So, I think I said it in the presentation, our business model proves continuously to be very, very resilient. And that also obviously speaks to the way we look at consumer sentiment. We are seeing very healthy demand. But then there's a second data point that you all know that we have that is important to us and that we measure very, very closely that is activation data. So, the number of Tonies and boxes that are being activated. And year-to-date, we are seeing very encouraging patterns. So, that is a good signal and a continued forward-looking signal also for us about consumer sentiment. And apart from that, as you've seen this year, again, we have very strong pricing power, and we have support from our partners, retailers and also our marketplace partners as we head into Q4. So, I'm personally really glad that this resilience is something that is showing up in the numbers that I've just presented today and Hansjorg have presented today. And we are currently unaffected by consumer sentiment, and we are walking into Q4 with a high level of confidence. Peter Dietz: We received 2 more questions for Hansjorg, I think. One is, you're talking about phasing for Q3, but this should only be true for the boxes. Why you think the figurines and accessors are so strong? Hansjorg Muller: Yes. Thanks for the question. I think the way to think about this is the fact with the launch of Toniebox 2, we launched into a whole new category, right? Toniebox 2 comes with play, which is the attach to Toniebox 2. And with that, there is a significant phasing, namely all the games that come in the Tonies category. So, that's the phasing part. But of course, we also have organic growth, so to say, in that category from the products that I mentioned earlier that contribute to that 36% year-over-year growth in the Tonies category. Peter Dietz: And another typical CFO question, I guess, can you break down the content licensing costs for figurines in Q3? And are there new licensing agreements that could materially increase costs in '25 or for the rest of '25, I suppose? Hansjorg Muller: Yes. Breaking it down would probably go into a lot of detail. But at a high level, there is typically 2 licenses, one is for the figurine, one is for the audio for the content. And for the new formats, that is very similar for Tonieplay. But you can assume that we negotiate with our partners for new or rates for new products that will match or come in at similar levels versus where we're coming from. So, I wouldn't expect any distortions or significant volatility. Now having said that, licensing cost ratio always depends a bit on our product mix as we've seen historically, but it's hovering around a very stable ratio. Peter Dietz: Okay. How sustainable is the Q3 growth run rate? What would be a sustainable growth rate in the coming quarters, indication on current trading would be helpful. Tobias Wann: I'm happy to take that. I think Hansjorg has spoken to it, and we have touched this in the presentation a couple of times. If you look at Q3 in isolation, clearly, the growth rate is influenced by the seasonal shifts we have seen due to the TB2 launch. And then that makes it clear, therefore, it is unique. We have guided a full year growth rate, and this should give you an indication for Q3. Peter Dietz: Another one for Tobias, which product categories do you still want to penetrate? And what R&D costs are expected in Q4 and in '26? Tobias Wann: I hope you understand I'm not going to explain our product road map to the public. There are many things that we are working on that creates a lot of excitement. And I think those of you who know me, they also -- you also can confirm that I personally stand for acceleration of our innovation speed. There's a lot more and sooner than obviously waiting another 9 years that I want to achieve with the team. I'm personally extremely excited. I can tell you that for what it's coming in '26, in '27 and '28, and I think probably the best way to look at this is and building some excitement, hopefully, with you is the Capital Markets Day because that is a good opportunity for us to also look into a bit of a broader strategy that holds for a couple more years. Peter Dietz: Okay. As I can see, we have 3 more questions at the moment. One is regarding the Rest of World development. In Rest of World, we saw significant growth in Q3. You mentioned better product accessibility as the main driver. How do you achieve better product accessibility in those regions? Tobias Wann: Product accessibility. So, I think if you look at the growth in Rest of World in every market, it's sustained by scaling our operations and the installed base, right? So, what we are doing is we are expanding the channel. We have more retailers, more doors, more shelf space and then all results in more velocity at the point of sales. And we have product expansion, right? So, we have above-the-box product expansion that continuous innovation, and we presented a few over the last couple of earnings calls. So, I mentioned pocket Tonies before. So that's Clever Tonies and Book Tonies, I mentioned My First Tonies. There's a lot happening and continues to happen on above-the-box innovation as we call it. And now obviously, with Toniebox 2, there is also innovation that is happening at the box level. And as I said, there is clearly also our desire to continue working on innovation like that. And if you combine all these things in this recipe, there is continued accessibility in all region, not only in rest of world. Peter Dietz: Okay. Thanks. We have a question from an investor who also seems to be a customer of us. As a parent, I'm excited about Toniebox 2 and plan to upgrade. From an investor perspective, could you clarify whether Toniebox 2 includes any design or manufacturing changes that are expected to reduce unit production or maintenance costs and thereby improve gross margin or operating profit? Tobias Wann: Hansjorg, do you want to take that one? Hansjorg Muller: Happy to take that, and thank you for considering to upgrade. I'm also a parent and I have upgraded. I think we have talked to this to an extent at the TB2 call. We currently do not plan with improvement in margins for this year. We rather plan with directionally similar levels as with TB1. Of course, we're working on initiatives to continuously improve our bottom line through product levers, design-to-value levers as we've shown in the past years, and we're good at it. But right now, we're not able to comment further details on that. Peter Dietz: Okay. Here's the one related to the revenue share of TB1 and TB 2. How does it compare between the 2 Tonieboxes? How does the share of each Toniebox looks like? And what could be the rough steady-state estimate for '26? Hansjorg Muller: Yes, happy to take that one, too. But a simple answer, please understand we're not breaking out this detail at the highest level or simply said TB2 replaces TB1. Peter Dietz: That was quick. Another follow-up to the free cash flow question we already received. Can you explain what free cash flow you think tonies can achieve in Q4? Tobias Wann: Hansjorg? Hansjorg Muller: We're not providing a free cash flow guidance, as you know, as mentioned before. And then, yes, I can add 2025 is marked by high investments, right, associated with the market launch of TB2 and Tonieplay. We're expanding our portfolio. So, the strong figure that we showed in 2024 is maybe not the exact or the right comparison. But as I mentioned before, we are confident to deliver sustainable positive cash flow in the years to come as we are able to deliver on our substantial growth potentials our business model has. So free positive cash flow is inherent in the business model, but now we manage growth and product and category expansion first. Peter Dietz: Okay. And I think we're coming to the last question we received, and this could be a question I have sent in because I'm most interested in this one. How likely is [ SDAX ] inclusion in '26? Tobias Wann: Happy to take this one. And I'm interested in this one as well. I'm following this personally. But I have to tell you, it's difficult to answer. All of you know how it works. There are clear criteria for companies to be included in SDAX. We do qualify from -- clearly qualify from a market cap perspective. Turnover rate is the other important criteria. And based on the trading in the past few months, I would say it's increasingly likely. But I cannot predict this. And so, I would probably recommend you do your own calculation and your own estimations and follow it, and then we'll look at it again early 2026. Peter Dietz: Okay. Since there is no other follow-up question, this concludes and wraps up our Q&A session. And as far as I have the microphone already, I continue a bit. And this is maybe also helpful for the inclusion into the SDAX in the weeks and months to come. So, it shows you a bit what we plan to do in the weeks and in the next quarter. The first glance on our financial calendar for '26 and the next official announcement date will be, as in the last years, we already did this the same way. We have scheduled the communication of Tonies preliminary results for beginning of February. And before that, we will be on the road with roadshows and conferences. We provide the presentation anyway on our web page or it's already on our web page, so you can check yourself. And if you are available around in the cities mentioned here, we would be happy to meet you personally. So, please ask the accompanying bank or the [ Ion ] Capital Forum will be a big one end of November to show up yourself. And we will continue this with the auto conference in Lyon and another big conference in Frankfurt. So, we're happy to meet you there and continue the conversation and whenever feel free to contact us for any additional questions you have following this conference call. And now we come to the end, as usual, with the key takeaways of Tobias, and over to you. Tobias Wann: Thank you, Peter. Maybe before I get to the wrap-up, I just want to -- thank you again for the great questions we got from you today. I also realize we didn't get to all the questions. We actually received quite a lot, which I appreciate. But maybe that's also a great connection to what you just said, Peter. If you are in one of the conferences, please make sure that you ask the question again, and we are very, very happy to answer them. Of course, you can always also reach out to Peter and our Investor Relation team, and we'll make sure that we follow up after the call. Okay. Let me briefly state the 5 key takeaways that have defined our performance so far this year and obviously also set the stage for Q4 and beyond. First, looking at our results year-to-date, we delivered strong growth across all markets with a truly exceptional Q3. The launch of Toniebox 2 drove growth and our footprint continues to expand. Our strategy is working, and we can deliver growth even under uncertain macroeconomic circumstances. This is important. Second, Toniebox 2 is a fantastic launch success. Let me be very, very clear here. It was important to land our biggest innovation to date, and we did. We are already seeing the first traction along our planned growth vectors that I explained and the product resonates with families, the momentum is real. Third, we are heading into the most important time of the year, well prepared and with confidence. Our team is ready to deliver powered by the strong feedback Toniebox 2 has received. Fourth, just like Tonies, our leadership team is stronger than ever. With Ginny, Christoph, Hansjorg on board, we have a group anchored in both Germany and the U.S., combining global experience, deep functional expertise and a shared commitment to driving Tonies next chapter. And finally, we are well positioned for '26 and beyond. Our new platform around the Toniebox 2 ecosystem sets us up for continued profitable growth and long-term success. I'm proud of what the team has achieved, and I'm excited for the crucial final stretch of the year, as well as for everything that lies ahead for Tonies next year, this year, even today because today is going to be an amazing day. Peter? [Presentation] Thank you, Snoop. A fantastic partnership we are really, really enjoying. So, I sincerely hope that you all have an amazing day, and I thank you for your continued interest, your trust and for joining us today. Take care. Bye-bye.
Operator: Welcome to BioArctic Q3 Report 2025. [Operator Instructions] Now I will hand the conference over to CEO, Gunilla Osswald; CFO, Anders Martin-Lof; and colleagues. Please go ahead. Gunilla Osswald: Thank you. Good morning, and welcome to BioArctic's presentation for the third quarter of 2025. BioArctic is continuing a great way in our new era. With yet another quarter where we see more and more patients are getting access to Leqembi. And we are broadening our collaborations, utilizing our BrainTransporter technology and we are also broadening our portfolio with new projects and new modalities, and we will talk more about that in today's presentation. Next slide, please. BioArctic is listed at nasdaq.com large cap, and this is our disclaimer. Next slide, please. So I'm Gunilla Osswald, and I'm the CEO of BioArctic, and I will share today's presentation with our CFO, Anders Martin-Lof; and our Chief R&D Officer, Johanna Fälting; and our Chief Commercial Officer, Anna-Kaija Gronblad. Next slide, please. So I will start our presentation today by giving some key highlights. We go to next slide, please. So before I come into this quarter and the presentation, I just want to give a high-level introduction to BioArctic, if we have any new listeners today. BioArctic is among the world's leading innovators in precision neurology, and we have 2 key platforms: the first one is about innovation and generation and development of highly selective antibodies targeting aggregated misfolded forms of toxic proteins. And examples here are -- for example, lecanemab, Leqembi and exidavnemab. The second one is when we are utilizing our BrainTransporter platform in innovative ways to deliver antibodies and different modalities to come better into the brain. In today's presentation, we will talk about both selective antibodies like Leqembi, exidavnemab and our new project for Huntington's disease with Huntington as well as our BrainTransporter Technology, which we have utilized now for all our internal targets, and we have also started to use it for external projects. And we now have 3 different partnerships utilizing the BrainTransporter technology, including the recently signed deal with Novartis. Next slide, please. During the second quarter this year, we held our first Capital Markets Day, and then we presented our ambitions for 2030. And I'm really pleased to say that we are already delivering on our ambitions. So if we start with the first one, Leqembi, to be an established treatment in Alzheimer's disease, I'm really happy to see how Leqembi's demand continues to grow. The second one is to have a balanced and broader pipeline with projects in all stages of development. And our pipeline is already broader and continue to increase and develop. The third one is additional successful global partnerships. And of course, we are very happy with the new collaboration with Novartis, and we have more positive discussions ongoing. The fourth one is our aim to be profitable and to have recurring dividends in the future. And we expect to be highly profitable this year, and these will come back to this. Next slide, please. As I said, we are already delivering on our ambitions. And now I will go through a bit about how. We start with Leqembi. And I think now we are really well on our way to get Leqembi established as a treatment for Alzheimer's disease, a disease-modifying treatment affecting the underlying disease. Thanks to our partner Eisai. They're great work with Leqembi. It's now approved in 51 countries around the world, with Canada being the latest one. The Iqlik, the subcutaneous auto-injector, like a subcutaneous pen was called Iqlik was approved for maintenance dosing in the U.S. during the quarter. And Eisai has already initiated a rolling submission for initiation dosing as well and launch has already started for maintenance dosing in the U.S. after the quarter. Next thing I want to say is about Europe, and there, the launch has been initiated in Germany and Austria. And we're really happy to see that Finland has got the first patients that have been treated in a private clinic. Of course, this is great news from us from a Nordic perspective since we are preparing for launch together with Eisai in the Nordic countries. And Anna-Kaija will come back and talk more about this. Then there has been several presentations on Leqembi during the period and after the period. And those have shown that long-term data over 4 years treatment show continued increasing benefits over time. And these are really reassuring to follow the real data coming for Leqembi when it's being used in clinical practice. And we have heard presentations, both from the U.S., Japan and China. And the data have shown that the benefit and the safety profile are at least in line with the Phase III results, which I think is great and encouraging. Subcutaneous administration data has also been started represented, and that supports this great further opportunity for patients, to, in a more easily way, get the injection, buy an auto injector and possible to do that at home in an easier way. Then I also want to mention that we -- of course, we follow with great interest the fantastic progress with the blood-based biomarkers. And the guidance was launched earlier -- or during the quarter about how to utilize the blood-based biomarkers and they can now be used both for confirmation and for charging, and we'll come back to that. If we then look at the second part of the pipeline, which is progressing really well and growing with new projects, I want to mention exidavnemab, our alpha-synuclein antibody currently in Phase IIa, with the second part of the study ongoing in both Parkinson's disease patients and in multiple systemic atrophy patients. And also really happy to be able to communicate that we are also now working on another misfolded protein target called Huntingtin for Huntington's disease. And here, we are working with antibodies, but we are also broadening it into other modalities, utilizing our BrainTransporter technology, and Johanna will talk more about this in today's call. The third one is to have additional successful global partnerships. And as I said, we are very happy about the new collaboration with Novartis regarding an undisclosed target for neurodegenerative diseases. And we will reengineer their antibody to include our BrainTransporter technology and enabling them a better penetration into the brain. I also want to mention the other BrainTransporter collaborations that we have so far is one with Eisai on BAN2802, where we're generating great data and BAN2803, which we are completing now the tech transfer to Bristol Myers Squibb. It's also great to see that we have continued strong interest for our projects and for our BrainTransporter technology for antibodies as well as for other modalities. The fourth part about the financials. We have strong financials, and we are highly profitable this year with increasing royalties as well as several milestones from Eisai and upfront payments from Bristol Myers Squibb and Novartis. Next slide, please. If we think about the Alzheimer's field, it's evolving in a very nice way, and I want to highlight 5 different areas. The first one is that we see that we are getting easier and easier diagnosis by blood-based biomarkers. And I think this is important in helping to build the market in an easier way and to help to get the right patients to come to specialists to get a treatment initiated. The first tests are now available as confirmatory for specialists as well as for triaging for primary care. If we then look at the second one, we see more and more data that shows that earlier initiation of treatment of Leqembi shows better effect. So when we are looking at the earlier patients in the Phase III Clarity AD open-label extension study, where now 48 months data are available. We see that the majority of aducanumab-related patients were stable or even improved after 48 months treatment. I think this is very encouraging. And I think it's also further supports the ongoing AHEAD 3-45 study in presymptomatic individuals with amyloid pathology, but yet without symptoms. The third one is also really important, and that is the data that are being presented show the importance with maintenance treatment to maintain the treatment and the benefit of continued treatment with Leqembi, even after the plaques are cleared in order to continue to clear the toxic protofibrils and that's possible due to the mechanism of action and the low immunogenicity that we see with Leqembi. The fourth one is about more convenient dosing with Leqembi Iqlik, the subcutaneous auto-injector. And I think this is a really important next step for Leqembi. And it's making dosing so much easier for the patients and care partners to handle the dosing at home. And we are also pleased to note that it was awarded as one of the top innovations for 2025 by Time Magazine. And the fifth one is that in the future, we expect to see more combination treatments for even better outcomes. And there is currently an ongoing study with lecanemab, and Eisai's tower antibody. And I think in the future, we will see more and more combination treatments. So to summarize, the key is to identify patients at an early stage. And here, we can use the blood-based biomarkers, and we can start Leqembi treatment early and continue treatment with convenient dosing with Leqembi Iqlik. So great progress in this field for Leqembi. Next slide, please. So now we come to the R&D update, and I hand over to our Chief R&D Officer, Johanna Fälting. Johanna Fälting: Thank you so much, Gunilla. Next slide, please. So as Gunilla mentioned, BioArctic is among the world's leading innovators in precision neurology, where we have 2 key platforms: the antibody platform with highly selective antibodies targeting aggregated forms of toxic proteins. And these are intended to treat severe neurodegenerative diseases with high unmet medical need, such as Leqembi in Alzheimer's disease, exidavnemab in synucleinopathies, Parkinson or MSA and also the TDP-43 project for ALS. BioArtic is also developing a BrainTransporter technology that facilitates the passage of antibodies and other drugs across the blood-brain barrier. And the aim with this platform is to improve the brain exposure and distribution of the drug and thereby allow for lower dosing, improved convenience, reduced manufacturing costs and potentially also better efficacy. And in addition now, we are also further developing our BrainTransporter technology and expanding this into new modalities other than antibodies, such as enzyme proteins and even genetic medicines. And the development of the platform that will enable us to address different diseases by tailoring the modality target combination with the highest potential clinical benefit. Next slide, please. So this is an overview of our R&D portfolio with the 2 platform antibodies and brain transporters and the cross program synergies. The portfolio is a combination of fully funded projects run in partnership with global pharmaceutical companies, innovative in-house projects and technology platforms with significant market and out-licensing potential. So far, our BrainTransporter platform has generated 3 collaborations with Eisai, BMS and Novartis and all of these collaborations are progressing really well. They are all with different targets. But importantly, the BrainTransporter technology is BioArctic's own proprietary and has the potential to generate more collaborations in the future. You will also note a new BrainTransporter project in the portfolio, the [HD-BT 4801] for Huntington's disease, and I will come back to this specific project later in the presentations. So to summarize, we are both advancing and broadening our R&D portfolio with new projects into new disease areas and with new collaborations. Next slide, please. So exidavnemab is an antibody that selectively targets the pathological alpha-synuclein aggregates while sparing the physiological monomers and exist is a Phase IIa study, testing the safety and tolerability of exidavnemab. In this study, we are also exploring a wide range of biomarkers, both biochemical and digital and we have a quite unique approach in including the right patients in the study with a smell test that is an early sign of Parkinson if you have an impaired smell and also a CSF seeding amplification test to really make sure that we have the correctly diagnosed patients with the alpha-synuclein pathology in the study. The high dose cohort is currently ongoing, both in Parkinson and multiple systemic atrophy and the results are expected mid-2026. So following this EXIST study, there are several potential possibilities for future development in different synucleinopathies such as Parkinson MSA and DLB, and we are currently preparing for the next stage of development. Next slide, please. So this is very exciting to me that we are now expanding our portfolio into a new neurodegenerative disease, the Huntington's disease. And this is an inherited progressive neurological neuropsychiatric disorder that is caused by impaired function and degradation of nerve cells in specific areas of the brain. Huntington's disease is caused by a toxic mutant Huntingtin protein in the brain and the mutation in this gene results in a buildup of toxic aggregated Huntingtin protein causing Huntington's disease. The disease onset is between 30 and 50 years old of age, and it's fatal within 10 to 30 years. Current treatments are only symptomatic and there is a large unmet medical need for better treatments. So next slide, please. Targeting the Huntingtin protein in the Huntington's disease is an excellent strategic fit into our portfolio at BioArctic and with our capabilities. So this project is built on BioArctic's extensive experience in developing antibodies against misfolded aggregated toxic proteins and also our BrainTransporter platform that will enable us to increase the brain delivery of the drug. In this project, several modalities is being explored in parallel, antibodies as well as genetic medicine approaches. And since this is a brain target we have, of course, also combined it with our BrainTransport technology. So we are excited that we now expand our portfolio with yet another neurodegenerative disease in addition to Alzheimer alpha-synucleinopathies ALS and Gaucher with the potential to bring hope for even more patients. Next slide, please. So with that, I will hand over to our Chief Commercial Officer, Anna-Kaija Gronblad for a commercial update. Anna-Kaija Gronblad: Thank you, Johanna, and you can go to the next slide, please. And I will go back to Leqembi again. And I'll start with the regulatory update for all of you. So since the last quarterly report, Leqembi IV has now been approved in 3 additional countries. That is in India, Australia and in end October also in Canada. So in total, Leqembi it can is approved in 51 countries and territories. And as of October, in addition to the U.S., the IV maintenance treatment, meaning once every 4 weeks is also approved in China, in Qatar, United Arab Emirates and India. So Anders will soon present the sales numbers. But in short, I would say that the Leqembi growth really continues steadily. So in Q3 versus Q2, when you adjust to the China's actual demand, the growth was 14%. And we have seen recent launches in Mexico and Saudi Arabia. And as of August and September, as Gunilla mentioned, Leqembi was launched also in the EU, in Austria and Germany, where patients have started treatment. So -- and what we hear is that within the first 2 months, it's around 350 centers were registered in the system for the controlled access program. And as educational activities is being rolled out in the 2 countries, registrations and prescriptions continue to increase at major specialist clinics. And finally, in the Nordics, of course, as Gunilla mentioned, there is a private clinic in Finland offering Leqembi treatment to patients willing to pay out of pocket and we know that a few patients have received treatment in October. So this is an important milestone for us in our ambition to also becoming a fully-fledged pharmaceutical company. So in the meantime, the price and reimbursement and the dialogue continues with all the Nordic countries, and we aim to launch gradually across -- throughout 2026. So next slide, please. So additionally, I would like to spend a few minutes again on the Leqembi Iqlik, the subcutaneous auto-injector, which was approved in the U.S. in August and launched as of early October. And as Alzheimer's disease is a progressive disease where neurodegeneration and cognitive decline continues even after plaque removal, it is important to offer both health care professionals and patients the possibility to choose between continuing on once-monthly infusions in the hospitals or to switch to once weekly at home injections after the 18-month treatment. So this obviously could be a benefit for the patient who might want to travel and feel less bound to the hospital but also to health care providers in reducing the resources related to the infusions. Reimbursement for the Iqlik is expected to be included on formulary in the beginning of 2027 but individuals can seek insurance coverage via the medical exception process, which is something that is quite common in the U.S. And Eisai staff is providing information on this process and nurse educators provide support on dosing and demonstration kits, et cetera. So this is truly a major step in the treatment of Alzheimer's disease patients. And recently, Leqembi Iqlik was selected by Time as one of the best inventions in the medical and health care category. In addition, Eisai has also rolling SBLA ongoing also for the weekly initiation treatment in the U.S. since September, which is planned to be completed in the last quarter of this year. So potential approval maybe in Q2 or Q3 next year. And finally, submissions for the subcutaneous weekly initiation treatment is also planned for Japan before the end of this year. Next slide, please. So moving on to my final slide. This is to highlight again the true advancements we are seeing with the Leqembi Iqlik and with the parallel development in the usage of diagnostic blood test. If you remember, U.S. clinical guidelines were presented at the AD/PD congress in July this summer, saying that blood-based biomarker test showing more than 90% sensitivity and specificity can be used for confirmatory diagnosis in patients with cognitive impairment. And the first blood-based confirmatory tests are available in several countries in U.S. and China, for instance. And Fujirebio's test, Lumipulse, for instance, has been granted IVD clearance and C2N is another company has submitted for regulatory filing in the U.S. for their confirmatory test. And meanwhile, Roche phospho-tau 181 blood test was granted IVD clearance from the FDA for use in the primary care test as a triage test. So more tests will be done. 350,000 tests are expected to be used in 2025. And the new CMS payment rate is coming up from January next year. And of course, as more patients are being tested, more patients will receive a diagnosis. So as we see it, these advancements will contribute significantly to the Leqembi growth going forward, especially in the U.S., China and Japan. So that's all for me. And with that, I will now hand over to our CFO, Anders Martin-Lof. Anders Martin-Lof: Thank you, Anna-Kaija. If you start to look at the Leqembi numbers, the global Q3 sales work came in at JPY 18 billion or roughly $121 million. And at first glance that looks quite negative since there was a 22% decrease from the second quarter of 2025, but that is all due to a large stockpiling effect in China in the second quarter. So Eisai calculated what the growth would have been from the second to the third quarter without the stockpiling effect and then the growth would have been 14%. We recorded a royalty of SEK 117.2 million. That's also then down from SEK 162.5 million in the second quarter. But we have also estimated what the royalty would have been without the stockpiling effect. And then we would have been around SEK 125 million in the second quarter and SEK 135 million in this quarter. So I think that's a better reflection of the actual development of the Leqembi sales in the world. Turning then to China. So actual recorded sales for JPY 0.2 billion or $0.6 million. So a 97% decrease from the second quarter. Basically, the clinics in China are receiving Leqembi from inventory right now in the third quarter. The actual demand was roughly $18 million, and that's a 10% increase from $16 million in the second quarter. But all in all, this means that there is still quite a significant inventory left in China. So we expect very low sales in China also during the fourth quarter, and that was reported by Eisai. Turning to the U.S. There, the sales are increasing well. They were up to JPY 10.2 billion or roughly $69 million, representing a 12% increase from the second quarter. And here, Eisai is really trying to leverage the developments that Anna-Kaija was talking about with the blood-based biomarkers that are now being used more and more and acceptance of Iqlik for maintenance therapy this year and for induction next year. But to really get the full effect of this, you have to target the primary care practitioners. So that is what they say it's doing now. They're targeting roughly 2,500 primary care practitioners. They're running very big educational programs and running large awareness campaigns straight to the patients. So they're really building momentum now to start to see an impact from Iqlik and blood-based biomarkers starting probably more from next year, but they're really starting to do the groundwork now. And here, you can say that they're mimicking Japan a little bit. Japan is the market that has come the furthest along in the demand expansion phase. Sales here were $42 million, representing a 13% increase from the second quarter. And here, they have really succeeded in setting up a good treatment chain where roughly 4,200 doctors are referring to 800 initial treatment centers, and there the patients stay for a while, and then they are moved over to follow-up facilities. So that's a system that has worked incredibly well, and that is what they're trying to achieve now in the U.S. as well. I think it's also really interesting to see that the disease awareness campaigns that they are running for mild cognitive impairment in Japan are significantly increasing the recognition rates because we all know that mild cognitive impairment, which is the earliest phase of the disease is really where you want to treat the patients with the disease-modifying therapy, you can have the most effect if you start as early as possible. But today, those patients aren't really diagnosed to a large extent. So these awareness campaigns can really start to build momentum for more patients getting the drug when they really should have it. And then as Anna-Kaija mentioned, the EU launch has been initiated in Austria and Germany. It's really exciting to see that, that is starting well. However, it will take some time before you see any significant impact in our royalties from EU, which is slightly slower market than the U.S. and Japan. If we then turn to the Leqembi Global sales forecast. They have a forecast of JPY 76.5 billion for their fiscal year 2025 for Leqembi. And if you look on the right-hand side of the graph, you see that they have already in the first 2 quarters of that fiscal year, achieved 48% of the forecast in the U.S. and 49% in Japan and already 83% in China. So all in all, if you also include the other countries, they have achieved roughly 52% of the overall annual forecast in the first 2 quarters of that period. And since they are growing, we have a very high confidence that they would reach the forecast for the year. So everything is looking really, really good for Leqembi, and it seems to reach their forecast with some margin. If we then turn to our own numbers, you see that the Q3 net revenues were SEK 133 million. And this quarter, that was mainly based on the recurring revenues with royalties of SEK 117 million and co-promotion revenues of SEK 5 million. So it's exciting to see that we're becoming more and more like a normal company with recurring revenues that make up a larger share of our revenue base. We also recorded some revenues from the new Novartis agreement. As you know, we got in a $30 million upfront when we started that collaboration. And now we recorded SEK 9 million out of that in the third quarter, and we will record the rest during the remainder of that collaboration. Looking at our operating expenses, they increased to SEK 150 million this quarter compared to SEK 95 million a year ago. And this time around, that was basically just normal cost. We have had large currency effects in the previous 2 quarters, but not this quarter. So the underlying operating costs were SEK 146 million. And that's slightly over than our recurring revenues. So we have operating costs that are SEK 24 million higher than our recurring revenues, but we are approaching a point where we will have recurring revenues that are larger than our operating expenses. So we are getting closer and closer to long-term profitability. If we then look at our cost for the remainder of the year, we expect them to keep increasing since we have a more mature project portfolio, and we have built up our commercial organization. I have previously stated that I expect our full year cost to be roughly 50% to 70% higher than the cost of last year. Now we think we will be in the lower range of that interval. So I would say roughly 50% to 60% higher than the cost of last year. And then on the right-hand side, you see that operating loss was SEK 29 million for the third quarter. We expect something similar in the fourth quarter. So the operating profit for the year should be well above SEK 1 billion. On the next slide, you see our net result on the left. It's then, of course, a lower loss or a bigger loss the operating loss, but -- and that's mainly explained by the accrued taxes of SEK 65 million that we also -- we have a positive financial net of SEK 8 million, so that ameliorate a little bit. And then the operating cash flow, you typically see one very big bar, and that's the payment of the $100 million upfront payment that we received from Bristol Mayer Squibb in the second quarter. The $30 million upfront payment, $30 million, I should say, from Novartis had not been received in the third quarter. It was received in October. So the bar you see on the left-hand side with our cash balance right now of SEK 1.9 billion does not include the Novartis payments. So our financial position will continue to be strengthened in the fourth quarter. So we are going to end the year with a very, very solid position. I think that was all for me. And now I hand back to Gunilla for some closing remarks. Gunilla Osswald: Thank you so much, Anders. So we are coming towards the end of today's presentation with some upcoming news flow and some closing remarks. So next slide, please. So we are now in the fourth quarter of 2025. And I think it's great to see that more and more patients are getting access to Leqembi around the globe. And also really pleased to see that we're also starting even if it's small. So we are starting in the Nordics. We see continued regulatory processes on lecanemab, with the Canada approval. And I think it's great to see the Iqlik being approved for maintenance dosing in the U.S. and our partner, Eisai are working hard to conclude the supplementary BLA filing for Leqembi Iqlik in the U.S. for initiation dose. And also