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Operator: Good morning, and welcome to Fiera Capital's earnings call to discuss financial results for the Third Quarter of 2025. I will now turn the conference over to Natalie Medak, Director, Investor Relations. You may begin your conference. Natalie Medak: Thank you, and good morning, everyone. Welcome to the Fiera Capital conference call to discuss our financial results for the third quarter of 2025. A copy of today's presentation can be found in the Investor Relations section of our website. Comments made on today's call, including replies to certain questions, may deal with forward-looking statements, which are subject to risks and uncertainties that may cause actual results to differ from expectations. Please refer to the forward-looking statements on Page 2 of the presentation. Our speakers today are Maxime Menard, Global President and CEO; and Lucas Pontillo, Executive Director, Global CFO and Head of Corporate Strategy. Also available to answer questions will be John Valentini, President and CEO, Private Markets. With that, I will now turn the call over to Maxime. Maxime Ménard: Good morning, everyone. Thank you for joining us today. We are pleased with our operating and financial results for the third quarter of 2025. Total assets under management increased 4% to end the quarter at $166.9 billion, supported by market appreciation and total net organic growth of $900 million. Within our public market platform, assets under management reached $145 billion at the end of the third quarter, up 3.9% from the end of Q2, reflecting market growth and positive net flows. And assets in our private market platform ended the quarter -- third quarter at $22 billion, up 5.3% from the end of the prior quarter, reflecting strong net inflows of approximately $850 million, along with market growth. I will now turn to highlights of our commercial and investment performance across our asset classes, starting with our public market platform. Total net organic growth was $55 million during the quarter. We secured new mandates of close to $500 million, primarily into our U.S. growth equity strategy and positive net contribution from non-sub-advised AUM of close to $400 million, mostly across a mix of our equity and fixed income strategies. This was largely offset by outflows of approximately $700 million from sub-advised strategies. During the quarter, we announced an extension of our partnership with Wellington-Altus with the launch of our Canadian Corporate Bond Plus, an investment fund focused primarily on Canadian corporate bonds and exclusively available for purchase by Wellington-Altus Advisors. This mandate joins the Canadian High Conviction Equity strategy, which was announced in the prior quarter. Both mandates are expected to fund over time, but carry strong growth potential. Turning to investment performance in public markets. Our fixed income strategies continue to perform well in the third quarter with nearly all strategies adding value. Approximately 86% of our fixed income AUM have outperformed their benchmark over the 1-year period and 97% have outperformed over 5 years. We are pleased to report that Fiera Capital was recognized as Fixed Income Manager of the Year at the European Awards 2025. This recognition reflects the strength of our fixed income platform, along with our leadership and long-standing expertise in the insurance investment space. Among our equity strategies, outperformance relative to benchmark was challenged during the quarter. Although equity markets delivered solid gains during the third quarter, relative outperformance of a select group of companies continue to create a challenging environment for generating alpha. Year-to-date, our Canadian equity strategy delivered positive returns, but performance relative to benchmark during the third quarter was impacted by softness in select high conviction holdings and limited exposure to outperforming sectors like materials and energy. Nevertheless, the strategy continues to add value since inception. Returns on our U.S. Equity Core and Atlas Global Companies strategies were also positive for the quarter and year-to-date. However, outperformance relative to benchmark was affected by security selection within a few key sectors. Both strategies continue to outperform since inception. Our International All Cap ADR strategy remained a highlight, outperforming its benchmark by close to 50 basis points in the quarter and 500 basis points for the 1-year period, led by strong selection in health care. Among our sub-advised strategies, the Global Equity strategies performed in line with its benchmark. However, U.S. and international equity were impacted by security selections in financials and industrials and limited exposure to index leaders. Despite short-term challenges, each strategy continues to outperform its benchmark since inception. Turning to our private market platform. Net organic growth was approximately $850 million for the quarter, driven by new subscription of more than $900 million. As we announced during the quarter, we received an initial investment of approximately $800 million from the Canadian District of the United Brotherhood of Carpenters and Joiners of Americas and to the newly launched Canadian Built Opportunities Fund. The initial commitment is divided equally between infrastructure and real estate investments and aims to reach over $1 billion in assets within 3 years. The fund has a dual mandate of generating attractive risk-adjusted returns on capital and supporting jobs for union members and is a testament to our ability to design and deliver high-impact customized investment solutions. During the quarter, we returned capital of approximately $150 million to investors in our private market strategies. And year-to-date, we have returned capital of more than $500 million. We also deployed approximately $400 million of capital into new projects during the third quarter and $1.5 billion year-to-date. Our pipeline of undeployed committed capital increased to $2.1 billion from $1.3 billion at the end of Q2, reflecting the initial investment into the Canadian Built Opportunities Fund during the quarter. In September, we announced that we made changes to our global infrastructure capabilities to broaden the range of strategies available to institutional investors and strengthen the execution risk and oversight. After a careful and deliberate process, we appointed Bruno Guilmette as Global Head of Infrastructure. Bruno oversees both our infrastructure equity and debt capabilities, which manage approximately $5.5 billion in assets and are supported by a team of more than 30 professionals across key global markets. Bruno brings more than 25 years of experience leading large infrastructure platforms and has held senior investment and governance positions in several public sector institutions, including Canada Infrastructure Bank, PSP and CDPQ. Moving on to investment performance. Our private market strategies continue to deliver steady investment performance with key strategies generating positive returns in the third quarter and absolute returns of 5% to 10% over the 1-year period. Private credit strategies, in particular, performed well in the quarter. Our infrastructure debt fund returned 2.6% in Q3 and produced an internal rate of return of more than 11% since inception. The team completed 2 investments during the quarter and is on track to complete its remaining capital commitment by late 2025 or early 2026. Our Direct Lending Opportunities Fund also returned 2.6% for the quarter and more than 10% over the 1-year period. The team has tightened underwriting standards, keeping leverage at conservative levels to ensure borrowers have an adequate flexibility. Our Global Private Equity strategy delivered a solid return of 2.1% in the third quarter, supported by earnings growth and free cash flow generation across core portfolio companies. Lastly, our Global Agriculture strategy returned 1.5% in the Q3 as strong operating results were tempered by a challenging commodity environment. Turning to Private Wealth. Assets under management of $14 billion at the end of the third quarter increased 2% from the end of Q2. The quarter was impacted by negative net contribution largely out of treasuries and sub-advised strategies. We continue to view the private wealth business as highly complementary to our public and private market platforms and remain committed to driving sales growth within this key channel. With that, I will turn it over to Lucas for a review of our financial performance. Lucas Pontillo: Thank you, Maxime, and good morning, everyone. I will now review the financial results for the third quarter of 2025. Beginning with total revenues. Across our investment platforms, we generated total revenues of $167 million in the third quarter. Total revenues were up $4 million quarter-over-quarter or 3% as a result of higher base management fees in both public and private markets as well as an increase in performance fees in private markets. Revenues were down $5 million or 3% from the same quarter last year, reflecting lower base management fees in public markets and lower commitment and transaction fees in private markets. This was partly offset by higher base management and performance fees in private markets. Base management fees of $153 million in the third quarter were up $5 million or 3% from the previous quarter, but down 1% year-over-year. On a year-to-date basis, base management fees of $455 million were flat from the same period last year as higher base management fees in private markets continued to offset a decline in fees from public markets. As Maxime highlighted, this quarter, we received an investment of over $800 million in newly launched Canadian Opportunities Fund within private markets. These assets are currently within committed undeployed capital and are expected to be deployed over the time beginning in the first half of 2026, with the related revenues beginning in the second half of 2026. Assets are expected to be fully invested within 3 years. As a result, our base management fee rate in the quarter reflects a portion of the impact from the increase in undeployed capital. As assets are invested and begin to generate revenues, our fee rate is expected to increase commensurately. Turning to public market revenues. Base management fees of $103 million in the third quarter increased by $4 million over the prior quarter as a result of net organic growth and market appreciation. Base management fees declined $4 million from the same quarter last year, primarily reflecting lower sub-advised assets under management. On a year-to-date basis, base management fees of $306 million were down 3% from the same period last year, reflecting lower sub-advised AUM. Performance fees were $200,000 during the quarter, down from fees of less than $1 million in the same quarter last year. And other revenues of $1.6 million in the quarter were flat compared to the last quarter and down from $3.7 million in the same quarter last year as this was largely due to revenue related to an insurance claim in the prior year. Turning to private markets revenues. Base management fees of $50 million in the third quarter increased by $600,000 from the prior quarter and were up $3 million or 5% year-over-year. This increase was primarily driven by us taking a controlling interest in a U.K. real estate platform during the first quarter of 2025, along with higher deployed AUM within our real estate and agricultural mandates. On a year-to-date basis, base management fees of $149 million increased $10 million or 7% from the same period last year, offsetting the decline in public market base management fees over the same period. And transaction fees of $2 million for the third quarter compared with fees of $5 million in the prior quarter and $4 million in the same quarter last year and reflect lower transaction fees earned from clients as some new mandates won during the quarter did not generate commitment or transaction fees. Performance fees of $7 million during the quarter were $4 million higher quarter-over-quarter and $2 million higher year-over-year, reflecting fees from our global agricultural fund in the current quarter. Lastly, share of earnings in joint ventures related to our U.K. real estate business were $1.4 million in the quarter, down slightly from the prior quarter and same as last quarter last year. Year-to-date basis, earnings from joint ventures were $6 million compared with $11 million from the same period last year, reflecting income earned from completion of several large construction projects in the prior year and the fact that the consolidation is now in base management fees of our controlling interest in our U.K. real estate platform. For the quarter, private markets comprised 13% of total assets under management and generated 37% of our total revenues. Private markets platforms continues to deliver solid AUM and revenue growth and provide attractive diversification to our overall business. Turning now to expenses. SG&A expenses of $117 million, excluding share-based comp in the third quarter were down slightly quarter-over-quarter and down $3 million or 3% year-over-year, primarily reflecting lower sub-advisory fees, lower travel expenses and fixed compensation expenses, which were partly offset by higher variable compensation due to increased organic growth. On a year-to-date basis, SG&A expenses, excluding share-based compensation, were down $9 million or 2% for the same period in the prior year as a result of our ongoing cost management efforts and lower sub-advisory fees. We remain committed to improving our operating efficiency and continue to prudently manage our expense base. Turning to adjusted EBITDA and adjusted EBITDA margin. Adjusted EBITDA for the quarter was $50 million, up $5 million or 10% quarter-over-quarter as increased revenues and decreased SG&A expenses helped drive margin expansion for the quarter. Year-over-year, adjusted EBITDA was down slightly for the quarter by $1 million as lower revenues were mostly offset by lower SG&A expenses, excluding share-based comp. Year-to-date, adjusted EBITDA of $139 million was down $3 million or 2% for the same period in the prior year as lower SG&A expenses, excluding share-based comp, helped to partly offset lower other revenues and lower earnings from joint ventures. Our adjusted EBITDA margin was just over 30% for the quarter, up from 28% in the prior quarter and flat from the same quarter last year. Looking at earnings. Net earnings attributable to the company's shareholders were $6 million or $0.05 per diluted share for the quarter, up from $4 million or $0.03 per diluted share last quarter. This compares with $13 million or $0.11 per diluted share for the same quarter last year. On an adjusted basis, net earnings were $25 million or $0.23 per diluted share for the quarter compared with $27 million or $0.24 per diluted share last quarter and $29 million or $0.25 per diluted share in the same quarter last year. Last 12 months free cash flow of $87 million compared favorably with $75 million for the prior quarter. The increase primarily reflects improved changes in noncash working capital for the quarter. While the last 12-month free cash flow was below the $95 million generated in the LTM period from the prior year, it is important to note that last year's number included over $31 million in public market performance fees from Q4 2023. Turning to our financial leverage. Net debt was $680 million at the end of the third quarter, down $33 million from the end of the prior quarter as we used a portion of higher free cash flow to pay down our credit facility. We expect net debt to continue to decrease as we prioritize directing a greater share of free cash flow towards debt repayment. Our net debt ratio declined to 3.5x in the quarter from 3.7x in the prior quarter. Funded debt ratio, as defined by our credit facility declined to 2.9x from 3x in the prior quarter. Delivering value to our shareholders remains a fundamental pillar of our strategy. During the quarter, we opportunistically repurchased approximately 540,000 shares for total consideration of $3.6 million. On a year-to-date basis, we repurchased 1.6 million shares for total consideration of close to $10 million. We continue to see significant value in our stock at the current prices. Lastly, the Board has approved a quarterly dividend of $0.108 per share, payable on December 22, 2025, to shareholders of record on November 24, 2025. I'll now turn the call back to Maxime for his closing remarks. Maxime Ménard: Thank you, Lucas. We are pleased with the operating and financial results we delivered this quarter as we continue to make progress executing against our strategic priorities. We continue to grow our private market business, which saw AUM increase more than 5% in the quarter and close to 12% year-to-date. The positive net organic growth during the quarter was driven by 2 large mandate wins, which we believe are a testament to the strength of our distribution teams and our ability to design and deliver high-impact customized investment solutions and reflect the confidence that clients continue to place in our investment capabilities. We exercised good expense control and generated a 30% adjusted EBITDA margin. We improved our financial flexibility, paying down our credit facility and reducing our net debt ratio. And we returned capital to shareholders through our quarterly dividend and share repurchases. I will now turn the call back to the operator for questions. Operator: [Operator Instructions] First, we will hear from Etienne Ricard at BMO Capital Markets. Etienne Ricard: So to circle back on the launch of the Canadian Built platform, there's a lot of talk about new infrastructure projects by Canadian trends. So it sounds like the opportunity set is there. But I think we're all aware the pace of capital deployment can be lumpy in infrastructure. So I'm wondering what's the potential for this strategy to scale over time? John Valentini: The potential for... Etienne Ricard: Yes. For the strategy to scale over time. John Valentini: Yes. Well, we -- first of all, let's say it's a large mandate. It's the biggest mandate we've ever gotten in our private markets platform. I think there is a significant opportunity in this type of mandate to continue to grow. I would also say that we're currently also in discussions to grow this particular mandate in similar mandates. So I think there is a potential. I think there is growth potential in this particular strategy and mandate. To answer more specific, I mean, in terms of our pipeline of similar types of opportunities, we are discussing similar opportunities with different parties in Canada. So it's -- yes, we do see this as a growth potential. Etienne Ricard: Okay. And Lucas, I think you said that you would -- you expect to invest this capital over a 3-year period. Have you -- do you have commitments at this point or it's more in the future? Lucas Pontillo: No, no. So the comment was relative to the capital commitment that we already have. So the idea being that it would be deployed over a 3-year period. So starting early next year and then likely ramping up in the following year and following into the third year as well. So it was with respect to the capital that's already been committed, the $800 million we referred to. Maxime Ménard: Yes, the mandate carries a good revenue scheme in terms of management fee and also performance fees. So we think it's on a relative basis compared to our private markets revenue, I think this is going to be -- it's going to be accretive. Lucas Pontillo: Yes. So again, like not to extend too much on this, but I think what's really interesting, again, we were able to come up with a very customized solution for a group that was looking for deployment of capital. I see a great opportunity and our ability to continue to grow it as they've committed already $800 million in both strategies, real estate and infrastructure. We already have committed to some projects, more importantly, in the real estate right now, and we continue to look for infrastructure. And I think as we deploy this capital, there potentially is other groups that will join as part of other unions and increasing the capital potentially allocated to this. And so we don't yet have a number, but certainly, there is upside potential in increasing the pool of assets committed to that solution. Etienne Ricard: Okay. Appreciate the details. And switching on public markets. What interest are you seeing for active equity strategies from institutional investors given that we continue to see a concentration of market returns? John Valentini: Yes. I think the last quarter is not necessarily indicative of how much interest there is across public markets. In fact, I think we've seen probably the most of interest across our different strategies in the last 2 quarters, including, as I mentioned, a large proportion that went to an active U.S. large cap mandate. And again, this is probably the largest asset class that typically would go nonactive. So I think the last quarter was a difficult one for, call it, high conviction active managers. But nevertheless, I think in the long run, we've seen an increased appetite for public markets and active managers and especially the managers that we tend to have, which is high conviction managers. So whether it's Canadian equities, whether it's U.S. equities and even global, we've seen a constant demand in RFPs coming in. Maxime Ménard: And I would just add to that, despite the difficulties in the quarter, when you exclude the sub-advised mandates, we actually had positive net organic growth in public markets of almost $800 million. And it was a nice diversified set of new mandates across everything from Canadian equity to U.S. equity. So I'd say we continue to see good demand for our products in the quarter. Operator: Next question will be from Jaeme Gloyn at National Bank Capital Markets. Jaeme Gloyn: Yes. First question, just on the cash flows. Just kind of trying to pick up the note from the presentation around timing of accounts receivable, timing of other items. Can you try to kind of normalize some of those factors and what kind of contribution that might have had on the increase in LTM cash flows? Lucas Pontillo: Thanks, Jane. Great question. Actually, I would say it -- I'll reverse it a bit. It actually is quite normalized for the quarter, where we had a significant working capital drag was last year. So when you compare that $95 million versus the $87 million, that's where you're seeing the difference. So we ran a much tighter sort of noncash working capital turnover this quarter, which I would say is probably more in line with how