to file in Japan for both initiation and maintenance dosing with Iqlik. We are, of course, looking forward to the next Alzheimer Congress its CTAD in San Diego in the beginning of December. And there, we note several presentations on lecanemab, including subcutaneous data and more real-world evidence data from, for example, U.S. registered. So this is something I'm really looking forward to. So I'll come to next slide. So the key takeaways from today's presentation is that BioArtic is now in our new era, and we see great progress both on Leqembi as well as the rest of our portfolio and the BrainTransporter technology. We have already started to deliver on our 2030 ambitions. Leqembi is well on track to become an established treatment for Alzheimer's disease. Sales continue to show increasing demand on a global level, further regulatory approvals, launches reassuring data from long-term treatment and real-world evidence. Our portfolio has increased, and we have initiated program for Huntington's disease with different modalities. Our brain -- or our business development efforts continue to deliver with a third BrainTransporter collaboration now having been initiated during the third quarter. And this was the first of its kind, and it shows that we are also expanding to becoming also a platform company. And the last point is that we have strong financials, as Anders described, with great cash flow with milestones and record royalties during this year, growing more than 180% year-on-year. So I think the future looks very bright for BioArtic and is bringing hope for many patients. Next slide, please. So by that, we say thank you so much for your attention, and we're happy to take some questions. Operator: [Operator Instructions] The next question comes from Joseph Hedden from Rx Securities. Joseph Hedden: Firstly, on the Leqembi Iqlik, do you have any visibility on when regulatory filings might be made in Europe or China or the strategy there is? And then secondly, it's great to see a Huntington project. Just on the BrainTransporter technology. I know that first program is an antibody and you've mentioned genetic medicines. Is BrainTransporter are capable of, for instance, using an AAV vector like, I mean, Huntington's, the uniQure therapy made a lot of noise recently. Does any significant modification need to happen with your current platform to be able to carry a vector such as AAV? Gunilla Osswald: Thank you so much, Joseph. Excellent questions. So I think the first question on Leqembi Iqlik in Europe and China, we cannot comment on that. I mean right now, we are really happy about the progress in the U.S. and Japan. And then we know our partner is doing everything they can to help as many patients as possible around the world. So we'll come back to that. Then your question with regard to Huntington's disease and where we are also really happy to see the BrainTransporter. So I didn't understand any specific question. Johanna Fälting: I think I can take the question. Gunilla Osswald: But if I just -- then I hand over to you, Johanna. And then for the BrainTransporter, I think it's really, really good to see that we can utilize that for several different modalities and definitely help to get different modalities better into the brain. And I think it's important to point out that BrainTransporter is not one thing, it's the platform with many different tailor-made ways to handle depending on if it's what kind of target and what kind of modality. So we have several different approaches that we utilize depending on if it's an extracellular target, intracellular target or what kind of modality we have. And then I hand over to Johanna, who understand the question I missed. Johanna Fälting: Thank you so much, Joseph, for that excellent question. And we are, of course, following the competitive landscape very well, and we understand and we have seen the uniQure data. I think it's excellent data. But that's a treatment that is not for everyone. It's a quite invasive treatment, and you actually need maybe a 15-hour surgery for one patient to administer that drug and you do it with intrathecal administration and injections in different sites in the brain right now. So our approach is a bit different, and I can't speak too much of it today before we have the patents in place and so -- but we have another approach, and we are not primarily targeting AAV with our BrainTransporter technology. Gunilla Osswald: I hope that responded to your question. Thank you, Johanna. Joseph Hedden: Yes. Operator: The next question comes from Suzanna Queckbörner from Handelsbanken. Suzanna Queckbörner: I'd like to ask a question regarding the Leqembi subcu. So listening to the Eisai conference call, there was talk about the Iqlik being listed in formularies only by 2027. There seems to be a medical exemption program, which would address something like 80% of patients. To me, it sounds like there's likely to be more paperwork associated with that, which sounded like it was going to be limited or access was going to be limited at least until 2027. Maybe you can just sort of explain that to me? And then also, how does that impact your competitive advantage versus Elli Lilly's remternetug, which is also expected to read out data in 2026 and they have the subcu formulation as well. Gunilla Osswald: Yes. So we start with your question on Iqlik and the process in the U.S. with the reimbursement agency or CMS is that it's certain times of the year that you need to submit in order to come into the next year. So that's the reason for why we expect Leqembi Iqlik to be on the formulary from January 2027. Right now, just as you said, Suzanna, there is a possibility to utilize the medical exemption program, where -- which I think many of these physicians are used to do for other treatments. And what we have understood from Eisai is that it's not overwhelming paperwork. It's a fairly easy process that can help the patients -- most patients to already be reimbursed right now. And I'll also go on the differentiation part a little bit and then hand over to Anna-Kaija. So I think, I mean, we see then the Iqlik has a really good differentiator versus competitors. And then we will follow with great interest when also remternetug comes with some efficacy data. We haven't seen much yet. So I think each compound has to show itself before we can comment too much. And we haven't seen much of it yet. So -- but I think meanwhile, we're really happy for Leqembi Iqlik, which all the data we have seen so far looks really, really promising. And more data is expected to be shown at CTAD. I don't know, Anna-Kaija, if you want to add something. Anna-Kaija Gronblad: No, not really. I think -- again, I think it's -- we haven't seen that much data on remternetug yet. So I think it's too early to say anything about it. But we, of course, understand that they also see the need of subcutaneous auto-injector because we think that this will be a key driver and for patients also being having an easier treatment. So we see -- so the need from the Elli Lilly as well. They see this as a competitive advantage. Suzanna Queckbörner: If I can have a follow-up question. Also, I saw that Takeda discontinued their alpha-synuclein antibody, which they reported to had Phase II results on. Maybe you can talk about the differentiation to your alpha-synuclein antibody. Gunilla Osswald: Yes. I think it's really important to understand that every antibody is different from each other. And we think that we have a clearly superior antibody, much more selective. The most selective antibody that we know for alpha-synuclein between the pathological forms and the physiological forms. So we have more than 100,000 fault electivity, which is a huge difference from competitors. And also, I think it's important to see the design of the clinical studies that we also think that we are designing better studies for the future. But I will hand over to Johanna. Johanna Fälting: Thank you, Gunilla. I totally agree, and thank you for the question. Of course, it's always sad when a clinical study that being sold to patient does not read out. But I think that we have a differentiated profile, both in terms of the selectivity for what we believe is the toxic species, the aggregated species and a very high affinity for those species. And we also have a superior human PK profile as compared to the AstraZeneca Takeda that recently read out. It was also fairly small, I would say, a Phase II clinical trial. And I think that we can have a clear differentiation versus both in terms of human PK study design and selectivity for the toxic species. Gunilla Osswald: So not much read over, I would say. Johanna Fälting: Absolutely not. Operator: The next question comes from Natalia Webster from RBC. Natalia Webster: Firstly, I was wondering on Eisai's full year Leqembi guidance to March. This is implying a slowdown in growth for Leqembi sales for calendar Q4 into Q1 '26. So just curious to hear if you think this is conservative, appreciating that there may be some further impact from the China inventory adjustment in Q4. And then my second question is on the European launch. I appreciate it's early days and it could take some time to see a more meaningful contribution here, but are you able to provide a bit more feedback on how this is progressing? And if you're counting any of the initial challenges that you saw in the U.S. around capacity or otherwise? And then finally, just on profit. You've maintained your long-term ambition for sustainable profitability. I was wondering if you're able to touch on any key considerations for cost phasing in 2026? And if you're able to confirm that you still expect to reach sustainable profitability from 2026 as well? Gunilla Osswald: So I think it's Anders, who should start this questions. Anders Martin-Lof: Right. So if you look at the Eisai's forecast, I think you're specifically asking whether they will reach for China. Well, all in all, they are already at 52% of the full year forecast after 2 quarters, 87% in China. I think it's correct that the Chinese sales will be very low in the next quarter as well. But then I think more or less the inventory should be used up, so they should have a strong first quarter of next year. So we remain very confident that they will reach their forecast for the full year, and so are they. That's what they communicated on their call. As for the profit for next year, we will not comment on our cost for next year until we finish the year. So you'll hear more about that in February when we communicate our year-end results. Gunilla Osswald: And then there was a question for Anna-Kaija. Anna-Kaija Gronblad: Yes, regarding the EU launches and what I can say is that, of course, I mean EU consists of 27 countries and all of these countries have their national market access processes on price and reimbursement. So I would say that after Germany and Austria, typically being the early launch countries, it takes quite some more time before each country has gone through this process. So I would say that we can be cautious when it comes to the sales coming from Europe next year. I think we are, let's say, infrastructural wise in a better situation than in the U.S.A. But still, I mean, this is a new treatment paradigm also that is being implemented. So each clinic has to really go through and have a checklist on what to have in place in order to start treatments on patients. So I think we should be kind of cautious and understanding of the changes that needs to be in place in the clinic. So it will be rolled out gradually throughout Europe next year. Gunilla Osswald: And I just want to remind also that we have said all the time that Europe is a small, small proportion out of the global sales especially, I mean, the coming 2 years, but also long term. It's really U.S., Japan, China and other parts of Asia and other parts of the world, that also contributes. Yes, a lot. Operator: The next question comes from Viktor Sundberg from Nordea. Viktor Sundberg: So yes, one first on the financials. So I just wondered how we should think about the Novartis upfront payment being recognized over 21 months. Will this be in a linear fashion? Or how should we think about the revenue contribution of that part going forward? Anders Martin-Lof: The short answer is, yes. Gunilla Osswald: Linear. Anders Martin-Lof: So yes, linear. It's very hard to -- we are delivering as we have communicated, we are working on the Novartis compound that we are modifying and we will deliver back to them. And that will take some time, and it's really hard to estimate how large share of that work has been done. So you typically do that in a linear fashion over the expected time course of the collaboration, so linear. Viktor Sundberg: Okay. And also I had a question on your competitive position or Eisai's competitive position versus Kisunla. Looking at the curve, it seems that they are accelerating sales, I guess, Eisai has done a lot of the groundwork already to prepare for that. But I just wonder on your discussions with Eisai, like why are some patients choosing Kisunla over Leqembi, or why some patients choosing Leqembi over Kisunla. What's your feedback here so far in the launch? Gunilla Osswald: Would you like to take it, Anna-Kaija? Anna-Kaija Gronblad: Yes. I mean, of course, we're still -- Leqembi still the #1 disease modifying treatment Alzheimer's in the U.S. as well. But as you say, I mean, of course, Kisunla is having some advantage to us being a front runner in establishing these kind of treatments on the market. So it's -- but what we can see is that at Eisai reports is that it's not kind of reducing the Leqembi market, but it's growing the kind of total market as such. Of course, I mean, there is a difference in the -- they have once monthly today, and we have twice monthly in the 18-month treatment phase, and then you can choose to go to once monthly or Iqlik. So of course, every patient is an individual and has to kind of decide what is -- what works best for that patient. So -- but otherwise, I think Leqembi is still showing a strong growth, so -- and driving, and so in total, it's growing the total market. Operator: The next question comes from Sebastiaan van der Schoot from Kempen. Sebastiaan van der Schoot: Congrats on the progress. Just one from our side. Could you maybe give some color on what would be your goal or non-go discussion decision for further development of the Parkinson's program. What type of signals do you want to see against placebo to push the development forward? And what could next steps for the program look like? Gunilla Osswald: Yes. So I will start and just say that exidavnemab, which is currently in a Phase IIa study. And the main task for this study is to look at safety tolerability and we have 2 doses. We have had first a lower dose where we have had a safety review that supported us to go into the higher dose part in exactly the way that we had planned and wanted. And then we have also broadened it not only for Parkinson's disease, but also for multiple systemic atrophy where we also have called orphan drug destination. So I think -- I mean, we are doing a lot of biomarkers, but that's really in order to prepare also for the next step for Phase IIb. So I think it's really important to see that the expectation here is really to look at safety tolerability for this program. And so far, what we have seen, it looks really good. So I think that's -- but the readout there will be just after summer next year is what we expect. The study is ongoing and still recruiting. So it's a little hard to say exactly when it happened, but the best estimate is a little bit after summer next year. And then there is a lot of opportunities for this asset. And as we have described before, it can be Parkinson's disease dementia, it can be Lewy body dementia. It can be different parts of Parkinson's disease. It can be MSA. So there's a lot of opportunities. And at the moment, we are evaluating different of those kind of indications and preparing for the next step. So I think this is a very interesting asset, very exciting with a lot of opportunities. I don't know if you want to add something, Johanna? Johanna Fälting: No, I have nothing to add to that. Just to say -- to echo what Gunilla said, this is a quite small study and a short study. So not too much should be expected in terms of biomarker readouts. It's a safety and tolerability study, it's 3 months, and that's a bit too short to see efficacy on biomarkers related to disease modification. Gunilla Osswald: That should be the next... Operator: [Operator Instructions] Oskar Bosson: So there doesn't seem to be any people in the phone queue right now, but we have some written questions that have been posted during the call, so I'll read them out loud. And then Gunilla can direct who should take the question, although I think the first one is maybe Anders one. But it's from Peter, who wonders looking forward when we start to record sales in -- for Leqembi in the Nordic countries, how are we going to report that going forward? Anders Martin-Lof: So in our profit and loss statement, you have our total revenues. And then in the notes, we will have our different revenue split up by line, and we already do actually. So the revenues from the Nordics won't be seen straight away. They are part of what is called co-promotion revenue, which is the reimbursement we get from Eisai for profit sharing. But over time, yes, I think we will comment on how things are going in the Nordics. I hope that answers the question. Oskar Bosson: And then a follow-up question from Peter as well regarding OpEx and the difference in OpEx if you compare Q1 and Q2, it's down in Q3, and he wonders what were the reasons for this and then going forward also what is the level that we can expect? Anything you can say there? Anders Martin-Lof: Right. No. So our costs are quite lumpy. So if you deduct the other operating expenses, which is mostly currencies. Yes, our costs were down a little bit in the third quarter, but we expect them to go up again in the fourth quarter, and then we'll see what happens next year. Especially what happens with -- after the EXIST trial, if we enter into significant clinical trials with exidavnemab, you should expect increasing R&D spending next year. But it's too early to tell exactly what that will look like. But of course, with the maturing R&D portfolio, you incur larger costs, which is a great thing for a company like ours. Oskar Bosson: Then we had a question from Frederic, but I think we answered that because it came from somebody else as well. And then Eric from Carnegie has a question regarding the EVOKE trials that are coming up soon in just the next couple of weeks. Expectations on results for the EVOKE trial where semaglutide is tested in early AD in EVOKE and EVOKE+. What's our thoughts on that if that study is positive and how that could potentially impact or not impact Leqembi. Gunilla? Gunilla Osswald: Yes. So I think I'm really looking forward to seeing the results, and it's quite imminent now. I think it's 2 well-designed clinical trials in Phase III. They did not have a proper Phase II. So it's very hard to say anything about what to expect here, I think. But if positive, then I think that it's a complement to Leqembi. I don't see this as a competitive treatment. I see it's a complementing treatment because it has a completely different mechanism of action and potentially then could help patients together with Leqembi. Oskar Bosson: Okay. Thank you. And I think the last one about the risk regarding China. You touched upon it, Anders, but maybe you want to clarify once again what we think about the stocking effect in China and how long that's going to last and when we can expect more new sales coming in, in China. Anders Martin-Lof: Yes. So the stockpile that was built up in Q2, I expect it to run out during the fourth quarter. So you should see an effect of that on the sales in the fourth quarter, but not beyond that, but that would be my estimate. Oskar Bosson: Yes. Thank you. Those were all questions in the queue. I don't believe, operator, that we have any more questions waiting in line either. And if so, I think that concludes today's call. Thank you so much for listening, and we'll see you back in a quarter from now. Thank you so much. Gunilla Osswald: Thank you. Have a good day.
Operator: Good morning. My name is Sergio and I will be your conference operator today. At this time, I would like to welcome everyone to the Southland Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Alex, you may begin your conference. Alex Murray: Good morning, everyone. Welcome to the Southland Third Quarter 2025 Conference Call. This is Alex Murray, Vice President of Corporate Development and Investor Relations. Joining me today are Frank Renda, President and Chief Executive Officer; and Keith Bassano, Chief Financial Officer. Before we begin, I'd like to remind everyone that this conference call may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995. Forward-looking statements are uncertain and outside of South of control. Southland's actual results and financial condition may differ materially from those projected in forward-looking statements. Therefore, you should not rely on any of these forward-looking statements and we do not undertake any duty to update these statements. For a discussion of some of the risks that could affect results, please see the Risk Factors section of our Form 10-K for the year ended December 31, 2024, that was filed with the SEC on March 5, 2025 and discussion on Form 10-Q for the quarter ended September 30, 2025, that was filed with the SEC last night. We also refer to non-GAAP financial measures, and you'll find reconciliations in the press release related to this conference call which can be found on the Investor Relations page of our website. With that, I will now turn the call over to Frank. Frankie S. Renda: Thank you, Alex. Good morning, and thank you for joining Southland's Third Quarter 2025 Conference Call. Before we jump into this quarter's results, I'd like to highlight that this quarter marked the 5-year anniversary of our acquisition of American Bridge Company. This quarter, we also achieved substantial completion on the last of the 27 highly technical projects assumed to the acquisition. These projects included the Queensferry Crossing in Scotland, Edmonton Valley Light Rail in Canada, Queensboro Bridge in New York, and the SR 520 Montlake project in Washington. Closing out this final construction phase of the legacy AB backlog is a major accomplishment and testament to our operational expertise, technical knowledge, and ability to successfully execute some of the world's most complex infrastructure projects. Now to turn to this quarter's results. We reported third quarter revenue of $213 million to gross profit of $3.3 million. Consolidated gross profit margin was 1.5%, an increase from negative 29.5% in the prior year period. The improvement was driven by strong performance in our new core work and fewer impacts from legacy projects in this quarter versus the same quarter last year. Our new core work continues to perform at double-digit gross margins. Our Civil business continues to perform very well with 10.5% gross margin in this quarter. This was inclusive of unfavorable noncash adjustments from dispute resolutions that impacted revenue and gross profit by $8 million in the quarter. We continue to make progress resolving smaller disputes. A vast majority of our contract assets balance consists of money we are owed from legacy projects that were started prior to COVID where construction is complete. We expect our contract assets balance to continue to decrease and to collect a significant amount of cash from these legacy disputes. We have a clear plan to finalize the remaining legacy projects and are making progress towards their completion. As this work wraps up, we expect to significantly derisk our earnings profile as we progress through next year. We have some more work to do, but we are getting closer to putting these projects completely behind us and focusing solely on our high-quality new core backlog. During the quarter, we added approximately $151 million in new awards and contract adjustments. This was led by a $77 million bridge rehab contracts in our Transportation segment for a private client in the Pacific Northwest, and a $53 million water resource contract in our Civil segment in Texas, bringing our total backlog to approximately $2.26 billion. All indications are that the robust demand for infrastructure will continue for years to come. Our outlook on the market remains positive. We continue to successfully execute our strategy of targeting short duration, high-margin projects in both public and private markets. In private markets, we are seeing strong demand for large-scale data centers. We have been carefully evaluating data center opportunities over the last couple of years, maintaining a highly selective and disciplined approach to ensure we remain within our core capabilities. Many new data center sites are very large and are being built in rural areas, resulting in an ongoing need to build additional water resources to support these build-outs. Utility packages on the data center projects are getting larger and the margin potential is very attractive. We are in discussions on several data center opportunities to leverage our utility and site development capabilities. The construction activities we are pursuing are very similar to the scopes in our existing core backlog and match our team's expertise very well. We expect to convert some of these opportunities to backlog in the coming quarters. While data center projects present a unique opportunity, our strategy remains the same, and we will continue to pursue a mix of private and public market opportunities. We continue to see strong demand for public market projects from federal, state and local levels. The IIJA is well underway and driving strong demand for public market projects. Significant opportunities remain across our core business with hundreds of billions in authorized funds still to be spent under the IIJA. At the state level, last week, Texas voted in favor of Proposition 4, the amendment proposed by the House joint Resolution 7, which will allocate $20 billion to the Texas Water Fund over the next 2 decades. This is a major commitment to one of our core markets and we are positioned well to help expand Texas' water resources. Upcoming public market opportunities include numerous water resource projects in the Midwest and the Southwest. We are also excited about several bridge opportunities in the Southeast. We have great visibility into future demands. We will continue to be focused on improving margins first, and growing backlog and revenue. We will ensure we have the right resources to build the work and continue to pursue projects that align with our core capabilities. In closing, as we reflect on the quarter, we have a similar message to the past few quarters. While we have more work to do to get the legacy projects completely behind us, our core business is performing well. As we wrap up legacy projects, we expect to deliver strong and consistent results with robust opportunities across our end markets, we expect to win our fair share of high-margin projects. We maintain confidence in our long-term outlook and future direction of our business. With that, I'll now turn the call over to Keith for a financial update. Keith Bassano: Thank you, Frank, and good morning, everyone. I'll discuss an overview of our financial performance during the third quarter for 2025. You can find additional details and information in the financial statements, footnotes and management's discussion and analysis that were filed on Form 10-Q last night. Revenue for the quarter was $213.3 million up $40 million from the same period in 2024. Revenue in the quarter was lower than anticipated due to the timing of new project starts, impacts from dispute resolutions and project delays. Gross profit was $3.3 million, an increase of $54.4 million from the same period in 2024. Gross profit margin in the quarter was 1.5% compared to negative 29.5% in the prior year. Selling, general and administrative costs in the third quarter were $14.6 million, a decrease of $2.9 million compared to the same period in 2024. The decrease was primarily due to lower compensation expenses as well as a reduction in legal and professional fees compared to the same period in 2024. Interest expense for the quarter totaled $9.2 million, up $1.6 million from the prior year. This increase was primarily driven by an increase in interest rates on external borrowings. We anticipate interest expense to average approximately $9.5 million per quarter going forward. Income tax expense was $57.2 million for the quarter compared to income tax benefit of $17.1 million in the same period last year. Included in this quarter's income tax expense was a $57.3 million onetime noncash expense from a valuation allowance placed on our net deferred tax assets. This valuation allowance is required under U.S. GAAP. However, this does not limit utilization of the respective tax assets in the future. We expect our effective tax rate for 2026 to be in the 15% to 20% range based on current forecasts. We reported a net loss of $75.2 million or a net loss of $1.39 per share in the quarter compared to a net loss of $54.7 million or a net loss of $1.14 per share in the same period last year. It is important to note that approximately $1.06 per share of this quarter's loss was due to the onetime noncash tax expense related to the valuation allowance. In the third quarter, we produced EBITDA of negative $3.5 million compared to negative $8.7 million for the same period in 2024. Now to touch on segment performance for the quarter. Our Civil segment had revenue of $99.5 million compared to revenue of $55.8 million in the same period in 2024. Our Civil segment gross profit was $10.4 million, an increase of $28.7 million from the same period in the prior year. As a percentage of revenue for the quarter, our Civil segment had gross margin of 10.5% compared to negative 32.8% in the same period in 2024. In the quarter, we had unfavorable adjustments from dispute resolutions on 2 projects in our Civil segment that impacted revenue and gross profit by $8 million. These resolutions resulted in cash collections of approximately $6.5 million in the quarter, with an additional $3 million expected in the coming months. For the quarter, our Transportation segment had revenue of $113.9 million, a decrease of $3.6 million from the same period in 2024. Our Transportation segment had a gross loss of $7.2 million, an increase from a gross loss of $32.8 million in the same period in the prior year. As a percentage of revenue for the quarter, our Transportation segment had negative gross margin of 6.3% compared to a negative gross margin of 27.9% for the same period in 2024. The Materials and paving business line contributed $22.9 million to revenue and $3 million in gross loss in the third quarter. At the end of the quarter, we had approximately $89 million of remaining M&P backlog. This is down from $99 million at the end of last quarter. I'd like to highlight that one M&P projects contract value was increased by $21 million in the quarter. This was a result of ongoing discussions with the owner and is a positive outcome as we expect to get paid more to complete the remaining scope of work on this contract. Last quarter, we noted that we expected 3 of these projects to tail into 2026 and we now expect the final for paving projects to be completed in 2026. Our Transportation segment margin was also impacted in the quarter by an unfavorable adjustment of $7 million on a legacy bridge project in the Midwest. The project experienced delays and has significantly impacted results over the past several years. Our remaining non M&P legacy backlog is now $32 million, down from $40 million last quarter. excluding the impacts from M&P, unfavorable adjustments in our non-M&P legacy backlog and dispute resolutions, gross profit in our core business produced double-digit margins. We expect legacy projects to have less impact on the overall results in 2026 as we continue to wind down these projects. We finished the quarter with approximately $2.26 billion of backlog, of which we expect to burn approximately 39% over the next 12 months. Now to touch on the balance sheet. We are exploring debt solutions that would provide us with additional capacity and offer flexibility in accelerating work on the legacy backlog. We are currently in discussions and expect to be able to close the facility before we report next quarter's results. We will share more details as this process progresses. Thank you for your time and interest in Southland. I'll now pass the call back to the operator for questions. Operator: [Operator Instructions] Your first question comes from Adam Thalhimer from Thompson, Davis. Adam Thalhimer: I want to start with your comment on data centers. I was curious if you were looking at anything else on the private side? And what is the scope that -- or how big are those packages potentially for you? Frankie S. Renda: Yes. So what we're looking at, Adam, is stuff that's in our core market. So there are some larger data centers out there. The data centers are obviously a very active market right now, just tons of opportunities across the country. The past couple of years, these developments have just exploded. So we've spent time getting our arms around the scopes, and they're very similar to what we have done for public owners. But now it's just for a slightly different customer base. The opportunities on the public market side are still really strong. We see data centers as an opportunity to supplement our existing work and really turn some cash quickly. So we're excited about the potential and hope to talk more about these here soon. As far as other work on the private side, we've always had a mix of private and public, more heavily weighted to the public sector. But there's a lot of opportunities with new manufacturing coming to the U.S. that we're looking at as well. But our scope specifically would be in that water, wastewater site development type market on those developments. Adam Thalhimer: Got it. And then -- so you took an $8 million hit to gross profit from claims settlement in Q3, but that's going to lead to $9.5 million in cash, so not a terrible trade-off there. I'm just curious, you sounded like you had a little better sense and you had a little bit more, I don't know, momentum or it seemed like you had a higher confidence that maybe a lot more of these legacy claims would get settled, call it, in the next 12 months. Is that fair to say? Frankie S. Renda: Yes. We've made we've made some small progress this quarter on some of the smaller disputes, which leads to some optimism. It's good to see our contract assets balances coming down. But no, we're -- these things can't wait to be settled forever. We're at the table on numerous claims. And so yes, we expect to see some progress, some real progress over the next 12 months. Adam Thalhimer: And then just last one for me. The project delays that impacted you in Q3. Have those projects started in Q4? And I know you're not giving guidance, but just curious if you kind of expect to end the year on a higher note. Keith Bassano: Yes. So as it relates to some of the delays that we've encountered, we would -- so it's delays, and then we also had some derecognition in the revenue just due to some of the adjustments that we took in the quarter. I would expect the Q4 to be pretty similar to Q3 with maybe a slight uptick. Operator: Your next question comes from Julio Romero from Sidoti & Company. Julio Romero: I wanted to talk about the free cash flow outlook for the fourth quarter, just given the decrease in the contract assets, which is certainly notable, but also the increase in the receivables. I believe you called out the $3 million in cash collections expected in the fourth quarter, but just -- I keep looking at that increase in receivables. I'm just trying to see if you could help us out with kind of a finer point on free cash for the fourth quarter. Keith Bassano: Absolutely. So we did generate positive cash flow from ops in the quarter, and we're there year-to-date. We may see a decrease in Q4 and in Q1 of 2026, but we do expect to see some positive cash flow overall from ops in 2026. Julio Romero: Understood. And can you help us size up the pipeline for some of these additional quick turn projects in the Civil segment? And has the size and runway evolved at all since Texas's passage of Proposition 4 to fund order infrastructure projects? Alex Murray: Julio, you broke up a little bit there. Can you just repeat that? Julio Romero: Yes. Can you hear me? You broke up as well. So I couldn't hear you. I was just trying to see if the size and the runway of these quick turn, high-margin projects in the Civil segment? And has that changed at all since Texas's passage of Prop 4? Frankie S. Renda: Yes. No. Civil margins have been strong, and we expect this to continue. This quarter, Civil margins were 10.5% which included impacts of $8 million from dispute resolutions. If you look year-to-date, gross margins are roughly 17%, which is very strong. So overall, we're excited about the success we're seeing in the civil market, and we really like those $50 million to $150 million quick turn in cash projects on the civil side and that the bill that Texas passed, adding another $20 billion to critical water projects should be -- should provide some great tailwinds for us. But it will take $40 billion to be deployed, sorry. Julio Romero: No, you're fine. And then I know last quarter, you talked about those tunnel boring machines that you have that kind of give you a competitive advantage there. Are you guys kind of the only game in town with those? Or can you just speak to how that kind of differentiates you there? Frankie S. Renda: Yes. So there are quite a few total jobs out there. There we feel like we have a significant advantage, producing our own tunnel boring machines, in some cases, and we have we have a really good fleet, probably one of the larger fleets in the United States of existing PBM. So hopefully, we're able to really take advantage of the tunnel opportunities bidding over the next 12 to 24 months. So excited about that market as well. Great question. Operator: Your next question comes from Christian Schwab from Craig-Hallum Capital. Christian Schwab: Frank, I'm just wondering if you could give us an idea of the size of the projects for a typical data center that you're looking into? Frankie S. Renda: Yes. So for us, Christian, we're looking for data centers that are close to where we have existing projects in that water, wastewater market. But you can see projects as small as probably $15 billion to $20 billion. And as far as the top end, we're going to feel the market out around that $50 million, $75 million range maybe to start, but they could make it grow from there. Christian Schwab: Great. And then it sounds like we're finally coming to the end of legacy work and should finish that up in calendar '26. As we go into '27, would you expect your core business is to run at the current margin profile? Or do you think that could actually improve in '27? Frankie S. Renda: Yes. So '25, as we talked about, was kind of that reset year. We're really going to focus on cleaning up legacy projects and use that as a springboard into 2026, getting into more of our core work and then 2027, as you stated, being completely into our core market and we're excited to really improve profitability in the years to come. Operator: Thank you. Ladies and gentlemen, there are no further questions at this time. You may proceed. Frankie S. Renda: Thanks, everyone, for joining us. Look forward to speaking with you all next quarter. Operator: Ladies and gentlemen, this concludes today's conference call. Thank you all for your participation. You may now disconnect.
Operator: Good morning, ladies and gentlemen, and welcome to the K-Bro Linen Systems, Inc. Third Quarter 2025 Results Conference Call. [Operator Instructions] This call is being recorded on Thursday, November 13, 2025. I would now like to turn the conference over to Kristie Plaquin. Please go ahead. Kristie Plaquin: Thank you, operator, and good morning, everyone. Thank you for joining us today, and welcome to our third quarter results conference call. On the line with me today is Linda McCurdy, President and Chief Executive Officer. Before we begin, I'd like to remind everyone that statements made during our prepared remarks of the conference call with reference to management's expectations or our predictions of the future are forward-looking statements. All statements made today, which are not statements of historical fact are considered to be forward-looking statements. Certain material factors or assumptions were applied in drawing a conclusion or making a forecast or projection as reflected in the forward-looking information. Investors are also cautioned not to place undue reliance on these statements. Actual results could differ materially from those anticipated. Risk factors that could affect the results are detailed in the corporation's public filings. I'll now turn the call over to our CEO, Linda McCurdy, who will provide her insights and remarks on the quarter. Linda? Linda McCurdy: Thank you, Kristie, and good morning to everyone. Thank you for joining today to review our 2025 third quarter results. I'll spend time focusing on the main highlights of the third quarter, and then I'll hand it over to Kristie to provide more details on our financial performance and the balance sheet. So we are delighted to have reported record results for Q3 with revenue of $156 million and adjusted EBITDA of $33.5 million for the quarter. Q3 marks our sixth consecutive quarter of record results and includes early contributions from the Stellar Mayan acquisition. This acquisition has enabled us to establish a national footprint in the U.K. commercial laundry and textile rental sector and really enhances our revenue diversification by geography and business mix. Based on annualized consolidated revenue, K-Bro's combined business is now approximately evenly split between Canada and the U.K. with national platforms in both countries. We're excited to become a strategic supplier to the healthcare sector in the U.K. like we are in Canada. We believe the U.K. healthcare market shares similar characteristics and trends to the Canadian healthcare market. And while it's still early, we're pleased with the progress of our ongoing integration efforts as we work towards optimizing our local and national footprints and positioning K-Bro for long-term growth. So consolidated revenue in the third quarter increased by 49% compared to Q3 2024 with healthcare revenue having increased by 67% and hospitality revenue by 34%. Healthcare revenues represented about 53% of our consolidated revenues, which is higher compared to 47% in 2024 due to the acquisition of Stellar. A key point, of course, is that strategic acquisitions of high-quality operators with leading market positions in key regions have always been an important contributor to our overall growth profile, and we continue to actively pursue these growth opportunities. Of course, we will continue to incur certain transaction, transition and financing costs, which are reflected in our adjusted EBITDA number. And in this context, we do believe that adjusted EBITDA before adjusting items will assist investors to assess our performance on a more consistent basis as it's an indication of our capacity to generate income from operations. As always, we're focused on delivering industry-leading service, and we're proud of our talented combined team that focus tirelessly on being dependable partners to our existing and new healthcare and hospitality customers. I'll now turn it over to Kristie to discuss our detailed financial results for the quarter, and then I will come back to you and talk about our outlook. Kristie, over to you. Kristie Plaquin: Thank you, Linda. The information we are discussing today is also highlighted in our 2025 third quarter earnings press release issued yesterday and detailed supplemental financial information can also be found on our Investor Relations website under the heading Financials. As a result of the Stellar Mayan acquisition in June 2025, consolidated hospitality revenue for Q3 increased by 33.6% over the comparable period of '24, and the corporation saw a 66.8% increase in consolidated healthcare revenue for an overall increase in consolidated revenue of 49.3%. As we've discussed in previous quarters, when reporting adjusted EBITDA, we've revised our adjusting items to reflect certain amounts, which are not indicative of ongoing operating performance. This includes transaction costs, structural finance costs, transition and integration costs, restructuring costs, gains and losses on settlements of contingent consideration and any other nonrecurring transactions as defined within our MD&A. We believe adjusted EBITDA will assist investors to assess our performance on a consistent basis and details of the calculations and the adjustments can be found in our MD&A under terminology. Consolidated adjusted EBITDA increased in Q3 of '25 to $33.5 million or by 45.9% compared to $23 million in 2024. Adjusted EBITDA margin decreased to 21.5% in 2025 from 22% in 2024. The decrease is due to the combination of the lower Stellar Mayan margin profile. Consolidated EBITDA increased in Q3 '25 to $32 million or by 40.2% compared to $22.8 million in 2024. On a consolidated basis, EBITDA margin decreased to 20.5% in 2025 from 21.9% in 2024. For the Canadian division, the adjusted EBITDA margin in the third quarter of '25 increased to 22.8% compared to 20.8% in 2024. The increase in adjusted EBITDA margin was largely due to labor efficiencies and the elimination of the Canadian carbon tax in 2025. EBITDA margin increased to 22.6% in the third quarter of '25 from 20.7% in 2024. For the U.K. division, the adjusted EBITDA margin in the third quarter decreased to 20.3% in 2025 compared to 24.3% in 2024. The decrease is due to the combination of the lower Stellar Mayan margin profile. The EBITDA margin for the U.K. division decreased to 18.8% in the third quarter of '25 compared to 24.3% in '24. And the decrease in EBITDA margin is due to the adjusting items in the quarter related to Stellar Mayan's transaction and transition costs in addition to the lower margin profile. Net earnings increased by $0.8 million in the third quarter of '25 or 8.9% from $8.1 million in 2024 to $8.9 million in 2025. And net earnings as a percentage of revenue decreased to 5.7% in '25 compared to 7.8% in '24. Wages and benefits in the third quarter of '25 increased by $21.4 million to $60.6 million compared to $39.2 million in the comparative period of '24 and as a percentage of revenue increased by 1.4 percentage points to 38.9%. The increase as a percentage of revenue is primarily due to the combination of the Stellar Mayan cost structure. Linen in the third quarter of '25 increased by $5.3 million to $15.3 million compared to $10 million in the comparative period of 2024 and as a percentage of revenue increased by 0.2 percentage points to 9.8%. Utilities in the third quarter of '25 increased by $2.1 million to $9.5 million compared to $7.4 million in the comparative period of '24 and as a percentage of revenue decreased by 0.9 percentage points to 6.1%. The decrease as a percentage of revenue is primarily related to lower gas costs in the U.K. market and the elimination of the carbon tax in Canada in Q2 of '25. Delivery in the third quarter of '25 increased by $4.7 million to $16.9 million compared to $12.2 million in the comparative period of '24 and as a percentage of revenue decreased by 0.8 percentage points to 10.8%. The decrease as a percentage of revenue is primarily related to the combination of the Stellar Mayan cost structure, delivery route optimization and lower fuel prices in Canada. Occupancy costs in the third quarter of '25 increased by $1.3 million to $2.9 million compared to $1.6 million in the comparative period of '24 and as a percentage of revenue increased by 0.3 percentage points to 1.9%. The increase as a percentage of revenue is primarily related to higher facility operating costs. Materials and supplies in the third quarter of '25 increased by $3.8 million to $7.4 million compared to $3.6 million in the comparative period of '24 and as a percentage of revenue increased by 1.3 percentage points to 4.8%. The increase as a percentage of revenue is primarily related to the combination of the Stellar Mayan cost structure. Repairs and maintenance in the third quarter of '25 increased by $2 million to $5.9 million compared to $3.9 million in the comparative period of '24 and as a percentage of revenue increased by 0.1 percentage points to 3.8%. Corporate costs in the third quarter increased by $1.1 million to $5.3 million compared to $4.2 million in the comparative period of '24 and as a percentage of revenue decreased by 0.6 percentage points to 3.4%. The decrease as a percentage of revenue is primarily related to the combination of the Stellar Mayan cost profile. Now looking at our capital resources. Distributable cash for the third quarter of '25 was $19.6 million, and our payout ratio was just under 20%. The company paid out $0.3 per share in dividends during the quarter for total consideration of $3.9 million. The corporation had net working capital of $95.7 million at September 30, '25, compared to its working capital position of $54.1 million at December 31. The increase in working capital is primarily attributable to the acquisition of Stellar Mayan on June 11 of '25. With regards to credit and liquidity, we have a strong balance sheet and ample undrawn capacity on our syndicated revolving credit facility, which has an operating line of $175 million, and amortizing term loan of $134.3 million and a further $50 million accordion for growth purposes. At September 30, we had an undrawn balance of close to $54 million on our operating line without taking into account the accordion, which reinforces our strong liquidity. This results in a debt-to-EBITDA ratio on a pro forma basis, excluding leases of about 2.7x. Debt to total capitalization for the period ended September 30, '25, was 49.5%. Total debt net of cash decreased in the quarter from $228.3 million to $220.3 million due to repayments of revolving debt and the amortizing term loan. I'll now turn things back over to Linda for additional commentary. Linda, please go ahead. Linda McCurdy: Thank you so much, Kristie. So I just want to point out that K-Bro went public 20 years ago with a vision to deliver industry-leading essential service to healthcare and hospitality customers. At the time of our IPO, we had 4 Canadian facilities and aspirations for national expansion. Today, we've grown our footprint to 25 facilities with national platforms in both Canada and the U.K. Our coast-to-coast footprints in both countries give us strategic national presence, scale and efficiencies, and we're excited by our growth opportunities ahead. While still early, we're pleased with the progress of our ongoing Stellar Mayan integration efforts. Our U.K. Managing Director, who is an experienced K-Bro veteran oversees the combined U.K. operations, including the Stellar Mayan business integration plan. Our transition team is reviewing cost synergies, operational efficiencies and platform optimizations, and we anticipate run rate cost synergies will be realized over the contemplated 24-month time horizon. On a consolidated basis, we're excited about the future potential of our combined business. We have been market leaders in the Canadian healthcare sector for over half a century, and we're excited to expand the scale of our U.K. healthcare business. Both of K-Bro's healthcare and hospitality segments continue to experience steady growth trends. In the Healthcare segment, we expect activity levels to remain strong from continued focus on reduced wait times and enhanced patient care. In the hospitality segment, we expect solid activity levels from both business and leisure travel, reflecting historical seasonal trends. Going forward, we expect combined adjusted EBITDA margins will remain at similar levels to seasonally adjusted combined historical margins. In line with management's expectations due to the lower EBITDA margin profile of Stellar, the consolidated U.K. divisional adjusted EBITDA margins will be lower than seasonally adjusted historical margins. We continue to monitor evolving global and Canadian foreign policies, geopolitical events and economic conditions, which could have a direct or indirect impact on K-Bro. We're not currently expecting meaningful impacts on the business as key customers and suppliers are not U.S.-based. On November 5, you will have noticed we announced a new Board appointment. We are absolutely delighted to announce the appointment of the Honorable Rona Ambrose to our Board of Directors. Ms. Ambrose is the Deputy Chairman at TD Bank Group's Investment Bank. She's also served on several corporate and nonprofit boards. She's the Founder and Chair of the Council of Women's CEOs, Chair of Plan International Canada and a passionate global champion for the rights of women and girls. I'm sure most of you know that prior to her retirement from politics in 2017, she was leader of Canada's official opposition in the House of Commons and leader of the Conservative Party of Canada. She's held many cabinet positions during her time, and we are absolutely delighted to add her as a Board member to K-Bro. We are -- going forward, committed to a sustainable future, and we're proud to say that we have 7 decades of responsible, innovative growth. We are excited to publish our third annual sustainability report in the next month. It will be accessible on our website. We continue to collaborate with our shareholders to appreciate their priorities, solicit and receive feedback and align around common goals. Our services are essential to the continuity of our customers' operations, and we're embodying sustainability practices to support them for the long term. I'll now open it up to any questions you may have as it relates to the third quarter. Operator: [Operator Instructions] Your first question comes from Michael Glen with Raymond James. Michael Glen: Linda, just to start, with the U.K. division, if we're looking at the MD&A, there is this notable jump in wages and benefits, and you've explained that's related to Stellar Mayan. I'm just trying to get a sense here when you look at that particular line and cost structure, do you think you can eventually over time, get it back down to what your U.K. average was pre-transaction? Linda McCurdy: I would say that we'll certainly gain ground there, Michael. Getting it back to the historical percentage of revenue for wages and benefits we'll probably not get all of the way there, but we certainly will gain some ground. And that will come through operational efficiencies that we're working. Our Canadian team and our existing U.K. team is working with the Stellar team, both in terms of changing shift patterns, which will be helpful, eliminating night shifts, which are costly and not as efficient. It will come through improvements as a result of the CapEx plan that we announced as part of the acquisition. And it will also come from increased prices as we move forward as contracts renew. So there will be improvement, Michael. It won't be in a -- on a 1-quarter basis, but there are several key focuses that will result in improvements in that area. Michael Glen: Okay. And is there -- if we look back to Fishers, I believe there were some wages, some cost benefits you realized there from -- on wages and benefits. How -- could you just recall how long that took to be realized? Linda McCurdy: Up to the 24-month mark, which would be the plan. Michael Glen: Okay. And just moving over to Canada. So organic growth, as I'm calculating -- year-over-year growth was 4.5%. That number, as far as I can tell, that's a pretty clean read on what organic growth is because you're not including -- we're lapping all the M&A now. Can you just give a read on -- is that the right rate for organic growth in Canada going forward? And where are you seeing some of the pockets of strength within that organic growth figure? Linda McCurdy: I would say that from mid to mid-single digit is a reasonable expectation going forward or slightly higher. I think we've seen solid growth in the Quebec market, more to come there as well as in the Toronto market. So I'd say we're optimistic in both of those key markets, but we'll see consistent growth across the country, Michael. Michael Glen: And you would say that mid-single digit based on what you see in front of you that should continue through 2026? Linda McCurdy: Yes, yes. Operator: [Operator Instructions] Your next question comes from Derek Lessard with TD Cowen. Derek Lessard: Linda and Kristie, another solid quarter. So congrats to you and the team on your 20-year milestones. Just a couple of questions for me. So almost, I guess, 6 months into the Stellar Mayan acquisition now. Just curious if from when you guys, I guess, first bought the business and you did your due diligence to now, have you maybe identified any other opportunities there or maybe opportunities bigger than you might have originally thought? Linda McCurdy: I think what I would say is we always knew this was an asset that made so much sense for K-Bro to combine with Shortridge and Fishers acquisition. We're even more optimistic about it in the medium term. We have so much to offer that market in terms of our healthcare offering. I think I have relayed many times how we think new innovative products in that market to convert from disposable to reusables, it's even further reinforced. And having met with up to 15 customers since we have closed the transaction, they are very focused on sustainability. We do know that change doesn't happen, clinical change doesn't happen quickly, but there is a desire. There is an interest, and it has been -- the acquisition has been very well received with a healthcare player from a different market coming to the U.K. to offer new products and services. So I think it's further reinforcement of what we believed, but now having one-on-one interaction with customers, I think, further makes us optimistic and enthusiastic about the acquisition. On the hospitality side of the business, I would say -- I will comment quickly on the hospitality side of the business. And obviously, we service now the London market, one of the largest hospitality markets in all of Europe, if not the largest hospitality market, we have a huge platform for growth now there as well. And I think our experience of the Fishers team and the Shortridge team and our commercial expertise and relationships will enable us to grow that part of the business very successfully going forward as well. Derek Lessard: Awesome. That's great color, Linda. And I agree with you a great add to your Board with Ms. Ambrose. Curious if maybe if you can add some color or maybe talk about how that relationship came to be. Linda McCurdy: So the Board and several members of the Board, we obviously have been looking to add an additional Board member. And through existing relationships over a number of years, Rona had accepted to join us, and I think she brings an amazing skill set in terms of her knowledge of government, her knowledge of provincial and federal government and just her exceptional experience on corporate boards. So that's really the history there, Derek. Operator: We have a follow-up from Michael. Michael Glen: Just looking at the CapEx outlook for the next few quarters. I know the CapEx guidance is unchanged, but are you able to just maybe give some indications about how we should model CapEx over the next, say, 2 or 3 quarters with both the maintenance and the Stellar Mayan indicated CapEx? Linda McCurdy: 100% Kristie, I'll let you address that, if you could. Kristie Plaquin: Yes. No, absolutely. I guess -- so in terms of the -- maybe I'll take the 2 pieces separately. So in terms of our ongoing capital, not specifically related to the Stellar [ GBP 5 million ] investment that we had guided on. I would say that with respect to that CapEx, the balance, which is probably in the 2-ish million range would be spent over the balance of 2025. And I would anticipate in 2026 that our ongoing CapEx would be spent fairly evenly over the 4 quarters, Michael. And in terms of the Stellar Mayan CapEx, so specifically the [ GBP 5 million ] I would suggest we've committed to about [ GBP 4 million ] so far of that amount. [ GBP 3 million ] will likely be spent in Q4. Some of that may trickle into Q1. And then the balance of that [ GBP 4 million ] would be spent within Q1 with the further [ GBP 1 million ] to be spent in Q2 of '26. And in terms of -- just to go back to the first comment on maintenance versus strategic, I would say that you would see maintenance CapEx at typical levels that you've seen historically spent evenly over the 4 quarters. Michael Glen: Okay. And then for working capital, any thoughts on buckets of working capital, how they should trend over the next, say, coming year? Kristie Plaquin: We don't see any significant investment required in working capital. I would suggest that it would follow pretty much our historical trends. Michael Glen: Okay. And then can you update us on what type of tax rate we should be using for our modeling? Kristie Plaquin: Yes. So I would suggest in the 25% to 26% range would be a reasonable rate to use. Operator: Your next question comes from Justin Keywood with Stifel. Justin Keywood: Nice to see the results. On the Canadian federal budget, obviously, still some moving parts, but there's been some significant investments announced geared to Canadian hospitals. One mention of $5 billion for a new healthcare infrastructure fund. I'm wondering how that could impact K-Bro Linen. And would there be additional expansion within these hospitals as far as expanding capacity to help alleviate the strain and how you're seeing that impacting the growth profile for the Canadian segment going forward? Linda McCurdy: Yes. Thank you, Justin. We obviously see this as very positive, won't impact necessarily in the very short term. But every time we're adding beds, that has a very positive impact on more Linen required. So while it will take some time, it plays right into our shorter or our medium-term growth that will result in additional volume going through our plants. In terms of how it would impact new markets, I don't think that in itself. A new hospital in Halifax, for example, wouldn't necessarily change our strategy. It would require a larger commitment of larger volumes to enter a new market. But obviously, the operating leverage associated or as part of our existing plants will mean it will be higher-margin business as it comes online. Justin Keywood: Okay. That's very helpful. And then we saw a new laundry peer or comp have a substantial IPO, Alliance Laundry Holdings. A bit of a different business model more from the equipment provider side, but similar end markets to K-Bro. I'm just wondering your thoughts on maybe potential expansion beyond Canada and Europe into the U.S. and maybe how you're seeing that company as compared to K-Bro? Linda McCurdy: So I would say that we remain very focused at the moment on Canadian footprint and platform, and we still have work to do, obviously, with Stellar in terms of optimizing plants, securing and rolling out new products and services. That doesn't mean that we don't keep our eyes on other markets. The U.S. is one of them, which will continue. But we do remain pretty focused on our existing 2 platforms. The U.S. market, given the structure of healthcare is significantly different than the Canadian or the U.K. platforms. To your point on Alliance, similar end markets, but really, I would say, smaller, not necessarily focused on acute care hospitals. So I wouldn't say that there's a lot that is -- a lot of takeaways from Alliance that we could learn from. There are regional players in the U.S. that are of interest. But again, I temper that comment with the fact that we remain pretty focused on our 2 platforms in Canada and the U.K. Operator: We have a follow-up from Derek. Derek Lessard: Yes. I was just hoping you could maybe give us an update on sort of the hospitality trends that you're seeing in Canada, I guess, particularly against the -- still by Canada backdrop. Linda McCurdy: So in speaking with our hospitality partners, they have had very, very solid years, both as a result of staycations, the result of, I think, a weaker Canadian dollar as well as the conference market coming back. I think their expectations for next year remains very, very positive. I'd say -- so from a Canadian context, that works and is very positive for K-Bro looking into next year. I'd say in the U.K., the London market just always remains busy. There isn't -- obviously, outside of COVID or the pandemic, but it remains a very, very active market. Up into Scotland and Edinburgh, in particular, it as well remains a very high traveled destination market. We haven't necessarily seen it, but the Lake District where our Shortridge platform where our customers are from our Shortridge platform. We've had a solid year. Hard to predict what that means for next year. It is dependent on it's weather related, the overall economy in the U.K. is also a factor, but we don't see any warning signs for hospitality in the U.K. either, but we're pretty enthusiastic about hospitality in Canada for '26 based on our feedback from our customers. Operator: There are no further questions on the phone line. I will turn it back to Linda for closing remarks. Linda McCurdy: Well, thank you, everyone, for joining today. Kristie and I are available if there are follow-up questions. So please don't hesitate to reach out. And thank you again, and have a great day. Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines. Have a great day.
Operator: Greetings. Welcome to Gambling.com Group Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to Peter McGough, Vice President, Investor Relations. Thank you. You may begin. Peter McGough: Hello, everyone, and welcome to Gambling.com Group's Third Quarter 2025 Results Call. I am Peter McGough, Senior VP of Investor Relations and Capital Markets, and I'm joined by Charles Gillespie, Gambling.com Group's Co-Founder and Chief Executive Officer; and Elias Mark, Chief Financial Officer. This call is being webcast live through the Investor Relations section of our website at gambling.com/corporate/investors and a downloadable version of the presentation is available there as well. A webcast replay will be available on the website after the conclusion of this call. You may also contact Investor Relations support by e-mailing investors@gdcgroup.com. I would like to remind you that the information contained in this conference call, including any financial and related guidance to be provided, consists of forward-looking statements as defined by securities laws. These statements are based on information currently available to us and involve risks and uncertainties that could affect actual future results, performance and business prospects and opportunities to differ materially from those expressed in or implied by these statements. Some factors that could cause such differences are discussed in the Risk Factors section of Gambling.com Group's filings with the Securities and Exchange Commission. Forward-looking statements speak only as of the date the statements are made, and the company assumes no obligation to update forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information, except to the extent required by applicable securities laws. During the call, there will also be a discussion of non-IFRS financial measures. A description of these non-IFRS financial measures is included in the press release issued earlier this morning, and reconciliations of these non-IFRS financial measures to their most directly comparable IFRS measures are included in the appendix to the presentation and press release, both of which are available in the Investors tab of our website. I'll now turn the call over to Charles. Charles Gillespie: Thank you, Pete. Good morning, and thank you for joining our third quarter 2025 conference call. We generated record third quarter revenue and adjusted EBITDA with revenue rising 21% and adjusted EBITDA growing 3% year-over-year. Our sports data services business grew over 300% year-on-year in the third quarter. The marketing business was flat year-on-year as a result -- as revenue was held back by less favorable search rankings as previously discussed, that persisted for the entire third quarter. As has been the case since July, Google search algorithms continue to generously favor low-quality spam content in the gaming space, in particular, outside the U.S. However, since late October, the search marketing dynamics have started to improve for us. Our sports data services business continues to outperform our expectations with another quarter of strong growth driven by enterprise sales. Sustained strong growth in sports data services is increasingly the future of GAMB given our attractive offering and the multibillion-dollar TAM in front of us. I will, therefore, start today's call by laying out the opportunity that we see within sports data services, our fastest-growing segment. Through a combination of acquisitions and great execution, we have created a fast-growing sports data services business out of nothing, which delights both enterprise and consumer clients and is already responsible for 25% of our 2025 revenue. The tight product market fit we have given us confidence that there is a straightforward path for sustainable and highly predictable growth for this business. Sports betting operators are increasingly reviewing the cost side of their businesses, particularly in markets which are not growing like they used to. Our next-generation data platform delivers comprehensive premium data services at a competitive price point, enabling both start-up and scaled operators to take costs out of their businesses while potentially improving their offerings. We expect this business to finish 2025 strong and to continue to grow organically at a healthy pace in 2026 and beyond. The fastest-growing part of our sports data services business is OpticOdds, our enterprise solution for sportsbook operators. OpticOdds' third quarter revenue doubled year-over-year, reflecting growth in both customers and revenue per customer. OpticOdds began by providing multi-operator Odds data from around the world to the trading teams and sports betting operators to use as an input to their risk management processes, like a bond trader would use a Bloomberg Terminal to understand the bond market. We have expanded the products and now also provide bet settlement services, which is now live with multiple customers. Sportsbook operators can now rely on OpticOdds as an end-to-end solution to power both pricing and bet settlement. Included in our bet settlement services is support for the dynamic pricing of same-game parlays, and we are investigating adding on early cash out functionality. OpticOdds has also partnered with specialist Odds providers like Rimble and Pro League Network to plug into our OpenOdds marketplace, where our operator clients can easily subscribe to additional third-party data services and get delivery through the OpticOdds feed, creating additional value for our customers and enhancing our partners' distribution. OpticOdds was founded by Americans with an initial focus on American sports. We continue to rapidly expand the Odds data offered on the platform to cater to sports betting operators around the world. And year-to-date, we have added 10 sports, 350 leagues and over 1,000 different betting markets to the OpticOdds offering. OpticOdds recently announced a deal with Pragmatic Play, a leading international platform provider. OpticOdds will expand Pragmatic Play's offering by enhancing U.S. player prop market coverage. In short, we are offering more Odds data and trading tools to an expanding client base, thanks to enhanced distribution. Another exciting aspect of the OpticOdds business is the clear value we can create for firms trading on prediction markets. This segment of the business is growing rapidly and currently includes a number of Wall Street's most well-known firms as well as the market-making arms of Kalshi and Polymarket themselves. We expect the prediction market ecosystem to become significantly larger given the national addressable market and some advantages over state-regulated sports betting. Prediction markets are additive as a new category in the U.S., not a substitute for sports betting as we know it, which will no doubt still thrive given its simpler and more accessible product. We believe that our OpticOdds solution is uniquely well positioned to assist market makers and therefore, monetize the growth of prediction markets as they expand options for sophisticated consumers who want to create risk exposure with better payouts and fewer gimmicks. Given the long runway we have for consistent growth in our sports data services business, we believe that this exciting future will be the core of GAMB. Having said that, we expect our sector-leading marketing business to grow in 2026 and beyond, which will throw off more than enough cash for us to continue to invest in our sports data services offering and retain firepower to deploy capital to create shareholder value. I'd like to congratulate everyone working on our marketing business for winning the EGR Affiliate of the Year Award for an unprecedented third time in October. We are simply unequaled in our success in the online gambling affiliate industry. Having operated a search marketing business at the highest levels of success for nearly 2 decades, we remain confident that the recent underperformance of the marketing business is overwhelmingly driven by short-term temporary search dynamics, which will be addressed. Following Elias' review of the third quarter financial details, I will map out how we expect to return to growth in the marketing business. Elias Mark: Thank you, Charles. Third quarter revenue grew 21% year-over-year to a Q3 record of $39 million. Sports data services revenue quadrupled to $9.2 million in the seasonally slower third quarter. Subscription revenue was 24% of total revenue. Inclusive of revenue share arrangements in our marketing business, recurring revenue was 49% of total third quarter revenue. Our marketing business continues to be impacted by low-quality search results in the gaming space, primarily outside of the U.S. as we have discussed. As a result, marketing revenue was flat and NDCs of 101,000 were down 13% year-over-year. Gross profit increased 17% to $35.6 million. Cost of sales of $3.4 million compares to cost of sales of $1.7 million in the year-ago period, reflecting costs associated with the acceleration of our traffic sources diversification strategy for the marketing business and cost of sales from the acquired OddsJam and OpticOdds businesses. Gross profit margin was 91.2% compared to 94.7% in the year-ago period. Operating expenses adjusted for fair value movements and acquisition and restructuring related expenses grew 30% to $25.7 million. This growth is primarily associated with added headcount from this year's acquisitions, higher marketing costs associated with traffic source diversification and increased share-based payment expense. Headcount outside the acquired businesses is flat year-to-date. While keeping a very keen eye on cost control by optimizing our operating teams and adopting AI in our work processes, we continue to invest in product development and diversification strategies that we believe will power growth in coming years. Adjusted EBITDA grew 3% to $13 million. Adjusted EBITDA margin of 33% compared to 39% in the year-ago period, reflecting the higher cost of sales and marketing expenses associated with our traffic diversification strategy. Adjusted net income and adjusted net income per share for the third quarter fell 16% from the year-ago period to $9.3 million and $0.26, respectively, primarily because of increased interest expense. Free cash flow was $9.6 million, reflecting strong cash conversion from adjusted EBITDA of 74%. Free cash flow was down from $14.2 million in the year-ago period as a result of timing differences in 2024, where we saw an atypically strong Q3 following an atypically weak Q2. At the end of the quarter, we had total cash of $7.4 million, and we had $70.5 million of undrawn capacity on our credit facility. During the quarter, we acquired Spotlight.Vegas, which included a payment of $8 million before working capital adjustments. We also made interest and term loan repayments of $3.4 million and $5.6 million, respectively, in the quarter, and we've repurchased approximately 562,000 shares for a total consideration of $4.7 million. Year-to-date, we have acquired 672,000 shares for total consideration of $5.6 million, and we have $14.4 million remaining with our share buyback authorization. We continue to generate strong free cash flow, which, together with our healthy balance sheet and undrawn credit facilities, continues to provide us with the flexibility to optimize our capital structure and shareholder value. This morning, we revised our full year guidance to revenue of approximately $165 million and adjusted EBITDA of approximately $58 million. The change in guidance reflects the continued headwind of poor search dynamics, which affected all of Q3 and while recently somewhat recovering, persists in Q4. During our Q2 call, we expected Google's anti-spam team to make more progress against bad actors than we have seen to date. When Google addresses these quite objectively and frankly, serious quality problems with the search results, we will immediately see meaningful revenue improvement, which flows straight through to adjusted EBITDA. Our revised guidance also includes approximately $1 million in higher cost of sales than previously anticipated related to the successful acceleration of our traffic diversification strategy. The midpoint of the revised guidance represents 30% year-over-year growth. The midpoint of the revised adjusted EBITDA guidance reflects 19% year-over-year growth. Our guidance assumes an average euro to USD exchange rate of $1.15 for the year. I will now turn the call back to Charles for a review of the work we're doing to diversify and expand our marketing business. Charles Gillespie: Thank you, Elias. We continue to see tremendous value in our marketing business that far exceeds the value currently being ascribed to it by the public markets. The perception gap is due to the fact that the marketing business has already been transformed from a pure SEO business into a diversified marketing engine, which is less reliant on SEO than ever before. Our push into non-SEO channels has succeeded and is already evident in our year-to-date results. In Q4, we expect to generate more revenue from non-SEO channels than SEO for the first time as a public company. And as these non-SEO channels scale further, the economics become increasingly attractive. I think the best is yet to come as our marketing business is uniquely well positioned to drive growth and an exciting new line of business we plan to launch in Q1, which will further diversify our offerings. My positive tone today reflects the fact that my senior leaders and I are genuinely excited about both our fast-growing sports data services business and the future of the marketing business. On the marketing side, we are, however, behind where we and our analysts thought we would be this year. And as a result, the share price has come under substantial pressure. This recent price action seems to suggest that the marketing business is dead or dying, a position which is simply unsupported by the facts as we produced $13 million in adjusted EBITDA and nearly $10 million in free cash flow in the quarter despite having one hand tied behind our back from short-term search dynamics. Furthermore, our business is now more resilient than ever, thanks to 2 years of successful execution against our plan to diversify away from SEO. While the full SEO recovery remains in front of us, we are now past the worst of the short-term challenges and off the low point of the last several months. Even though SEO is a smaller part of our future, there is still substantial upside to the current run rate of the SEO side of our marketing business. We consider the company's current market valuation simply wrong and have a sizable authorization for share repurchases in effect, which we are using. All in all, our diversification initiatives have already resulted in both a new fast-growing sports data services business and a more resilient marketing business that we expect will grow in 2026 and continue to throw our strong free cash flow for years to come. Operator, we will open up the floor for questions. Operator: [Operator Instructions] Our first question is from Ryan Sigdahl with Craig-Hallum Capital Group. Ryan Sigdahl: I want to stay on Google search, just given the impact to results and kind of the transitory impact of the business right now. I guess what gives you confidence to step out on a ledge with confidence and say you're positioned to grow that business in 2026? Specifically, I know you gave some comments, but I guess, secondly, to that or more specifically, has Google changed their algorithm where you've actually seen rankings start to change? Or have you guys refined internally to make things better? But what exactly has happened in recent weeks that gives you that confidence? Charles Gillespie: Ryan, so towards the end of October, some of these spammy results started to get thinned out, rankings improved. We saw better rankings. We saw better traffic, and we immediately saw more revenue. So Google search is still working exactly in the way it has frankly always worked. I know we talked a lot about AI headwinds on the Q2 call. I think we maybe over -- put a little too much emphasis on that. The reality of the situation right now is that this is absolutely a business-as-usual search situation. It's not anything to do with AI. It's just rankings at the end of the day. And as we've seen rankings come back, it has immediately translated to revenue as we would have expected it to. So that gives us great confidence that, frankly, it is business as usual with Google. And we've always managed to get past any sort of ranking challenges in the past, and I don't have any doubt that this time will be different. But it is a little bit -- what is different this time is it's a little bit more dependent on Google than us. We're not -- I'm not responsible for clearing the spam out of the search results. That's obviously the search engine's job. And we think that there is possibly -- Google -- certain Google people have telegraphed that there could be another update coming end of the year in December and a focus of that update could be on dealing with some of these sort of spam results. And therefore, we, in general, expect this to come back around, and we have reason to believe it could meaningfully change in December, if not before December. This has taken longer than it normally takes. Obviously, that's affected our results and guidance today, but there's -- we don't have any reason to believe that anything has fundamentally changed. Ryan Sigdahl: Helpful. Data services, big focus, great growth, a lot of opportunity. I appreciate kind of the comments there. On the B2B side, it certainly seems like a lot of momentum in core markets and predictions. I want to actually ask about the B2C side, which historically was the bigger part of that business. But has that continued to grow? Is that an emphasis? And then what are you guys working on specifically on the OddsJam side? Charles Gillespie: Yes. Revenue year-on-year in the consumer data services, so that includes B2C RotoWire and B2C OddsJam grew marginally. Pro forma growth on a like-for-like basis year-to-date is around 10%. The third quarter was affected by the launch of the refreshed RotoWire products, where we are optimizing for improved customer lifetime value at the expense of short-term revenue, which we have historically seen substantial spikes in revenue from that business at the very beginning of football season due to the way that they used to monetize the apps. Now we're -- we have subscriber numbers for RotoWire are up 20% -- 21% year-on-year, and that's on a much better -- much higher estimates of subscriber LTV. So we're well positioned with that business to grow from this point forward. And also in October, OddsJam added some new features, which analyze the liquidity across prediction markets and betting exchanges to identify where the sharp money is. And so that their users can kind of position themselves alongside that smart money. And that product has been an immediate hit. It's