we should be running it. And the last year's number got really impacted by 2 things. It got impacted by large performance fees, as I mentioned, in Q3 2023 -- Q4 2023. And then likewise, there was some slippage with the working capital last time. Jaeme Gloyn: Okay. Understood. And then in terms of the organic growth story, any insights on how Q4 is shaping up? Maxime Ménard: Again, we continue to see lots of interest for the different asset class we have. Again, like it's a little early for me to say how this is going to look like. I've mentioned that there's a bit of a softness in terms of the performance in some of the strategies. Q4 is not necessarily indicative of a lot of decision-making within the institutional world, but we're keeping a close eye on flows. But again, as I said so far, it's hard for me to give you any indications of how this is going. It's a mix of some outflows and again, some positive flows in some of the accounts that we recently won. But we're keeping a close eye on this. Operator: [Operator Instructions] Next, we will hear from Graham Ryding at TD Securities. Graham Ryding: Some solid performance fees in the quarter. I think Q4 historically has been your sort of bigger performance fee part of the year. Your Frontier Markets fund, the performance there has been lagging, but you've had solid performance on your emerging market strategy. So can you give us a feel for sort of how things are looking in terms of performance fees given I believe those funds are sort of fairly material drivers historically. John Valentini: Yes. Thanks for that, Graham. Indeed, as you said, some of the performance, it's a bit lopsided. We've got one that's doing quite well and one that is underperforming. I mean, certainly, at this point, where we are during the year, you can see we're lagging a bit even in terms of the crystallization of some of those performance fees relative to prior year. And as things stand, we're not expecting to have the same level. But again, with these things, it's always so volatile. We still have 6 weeks to go in the year and the sensitivity, particularly around those emerging market strategies, I mean, we've seen it come and go in a matter of weeks at times. So at this stage, we're watching it prudently, but we're certainly more cautious going into Q4 than we would have been historically. Graham Ryding: Okay. Great. And then I know you've made some changes in leadership at the private debt interest or I guess, your infrastructure sort of vertical overall. How would you sort of describe sort of the changes that you're expecting to see there? Is this performance focused, distribution focused? What are you sort of hoping to see come out of that? And a second on that, I think there's some redemption requests, sort of legacy redemption requests there. Are those material in nature? And how are you sort of managing through that? Maxime Ménard: Yes. So the changes that you're referring to is Bruno Guilmette that we brought in, in terms of Global Head of Infrastructure. The goal on that was to strengthen the team in terms of our capabilities around what I consider to be probably one of the most attractive asset class on a go-forward basis. And the point of this is a combination of many things. Again, it's the way we approach the client base and the way that we are coordinating between the debt and the equity. So we decided to bring the 2 asset classes under one leadership, and Bruno had lots of experience on this. In terms of the queue, again, like we're addressing the situation with a combination of making sure that we create the necessary liquidity to address the queue, but also while protecting the performance of the fund. Operator: And at this time, Ms. Medak, we have no other questions registered. Please proceed. Natalie Medak: We'd like to thank everyone for joining us this morning. Please reach out if you have any other questions. Sylvie, with that, we can end the call. Operator: Thank you. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. And at this time, we ask that you please disconnect your lines.
Operator: Good morning, ladies and gentlemen, and welcome to the KBC Group's Earnings Release Third Quarter 2025. [Operator Instructions] I would now like to turn the floor over to Kurt De Baenst, Head of Investor Relations. Please go ahead. Kurt De Baenst: Thank you, operator. A very good morning to all of you from the headquarters of KBC in Brussels, and welcome to the third quarter conference call. Today is Thursday, November 13, 2025, and we are hosting the conference call on the third quarter results of KBC. As usual, we have the group CEO, Johan Thijs as well as group CFO, Bartel Puelinckx with us, and they will both elaborate on the results and add some additional insight. As such, it's my pleasure to give the floor to our CEO, Johan Thijs, who will quickly run you through the presentation. Johan Thijs: Thank you very much, Kurt. And also from my side, a warm welcome to the announcement of the third quarter results 2025. And as always, we start with the net results, which stands at a very excellent EUR 1.02 billion. So once again, the KBC bancassurance machine has been firing on all its cylinders, which also means that all entities in our group have been contributing positively to this result. As a matter of fact, it's once again perfectly balanced income, 50-50 split over net interest income versus the non-interest income bearing results, which once again shows that we keep up the pace with our, let's call it, ancillary business in compensating the growth on the net interest income side. If you look at the different lines, well, then it's very straightforward. Once again, strong performance on the net interest income side, which has been growing despite the fact that there was a significantly lower net interest income on inflation-linked bonds. Consequently, we also increased our guidance from what it was at least EUR 5.85 billion to now at least EUR 5.95 billion. This income growth on the net interest income side has been triggered, amongst others, by a strong loan growth, but also again on a strong performance on the transformation results, so our replicating portfolio. Coming back to the diversification, well, both the fee business, which is generated through the asset management and bank services have been growing significantly as did the insurance business, the bit latter was also driven by good quality with a combined ratio of -- not of 8.7%, that would be ridiculously lower, but at 87%, which is indeed still excellent. If you take all those income lines in consideration, you come to the conclusion that indeed we can further increase our guidance of our income side as well we now stayed at least 7.5%. And if you then know that we stick to our guidance for the cost side, which means at least -- sorry, maximum 2.5%, we know can also conclude that the jaws will be superior to 5%, which is indeed a very strong number. Coming back to that cost side, they are perfectly under control and perfectly within our guidance. And on the credit quality side, we posted a very excellent credit cost ratio of 12 basis points, which is significantly lower than the long-term average and also consequently lower than the guidance which we provided. No big surprise that our solvency position stands solid at 14.9%. And then on the liquidity side, as usual, we are performing very well with numbers 158%, respectively, 134% for NSFR -- for the LCR and the NSFR. And then also, last but not least, we also issued the interim dividend of EUR 1 per share, which is paid on the 7th of November. And we also announced that do things. First of all, the acquisition of Business Lease in Slovakia and Czech Republic, but also our inaugural SRT, which is freeing up 23 basis points of capital, hereby fulfilling the promise which we made a more active management of our risk-weighted assets. When we go to the more digital side of our story, we go to Page 4, you can clearly see that Kate continues to grow. As a matter of fact, 5.8 million customers of ours in the meanwhile clicked on Kate and continue to use her in the further business, which we are doing with KBC. We also see clearly that the number of interactions with our customers continue to increase, and not only the number of transactions increase, but also the fact that Kate can autonomously, which means without any help of a human being that Kate can deal with those questions and provide the customer solutions in an autonomous way, 7 out of 10 times. In that perspective, it's also important to understand that since October, we start launching Kate 2.0, which is actually a fully enabled LLM, so large language model Kate, which allows us 2 things. First of all, to better anticipate the questions in the context by which they are asked, so therefore, allowing us to provide more and better answers to our customers, which intrinsically means that more customers can be helped. And secondly, that the autonomy, which now stands at 70% will further increase. So both will have a positive effect on the 2 sides of the cost-to-income ratio. First of all, it allows us to sell more via Kate, Kate 1.0, so the old version generated actually sales, which allows us to do 400,000 sales over the period of 12 months. And then on the cost side, as I already said, the autonomy actually creates solutions without human being interfering, which means that Kate today is -- Kate 1.0 today is doing the work of roughly 360 FTEs, which is already a quite a significant number, which is going to improve going forward. Let me go into the different P&L lines because there were no exceptional items this quarter, which means that on the net interest income side, we do see overall an increase of 1% on the quarter and 10% on the year. But what is far more important that is actually, if you look at the underlying building blocks, then actually the net interest income on the banking side increases with 2%. Why? Because there is a very negative impact of -- I mean, it has a positive impact on other things, but inflation was coming down. And therefore, the income, which is generated through inflation-linked bonds, was significantly down as well, EUR 20 million difference on the quarter, and that obviously has some impact on the growth. Big chunk of that is booked on the insurance side. And therefore, if you purely look at the banking side, a 2% increase. Now that is triggered by, in essence, 2 things. First of all, a further increase of our transformation results, which went significantly up due to the way how we replicate our portfolios. And the second one is a very strong performance on the lending side. As you know, there is still some competition on margins in the markets where we are present, but this is more than compensated by the loan growth. The loan growth, which stands at 1.6% in the quarter, 8% on the year, and that is indeed a very strong number. Also, when you compare that with the guidance, which we previously gave, then we also came to the conclusion that we increased our guidance to approximately 7% going forward. Year-to-date -- so after 9 months, of 2025, the loan growth stands at 6.3%. If you would include the FX effect, even at 7.3%, which is indeed a very strong number. All the other elements are mentioned on the slides, have far less impact. We are talking about better income on the dealing room side, cash management, the number of days, but let me not go into that detail. Let me go back to the margin, which now stands at 205 basis points, which is slightly down compared to previous quarter, but I have to make a caveat here. First of all, the impact here is quite clear of the inflation-linked bonds. If you -- that itself already explains a big chunk of that difference, but also the strong loan growth, which is done at margins, which is slightly below the back book. It depends a little bit on the country. And last but not least, also on the fact that we do generate net interest income by investing liquidities in bonds, so using the higher spreads. This generates normally net interest income, but at margins which are obviously lower than the 208 basis points of previous quarter. And that has a positive effect on one side, but a slightly negative impact on the margin. Just to give you some insight how it worked. What about the other drivers of that net interest income, volume on the lending side already dwelled upon. What about the deposit side? Once again, we do see an increase of our core monies with our customers of EUR 1.1 billion in the quarter. That is a bit -- that is an obvious effect that we start to see the first moves of the monies which came in, in Belgium as a recuperation of the state monies invested in 2023. Well, that money is coming to maturity, as you know, partially in the first part of this year, and the big chunk is going to mature in quarter 4. But you clearly also can see that you see some effects already in the third quarter by the savings certificates, which were entirely freed up and not reinvested again in those savings certificates. In essence, it comes down to the story that what we do see in practice is one moneys, which were recuperated on the state mature that the vast majority returns in either current accounts, saving accounts or in mutual funds, only roughly 25% is reinvested back in term deposits. And that has translated in this slide. The evolution of the current accounts here is very specific seasonal effect in corporate deposits in Belgium. This is temporary, and this will be corrected in -- by the natural flows in quarter 4 of this year. If you look at the total picture, that is even more substantial, EUR 8.5 billion of monies flowing in into our different pockets for our core customer monies. And this is translated in a fundamental increase on the current account, savings account side and the fundamental decrease on the term deposit side, which in translation of margin is good news. Last but not least, but I'll come back to that in one second, that is the inflow of those monies, which are maturing into the fee business generated through asset management and life insurance, while that has clearly also happened in quarter 3, which brings me immediately to that fee and commission business. Here, once again, a very strong result, up 6% on the quarter. Let's face it, after already high quarter 1, 2, we now have a very strong quarter 3. And also if you look at the different contributor parts here, the asset management services or the banking services, both are up significantly, 7% up on the Asset Management Services and 5% up on the banking services. Starting with the former, well, that is driven by 2 things. First of all, the fact that obviously, the management services had the fees or the management services has a positive impact on the performance of the financial markets. But also clearly, there was a strong net inflow again on the asset management product side. As a matter of fact, we have seen a growth of net inflow of EUR 1.8 billion in the quarter, which is for the third quarter, a very strong number, and it tops up the first half of the year to a total of EUR 5.3 billion of net sales. That is an all-time high after 9 months. In terms of the buildup of those monies, we were also able to do it at a stronger management fee, but also at a stronger entry fee. In terms of the split up of responsible investments, be aware that our book now -- our total book stands at roughly 50% under the umbrella of Responsible Investments, whereas the inflow on the new monies is roughly 58% Responsible Investments. The other -- so perhaps something on the assets under management, the consequence of all of what I said, obviously, are positive for those assets under management. We now stand at EUR 292 billion of assets under management, which is a strong EUR 12 billion on 1 quarter up. If you compare it with previous year, it is an increase of 8%, which is perfectly split 50-50 between inflows and so -- fees -- sorry, and performance also 50% being 4% in this case. Let me then go to the insurance side. Well, also here, very good results to use an understatement, once again, up 8% on the quarter. On the non-life side, this is due to strong performance in Belgium and our Central European countries, split up there is Belgium a bit more on the lower side, so 5%, 6%, whereas Central Europe in essence is growing more than 10%, depending on the country. The quality of that book is -- stands at 87% combined ratio, which means excellent results again and also a bit better than the period of 9 months of last year. On the life side, the story holds as well. Again, the strong performance on the total life insurance book. We went up 29% on the quarter. And if you would make the comparison with the same period last year, 7% up significantly. Now in both quarters, '24, '25, quarter 3, we did commercial campaigns. So the commercial campaigns this year was even more successful than it was last year, and this is amongst others due to the fact that we have monies maturing on the previous state note. Split up between unit-linked and interest guaranteed is roughly 50% versus 43%. Small detail, if you compare the number after 9 months with the same period last year, it's 15% up and that is indeed something which is quite remarkable after the record of last year. Going into smaller P&L impact lines, you have the more volatile financial instruments at fair value. Well, they are EUR 28 million lower than previous quarter. I can be very brief about this. This is mainly driven by the evolution of the mark-to-market derivatives in essence. And on the net other income side, we are perfectly in line with the run rate being roughly EUR 50 million. We now stand at EUR 47 million. But if you look at the underlying building blocks, when they are perfectly spot on compared to what it was before. So the leasing and the assistance company have the same outcome as what it was last year and more or less the same outcome of this year. What about the more serious stuff that is the OpEx evolution? Well, let me bring it to its essence. The costs are under control. As you remember on previous call, we always highlighted the difference, if you make the comparison of, for instance, 2025 with '24, which was the trigger for the guidance, that you need to be careful that the distribution of the costs in over the quarters is completely different comparison '24, '25. But it was more back loaded in '24, it was more equally spread in '25. In that perspective, you now start to see the effect of what we always highlighted on previous quarter announcement, that is costs evolution over the quarter 3 with quarter 3 of last year is now coming -- if you exclude bank tax, it is below 1%. And that makes it quite clear that if you look at the number over 9 months, that we're coming close to our range, our guidance. That is we are now standing at -- if you exclude bank tax at EUR 315 million, which is more or less 50 basis points higher than what it was previous quarter, but it starts to come into that range. Actually, as a matter of fact, if you look at our costs compared to the budget, which we had internally, we are better than our budget foreseen for 9 months of 2025. So we are perfectly online to make our guidance -- perfectly on track, sorry, to make our guidance less than 2.5% cost increase true. Cost-to-income ratio is obviously translated, if your income is growing more than roughly 8% and your costs are only growing 3%, then your jaws are significantly up. We are talking about 5% jaw translated in a cost-income ratio, which goes down for 43% in '24 to 41% now, which I think is indeed an excellent performance. There are always uncertainties in life, and that is bank taxes, which are always reviewed -- most of them reviewed for the upward. We do expect on the full year to pay EUR 668 million of bank taxes. Currently, we stand at EUR 615 million. In the third quarter, the back taxes were pushed up because of additional national bank taxes and deposit guarantee scheme contributions mainly in Hungary. That has translated to more detail on what is that Page 13, where you can see the split up over the different business units, but I suggest that we further continue with the credit cost ratio, where other strong performance can be mentioned. We now stand at EUR 51 million, all things combined, which is built up, in essence, about in 3 parts. The first one is the loan book with an impairment of EUR 55 million. But be aware that we deliberately took EUR 26 million to cut down the shortfall, the backstop shortfall, the tool, which is imposed upon us by the ECB. So we lowered that with EUR 26 million, which actually generates a positive capital impact on the CET1 ratio of 2 basis points. If you take that into account, then the impairments on our loan book are very, very low. If you look also at the evolution of the macro parameters, which are used in our model to calculate the geopolitical and macroeconomic buffer, well, then we came to the conclusion that there is a release to be booked for EUR 9 million, which makes the buffer now stand at EUR 103 million. There were some EUR 5 million in asset software impairments. And if you bring that all into account, then you see that our credit cost ratio now stands at 12 basis points if you include the ECL buffer. If you would exclude that, we are at 13 basis points, which is significantly lower than the long-term average, which is perfectly in line with the guidance where we said it would be indeed better than that. In terms of quality, well, it's very simple, 1.8% NPL ratio, which is substantially lower than, for instance, the European average. If we would look at the EBA definition, it would even come to 140 bps, which is 40 bps lower than the European average. For good understanding, if you look at the migration metrics of our PD classes, then we do see a positive shift towards an improvement of the portfolio overall, and that is some reassuring news given the circumstances we're all in. What about capital? Well, also there, a strong performance. We now stand at 14.9% at the end of the third quarter. This is mainly triggered by an increase of our risk-weighted assets, EUR 1.6 billion. I mean, in essence, due to the growth of our lending book, EUR 1.4 billion is entirely due to that growth. And it's also triggered by, obviously, the booking of our net interest -- sorry, not net interest income, but net result and, of course, the accrual of our dividend. Now going forward, what do we expect for the fourth quarter? So we do still see some positive effect due to the liquidation of KBC Bank Ireland. You remember that we booked deferred tax assets. Those deferred tax assets contributed positively to the quarter 3 capital position. In total, EUR 166 million, bringing it to 13 basis points. We do expect the further balance to come