driving growth in ARPU and new users and is a perfect example of how we keep innovating with that product to drive growth through added features. Ryan Sigdahl: I can attest that I've tried your sharp money product, that is fantastic. Good luck, guys. Operator: Our next question is from Jeff Stantial with Stifel. Jeffrey Stantial: Maybe hanging on Ryan's second question, but switching more to the enterprise side of the data services business. Charles, could you just give us a little bit more color on progress to date on OpticOdds commercialization? Sort of what inning are you in of having that new sales team attack sort of some of the opportunity in Europe, bring more customers into trial? What's been the conversion rate on those trials? Just any sort of additional metrics or color that can help us think about sort of what point on the J-curve you're at today would be helpful. Charles Gillespie: Yes. I mean, as I said in the prepared remarks, we've got a tight product market fit with the offering we have today with OpticOdds. I think there's a very clear and long runway to grow the business just with that offering. Now having said that, we've got a great team there. They're very ambitious and very keen to build additional features and expand the capability of the product as we all are. And so I think when you look out over '26, '27, there's a lot of opportunity there beyond just pure data and bet settlement. There's an entire kind of category of services called managed trading services. Some people call that sportsbook operations, but you've got personalization of content, player profiling, active risk management, bet acceptance. There's a whole kind of suite of problems that need to be solved before you get to being a platform provider. We don't want to do that. That I think operators need to do that themselves. They need that last step where the UI touches the user. I mean that's the critical place where an operator differentiates their offering. But everything kind of behind the scenes, especially around risk management, bet acceptance is very interesting to us. And I think it was Bezos that said, your margin is my opportunity. There's quite a lot of margin out there between Sportradar and Genius and others that are doing very well with this category. And I think we've just got the team, the tools and the platform to be extremely competitive in more than just data and bet settlement. So that's where our heads are at when you look at the next kind of 1 to 2 years. Jeffrey Stantial: That's great. And switching gears, Elias, can you just help us think a little bit on -- I know you're not providing formal guidance quite yet, but just on the margin side of things, just how to think about directionality here as we head into 2026, cost of sales starting to tick a little bit higher on some of these adjacencies in the marketing business. I think you touched on it in the prepared remarks that's going to be a bit of an investment mode before you start to realize the benefit of leverage on that. But just can you give for us a sense of sort of puts and takes and how to think about margins maybe relative to your historical guidance as we start to look to 2026? Elias Mark: Yes. I think before we look into '26, and you're right, we're not giving formal guidance here, but a few talking points, I think, would be helpful for everyone. But before we get into that, it's important to kind of highlight what Charles said earlier that we think we are through the worst of the SEO challenges and our non-SEO efforts are really bearing fruit faster than planned. So we have a high degree of confidence that we have bottomed out, and we're on the right path here. So this means that we expect to see kind of mid-teens growth in revenue and around 10% adjusted EBITDA growth or even mid-teens growth quarter-on-quarter from Q3 to Q4. Our updated guidance implies revenue of $46 million for Q4, which will be by far the biggest quarter in the company history, just to illustrate that we think that although we're not where we thought we would be at the beginning of the year, we're in a healthy place and we have bottomed out. If we turn into 2026, we expect to see overall revenue growth in the low-teens with the sports data services business continue to lead the way. We expect marketing to grow at a rate in the low-teens and for sports data services to grow in the high-teens with B2C in the high-single digits and B2B above 20%. And if we look at our marketing business, our non-SEO marketing business continues to scale. The contribution margin becomes more attractive in the non-SEO channels, and that also carries much fewer fixed costs compared to the traditional SEO business. All in all, we expect to maintain overall adjusted EBITDA margins in the mid-30s as we see on a run rate basis. So in Q3, our EBITDA margin was 33%. Our Q4 guidance looks towards 33%, 34%. I think that's pretty indicative for our expectations for 2026. Operator: Our next question is from Barry Jonas with Truist Securities. Barry Jonas: Some of the other data providers have said they're not ready yet to work with prediction markets. Curious to what extent that impacts your opportunity or strategy today? Charles Gillespie: Barry, it definitely positively impacts us. I mean you're right. I think some of the big names out there are taking an extremely cautious approach to the category, which means if you're a market maker, you literally can't buy data from certain people at the moment. We've got, as I said on the prepared remarks, quite an interesting business developing there. A lot of the market makers, both on Wall Street, traditional kind of Wall Street market makers, which are active on prediction markets and then the prediction market kind of native prediction learning companies, if you will, are -- they're virtually all clients of the data services business, not necessarily marketing. But that data that we have is exactly what traders are looking for to make markets and reduce risk. Barry Jonas: Great. And then just as a follow-up question, I wanted to talk more about trends in the affiliate business outside of sort of that transitory Google algo change. The larger U.S. operators have talked about heightened OSB promotions. Is that something you're seeing translate to your wider business? At the same time, I'm curious to get your thoughts on any implications from PENN shutting down ESPN bet. Charles Gillespie: Yes. So if you look at our -- just to give you a little extra context there. If you look at North America for us, we grew 55% year-on-year in the third quarter, but that was driven mainly by sports data services. While the marketing business was flat globally, it was down a bit in North America, but that was actually driven by Canada. In the U.S. itself, marketing grew year-on-year, and that's thanks to a lot of the non-SEO diversification that we've already done in the marketing business. I think operator demand is healthy on the sports betting side. We haven't seen any meaningful change in the way we work with our operators. We do continue to send more players on a revenue share basis, which delays revenue recognition and suppresses like-for-like growth rates. But even with that, the U.S.-specific marketing business definitely grew year-on-year. In regard to PENN and ESPN, I mean, I think we were all watching with bated breath about what was going to happen there. It is -- we certainly had a few kind of ideas about what ESPN could have done if they were not working with PENN. And one option, of course, is to go deeper with an individual operator like they've done with DraftKings, but it's not going to have a major effect on our business. We work with PENN, of course, but not going to meaningfully move the needle. And of course, we also work with DraftKings. Operator: Our next question is from David Katz with Jefferies. David Katz: Charles, I wanted to go just a little more strategic with respect to the Odds data business and just talk through what the sort of critical success factors are, the barriers, right? I mean you did mention some others that play in similar spaces that may be larger. How important is scale, bundling as part of offerings? What are the things you really need beyond just your obvious innovation capabilities? Charles Gillespie: David, thanks for asking a longer-term question. I think -- as I said, I think we've got a clear path with what we've got, but there are these areas, which I think are easy for us to move into. There's a lot of people out there that provide these managed trading services. It's not just Radar and Genius. There's tons of private companies. But a lot of these companies are pretty old. They've been around 20, 25 years. So they don't have state-of-the-art technology. It just wasn't built in the last 2 or 3 years using native cloud services, data science, Python, low latency, everything. It's just -- no matter how smart you were 25 years ago, it's very dusty when you bring that forward to today. So that creates real technology debt for some of these larger incumbents. And we've talked a lot about the ace team we have with OpticOdds and OddsJam. I mean these guys are hungry and they move very fast. And they start building stuff at the drop of a hat and are extremely effective. So I just -- I think we've got the right people and the right platform to meaningfully go after some of these opportunities. And the other kind of big trend in the space is I think there was this big debate a couple of years ago post pass about official data and some of these -- they were lobbyists to try to get it into the statutes that you had to buy official data. And as far as I understand, I don't think that's succeeded anywhere. And -- but if you have the official data today, it's obviously very -- it's great, and it gives you access to other things, which are bundled along with the official data. But not everybody wants the official data. And this industry, while it's still a growth industry, it's not growing at the kind of furious clip that it was for the first 30 years, which causes a lot of operators to look at the cost side of their business. How can I -- if I'm not going to grow by 25% this year, I'm going to grow by 10%. Well, how can I take 5% in cost out and boost that EPS growth. And whereas I think everybody just kind of naturally gravitated to the official data for a long period of time, I think there's an increasing willingness from a variety of customers in the space to not start there and actually just look and say, okay, well, what else is out there, what can we do? And of course, that's just one thing that we do, but it is a gateway to get the door open and then sell other things to our operator clients. We have great relationships with them on the data services business. They trust us. They ask us if we can build things for them. There's a lot of back and forth in terms of communications and customer feedback. And I think we have operators as trust to solve more problems for them. So why would we not? David Katz: Understood. I see clearly the upstart advantage. But the natural follow-up to that, and it's one that we get about this end of the business all the time is if not for the official data and the scale and the length of tenure, would larger operators just be able to -- why can't they do it themselves, right? I mean that's the question we get all the time. So I'd like to sort of put that one out there, too. Yes. Charles Gillespie: If you just think about the OpticOdds market data business, we spend upwards of $1 million a year on compute to process that data. So if any individual operator wants to do it themselves, well, it's going to cost them at least that, plus then obviously building all the software, the team and everything else. Well, it doesn't -- we don't charge that much per client per year. So there's just an obvious advantage to buy it from us instead of trying to do it yourself. It's a big complex industry. You can't do everything. David, I think it's very helpful to break the operators down into tiers, okay? Like the Tier 1 guys are always going to kind of try to do everything themselves, absolutely everything themselves. That's their whole stick. If they can't do it all themselves, their equity free kind of doesn't make sense. So we're not going after Tier 1s. I mean we do work with Tier 1s on data services, but we're not trying to overhaul their businesses. But there's this very long list of Tier 2, Tier 3, Tier 4 operators, which are very happy to give away substantial portions of their business to anyone that can do it better for them. You think about the long list of online casino operators in Europe, which offer sports betting. It's not the core product. It's just a kind of -- it's a tab on the website. And they want to set it and forget it solution. They don't ever want to think about it. They just want to get a little bit of incremental extra revenue through. And cases like that, they're very happy to work with the most efficient provider that they can find. And when I think about all this stuff, it gives us an opportunity to really invest and win on product. We're a marketing company. So historically, we've won by having great marketing, great distribution. But with our data services business, we can actually win on product. We can kind of go Tesla style and say, okay, we're going to make something that's so good and so obviously better than everything else out there that it sells itself. And I just -- I think we have the team to build products like that. Operator: Our next question is from Chad Beynon with Macquarie. Chad Beynon: Charles, I wanted to ask about the upcoming U.K. autumn budget and how this could affect the business. You guys are obviously a leader in that market. So from what we've heard, it could hurt some of the smaller players. But anything you can help in terms of how you think this will change the affiliate business in that market and what you've learned in the past when taxes have been adjusted? Charles Gillespie: Chad, to the extent that the next U.K. budget does raise gaming duty, it does hold back player lifetime values in the market, and that does ultimately affects what we can charge our clients, but that doesn't happen instantly. The perceptions of the player lifetime value take time to evolve and our commercial agreements take time to evolve. But in any event, if they raise gaming duty, it's obviously not helpful. I think our expectations for the U.K. and Ireland segment next year are very feet on the ground. I think we're actually planning -- when we're looking at our budgeting for next year, we're not expecting it to grow. We're certainly not expecting it to fall apart either, but it's not going to be a growth driver next year for us like it has been in the past. Chad Beynon: Okay. And then in terms of maybe a medium or longer-term question in terms of how you're thinking about running the company's leverage. You talked about at the outset that you are active in terms of share repurchases and you're unhappy with the stock price. So that's obviously a use of capital. You've made some recent acquisitions in the last couple of quarters. And then more importantly, with OpticOdds and the sports data business, there might be other tuck-in acquisitions. So how are you thinking about running the company's leverage at this point, if maybe this is a time to lever up, create the best product for the future or if you're going to run more conservative with just what you currently have in the tank? Charles Gillespie: Yes. Elias and I are always aiming to maximize shareholder value by continuously optimizing the capital allocation. We continue to see buybacks as a tactical tool to maximize shareholder value, but not as a means to return a specific amount of capital. At the moment, we've got about $89 million in interest-bearing debt outstanding, and we have about $70 million in undrawn credit facilities available to us. So as we generate cash, debt repayment is one of the options available to us. OddsJam and OpticOdds are doing really well. They are in a good position to capture most, if not all, of the contingent consideration in respect of 2025. That means that we will owe them $40 million in April '26 and $20 million in April '27. So we do have those payments coming up. At this stage, I don't think we're looking at levering up beyond our existing credit facility. I think we'd like to see a little more rebound in the marketing business, a little more progress on growth in sports data services. And then I think we have some confidence to lean in harder in terms of creating shareholder value through buybacks and other things. But we are -- yes, it's an everyday conversation every year and something we think about a lot. Operator: Our next question is from Mike Hickey with The Benchmark Company. Michael Hickey: Just 2 from us. On the predictions market, obviously, we can't stop talking about it, either can investors, either can operators, it's obviously accelerating here. We've got Flutter last night saying they're going to launch in December. DraftKings probably like to be the same. And part of that, Charles, is pretty meaningful investments in UI as we heard last night, and of course, Kalshi and Polymarket are there. So you've got a pretty vibrant ecosystem. So with that context, how are you thinking about the marketing services opportunity in this category? I know your data peer Sportradar is already active. Just curious how you -- if you're active and how you see the opportunity unfolding, especially in '26 for growth? Charles Gillespie: Mike, thanks for the question. I think the sports data services, as we've covered, is where prediction markets are very exciting. When you think about the marketing side of the business, one unique feature of the prediction markets in contrast to sports, traditionally regulated sports betting is that everybody has to be treated the same. It has to be a totally level playing field. So you can't have personalization. You can't have different bonuses. There's frankly less marketing involved. Now people still need to find these services and sign up, and we can obviously help with that. But I think we're taking a little more of a cautious approach with that, given our partnerships with all of our regulators in the United States. I think broad data services is fairly innocuous. But on the marketing side, there's -- I think there's also an opportunity there, but we're very focused on the data services side. Michael Hickey: Charles, on the data services, it sounds like you might be constrained a little bit on M&A, just given your current leverage profile and your stock being down. How are you thinking about investment there? It sounds like you're adding layers, which is exciting. But how do you sort of balance, I guess, internal investment and capital allocation to sort of the organic development of data versus M&A, which I imagine there's probably some nice tuck-in assets out there that could sort of round out your current offering? Charles Gillespie: Yes, it's a great question. Again, something we are talking about often these days. I think if you come at it from a first principles perspective, you need to figure out what you want to buy. And if it makes true sense for the business, if it literally ticks all the boxes and everybody has very high conviction, then okay, then you need to find a way to pay for it, and hopefully, that will come together. At the current share price, virtually nothing is accretive. It's certainly a headwind in terms of justifying M&A. But that doesn't mean we're not still thinking about things. But obviously, it's front of mind, and we're going to be as focused on capital efficiency as we've ever been. But there's different ways to skin the cat. There's -- every one of these deals is unique and interesting, and there are ways to go out things which preserve our capital efficiency. Operator: With no further questions, I would like to hand the conference back over to management for closing remarks. Charles Gillespie: Thanks for joining us today. We do expect to finish the year strong here in Q4, subject to our updated guidance, and we look forward to updating everybody on that early next year. Thanks for joining. Bye-bye. Operator: This will conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.
Operator: Thank you for standing by. This is the conference operator. Welcome to the Nexus Industrial REIT Third Quarter 2025 Results Conference Call. [Operator Instructions] The conference is being recorded. [Operator Instructions] I would now like to turn the conference over to Kelly Hanczyk, Chief Executive Officer. Please go ahead. Kelly Hanczyk: I'd like to welcome everyone to the 2025 Third Quarter Results Conference Call for Nexus Industrial REIT. Joining me today is Mike Rawle, Chief Financial Officer of the REIT. Before we begin, I'd like to caution with regard to forward-looking statements and non-GAAP measures. Certain statements made during this conference call may constitute forward-looking statements, which reflect the REIT's current expectations and projections about future results. Also during this call, we'll be discussing non-GAAP measures. Please refer to our MD&A and the REIT's other securities filings, which can be found on our website and at sedar.com for cautions regarding forward-looking information and for information about non-GAAP measures. In the third quarter, we took another step in our journey as Canada's industrial building partner by completing 2 exciting new industrial developments and by completing another strong quarter of leasing. Combined, our new developments will add 440,000 square feet of additional GLA and will generate $6.6 million of annual stabilized NOI, representing an enviable 9.4% unlevered return on development costs. On the leasing front, we continue to drive strong organic growth, completing the backfill of 2 of the 3 properties vacated by CCA tenants earlier in the year, advancing leasing on the remaining 2025 and upcoming 2026 renewals and delivering healthy same-property NOI growth in the quarter. I will dive into both the development and leasing achievements into more detail. But first, I'd like to reflect on how far we've come in the last 12 months. In September 2024, we were growing industrial REIT, but we still had 16 retail buildings with over 1.6 million square feet of GLA. We also still had 6 office buildings with nearly 0.5 million square feet, having just closed on the sale of 6 other office buildings. We had completed 3 development projects, but still had significant work to do on our largest project in St. Thomas, and we hadn't yet broken ground at our 102 Avenue project in Calgary. Today, 1 year later, we are in a completely different position. We have nearly sold all of our retail and office buildings at good prices and have used the proceeds to reduce debt and complete development. We are now a pure-play industrial REIT with over 99% of our NOI derived from industrial assets. In this quarter, we completed 2 more attractive projects. We have come a long way in a short time, and I'm immensely proud of our team and the work that we have done. Looking more closely at the development projects that we finished during this quarter, the larger property was a 325,000 square foot expansion, our largest development yet of our building at 70 Dennis Road in St. Thomas, Ontario. This expansion was for an existing tenant, Element5, a leading laminated timber manufacturer. The project was originally planned at 70,000 square feet, but as the tenants' needs grew, we worked with them to adjust the building scope. This resulted in a huge win-win. Element5 has a North American flagship facility, while Nexus owns a well-located high-quality building under a long-term lease. During construction, we earned 7.8% on the development spend. However, effective September, having now met the criteria for substantial completion, the project transitioned to yielding 9% on the completed development cost of $55 million. The second property that we finished was a new 115,000 square foot small bay industrial building at 102 Avenue in Southwest Calgary. We built this on spec, on empty land adjacent to one of our buildings. We completed construction in August and leasing is tracked ahead of plan. We already have tenants for 8 of the 9 units, 5 of which are now firm. We expect the building to begin cash flowing in the fourth quarter and to be fully stabilized in the second quarter of 2026. Once stabilized, the building will generate an 11% unlevered return on its development cost of $15 million and contribute an annual net operating income of $1.6 million. We are still looking for a tenant for our 150,000 square foot Glover new build in Hamilton, which we completed last summer. We own 80% of the property and expect to earn around a 5.9% going yield on our $20 million share of the development costs. It's been a challenging market in Hamilton lately, but we do have a brand new state-of-the-art 40-foot clear LEED-certified product, and we actually will have some pretty good news on that very shortly as things are looking pretty good for us there. But it's a little premature to announce anything, but we'll wait for the next few weeks. We also recently announced 2 additional development projects, which will get underway in the first half of 2026. We are going to build small bay industrial units on vacant land surrounding our industrial building at Adams Road in Kelowna, BC. And at our Richmond property, we're adding 52,000 square feet for an estimated cost of $29 million. The cost is being paid in REIT units issued at $10.50 per unit. We'll earn 6% on our costs during the construction period, and we'll earn a contractual 6% yield upon completion. We expect the construction to begin in the first half of 2026. The third quarter was another strong quarter of organic growth for Nexus. In total, we completed nearly 150,000 square feet of renewals at an average rent lift of 13%. Year-to-date, we have completed a total of 1.1 million square feet of leasing and realized an average leasing spread of over 60% in expiring and in-place rents. In the quarter, our industrial occupancy grew 1% to 96%. Combined with embedded rent escalation in our leases, our leasing activities drove industrial same-property NOI growth of 2.9% in the quarter and on a year-to-date basis. For the full year 2025, we expect to realize same-property NOI growth of approximately 3%. In the third quarter, we signed a 15-year lease for our 223,000 square foot building at Clark Road in London, Ontario with one of Canada's largest construction service firms. This building was vacated in April after Peavey Mart entered creditor protection. The new tenant took occupancy August 1. In their 6-month fixturing period, the tenant will invest between $8 million to $10 million to update the building and pay net rent of $3 per square foot, roughly equivalent to Peavey Mart's exit rate. In January 2026, the fixturing period ends and the rent ramps up to $7 a foot with annual dollar rent steps until 2031 and then 2% thereafter. Our ability to quickly backfill this property is a testament to the strength of our operating team and the quality of the portfolio. It's a really good deal for us. This brings a very strong large tenant, and the reduced rent was due to the fact that we had to put nothing in it and it was an older building, lower clear heights and the rent ramps up relatively quickly back up to market. So we're really pleased with this deal. In April, Peavey Mart also vacated a second building at 40 Avenue in Red Deer, Alberta. We're in discussions with a few prospective tenants. However, it is not yet leased. The building is 190,000 square feet, which is very large for that area. So we're marketing it both for lease and for sale in the event we find an owner operator who is interested. Our cross-dock facility at 102 Avenue in Southeast Calgary, the receiver continued to pay rent through to the end of September, which was longer than what we thought, but we have now a new tenant lined up for December 1. The tenant will pay nominal rent to cover costs during a short fixturing period. And then upon conclusion of the fixturing period, which will be approximately February of 2026, the rent steps up to $27.83 for the 29,000 square foot building. And this is approximately 45% higher than the outgoing rent of $19 per square foot. Overall, while we saw strong organic growth in the quarter, we expect to realize an even bigger benefit in early '26 and from rent steps at Clark Road and 102 Avenue. We've also made good progress on our 2026 renewals. In total, we have 765,000 square feet coming for renewal in 2026. Roughly 50% of this or 385,000 square feet comes due in the first 9 months and the remaining 50% in the fourth quarter. As of today, we have tenants lined up for 90% of the January through September expires, and we will soon begin working on the fourth quarter expires. Nexus has a track record of accretive capital recycling through the disposition of legacy buildings and acquiring newer high-quality tenant industrial buildings. During the quarter, we sold a noncore industrial building located in Saint-Laurent, Quebec for total proceeds of $9.2 million and an implied cap rate of 5.5%. The proceeds were used for debt reduction and for development. After the quarter end, we also closed on the sale of excess land at our remaining retail property, Galeries d'Anjou for cash proceeds to us of $8.5 million. We're now marketing our 50% share of the retail mall for sale. The is an attractive asset in cash flow as well. So we hope it sells in due time. In summary, we continue to advance our strategy in 2025 as Canada's industrial building partner. We will continue to realize organic growth through embedded rent steps and positive mark-to-market on renewal. We will continue our track record of accretive capital recycling through opportunistic acquisition and development. I'll now turn the call over to Mike to give some more color on our financials. Michael Rawle: Thank you, Kelly, and good morning, everyone. Starting with headline earnings in the quarter, net income was $3.4 million, a $49.4 million increase compared to a net loss of $46 million last year. The increase was primarily due to higher fair value adjustments on Class B LP units by $43.3 million compared to a year ago and higher fair value adjustments on derivatives by $20.9 million compared to a year ago, partially offset by lower fair value adjustments on investment properties by $15.4 million and further offset by lower net interest expense by $900,000. Our Q3 net operating income decreased 1.1% or $400,000 year-over-year to $32.2 million. This was primarily due to a $2 million decrease resulting from property dispositions completed since Q3 2024, partially offset by an $800,000 increase in same-property NOI, higher straight-line rent adjustments of $500,000 and a $200,000 increase from completed developments and expansions. Normalized AFFO for the period was $0.146 per unit compared to $0.157 from a year ago, primarily driven by the lower NOI, lower straight-line rent adjustments by $0.5 million and a $300,000 increase in general and administrative expenses from higher compensation and legal expenses. Net interest expense in the quarter was $13.1 million, a $900,000 decrease from the same period last year. The decrease was primarily due to lower credit facility interest expense of $400,000, resulting from more favorable borrowing rates during the period and lower interest on mortgages by $400,000 resulting from property dispositions. At September 30, 2025, our NAV per unit was $12.98, a $0.19 per unit decrease from last quarter, primarily due to the issuance of 2.7 million Class B units in the quarter at $10.50 per unit to fund additional development at our property in Richmond, BC. Our weighted average cap rate decreased by 2 basis points to 5.85% in the quarter. The carrying value of our investment properties decreased by $5.4 million in the quarter, primarily due to the reclassification of our building at 41 Royal Vista Dr, Calgary to assets held for sale. As Kelly mentioned, this quarter, we finished 2 development projects. The completion of these projects will have accounting impacts on our financial results in the future. At our 70 Dennis Road property in St. Thomas, Ontario, the tenant is now paying rent equal to a 9% yield on the $55 million of development costs compared to a 7.8% yield during development. As a consequence, we will generate additional cash flow of approximately $220,000 each quarter. In addition, from an accounting perspective, the full quarterly rent of $1.25 million generated by the building now qualifies as net operating income. This means that it will be included in our FFO and AFFO metrics. Up until September, the 7.8% yield on this expansion was capitalized to property under development and did not qualify as net operating income, FFO or AFFO. So going forward, our key financial metrics will be higher and paint a more accurate picture of our cash earnings. Since we have now completed both the Dennis Road and 102 Avenue projects, we will no longer be able to be capitalizing interest on these buildings, which in the third quarter amounted to approximately $500,000 for the 2 of them combined. I will now turn the call back to Kelly. Kelly Hanczyk: All right. Thanks, Mike. We will now pass the call over to the operator to open the line for questions. Operator: [Operator Instructions] The first question today comes from Kyle Stanley with Desjardins. Kyle Stanley: Just looking at the slight downward revision to your guidance for 2025 on the same property front, I'm just curious what changed, I guess, between August and today that would have driven that? And how much maybe was related to just getting the timing of getting income online? Or was it something more long term in nature that could have an impact to your 2026 growth outlook? I guess, in another way, just trying to think about the slight revision for Q4, does it have an impact on the outlook for '26? Michael Rawle: Kyle, yes, good question. No impact on '26. It's really -- it was driven by primarily 2 different buildings, slightly slower lease-up than we had anticipated. At our 102 Avenue in Southeast Calgary, the receiver stayed in position longer than we had hoped, and it took us a little longer to get -- it will take us a little longer to get the new tenant in at that healthy $27.83 rent because there's a bit of a fixturing period. So they're coming in, in February instead of in 2025, early in 2025. So that's one. And the second one is our lease-up at 855 Park Street in Saskatchewan. We had an expectation to get the new tenant in there a little earlier, and they are lined up for the back half of this year, but it's not as early as we had hoped back in August. Kyle Stanley: Okay. Okay. That's helpful. So limited impact, I guess, on '26, maybe a month in Calgary, to your point, on getting that tenant in, in February. Michael Rawle: Yes, exactly as I told. Kyle Stanley: Okay. Just moving over to your debt stack. Hypothetically, if you were to get an investment-grade credit rating tomorrow, looking at where rates are in the markets, it does look like there would be some pretty significant savings for you. With your swap book, how quickly would you be able to unwind that? And would it be at significant cost? Or -- just walk me through, I guess, your thoughts on that? Michael Rawle: Yes. Good question. So I mean, yes, we've been pretty, I guess, pretty clear that we're heading for an investment-grade credit rating, which is -- we're working through that with the agencies at the moment, but that's probably a back half of 2026 thing. And as far as pricing goes, yes, very attractive rates right now. You're right, there's some benefit there. So we're trying to push the rate a little and get there as soon as we can, but there are limitations. As far as unwinding the hedge book, at the moment, we actually want the hedge book because that effectively keeps us in position for -- like there's a really strong correlation between swap rates and GOCs and government -- investment-grade borrowing yields. So this effectively is like a bond lock for us now. So we would unwind the swap book when we issue investment-grade debt. But up until that point, it basically acts as a good hedge on that bond issuance. So no desire to unwind it at this point. But when we do, it would just be a standard transaction with our counterparties, which are our regular banking partners, so very easy to unwind them at that point. Kyle Stanley: Okay. No, fair enough. And then just last one for me. Kelly, you mentioned Glover and Hamilton making progress. That's great to hear. Obviously, still in negotiations, but how would you say the rent is looking versus maybe what your underwriting had called for? And do you expect a more significant TI package required to get someone in place? Kelly Hanczyk: Yes. A little different route here, Kyle. We are working through an offer to purchase. So I think hopefully, that gets wrapped up and we get something firm and wave in a way we go. So I think at the end of the day, a little different version. It would be a strong deal for us, would free up capital and reduce any burn that were existing on the asset right now as it sits empty. So I think that's the play that's going to happen here. Kyle Stanley: Okay. So just to confirm, you'd be looking to sell it to a potential end user or something like that. That's what you're saying? Kelly Hanczyk: Yes, correct. Operator: The next question comes from Brad Sturges with Raymond James. Bradley Sturges: Just to follow up on that line of questioning on Hamilton. Just would the purchase price be more than the original construction cost? Or how do we think about that? Kelly Hanczyk: I guess my answer would be yes. Bradley Sturges: Okay. Understood. Just on the guidance revision, obviously, a little bit related to timing of leasing. Just what would that imply from an occupancy rate by the end of the year? What -- just to round that discussion off? Michael Rawle: Yes. I'd have to do the calculation. It's, I think, looking pretty healthy. I mean if you back up and look at where we're at today, we have about 475,000 square feet of vacant space, and that is predominantly 4 different buildings. So one is Glover. The other is 7740, the Red Deer, ex Peavey building in Red Deer. And we have 855 in Saskatchewan, which we have a tenant lined up for. And then the final one is the new development at 102 Avenue, which we also have 8 of the 9 units already lined up. And so it's just a matter of the tenants coming in. So leasing for 2025 is in great shape. Bradley Sturges: I guess what's the [indiscernible] in start of next year after the fixturing period. Would you -- do you think that organic growth would kind of get back into that mid-single-digit range? Michael Rawle: Yes, I think a little early for us to give guidance for next year as we're working through our budgeting process now. But next year does look -- I mean, just from what we've disclosed so far, next year looks really strong with the development coming on board and the embedded rent steps that we have. So yes, next year should be a good year for us. Bradley Sturges: And nothing material at this point from a nonrenewal perspective for next year? Kelly Hanczyk: No. It's looking pretty good. Like 3 of them, fairly large, what is this total -- like 400,000 square feet or so comes up from October 31 to December 31. We fully expect all 3 of those to renew. It's all in London. So all 3 are kind of long-term hold tenants for us. Another one in November in that batch was a 91,000 square footer in Montreal in this tenant, just to explain this one. So if anyone is going to leave, it's this one, they were in at a $6 rate, and I think they had like 3 renewal options, 5-year renewal options for like 2% each renewal option flat. And they were looking to consolidate their operations. So we did a 1-year deal with them at $9 per square foot. And I expect them to vacate possibly at the end of November and that we think we can re-lease that in the low teens. So that's the one that possibly, but that's end of the year, November 30. And we've made good progress already on the first half of the year. So things are looking pretty good. Michael Rawle: Yes. So just to reiterate Kelly's comments on the call, for next year's renewals, half of this GLA renews in the first 9 months. And of that, we've done 90% of it already. So we've got lined up, that tenant is lined up. So a really good jump on that. Bradley Sturges: Last question, just from a modeling perspective, straight-line rent, just given the moving parts around fixturing before rent payment, like how should we think about that over the next couple of quarters in terms of contribution to FFO? Michael Rawle: Yes, it's elevated because we've put in -- with these new leases, we've been bringing in people with pretty rapid escalation in rents. So healthy rent steps. So it's higher than it has been in the past, and you saw that this quarter where straight-line rent is higher than where it has been in the past. Bradley Sturges: I guess it would be at a similar level for Q4 relative to Q3 and then it kind of slips back to where you were... Michael Rawle: Yes, I think so. It's probably a fair way of thinking about it. Operator: The next question comes from Matt Kornack with National Bank Financial. Matt Kornack: Just quickly on the Alberta lease maturities, and you may have mentioned it, but I missed it. They're a bit higher rents, presumably at the type of space that's maturing. But are you expecting kind of a new or renewal leasing spread consistent with the Alberta market on those? Or how should we think about the rents that you'd achieve on those? Kelly Hanczyk: I have to just see here what we have expiring. So it's not. Matt, I have to get back to you because I'm not offhand know what the expiring rents are. Matt Kornack: Okay. Fair enough. Just to... Kelly Hanczyk: One of the... Matt Kornack: I think it's 79,000 square feet at $17. And next year, it's 47,000 square feet at $30 -- is it $35. Kelly Hanczyk: Yes, I have to look at which ones those are. I think one of them, we will take a hit. I believe it's the Blackfalds asset that was formerly -- or that is currently occupied by a subtenant of MasTec. And that one, I know we would definitely take probably, I want to say, maybe a $10 hit on that one. That's the one outlier. Matt Kornack: Okay. If I look at -- I mean, we're at like mid-40% spread for '26 across everything. Obviously, London drives a bit of that. But I guess Alberta would maybe bring it down into the 30s, somewhere in the 30s, I guess, on that. Michael Rawle: Yes. I mean -- we don't have a lot of GLA in Alberta, right, renewing. So it's less than 50,000 square feet. Matt Kornack: Okay. Fair enough. And then just to confirm on St. Thomas, you had no NOI contribution in Q3. You'll get the full $1.25 million in Q4. And obviously, you have a step down in capitalized interest, but you're still going to have kind of $300,000 of residual capitalized interest against other assets still under development? Is that... Michael Rawle: Yes, there will be -- so two questions -- with St. Thomas, we had 1 month worth of NOI contribution from it. So I think it was around -- so that was in the September contribution. And you're right, there's about $300,000 of capitalized interest going forward from the other projects that we have underway. Matt Kornack: Okay. And then for the $400,000 per quarter contribution from Calgary that you're going to get in Q2 of '26, like should we assume kind of half of that you get before? And -- or should we kind of split it out over the next couple of quarters? I think it was 33% leased as of Q3. So it's going to ramp up. But just wondering how we should think about that. Michael Rawle: Yes. I mean I would just move it over the months, assume a straight linear ramp-up. Operator: [Operator Instructions] The next question comes from Sam Damiani with TD Cowen. Sam Damiani: Question for me, just on the, I guess, the use of proceeds from the dispositions coming up in Q4. Will the REIT sort of take the opportunity to delever or redeploy into acquisitions? How are we thinking about, I guess, target leverage as you head toward investment-grade rating next year? Michael Rawle: Yes. So ultimately, we're looking to achieve investment-grade rating. Our focus now from a leverage perspective is to get to below 10x. So -- and we have a clear path to that by mid next year-ish. And so that's our target from that perspective. So going where we will use surplus capital or cash from sales will be delevering and the development that we have in flight. And if there are just amazing opportunities that come up, we consider them. But really our focus at this point is ultimately getting to a mid-9s leverage profile. Operator: This concludes our question-and-answer session. I'd like to turn the conference back over to Kelly Hanczyk for any closing remarks. Kelly Hanczyk: All right. Thanks, everyone, for attending, and we'll chat next quarter. And if any questions, just feel free to reach out to Mike or myself. Operator: This brings to an end today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.