mainly in quarter 4, a little bit in '26, depends on the profitability in the quarter. And that brings the positive impact. We do expect further upstream of our Belgian GAAP insurance profit in -- to KBC Group. And then obviously, we do also still hope that we do get the approval in our 365 Bank that is in its process and that will generate roughly max 50 basis points on the capital side. Also, in that perspective, it has nothing to do with the fourth quarter because we think that will be cleared by the first quarter next year, that the leasing side, it has only an immaterial impact on our CET1 ratio next year of roughly 4 basis points. Now if you bring all those numbers into account, also taking into account the SREP, which was issued a couple of weeks ago, well, the MDA now stands at the same level as the OCR ratio, both at 10.85%, and that generates a buffer of 4.1%., which is indeed quite solid. In the meanwhile, also the National Bank Belgium has made statements about the review, which they are going to put into motion as of what is it the 1st of July next year. That is, I mean, some of 2 parts, the countercyclical buffer and the systemic buffer that play around a little bit with those numbers, which has for us, given the composition of our book and given the way how it is supplied, a negative impact of 2 basis points on our CET1 ratio, starting with the current number of risk-weighted assets. So to be remembered, strong performance and strong MDA buffer going forward. So that is then also translated into the solvency of the insurance side, which has increased to 216%, and then the leverage ratio, which is also 5.8% over the quarter. In terms of liquidity ratio, already mentioned that it is managed, as you know, in a very specific way. And therefore, we do see the same solid performance on the liquidity side with -- around the numbers, 160% and 130%, respectively, on the short term and on the long term. Going forward, we do expect that the economy is going to slightly pick up a little bit in 2026. That is definitely true for the Western European markets, for the Central European markets where we are present, we do see a more fundamental growth, at least double of the amount of Western Europe. Western Europe is estimated at roughly 1%. In terms of inflation, the European inflation hovering around 2% in certain Central European countries like Hungary. It can be a little bit higher, but it is at least in such a way that ECB, we do not expect further rate cuts to happen in 2025, neither in 2026. And in the Central European side, we expected Hungarian National Bank to further bring down their 6.5% policy rate. But in essence, we do expect a slightly positive view on the economic side, which also gives us the certainty to adapt our guidances for 2025 upward. I already mentioned the 7.5% at least for total income and the at least EUR 5.95 billion for the net interest income side. As you remember from previous call, as always, KBC includes a certain margin of conservatism to -- I mean, eliminates the uncertainty in certain parameters given that, that uncertainty has gone away, we have actually translated to that conservatism into a more stricter guidance, but we will -- let me say it, as follows, be sure that we will make that number happen. I would not say fingers in the nose, but with a certain margin. The insurance revenues are solid, and I already dwelled upon the 2.5% cost side. No changes on the forward looking for '27. This is something which we're going to provide to as always on the back of the fourth quarter results, which are published in February. I will wrap it up here, and I will give back the floor to Kurt, who will guide us through the questions. Kurt De Baenst: Thank you, Johan. The floor is open for questions now. [Operator Instructions]. Thank you. Operator: [Operator Instructions] We'll now take our first question from Tarik El Mejjad of Bank of America. Tarik El Mejjad: I'll stick to 2. The first one on net interest income. If we take the Q4 implied exit rates and then we adjust for all the inflation-linked bonds and so on, clearly, the run rate is quite attractive versus consensus. Could you give us some indication in terms of '26? I know you updated with the full year, but given where you see consensus and I think I see quite a lot of upside there, if you can help on seeing the upside, it would be very helpful, indication for '25, but '26 is important. And then the second question is on M&A, specifically on Ethias. This is clearly very important for your investment case and you've been always helpful giving us the latest on what government thinks and so on. Can you maybe refresh us on where we are in the process? And what do you think are your odds to run successfully that bid? Johan Thijs: Thank you very much, Tarik, for your questions. And let me provide you answers to both. So first of all, obviously, I mean, what you asked in your question and where you were making reference to the interest rate evolution, the yield curve evolution, you're 100% spot on. They are indeed better than what it was, for instance, a year ago. We do also see that translated for sure in our results of 2025. And that is also something which is indeed true for 2026 as well. Obviously, taking into account that -- I mean, there are a couple of drivers in the economic environment, which are crucial. For instance, the situation of the war in Ukraine, if that would escalate that we have completely different picture. But all those parameters taken into account being stable, then you're right in your analysis that certain of those drivers of the net interest income are evolving positively compared to a year ago. So indeed, you can expect that on the net interest income side, there is a positive effect and I can only confirm. To provide you already the detail of what 2026 is going to be, well, we are going to do this on the back of our quarter 4 results. As a matter of fact, we will have discussions on the budget. We had a preliminary discussion on the budget of '26, '27 and '28 earlier this week, but the fundamental discussions and also the approval by the Board is going to happen in the next week and the week to come. So it would be a bit preliminary to already elaborate that in an analyst call. But the first part of your question, I can only confirm as having a positive impact on the evolution of our net interest income, which, as I said, for 2025 is at least EUR 5.95 billion with a certain degree of conservatism. You could say easily EUR 6 billion that you can start to add up. Regarding your second question, the M&A, more specifically about Ethias, well, today, and that is something which I already indicated in, I think, previous call or 2 calls ago, my expectation was that Ethias would not come to the table in 2025, but it would be prepared by the government in 2026 because the urgency, Belgium is not having a favorable budget situation nor the debt GDP situation that, that is not imminently on the table for pushing 1, 2 assets out of the portfolio of the Belgian state. And I can only confirm that today. So my guess is that Ethias -- as far as Ethias is concerned that the preparation will be done by the government in the course of 2026 and then bringing it to the market by the end of the year potentially even early '27, we'll see. It depends a little bit on where the budget discussions end. On other assets, for instance, Belgium, it might be going a little bit faster, at least for a small part of it. Where are we? So we are indeed fully prepared for the file. We have a clear business case for that. And when you were asking about the ops, what we will do our utmost without doing stupid things on pricing. As always, for us, it needs to tick a couple of boxes on the strategic side. It makes a lot of sense for KBC to go for an acquisition of Ethias. It is a core market for sure. And it is delivering added values, I think, for both sides. And then last but not least, it obviously needs also to tick the boxes on the return on investment, return on equity. That is something which triggers me to say we will not pay stupid prices. I recommend everybody not to pay stupid prices. But for sure, we will not do so. So we are prepared and will be further continued. Tarik El Mejjad: So just to understand on the timing for TS from the government perspective. So you think there will not be any decision to sell it before the next budget discussions, basically, right? So with the conclusion in the second part of the year. Is that what you said? Johan Thijs: That is indeed my reading of what is happening today. Operator: Our next question comes from Giulia Miotto of Morgan Stanley. . Giulia Miotto: I'm afraid I will follow up on NII and ask about Q4 and the exit rate. So the guidance of EUR 5.95 billion is extremely conservative in my view because it would imply NII to go down in Q4, whereas I think it should increase quarter-on-quarter given the tailwind. And from that into next year, can you help us understand or quantify at least the benefit you see from the hedges? Some of your peers give a slide with some quite clear disclosure on benefit from hedges over the next couple of years, and also how you expect loan growth to evolve? Because it's very strong. And from here, perhaps it could only accelerate, I guess, with the German fiscal stimulus, hopefully helping see countries indirectly. So yes, I would love your thoughts on these moving parts. And then secondly, Kate 2.0, historically, you said that Kate helps with 1% of efficiency each year. So essentially, you managed to grow costs less than revenues. Do you already have an estimate of how much efficiency will Kate 2.0 help you with? I would expect a higher efficiency. Bartel Puelinckx: Thank you, and good morning to you all. I will tackle the NII question and Q4. So the -- indeed, the guidance that we've given is EUR 5.95 billion at least. So this is a floor. So it will be most likely higher. Also, as Johan was indicating, I mean, the difference indeed, if you just simply add the third quarter, once again to the fourth quarter, you more or less come to your -- the analyst consensus level. So there is indeed still some conservatism included in that guidance. Now as far as your question is concerned related to the hedges. So as you know, we are not fully disclosing the -- how we hedge that portfolio. Part of it is, of course, considered as being noncore money and noncore money is being replicated overnight whilst the core money is replicated, obviously, at longer terms. These are cyclical reinvestments. The average duration, as indicated before, on the current accounts is 4 to 4.5 years. On the saving accounts, it's 2.5 years. And then, of course, on the excess equity, it's about 5 years. Now basically, that is, if you have then a kind of sensitivity, what you can indicate is that we can use is that for a parallel shift of 25 basis points, you can take into account roughly EUR 50 million. Now coming back also to the recent developments with respect to the repayment or the maturity of the term deposits that were issued back at the maturity of the state bond, you remember that we lost EUR 5.7 billion with the state bonds, we recovered actually EUR 6.5 billion. Out of that EUR 6.5 billion, EUR 6 billion was reinvested in term deposits. At that time, as you will recall, negative margins. Now we issued at that time, 2 types of term deposits. There was a term deposit at 6 months and a term deposit at 12, 13 months. And so that means that the 6-month term deposit came to maturity in March. And there, what we have seen, we have seen a shift back into term deposits of only 38%. 40% went into CASA and the remainder went to in mutual funds and some outflow. Now in October this year, so a couple of weeks ago, we had the maturity of the most substantial part of the term deposits of 13 months. And there, we have some positive news in the sense that it clearly demonstrated that the market has become rational again, as we expected in the sense that out of the maturing deposits 50%, 5-0, went into CASA. Only 25% went into term deposits and then in term deposits, obviously at positive margins and 25% went either into maturity -- mutual funds or some part, small part exit. So that's a bit what you can take into account for next year for the head start that we will see next year. Johan Thijs: Giulia, I will answer your second question. So Kate 2.0 is indeed giving us productivity gain. As you rightfully pointed out in the past, Kate 1.0, I mean, generated roughly between 1% and 1.5% of productivity gains. We launched Kate 2.0 actually in October. So it's in very early days to make already conclusions what it will be and definitely make those conclusions public in an analyst call. What I can say -- so it's too early to judge. But what I can say is that given the fact that Kate 2.0, which is actually Kate 1.0 retrained in a full LLM environment. So previously, Kate was already using some LLM, but not extensively. That is -- that we do see in the trials, which we have been running over the first 5, 6 months that we had indeed an increase of our autonomy of roughly 15%, which is quite strong. If that will be translated in full of -- for a productivity gain, that needs to be further fine-tuned. But what is also important to see and that is the second element, which we tend to forget that is the fact that customers are using Kate more and more because they find solutions via Kate and don't have to queue anymore in branches or whatever, don't have to take the car anymore looking for parking places, makes them use Kate more and more, which actually means also that they are not only using it more for -- and therefore, generating cost side, but also allow us to address the more specifically, more tailor-made solutions on the back of the traces, which they leave with us, so the data analysis. And that is obviously triggering us more sales, which is the combined effect. So when we speak about productivity gain, ultimately, it is translated in the cost-income ratio. So the outlook is positive, and the outlook is if I use the floor to play at least what we guided before. Operator: And we'll now take our next question from Namita Samtani of Barclays. Namita Samtani: My first question, you flagged in your forward-looking guidance that you include no speculation on potential measures of any government. Could you please give some color on anything you're watching there that might positively or negatively impact earnings next year? And secondly, just on Ethias, if it's not coming to the market until 2027, would you consider to pay back some of the excess capital that you have as a special dividend in 2026? Otherwise, I just struggle to see how this isn't trapped capital. Bartel Puelinckx: Okay. Thank you, Namita. So as far as the potential measures of the government are concerned, it might have an impact on the earnings going forward. You're mainly referring obviously to the banking taxes and how we see the evolution of the banking taxes. First of all, as far as Belgium is concerned, we still do not see and do not expect any significant increase in banking taxes. They are already had a quite high level. Of course, also the question is going to be and remains still because there's still no clarity what the government is going to announce because basically, normally, the banking taxes to somehow drop as a result of the fact that, of course, the deposit guarantee fund in Belgium has now been replenished and actually only contribution should be limited to the increase, of course, in eligible deposits. Were it not for that one sentence, of course, in the government agreement that indicates that banking sector should at least remain at the same level. But due to the political situation currently in Belgium and the fact that the budget discussions have been postponed, there is no clarity yet on this side. Where there is some more clarity is the decision of the European Court of Justice compared with respect to the loyalty premium and, of course, also the tax benefit that you get for the first part of the savings and the saving accounts, which have been considered as indeed discriminatory. We will see what the impact of that is going to be. And we are looking now at what the impact is going to be on the loyalty premium. Most likely an alternative version of the loyalty premium will be foreseen, but we do not expect any major impact of that for the very simple reason that actually, first of all, the loyalty premium with KBC is already low, 20 basis points. But next to that, also already 95% of our deposits are eligible for loyalty premium. So the impact of that is going to be very small. Last for Belgium then at least is also the added value tax that is under discussion, but also that has been postponed as a result of the postponement of the budget discussions because it still requires, of course, the adoption of a former loan law to actually charge the taxes. And as long as you don't have that law, you cannot charge taxes. We already as KBC, so we will implement that, but it will depend, of course, at the initiatives that are being taken by the government. Then as far as Belgium is concerned, for the Czech Republic, we have some good news in the sense that basically we do not expect, and it's not part of the government agreement of the new established government under Babiš. So Basically, there is no sign of a further increase of banking taxes in the Czech Republic. And as you know, for the banking industry, the windfall tax in the Czech Republic is actually having no impact. So that's good news. Also in Bulgaria, as you know, the government for the time being is not considering implementing any banking taxes whatsoever, apart from the fact that they have established an alternative version, which is more a kind of a prefinancing of the taxes going forward. Slovakia, there basically also, there is no sign of a further increase of the banking taxes. There, the government sticks to the agreement that they made with the banking sector in the sense that it will be gradually decreasing to '27. There are also some alternative measures that are being taken, such as also having a tax-free benefit on the state bonds because they're also issuing some state bonds in Slovakia, but the impact of that is also limited. And then, of course, we come to cherry on the cake, which is Hungary, where indeed there -- that they already -- the bank -- the windfall tax that was supposed to be temporary is far from temporary that has been extended and the indication of -- is that basically they consider windfall as long as the policy rate is above 3%. And as they are today at 6.5%, this is still likely to last for a while. There are, however, some rumors, and there was indeed an announcement or at least some indication by the Minister of Finance, Mr. Nudge, that there might be going forward, again, an increase in the banking tax -- in the windfall tax and also a limitation of the mitigating measures, but that so far has not yet been confirmed, but there is a risk that, that would have a negative impact going forward on Hungary. Johan Thijs: Good morning, Namita, and also, I will take the second question. So regarding the capital position and your reference to potential trapped capital beyond 2027, well, I would use the dividend policy, which probably as good as I know is quite explicit in that perspective. So first of all, we have a couple of priorities now and that is straightforward. First, we want to grow our book in an autonomous way. And it sounds perhaps fluffy, but it is definitely not. Just look at our track record. Over the last 5 years, we have grown a company like Czech Republic, Chairs of Bay, in terms of the loan and in terms of the deposit side, autonomously, so organically. And if you then look very specifically of what we're doing this year, which is not included in those 5 years I was referring to, it's even better. So the guidance now, we're approximately 7.5%, let's round the number, 8% growth on the year. Well, that is something which we will continue to strive for going forward. The other element is, of course, that next to that organic growth, which consumes risk-weighted assets, as we all know, we will have a further eye on the market in terms of M&A. So Ethias is the one we are focusing on because that is the bigger one, which we can do, by the way, by a Danish compromise solution by our insurance company. But let's not forget that we recently also and that this approval still happening as we speak, as we did an acquisition of a bank in Slovakia and a smaller leasing company in Czech Republic and in Slovakia. Well, these are things which were officially not on the radar, but it doesn't mean that they were not becoming available. And that is something which we are going to look into going forward. So capital is used for those 2 priorities, growth autonomously and growth by M&A going forward. Let's not forget that given the strong profitability, dividend will have a very strong position given our payout ratios, which has the range between 50% and 65% without preempting now already on what the final dividend over 2025 is going to be, I mean, look at our track record over the last years, well, it is more towards the higher end of that range. So all in all, given what I should have said, there are 3 components and then the fact that we want to be amongst the better capitalized financial banks, financial institutions in Europe, we have a very solid position and not necessarily will have what you call trapped capital. And in the event, you know that our minimum is 13%. And in the event that it becomes clear that, for instance, an acquisition we have in our mind is not going to happen. Well, then the policy is quite straightforward. The Board will take that decision then as a definition of capital, which we no longer need because the availability of M&A is not there. The position is solid. So let's bring that capital back to shareholders because we cannot make it work within KBC. That's straightforward. So the risk of having trapped capital in our company is nonexistent given our policy and given how the way we are executing our business as we speak. Operator: I will now take our next question from Benoit Petrarque of Kepler Cheuvreux. Benoit Petrarque: So the first question is on the Belgium deposit market. We see a lot of discipline also in September, by the way. So it's a very attractive market currently. Looking at previous cycles where we have a bit of steepening and the curve is quite attractive. And also, yes, there's a ramp-up of the transformation results expected for next year. In such a market, would you expect discipline to be maintained? Or what is your kind of view on the deposit market into '26? Do you expect discipline to be retained like this? That's number one. And