Operator: Ladies and gentlemen, welcome to the analyst and investor presentation quarterly statement January to September 2025. I am Sandra, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Kaveh Rouhi, CFO. Please go ahead, sir. Kaveh Rouhi: Thank you, operator, and welcome, everyone. I very much appreciate that you are taking the time for this investor and analyst call on our 9 months 2025 results. This conference call is scheduled for up to 60 minutes and will be recorded. After my management presentation, I will be happy to answer your questions. Today's presentation is available on our Investor Relations website. The replay will also be available on this website shortly. Our agenda for today, first, I will give a review of our 9 months [indiscernible] our presence in the home segment in the U.S. is currently being evaluated. Excellent service will be our USP in the future, enabled by cost-efficient operations via our [ multi-shared ] service center in Poland. In general, it means that we will use our global footprint even stronger going forward while strategically focusing more on our core market -- on our core home market in Europe. In total, the program will mean a reduction of about 300 FTEs in Germany and another 50 in noncore markets, while building up about 200 FTEs, mainly in Poland and India. Now let's talk about large scale. Our large scale and project solutions continues to operate in a highly dynamic global market that is driven by a growing demand for grid stability solutions. SMA is a recognized expert and leader in this field, which puts us in an excellent position to seize this momentum. One example for the successful inauguration of the first utility-scale battery energy storage system with grid forming technology in continental Europe, in [indiscernible] Germany. We are proud to have delivered 7 medium voltage power stations with our Sunny Central Storage [ UP ] battery inverters and the SMA Power Plant Manager. Altenso also continues to grow and realize challenging projects, as you can see in our second example here. In September, Altenso commissioned a hydrogen plant conversion unit, Hydrogen Dune, a pioneering green hydrogen plant located on the coast of Namibia. The special feature here, this plant is the first ever to operate 100% off the grid and an intelligent energy management system coordinates the optimal time for hydrogen production. Large scale has delivered the first Sunny Central FLEX and a Power Plant Manager in the U.S. at the end of July, manifesting our position as a global player in this field. The Sunny Central FLEX is an innovative modular power plant solution that was just last year recognized by pv magazine with Top Innovation Award. The award recognizes the ability of the Sunny Central FLEX to facilitate the integration of PV, battery, and hydrogen applications into large-scale projects, making it possible to design, build, and adapt for new and exciting power plant use cases. Now let's turn to the last page, our guidance for 2025. As said several times, the market environment for HBS is still very difficult due to macroeconomic deterioration and the declining expansion rates in the residential and commercial sectors in most key markets. Thus 2025 sales are expected to be well below the previous year's level for this division. The large scale and project solutions division is planning sales slightly above the high level of the previous year. Group EBITDA and EBIT will be negatively impacted by lower sales and the resulting lower fixed cost integration in HBS as well as one-offs described earlier. Due to the significant further deterioration in Q3 of the anticipated sales performance for '25 and the following years in HBS, we had to lower our guidance range on September 1st to EUR 1.45 million to EUR 1.5 million for sales and minus EUR 80 million to minus EUR 30 million of EBITDA. Of the expected total one-offs of about EUR 250 million to EUR 265 million, EUR 45 million were recognized in Q2 and EUR 159 million in Q3. Please note that further provisions for restructuring measures will be added in Q4. Last but not least, a note on our upcoming events. Full year 2025 financial results will be published on March 26 next year, combined with an analyst and investor call. With this, I conclude the presentation. And of course, I'm happy to take your questions. Operator: [Operator Instructions] Our first question comes from Lasse Stueben from Berenberg. Lasse Stueben: Just a question on guidance for this year. In terms of revenues, it looks pretty conservative for the fourth quarter. So I'm just wondering how do we square that performance, particularly in large scale in what's usually a stronger Q4 than Q3? So I'm just wondering what the effects are there. And then the second question would be, you're profitable on EBIT in C&I in Q3. Is that something we should expect going forward as well? Or is there more one-offs that we should be expecting in Q4 and also maybe in 2026? Kaveh Rouhi: Thank you for the question, Lasse. Let's start with the Q4 revenue. So you're right, in the last 2 years, Q4 was always the strongest quarter in terms of revenues. This year, we don't expect that, to be honest. I think Q3 was very, very good. And hence, Q4 will be a bit lower. And that's why we were confident with the range that we kind of laid out, to answer that question. And it's depending on when the projects are commissioned, you always have the topic that if a large project at the end of December, is commissioned end of December, then it's in year, and if it floats to the next year, it can be a change of, let's say, EUR 20 million, EUR 30 million, EUR 40 million. That's why it's always a bit tricky to land, let's say, the large scale revenues exactly. But in general terms, Q4 will be a bit lower than Q3 and the numbers will add up. First question. Second question, I'm not sure I got it. I think you mentioned that C&I has a positive EBIT. I'm not so sure about that. Even including -- excluding one-offs, EBIT is negative of that division. So not sure if I got your question right. What if I've answered it? Lasse Stueben: Yes. I mean, if I look into the Q3 report this year and I go into EBIT, sort of in operating profit terms at least, you had, I think, EUR 10 million positive, unless I'm reading it wrong. Kaveh Rouhi: Yes. Let's double check. So we had -- I mean, as shown on Page 6 of the presentation, we had a minus EUR 322 million, thereof EUR 200 million one-offs and the other 100 -- minus EUR 112 million along the 9 months. So even operationally, they were loss-making. So maybe you have to check the report, how you read it. But no, they were not operationally profitable. Operator: The next question comes from Constantin Hesse from Jefferies. Constantin Hesse: All right. Just on my side, I'd like to start with order intake because clearly blowout quarter in Q4 in terms of large scale. What I -- I do apologize if you had commented on it because I was at a separate call because I have 2 results at the same time. So I would like to just understand, in terms of the momentum that you saw in large scale in Q3, how much of that was related to delays that you saw in Q2? And how should we think about this going forward? I mean, is this something that you think is sustainable? Or how should we think about the Q4 level of orders and into next year? Kaveh Rouhi: Thanks, Constantin, and glad you made it to the right call. On the Q3 order intakes, they were higher than what we expect in Q4, to start with that. We had a really good Q3. We had one spike in EMEA, but this will not -- which is a huge project. This will not come again in Q4. As I mentioned, U.S. is getting back to normal levels. I think that's important. And the rest will be good. So we think the order intake will be, yes, something -- at least more than EUR 300 million up to EUR 400 million, depending again on timing of the project. So hence, it will be lower than Q3, but it will be on a good level in Q4. Constantin Hesse: Is that group or is that large scale only? Kaveh Rouhi: Basically, that's the same these days, right? So that's -- because if you see at our order backlog of HBS, it's pretty much stable because what comes in, we basically convert to revenue. So how you want to read it, but this is mostly large scale. Constantin Hesse: So going into '26, this U.S. momentum, you expect that to continue. Yes. Kaveh Rouhi: Yes. Constantin Hesse: I mean, what -- I mean, just trying to figure out, what's the key driver here? Because if I look at the current outlook for U.S., it looks relatively -- I mean, it looks obviously less positive around permitting, there are some issues. In Europe, you clearly have a lot more competition. So what's driving this in both regions? Kaveh Rouhi: I think the market is there. Let's start with that. As you know, we are operating in batteries and in PV markets, right? It's nearly 50-50 in the regions. And we see that the market is there. We have the right products. We have a good market positioning. We have good sales. So I think we are not planning to gain market shares or strongly outperform competition. It's more around keeping the momentum. And with all the USPs we have, which is the grid forming capabilities, the lifetime of our products, the quality that we have out there, I think we can be proud of what the team is doing there. And so this is giving us confidence going forward. Constantin Hesse: You said something interesting. I think you said storage versus solar, it's 50-50 now. So is that the level of storage that you're getting in, in terms of order intake? Kaveh Rouhi: Yes. Yes, roughly. Constantin Hesse: Going into -- Kaveh, so one thing I'm going to ask again, same question that I asked in Q2. Around the building blocks, or should I rather say, how should we think about the development of the bottom line for HBS into next year? Because I think it's been relatively tough to get a clear cut view. I mean, if I add back the one-offs this year and I assume no growth, I'm assuming a loss of about EUR 100 million. But then you obviously have some savings initiatives in place. You said EUR 150 million to EUR 200 million into the end of '26. So if I look at a potential breakeven level for HBS, would that be below EUR 250 million or below EUR 300 million? How should we think about this potential new breakeven level? Kaveh Rouhi: Yes. Yes, that's a good one. I think we have -- we have lots of things in movement, right? And I talked about the value chain and all the adaptations that we make. And I think the breakeven that we need depends a bit, obviously, on the product mix and the margins of the product. So EUR 300 million sales can be very, very profitable. It can also be [indiscernible] with the same profitability of, let's say, EUR 350 million or EUR 360 million revenues, right? So depending on what you assume there in terms of product mix and profitability, the breakeven will never be below EUR 300 million. We will at least need a EUR 300 million to get to breakeven and also even higher depending on how much price deterioration and pressure remains in the market. So I would say, currently looking, and it's a wide range, I know that, forgive me for this, but it's between EUR 300 million to EUR 400 million actually. Constantin Hesse: Okay. EUR 300 million and EUR 400 million in order to -- okay, fine -- to get... Kaveh Rouhi: To get to breakeven. And we will not be breakeven next year, obviously not, because there's still much going on. Constantin Hesse: So -- and if I look at the profitability for large scale, you're probably going to close this year above 20%. Is that a level that you'd expect going forward? Or do you anticipate to start investing a bit more in R&D or whatever? And could there potentially be any headwinds on profitability there on the margin, right? Kaveh Rouhi: Yes, yes. I think there will be 2 trends that will impact the profitability going forward. The one trend is, as you just mentioned, we will need to invest a bit more into this business. We've been a bit prudent last year and also, let's say, until Q2 this year to basically keep the money together and to help with all the other topics. We will now spend more next year for large scale to increase our competitiveness, right? So this will impact profitability to a certain extent. And the other thing, and I know it's always a bit tricky, but it's the FX rates. So we see that expectations next year for the U.S. dollar and euro rate that they will impact our profitability as well. And as we produce in Germany mostly and export it to the U.S., we will get a hit. And then we will say, well, why don't you produce there? So if you do that there, we will have the tariffs and everything coming in. And then things are again more expensive and then you pass it on, so you have a similar effect. So we've done different scenarios. And overall, we will not be able to keep the 20%. Constantin Hesse: So we should be thinking about something right around high double digit, high-teens? Kaveh Rouhi: Yes. I mean, we're not talking about the EBIT margin for next year right now, right? So I think we will give the guidance for next year. It will be lower than 20%, but the group will be positive, so all good. Constantin Hesse: And then just lastly, just wondering if Florian said anything around large scale in the U.S. I mean, I think it's interesting to see what could potentially be a very bullish market for you, right? Because if we assume that FEOC comes out in a rather stringent way, that would, of course, potentially limit some gross business in the U.S. So are you seeing any increased interest, I guess, from U.S. developers for SMA? And then I'm not sure if you've seen that Nextracker, or now they're called Nextpower, they just launched a utility inverter as well. So just wondering if you had some feedback on that yet. Kaveh Rouhi: Yes. The last one just came in this morning. To be honest, I didn't have time to build an opinion myself, so I will not comment on that one. Sorry for that. When it comes to upsides due to the FEOC regulations in the U.S., I think it's fair to say that if you are in this regulated markets, you can have huge swings built on new incentives, tariffs in, tariffs out, protection here, new rules there. And then when you, let's say, build your business around that, you're very prone to be dependent on what actually happens in the end. And you can never be sure that the next guy or even the same guy changes the regulation again. And hence, we are kind of ignoring that. As long as it's not harming us, we are not planning with any upsides. But of course, we will welcome every customer that decides not to go ahead with Chinese and once a European and a premium German venture -- producer, and we will, of course, serve them, right? But for our planning, we are not considering that as a realistic case. It could be an upside, but that's not what we will put in our budget. Operator: The next question comes from Guido Hoymann from Metzler. Guido Hoymann: I've got 3 or 4 questions, and maybe we can go through them one by one. The first one would be, again, on large scale. Am I right, or maybe is that a reasonable assumption that the deadline for switching from the 5% safe harbor rule to the so-called physical work test, I think that was the 2nd of September? So that triggered a lot of prebuying there. So did you observe particularly high orders before that, early September? And how did the, yes, order development then -- yes, develop over the rest of the quarter in the U.S.? And do you think that given that there are other deadlines like July '26 for those projects, which passed this physical work test and then year-end '27 for those projects, which did not meet any deadlines. So do you expect all these deadlines to continue to trigger high demand in the U.S. until then in your large scale business? That would be the first one. Kaveh Rouhi: Okay. Let's do this one first. Hello, Guido. So the safe harbor rule. So no, we don't see an impact, to be honest, in our business. Neither has there been an increase or a decrease. As mentioned, our order intake was good, a little bit of catch-up because Q2 was very low. And we have lots of discussions with customers. And the question is how do they safe harbor. And they don't have to safe harbor buying inverters. They can also, as you said, do the safe harboring by the start of physical work. And hence, many of them are doing that, and we will -- we don't see a drop in our pipeline at a certain point going forward because they have now safe harbor and then there's nothing else after that. Plus, what's also important, let's not forget, these rules apply only for PV only, not for batteries, which is again half of the U.S. business. So it's basically a half of a half of our business that's impacted by those rules anyway. And hence, I think we are pretty prudent here with how we plan going forward. Guido Hoymann: And the second one would be on your status to increase the local content in the U.S. and to avoid or to reduce less tariffs. Can you maybe give me a brief update on the status there? Kaveh Rouhi: Sure. I think the short answer is we're on track. The longer answer would be that, as you know, the MVPS stations, which have the transformers included, they are going to be produced in the U.S. by end of this year, and the integration will start in January. And the whole integration and the ramp-up of the MVPS stations is scheduled for the second half. We do those 2 things with our partners, and they report they're well on track. Guido Hoymann: Then maybe also 2 quick ones. The restructuring costs you're planning for Q4, did you quantify them or can you do that, please? Kaveh Rouhi: Yes, sure. I think the biggest chunk of the still to be booked one-offs for Q4 is the amount of severance payments that we will need to put aside for the labor topics, and we estimate something between EUR 30 million and EUR 40 million. And that is roughly what we had put into the guidance. Guido Hoymann: And the last one, again, on HBS. Obviously, we're coming now a relatively small player. It is a highly price-sensitive segment. So do you see it to be viable or maybe to get an exit for this question? Do you want to focus on specific niches? EV charger, could be something else. Or do you still want to address? Or do you just want to, let's say, focus in a geographical perspective, but not in the range of products you're selling? Kaveh Rouhi: Yes. I think we do focus, but it doesn't mean that we will just sell one product. And I think I tried to lay it out, but let me recap a bit. So we will reduce the global footprint. And as I've learned, these -- the time since I'm with SMA that an inverter is not the same product depending on the countries that is operated due to grid regulations and all these kind of things, cable width, and whatnot. So the variety of our products will be lower because we will have less countries to serve. So here, we will reduce the amount of complexity, right? That's one topic. The second topic is that also the, let's say, the product variety in terms of how many different PV only we have, or hybrid inverters will also be reduced. But -- and this is very important for the core markets that we will target, we will make sure that we will deliver the full solution. And the full solution these days is in hybrid inverter together with batteries, together with energy management, and together with the right software. And so -- and an EV charger, of course, if you have a car. So what we make sure for the home market is we can give to these core markets a complete portfolio, but not having varieties of it in many regions, which will then [indiscernible] to serve. That's kind of making sense? Guido Hoymann: Yes. Okay. Very helpful. Operator: The next question comes from Jeff Osborne from TD Cowen. Jeffrey Osborne: Just a couple of questions on my side. I was wondering if you could articulate what the pricing changes were either sequentially or year-on-year. I think you had alluded to immense pricing pressure in your statement for the restructuring a few weeks ago. Kaveh Rouhi: Yes. I think that's a tough one, right, because it depends product by product. I know that's an easy answer. I think, if you just look at -- and we did the analysis just recently. When you look, what happened H1 '24 between this point of time and H1 '25 in the home market, especially, I think we see price declines between 5% to 15% on average. And of course, this hits your profitability if you can't be flexible with your production. So that's what we call immense in 1 year. Jeffrey Osborne: And I'm just curious, after the Chinese policy changed June 30, if things got worse in the third quarter as it relates to home and small commercial? Kaveh Rouhi: Not really, no. Jeffrey Osborne: Good to hear. And then I just wanted to understand the factory realignment with HBS. It sounds like the majority of the design work will be done in India and manufactured in Poland, if I heard you right. What was the trade-off of possibly using contract manufacturing in eastern Europe or other locations relative to leveraging your own facility, which I think historically made subassemblies and equipment for the utility scale product, if I'm not mistaken? Kaveh Rouhi: I think, for us, it's important that we own the product, that we own the development, and that the software where the heart of the product is compared to maybe 20 years ago where the hardware was a key differentiator. So we want to make sure that this is owned by us and owned by our own development. And we go to India where we have -- we already have established a hub, very good developers and a strong access to the local market, local universities. So that's, I think, the key driver here for the software part. And when it comes to assembly, obviously, there is -- yes, labor arbitrage is one topic. The flexibility is the second topic, and we have experience there. So I think, overall, the -- let's say, the Polish entity is used to do manufacturing, and hence, we will leverage that. Otherwise, it would be a waste of capabilities and good people. Jeffrey Osborne: Maybe just my last question is, if I heard you right, you're reevaluating the U.S. and Australia home market, but you have a sizable presence in the U.S. commercial market historically. I know you're working with Create Energy on the utility scale side. But what's your plans in defending market share as it relates to the commercial segment? It would seem you're poised to lose share given that Chint is likely booted out given FEOC. I think they're the market leader, you're #2 historically. Most of the commercial folks are going to want a U.S.-manufactured product. So do you have plans for manufacturing commercial inverters in America? Or are you willing to seed that market share? Kaveh Rouhi: I mean, currently, the setup is, as you said, we are for the commercial part, right? We produce in SMA in Kassel and we ship it over there. And we have no indications that this is going to deteriorate. When I talked about removing ourselves from potential U.S. and Australia, that's more the home part, not exactly the commercial. So no -- so yes, no concrete plans now to do a localization of that, but could come later. Operator: The next question comes from Peter Testa from One Investments. Peter Testa: I was wondering, on the large scale side, could you just give a sense as to whether the value-added margin is particularly different between battery and PV, whether you see a particular difference in value-add margin? I'll go one at a time. Stop there. Kaveh Rouhi: I mean, I'm not a technical guy, but to be honest, my understanding is in terms of production costs, they are pretty similar. And so I don't recall a big difference in the margins. Peter Testa: So margin mix isn't a factor. Okay. Fine. Kaveh Rouhi: Yes. Peter Testa: And then on the Chinese side in terms of competition, you said there had not been any particular difference in pricing at this stage, I guess, in the HBS part. Would you have any particular concerns about pricing in Europe and APAC, in particular, from the changes in Chinese market situation becoming exporter going forward? Or are you not seeing that? Kaveh Rouhi: No, I think, when we were at Intersolar, I heard a person from Sungrow saying that all the low-tier Chinese players are ruining the market with their pricing, right? And this was referring to China itself, which was, for me, an astonishing statement, to be honest, coming from Sungrow. So overall, I think the price pressure will mostly hit the Chinese market because it's big and they are cannibalizing themselves a lot. And I don't see an additional pressure on Europe due to that at this stage. Peter Testa: And you gave a number between EUR 300 million and EUR 400 million for breakeven on the HBS business revenue. Is that for 2026 or post all the restructuring? Kaveh Rouhi: No, that's post restructuring. That's post restructuring. So as I said, we will not be breakeven next year. Peter Testa: Yes. I'm just wondering what -- whether that sales level is after all the savings or midway? Kaveh Rouhi: No. Peter Testa: And then the last thing is just on -- with the write-offs that have happened in various different levels, both in projects, depreciation, also inventory. When you think about the impact of that on the 2026 profit, i.e., lower depreciation, lower amortization and maybe what happens to the written-off inventory, is there any sense on how that changes the, say, profit base just from the impact of all the write-offs? I don't mean by having no write-offs, I mean, the run rate. Kaveh Rouhi: Yes, yes. So no, it should not impact the run rate because the rules are we can only write off things that we're not going to use next year. So I can't plan now that we will have better margins because I'm going to use them again. So the write-offs are real write-offs. Obviously, we have still the material. We don't plan in the next years, so to say, to use it. However, we need to come up with a plan in terms of how to deal with this amount of materials. And then it might be that at one point, we find good solutions for that, and this could be an uplift, but it will be a onetime uplift and not a run rate [indiscernible]. Peter Testa: So you'd highlight that related to the inventory. But I guess you have lower depreciation, lower amortization because of the write-offs next year. Kaveh Rouhi: Yes, but it's not material in that sense. Peter Testa: Material? Fine. Okay. Operator: The next question comes from Constantin Hesse from Jefferies. Constantin Hesse: Kaveh, a quick follow-up. Just on cash, I mean, your balance sheet is looking quite good again. And I'm just wondering, is there any M&A potential here that you could be keen or focused on, be it a segment M&A, be it a regional M&A, anything interesting? Or is this even a focus potentially? Or will you just continue to focus on making sure that you continue building up the balance sheet? Kaveh Rouhi: No. I think, even if we had an M&A plan, we would not talk about it here, right, to be honest. Operator: [Operator Instructions] We have a follow-up question from Peter Testa from One Investments. Peter Testa: Just on the large scale side, could you talk a bit about 2 things on the backlog and the pipeline? On the backlog, if you look at phasing in terms of how that phases in time, the EUR 900 million -- EUR 902 million, how does that phase out in time by either quarter or years, just to give a sense? I'll ask about the pipeline. Kaveh Rouhi: Sure. So the -- it depends a bit where you have your backlog. So if you have projects in Europe, usually, they materialize up to 6 months -- around 6 months, I would say, 6 to 9 months, depending a bit. And if you have projects in the U.S., they can take up to 12 months because you have to produce here, bring it to Italy, ship it over, bring it then from the coast to the -- so it's usually the, let's say, transport times and it's the time that you need for supply for the MVPS station itself, the medium voltage part. So these are basically the 2 things that are hindering a faster turnaround. And hence, you have something between 6 to 12 months depending on the project. Peter Testa: And I guess, in Australia, it would be more like U.S.? Kaveh Rouhi: Exactly. Peter Testa: And then on the pipeline, can you give a sense, please, in terms of what you're seeing in project behavior -- tendering behavior, i.e., speed at which decisions are made, the speed at which permitting is granted? And just so we can kind of understand what you think about pipeline flow and what it means, therefore, for orders coming to delivery, arriving, and booking of revenue? Kaveh Rouhi: I think, in Q2, if you had asked me this, we were very -- yes, we were very cautiously looking at that because we saw that the turnaround times were a bit slower. I would say we have gone to normal levels. So when I remember our business discussions with the teams, nothing specific, to be honest. So it looks normal. Peter Testa: And the scale of the pipeline, any different geographic message? Kaveh Rouhi: No, all good. As I said, so I think we will end the year with a similar backlog as last year. That's at least what we expect now to happen in the next months. And we will go with a good backlog into next year. And the pipeline itself is on a similar level. So we are -- actually, I'm cautious here given the recent quarters, but I'm actually quite optimistic. So that looks good from our side. Operator: [Operator Instructions] Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Kaveh Rouhi for his closing remarks. Kaveh Rouhi: Yes. Thank you, everyone, again, for your interest. And of course, please do not hesitate to contact us in case you have any further questions. So goodbye, and have a great day. Operator: Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.
Operator: Good afternoon, ladies and gentlemen, and welcome to the MLP SE conference call regarding the publication of the results for the third quarter 2025 and first 9 months 2025. [Operator Instructions] Let me now turn the floor over to your host, Pascal Locher. Unknown Executive: Thank you very much, and welcome to MLP's conference call to our results for the third quarter and the first 9 months of 2025. With me today is our CFO, Reinhard Loose. He will guide you through the presentation. And of course, we are happy to take your questions after the presentation. So please go ahead, Reinhard. Reinhard Loose: Thank you, Pascal, and good afternoon, ladies and gentlemen. First of all, please allow me to present the key message for the first 9 months of the financial year 2025. MLP remains firmly and vigorously on its good course. Even one-off effects, which need to be processed at times as it is the case this year, do not change this. We provided information on this last Friday. Within the MLP Group, we benefit more than ever from our broad and strategically interlinked positioning, which provides additional stability and at the same time, generates sustainable growth year after year. During the first 9 months of this year, we were able to achieve new highs in total revenue despite a persistently difficult macroeconomic environment. This is a remarkable achievement by our team, not least because, as I already reported at the half year stage, we have not experienced and are still not experiencing any tailwind in parts of our markets. Businesses and consumers alike are unsettled. The U.S. President's so-called Liberation Day in particular, with the drastic tariffs shook the capital markets in April and still has an impact today. However, the lack of political decisions, the ongoing economic downturn and not least recent rising unemployment are also cause for concern. Despite operating in such a difficult environment, the MLP Group still succeeded in setting new highs in key figures for future business development. This applies to both the assets under management of EUR 64.2 billion and the managed non-life insurance premium volume of EUR 794 million. In terms of earnings before interest and taxes, EBIT, the MLP Group stands at EUR 61.1 million after 9 months in 2025, which is below the previous year's record high figure of EUR 66.4 million. In the third quarter of '25, we achieved EUR 18.3 million and thus, even slightly exceeded the very strong prior year quarter. One thing is particularly noteworthy about this development, our well-established and very successful consulting business, namely the intensive support we provide to our clients. We are their preferred dialogue partner for all financial matters. A closer look at the previous year's comparative figure makes this particularly clear. Q3 EBIT 2024 includes significantly larger EBIT contributions from performance-based compensation at FERI and from the interest rate business of MLP Banking. This shows the enormous growth and substance that we have already achieved in the MLP Group in recent years. As already reported, we have adjusted our EBIT forecast for the current year. This was due to changed expectations regarding the level of performance-based compensation in wealth management and the real estate development business. In addition, we are seeing a weaker than originally expected old-age provision business. As previously announced, we also intend to focus the business of our group company, Deutschland.Immobilien, and thereby making it less susceptible to risk. We will benefit from this very soon, just like from our extensive IT investments, which I talked about at the half year point. The IT investments are focused particularly on artificial intelligence, which is increasingly being integrated into our consulting services, for example, in the preparation of client meetings by our consultants. And last but not least, we'll further strengthen our position in the corporate client business, among other things, through innovative and digital companies that we have established within the MLP Group in a targeted manner and whose development we are actively advancing. This means we are following our proven path to success. We have increased our EBIT midterm planning for 2028 to between EUR 140 million and EUR 155 million. On our way there, the current year is above all a year of transition, a year in which we have invested and focused. Regardless of the necessary responses to changing markets, our business model is so robust that we have set ourselves even more ambitious yet realistic targets for 2028. The fact that we are implementing this increase in our targets at this particular point in time once again underpins how sustainably we have positioned the MLP Group for this path. You can find an overview of revenue development on Slide 4 of the presentation. In the first 9 months of 2025, MLP increased the total revenue to a new high of around EUR 773 million. The share of recurring revenue was almost 70% at the end of '24, highlighting the great and sustainable stability of our business model. We earn recurring revenue from the continuous high-quality service provided to our existing clients throughout the MLP Group, above all the Property & Casualty and Wealth competence fields. The remaining share of sales revenue generated from our new business, particularly in the Life & Health competence field. In the first 9 months of '25, the group grew particularly strongly in the Property & Casualty competence fields with an increase of 7%. Compared to the same period of the previous year, MLP was able to significantly increase the managed non-life insurance premium volume. MLP also achieved growth in the Life & Health competence field with an increase of 4%, driven primarily by the health insurance business included in this figure and to a lesser extent, by the old-age provision business. After the first 9 months of the year, the Wealth competence field recorded a slight decline in revenue of minus 2%, primarily as a result of significantly lower performance-based compensation. This requires new record levels to be achieved in the underlying concepts even after market-related setbacks. Without the performance-based compensation, the Wealth competence field would also have recorded growth with the corresponding figure standing at 4%. While we recorded lower interest income as expected due to the declining interest rates, we were able to achieve double-digit growth rates in real estate brokerage and loans and mortgages. This is yet another example of the strength of our business model, which is based on multiple pillars. Finally, a brief look at the Others competence field. As expected, revenue was slightly lower here due to the plan that strictly implemented reduction of market and business-related risks in the real estate development business. I've addressed this repeatedly during the previous quarters. And with the step announced last Friday at Deutschland.Immobilien, we now intend to end real estate project development, for which we ourselves are also responsible for construction and thus make our real estate business less risky. We will, therefore, no longer initiate such projects. Only the existing projects will be carried out by us to completion. The growing and continuing trust in our consulting services displayed by our clients is also reflected in the key figures. They are extremely important for future revenue development. It is therefore all the more pleasing that we were able to increase assets under management to a new high of EUR 64.2 billion. To the best of our knowledge, this makes us the second largest bank independent asset manager in Germany today. Let's take a quick look at our other key figure. We were also able to increase the managed non-life insurance premium volume to another record high of EUR 794 million. As of the 30th of September, the MLP Group's consultants served 597,400 family clients. The gross number of newly acquired family clients was 15,500. We also supported a further 27,800 corporate and institutional clients in the MLP Group. The number of consultants rose to 2,121 during the course of the year, primarily as a result of our successful trainee program. This program, which is very attractive for young professionals, equips employed junior consultants at MLP with the skills they need to succeed as self-employed consultants. Indeed, 495 trainees had already joined the program by the end of September '25 since its launch in mid-'23. You can find in the bridged version of the current income statement on Slide 8. In the first 9 months of '25, the MLP Group recorded EBIT of EUR 61.1 million, which, as already communicated, was below the exceptional strong figure from the same period last year, but significantly above the average of the past 5 years with average figures EUR 47.6 million. If you now take a brief look at the right-hand section of the slide, you will see key performance indicators that underpin our strong balance sheet. Our shareholders' equity amounts to EUR 577 million. The regulatory core capital ratio was at 17.9% as of the 30th of September, which remains significantly above the requirements of the regulatory authorities. The liquidity coverage ratio or LCR for short, serves as a benchmark for short-term liquidity and stress scenarios and is therefore an indicator of resilience. At 1,124%, it is also well above the 100% minimum required by regulatory authorities. Let me come back to our recently revised EBIT forecast of EUR 90 million to EUR 100 million for the whole year before possible one-off effects resulting from focusing of the real estate business in terms of EBIT. However, these effects should not exceed EUR 12 million and might also even have an impact on EBIT of the financial year '25. We are more convinced than ever that we will continue our operational business success. In the current financial year, we expect sales revenue to slightly increase in the Property & Casualty competence field in particular. In the Wealth competence field, we continue to expect revenues in '25 to remain at the previous year's high level, though we remain cautious in view of the volatility of the capital markets. Of course, it also cannot be ruled out that there may be positive capital markets developments from which we would benefit directly in the Wealth competence field. In line with developments in the first 9 months, we are now anticipating stable revenue in the Life & Health competence field, having previously expected a slight increase in revenue. Within this competence field, we continue to expect a slight increase in revenue from health insurance and expect now stable revenue from old-age provision. Irrespective of this, we are keeping a very close eye on our costs. As already mentioned, we have slightly increased our midterm planning for the end of '28. The corridor now ranges from EUR 140 million to EUR 105 million -- EUR 155 million, sorry. Previously, it was EUR 140 million to EUR 150 million. We continue to expect total revenue of EUR 1.3 billion to EUR 1.4 billion. Performance-based compensation at FERI, which can only be planned and influenced to a limited extent, has once again been considered cautiously and therefore, only included to a limited extent in the increased planning. We have left unchanged from the previous planning. In this context, I had already referred to the enormous substance of our operating business, which we have continuously built up over the past few years. This is also reflected in our planning for continued significant growth in key figures, namely the managed non-life insurance premium volume and the assets under management. The expanding asset under management, FERI has significant further potential as an asset manager, underpinning by highly professional and modern investment research. In the area of alternative assets, with over EUR 18 billion under management, FERI already maintains one of the largest expert teams in Germany. The strategic development of potential and consulting family clients, the targeted expansion of the corporate client business and the multi-asset approach for institutional clients should lead to growth in all competence fields. The planned significant increase in earnings is also supported by our digitalization strategy with a particular focus on AI applications, which are expected to drive ongoing efficiency gains and further improve client support. Our development of AI service agent continues at full speed. At the final stage, we'll offer clients 24/7 [ visibility ] and complete processing of simple matters. An AI system, which makes the sometimes time-consuming preparation for client appointments significantly easier for our consultants has already reached the practical testing phase. For example, the AI can extract the relevant data for financial consulting from documents uploaded by clients and sought and stored in the right place in our systems to directly support the consultants. These new technologies are used throughout the MLP Group in a very targeted manner, but also always responsibly. Ladies and gentlemen, allow me now to move on to the summary. Firstly, our strategically developed positioning is proving itself more than ever, especially in phases without a tailwind from the market and also when it is necessary to deal with one-off effects, which can occur from time to time. Secondly, artificial intelligence as part of our digital strategy is already an additional efficiency and growth factor today and will remain so well into the future. We'll also remain vigorously active in this field. Thirdly, our increased midterm planning for the end of 2028 underlines our sustainable growth path. In the coming years, we will benefit from the fact that we have now focused our real estate business and at the same time, made strategic investments. Many thanks for your time and your interest. I'm now happy to take any questions. Operator: [Operator Instructions] The first question at the moment comes from Henry Wendisch, NuWays. Henry Wendisch: Thank you, Reinhard, for the presentation. A couple of questions from my side. Let's go with the obvious one I always ask is the net inflows and the performance fee metrics that we have seen in Q3 for our modeling. And then on the same topic, more or less regarding the guidance cut, you said was a mix of 3 things. One is a lower expectation of performance fees and of course, the real estate development that is not turning out the way it might have been looked like at the start of the year. And what is sort of a little bit of a surprise for me is the weaker old-age expectation now. Could you give us maybe a little bit of a split? So which of these 3 developments was the biggest one or to what extent? And then directly a follow-up on that, why has sort of your old-age provision business outlook for Q4? It's very, very important for the fourth quarter. So why has your outlook a little bit changed there? I've seen you launched a new product, the portfolio [ Venter ]. So what is sort of the -- how can we think of this new outlook of yours in the old-age space? And then I think the very positive highlight here is the underlying profitability. It was a very strong gain. And also sales, if you include performance fees, you grew by 5% on a Q3 basis. So that looks very good. And I think the biggest improvement we've seen in profitability was in banking. Could you shed some more light on what has happened there? I've seen a positive effect in the so-called the [indiscernible]. Maybe that's something that's behind this, but I don't really understand yet what is the real driver here, the banking business underlying profitability. So even if you include the net interest income, which has declined, of course, as well, the profitability is still very -- on a very good level there in banking. So what's going on there? Reinhard Loose: Henry, thanks for your questions. And I start with the, let's say, easy one to answer the net inflows. The net inflows for the whole group for the -- let's say, the gross inflow for the whole year was EUR 4.2 billion, and the gross outflow for the whole year was also EUR 4.2 billion. And then we have overall performance of EUR 1.2 billion. Obviously, mixed in different areas. Your next question will be where does it come from? We had outflow of a bigger customer with a consulting mandate in -- with extremely low margin, but with some interesting assets under management. And therefore, the -- in the area of the company sector there was relatively weak for the whole year. This was more or less explanation a little bit to the net inflows. The performance fees for the whole year was EUR 4.8 million. And I think this leads to your question then for the underlying business. And I just would like to compare for everyone here on the call, the performance fee for the first 9 months in '24 was EUR 26.8 million. That means we have EUR 22 million less performance fees in 9 months and only in [ license ], only EUR 5 million less profit finally that underlines that the rest of the business in general was quite okay, I think just to underline this. The guidance cut, yes, performance fee real estate is clear. Old-age provision, old-age provision, we will have a very strong last quarter, but perhaps not as strong as we expected. That's clear. And what's the reason for that? We see, let's say, very, very good activities in the wealth management area. And we know that our consultants are obviously only have 24 hours a day. And at the moment, they invest more time in wealth management than in old-age provision. And therefore, we have a little bit mixed feelings about this. On one side, we are extremely happy what's going on in the wealth management area, especially, let's say, in the area of private -- of the private consultants. The inflows are extremely good there, but this has then the result that they have less time to consult their customers in old-age provision. And that was the reason why we were a little more cautious there. But again, there will be a strong quarter, but perhaps less strong than we would have expected in the beginning. On the other side, we will see better results, I think, in the wealth management area in the last quarter in the private clients business. And therefore, as you also said, the underlying profitability was quite good. One reason for this profitability, of course, was the banking sector. There you also see as an outcome, what I just mentioned, the inflows in this area. We have, in the first 9 months, more than EUR 1 billion net inflow in the private customer sector in the banking with obviously the best margins in the wealth management in the whole group. And therefore, this supports the banking business and in the risk -- the [indiscernible] risk sector. We were relatively cautious concerning risks last year. And therefore, the comparison last year to this year is that we are good provided in the risk sector already from last year onwards, and therefore, we had to do less this year. That was the reason why the risk figure in comparison to last year is quite good. And I hope, Henry, I have answered all your questions with that. Henry Wendisch: Yes. Just one follow-up on the banking. So does this imply that this elevated margin is going to stay there at these levels? Or do you see an effect coming back in Q4 maybe and also into 2026? Reinhard Loose: As always, it's depending a little bit on the development in the market. But for '25, now 13th of November, we don't expect declining margins in the banking sector [indiscernible]. Operator: The next question comes from Jochen Schmitt, Metzler. Jochen Schmitt: I have 3 questions, please. Firstly, what's your new expectation for performance fees for the full year? Secondly, excluding any exit costs, do you expect a negative EBIT from property development in Q4? And thirdly, the EBIT range of your new guidance, may that implicitly be read as sort of headroom for the Financial Consulting segment for which Q4 is seasonally the strongest quarter for full year EBIT, but which may be somewhat volatile. These are my questions. Reinhard Loose: Mr. Schmitt, the performance fee in our original plan, we expected a low double-digit figure for performance fee. I just reported that we have until now EUR 4.8 million performance fee for the first 9 months. I would expect something like a lower EUR 1 million number to add on this EUR 4.8 million, but we will be definitely somewhere between EUR 5 million and EUR 8 million, I would say, just to give some numbers there. On the property and the real estate sector, that's a good question. The question was if we expect a negative result in the last quarter in the real estate segment, I would altogether expect a negative figure there. Yes. And then the EBIT -- I think I lost the last question. Can you please repeat the last question again? Jochen Schmitt: Yes, sure. I mean you have implicitly left a range of EUR 10 million in your new outlook for the full year, but this also refers to the fourth quarter. And what may bring you to the lower or to the upper end? Is it finally the performance of the Financial Consulting segment? That's my question. Reinhard Loose: Obviously -- thanks. Obviously, the area of performance fee left leaves some volatility for the last quarter. We are quite happy with all the other segments at the moment. And therefore, let's say, to reach the upper area, I think we should see -- we have to see no negative or let's say, some positive effects, not perhaps positive result, but at least some positive effects in the real estate segment and some perhaps a little tailwind on performance fees that would help us to come to the upper area of this range. Operator: So at the moment, there seem to be no further questions. [Operator Instructions] So as there are no further questions at this point, I'd like to hand it back to you, Mr. Locher. Unknown Executive: Okay. So if there are no further questions, I would like to thank you for taking part in our conference call. And of course, you can reach us if any further questions arrive later. I wish you a good afternoon. Thank you, and goodbye.