number two is on the lending NII in Belgium. It's clearly turning around, let's say, more positive in the latest quarter, especially driven by a very strong loan growth, 6% year-on-year. And I was wondering what -- where it comes from, basically. We've seen actually the competition not at that level, and you seem to be gaining market share. So I wanted to get a bit more underlying reason for that very strong performance. And just maybe also thinking about NII on '26, you have been very conservative on your guidance. You have been too conservative in '25. And I just hope that there will be a bit less conservatism in a way and more accuracy in the guidance, but that's just on a separate note. Bartel Puelinckx: So as far as your question is concerned on the Belgium deposit market, which indeed, I concur is -- remains very attractive. Also the steepening of the curve is indeed going to ramp up the deposits. Now in terms of potential further developments going forward, it looks like we are quite confident that we will be able to continue to move into that part and to, of course, raise additional deposits going forward. The only thing that is popping up somewhat more. You know that we've been reducing and all markets has been reducing the external rates on the saving accounts. We moved them from 90 basis points at the beginning of the year, 45 basis points -- loyalty program and 45 basis points base rate dropped now to 60 basis points being 40 basis points base rate and 20 basis points loyalty premium. All others -- all banks have been following on this side, apart from some smaller banks. And this has raised some attention also from the government. So the Ministry of Finance has indicated and has publicly stated that he will be looking into the further development of the external rates on the saving accounts. So we might see some drawback from that going forward. But for the time being, there is nothing specific. Johan Thijs: And then perhaps on the guidance, the side note which you made, I obviously understand where you come from. You said too conservative, make it a bit sharper going forward. But I would like to comment in 2 ways on this. First of all, to a certain degree, you're just purely looking -- I agree with what you say. On the other hand, I would like to add that given also the question about the discipline in as we speak, the biggest markets for us in terms of deposits is Belgium. The 2 combined actually triggered us to put the guidance where it was. So there was a big, big, big amount of money being freed up, as you know, EUR 6 billion. And if things would repeat what happened in 2023 or in 2024, then obviously, you would have completely different picture. We had those term deposits at a negative margin. Unfortunately, this did not materialize. And I think the main trigger for that is to be found in the results of our peers, which have been involved in that deposit war in 2024. That is quite straightforward that, that discipline is there. So it allows us indeed now to take that uncertainty out of our guidance. And as of the moment, that uncertainty is gone, you can make more accurate predictions. I would actually say, in that perspective, we will continue to make our guidances because KBC has a track record of underpromising and overdelivering. It's better than the other way around. But we take your side note or your side remark for granted. Thank you. Sorry, sorry -- in my excitement -- Sorry, I forgot about the margins on lending. Well, yes, in that perspective, so there are 2 reasons. So first of all, I think there's a bit more discipline in the market. So let's also not forget that all the banks being pushed by the ECB on risk-weighted assets. You remember what happened to KBC 2 years ago. But this is also happening to other banks, which you can clearly see in the announcements which they all make either via the mother ship, either via the local entities. So if you want to keep your capital ratios intact, then you need to achieve a return on risk or a risk-adjusted return on capital, and therefore, your margins cannot be lowered anymore. That is something which we see next to that and that is what we are striving for. KBC obviously has had a very strong loan growth in the first 9 months of the year, which allows us also to be more -- to be a bit more selective in terms of the margins. You can clearly see in the detail, which is provided in Belgium that is on Page 25. I do not make a mistake that indeed, we are pushing now for several quarters already to bring that margin to a more sound level given the capital consumption. And that is something which is also possible, given the fact of the strong performance of the loan volumes, which we have year-to-date. So yes, we are working on the margins. Yes, there is more discipline. And yes, we are comfortable giving the loan growth, which we have already realized in the first 9 months and the pipeline, which we have for the quarters to come. Operator: And we will now take our next question from Sharath Kumar of Deutsche Bank. Sharath Ramanathan: A couple of follow-ups. Most of my questions have been answered. Firstly, on loan growth, can you comment on the sustainability of the double-digit levels in most international markets? Also, is it a fair conclusion to say that the level of loan growth in 2026, 2025 level would be the floor? And if you can comment on the type of areas that you're getting this loan growth from, so it will be useful. Secondly, on M&A, can you confirm that there are any other active files rather than Ethias? Also if you could confirm there is no interest to get back into Ireland? Bartel Puelinckx: So I will take the first question on the double-digit growth. And I presume that what you're mainly referring to is the double-digit growth that we see basically in Central Europe. And there, of course, you have a particularly strong growth in -- first off, to start with in Bulgaria, where we see a year-on-year growth of 18%, which is mainly driven by the very strong growth on the mortgage side. And the mortgage side is actually due to the fact that you have the euro adoption, as you know, in Central Europe in Bulgaria and people are more or less concerned about the potential inflation after the euro adoption. So from that perspective, that explains why we see significant growth currently. We, however, expect that to continue, however, at a somewhat lower pace after the euro because, obviously, in Bulgaria, the disposable income has increased quite significantly and also the quality of housing in Bulgaria is not at the same level, of course, as the level that we see in Western Europe. So that is as far as Bulgaria is concerned. The Czech Republic there, obviously, we also continue to see a very strong year-on-year growth on -- of the loans of 11%. There, what we see is that also the mortgage business is doing and continues to do very well. There is somewhat a small impact on the margins, but the margins are well above the back book. So that continues to generate quite some nice growth. So year-on-year growth on the model portfolio is almost 7%, but also in the Czech Republic, we continue to expect some further loan growth due to the fact that also GDP growth continues to be quite significant. They recently increased actually their projections for GDP growth from 2.5% to 2.7%. And typically, as a rule of thumb, what we use within KBC is that you can see a loan growth, which is equal at the GDP growth plus inflation. Also in Slovakia, and Slovakia continues to perform quite nicely, particularly on the mortgage side, also there at quite stable margins and nice margins. On the corporate side, they have been performing quite well as well, and we expect that to continue. You know that they are in the market. The growth today in Slovakia is somewhat subdued at 0.5%, but this is expected to pick up again in the next year, particularly also because Slovakia being an open economy with also more benefit from the German initiatives in spending. And then last is Hungary. Hungary also, despite the fact that Hungarian economy is not growing significantly either, we continue to see quite some strong growth, particularly in the mortgage business. And also the recently announced new government initiative with the Home Start program, increasing the services should help further also the mortgage growth, together with also at quite attractive margins. On the corporate side, there is somewhat more competition, somewhat more pressure going forward. So basically, that as far as the expected loan growth is concerned going forward. Johan Thijs: I will take your question regarding the M&A. So first of all, we are constantly monitoring the markets. Otherwise, we would never ever have detected 365, nor the leasing activity acquisitions. But do we have interest in other files? Well, I cannot answer those questions concretely because then it would make very obvious what we are looking into and what competition perhaps should be finding interesting as well. But to be very concrete, your question on Ireland, we are not going to go back to Ireland, no. Operator: Any further questions? We now will take the line of Chris Hallam from Goldman Sachs. Chris Hallam: I just have 2, one on SRTs and then one on capital. So regarding the inaugural SRT on the corporate loans, I guess that comes back to the EUR 8.2 billion RWA add-on that was imposed on KBC back in 2023. Is that the right way to think about it, that the risk weights on those corporate and SME loans was artificially high? And then if so, how much more is there to go on those high-risk weight loans, either in terms of the amount of relevant loans you could still SRT or the amount of that EUR 8.2 billion add-on you might look to recover via future SRTs? And then secondly, on capital. You said earlier that the risk of there being trapped capital in KBC is nonexistent. Should we interpret that as a commitment that the CET1 capital ratio at the end of 2026 will be as close as possible to the target for a 13% pro forma for any announced acquisitions or distributions? Bartel Puelinckx: Thank you for your questions. I will take your first question related to the SRTs. As indeed, we announced this morning the -- our inaugural issuance of EUR 4.2 billion SRT leading to EUR 2 billion of risk-weighted assets relief and having a 23 basis points impact on our positive impact of scores on the common equity Tier 1. Your assessment is indeed correct. Basically, the higher risk-weighted asset density created is due to the add-on of 2 years ago, indeed, is impacting that. Now we always stated that we consider SRTs as a means to an end and not as a strategic development. So basically, that means it is one of the tools that we will use to further optimize the portfolio management. So if your question is, are we going to continue to do SRTs? Yes, we are continuing to launch SRTs, but this is -- we do not want to become dependent on the SRT market as some of our peers are. So from that perspective, there is going to be further SRTs. These SRTs will remain focused indeed on those portfolios that have the highest risk-weighted asset density in view of the efficiency of those SRTs. And -- but it is not going to be a major significant increase for the years to come. Johan Thijs: Thank you, Chris, for your questions. And let me come back to the very concrete topic if that by the end of, let me say, 2027, it should be somewhere in the neighborhood of 13%. Well, the -- what I said on the previous question, the previous -- and I don't remember who asked it. Actually, the dividend policy is pretty straightforward. And the dividend policy in that perspective allows us to distribute capital. There is one constraint you need to take into account as well, and that is the constraint of to be amongst the better capitalized financial institutions in Europe. We have more freedom there to decide are we -- yes or no than we did previously because previously, it was mechanically so there is more possibility to have in that perspective, a discretionary decision by our Board, but that's a trigger. So if the entire sector would go to 13%, 12.5%, whatever, and there are no M&A opportunities, there is clearly a possibility to finance our economic growth, which -- autonomous growth, which is quite significant in terms of percentages, which you know, but then the Board will take a decision in all discretion. All those elements into account, can I make a hard commitment on the execution of the policy? Yes. Can I take a hard commitment that it's going to be 13%? For obvious reasons, I can't. Operator: And we'll now take our next question from Shrey of Citi. Shrey Srivastava: Just changing tack a little bit. On fee development, you've actually managed to keep margins sort of broadly stable. And I know the very strong inflows and higher margin direct client money. Looking forward, how do you see net inflows in sort of this component versus the others? And I suppose in turn, what do you see as the outlook for margins in the asset management business specifically? Bartel Puelinckx: Thank you, Shrey, for your question. Indeed, we've seen a 3.4% growth on our direct client money. And basically, this is, on the one hand, of course, driven by the very strong net sales that we see of EUR 1.8 billion for this quarter, bringing it already to EUR 5.3 billion for the 9 months. And what is important here is that this is true for more than 1/3 driven actually by what we call our RIPs. This has nothing to do with rest in peace, but these are the regular investment plans, whereby households continue to regularly invest on a monthly basis, a relatively small amount, but this is a sustainable amount. And we actually see the number of those RIPs increasing continuously. Today, we have 2.3 million of those RIPs with an average contribution in Belgium of roughly EUR 120 per month; in the Czech Republic, roughly EUR 40 million per month; and in the other countries, slightly higher than the EUR 40 million -- EUR 40, of course, a month. So that gives you an insight into the relatively sustainable growth of that portfolio going forward. The remainder, obviously, is going to depend on the market performance. And as you know, we are not guiding on that part of the portfolio. Operator: There are no further questions in queue. I will now hand it back to Kurt De Baenst for closing remarks. Kurt De Baenst: Thank you, operator. This sums it up for this call then. Thank you very much for your attendance, and enjoy the rest of the day. Bye-bye. Operator: This concludes today's call. Thank you for your participation. 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: 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.
Operator: Good afternoon, and thank you for joining the PetroTal Q3 Webcast. Manolo Zuniga, President and CEO; and Camilo McAllister, Executive Vice President and CFO, are your presenters. You can submit questions via the platform, and we will do our best to answer as many of these as possible in the time available. Without any further ado, I'll hand over to Manolo and Camilo. Manuel Zuniga Pflucker: Thank you, Mark, and good morning, everyone, and thank you for joining PetroTal's Third Quarter 2025 Results Webcast. My name is Manolo Zuniga, and I'm the President and CEO of PetroTal, and I'm joined today by Camilo McAllister, our Executive Vice President and Chief Financial Officer. Today, we're walking through the financial and operational results that we published overnight. If you access this webcast via the link included in today's press release, you should be seeing our slide presentation on your screen. Before we get started, I'd like to point out that there are disclaimers located at the end of the main presentation and also on our website. We encourage you to review those after the prepared remarks. I will now pass the microphone to Camilo to give a brief overview of our third quarter 2025 financial results. Camilo McAllister: Thank you, Manolo. Turning to Slide #2. I wanted to give a quick summary of our third quarter financial results. The message may have been lost in the rest of the press releases today, but it's worth noting that our financial results were actually quite good at this quarter. Our production averaged over 18,400 barrels of oil per day in the third quarter. which was a 21% increase over the same period last year. We benefited from unusually wet weather this year, which boosted river levels compared to 2024. We were able to export essentially 100% of our production capacity during the dry season this year, which was a very good outcome. Oil prices rebounded a little bit in the third quarter, but our net operating income fell slightly compared to the prior quarter. Even though our operating costs normalized following some expenses from pump replacements in the second quarter of 2025, our transportation costs were a bit higher this quarter. Lastly, even with a slight increase in capital spending, we still generated just over $12 million in free cash flow during the third quarter bringing our year-end-to-date free cash flow to more than $87 million. We have already returned approximately half of that free cash flow to our investors through dividends and buyback prior to the suspension of our fourth quarter dividend, which we also announced today. I will now pass the microphone back to Manolo to walk through our operational results. Manuel Zuniga Pflucker: Thank you, Camilo. Moving to Slide 3. I would like to have an open discussion about some of the operational challenges that we are facing right now. Overall, I think our track record has been very good for the past few years. But unfortunately, we seem to be dealing with a number of headwinds at the moment. We have already disclosed a series of pump failures and tubing leaks in 2025. And while I have been very happy with the swift response from our operational teams, the reality is that we need to prepare for the possibility that we may experience additional failures in 2026. Our people are preparing contingency plans right now to ensure we can minimize production next year in the event that more wells fail. Water handling has always been an important consideration for PetroTal, but the issue has become more pressing in 2025 after we brought 7 wells on stream last year. If you consider that each of our horizontal wells produce more than 10,000 barrels of fluid per day, the excess water handling capacity must be built out in advance of our development wells. Otherwise, we may have to shut in existing production to accommodate new wells, which is obviously not ideal. Moving into 2026, we had originally expected our drilling rig to arrive at Bretaña early in the year. However, for a variety of reasons, that time line has now been pushed back by at least 6 months with limited ability to generate organic production growth for the medium term, it seems clear now that our base production is likely to decline throughout the first half of 2026. When we combine the impact of falling production with a weak oil price outlook, we have been faced with some difficult choices as we finalize our 2026 development program. We would like to resume development drilling as quickly as possible, but ideally, once we have sufficient water handling capacity in place. The team is working on enhancing the activity on our existing water disposal wells to bring back up to 5,000 barrels of oil per day of currently shutting production. Turning to Slide 4. We have tried to summarize the range of production outcomes we are seeing in our development plan right now. The dark blue line shows our actual monthly production so far in 2025. As you can see, the general downward trajectory is expected to continue until at least the middle of 2026. The dotted green line shows our best case production scenario, which assumes we are able to move a rig to Bretana by the middle of 2026. In this scenario, we believe it would still be possible to drill and complete 3 development wells by the end of the year. Depending on production deliverability, it's possible PetroTal would exit 2026 with production in excess of 20,000 barrels per day. Enhancing our water disposal capacity, as mentioned before, will put us somewhere in the middle of both curves. The lower dotted blue line shows our low case production scenario, which basically assumes we are not able to complete any drilling activities in 2026. I think this scenario is unlikely for [indiscernible] possibility that we do not drill any wells next year. In this case, we would likely center our capital program on investments in water handling capacity, preparing for improvements in oil pricing in 2027. I should point out that we are also considering other scenarios that are not pictured here. For example, it's still possible we could send a drilling rig to Block 131, where we don't have to invest in water handling capacity before bringing new development wells. We are also looking at options to secure a third-party drilling rig, which will give us more flexibility to resume drilling in the event that our own drilling rig continues to be delayed. In any case, we plan to finalize our 2026 budget in January, at which point, we will provide more specific details on our development program. So please stay tuned. I will now hand the microphone back to Camilo to discuss the financial implication of our announcements today. Camilo McAllister: Thank you, Manolo. On Slide 5, we have prepared a summary of the initiatives we are undertaking to preserve liquidity as we navigate this period of uncertainty. Although we have a rough idea of the activities we must undertake in order to restore production capacity at Bretana, the reality is that we won't know our through funding requirements until we have finalized our 2026 development plan. However, we do know that with production declining and considering the prevailing outlook for oil prices, we would not be able to support both a reasonable development program and a regular dividend in 2026 without substantially drawing on our available cash reserves. So at our Board Meeting this week, when faced with a decision to let approximately $14 million out of the company in December, we felt it was in the best long-term interest of PetroTal and its shareholders to suspend the dividend immediately. I would like to stress that dividends are not the only lever we are pulling to preserve liquidity. Our Board of Directors has given us a clear directive to cut costs so that we are better positioned to return capital to shareholders at a wide range of oil prices. We will immediately focus on OpEx, where we have a very high fixed cost base at Bretana. We will also be targeting substantial G&A cuts as this is a metric on which we have not compared favorably with our peers. We will provide additional color on our cost-cutting initiatives with our 2026 guidance in January. But the reality is that any savings we achieve will be paled in comparison to the $55 million of dividends that we pay out annually. The simple fact is that dividends are by far the most powerful lever that we have at our disposal to preserve liquidity. We certainly hope to resume our return capital program as soon as possible. But that would only occur once PetroTal has achieved a structural reduction in its cost base. I will now pass the microphone back to Manolo to provide some closing remarks. Manuel Zuniga Pflucker: Thank you, Camilo. I would like to wrap up by pointing out that although our stock is understandably not reacting well to our announcement today, our conviction in PetroTal's investment case remains strong. As shown in Slide 6, the challenges we're experiencing right now are entirely aboveground issues. I would like to remind you that our team have resolved many big issues before, including COVID and multiple river blockades. Right now, we're working around the clock to resolve our current issues as well. Bretaña is still a great asset, and I am confident that the barrels will still be waiting for us once we have expanded our water handling capacity, resume drilling and oil prices have improved. In the meantime, we are well capitalized to wait things out while we formulate a sensible development plan for the Bretaña field. PetroTal has drilled 19 horizontal wells at Bretaña, and we still have 16 wells left out in our 2P reserves, plus underdetermined amount of inventory in the VS-1 formation. In other words, we're still very much in the middle of this [indiscernible]. These new wells, especially those in the VS-2 sand will require additional water disposal investments. The first 19 wells have seen Bretana generate over $400 million of free cash flow, of which we have returned more than $155 million to shareholders, and we paid a $100 million bond. These are real tangible returns that we have generated for shareholders and which we hope to replicate again in the future. In conclusion, I would like to thank our shareholders for their ongoing support. We look forward to providing more details on our 2026 development program in January. That wraps up our prepared remarks. I would like now to turn the call back to Mark for questions. Operator: Thank you, Manolo, Camilo. So first question, where is the new drilling rig? It's been over a year since it was supposed to arrive on site. Why didn't you rent the old rig for a longer period until the new one was in country? Manuel Zuniga Pflucker: The rig is in Houston in Conroe, Texas. It was supposed to arrive about midyear this year. So it's going to be about a year delay. And the old rig is decommissioned. And the old rig, we cannot use it for the new Bretana wells, which is why we decommissioned that rig. Operator: Can you share the scenarios or assumptions that led the Board to the conclusion that dividend had to be completely suspended? Could 2026 estimated CapEx exceed $100 million despite only 2 wells being drilled? And any guidance on 2027 CapEx? Camilo McAllister: So I mentioned in the remarks just now, we shared a couple of production profiles. Let's hypothetically assume a $60 oil price next year and a 15,000 barrel a day average production. With our current cost structure and discounts to Brent, that would mean the company would have a total source of roughly $175 million. And we have a starting cash balance, say, of $100 million for next year. Now our uses and that we have to pay interest, taxes, debt amortization, CapEx at CapEx levels, say, around $130 million, that leaves our ending cash at about $16 million. We have spoken to all of you in the past that we want to maintain at least $60 million in our cash flow. That is a little bit too conservative. But to us, it's prudent because we don't really know what's going to happen to oil prices next year. So as we finalize our budget, we want to make sure we have enough liquidity to have a good year. Operator: Thank you, Camilo. Is water handling capacity maxed out? And how is this level compared to expectations a year ago? Manuel Zuniga Pflucker: The water handling capacity, it is currently maxed out. And part of the plan is to be able to expand that on an ongoing basis. And the target right now is to bring it up to 240,000 from the current 170,000 barrels per day. And as we drill more wells, we're going to have to continue expanding that water handling capacity. It is part of the plans. It is just taking longer to implement all of that. Operator: Okay. Next question. Please tell us about the leakages on the 5 wells. Does this indicate that preventative work will have to be done on the other older wells? Manuel Zuniga Pflucker: The issue with the tubing that brings the oil up to the surface is that we have a corrosion caused by CO2 in the oil and the water. And that's -- the chemicals that we were injecting we're not reaching the proper point. So we have now -- we understand now the issue. We have already replaced a number of pumps where we have provided the corrective measures and the ongoing cooling campaign will do that. Of course, there are other wells that were set up in the past. Right now, we don't see any evidence of any failures. So we're hoping that nothing happens next year, but we just wanted to caution our investors that maybe we'll have more than one well that will also fail because of the same situation. But the important thing is that we now understand the issue, and we have taken the corrective measures. Operator: What happened to you expecting between 500 and 1,500 barrels a day in additional production from Los Angeles after the workover? Manuel Zuniga Pflucker: When we did the workovers, we noticed that the existing cement behind [pipe] was actually not completely stopping the water from below. And that then has forced us to evaluate how to remediate that while we plan to bring a drilling rig to start drilling an initial well -- development well in Los Angeles. So that's why production at Los Angeles has not increased. But now we have also a good understanding of what's going on, and we plan to ideally drill a well next year. Operator: Are you going to buy back shares at these low prices? Camilo McAllister: We will continue to evaluate. I mean, our message today was clear in suspending our return to shareholders, and this is obviously one way of doing it. And depending on what share price does, it's something we continue to evaluate. Operator: Thank you, Camilo. What are the reasons behind the equipment failures, quality of product, poor installation, et cetera, will they be identified as possible risks beforehand and how can you ensure they don't happen again? Manuel Zuniga Pflucker: As I mentioned before, we now understand why is that the chemicals were not reaching the proper point. And now that we are changing the pumps and the tubings, we are actually setting up the electric submersible pumps much, much higher. That also reduces the cost of these replacements. It also reduces the amount of energy that we need to lift all of the fluids as the pumps are much, much higher and also allows us to ensure that we have the chemicals at the right entry point, and we should not have issues in the future. Operator: Okay. What's PetroTal's all-in corporate breakeven oil price, including all costs and debt finance? Camilo McAllister: From a cash perspective, is about $60 per barrel. Operator: Thank you, Camilo. There's an exploration commitment to drill 2 wells in Block 107 by February '27, will today's update affect this commitment and any update in finding a farm-out partner? Manuel Zuniga Pflucker: The commitment that we have, we plan to have an extension given to us. So that will give us more room to maneuver. And we continue to try to find a partner or partners to come in. There's a couple of companies looking at information. So we will continue looking to be able to drill a well in the future. Operator: Can you explain delays behind the rig? You didn't explain why it was going to be delayed by at least 12 months. Can you expand at all? Manuel Zuniga Pflucker: Yes. We had issues during the commissioning of the rig. We ended up switching contractors, and that has delayed the process all of this time, unfortunately. So when you do a change in contractors, there's always delays, as you can imagine. Operator: Okay. Can you give any more guidance on how much CapEx you may spend on increased water handling capacity? And when? And has this expectation changed over the course of the year? Manuel Zuniga Pflucker: The expectation, it doesn't change. We have a plan that we try ideally to have the water disposal capacity at about the same time as we have -- we drill new wells. I have explained this since I raised the initial capital 8 years ago. Unfortunately, it's always difficult to have a perfect match. And so now, as I mentioned earlier, from the 170, we want to go to the 240, eventually, we're going to go to the 300 as more wells come in. Operator: Thank you, Manolo. Next question, it sounds like the need for increased water handling facility has been a bit of a surprise. Have the recent wells been seeing higher water cut levels than you expected? Manuel Zuniga Pflucker: The water handling facility has not been a surprise. We always knew this. I will always give examples to our investors that we have 20 wells, you're going to have to manage 200,000 barrels of fluid. And that's a 10,000 per well. If the wells produce 15,000 barrels per day, then you're going to have 300,000. So that's always been that. Our original 3P case had a total of 20 wells. So I will provide that example to the investors. Amazingly, we are now surpassing the original 3P case. That's something I promised investors that we would do, that we are limited right now on total fluid handling of about 200,000, which, again, initially, that was my 3P goal, 200,000. Right now, if I open all of the wells fully, we will be at 300,000. So we're short. So we need to carry up to add more handling capacity. We believe we can go up to 240,000, and that will allow us to open up oil wells to bring an additional 5,000 barrels of oil per day in the next few months, and we're working on that, which is why in that graph in the presentation, I mentioned, with that, we will be somewhere between the 2 curves as shown. Operator: Thank you, Manolo. Looking at the reserves auditors 2P profile and future development cost at year-end 2024, how much peak water handling capacity were they assuming? And how much of the $645 million of the future development cost in the 2P case was for water handling? Manuel Zuniga Pflucker: How much was water handling? I will need to go back and check that. I can -- I see the person that asked that question to answer that. I don't have the number exactly with me. But again, given that the wells on average produce about 10,000 barrels of fluid, on the 2P case, we have 32 wells. So we're going to need to manage 320,000 barrels of fluid per day and that is the follow-up goal. So from 170, 240, 320, and then we event -- actually, of the 1P case nowadays is 32 wells. The 2P is 40 wells. So that will mean that we will go to 400,000 in the future and beyond. And the more we can process, the more oil we can produce and the more money we can make because here, we are to add value, not only production. Operator: Okay. Thank you. How much CapEx does the low case full year '26 production profile of 12,000 barrels a day assume? Camilo McAllister: We will provide that guidance in January as we finalize the budget. Operator: Thank you, Camilo. And a follow-on, in light of production and the rethink on development, how are you seeing 2P reserves directionally versus year-end 2024? Manuel Zuniga Pflucker: Well, we have -- we are going to end up producing about 7 million barrels this year. And given that they have been no drilling, I imagine the reserves are going to drop accordingly. So 2P reserves were a substantial number of 108 million barrels. So we are going to still have a lot of oil to be produced. As mentioned in my remarks, we're in the middle of the game. Operator: Thank you, Manolo and Camilo, if you want to move on to any closing remarks at this stage. Manuel Zuniga Pflucker: Well, I want to thank our shareholders for all their support. As we have mentioned, we have some headwinds against us right now. As also mentioned, these are all aboveground issues that we need to tackle and we are tackling. I have promised also investors that this project was going to be a free cash flow machine that requires that we complement the number of wells with the water handling capacity because it is to be truly a water -- a free cash flow machine in the future. So this is a hiccup that we're going to have for a year or so, and we will try to go back to paying dividends as soon as possible. Well, with that, I want to thank everybody. Camilo McAllister: Thank you, everyone.
Marc Spezialy: Okay. Good morning, everyone, and welcome to Pure Cycle's Year End Investor Presentation. If you please mute your line as Mark Harding goes through the present and then at the end, we'll -- we have a video, and then we'll open it up to Q&A. So with that, I'll hand it off to Mark Harding. Mark Harding: Thank you. Thank you, Marc. Welcome, everyone. We're delighted to share with you our fiscal 2025 earnings presentation this morning. With me today is our CFO, Marc Spezialy; and our Controller, Cyrena Finnegan. So if you have any tough questions, we'll have them help weigh in on the answers for all that. But we really are excited to give you kind of some insights as to how we were working through the fiscal year, and it's been an exciting year in a couple of fronts that we'll detail. First, I want to get the lawyers out of the room and remind everybody that this presentation includes forward-looking statements. I'm pretty sure you're all familiar with the forward-looking statement caveat in this. So with that, we'll get to highlighting the important thing. The most important thing is I get the privilege of working with just an outstanding team of professionals. Marc, together with Cyrena and then those folks that kind of grind out day in and day out to make sure that our -- we stay on track and really have a good customer experience in all three of our business segments. So great to work with them. And then just to remind everybody that we punch above our weight with our advisers and our Board of Directors. We've got a great team, highly experienced and specialized Boards of Directors that continue to really emphasize how best-in-class performance is for each of our business segments. So we're privileged to work with a great team. And you, from a shareholder standpoint, should get a lot of comfort as to the continuity and really the caliber of the company's Management and Directors. Let me start out with kind of some of the themes for this presentation. And I'd say continued profitability where you've got 25 straight quarters of profitability and this quarter and this year is no different. Really continued growth in each of the revenue segments, especially in the recurring revenue segments, and that's really one of the most important components of what it is that we're doing, building a stable earnings from both water and wastewater, our land development side, our rental income from our single-family homes. So terrific continued growth in that. Also, in our land development, resiliency, our business model. And when you see changing market dynamics as we've seen this year, you stress test your business model. And one of the things that we're going to highlight is kind of the flexibility of our business model to be able to risk on, risk off, turn the volume up, turn the volume down to really match our customers' needs in that segment. And that's the most -- that's the highest delivery segment for that. So that flexibility continues to demonstrate its use and its resiliency in our business model. And then our capital position and liquidity, continued strong stewardship of shareholder capital. So we'll continue to emphasize those positions and make sure that we have a solid foundation for delivering results year-over-year. Okay. With that, let's dive right into the Q4 results. And as all of you know, our Q4 is typically our strongest quarter, and that has a lot to do with seasonality and really how we deliver because of the -- our weather conditions here in Colorado, concrete and asphalt paving really do cycle themselves into making sure that you get that down before our winter season. Our perfect cycling would be kind of Q1, end of November, but our year-end happens to be end of August. So sometimes that works to our advantage. Sometimes things spill over from year-over-year. So revenue for Q4, again, it was our highest quarter, slightly down, mostly due to the housing headwinds and pushing some of that revenue recognition from our percent completion into Q1 2026. So both revenue and gross profit up, but slightly off from what we saw in 2024. Taking a look at net income and earnings per share, again, profit margins are still remaining. And really, that is some of the diversity to the company's revenue streams, and we'll talk a little bit more about that. But Q-over-Q in Q4, again, our highest quarter and solid performance on both our net income and earnings for the quarter. So let's take a look at kind of how that normalizes itself for the overall year-end performance. Year-end, slightly below expectations. And again, that was mostly due to the headwinds of housing pushing some of the percent complete. And so as most of you know, we operate on a percent complete because we develop lots over about a year's delivery schedule. Sometimes that works within our fiscal year, sometimes that carries over. And last summer, I think what we look to do is really dial up some of those deliveries. So we had as many as three different phases of our land development going on at the same time, delivering what we were looking for in 2024 and then having two phases in 2025 and spilling over into 2026, delivering at the same time. So strong results again, but slightly below expectations on revenue and gross profit. But then moving into kind of the thing that matters the most is our net income and earnings per share, which actually exceeded our expectations. So again, the most important metric is earnings per share, slightly above what our forecast was. And that's largely due to oil and gas royalty income coming in much stronger than projected. And the reason for that was we had the completion of an additional 7 -- 6 or 7 wells into the largest portion of our royalty estate and those wells came online and started producing in 2025. And that really did exceed that expectation. We knew that those were there, but you never have clear visibility as to the price of oil and then how that's going to result in. And so one of the things that we continue to show is that diversity of revenues to the company where we have multiple shots on goal here and are able to drive revenue and earnings from our assets in a number of different ways. Let me go over kind of the earnings bridge of where that -- where the headwinds and tailwinds came in from each of the revenue sources. So our forecasted net income was right around $12.5 million, slightly lower revenue from our land development segment, and that wasn't that we lost that revenue. It was really more that it was pushing into 2026. Some of that was Q1 2026, but some of that's going to be in the first half of 2026. Slightly higher costs of revenue, and that's really driven by a little bit by tariffs, a little bit by inflation. So we saw a little bit of slightly higher costs on that, but then lower G&A expenses. So those things that we can control, particularly when we have a headwind type environment, we pay a lot of attention to SG&A. And then we're given a little bit of tailwind from royalties on the oil and gas to allow us to bring that net income -- even not only above -- slightly above that forecast but continuing to drive earnings to the company. I want to move into kind of taking the view up a few feet and really highlight each of the business segments so that you get a flavor for not only where our investments are going, but how each of these segments are performing. So in our Water Utility segment, really the main drivers there are where we get our revenue from. And so the recurring revenue side of it, we have a little over 1,600 commercial connection points on there out of a total of 60,000 potential given our water portfolio. So we're just getting started on that. Industrial water sales, water sales to oil and gas customers and then connections, and that's largely driven by our land development business, and we get tap fee revenue that's attributable to that and delivering high margins there as we continue to invest year-over-year into our water system and really deploy that capital that we're receiving from maybe some of the one-time sales to oil and gas to make sure that we get high margins and continued profitability into our tap fee connections. If you look at kind of how that portfolio -- our water portfolio performs. We've talked about this a number of times. We believe we can serve 60,000 connections, probably can be a little bit stronger than that given the trending in the amount in water consumption per single-family equivalent, but we continue to really pace our guidance on this at 60,000 connections. And as most of you know who are familiar with the company, we get two fee incomes from that. We get a large [ whomp ] upfront capital fee component and our tap fees now, our combined water and wastewater tap fees are right around that $40,000 mark. So those continue to grow and appreciate based on the scarcity value of water and the cost of incrementally delivering those supplies, which are farther and farther out and harder and harder to bring on board. And then annual revenues. And our annual revenues are pretty consistent. We're probably growing that a bit. That's about $1,600 per connection per year. And so when you take a look at that, the connection of 60,000, that's about $2.5 billion worth of top line revenue, cost us about $1 billion to build that full system over time and then our connections year-over-year revenue. So overall, we're still a very small fraction of our total capacity, close -- a little over 2.5% of what we're really deploying depending -- compared to our capital and our capacity. And then the production year-over-year. We continue to invest in that system. We had a pretty light year, which we knew that was a forecastable gap in oil and gas deliveries. So we still have plenty of pedal on what we've developed in our production capacity to deliver that water as that water increases. And we look to see a bit