Operator: Good morning, ladies and gentlemen, and welcome to today's Investcorp Credit Management BDC's quarter ended September 30, 2025 Earnings Call. It is now my pleasure to turn the floor over to Andrew Muns, Chief Financial Officer. Andrew Muns: Thank you, operator. Welcome, everyone to Investcorp Credit Management BDC's earnings call for the quarter ended September 30, 2025. I'm joined today by Suhail Shaikh, President and Chief Executive Officer of the company. I would like to remind everyone that today's call is being recorded and that this call is the property of Investcorp Credit Management BDC. Any unauthorized broadcast of this call in any form is strictly prohibited. An audio replay of the call will be available on the Investor Relations page of our website at icmbdc.com. I would also like to call your attention to the safe harbor disclosure in our press release regarding forward-looking information and remind everyone that today's call may include forward-looking statements and projections. Actual results may differ materially from these projections. We will not update forward-looking statements unless required by law. To obtain copies of our latest SEC filings, please visit the company's registration statement on the SEC's EDGAR platform or our Investor Relations page on our website. The format for today's call is as follows: Suhail will provide an overall business and portfolio summary, and then I'll provide an overview of our results, summarizing the financials. This will be followed by Q&A. At this time, I would like to turn the call over to Suhail. Suhail Shaikh: Good morning, everyone, and thank you for joining our third quarter earnings call. We'll start with an update followed by a review of our third quarter results, current market conditions, portfolio activity, and then Andrew will walk through our financials for the quarter. I'm pleased to announce that the managers parent Company continues to provide strong support for the BDC. Our Board of Directors has approved Investcorp Capital, an affiliate of Investcorp Group to provide a backstop commitment to refinance our [ 4.78% ] new notes due April 1, 2026. When this commitment enhances our flexibility proactively addresses the near-term maturity and strengthens our balance sheet. Turning to our third quarter results. We reported net investment income before taxes of $0.6 million or $0.04 per share, a decrease of $0.02 per share from the previous quarter. The sequential decline in NII was primarily driven by a decline in income earning assets due to the loss of PIK dividend income from Fusion's preferred equity position which was placed on nonaccrual status as well as portfolio repayments and our continued discipline and not chasing lower-yielding investments. Net assets declined by approximately 4% with net asset value per share increase -- decreasing to $5.04 per share from $5.27 last quarter. This was largely the result of fair value adjustments and 2 legacy borrowers and the payment of a dividend in excess of NII. Nonaccruals accounted for 4.4% of the portfolio for a fair value, up from 1.6% last quarter following the addition of Fusion's preferred equity position. Although modestly higher, sequentially, the level remains comparable to the 4.8% reported a year ago, underscoring the continued stability of the portfolio and our proactive management of underperforming credits especially legacy credits. Overall, the portfolio remains healthy. Approximately 82% of assets at fair value are rated in the top 2 risk rating categories. Our weighted average interest coverage ratio improved to 2.3x compared to 2x a year ago, reflecting enhanced portfolio strength. Weighted average LTV remains approximately 41%, while weighted average leverage declined to 4.6x in the current period from 4.8x in the prior quarter as weighted average EBITDA increase. The portfolio is broadly diversified across 18 industries with average exposure to any single company representing less than 3% of the portfolio's fair value. As we reflect on the quarter, we continue to operate in a backdrop of solid fundamentals but heightened caution. Deal flow and sponsor-led M&A remains slow with many transactions still working their way through the processes rather than closing. Refinancing and portfolio redeployment activity has also slowed compressing spreads and limiting opportunities for compelling new originations. We remain highly selective in evaluating opportunities that meet our targeted yield and credit quality criteria. Approximately 57% of sponsor-backed private credit deals were priced with spreads below 500 basis points in the current quarter. While we actively manage the portfolio, we're not rotating into lower-yielding assets simply for growth of all deals entering our pipeline this quarter, fewer than 10% advanced to deeper diligence. Instead, our focus remains on credit quality and structural protections. We're not chasing the lowest yielding deals. Approximately 73% of our investments are in covenanted to deals. Looking ahead, we expect NII to benefit from these -- from new fundings, and we remain committed to disciplined portfolio management to drive long-term shareholder value. I will now turn to a summary of our investment activity for the quarter. This was a lighter quarter for sure for investment activity. During the quarter ending September, we invested approximately 25,000 in the preferred equity of 4L Technologies, an existing portfolio company to support an incremental equity raise and our existing position. We also fully realized 2 portfolio company investments, generating total proceeds of $6.5 million with an IRR of approximately 12.7%. We realized our first lien term loan positions in PureStar listed on our SOI as AMCP Clean Acquisition Company and One Call Medical, both of which were refinanced during the quarter. Our realized IRRs from PureStar and One Call were 11.5% and 13.7%, respectively. I'll now turn the call back over to Andrew to review our financial results in more detail. Andrew Muns: Thanks, Suhail. Let me begin by providing you with highlights of our quarterly performance. For the quarter ended September 30, 2025, the fair value of our portfolio was $196.1 million compared to $204.1 million on March 31. Our net assets were $72.7 million, a decrease of $3.3 million from the prior quarter. Our portfolio's net decrease in net assets from operations this quarter was approximately $1.3 million, and the remaining $2 million was due to distribution of cash dividends to shareholders. The weighted average yield of our portfolio from debt was 10.9%, slight increase from 10.6% in the previous quarter ended June 30. As of September 30, our portfolio consisted of investments in 41 companies, approximately 78% of these investments was first lien debt and the remaining 22% was invested in equity warrants and other securities. 98.5% of our debt portfolio was invested in floating rate instruments and 1.5% in fixed rate investments. The weighted average spread on our floating rate debt investments was 4.6%, relatively unchanged from the prior quarter. The average size per portfolio company on a fair market value basis was approximately $4.7 million or approximately 2.5% of total and our largest portfolio company investment on a fair market value basis was Bioplan at $13.4 million. Our largest industry concentrations by fair market value were professional services at 13.7%, insurance at 10.4%, containers and packaging at 8.9%, IT services at 8.5% and trading companies and distributors at 8.4%. Overall, our portfolio companies are spread among 18 GICS industries as of the quarter end, including our equity and warrant positions. We're also pleased to announce that on November 10, 2025, the Board of Directors declared a distribution for the quarter ended December 31, 2025, of $0.12 per share and a supplemental distribution of $0.02 per share payable in cash on December 12, 2025 to stockholders of record as of December 1, 2025. Gross leverage was 1.75x and net leverage was 1.59x as of September 30, compared to 1.77x gross and 1.54x net, respectively, for the previous quarter. With respect to our liquidity as of September 30, we had approximately $11.6 million of cash, of which approximately $7.8 million was restricted cash with $36.5 million of capacity under our revolving credit facility with Capital One. Additional information regarding the composition of our portfolio and quarterly financial results are included in our Form 10-Q. With that, I would like to turn the call back over to Suhail. Suhail Shaikh: Thank you, Andrew. To close, we remain focused on executing our strategy and positioning the portfolio for long-term value creation. We believe we are well positioned for the current environment with a robust portfolio of strong capital backing and a disciplined investment posture that prioritizes credit quality and income stability over yield. As the broader backdrop remains uncertain, our emphasis continues to be on maintaining flexibility, protecting asset value and ensuring our dividend remains fully supported. The refinancing commitment from our parent affiliate, Investcorp Capital, underscores the confidence and ongoing support from our parent company. Further strengthening our balance sheet and providing additional financial flexibility as we navigate this environment, the $65 million commitment to refinance the [ 4.78% ] notes, coupled with approximately 3.6 million shares held by our parent are reflective of Investcorp's strong commitment to increasing shareholder value and aligning interest. While market activity remains subdued, we continue to see solid underlying portfolio performance with strong coverage metrics and healthy diversification across sectors. We remain patient and selective, ready to deploy capital when attractive opportunities arise. Thank you again for your time and continued support. We look forward to updating you on our progress next quarter. That concludes our prepared remarks. Operator, please open the line up for Q&A. Operator: [Operator Instructions] Our first question comes from Christopher Nolan with Ladenburg Thalmann. Christopher Nolan: On the backstop, could you clarify whether or not that's to buy up the full refinance amount for the maturing $65 million bond? Or is that simply just to cover principal and coupon payments from the new bonds? Suhail Shaikh: No, it's the former. So the backstop, Christopher, is to refinance the notes in the event that we have not refinanced them prior to the April 1, 2026 maturity debt. Christopher Nolan: Right. And is there any sort of parameters in terms of the coupons... Suhail Shaikh: Yes, I believe the letter outlines it. We published and it's an exhibit to the 10-Q. We have agreed to SOFR plus 550 on a floating rate basis as the new coupon. Christopher Nolan: Great. Second question, I guess for Andrew, what was the spillover income in the quarter, please? Paul Johnson: Well, I think as we said last time, we don't give the specific spillover income, but I think you probably noticed in the past that our dividend has been above NII. And obviously, the amount that we've chosen to pay out is reflective of the spillback amount that's required so you could make a similar assumption for the declared dividend to be paid in December of this year. Christopher Nolan: Right. And the final question I had is for Klein Hersh. This is nonaccrual, but the cost basis is 0 and the fair value is 0. So why keep it on the investment portfolio at all? Suhail Shaikh: The sub notes? Andrew Muns: We're required to -- under accounting rules, you have to put everything on there that has any chance of being paid at any time. You see the CareerBuilder warrants are on there also marked at 0. Those were not expected to and now that, obviously, the restructuring of that is complete. It certainly will not in the future, pay anything. So that's just something we're required to do and we have had things market 0 before. Interestingly, the notes for client that are on nonaccrual actually have a 0 coupon to them. I think if they were on accrual status, we would theoretically have to amortize the 100% discount over time, which I think would distort the results pretty materially. Operator: [Operator Instructions] I don't see any other questions, sir. Suhail Shaikh: Great. Excellent. Well, thank you, everyone, and we appreciate your time, and we look forward to speaking again next quarter. Thank you, Luke. Operator: You're welcome, sir. And this concludes today's conference call. Thank you, everyone, for attending.
Operator: Good day, ladies and gentlemen, and I warmly welcome you to today's conference call of the Friedrich Vorwerk Group SE following the Q3 figures of 2025. And as always, I'm delighted to welcome CEO, Torben Kleinfeldt; and CEO, Tim Hameister. So the gentlemen will speak shortly and guide us through the presentation and the results. And afterwards, we will be happy to take your questions if you may have. And having said this, Mr. Kleinfeldt, the stage is yours. Torben Kleinfeldt: Thank you very much, and also a very warm welcome from my side. My name is Torben Kleinfeldt, CEO of the Friedrich Vorwerk Group SE. I'm on board Friedrich Vorwerk already since 2001 from profession civil engineer. And I'm responsible of the total overall strategy of the company group and also still focused on a lot of hydrogen projects, which are in progress here in our company's group. Yes, a little bit about Friedrich Vorwerk in detail to all of us who have not seen us yet, Friedrich Vorwerk Group is active since 60 years in the industry of energy infrastructure. The company group is very well represented in the northern part of Germany with 40 locations, about 2,200 employees by today. And we can look back on a very strong growth over the last 5 years with an annual growth of above 20% each year. Our main markets here in Friedrich Vorwerk is, as I said, energy infrastructure, mainly covering natural gas, electricity, hydrogen and we have a -- other piece of adjacent opportunities where we cover all our expertise and services in biomethane treatment and also in district heating. And the business update will today will shine another light on some upcoming projects, which would be within our adjacent opportunities here as well. Main customers, of course, the large TSOs operating here in Germany. So on the electricity side, we see TenneT, Amprion, 50Hertz. On the gas side, it's more Open Grid Europe, Ontras, Gascaribe, these are our main customers, but for very special services also serving the chemical and petrochemical industry here in Northern Europe. Due to the energy transition going on here in Germany and in Europe, we can look back on a very strong order backlog today, still having more than EUR 1 billion of orders in the book by today. So what is Friedrich Vorwerk actually doing? Very short update on that or not an update, but a very short introduction to our business. This slide basically represents what we are doing. On the top, you can see our activities within the natural gas infrastructure. So usually, we are able to set up LNG plants or cross-country pipelines and cross-country stations where Germany is taking over natural gas from various sources outside Germany. Then we are able to engineer and also construct large diameter pipelines to transfer the natural gas to, for example, storage facilities or compressor stations, which are needed roughly all 200 to 300 kilometers in the pipeline to boost the flow of gas and finally bring the natural gas to the consumers. And right at the edge of the consumers, which could be a big city or an industrial plant, it requires also gas pressure, let down and regulator stations to supply the natural gas in the right pressure and the right volume. And of course, there, it needs to be metered for later invoicing as well. So Friedrich Vorwerk is basically able to engineer and also set up, maintain and operate all these components of the natural gas split. Pretty much the same activities. We can supply on the future hydrogen grids, which you can see at the very bottom of this slide, except that, of course, hydrogen cannot be found in nature. So it has to be made by splitting water into oxygen and hydrogen. This is basically done by large electrolyzer stations, where we are also able to supply engineering services, and we have a full range of small to medium electrolyzer arrays from 1 megawatt to 5 megawatt, which we can supply to the market. Business in electricity infrastructure, which is shown here in the middle of this slide, looks a bit different. Usually, our services start when we take over underground cable lines from offshore units. So when new wind farms that are situated outside in the North and the Baltic Sea, cables have to be transferred to land. There's a so-called landfall, which is typically done by a horizontal directional drilling method to under board the crucial environmental areas on the shores of the North and the Baltic seas. And then we are able to engineer and also run underground cables to the next transformer of converter stations with laying cables, we can handle up to 525 kilovolt in transmission voltage. And we are also able to engineer and set up transformer inverter stations, inverter stations unnecessary to switch the current from AC to DC. And of course, in today's grids, we can also connect the electricity grid to the heat grid. So we are also able to engineer and set up large-scale power to heat stations. Okay. Short business update, this time, not on our core markets, electricity, natural gas and hydrogen, but on some adjacent opportunities, which came up lately. First of all, I want to focus on what we call the NATO grid. The NATO grid here in Northern Europe has been set up in the cold war area. So in the -- starting in the '70s and '80s, on the right hand, you can see a sketch of the existing NATO pipeline grid, which is basically transferring jet fuel to crucial air fields of the [indiscernible] and the allies as you can see, basically, the NATO pipeline grid ends pretty much in the -- at the former inner-German border. And now since activities are going more to the east, this nature pipeline grid will be expanded by another 300 kilometers towards the Polish German border and then also into Poland and possibly also to the Baltic states. Since this is the pipeline system, pumping fuel, this is, of course, within our scope and it's a very nice addition to our usual portfolio estimated costs to set up this pipeline grid is roughly EUR 5 billion and also the first steps and the signing of contracts with Poland has been done in October. So we really see that this project is being kicked off, and we'll probably see tenders from the NATO grid in 2027. Next and also very interesting for us is decisions made by the German government concerning ramp-up of hydrogen activities here in Germany. First of all, of course, German government has emphasized that they're still looking for further investments in the pipeline infrastructure and also the plant infrastructure mainly focusing on setting up new electrolyzers to fill the hydrogen core grid, which is planned to be set up here in Germany until 2035, which, of course, requires not only the import of hydrogen, but also the production of hydrogen. They also made decisions to accelerate the tenders by digitalization and which is, I think, the most important decision which has been taken that they also accept not only green hydrogen, but also other colors of hydrogen to be transferred in the corporate and make it available for the consumer. So that's very important decisions for our hydrogen activities. And at the moment, we really see that both on the pipeline side and on plant construction sites, new projects pop up, and we received quite a bit of inquiries for setting up electrolyzers and also pieces of pipeline grid, which is summarized under the core grid here in Germany. And the third outlook I want to show is activities in CO2 transport because also here, very important decisions by the German government have been made in early November. So for example, they've agreed in general that we are able to split up the CO2 for certain industries, which cannot eliminate the emission of CO2. So for example, the cement industry is one of the core industries where you cannot get rid of the CO2 except to capture it and then transfer it to a storage facility. And of course, one of our largest customers, Open Grid Europe is already looking into the future CO2 grid, which will connect the emitters of CO2 to the neighboring country, Belgium and Netherlands because these countries are able to take CO2 and pump it in former gas and oil wells to store there for a long, long time. And also one of the CO2 clusters, which is planned is the so-called Elbicluster, which is pretty much in front of our doorstep to transfer CO2 from the cement industry to the ports on the North Sea and then, there it will be liquefied and brought by shipped to Norway, and Norway is able to take over the CO2 and also store it in old natural gas wells. That's it from my side for the moment. And with the update of our future -- possible future activities, and I would then hand over to my colleague, Tim, who will present the financial performance of the company's group for the third quarter. Tim Hameister: Yes. Thanks a lot, Torben . Good afternoon, ladies and gentlemen, and a very warm welcome to our earnings call and the Q3 figures. My name is Tim Hameister, CFO of Vorwerk. And I'm very pleased to walk you through our extremely strong Q3 figures and the updated outlook today. After reporting record revenue in the second quarter, we once again managed to beat that figure in the third quarter, achieving quarterly revenue of more than EUR 200 million for the first time in Vorwerk's history. Despite ambitious year-on-year figures, this represents growth of a fantastic 39%. Although the start of the third quarter in July was mixed due to challenging weather conditions, this was more than offset in August and September. The continued success in recruiting contributed significantly to this, enabling us to hire more than 100 new employees in the third quarter alone, also including a small M&A transaction consisting of roughly 35 employees. From a project perspective, the largest revenue drivers in Q3 were, of course, still the large-scale Anord project, followed by a number of pipeline projects, such as the EWA pipeline as well as several large volume gas pressure regulating and metering stations, which ensured high capacity utilization for our plant construction division. Consolidated revenue for the first 9 months of the year amounted to EUR 505 million, representing growth of 49% compared with the previous year. In both percentage and absolute terms, our electricity segment was once again the growth driver. However, it's also noteworthy that absolute revenue in the natural gas segment increased slightly again compared to the previous year, particularly due to the high number of plant construction projects. Revenue in the clean hydrogen and adjacent opportunity segments is roughly on the same level as the previous year. However, the development of profitability in the third quarter is particularly remarkable. Once again, the already very solid EBITDA margin of 21% in the second quarter was improved by another 4 percentage points to 25.4%, compared to the previous year, this represents an increase of 8 percentage points and a doubling of absolute EBITDA to over EUR 50 million. The EBIT margin even rose by 5 percentage points to a new record high of 19.1%, corresponding to EBIT of EUR 45 million alone in Q3. All segments contributed to this improvement in earnings are the largest increases that were achieved in the pipeline construction projects. In addition, the share of profits from joint ventures, [indiscernible] doubled compared with the previous year due to the higher number of projects awarded in this specific contract structure. Accordingly, the 9-month period closed with EBITDA of EUR 105.8 million, corresponding to a margin of 20.9% and adjusted EBIT of EUR 87.3 million or an EBIT margin of 17.3%. These fantastic results include minor catch-up effects in the mid-single-digit million euro range from variation and change order negotiations, but as already in Q2, the vast majority was achieved with our ongoing projects fueled by our high-quality order backlog. Now let's take a look at the development of order intake. In addition to the conventional order intake figure, we've introduced a new KPI with the half year figures, the total project volume acquired. And I would like to use the opportunity to once again explain the differences between the two key figures to all shareholders who were not present at our last earnings call. So there are basically two different types of project structures. In Option A, Vorwerk acts as a general contractor and handles the entire project through its own P&L statement, which means that 100% of the order value goes into order intake and later into revenue. And the second option, the client awards the entire project to a joint venture. And in this constellation, we do not show the proportional share of the total order volume and conventional order intake. Instead, we are only allowed to show the supply of personnel and equipment to the joint venture, which can, in some cases, be significantly lower than the proportional share of the total project. The order intake figure, therefore, does not reflect the actual project volume handled by the Vorwerk Group, which is why we also report this new K figure. And this KPI also includes the proportionate project volume from the joint ventures in which Vorwerk involved. And therefore, in our opinion, provides a more transparent view of the actual order situation, regardless of the type to contract structure. So the total project volume acquired rose by 45% to EUR 886 million in the first 9 months of 2025, while conventional order intake at EUR 419 million is around 20% below the same period last year. The main reasons for this are, on the one hand, the shift in the order structure toward joint ventures, especially in H1 2025. And on the other hand, our already well-filled order book. Nevertheless, we've also acquired many new and attractive projects in 2025. Some of them, Torben will present later in this call. The order backlog, which corresponds to order intake declined slightly to EUR 1.1 billion for the reasons stated before and currently consists of around 70% order volume attributable to the electricity segment. In addition to the strong development in both revenues and profitability, the development of net cash is impressive as well. Compared to Q3 2024, we've increased net cash by EUR 80 million to EUR 112 million. And thereby creating an excellent basis for further organic and acquisition-driven growth. The main reasons for the significant increase are, firstly, significantly higher profitability. Secondly, an improved negotiation position with regards to the payment terms in the contracts and thirdly, improved working capital management with regards to our internal processes and project controlling. Yes. And based on the strong performance in the current year and especially in Q3 and an unchanged positive outlook, we raised our guidance already for the second time this year, a few weeks ago. We now expect revenues in the range of EUR 650 million to EUR 680 million with an EBITDA margin of 20% to 20%, 22%, which corresponds to a margin improvement of 5 percentage points at the midpoint year-on-year. Now let me now hand it back to Torben for some updates on the ongoing and upcoming projects before we open the floor to your questions. Torben Kleinfeldt: Tim, thank you very much. Yes, very proud to present another major pipeline project, which will be executed in 2026. It is a project driven by German Gasunie division. The project is strongly in conjunction with the ETL 182, which is a 56-inch pipeline running from Stuttgard at the river banks of the Elbit towards the city of Bremen. In the end, this pipeline will be constructed also by a joint venture driven by Friedrich Vorwerk to bring regasified natural gas from Stuttgard to a hub in close to Bremen and the ETL 179.200, which has been awarded in the last month also to the same joint venture will basically connect the Dow Chemical facility, which is located in the northwest of the city of Stuttgard to this new pipeline grid. It is a 900 so 36-inch pipeline, roughly length is 18 kilometers, very difficult terrain for constructing pipelines. But since it is tight conjunction with the ETL 182. This is a very nice top-up to the existing project and we are actually managing this project also with the same resources as the other project. So second project I would like to represent is the TenneT project, which has already been ongoing this summer. It is one of the landfall projects, which is driven by TenneT, basically a framework contract where we are entitled to cross different islands north of the mainland of Germany in the North Sea by means of horizontal directional drilling. We have to execute in total 39 boreholes for the later use of -- with the cable -- with the high-voltage cables. We have already executed five drillings under the island of Baltrum this year and basically stopped operations now over the winter and we'll continue with the operations on the island of Baltrum next year in May when the window for working in the [indiscernible] is being opened. And once all the cables under the island of Baltrum have been laid, we'll shift to the next islands and then also to Buzon, which is shown here on the top right side of the picture. Friedrich Vorwerk and [indiscernible] share here in this joint venture is roughly 40%. So we'll also be entitled to do most of the drillings, which are necessary to complete all landfalls. Third project I want to focus on today is also from natural gas or hydrogen market. It's a plant construction project, a rather large gas metering stations and pressure letdown station, which is located at the compressor station in Boa, which is in former Eastern Germany. This project is set up by Ontras Gas Transport, and it is necessary to transfer hydrogen, which is taken over from the YAGAL pipeline and will be supplied into the grid of Ontras Gas Transport, where it is then transported to numerous industrial consumers in Sachsen and Sachsen-Anhalt. Friedrich Vorwerk not only has the contract to set up this plant, but also to do the full detailed engineering scope. And we have already started executing the engineering part of the project and will then be executing the actual project in 2027 and 2028. So here also a very nice project for our Plant Construction division, not only here in Halle Saale, but also in [ Vismore ] for the prefabrication activities, which are necessary to perform this project. Final project I want to focus on is another district heating project. You know that we have just finished the so-called [indiscernible] in the city of Hamburg, which is a large diameter district heating system, bringing heat from industrial producers in the port area of Hamburg to the north. And the follow-up project is, so to say, the -- it's called the [indiscernible], which in the end then transports the heat from these industrial consumers more in the middle of the city of Hamburg. This is a project in tendered in 3 lots. We have actually been awarded with lot number three. Pipeline here is also flow in the return line, diameter DN600 and 700 millimeters right in the middle of Hamburg. So very difficult inner city terrain to execute. But since we have a very well trained and very well executing district heating team here, we are really happy to have won this project so they continue -- they can continue their good work from the previous projects. And also looking in the future, there will be numerous district heating projects, especially in the city of Hamburg. For example, we are at the moment working on the tender for constructing also a large diameter pipeline grid towards the airport of Hamburg, which will later on supply the actual airport and also the Lufthansa facilities, which are located right at the Hamburg Airport. Yes. Now final slide from my side, at least on the technical part, is a short update on our newly developed welding system, the so-called PX2. PX2 has been developed and is also operated by our subsidiary, 5 CTECT welding system, fully automatic, being able to trace the actual well, so it can adjust automatically. It doesn't need an operator anymore to be run around the pipeline. system has first been tested on the EWA pipeline this year and has now continued on the pipeline. First experience, very high productivity, very little weld defects. We had a defect quota of below 1%. So repair rate below 1%, which is very unusual in the past with other welding systems, we had almost double-digit repair rates. So we are very, very happy to have developed the system, and we were already able to receive contracts outside Germany, for example, in Croatia and Turkey. And at the moment, we are actually supplying welding services in Turkey to a 40-inch pipeline and quite happy with the production. We are doing almost 100 wells a day, which is a very, very good performance and still with a very low repair rate. So the investment in the development of the new PX2 system is, in general, very good for us and opens up a complete new market also on international projects. And of course, finally, switching back to our HR department, I think Tim already focused on it. We have grown by more than 13% in the third quarter of 2025. So taking on a lot of new employees. And in the end, that has really helped for numerous projects, and we are -- we hope we can keep up the pace with our employees and hope with all these people on board for a very successful 2026. This is the end of our presentation, and we are, of course, very happy to take your questions. Operator: [Operator Instructions] We received the first question, or hand from Mr. Stueben. Lasse Stueben: I'll have three questions, please. First of all, the margin profile in the natural gas segment, it was really high again in Q3. I know that's probably in part due to those negotiation payments. But I'm just wondering, can you just give some more explanation to that? And what we should be looking for in terms of the margin profile going forward? The second one is you spoke in the past about a potential delay on the Anord project. I just wanted to ask how that is looking or if there's an update there and what the possible impact is for you? And the third one is the duration of your backlog now. That EUR 1.1 billion that you have in terms of the phasing, does that already cover you for potential double-digit growth in 2026? Or is there still, I guess, some gaps to fill with some short-term projects for 2026 to potentially achieve double-digit growth? Tim Hameister: Yes. Thanks for joining today, Lasse. I would like to start with the first question regarding the segment profitability. In Q3, there were actually two drivers for the strong margin for the natural gas margin. On the one hand side, I already mentioned, there were some negotiation one-off effects from change in variation orders from past projects. And the second effect here was the high share of joint venture profits because this structure is mainly used at the moment in pipeline construction projects. Regarding your second question, Anord, I still foresee that there will be delays in construction due to a lack of building clearance, especially in terms of missing permits, and we are still in constructive discussions with the client to adjust also the relevant targets for the bonus-malus clause since it's not our risk here in the end. So the customer is responsible for obtaining the permits. And we expect to have a result here on this before Christmas this year. Regarding the third question, the backlog. There are just a few projects such as the [indiscernible] project, Torben , as presented, the [indiscernible] duration until 2028. But apart from that, the majority of the backlog will be transferred into revenue in 2026 and 2027. And therefore, we have a very strong basis for further growth in both of the 2 years. Operator: All right. Thank you so much. Yes, no, we did not receive any further questions. So having said that, we received -- yes, just go ahead with you. The follow-up. Lasse Stueben: Yes. Just a follow-up, please. And then just on guidance, revenue guidance for this year. I mean, we've seen in last year, I know it was probably a bit special with Q4 being stronger than Q3. Guidance this year implies that Q4 is quite a bit weaker. So I'm just wondering, sort of -- what the thoughts are behind that and what that kind of means in terms of also potentially a contribution from Anord. I saw it was roughly EUR 180 million in 9 months. I think originally, you were guiding for I think, EUR 250 million or above for this year. So I'm just wondering if that's still current or if we should be modeling a bit less than EUR 250 million from Anord. Tim Hameister: So based on the current forecast and the Q3 figures, this would imply revenues between EUR 145 million and EUR 175 million for the last quarter this year. When you think about the usual seasonality of our business, Q4 is easily weaker than Q2 and Q3, although we had an extraordinary strong Q4 last year. But in general terms, it's are more likely to expect a weaker Q4, at least in terms of revenue due to the weather conditions and less working days since we usually close the construction sites mid-December. And of course, we also try to reflect risks and uncertainties from our project business within the guidance. Regarding Anord due to the missing permits on some of the sections on the track. There will be shifts of revenue to 2027 as well, at least to the first half of 2027. And therefore, we expect that the revenue contribution this year will be a bit lower compared to previous expectations. Operator: And in the meantime, we received questions in our chat box. And the first one is, to put it simply, which is the better leading indicator of future revenue recognition, the order intake or the new KPI total project volume in your opinion? Tim Hameister: So in our opinion, it's of course, the total project volume acquired. That's the reason we have introduced this figure because can transparently show how much project volume is in the end, handled by the Vorwerk group. Although it's important to say that the total project volume is not the figure that will translate into revenue in the next years. Only the order intake will translate into revenue. However, you will see higher profit shares from these joint venture constructions so that in the end, the total EBITDA will be the same regardless of the contract structure. Operator: Next question, how likely is it that you will be able to generate revenues with the CO2 transport network already next year, assuming the Federal Council's approval is greater this year? Torben Kleinfeldt: We do expect not to have any revenues in CO2, at least not in the pipeline business because the first project is being set up here between cement industry farm in [indiscernible] in the Port of [indiscernible] We do expect that public permits for this projects will be applied for next year. We expect to have a duration of about 12 months to get the permits approved. So construction will probably be '27, '28, '29, but we already have some revenues in the CO2 business, we are delivering CO2 purification and liquification plans, especially as an add-on to our biomethane treatment plants. So this liquefied CO2 goes in the food and also in the beverage industry. And we have already supplied a couple of CO2 electrification plans to the market until today. Operator: And the next question, what are your plans for share buybacks? Tim Hameister: Well, we have plans for at least capital allocation, not necessarily for share buybacks our priority number one, to use our cash is, of course, still organic growth, which means that we continue to invest primarily in technical equipment and machinery. In addition, we have to take into account the working capital swings across the year and maintain a very solid balance sheet at all times as this is part also of the pre-liquification processes for our projects. Yes. In addition, we are keeping certain amounts of cash available for potential M&A transactions. And we also expect to pay a higher dividend in the next year since this is linked to the net profit of the company. Operator: And another last question. Do you expect a higher margin in the electricity segment from H2 2027 onwards. Once Anord is completed and follow-up projects will not be executed via IPA? Torben Kleinfeldt: Yes, of course, once the dilutive effect from the Anord project has run out in the next years, and there are no follow-up projects with this specific contract structure. We will, of course, expect higher margins in electricity as well. Operator: So with you now chat and in the queue, there no further question pops up and that seems, we will come to the end of today's conference call. So thank you, everyone, for your showing interest in the Friedrich Vorwerk Group SE and also a big thank you to you, Mr. Kleinfeldt and Mr. Hameister for the time you took today. It was a pleasure to be a host, wish you all a lovely remaining day or evening and hand back for some final remarks, which concludes our call. Torben Kleinfeldt: Yes. Thank you very much for hosting us. Also thanks for listening today. And I can only say let's keep fingers crossed that the weather stay with us to make it a very, very successful year here in 2025 for Friedrich Vorwerk and hope to come back with good news in the beginning of next year. All the best and bye-bye.