of increase in that in 2026. As that applies to kind of fiscal year-end year-over-year, really, the interesting thing about the water side is some of the diversity in the mix of customers. When you take a look at that, we're sort of looking at the domestic customers, which is that dark blue, and that will be what we're delivering to that 1,600 connections year-over-year, some of the oil and gas deliveries and then the tap fee deliveries, which are attributable to our land development segment. And so while our overall revenues stay in line, the mix of that, as you can see, between year-over-year is variable. And so you're going to see a diversity there that allows us to kind of continue to grow that asset base, not only from the recurring standpoint, but also in capitalizing on other business segments and being able to put some of that idle capacity to use either through oil and gas or in the development side. And then good customer growth. Again, we've got about a 22% CAGR on our customer growth. So we continue to really leverage out building that recurring and perpetual customer growth in the recurring revenue side. Just a small snapshot of the oil and gas side. We did have a forecastable decline for oil and gas deliveries in 2025, and that was largely due to a strong push of permitting oil and gas wells on the Lowry Ranch in our service area. And oil and gas operators have close to 200 permits now that they're actually drilling. So we have a drill rig that is, for the time being, committed to drilling nothing but pad sites on the Lowry Ranch. And so we do see for 2026, a significant increase in oil and gas deliveries for that segment. So you'll look forward to seeing some of that action in 2026. Let me move over to the Land Development segment. Taking a look at each of the phases of that, one of the carryovers on Phase 2C. So we did deliver the 228 lots of Phase 2C that we had forecasted for 2025. And we had a small about $800,000 of deferred revenues that spilled over into Q1, and that was a function of sort of the regulatory climate in permitting and getting some lot templates on some of the lots that we had for one of our builders, but that did come in, in Q1. Overall, sales in Land Development were off then from our expectations, and that was largely attributable to some of the headwinds that we're seeing in housing and really trying to provide that customer service to our homebuilders and making sure that we're pairing inventories at appropriate levels where we're not overinvesting in roads, curbs and gutters, and they're not inventorying finished lots beyond sort of those annual increments that we like to deliver them to and they like to receive in. Taking a look at 2026, we're working on completing Phase 2D. And so we'll see -- we're about 43% on that. So that was some of the rev rec in 2025, but you'll see the completion of that rolling into 2026 and then visibility from there, taking a look at not only 2D, but 2E, which is going to be the next phase. On the land development side, this is kind of a breakout of which phase is contributing to the revenue streams. As we had this Phase 2, we subphased that out. We initially had that sub phased into four sub phases, but we were able to add a fifth one with that with this 2E. But it really does show you that bulk of '25 deliveries was from Phase 2C and some of those forecastable revenues that we had that we were able to dial down just a bit because of the housing headwinds will push into the first half of Phase 2D on that. And so it gives you kind of the total land development revenues and how those occurring for the trailing three fiscal years. So it kind of gives you a profile of some of the developments and really how that's maturing, and you're seeing this slide where we're carrying it forward on not only the land development side, but then kind of how that vertically integrates ourselves into the water side from the tap fees. We haven't fully received all the tap fees from Phase 2b. So we still have some contribution on those -- from those deliveries, which were in 2024, that will come in, in '26 and then taking a look at 2C and 2D on the tap fees for that and then also single-family rentals. And last year was a bit of a struggle for us on single-family rentals. Again, another regulatory issue for us as the county, which is our jurisdiction, updated their building codes and really had difficult time processing homebuilder permits on that. And so we're through that phase. Most of our homebuilders have got what we call Masters approved. So each housing plan will be approved and then they can build that same house, different elevations so that they change the look of that, but the building department's approval of that Master allows them to build that on any number of different lots. And so each of our builders have got their Masters approved, which still accelerate into our single-family rentals. So you'll see a substantial increase in the number of single-family rentals in 2026 and into 2027. I'll highlight a little bit more of that later. What I wanted to do is this will help illustrate kind of how our percent completion works. And most of our builder contracts are structured in a [ Flow ] Funding Agreement where we get paid in three installments. We get paid once we do the Plat, which is a recordable property interest to an individual lot. It's a paper lot, but it is that they own that address lot. And then we use those funds to be able to really do the land development side. So we're really working in a partnership with our homebuilder partners to be able to deliver these on a real-time basis. As we complete the wet utilities, which includes the overlot grading and the overexavation for the soils, then we make that second payment. And then as we deliver the roads, curbs and gutters, we get that finished lot payment. And so this kind of shows you some of the timing of how those payments go and really that work product over the POC. And sometimes those will span quarters, sometimes those spans year-end. And when you take a look at delivering each of these individual increments of lots, it's not always clean enough to deliver in one fiscal year, but it does deliver in a year, and that year may be 12-month period as opposed to matching with our fiscal year. But that kind of gives you an illustration of how some of that -- how we can dial up and dial down to the market depending on how the strength of that market goes. This is kind of the location of where our next phase is going to be. So it's going to be directly across that Phase 2E, and that's about another 150 lots that will be directly across from the high school. The important component of this is we're really almost complete with most of the major infrastructure on that. The roadways were complete pursuant to some of the other phases. So this should be a high-margin area because most of the off-sites and arterials are all completed and the roadways are completed, the water, sewer, all that system expansions are already to this property. So that will be a nice phase for us. One of the key milestones for 2025 was really groundbreaking for high school. And as you can see from that aerial drone shot, it's right adjacent to our primary school. So it's a full campus. It's a full K-12 campus and really excited to continue to work with National Heritage Academy. There, our charter partner and really -- that's one of the high-value commodities for our development here is that we've got a full walkable K-12 campus right on site for the development and outstanding delivery of education here at Sky Ranch. So we're very grateful for that. We're very grateful for our charter, which is the Bennett School District and our partnership with Bennet School District on bringing this education system to Sky Ranch. I continue to want to kind of illustrate our service area and kind of where Sky Ranch is in the metropolitan area. And so the map on the right here, the black line at the top of that really is the I-70 corridor. And Sky Ranch is the development in the blue there, and that kind of illustrates really where we are. We talked often about the fact that Denver really situates itself on kind of an ocean-like framework because we can't grow West. And so all the growth is concentrated to the Eastern Plains area. And really, our assets, whether it's our land development assets or our service area are located in the most ideal section of the Denver metropolitan area. And the aerial to the right really kind of shows the encroachment of development on our service area. This is owned by the State of Colorado and its development and its revenue opportunities really benefit the education system here in Colorado, the K through 12 education system, but you can continue to see all of the development that surrounds the surface area for that. So our assets are ideally positioned in the right location, and we continue to really look forward to how these will grow and monetize over time, both for the State Land Board as well as to expand our systems. As I mentioned, we want to talk a little bit about single-family rentals. And so this kind of illustrates where that portfolio of single-family rentals are. A, that 2 Phase -- sorry, Phase 2a really was where we had the 14 units. We have about 4 units in filing 1, but then 10 units in A and really the acceleration of how B, C, D and E are going to add to the portfolio. And so with that bit of a delay because of the building code upgrade, we have about 40 homes under contract now that are delivering from several of our homebuilders. And what we've tried to do is pace that out so that they can deliver those on 5 units a month. We had 5 units delivered in Q1 of 2026. And of the deliveries, those delivered in late October, I think we've got three of those leased. Two of them are on the market, but we're continuing to show strength in the rental market on single-family rentals. And then those will pace out and deliver those units through fiscal 2026. Steady rental income stream from that. We really like that asset-light appreciation model where we can lever up the vertical cost of that and continue to keep our balance sheet clean and strong. So this is what you're going to see in 2026 and the real story for performance on 2026 is continued pacing with our land -- our homebuilder partners and our land segment and then acceleration of growth in the single-family rental segment. It's a bit of the fiscal year performance year-over-year. So we're seeing a slight increase in growth on the rents. But for the most part, our occupancy is very, very low. I think we've got a 97% occupancy for the portfolio to-date and then continued asset appreciation. The nice thing about this segment is -- we carry forward the equity of the lots as well as the water utility side and then are leveraging up the vertical cost of that and really have a nice relationship on that because we have a high loan-to-value ratio there and then that asset continues to appreciate together with the market. We're seeing continued growth in that, not only just because of housing growth, but also because of the continued investment that we have in the community. This will kind of show you the growth of each of the phases and how we do that. And so that Phase 2b, where we were looking for a stronger growth in 2025, really pushed over into 2026. So we'll have a bit more than the 31 homes. We'll probably have 40 homes accelerate in that area. And then how it continues to grow from Phase 2b and C. So those are where we're looking for, for '26. And then continuing on through the second phase. And if you take a look at this whole portfolio as it relates to the overall development, we're looking at being in that 8% to 10% of the total homes. And so if we have about 3,000 single-family equivalent units out there, somewhere in that 250 to 300 homes would be our target for this portfolio. Talk a little bit about stewardship of shareholder capital and our balance sheet. We continue to invest into these assets. So you'll see continued asset growth and strength to the company. Water segment is around $68 million, land development segment. That continues to mature. So as we're bringing assets into the portfolio, we're also taking them off our balance sheet because we're selling them. But we continue to make sure that we maintain liquidity. And as our capital stack goes, we want to make sure that we're investing into monetizing these legacy assets that we acquired over the years and really generate the high-margin incomes from each of the segments and then continuing to build into our single-family rental and continuing to maintain a strong liquidity portfolio, really balanced out between our cash, which is inclusive of restricted and unrestricted. And the restricted cash is really just letters of credit that we have for performance to the local municipality on the roads, curbs and gutters. It's how we warranty out those during our 1-year warranty period. And then the note receivable that we get as that comes in periodically in sort of increments as we build assessed value within the community, more homes, more assessed value, more tax revenue that's available for us to issue bonds through the local municipality and reimburse us for all of those receivables. And then a small amount of debt, our debt is really attributable to most of the single-family home rental side of the business. So continued strong balance sheet. Capital allocation, if you take a look at how that composite makes itself up, cash and investments and the note receivable and then just growth in the infrastructure, making sure that our water systems continue to grow so that we can continue to add those recurring customers. And then we continue to reinvest in ourselves, probably a little more conservative in 2025, mostly because of the housing headwinds and wanting to make sure that we're pacing. We had a lot of chips on the table last summer, really dialing up the absorption of our lots. And we wanted to make sure that we weren't pushing our homebuilder customers into a risk profile that really shifted most of that from our risk to their risk. So we wanted to balance that out. So we were a little bit more conservative than I think we would have otherwise been, but we continue to reinvest in the share repurchase program. Give you kind of a profile of how we were performing quarter-over-quarter in that. And then the diversity, I think one of the things that we want to continue to emphasize is the number of ways that we generate revenue from these assets, whether that's on the Utility segment, where we have a number of segments, subsegments in there, whether that's the domestic side of the business or the industrial side of the business, rental income revenue from our single-family homes, and you're going to see a strong acceleration of that, land development and the synergies that we get on doing just a fantastic job of the Master Planned Community and adding value to the community and really partnering with our homebuilder customers and then making sure that we are good stewards of your capital. Taking a look at kind of how we see things rolling out not only this year, but then how it's going to roll out through a midyear forecast as well as a builder forecast. I think we tried to foreshadow some of this last year, but 2026, if you take a look at the recurring, we do have an expectation of continued recurring revenue growth, not only from our water customers, but also some of our single-family rental. And that's going to become a better -- a bigger component of our recurring revenue. You're going to see that continue to accelerate where we're going up to 100 units in Phase 2 and then maybe up as many as 250 to 300 units through build-out. And so that will continue to add to the asset growth. So when you take a look at how that translates, that asset growth is a tremendous opportunity for the company and particularly compared to the percent of each of these assets that we're currently developing. And so as we can accelerate that development, we do that, and we try and pace that with making sure that our inventories are appropriate. This is a little bit more highlight on kind of how the profitability trends from each of our business segments, the Water, the Land Development and then also kind of continued emphasis on recurring revenues. So you'll see that continued growth. We're looking at 2026, depending on sort of these housing headwinds, that might be slightly down from 2025. We do believe we have some pedal in the oil and gas deliveries this year. So we'll see how that goes. We didn't want to be overly optimistic just because of the visibility of the price of oil, but we're really optimistic about continued monetization and continued growth in this segment. And really, the transition going up to this -- what would be a tantamount change to the monetization of these assets are we continue to pace our growth on the residential side. But moving into 2028 with the delivery of our interchange, which we're working through in the permit process, but we're fairly close to getting that finalized. And we'll work through the financing of that through the Metro District. So we reserved some bonding capacity in that to make sure that we have the funds that are available to bond that out in 2026, start construction of that in 2027 and then really layer in and almost double the deliveries of our Land Development revenues maintaining the same pace with our residential development, but then also delivering a like amount of equivalent lots for our commercial development. And then the valuation on those commercial lots, we're forecasting that to be about 2x the valuation of our residential lots. So that's the real delta in how we look to change the composition of the land development and how we're almost doubling that land development -- a little more than doubling that land development revenue is because of the bringing online that commercial lots. And that's a function of two things. One is going to be rooftops. Most of the commercial players are going to want a certain number of rooftops to be able to generate revenues from what their investments are going to be, but then also access and making sure that we have a large volume of transportation access and really capitalizing on our location being right on the Interstate with an interchange, an exit ramp right where our project is. So that's kind of how we gain some leverageability and some scalability to the Land Development and the Water Development side of the businesses. Valuation sensitivity. So 2026, our gross revenue, we're going to show a range there of 26% to 30%, and that's going to be a function of some of that sensitivities on lot deliveries as well as some of the industrial water sales activities. So a range of earnings per share that corresponds to that. Upside and the timing of the acceleration is really going to be how we look to deliver and maintain those inventories of lots so that we're not investing into that -- the capital cost of delivering those in advance of having those deliveries for our homebuilder customers. And really, we started out with delivering this project with -- started out with 3 builders, 4 builders, and now our portfolio is closer to 7 builders. And so each of the builders would like to maintain a year's worth of inventory, which allow us to have a bit more of an acceleration to our Land Development side that serves more diversity of product mix. And so as the community continues to mature, we look forward to continuing to serve the whole portfolio of our builders. Short-term outlook, I won't spend a lot of time. I think we've covered a lot of what this is. But our Water segment growth, we're going to take a look at the 3- to 5-year period where we're going to get up to about half of our total water recurring customers. Sky Ranch in total will be about 5,000 total connections. So we look to see that come into about that 2,500 units. Land Development side, we should get to -- we're right around that 18% of complete. So we'll probably get closer to 30%. So we're looking at doubling of that. And then once we've got that commercial in play, you'll see that accelerate through the longer term. So build-out of Sky Ranch is in that 7- to 10-year window. But in the short-term, we look at kind of getting up to about that 30% and then having a faster acceleration once we're layering into the commercial component. And then single-family rental, we see up to about 100 units in this short-term outlook. Longer term, this kind of gives you a perspective of the total build-out. And then when you take a look at our build-out potential, really monetizing our net revenues from land development get close to $700 million. And the recurring revenue is going to be around that $15 million, $16 million. And that's really a function of kind of the -- you take a look at a $250 million market cap and really what we've got in production of our assets it really is the story for us. We've got a tremendous asset here. We're very aggressive about making sure that we're building this thing out and monetizing it and making sure we can do that as quickly and as profitably as we can. So one of the things we're going to do is give you kind of a video tour here. And really, this will kind of give you a view. I'll probably try and stop and kind of highlight a couple of the areas on there. So if we want to get that started, this will be an aerial representation. As you can see, this is our first phase. And so this was the more mature side of the community. It really kind of gives you -- stop it right here. It gives you kind of a profile of where we're at relative to the metropolitan area and the growth of the metropolitan area. You see the mountains there in the background, and that's what we get to wake up to every day, which is wonderful. But the other key aspect here is if you see kind of at the top of the development there, hard to illustrate, I don't know if you can see the cursor where our wastewater treatment plant is right there. And really, that's a unique asset in and of itself because 100% of the water that comes from our community is treated and reused. And so you don't see any stream that's discharged to that. We bring that back. We reuse 100% of that water supply either through irrigating our open space, which you can see our beautiful open space here for our community or taking that back and selling that to our individual customers. So if you continue on, on that, you'll see panoramic view of kind of the continued growth. We'll stop it right here. And this kind of gives you a perspective of really the deliveries of the phases of the land development segment. Right to the left there, where the cursor is, that was Phase 2A, and that delivered in 2023. And then to that, the next slide, that's 2B. And then what we delivered in 2026 was 2C. You can see the roads, finished lots. You can see some vertical homes just starting in that from one of our new builders. I think those are Taylor Morrison lots in there. And then you can kind of see 2D under construction where we're really starting -- we're finishing up the wet utilities there, and we'll be moving into roads, curbs and gutters on that. Continuing on, we'll see kind of that -- all the land you can see that's farmed there, that continues to be our portfolio. So that's the continued growth of the project. And so that will be our build-out, plenty of inventory of land that we have on the residential side. So that will continue to grow on the residential side. And then you can kind of get a perspective of how our infrastructure is there. We've got most of the main roadways developed. That's the Boulevard area. Stop where the cursor is, that's kind of the oil and gas and that we bring all our water, our treated water back to that reservoir there at the top, and that maintains the flow for our irrigation system. And those are kind of some of our oil and gas wells that we have in the site. So Colorado has a rich history of coexisting with oil and gas and residential and commercial development. We can see kind of rolling into Phase 2E there right next to 2E rolling right there, roll right into there. That's our water tank, but that Phase 2E will be between our water tank and the school. That gives you kind of a sense of -- there's our primary school and then the construction of the high school. And it kind of shows you we've got most of the road network developed for that. We'll have a little bit of extension on the road up through the high school and continuation of one of the Boulevards. And so this kind of gives you a good feel for that campus is right in the middle of where we're looking to go, right in the middle of all of Sky Ranch. There you go. So really accessible for all the students to be able to walk there. This is kind of a view of the commercial area, right? So we're really flying into that 150 acres, which is adjacent to the Interstate. It gives you a strong profile of what the transportation access is and the value of that transportation access. Up in the top of that is the airport. So it kind of gives you a feel for how close we are to the airport. We're 4 miles directly south of the airport. And then kind of where that Interchange is going to go, it's going to go straight along the alignment of the Boulevard there, where the -- yeah, so where the existing Interchange is, we'll keep that up and operating. We'll build the other Interchange and then we'll ultimately remove the existing Interchange, but it gives you kind of a flavor for really all of the physical features of the Sky Ranch development. So with that, what I'm going to do is kind of turn it over and see if there's any questions. We'll open up everybody's mic. And I guess if you have a question, just shout it out. We can't mute them. Yeah, you have to unmute. So the technology here is just unmute your mic and then shout it out and we'll drill down on some of the details or raise a hand and you can type it in the comment section. Marc Spezialy: [Operator Instructions] But yeah, this concludes obviously, our slides. So we'd like to provide this opportunity to anybody who has questions. [Operator Instructions] I see that you're on mute. Are you able to talk just so we know everything is working. Mark Harding: Greg, can you unmute and see if your mic works [indiscernible]. Greg Vennett: I'm testing this out. Does it work? Mark Harding: There you go. Okay. At least I know we're working. Greg Vennett: Yeah. Anyway, this is Greg Vennett. I'm one of your long-time shareholders. I just wanted to test it to see if people are having problems with the technology. I came in late in the call, so I'll have to relisten to the replay in order to call you back and ask questions. One quick question. Has -- and maybe you said this in the beginning, but with -- has housing sales in your areas slowed down due to affordability or -- I guess my sense is the builders are still building. So if you could answer that, that would be great. Mark Harding: That's a good question because really, you have two variables in the housing industry. And I think Denver is probably on the high side of unaffordability. When you take a look at most housing markets and Denver is in probably the top 10 cities of housing markets, people generally take a look at Denver is pretty high in affordability. And that has been a challenge for us. I would say that's also one of our strengths because we have that entry-level price point and of all of the markets that the builders are looking to serve, when you have an interest rate-sensitive market and when you're looking to buy down interest rates on higher mortgages, the incentive packages that they can offer really have more impact on an entry-level house than they do at kind of a move-up house. And so I would say the resiliency of our builders and our project is strengthened by the fact that we are in that affordable market segment. And that's not saying much when you have to say affordability is anything less than $500,000. That's still a high, high number for an entry-level house, but we are one of -- probably in that 4% of homes that are delivered on an annual basis are in that affordable price segment. So that's why I think we're performing slightly better than maybe some of the other master planned communities and then also our business model being able to time that out. So yes, housing has some headwinds. We've probably managed that a little bit better just because of how we can deliver lots on an incremental basis. Marc Spezialy: I also want to point out sorry, Greg. Greg Vennett: No, sorry, go ahead and point it out. Marc Spezialy: [Operator Instructions] Unknown Analyst: On acquisitions and land acquisitions and where you are on those? And any progress throughout the quarter? I know it's hard to time when you're going to have the ability to acquire land and at what price you're willing to pay for it. And then additionally, on the commercial side, I know you have a big hockey stick in '28, but is there anything that's materialized with any commercial players throughout the last couple of quarters? Mark Harding: [ Craig Weinert, ringing an E ]. Good questions. As you take a look at these acquisitions, as we have commented, we really do have our nets out, and we're saving a bit of liquidity just for that. And I'd love to be very detailed about that, but I would say our conversations continue to strengthen with our target areas of acquisitions. It's an interesting profile. If you had the nation as potential acquisitions, your sandbox is much, much bigger. Our sandbox is very small and very targeted. And that's on purpose because we think that that's where we can provide the best leverage on that. And yes, we would like to be as aggressive. We do have the ability to probably pay more for land than any other developer just because of our ability to bring value to that land from our water portfolio, but we also like to make sure that we're paying for that on land acquisitions that we find to be appropriate for the timing of development. And so we're balancing that out to give you that flavor for it. And I'd say I'm more optimistic this year than I was last year, but I say that every year. So we hope that we can see some movement in that area. To your second question in terms of the commercial, we are in the market. We do have listings with the commercial folks that really represent 70%, 80% of the transactions that are in the Denver area. We are seeing interest from a lot of those. Our interest in the commercial is to go directly to the end user. There are a lot of folks that like to get between us and the end user. And really, those aren't as interesting to us as really going strictly to the end user on that just because of value propositions. And our balance sheet is strong, but we want to make sure that we maintain some flexibility to participate in some of that on the commercial side. So whether we sell the land, whether we partner and participate in some of those horizontal improvements are the types of structures that we're looking at for some of those commercial transactions. Understanding, Craig, that those are going to take some lead times. And so there may be transactions that we're pursuing that would be in 2026, 2027 that would really start to monetize and show that scale of revenue growth in 2028. Marc Spezialy: I would just add to that, though, the growth you're seeing that we're projecting in 2028 is mostly a factor of being able to open up Phase 3 with the interchange and less to do necessarily with some of the timing. So we still have a strong portfolio of commercial lots that aren't really showing up in the projections yet. Unknown Analyst: It's interesting because the near-term weakness that you're seeing from some of the homebuilders may be a long-term benefit for you guys in that the land may not be as expensive as it was when things were so hot. Mark Harding: I think that's true. And as much as I'd like to say, we're very disciplined in what we pay. And it's also a function of having people -- all of the folks that we talk to usually come back with -- and it's an appropriate retort to a land acquisition is, look, it's going to be worth more tomorrow than it is today. And when you get cycles and a lot of these folks have seen cycles in the past and some of these cycles are short-lived in months. Some of these can be long-lived in terms of several years. And so if they're close to looking at selling and they see a cycle, regardless of price, I think that that's a psychological determination for is to say, listen, it's time, we need to move on. And that's really, I think, what we're seeing more than a function of, oh, we can capitalize on a weak market and benefit there. I want to be disciplined, but I also want to make sure that this is a transaction that works for both them and us. And sometimes that's more timing than it is [ amount ]. Greg Vennett: Mark, let me ask you a question. This is Greg Vennett again. For land acquisitions, you're basically -- it's dirt. And are you looking at acquisitions where they don't have any access to water and you're the value creator or would you guys consider buying dirt that already has access to water? Mark Harding: I would say we would probably wait those acquisitions where we can bring added value for water. I feel very confident about our land development segment and really building that value in the land development. So if we were, for example, buying a piece of property that we're in an incorporated area where we were getting water service -- water and wastewater service from another provider, we would still do well in that scenario, but it wouldn't give us the vertical integration of leverage on accelerating not only that segment and monetizing investments in land, but also monetizing investments in water. Not to say that we wouldn't consider that, but I think that there's plenty of opportunity for us to be more aggressive on acquisitions where we can bring water to the table. Greg Vennett: So the person who owns that dirt now, are you the only logical provider of water or can they get water from somebody else? Is there competition? Are you the only provider? Is that your moat? Mark Harding: I would say we're the best provider, but we're not the only, right? I mean they come out -- they can go out and find water themselves and do the heavy lift of building a water utility. That's probably not any of the land interest that we're seeing. It isn't a picnic. And it's -- as you've seen through what we've done over the last 30 years, it's a difficult and expensive proposition to build your own utility. But there's competition from the neighboring city, City of Aurora. That's probably our only competition. So if they don't look to value our providing water service to them, they would have to consider an annexation. And that carries with it its own risks and its own costs, which then weigh into kind of the cost of land. And so we can deliver lots much cheaper in unincorporated Arapahoe County than any developer could deliver in the City of Aurora just because of our structure. And I think that continues to emphasize the price of a home and the affordability of that home. So when other people look at it, they have to look at it through the full development cycle and sort of say, am I competing for developing $800,000 homes or am I competing for developing $400,000 homes, which is what we're looking at. And so we have a competitive advantage to doing that, which then translates into being the best choice. Greg Vennett: So a new home in the Aurora area is $300,000 or $200,000 more than Sky Ranch. Is that the way? Mark Harding: It will vary. But I would -- some of the newer projects that are getting started in Aurora are getting started at that much, much higher price point. Some of the homes that are directly adjacent to us might only be $60,000 or $70,000 more. So you'll run that -- you'll run a gamut on that. But we certainly have the better location. We have better cost basis. We have better utility rates. Overall structure is much cheaper and much more efficient in unincorporated than it is in the incorporated area. Greg Vennett: The future for commercial development, along I-70 where you're going to build the interchange, is there other commercial development that you see in the future that could be competition for you or are you the bull's eye? Do you have the bull's eye -- commercial property? Mark Harding: So interchanges benefit all land in the area, and we have kind of a strong footprint in there, but there are other lands that are adjacent to us that we don't own that are looking to develop, and they will have to pay their pro rata share of the cost of that interchange, too. We might be advancing that. But ultimately, as they come online, they'll have to reimburse us for our covering that cost upfront. And so that was our structure is that we wanted to make sure our timing was our timing and that we would be advantaged in there and then somebody else coming in there would have that cost component as well. That would -- they would have that off-site investment, which would accelerate some of the reimbursable repayments to us as that competition came online. So we wanted to equalize that to say we weren't carrying them. But at the end of the day, as they come online, I think we have the competitive advantage. Unknown Analyst: Mark, can you hear me? [ It's Matt Reiner at Aranda ]. A question on Slide 34, the profitability trend slide. When I look at 2026, I mean, it seems like every category, the revenue is up a little bit, but yet the earnings forecast is down a little bit. And I'm just trying to -- is it the margin differences between the different segments? Is it -- I mean, it seems like you're buying back some shares. So I don't think it's a share count thing. So just curious as to what I'm kind of missing there. Mark Harding: Yeah. And so the -- you're right. What we're sort of looking at is the 2025 had a high profitability because of kind of the oil and gas, and that's almost 100% margin. And even though we're increasing the revenues in both land development and water, it's not -- we're not likely to see the same earnings per share bump that we saw in 2025 because of that profitability of the oil and gas royalties. That's the real differentiator. I think the comparison -- yeah, the comparison from '24 to '26 will be pretty analogous in it. '25, we were delighted that we exceeded our forecast because you never want to put a forecast out there and not meet it on the earnings per share. And so we were excited to do that. And that really came through the diversity of the revenue streams of the company. [Operator Instructions] Okay. Well, if we have no other questions here, I know we'll post the presentation for those of you that are going to hear this on a rebroadcast or listen to it again and inspire a question. Certainly don't hesitate to give me a call and we can drill down on any of the questions. Again, really want to emphasize the value of our leadership team, our management team and really all the employees in the company. We have a great group of professionals that bring their A game each and every day and allow us to really fine-tune the delivery of this. The businesses that we're in, all three of these businesses are about as capital intensive as you can be in a business segment. And you're investing into hard assets, you're investing into inflation-resistant assets that really continue to monetize. And sometimes you have a little bit of excess capacity in a water or sewer system that then you can help monetize that through delivery to your industrial customers. Some of those investments that we have in big infrastructure, whether that's going to be Boulevards or whether it's going to be land horizontal developments of grading or even an Interchange, those do come back to us. And so we're very cautious about how we make sure that we can finance those and carry those forward so that we can really deliver these lots on an on-demand basis. And while that development cycle can take a year from the time you break ground to the time you get a building permit, that's pretty quick in this world of land development, and we're pleased to be able to kind of match those inventory deliveries with our homebuilder customers. So the resiliencies and really the timing have really tested and really shined in kind of what -- when you get these markets that have headwinds, can you not only deliver -- continue to deliver your product, but also match those deliveries to what your customers are looking for. So we see a lot of that performance this year, and we're thrilled to continue to advance on monetizing each of these segments. So with that, I'm going to close out and wish you all happy holidays as we close out the year.
Operator: Ladies and gentlemen, thank you for standing by. I am Gellie, Chorus Call operator. Welcome, and thank you for joining the OTE conference call and live webcast to present and discuss the third quarter and 9 months 2025 financial results. [Operator Instructions] The conference is being recorded. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Kostas Nebis, CEO of OTE Group; Mr. Babis Mazarakis, Chief Financial Officer; and Mr. Panayiotis Gabrielides, Chief Marketing Officer, Consumer segment, OTE Group. Mr. Nebis, you may proceed. Kostas Nebis: Thank you, and good morning or good afternoon, everyone, and thank you for joining us today to review our third quarter results. I would like to start with our recent exit from the Romanian market. We are very pleased to have successfully completed a key milestone that will lead to a substantial improvement in our annual cash flow and enhance shareholder value. In line with our commitment, we have adjusted our shareholder remuneration following the completion of this transaction by distributing an extraordinary dividend. Before reviewing the quarterly performance, I would also like to highlight a recent agreement to expand the ultrafast broadband coverage in the remaining lots of rural and semirural areas across Greece through a subsidized projects covering a further 480,000 homes and businesses. This will further solidify our leadership in the market by connecting even more people to fiber speed networks. This initiative underscores OTE's commitment to providing to as many households and businesses as possible, the fastest, broadest and most reliable gigabit connectivity services, driving Greece digitization and transformation going forward. Turning to our quarterly performance now. I would like to stress above all the acceleration of the recovery in our fixed retail service revenues that is supporting our overall growth in both revenues and profitability. The performance of our fixed retail services is accelerating, building on last quarter's momentum. This growth was driven by the increasing adoption of FTTH services, supported by the growing demand, voucher initiatives and our expanding network availability. We continue to lead with Greece's largest fiber network and further enhance our offerings to the customer premises. Our FTTH footprint is growing significantly, enabling more connections as we continue to record strong customer additions. The newly adopted regulatory framework for stop selling FTTC in FTTH already connected buildings will further boost the transition to fiber connection, further accelerating the monetization of our fiber network investments and offer improved services to the end users. At the same time, our fixed wireless access solution powered by 5G stand-alone technology is gaining significant traction, effectively bridging Gigabit connectivity gaps, contributing to positive broadband net adds in a traditionally weak performing quarter. In our TV segment, we are seeing the positive impact of strengthened antipiracy measures and anticipate additional support from the abolition of the special tax at the beginning of next year, making our Pay-TV propositions even more affordable to the end users. Our TV business continues its robust growth and strong customer acquisitions. Building on our leading FTTH network, rising fixed wireless access adoption and strong TV performance, we remain focused on enhancing customer value. In line with this, we have deepened our convergent services strategy by partnering up with one of the major energy providers to enhance further the value offered to our retail customers. In the Mobile segment, we continue our strong growth driven by our network leadership and attractive commercial offerings. The successful transition from prepaid to postpaid plans, the optimization of our prepaid portfolio and the increasing adoption of larger bundles and 5G devices penetration, altogether contribute to our solid performance. The recent CPI adjustments, which were mild after many years of experiencing much higher inflationary pressures on our cost drivers were combined with additional customer benefits and we contribute to some extent in our future growth. We remain at the forefront of the market as the operator of Greece's only commercially available 5G stand-alone network, and the reliability and resilience of our network continue to reinforce our long-term trajectory. We have also recently introduced the Magenta AI portfolio services, aiming to democratize AI access in the Greek market. By integrating the power of AI, we are delivering great value, further strengthening our commitment to innovation and customer satisfaction, partnering up with a number of global leaders in AI innovation, leveraging the partnerships of the Telekom Group. Our