Unknown Executive: Good afternoon, everyone. I think we are pretty much at 2:00, so ready to crack on. Richard Godden: Yes, afternoon, everybody. This is the Premier Foods Half Year results Bond Investor Call. We had our main webcast call of the results that Alex Whitehouse and Duncan Leggett posted this morning, which should be available to view as a replay. We're hosting this to answer any questions that anyone may have from a credit perspective. So that's the purpose of the call. Duncan is going to do just a couple of slides from the presentation this morning, and then we'll open to any questions. Duncan Leggett: Perfect. Thanks, Richard, and good afternoon, everyone. Yes, I thought I'll just do a couple of slides. Some of you may have dialed in this morning. There's a webcast on the website for anyone who wants. So I'm just going to take Slides 3 and 4 of our analyst presentation that's on the website. And in terms of the summary, we're really pleased that after a bit of a softer weather impacted quarter 1 that we've seen quarter 2 sort of snap back into slightly more normal levels. So you can see in the middle here, Q2 U.K. branded growth up at 3%, and that brings H1 up to 2%. So really good trajectory. And actually, if you look at quarter 2, July was actually pretty warm. So delivering the 3% after pretty much only August and September being more normal, we're really pleased with. Again, that's where we expect it to be, but it's always good when it comes through. Total branded revenue for the half up at 1.9%. And then market share. So we've had a really good run of market share gains. You can see 130 basis points over 3 years. And that's all around deploying the branded growth model and effectively driving growth that in most cases has been some way ahead of the market. I think we're really pleased that we've been able to hold on to that growth, notwithstanding a bit of a weather impacted first half. So I think we're really pleased we managed to maintain and keep hold of those gains. In terms of profitability, so a slightly unusual one this half because we've got this extended producer responsibility levy, you may have seen from other corporates, but this is -- this is a levy based on producers all around the packaging it uses, the energy intensity, the recyclability. And the way the accounting works is that it's forced us to take a full year's charge in our first half numbers. Now if you think about how we deal with this, we would offset it and recover it over the full 12 months. So on the left-hand side or bottom left, you can see the reported profit delivery. So we have still growing trading profit and adjusted PBT with this full year charge in. But actually, if you exclude the amount that relates to half 2, effectively, we will recover and offset it over the second 6 months of the year. So if you take half of that out on a basis that will be dealt with in H2, then actually trading profit is up 7% and adjusted PBT up 10%. So really good underlying profit generation, which we're really pleased with. And then leverage, I mean, it's been coming down for a while, isn't it? We're well in the rearview mirror in terms of the net debt that we inherited. And as long as we have associated with Premier, I think really positive news that we bought Merchant Gourmet in the half year and net debt to EBITDA is still only 1%. So in terms of strategic progress, so obviously growing the core. And again, we've got good U.K. branded revenue growth, good recovery in grocery and a continued, frankly, pretty stonking performance from Sweet Treats so that grew 9.4% from a branded perspective, really successful consumer insight-driven and BD really, really doing performing well. CapEx, we continue to deploy capital. Everyone will be aware of, this is a key pillar of how we grow our gross margin and that creates the room to reinvest behind our brands, which clearly then drives future growth. CapEx is a big part of it. We are investing in pretty high returning opportunities still in the sort of 2-, 3-, 4-year payback for many of them. And doing pretty well in terms of laying that capital down this year, so well actually that we think we might spend a bit more than we thought, which for us is really good news because it means we're spending money on the projects that drive return and therefore the quicker we can get at those, the better. Category expansion. So this is something that's been growing really well for us. It's still a relatively small base, but you can still see really good growth. So you can see a picture of a FUEL10K yogurt. This is our latest expansion, which is a sort of protein-rich yogurt with a bit of a lid that includes what is now the U.K.'s best-selling Granola SKU, which is our Chocolate Granola for FUEL10K. So a really good combo there. Pretty early days, but seems to be performing pretty well. We've also got Ambrosia Porridge and the Cape Herb and Spice really driving growth in there. International, I think it's -- from an in-market performance perspective, we're very pleased. We are gaining listings of things like Spice and FUEL10K in Europe. We are getting new listings in the U.S. as well, and North America was up -- went into double digits for the second quarter. And in Australia, which is still by far the biggest component of our international business, in market performance, we're growing at 17% for Cake, which is fantastic. That doesn't translate into revenue, which you would have picked up, no doubt because the retailers have decided to reduce their overall stock holdings, if you like. They have been holding a bit of a buffer because of the inconsistent shipping lead times as we've come out of COVID and then the Suez Canal has not been used. And now shipping times and shipping routes are becoming a bit more established and a bit more reliable, they've decided to bring down the in holding stock. So what does that mean. Clearly, it's not anything we can control, we can just control driving the model in Australia, which is working really well. All that means is they just -- the in-market forms isn't flowing through to our revenue because they are effectively -- we are selling all that -- making all those great sales out of stock that's already in market. So that's just a bit of a timing adjustment, if you like, but certainly not a reflection on the overall health of the business. And inorganic opportunities, FUEL10K and Spice Tailor are flying. So U.K. and the U.K., they are growing well into double digits. And as you will know, Merchant Gourmet we acquired in September. So really, really pleased with that, early days, but performing well, and we're getting on with the integration of that and looking to, again, use the benefit of our broader scale and our model to help grow distribution, supercharge the NPD pipeline and generate value. So really, really excited about what that's going to bring. So that's all I was planning to share. I thought it would be a good overview, but I think most important is that we have time and able to answer any questions from yourselves. So happy to pass over, which will facilitate. Richard Godden: Thanks, Duncan. [Operator Instructions] I think the first one is coming from Neill. Neill Keaney: Congrats, Duncan, strong set of results. A couple for me. On the acquisition pipeline, you've been pretty consistent on how picky you are and how that fits into the -- how your potential targeting fits into the 5-pillar strategy, et cetera. But just on cadence of acquisition, it's -- I think it's been on average one a year for the last 3 years. I appreciate the gap is wider between FUEL10K and Merchant Gourmet. But if another opportunity came along in the next sort of 6 to 12 months, is that something you would look at? Or do you worry about distraction risk and integration risk with merchants? And then just on the bridge facility and interest guidance, the interest guidance that you've given seems to indicate to me that you would not be looking to refinance the '26 notes until after the end of this fiscal year. Is that the right way to read it? Or is it just you'll be opportunistic as and when you think the right time to come to market is? Duncan Leggett: Perfect. Thanks a lot, Neill. So taking your second question first, just before I forget it. I think, yes, clearly, what we've done with the bridge facility is just sensible financial planning really, isn't it, just buys us a bit of time, gets us through audit and sign off and stuff and just make sure that we can do our best as best we can to try and pick the market at the right time. I think your interpretation of interest guidance is pretty spot on. I think we're looking at sort of back end of this year, maybe early next will be what the guidance suggests. But clearly, if we thought the right thing was to go somewhere between now and then and we thought it was the best thing to do for the business, then we would seriously look at it. And the first question... Richard Godden: M&A. Duncan Leggett: So cadence. I mean, we are always looking. And as you say, roughly one a year, a couple of years almost since FUEL10K one, and we've been looking at a lot of stuff during that time, but we've decided not to get involved or decided that some of the stuff wasn't as attractive to us or -- 2 questions. So if something comes up in the next 3, 6, 12 months, we'll be seriously look at it. Yes, we are looking at stuff now. We always are. And clearly, when we're assessing whether to do a deal, clearly, financials, our commercial criteria, financial criteria are really important as well as our facility headroom. And to your point, we would make sure we don't buy stuff more than we can chew. I think the Merchant Gourmet, we are in the middle of integration. It's relatively straightforward. It's U.K. We are relatively known. So I think in the next few months, we'll be pretty integrated and then flowing that through the existing business. So that will be dealt with pretty quickly. And therefore, yes, clearly, if something comes up. And with these things, you can never tell that something is going to come up. You need to be prepared to act if they do -- isn't it? So yes, we could considerably do another deal if we felt it was the right thing to do in the next 6 to 12 months. Richard Godden: [Operator Instructions] Duncan Leggett: In the meantime, just maybe ask a question that you may have heard from this morning, but I guess just in case anyone's got any questions on working capital. So we do build stock during the first half of the year. That's very much how we operate on the basis that going into our Q3 peak sales period, we are sitting on a lot for obvious reasons because that is when we need it and when it sells through. That's probably shown through a bit more in the cash flow than it would normally do, and that's just around, a, the stock build was a bit bigger during H1 than it was the previous before, and that's just making sure that we've got everything ready for the second half. And the other bit is we've just phased the stock build a bit more evenly through the half. So therefore, there's a bit less of a natural offset with the creditors. So you might have seen there's no change to our full year view or full year guidance. But just in case it's a bit more of an outflow than people are expecting purely just a timing piece of when we build stock during the half, and we expect that to sell-through and get the cash in by the year-end. Richard Godden: Thanks, Duncan. No hands being raised just yet. Maybe just a minute on CapEx guide. Duncan Leggett: Yes, sure. So we've -- clearly, we're stepping up CapEx investment over the last few years, haven't we. And we guided to GBP 50 million for this year. And that's all around putting -- deploying capital in the way that we see the best way back into the business and generating pretty attractive returns. We guided to GBP 50 million for this year. We're just making really good progress in putting that to work and again, putting that to work for the value-creating projects. And we actually think we're making a bit better progress than we thought we would going into this year. So we've just ticked up guidance from GBP 50 million to GBP 55 million. Looking forward, whether it's GBP 50 million or GBP 55 million probably doesn't matter too much, but it's that sort of range going forward, and we have a good pipeline of effectively margin-enhancing projects we can see over the next sort of 3, 4, 5 years, a great visibility of, I guess, the fuel that's going to drive margin growth, which is going to drive investment back into the brands and drive future growth. So feeling pretty good about that. Richard Godden: Great. One more question coming from Neill. Neill Keaney: I'll take the opportunity if no one else does. There's a lot of noise in the press around supermarket price wars, real imagined anywhere in between. In terms of what you're seeing and negotiations, I guess, ramping up around this time of year and into first quarter of next year, any change to the sort of competitive tension between suppliers and retailers that you're seeing, anything we should be aware of this time? Duncan Leggett: Yes. It's a really good question. I think short answer is no. But you're right in terms of the amount of coverage it gets. What are we seeing? I think quite a lot -- not exclusively, but quite a lot of the, call it, price war, quite a lot of it is around fresh and areas that we're not part of. So we're probably not feeling it there. Clearly, negotiations with customers are never easy, and we're not going to -- otherwise, but they're not really changing. So we just manage them in the usual way. And clearly, having market-leading brands and pretty strong relationships, I think we are pretty well placed. In terms of, I suppose, the other piece is the relative performance of the customers, that's getting probably a bit more polarized with Tesco's winning, Morrisons not having done great, but probably shown some better signs and Asda still in a bit of a trouble. And clearly, therefore, when Asda is declining, we're declining in Asda. But what we're trying to do is grow within Asda even though it might be declining so that we can help Asda help themselves turn around. So we sort of leverage the strong relationships to try and grow the people that are growing, but also help the people that are struggling a bit more to grow their categories through growth of our brands. So that's the other piece that we're just keeping an eye on. But I think summary is no real change to the aggressiveness or otherwise in terms of negotiations. Neill Keaney: And given that backdrop, is there any change to your promotional strategy? I know that's the other thing we're hearing is promotional rate is elevated and remains so. I think it was 30% in October, which I think we normally only see in the peak weeks before Christmas. Duncan Leggett: No, we generally agree the promotional plan with the customers at the beginning of the year and broadly stick to it. So I mean, things like cake are generally on promotion a bit more than the grocery, but that's no change. So I wouldn't think there's anything that was called out. Richard Godden: We did have one question come in on the Q&A unattributed how you're thinking about your short-dated October '26 bonds. I think we've already sort of essentially answered that one. Duncan Leggett: Yes, I hopefully covered it -- is where we need to refinance. We've just used the bridge facility just to enable us to buy a bit more. So yes, hopefully, that's dealt with. Richard Godden: Great. Okay. Well, we have no further requests for questions or any further questions. So I think we'll probably wrap it up there if there's no more incoming. All the documents are -- that you might want to refer to are on our website and say -- there should be a recording of the webcast from this morning as well, if that's of help to anybody on the results center of the website. So with that, thank you very much for joining. And we'll have -- next time we'll come to market will be our Q3 trading update, which will be third week in January. Thanks, everybody. Duncan Leggett: Thanks, everyone. Appreciate you joining.
Operator: Ladies and gentlemen, thank you for standing by. Welcome to JD Logistics Third Quarter 2025 Results Conference Call. [Operator Instructions] I'd like to turn the call to Mr. Sean, Head of IR team at JD Logistics. Sean Shibiao Zhang: Thank you, operator. Good day, ladies and gentlemen. Welcome to our third quarter 2025 results conference call. Joining us today are our Executive Director and CEO as well as the CFO. Before we start, we'd like to remind you that today's discussion may contain forward-looking statements, which involve a number of risks and uncertainties. Actual results and outcomes may differ materially from those mentioned in today's announcement and in this discussion. The company does not undertake any obligation to update this forward-looking information, except as required by law. During today's call, management will discuss certain non-IFRS financial measures for comparison purposes only. For a definition of the non-IFRS financial measures and the reconciliation of IFRS to non-IFRS financial results, please refer to the announcement of financial information and business highlights for the third months ended September 30, 2025, issued earlier today. For today's call, management will read the prepared remarks in Chinese and will only be accepting questions in Chinese during the question-and-answer session. A third-party interpreter will provide simultaneous interpretation in English on a separate line for the duration of the call. Please note that English translation is for convenience purposes only. In the case of any discrepancy, management statements in the original language will prepare. I would like to turn the call over to Mr. Hu Wei. Please go ahead, sir. Wei Hu: Thank you, Mr. I'm so happy to meet you here. This is the third quarter of the 2025 earnings call meeting. In the third quarter, with the effect of proactive macro policies, China's economy maintained a steady and progressive trend as a critical enabler of the national economic circle, modern Logistics continued to facilitate the efficient flow of production factors, strengthening the economy's resilience. During the quarter, JD Logistics continued to strengthen its capacities in service experience and delivery partners, consistently expanding product portfolio and solidify the service competitiveness, improving customer experience and satisfaction and achieving high-quality related revenue growth. In the third quarter of 2025, JDL achieved a total revenue of RMB 55.1 billion, an increase of 24.1% year-over-year in terms of profit. Our non-IFRS net profit was RMB 2.02 billion with a profit margin of 3.4%. We are committed to building our long-term capacity and competitiveness, making targeted investments in areas such as international business expansion and timeless capacity improvement to enhance our operational strength and lay the foundation for long-term business growth. Revenue from integrated supply chain ISC customers reached RMB 13.1 billion in the third quarter increased by 45.8% year-over-year with both internal and external ISC customers sustaining solid double-digit growth. This included RMB 8.9 billion in the revenue from external ISC customers. Leveraging our extensive network coverage, extensive warehousing operations and management experience and accumulated ISC capacities, we continued to strengthen our leading position in China supply chain market, achieving growth in both the number and average revenue per customer APR of our external ISC customers. We provide industry-specific ISC solutions and service products for customers in fast-moving consumer goods, home appliances, home furniture, safety, apparel, automotive and fresh products and other industries. In the face of the ever-changing business environment and market landscape, we remain focused on experience, cost and efficiency, enhancing our industry-specific service capacities. We delivered products and solutions tailored to customer-specific industry logistics and operational pain points, helping them improve operational efficiency, reduce operating costs and optimize customer experience. In home appliance industry, we continued to expand our ISC solutions end-to-end process coverage. By leveraging digital capacities to integrate end-to-end information flow, we enabled efficient coordination in all aspects of operations, helping brand customers reduce cost and enhance efficiency. For instance, in the third quarter of 2025, a cooperation with a well-known home appliance brand customer extended upstream to the process from the customers' factory to their warehouse. Through our consolidated distribution model, we optimized the transportation routes and efficiently reduced the transit frequency during inbound to warehouse transportation, helping the customer to reduce logistic costs. Meanwhile, we leveraged our digital supply chain system to provide destination warehouse with real-time visibility of in-transit information. This enables them to range uploading zones and allocate manpower in advance, significantly improving inbound efficiency and shortening order fulfillment time. Going forward, we will continue to deepen our presence in the ISC space, capitalizing on our advantages in digital technology, network coverage and operational management. We will replicate and scale the successful experience with this brand to more customers, committed to build the most efficient ISC solution through the entire process. The steady development of our ISC business is underpinned by our continuously improving network infrastructure. As of the end of September 2025, our warehouse network covered nearly all countries and districts in China, consisting of over 1,600 self-operated warehouses and over 2,000 third-party warehouse owner-operated cloud warehouses under our open warehouse platform. Our warehouse network has an aggregate gross floor area of more than 34 million square meters, including warehouse space managed through the open warehouse platform. We have enhanced the breadth of our coverage and enriched our service offerings through further expansion into lower-tier regions and continued optimization of our warehouse network. During this quarter, guided by our cooperational philosophy of placing products as close as possible to customers, reducing handling frequency and minimizing fulfillment distance, we accelerated warehouse network development and verification of the service capacities in lower-tier cities since official commencement of JDL's Kafka warehouse in April 2025, both local customer experiences and local efficiency have improved significantly in the third quarter. The warehouse contributions to our operational efficiencies continue to grow, supported by our ongoing enhancements in warehousing operating efficiency and regional distribution capacities. Core areas now enjoying a 2-1-1 time delivery service, while surrounding remote areas have achieved steady next-day delivery. This quickly improved local customers' shopping experience, widespread positive feedback meanwhile, we strengthened our capacities in bulking item logistics building, JDL, delivery installation, assembly return, while steadily strengthening our leadership in China's ISC market while also expanding our overseas footprint, leveraging years of accumulated warehousing operation expertise and world-leading ISC capacities. As we replicate and scale these capacities in overseas market, we are providing more Chinese brands, overseas customers and for e-commerce platforms with high-quality efficient and comprehensive ISC services. Based on long-term in-depth cooperation with auto customers in China's auto spare parts supply chain sectors and the strategic advantages of our overseas warehouse in the Middle East. In the third quarter, a leading new NGB brand chose to further strategic partners with us to jointly expand into the Eastern market. we planned and now operated a spare parts warehouse in Dubai's Jebel Ali Free Zone, providing end-to-end logistics services from container acceptance, customer clearance, quality inspection and other processing to packaging and outbound logistics. This shortened customer spare parts distribution circle, improved inventory turnover efficiency and strengthened the aftersale network across Middle East, South Africa. At present, JDL has established multiple overseas warehouses in the Middle East and continue to enhance its automation and digital operation capacities, delivering global ISC solutions for several other companies and enabling them to achieve a more efficient and sustainable growth in international markets. As part of our overseas warehouse expansion, we accelerated our global smart supply chain network. and actively expand our overseas warehouse footprint bycelerating progress towards our goal of doubling the gross area of our overseas warehouse by the end of 2025, a target we're fully confident in achieving. In Q3, our revenue from other customers, including express and freight delivery services reached RMB 24.9 billion with a 5.1% year-over-year growth, we have consistently adhered to the high core development strategy, focus on expansion of the high-value businesses while enhancing timeless service capacity and product diversity, laying a solid foundation for the long-term sustainable growth of our business. In our express delivery sector, we continue to enhance our delivery timeless capacity and product competitiveness with a focus on expanding our high-turn, high-value, services. For instance, we expanded our high-tensile delivery capacity, which previously centered on categories such as lychee and hairy crab into high-value scenarios into production zones. This expansion has effectively improved the service quality and delivery efficiency, driving the growth of high timeliest delivery business. Additionally, we continue to strengthen our cooperation and penetration with leading brand merchants on mainstream platforms. For instance, in the third quarter, we started multiple channel cooperation with several well-known sportswear brands, achieving a notable increase in business share, while driving revenue growth in our high delivery services, we also helped the brand customers gain greater platform traffic through high-quality logistics services, creating value for our customers. In the last mile fulfillment process, we continue to optimize our service models and strengthen operational capacities. Recently, we acquired wholly owned subsidiaries of JD Group specializing in local on-demand delivery, which has already established a mature operating system in the sector and demonstrated the strong commercial potential and growth prospects. Looking ahead, we expect the integration of this business to further enrich JDL's product portfolio, complement our last-mile delivery network and enhance fulfillment graphic operational efficiency and overall user experience. Through our business development process, we have adhered to our core value first. JDL remains dedicated to offering premium services such as delivery, on-demand pickup and delivery and return exchange continuously enhancing the quality of our express delivery services. With such professional and reliable services, we have earned a trust and preference of our customers and consumers as well as recognition from national authorities. In August 2025, in the Logistics 2025 report released by the globally authority brand valuation consultancy, Brand Finance, JDL was rated as the strongest Logistics brand 2025 worldwide. Our ranking in the most valuable logistics brands listed in year-over-year, demonstrating our strong international competitiveness and brand influence. Regarding the freight delivery business, with the consolidation with Teton Logistics and [ King Freight, ] we ranked among the top tier in China in terms of cargo volume and revenue share of freight delivery services. We've now established a freight delivery product portfolio covering various timeliest levels and diversified service scenarios, allowing us to precisely match our customers' differentiated needs regarding timeliest requirements, service standards and other aspects. In terms of air freight, we continue to expand our international cargo route network. In the third quarter, we launched a new all type of fly route direct in Shenzhen Bao International Airport to Singapore, Chongqing Airport, further strengthening our air transportation connectivity with the Asia Pacific region. We constantly prioritize technical innovation through ongoing investment in automation equipment, AI and other applications. We have deeply integrated digital intelligent technologies into every stage of the logistics value chain, driving the comprehensive application of AI plus robots across end-to-end logistics chain, including warehousing, storing transportation and delivery. We recently self-developed series robots of [ W pack, ] which are highly suited to our operational scenarios. For example, in the warehouse operations, we are accelerating the deployment of the [ 2 line intelligent ] warehouse solution with both the number of deployed devices and the cities covered increasing further this quarter. And in addition, we have deployed [indiscernible] shadow for bulky item storage and boost to person scenarios, the [indiscernible] intelligent robotic arm and automatic towards for order picking, storing and packaging as well as f drone and dual unmanned vehicle for collections between industrial parks and delivery stations by continuously expanding automation coverage across both processes and logistic value chain we will enhance operational efficiency and provide customers with reliable high-performance supply chain support. Going forward, we will continue to promote the adoption of automation equipment and AI test driving efficiency upgrades across our end-to-end logistics value chain that will support middle and long-term profitability. Meanwhile, we will remain committed to promoting the tech upgrading of the industry, bringing efficient supply chain services to more regions worldwide, and we will improving the social value. Thank you. And we have just announced a new announcement. For my personal reasons, I will take new positions under JD Group. I will no longer be the CEO for the next session. Over the last few years, I collaborated and grow together with JDL, making contribution to customers and consumers. I worked with JDL team for years. I feel so happy and I'm so moved. I want to express my gratitude to the stakeholders and all the Board members. And next, Mr. Wang Zhenhui will take the role as the CEO. Mr. Wang has been working with different companies as well as public companies for years, and he has the business insight as well as the business vision. Mr. Wang has a very solid foundation experiences in the logistics sector. I believe that with his guidance and with his wisdom, JDL will further make contributions to stakeholders and Board members. I'm going to welcome Mr. Wang to say a few words. Zhenhui Wang: Thank you, Mr. Hu Wei, Dear investors, dear analysts, good to see you. My name is Wang Zhenhui. I'm so happy and honored to take this chance, and I will soon take the job as the CEO of JDL. I want to thank Mr. Hu Wei for your contribution. In the upcoming days and months and years, I will lead the team centrally on the cost efficiency and the core competitiveness, making new progress, not only for the company, but also for the but also for the entire side. Now let's welcome Mr. Wu Hao to give you the overview of the financial performance. Hao Wu: Thank you, Mr. Hu. Thank you, Mr. Wang. Hello, this is Wu Hao, the CFO of JDL. I'm pleased to present JDL's financial performance of the third quarter 2025. In the third quarter of 2025, China's macro economy remained stable with continued improvement, demonstrating strong resilience and vitality. Supported by our ever strengthening products and service capacities, JDL achieved accelerated revenue growth by continuously improving timeless and customer experience and further enriching our solution and product portfolio. In the third quarter of 2025, our revenue reached RMB 55.08 billion with a year-over-year of 24.1%. In terms of the profitability, IFRS profit was RMB 1.96 billion, non-IFRS profit with a margin of 3.2%. Non-IFRS profit was RMB 2.02 billion with a margin of 3.7%. Since the beginning, this year, we continue to make strategic investments to strengthen our long-term industrial competitiveness and actively expand business growth opportunities, further solidify our market competitiveness strength. Current investment phase remains consistent with our operational plan. Looking ahead, as business volume increases entering the peak season, we expect economies of scale and improved resource utilization to support profitability improvement. Let's look at the segmented business lines. Our revenue from ISC customers totaled RMB 13.13 billion in the third quarter with year-over-year increase of 45.8% among them. ISC revenue from JD Group amounted to RMB 21.20 billion, up 65.8% year-over-year, mainly due to the incremental revenue generated by our full-time riders participating in JD Food delivery as well as from the growth in the JD Retail. Revenue from external ISC customers was RMB 8.93 billion, up 13.5% year-over-year. The number of external ISC customers amounted to around 67,000, up 12.7% year-over-year, continuing the trend of double-digit growth over several consecutive quarters. While serving more customers, we also deepened and broadened our engagement with existing customers. In the third quarter, our average revenue per customer for external ISC reached RMB 134,000, up 0.7% year-over-year, extending the year-over-year growth from the previous quarter. This growth was primarily driven by our extensive comprehensive warehouse network and mature operational capacity. By continuously upgrading our supply chain products and services, including extending the service supply chain, broadening geographic coverage and deepening omnichannel integration online and offline, we strengthened partnerships with leading customers industries such as apparel, FMCG and auto, helping them improve market competitiveness while optimizing operational costs and efficiency. In the third quarter of 2025, our revenue from other customers, primarily including express and freight delivery services was RMB 24.95 billion, up by 21% year-over-year. For express delivery services, we continue to alleviate customer experience satisfaction focused on the expansion of high-value segments. In the freight sector, we ranked among the top tier in China in terms of cargo volume and revenue scale, supported by our diverse freight delivery services that cover multiple timeliest levels and service scenarios. Moving on to cost and profitability. In the third quarter, our gross profit margin was 9.1%. We continue strengthening our capacities in key strategic areas, including enhancing delivery, improving customer experiences and expanding our international business to drive JDL's long-term high [indiscernible] growth. Next, let's turn to the major parts of the cost and revenue. First, employee benefit expenses were RMB 21.82 billion in the third quarter, up 49.8% year-over-year. This was primarily due to the addition of full-time food delivery riders compared with the same period of last year as well as the year-over-year increase in the number of operational employees in the delivery and warehouse operations. The number of operational employees grew from approximately 640,000 at the end of the third quarter last year to 440,000 at the end of the third quarter of last year. while remaining relatively stable quarter-over-quarter since the beginning of this year, we've added our own employees to key operational processes such as last-mile delivery and warehousing aimed at upgrading our product and services and alleviating customer experience. The key indicators such as on-time delivery rate and customer satisfaction improved. In the third quarter, employee benefit expenses accounted for 39.6% of total revenue, up 6.8%. Second, our outsourcing cost was RMB 16.97 billion in the third quarter, up 13% year-over-year. Our outsourcing costs accounted for 13.8% of total revenue. With a year-over-year decrease of 3.0 percentage points, we optimized outsourcing costs, which are primarily transportation related by applying algorithm-based transportation deployment systems and optimizing the structure of transportation resources, such as increasing the proportion of the self-owned vehicles. Third, our total rental cost was RMB 3.20 billion in the third quarter, up 2.5% year-over-year. We continue to promote site integration and optimize network structure, improving the utilization efficiency in our sites. Our total rental cost accounted for 5.8% of total revenue in the third quarter, down by 1.2 percentage points. Apart from the major costs mentioned above, our ongoing business expansion has resulted in improved economies of scale, driving down our depreciation and amortization costs as a percentage of total revenue by 0.2%. Meanwhile, due to the growth of services such as nation and maintenance, other costs as a percentage of total revenue increased by 0.3 percentage points. In terms of expenses, our operating expenses in the quarter were RMB 3.70 billion, up 15.9% year-over-year, accounting for 6.7% of total revenue with a year-over-year decrease of 0.4 percentage points. This improvement was driven by our consistent enhancement in refined management and cost control capacity. Among them, sales and marketing expenses increased by 13.5% year-over-year to RMB 1.58 billion, accounting for 2.9% of total revenue, down 0.3 percentage points year-over-year. Sales and marketing expenses accounted for 4.7% of revenue for external customers, up 0.3 percentage points. We maintained monetary investments in sales and marketing personnel to drive business growth. In the third quarter, our R&D expenses were RMB 1.06 billion, up 15.9% year-over-year and accounting for 1.9% of total revenue, down 0.1 percentage points. We have allocated our R&D resources to strengthen our end-to-end automation, digital and intelligent capacities. including ongoing operation of AI algorithms and automated equipment in diverse logistics process. For example, we consistently upgrading our large language model, power digital intelligent solutions, improving the coverage of warehouse equipment and scaling up the regular operation of online delivery vehicles to drive further cost savings and efficiency improvements in diverse logistics scenarios, including planning, warehousing, storing, transportation, delivery and customer service. Our general and administrative expenses were RMB 1.02 billion, up 23.6% year-over-year, accounting for 19% of total revenue, remaining largely flat year-over-year. In terms of profit, please also consider our non-IFRS measures, which we believe may better reflect our core operations. Both non-IFRS profit and non-IFRS EBITDA excludes items that we believe are not indicative of our core operating performance to help investors and other users of financial information better understand and evaluate our core operating results. In the third quarter of 2025, our non-IFRS profit was RMB 2.02 billion, down 21.5% year-over-year. Non-IFRS profit margin was 3.7%. Non-IFRS EBITDA for the third quarter was RMB 5.32 billion, a decrease of 7.1% year-over-year with a non-IFRS EBITDA margin of 9.7%. We also continue to monitor our cash reserves and cash flow to maintain a healthy capital position to support business development and meet our operational needs. In the third quarter, excluding lease related payments, we recorded a free cash flow of RMB 0.59 billion, consisting of operating cash flow of RMB 4.71 billion and capital expenditure of RMB 1.95 billion, primarily for investment in automation equipment and self-owned vehicles. We continue to improve operational efficiency and capacity through efficient resource allocation. Before we wrap up, I would like to express my heartfelt thanks to our shareholders for their enduring support and the trust in the JD Logistics. Looking ahead, we remain committed to balance improvement with stable profitability and high-quality growth. We will continue to cultivate our ISC solutions, enrich our product portfolio, optimize customer experience and further strengthen core competitive barriers to promote healthy and sustainable business growth. Meanwhile, we will sustain our investment in automation as well as digital and intelligence technologies optimized network structure, innovate operational models and deepen refined management. We aim to improve the efficiency of the entire logistics process, achieve long-term and sustainable structural cost reductions and create greater value for our shareholders. Thank you. That concludes my prepared remarks. Now let's begin the Q&A session. Sean Shibiao Zhang: Thank you, Mr. Wu Hao. This concludes our prepared remarks. We'd like now to open the call to your questions. Operator, we are going to start the Q&A session, and we are going to receive the questions only in Mandarin. Now let's get into the Q&A session. Operator: [Operator Instructions] [indiscernible] please raise your question. Unknown Analyst: I have 2 questions. In view of the automation, the 5-year automation plan, I want to listen to your comments on the capital investment efficiency and the cost. This is the first question. The next is a full-time rider. We have the full-time riders, and we have outsourced the riders. I want to check with you about the orders. How many orders are you accepting per day? You are not the largest operator. How could you use up the network to make innovation to be the top operator of the food delivery? Unknown Executive: Thank you, [indiscernible], for the question. Over the last few years, JDL has accumulated a lot of the automation technologies and experiences. Most of the automation equipment are well used at a large scale and they are easy to use, they are user-friendly ever since 2025 in more than 20 provinces and cities, and we have already prepared our auto robots. In terms of the unmanned vehicles, we began applications in Guangdong, Jiangsu, Beijing, around 20 cities and provinces, thousands of the unmanned vehicles were put into place for the purpose of docking, collection and pickup. In the future, for the AI Super Brain together with launch robots, they will be deeply integrated to ensure the full chain of sorting, transportation and delivery. In terms of investments, automation and robots. And the outcomes will be collected. According to outcomes, we will promote the large-scale application of the robot in the long run. We will manage the cost, and we will find a balance between investment and return because that is the basis for the long-term optimization. So have some confidence in us by investing into automation sector, we are going to further improve our long-term and middle-term revenue. For specific investment pace, I will follow different industry, different category. We will check the real-life data. We will update our investments and our CapEx plan will be updated as well. It will be very close to our drop that we will go and check what happens, and we will gradually upgrade our investment year-by-year. With more technologies being invested, I believe that it will cut down the logistic cost for the entire society, driving the primary growth for the company. Question 2 is about the full-time riders. Around June, JDL made the announcement to hire full-time delivery. In Q3, we saw a very positive growing momentum. the revenue was boosted. The full-time driver team was quite stable, very consistent with us. This is a big advantage. We have a standardized training system. We have a refined operations, and we're improving the promised delivery. We are improving the timeless as well as the user experience. We made the announcement and we are going to integrate our driving forces. We are going to cover the full-time scenarios, especially for the last-mile delivery services. We're improving and boosting the capacity dramatically. In terms of utilizing the resources, in the long term, I believe there's a lot of robust complementary movements. During the e-commerce festival, the Photon riders could help us to make up the logistics gap. On the other way around, the man could also work together with the delivery man to meet up the requirements from the food delivery. Now the 2 teams are highly complementary, and we could have them work together in 10 of the core cities, the mutual supplementary efforts were made to boost up orders. I want to make a quick notice, the introduction of the Photon riders could improve our service delivery capacities to our customers, we are not only providing food services, but for other products, we are providing services to some luxury brands and 3C products. For instance, we could help them to deliver the luxury goods or 3C products as quickly as possible. That is how we are going to enrich our matrix of the delivery, and that is one of the core capacities for us in the future. By providing or improving the services to ensure timely delivery, we can get into the intra-city faster delivery services. Operator: Next question from Citibank, [indiscernible]. Unknown Analyst: I have a question about the overseas market. You're expanding your footprint. I want to listen to your opinion about your plans and about the implementations of the overseas market. Unknown Executive: Thank you for the question. For the overseas market, the international business is about capacity building. We want to have an entire global network by the end of 2025. The growth area will be doubled by the end. the floor areas for one site, and we want to improve the terminal to terminal capacities, such as the routes, such as cross-border timeliness as well as the speed to clear the customs. We want to make the entire journey more smooth. A, we want to reduce the cost of compliance for our customers, the automation capacities, the efficiency will be boosted all for the purpose of reducing the cost, and we want to expand the network of delivery. Those are the progresses. Still, I believe international market, overseas market are on capacity building because capacity will drive for long-term growth, we will meet up the requirements of the customers. carry out the accurate investment, optimizing our network operation and the localized delivery capacities. In the long term, we do more we scale it up the mature supply chain will be duplicated in overseas market while staying different, such as the health product integrated service, we will also build up the network in overseas market. All in all, we want to offer long-term sustainable value. Operator: Next one. [indiscernible] from Jefferies. Unknown Analyst: My question is about the number of ISC customers and ARPA. Can you share with us more about which segment is your core sector because you want to dive into the value creation and you also focus on numbers of the customers. And I'd like to invite you to share with us the capacity and human resource. Unknown Executive: Thank you, Jefferies -- thank you, Thomas from Jeffrey, the question. Over the last few years, in the ISC customer number and ARPA, we have our -- we have the room for improvement, of course. The numbers and ARPA are 2 important topics. For one thing, we have to improve the numbers and we have to offer them the best products. We can cover more clients. Some of the customers are not using the ISC services. So that is one direction. We will hedge for that in terms of ARPA. We have some key accounts. We also have some small accounts to store the improvement. For the key accounts, we have the PM, the project manager, the account manager to go deeper to find more opportunities. Generally speaking, I believe I can -- we can continue the existing path to further improve the profits, the numbers and the ARPA. Yes, of course, you are going to see fluctuations in the ARPA due to the seasonal reasons or due to the natural transition from a single client to ISC client. But in the long run, I believe the numbers will be further optimized. In 2026, still I'm not in the right time to make the forecast. I believe that in 2026, the revenue will further be optimized. I also wish that starting from Q4 of last year, the investment has begun to yield results. And in the long run, more results can be seen. Thank you. Operator: Due to time constraint, that concludes today's Q&A session. At this time, I will now turn the conference back to Madam Sean Zhang for additional or closing remarks. Sean Shibiao Zhang: Thank you again once again for joining us today. If you have more questions or further questions, please contact our IR team directly. Thank you.
Operator: Hello, and welcome to the Agfa Q3 2025 Results Conference Call hosted by Pascal Juery, CEO; and Fiona Lam, CFO. Please note this conference is being recorded. [Operator Instructions] I will now hand you over to Pascal Juery to begin today's conference. Thank you. Pascal Juery: Good morning, everyone, and thank you for attending our call. I'm sitting here in Warsaw with indeed Fiona Lam and Viviane Dictus for Investor Relations and some of the executive team. So what are the headlines of Q3? Well, first, a very difficult situation for medical film with a very strong decrease that calls for more cost actions from our side, which we are taking, and I will explain in more details. But that's the main highlight for the results of this quarter. Point number two, Healthcare IT, actually, the good news is we are seeing an accelerated shift to the cloud and to SaaS business model. The flip side is it's impacting our short-term results, and I will explain why and how this is the case. But overall, this is good news because in doing so, we continue to see a very good dynamic of order intake and mainly we are able to win net new customers in Healthcare IT. And three, DPC is, I would say, slightly above last year overall. So here, I would say, a rather steady performance in a market backdrop that is not fully favorable. Pleased with the cash flow performance of the group in Q3, and it's not only about AgfaPhoto, it's also due to the fact that it's -- sorry. It's also due to the fact that we have -- we are managing working capital and other cash components in a very efficient way, I would say. So these are really the highlights of the performance of the group. Now if I turn into more details, you see that the impact of the medical film and also Healthcare IT with this switch -- rapid switch to a SaaS business model. So the impact on the top line is quite significant, minus 4.7% at equal currency. The only business delivering top line growth is digital printing, but I would say the top line growth is subdued and actually more price driven than volume driven today and mainly in the industrial film area rather than with the growth engines. Very good cost control overall in this context. However, not enough to make up for the impact of the film decrease. Positive cash flow, EUR 21 million in the quarter. So it's, as I said, of course, due to the AgfaPhoto settlement, but not only, we are also very vigilant in our working capital management, and that provides also significant benefits. And if you look at the cash flow performance after 9 months, you can see a very significant improvement versus last year. So now a little bit more details on each of the business. Healthcare IT, here, we had the first 6 months where we had quite a significant number of project traditional, I would say, business, and that's reflected on a quite strong performance on the P&L delivery. Q3 and probably Q4, it's a very different story because the share of SaaS contracts in order intake is increasing significantly, and it means that the project order book is decreasing, while the recurring order book is increasing very much. It has a short-term impact of the transition that I will try to explain later in the presentation on very practical terms. But the good news is that our 12-month rolling order intake is increasing again, actually plus 6%. And we are expecting, by the way, this trend to continue and amplify during Q4, and we'll end up the year with double-digit increase. The top line decrease is clearly due to this model, this revenue model change, while at the same time, our recurring revenue is growing by 5%, including currency. That also is a good way to illustrate the underlying transition. Currency is important for Healthcare IT because as you would remember, about 2/3 of our business are in North America and therefore, dollar denominated. So it's a translation impact here that we are seeing. But therefore, it translated to a weaker EBITDA for the quarter. DPC, as I said, step-up in revenue, profitability slightly up, but we are operating in difficult market conditions, to be fair. So the 5% top line growth is mainly driven by specialty films. The reason being, actually, we have -- it reflects the price increase we have achieved following the especially silver price increase. However, the performances of Green Hydrogen Solutions and Digital Printing Solutions are more influenced by softer market conditions. In ZIRFON, we see very little growth over last year. We continue to make progress in terms of productivity and especially it will be even more the case with our new plant. And in DPS, we're operating in a more difficult market context actually, especially in North America for equipment, where we have seen a significant slowdown. So these 2 businesses are, I would say, more impacted by the current market conditions. Radiology is where we see the most significant decline. Our revenue is declining by 20%. Actually, what happens is the China market is disappearing quite fast. Today, this market that used to represent about 45% of our total volumes has been divided by 3 in the course of 2 years, and the trend will continue until the fast disappearance of the market that might be as fast as the end of '26. So actually, what we are seeing here is a bit of a race between taking the corresponding cost out of the business and the market decline. And for the time being, we are behind because it's not possible in the current social agreement to, I would say, go as fast as we need. So what we are doing is, I will detail in the -- actually in the next slide, what are we doing to face the situation. First, we had a 3-year program and a EUR 50 million cost decrease program. Actually, we are bringing it forward, meaning we are accelerating the program, things that we plan to do in '26, actually, we start doing in Q4 '25, and we are going to try and condense the program in a short-term time frame in order to have the maximum impact in '26. But not only that, we are launching an additional program of EUR 25 million related also to manufacturing activities. So it means we are expanding the current EUR 50 million program for manufacturing, but we are also touching a new area. We are going to adjust our go-to-market for film, and that will also be a significant cost-out program indeed that is actually ready to go. We are starting the discussions with our social partners, and we will start implementing as soon as we can. We are -- we have also implemented some short-term cost saving measures across the group that will -- for which the benefit will mainly be seen in Q4 to make sure that we mitigate the current results group. And we have also launched an initiative to right size the overall group organization. I cannot communicate any details for the time being with you, but we are actively working on resetting the group cost base to the right level and the new situation that we are seeing in the field. And last but not least, as already communicated, we are working on the potential redevelopment of part of its site in Mortsel and we have actually started a discussion to have a brownfield covenant. As you know, we have a campus in Mortsel that is probably quite for the size for our needs, and we are trying to look at the possibility to monetize part of it. So we are not staying idle in view of the current situation that we are seeing in the field. We are addressing this at first and we already have a lot of programs in place, but we are already -- which we are also working on more in order to secure the profitability of the company. Now if I turn to numbers, you will see the impact of -- which is, by the way, not currency corrected here. You see the strong impact of the decrease of the radiology business here 20%. You see also the decrease in the HealthCare IT top line. But here, again, we are winning share, but the transition to cloud means our bottom line is impacted and the growth in DPC, slight growth in DPC. And you see on the right-hand side, the corresponding effect on our bottom line, less top line for HealthCare IT is translating also to less bottom line stability plus for DPC and radiology results that are still very negative, hence, the actions that we are taking. If you look at -- we show this slide with our mature businesses and our growth engines, I would say what we are seeing here for the first time is we have a negative performance of the growth engines, mainly due, in fact, to HealthCare IT and the situation that I explained. And for the first time in many quarters, actually, we have a bit of a setback in terms of the growth engine businesses. But again, I insist it's not the case that we are losing share, actually, absolutely not. We are doing extremely well in HealthCare IT. Most of what you see here is the impact of this cloud transition that I'm going to detail in a few numbers for you. I'm going to turn now to Fiona to walk you through more numbers. Fiona? Fiona Lam: Thank you, Pascal. Like Pascal already said, Q3 adjusted EBITDA ended at EUR 5 million, which is EUR 10 million down versus last year. And you see also the exact numbers coming from the bridge, which was a decline in medical spend on gross profit only in radiology context has an impact of -- negative impact of EUR 7 million and also temporary impact of HealthCare IT due to cloud and SaaS transition. So that also in Q3 has a EUR 4 million lower gross profit. Unfortunately, there's also unfavorable exchange rate impact. So you see also exchange rate unfavorable impact of EUR 2 million. Good part of the cost control, like Pascal earlier also mentioned, we control the cost pretty well. And there you see offsetting part of this downside on the market, and that led to EUR 10 million lower EBITDA in -- adjusted EBITDA in Q3. On the other hand, we look at free cash flow of Q3, which is a positive of EUR 21 million, despite adjusted EBITDA -- lower adjusted EBITDA of EUR 5 million. That, of course, has been helped largely by the AgfaPhoto's income, which is in Q3. On the other hand, we also have say that lower CapEx investment fee -- sorry, working capital improvement. This is worth to see also Q3 working capital improved by EUR 16 million, and you will later on also see the working capital improvement is significantly contributing to the group's free cash flow in the first 9 months as well. CapEx is slightly higher than last year. As you know, we have still other investments, which were paid in Q3. Provision others are seasonality, you will not see any increase or decrease too much. It's stable if you look at the 9 months, this is just quarterly seasonality. The rest is quite stable, like adjustments and restructuring, et cetera, is quite stable compared to last year. Next slide related to the debt evolution. You see Q3, we reduced the net financial debt excluding IFRS 16 by EUR 20 million with the cash in of AgfaPhoto. The rest of the debt also the pension debt slightly decreased in line with expectation. And if you look at the syndicated loan withdrawal of EUR 119 million versus the total facility of EUR 118 million has been quite roughly stable on syndicated loan withdrawal. Applicable covenant test for Q3 is the minimum liquidity of EUR 30 million. There we have in Q3 2025, EUR 126 million on the minimum liquidity. The rest of the covenants are only for reference. So we also share with you the references of the ratios, but they are not applicable for testing until year-end, which is the leverage ratio, the interest coverage ratio and the adjusted EBITDA is IFRS 16. This is the ratio for your reference. Next slide is a bit more on the numbers, which you can see now the P&L. Q3, the growth was minus 7%, but year-to-date is minus 4%. That has been helped by the first half year strong HealthCare IT. Q3, like we just said, the cloud transition is very, very evident visible. And therefore, we also see HealthCare IT did not grow in Q3. The full year until first 9 months is minus 4%. Gross profit slightly decreased because of the mix as we have industrial film are the main growth areas in this year and then the first half year of HealthCare IT, but of course, because of the film under loading and the mix of growth, we see a slight drop of gross profit percentage. What is good that you also see the first 9 months operating expenses with the top line reduced the good cost control has delivered and maintained the percentage at 30% in the trend top line of lower top line. That led to year-to-date adjusted EBITDA of EUR 19 million versus last year. If we look at next slide, which shows the net results, thanks to the help of basically AgfaPhoto, both on EUR 38 million in adjusted restructuring expenses and also the interest income and net finance costs, which lowers it. So you see a net result for the period of EUR 20 million improvement compared to last year for the first 9 months. Also to mention about -- have a look at the free cash flow in the first 9 months, despite our adjusted EBITDA has been lower for the first 9 months by EUR 19 million. You clearly see here we improved the free cash flow for the first 9 months by EUR 72 million, even though it's still minus EUR 9 million negative, but this improvement is enormous. So it's not only because of AgfaPhoto EUR 38 million cash in, in this free cash flow, but it also has EUR 51 million improvement in net working capital in the first half -- first 9 months. Part of that, of course, in the net working capital improvement, you can anticipate because you are doing lower volumes and lower turnovers. On the other hand, a part of that is also really structural improvements because we also see between 2% to 3% improvements to sales on the net working capital, primarily driven by industry controls, et cetera. And we also compared to last year on the first 9 months, we spent less on CapEx. And therefore, you see in total EUR 72 million step-up and this is quite important, of course, contribution to our free cash flow position. Pascal Juery: Thanks a lot, Fiona. Let's go also very quickly to HealthCare IT to the details of the business. Well, I'm kind of repeating myself, but here, what you see for Q3 is 70% of the order intake is in the recurring part and 40% is in cloud deal. By cloud deal, we mean SaaS deals, okay? The difference, the 30% is some deals that are also recurring that can be cloud, but not SaaS and that could be managed services. So you see that this is a shift that is extremely significant. The good news is 70% of this order intake is done with net new customers. So it's a very good sign. It means we are winning share here, and we are winning contracts against the leaders of the industry. We are leading -- we are today winning contracts competing with the likes of [indiscernible], for instance. We are exactly on par, I would say. Last 12 months rolling order intake is plus 6%. As you know, it's pretty lumpy. Last year, we had a very high Q2. This year, we believe we are going to have also a very good Q4. So we believe, we're going to end up the year with mid- to high teens in terms of progress for order intake. And as you know very well, the leading indicator for us that describes our ability to win business. So what we are seeing today is a faster transition to the cloud and probably a bit faster than what we originally thought in the past quarter. Today, I would describe it in this way, all North American discussion more or less is a cloud contract. There is not anymore, any possibility of project contract. We thought that the mix would still be a bit different a few months ago, but this is a market reality. And the good news is we are able to take new contracts in this context. Now we added a slide to show you what is the impact of transition to the cloud, okay? And you see here on the top part of the slide, the traditional project revenue profile. When we take a EUR 10 million contract, we have EUR 10 million revenue on the year. So we invoice EUR 10 million with the corresponding gross margin, which for us is about 50%, as you know. And then we have the recurring maintenance and some managed services. And you see it's quite -- it's about 20% to 30% of the amount of the total contract. Now take exactly the same contract and get it in the cloud. You are not invoicing the first year 10, you're invoicing 4. That's a 60% decrease in top line, okay? That's a 60% decrease. And then what you are seeing over -- actually the course of the year, here we ended the numbers is actually an increase year-on-year, a small increase that is not only in year for all purpose, but that we are invoicing year after year. So the contract is definitely richer in cloud. This is a longer-term contract. Typically, the traditional project is selling the license and have for the 3-year contract for maintenance that can be renewed. Here in cloud, we are talking 5 to 12 years contract actually that could be as long as, yes, double digit in terms of years. Of course, stable and recurring revenue streams. Switching customers. Switching is more difficult for customers, of course, and we have profitability uplift driven by the strong operating leverage, meaning we can make more money over time. However, when you look at the 2 models, it takes 5 years to breakeven. And when we are entering in such a transition, the short-term impact is quite significant on the top line, but also on the bottom line for the first year. So this is what we are seeing. We are not seeing, of course, a 60% decrease in top line overall for the group. As you've seen, it was minus 13% because it applies only to the nonrecurring part of our business, but it is still a very significant impact. And what we are seeing today, as I said, is actually more and more SaaS contracts coming our way. Good news is we are winning these contracts, but it has an impact short term on this year. I wanted to be clear about that. So again, nothing is broken in this market. On the contrary, we are well positioned to grab these SaaS contracts, but it has a short-term impact. Now if you look at the numbers, you see minus 13% in Q3 in terms of top line. And of course, it has an impact on the bottom line due to this mix of contracts. This is the same slide with the P&L. To be noted after 9 months, we are still above last year. We had a year where the first half of the year, we have more project business in the second half had mainly SaaS and cloud contacts, which is a reason of the difference between the 2 halves. Q4 will still be by far the strongest quarter of the year, of course, as it is usually the case. Now if I turn to DPC -- DPS first. DPS is a business that was growing about 12% per year the past couple of years. And this year, it's not the same performance. Mainly what we are seeing is the North American market, equipment market that is very subdued. A lot of our customers in the U.S. have been delaying their decision -- their investment decision. This is due to the uncertainty in the economic policy with the change that happened at the beginning of the year. Although we are a little bit more optimistic for the end of the year, it definitely it has impacted, I would say, the business and therefore, for this business in an adverse market environment, we believe we're going to be slightly below last year, or best performance would be to be almost on par. Seeing sales growth has slowed as well in such environment, but has not disappeared. So nothing is broken here in this market. We are hitting, let me say, short-term difficulty, but our strategic growth initiatives around packaging are going on. Here again, the packaging market where we want to operate is actually in recession today with negative growth, which probably slows down the introduction of our solutions. But it's really a temporary situation, and we remain extremely confident with our growth initiatives going forward. Different -- actually, very different situation in Europe and outside Europe. Today, Europe is stalling a bit in terms of doing the transition into green hydrogen. And we have not a lot of projects in Europe compared to the original ambition of the commission. However, Middle East, Africa and especially Asia are showing great momentum in green hydrogen, and this is where we have redeployed our efforts. And actually, the 2 main countries where we are applying our efforts today are China and India. With some success already in India, and we believe that in China, we will be also able to, I would say, break the market for [indiscernible] due to the sheer quality of our membrane. So apart from that, as you know, we have inaugurated our new unit for the membrane. And we are meeting today all the conditions to receive the subsidy of the European -- of the European Commission that we will get before year-end. We are already using the new plant. It's already providing some more productivity improvement. And therefore, this year, even if it's -- the growth will be quite subdued, actually we continue to increase our margin through this productivity improvements, so that's more different. So now in numbers, as you can see, DPS before Q4 in negative growth territory overall. We still expect Q4 to be a very strong quarter as usual. For ZIRFON actually some growth, but probably not at the level that we were expected. And the growth in the film part is mainly price related. So in numbers, good stability of DPC. We probably we are expecting growth in DPS that we are not seeing this year. But again, nothing is broken in this business. Radiology, medical film, this is, of course, the negative story of the -- now already more than a year and especially in China and the rate of decrease of the market is probably higher than what we were expecting from our experience of what we have been through already in Europe and North America. The market will probably disappear quite quickly, meaning that we are taking action to further restructure, I would say, our cost base and also address our go-to-market. DR, a very specific situation this year because for the first time in many, many years, I think for the first time ever, the market environment is very negative, 7% decrease of the market for the first 6 months of the year, and we are directly impacted by that. We used to grow DR, I would say, high single digits. This year with a negative 7% market, we are in negative territory also for DR, which came also a bit as a surprise. We are reviewing our geographic footprint as I speak to make sure we are really investing in the right markets -- geographic markets for us as well as reviewing our product supply strategy in order to continue our ride for DR. So that's you see still in the numbers, so needless to say, this negative EBITDA situation is what is prompting us to accelerate and extend our cost-cutting programs. And this is the P&L. As you see, we are evacuating cost, but of course not fast enough given the rate of the decrease. Now the outlook. HealthCare IT, we believe the transition to cloud will continue and will probably continue to accelerate in terms of SaaS contract. So it will impact temporarily our financial performance. And therefore, we are changing a bit outlook in this context, saying that we expect now to be slightly below last year. But again, the good order intake momentum continues and the fact that we are gaining customers is giving us a lot of confidence going forward. It's a normal situation of a transition and go a little bit faster than expected, but we are well positioned to take advantage of it. And again, in the total number of suppliers in the market for HealthCare IT, actually, we are part of the [indiscernible] issue. We are ready to be able to grab market with this foundation. DPC moderate top line growth, slight profitability growth expected for the year in spite of the soft market conditions, a bit of less growth story for DPS to perform, but still holding our own in this condition. Radiology I think I already discussed it. A word on settlement because there is some news here. We have actually received a draft report from the experts actually. So things are moving. And the draft report, I would say, is very close to our expectation. We have now -- we should have by year-end the final report after the parties can also give some input. And therefore, for the first time, I have something very tangible to report and we should expect in Q1 a resolution -- in Q1 '26 resolution of the release story. For the year, we still believe, and we have not taken into account, of course, the settlement, we still expect a slightly negative net cash flow. So that's probably where I'm going to stop for your questions. And I will take questions from the analysts and from the press. Operator? Operator: [Operator Instructions] The first question today comes from the line of Guy Sips from KBC Securities. Guy Sips: Yes. Three questions from my side. First question is on the Packaging Printing segment. Can you indicate why the mid-segment is still performing quite good? And yes, how it is separated between, let's say, bigger machines and the smaller ones? And can you also give us an indication on the number of Orca's you sold in the quarter and what your expectation is for the remaining of this year? That's the first one. And the second question is on your net debt situation and especially on the, let's say, the updated slide you gave on the pensions, which is, of course, very helpful for us. But now you can give a quarter-on-quarter position of your net pension debt, while previously it was... Pascal Juery: We lost you... Operator: We seem to have lost connection with Guy Sips. The next question comes from the line of Laura Roba from Degroof Petercam. Laura Roba: I have 2 to start. First of all, regarding the cost saving plan. So the current plan is being accelerated. And did I understand correctly that you mentioned that what was supposed to happen in 2026 will take place in Q4? That was the first one. And then the second one is on the short-term measures that are implemented across the group to help mitigate the current results. Could you provide some example of that, please? Pascal Juery: Yes. Of course, thank you, Laura, for your questions. Cost saving plan, actually, we are not going to do in Q4 '25, the full of '26, but we have brought forward a number of things. And for instance, as an illustration in terms -- we had a schedule for people leaving the company. And actually, we have added a lot more people leaving in Q4 '25. The total plan we mentioned was about 470 people, and we have put forward like about 100 people in Q4 '25. And that's just to give you an example of how we are accelerating, but it doesn't mean that we do everything that we plan in '26 in Q4 '25. We do as much as we can, actually. Laura Roba: Okay. Pascal Juery: And regarding the short-term measures, well, I would say, our short-term measures are very diverse. For instance, that's what I described regarding what we are doing to anticipate is part of it. But we are -- it's clear we are taking measure about discretionary expenses, travel, hiring, of course, which are the classical set of measures. We are also very careful to make sure -- we are exhausting, I would say, vacation and over time before year-end. And we have also taken some extra measures, which are quite significant because we have -- actually, we have put a significant number of people in temporary unemployment until, I would say, the end of the year. That's some examples of the short-term measures that we are taking. Operator: We'll give the line back to Guy Sips from KBC Securities. Pascal Juery: So we got your first question, Guy. The second question, you didn't -- we didn't hear until the end. Guy Sips: Yes. Just on the net financial debt and pension debt. So now you give on a quarterly basis an indication of your net pension debt, while previously, it was only possible on a full year basis. What has changed with the auditors in that regard? And so is it now expected that at year-end, we will see smaller shifts on -- like compared to the EUR 391 million number? That's the second question. And the third question is related to Aurelius. So am I correct that you hinted that in your view that you expect now a solution or -- and a payment in the first quarter of 2026 and perhaps even earlier? Pascal Juery: Well, let me -- let's start by net debt, and I'm going to give the floor to Fiona. Fiona Lam: I think on the net debt question, there has been no changes of methodology. It has been always available in the balance sheet on the half year quarter year results release. The only difference is that I think at year-end, there's actuarial calculation. This actuarial calculation is only happening at year-end. So what you see in the quarter, every quarter, the evolution is actually the pay the people who die -- the update of the position of that. Until year-end, we will also update the actuarial calculations where the discount rate, the interest rate, all those calculations will be done by the actuarial. Pascal Juery: Does it clarify, Guy? Guy Sips: Okay. Pascal Juery: On -- I'm going to take the question on Aurelius. Well, Aurelius, as I said, we have now a draft report and the expert has given, of course, some time for the 2 parties to make their comments. And the current time line is we should get the final report after she took the comments, the expert takes the comments and decide what to do with it, so to speak. And we expect a final report at the end of the year. So realistically, we say we should be -- we should have a settlement in Q1 '26 given the time, we have 6 weeks until the end of the year. But I think for the positive news is -- 2 positive in this story. First, for the first time in more than a year, I mean, almost 1.5 years, things have moved, and we have now a practical report from the expert. And the second part is for the time being, what we are seeing from the expert is according to our expectations. Okay. And -- but the payment realistically, Q1. Okay, on this... Guy Sips: Okay. Pascal Juery: And now the packaging question. Well, on the packaging question, I just want to rephrase to understand if I understand, if I got it well. For Orca, you're asking us specifically, have we sold any SpeedSet? The answer is not yet, okay? The answer is not yet. We are going probably to sell our first SpeedSet in Q4 to our existing customer, but the contract is not signed, but should be signed, I would say, before year-end. But apart from that, no other Orca being sold. And this is, as I said, 2 reasons. First, the packaging end market today is not really favorable for our customers to invest in digital is probably a solution, they are willing to implement when they have the opportunity to increase their capacity. But so -- and the sales cycle for such product is a bit longer, of course, given the situation. And on the packaging printing, I mean, you made a comment on packaging printing regarding low and mid-range. That I'm not sure I understood fully your question. Guy Sips: Am I correct that the mid-segment in the packaging printing is doing rather good compared to the, let's say, the small segment? Pascal Juery: Actually, we have no mid-segment in packaging. We are -- the only thing we do in packaging is really Orca. So maybe what you refer to is more our traditional sign and display business... Guy Sips: Yes. Yes, sign and display, yes. Pascal Juery: [indiscernible], can you comment? Mid-segment, low segment? High segment. Unknown Executive: So indeed, in the Sign and Display segment, I would just -- which is our traditional segment and today, 90% or so of our sales. That part -- and that part of the market we have seen this year specifically that people are postponing investment decisions on the larger type of equipment. So we certainly don't see a slowdown on the smaller and midsized equipment printers, but the larger-sized printers or tower range, which is still very much appreciated technically, but is indeed people are taking less quickly or postponing investment decisions. And we do hear that in the market from other players as well. So it's not only an Agfa thing, it's really a market given, especially in North America actually for '25. Pascal Juery: Thank you, [indiscernible]. Next question. Operator: We currently have no questions coming through. [Operator Instructions] We seem to have no further questions. So handing back to you, Mr. Juery for conclusion. Pascal Juery: Thanks a lot. So again, a quarter that shows, first, situation in film that we are addressing with all energy through cost measures, amplifying and speeding, accelerating our measures. A transition to cloud for HealthCare IT that happens probably faster than we expected. But good news being we are on the winning side of this transition. And third, a DPC that will broadly deliver a slight improvement in profitability, but where the adverse market conditions have somehow dampened our hope for more rapid growth with the backdrop of a very stringent cost management and cash management at the company level to ensure, of course, the company profitability. Q4 will continue being the strongest quarter of the year as it is, although these trends will also apply to Q4 for film and HealthCare IT. So thanks a lot for attending the call. Thank you, and speak to you soon. Operator: Thank you for joining today's call. You may now disconnect.