ICT business continued its strong momentum with another quarter of double-digit growth, highlighting our pivot at role in advancing the digitization of diverse sectors, supporting the digital transformation and businesses and the public sector organizations across Greece. To highlight, our recent contribution with advanced digital services and innovative educational tools in the educational sector, bringing all stakeholders closer to the gigabit society. In addition, our international ICT business is also growing, including projects for several European agencies. We remain focused on our operating and production model transformation, aiming to build a digital-first organization by actively deploying digital and AI tools. We have already enhanced areas like predictive network maintenance and customer care with AI role in customer interactions steadily growing, boosting efficiencies and delivering further value. Before finishing this review, I would also like to briefly mention that we have undertaken the initiative to provide free of charge high-speed connections to around 600 schools in remote areas of Greece, leveraging our FWA technology, opening up access to the digital world and offering equal opportunities to digitization for all students in Greece. Our strong performance relies on our strategic directions. The strength of our integrated services portfolio provides tangible benefits and helps us confidently navigate competitive challenges while driving our future growth ambitions. Looking ahead, we remain confident in our ability to lead the market, capitalize on new opportunities and consistently deliver on our commitments to our shareholders, customers and partners. Babis, on to you. Charalampos Mazarakis: Thank you, Kostas, and welcome to everyone on the call from me as well. As Kostas already pointed out, the completion of our exit from the Romanian market marks a significant milestone. From a financial perspective, this transaction strengthens our free cash flow on a sustainable base. We have adjusted our shareholder remuneration and will proceed with an extraordinary dividend distribution of around EUR 40 million or EUR 0.10 per share in the next month. Now turning to our quarterly figures. In Greece, we achieved a robust 5% increase in revenue, reflecting continued strength across our Mobile, TV, broadband and ICT segments, which more than offset the expected headwinds in areas such as national wholesale. EBITDA rose by 2%, keeping us firmly on track for our full year objectives. Retail fixed service revenues accelerated the growth this quarter to 1.3%. Our TV segment delivered another strong quarter with revenues increasing by nearly 17%, maintaining a solid double-digit growth trajectory. Our customer base expanded by 6.7%, almost matching the net additions reported in the same period last year despite this being the second year of our content sharing agreements. While we expect the anniversary effect from last year's Q4 price adjustments to impact year-on-year growth comparisons, our outlook for this segment remains positive. The adoption of antipiracy legislation this year, together with the removal of the 10% special tax on Pay-TV, which will be effective January 1, 2026 are paving the way to further encourage the take-up of legitimate platforms and reinforce our strong position in the market. Our broadband segment delivered a strong performance this quarter, achieving positive net customer additions despite the third quarter typically being seasonally the softer. We recorded [ 1,800 net profit additions ], driven primarily by the momentum in our fixed wireless access, FWA offering, which now serves 33,000 subscribers. Turning to our FTTH services. There, we delivered another strong quarter, recording 38,000 net additions and bringing our total FTTH customer to 509,000. Our retail FTTH customers now represent 22% of our total broadband base, up from 15% in the same period last year. This robust growth, coupled with sustained wholesale demand of our infrastructure is driving increased network utilization and monetization. Utilization level has risen to 33%, reflecting both the ongoing demand for our FTTH network and the strength of our wholesale partnerships. In addition, under the new regulation in place, we have now started to stop offering non-FTTH services in buildings already connected with FTTH. This change serves as a key driver for customer upgrades and accelerate the transition to fiber to the home products. Now turning to our mobile operations. Their service revenues increased by 2.7%, sustaining the solid momentum. Our postpaid maintains its strong growth trajectory with the customer base expanded by 6.4%, primarily driven by ongoing pre-to-post migrations. Starting from December this year, we will implement a CPI-linked increase in monthly fees for our mobile customers. The adjustment is modest, 2.6%, averaging less than EUR 0.5 and will apply to roughly 2 million postpaid customers and will support the continued growth of mobile service revenues in the coming quarters. Our network leadership continues to serve as a key competitive differentiation. 5G coverage now exceeds 99% of the population while 5G+ coverage has expanded to more than 75%. Data usage maintains its strong upward trajectory, with average monthly consumption per user reaching 20.5 gigabytes per month, representing a 29% year-over-year increase. In our wholesale segment, revenues increased by 4.2% in the quarter, but that was primarily driven by higher volumes in the low margin international traffic, which helped offset in revenue terms only the decline in national wholesale revenues. Here, I would like to say that the international wholesale contributed approximately EUR 81 million in the quarter. However, we expect this revenue stream, international wholesale revenues, of course, to decline in the coming quarters as certain activities will be phased out. Specifically, we anticipate that approximately EUR 150 million in revenues will be removed from our records in the fourth -- at the end of the fourth quarter of this year and the small amount impacting the first quarter of 2026. The termination of certain agreements where OTE acts as transit carrier will have minimal, if [indiscernible] impact on profitability. Our national wholesale agreements on the other hand, continued to deliver solid volumes with 31,000 lines added to our network in the third quarter and 93,000 net additions year-to-date. On the other revenue streams, our system solution businesses via core of our ICT segment continued its robust growth, delivering almost 38% increase in the quarter. This strong performance builds on the momentum established in previous periods, and we anticipate this positive trend will persist throughout the remaining of this year. The solid results in ICT helped to partially mitigate the decline in handset revenues, which decreased by 15%, primarily due to phase out of certain 0 margin activities there as well. Total operating expenses, excluding depreciation, amortization and one-off items increased by EUR 34.3 million in the quarter, broadly in line with our revenue growth. The increase was mainly primarily attributable to higher costs directly associated with top line expansion, particularly increased third-party fees within our operating expenses, which reflect the strong momentum in our ICT segment, as we discussed before. Additionally, we continue to incur certain operating expenses related to the growing adoption of fiber to the home, notably associated with the final phase of the connection of the customer. We remain, of course, firmly committed to cost discipline across all other several areas with continued savings most evident in personnel expenses, supported by the ongoing benefits from our [ X programs. ] As a result, adjusted EBITDA after leases increased by 2% in the quarter, maintaining the same positive trend as in the previous quarter. Our EBITDA margin reached 41%, representing a decrease of 120 basis points year-over-year, primarily reflecting a higher proportion of lower margin revenue streams. Overall, as we now approach the year-end, our performance reinforces our confidence in achieving our full year EBITDA target and guidance. Now let's take a look at the CapEx and cash flow. First of all, CapEx was up 8.2% in the first 9 months, reaching EUR 437 million, largely reflecting continued rollout of fiber to the home and the expansion of our fixed wireless access infrastructure. Our full year CapEx guidance now stands at approximately EUR 600 million after stripping off the Romanian business. I would like to clarify that the acquisition of the [ repeat ] concession will not alter our CapEx guidance. We now anticipate that we will be covering nearly 3.5 million homes by 2030 as we continue our fiber to home rollout for a couple of more years and therefore, maintain the current levels of approximately EUR 600 million CapEx per annum. Finally, free cash flow after leasing from continuing operations reached EUR 108 million in the quarter, up from EUR 100 million in the same period last year. The improvement was mainly driven by the higher EBITDA in the quarter. Income tax outflows and the working capital figures have been affected by different set limits amounts between these lines related to payments and receivables from the public sector. Today, we updated our guidance for free cash flow to EUR 530 million, up from EUR 460 million due to the disposal of the Romanian business. The revised guidance now reflects exclusively our Greek operations. At this point, we conclude the presentation. And operator, we're now available to provide any further clarification. Operator: [Operator Instructions] The first question is from the line of [indiscernible] Andreas with EuroBank Equities. Unknown Analyst: I have 3 questions from my side. The first question is regarding your updated guidance of free cash flow. You're currently guiding of free cash flow of EUR 530 million for 2025, which seems to be the new basis for your recurring Greek free cash flow generation. Could you tell us what is the read-through for the free cash flow from your recent agreement to acquire TERNA FIBER as you maybe have already mentioned that, that there will be no negative implications from this transaction. This is my first question. My second question, which is also related to the free cash flow is regarding your usage of EUR 120 million cash tax savings related to the Romanian disposal, particularly to the extent to which this will be used to enhance -- this will be used to enhance your cash return or as a firepower for spectrum in 2027? And my last 1 is on mobile. Lately, market participants have been rolling out inflation-linked adjustments to mobile contracts, which on our understanding, marks the first coordinating pricing move since 2022. Could you comment on that and then the magnitude of the pricing and whether this has been consistent across all the operators? Thank you very much. Charalampos Mazarakis: For the questions. And let's start with the updated guidance. As it was clear, and you pointed out, this EUR 530 million, reflecting the organic, let's say, delivery of the Greek operations for this year. So regarding your question about what is the recurring base, this is the starting of this year, of course. To the extent that we expand the business in next year, this organic is also expected to enhance in the coming years. Regarding the TERNA FIBER, there are 2 things there. The CapEx and the acquisition of this company. As we already guided, there is no impact in the cash flow from these acquisitions since it has been done in a symbolic amount. And regarding the CapEx, I have to say that the CapEx envelope, as we alluded to, is not going to increase versus what we have communicated also in the past that this will be the EUR 600 million we guided approximately is the flow -- is the ceiling actually for the coming years, including also the UFBB rollout, which will be rolled out for the next 3 years. And there is also an internal reshuffling of funds from other activities [ that one ] without, of course, impacting the strategic rollout to accommodate all of our infrastructure investment. On the free cash flow regarding the tax break, the tax benefit of selling the Romanian business will be positive the cash item for 2026. And as I think also you mentioned, part of it or all of it or to the extent that this is required, we found the upcoming spectrum auctions, for which the timing is not exactly clear yet and the process is not open yet. So the organic cash flow would continue to be part of our shareholder remuneration. And the cash item being one-off items, I think it's wise in order to maintain a smooth trajectory of our operational, let's say organic shareholder remuneration to match any other one-off hit that we may have, which in this case is the spectrum. Kostas Nebis: Yes. As far as your question around mobile, first of all, I'm not sure I understood what you mean by coordinated. But anyway, I would only comment on what we have actually done recently or announced to do recently. Just to give you a bit of historical information, we have started updating our contracts about 2 years ago, providing for this indexation clause. This is the practice that we see in quite a lot of European countries. So after having updated all our contracts and renewed our customers, we decided to apply the indexation clause, which is as per last year's inflation. This is the 2.6% that Babis also referred to. This is what we announced for our customers. We try to do it as fairly as possible by providing extra value to our customers. It is true that we have suffered out of inflationary cost pressure for a number of years, have adjusted nothing. And now we are doing that -- we are talking about less than EUR 1, which is going to be backed up with extra value to our customers, gigabytes in order to make it as smooth as possible. And this is it. Unknown Analyst: Okay. My question is regarding if this inflation-linked adjustments has been followed and also from other operators. And if there are changes to these adjustments between the operators, differences, I mean. Charalampos Mazarakis: I cannot -- I do not know whether [ we have had any recent changes, ] to be honest with you. [ This is not something that I have picked up ]. Operator: The next question is from the line of Kaparis Efstathios with Axia Ventures. Efstathios Kaparis: Congrats on a solid quarter. I've got 2 questions, if I may. So the higher amortization this quarter, what does it relate to? Is it a one-off? Or will it continue in the following quarters? And also on the FTTH rollout. Traditionally, Q4 is a stronger rollout quarter. Would we potentially exceed the 2.1 million target by the end of the year? Do you see an acceleration as you build up know-how on the rollout? Kostas Nebis: Let me start with the question about the FTTH rollout. The answer is no. We do not expect to close the 2.1 million household. That was target since the beginning of the year. So we are more or less running in line with the plan. What we see being accelerated is the customer take-up. And this was the result to a certain extent or to a great extent, I would say, of the new regulation that allows us to stop selling FTTC in FTTH connected buildings. We have seen, first of all, a very strong quarter, which normally the summer months are not performing extremely well as most of the people are taking their summer holidays. We saw a more or less similar quarter in terms of net ads during Q3. And on top of that, what we have seen is a record high net add in both October, but also the pace of November is following the same logic. So what we can confirm is an acceleration in the FTTH net ads. And yes, landing as far as the FTTH rollout is concerned, more or less spot on the 2.1 million households that we're aiming for. Charalampos Mazarakis: Also regarding the depreciation and amortization, this is seasonalization of Q3. As you may have seen, the D&A at the end of the 9 months year-to-date is flat versus a year ago. Operator: The next question is from the line of Rakicevic Sofija with Goldman Sachs. Sofija Rakicevic: So I would just follow up on a question on mobile. When it comes to CPI linkage, I'm just wondering if you have quantified the benefits from it on the top line growth over the next year or 2. And did you say earlier that this will also include some other services as well. I just wanted to check on that. And do you think that mobile could continue to grow in the range of like 2% to 2.5% into 2026? And my second question is on TERNA acquisition. So you have clarified the expected CapEx spend, but I was wondering if you can comment on the rationale of this acquisition. And also, what is the demand for fiber in those areas actually look like? And yes, the last question is how likely in your view is that the new entrants will manage to bundle telecom services with its energy offering. Kostas Nebis: Okay. Let me start with the first question on mobile. First of all, just to say the record straight, mobile has been growing by these levels of 2.5% to 3% for quite some quarters now. The delivery behind -- the levers behind the mobile growth are more than just the CPI. So we have been moving customers, prepaid customers to postpaid. We still have slightly less than 60% of our base on prepaid tariffs moving into higher value postpaid tariffs. This is the biggest driver of our portfolio growth. The second thing is we still have a lot of customers who are not in unlimited mobile data by shifting them to buy more for more initiatives. This is also fueling our growth. The CPI is just a small on top that will contribute to a certain extent, I would say, a small extent into our total growth trajectory going forward. So yes, we expect to see similar trends in the coming months and moving into 2026. But predominantly on the back of pre to post and more for more postpaid customer development. With regards to the effect of the CPI, I think that Babis has already indicated, we are talking about something less than EUR 0.5 -- slightly less than EUR 0.5 and we are talking about 2 million customers. I would like to repeat for 1 more time that this less than EUR 0.5 price adjustment comes with extra gigabytes in order to make it fair towards our customers. Now going to your question about UFBB. I think it is important to highlight the strategic rationale of this initiative. We are talking about roughly 0.5 million households in semi-rural and rural parts of the country in the networks where we have the lion's share of market share, I mean, this is standard for all incumbents. And we also have -- we are also serving 100% out of our copper -- our wholesale customers, meaning both Vodafone and Nova. So there is a lot of value generated out of these networks. We estimated at around EUR 100 million. So us being in a position to preserve this value, first of all. And second, I'll present also a big part of it as a margin as we will not be [ buying ] from someone else, makes this investment a very, very important one. On top of that, what we expect is that since we will be moving customers from copper to fiber space, we will be in a position to also generate some ARPU upside out of this customer migration. And at the end of the day, adding up this nearly 0.5 million to be already committed the FTTH plan, we will end up at 3.5 million households in total at the end of our FTTH rollout plan, which is slightly more than 70% of the country. Now, I mean, on your last question, I mean, I cannot comment about what our competitors intend to do. I mean, this is something that you should be asking them. Operator: The next question is from the line of [ Colas Vasilis ] with [ Padala ] Securities. Unknown Analyst: I have 1 question about group's growth. The growth in adjusted EBITDA after leases has ticked to 2% while EU peers are running with growth rates above 4%. When do you think the growth will be higher following the government initiatives for accelerated FTTH takeup and stronger contribution from TV and Mobile as well? Kostas Nebis: Thanks for the question. We are also anxious to see this 2% stepping higher. I mean, just to remind everybody that we have to reflect a bit on the history. So we started off in 2023, we started off 2023, we landed at 1.2%. EBITDA growth, which moved up to 1.6% in 2024. Now we are just about to close the 2%, and we have provided an outlook of 2%. I mean, to be honest with you, looking into the underlying trends across a number of different fronts, both fixed and mobile as well as ICT, including Pay-TV, for sure, this is making us more optimistic looking into the future and in particular, looking into 2026. Operator: The next question is from the line of Karidis John with Deutsche Bank. John Karidis: I have 2 questions, please. So first of all, the experience across Europe is that when a late entrant comes in with very aggressive prices, it's sort of the second and the third players that blink first. And because they blink, they sort of rope incumbent into a bad situation. So I'd be very grateful if you could explain or share with us how you see the level of competition, particularly from the likes of Nova and Vodafone and how they're reacting to PPC. I note what you said about us asking them, but I just sort of wonder from your perspective, do you feel that these guys are close to sort of blinking? And then secondly, I'm aware that of the 2 other operators that have been around for quite some time, one of them is not rolling out FTTH fast enough. Unfortunately, that's in areas -- sort of key areas where you have quite a lot of customers. And I just sort of wonder at what point do you sort of act in order to save these customers from going elsewhere given that you can't actually migrate them to FTTH as part of the collective wholesale agreement you have with Nova and Vodafone? Kostas Nebis: Thanks for the question, John. First of all, the fact that we have a couple of technologies available, both FTTH, including our infrastructure as well as our wholesale partner infrastructure, but also fixed wireless access is giving us optionality and what we are going to do is to make the most of both technologies in order to accommodate our customers' needs. This is on the second part of your question. So the first part of your question, I mean, I think that I have already presented our strategy. We are pursuing an FMC strategy. So we are trying to provide extra value to our customers by combining a number of different services as compared to just having 1 broadband-only product. This is what is holding us extremely strongly in the market, defending our base but also growing value. We are providing fixed voice, broadband, Pay-TV services on top of that mobile. We have also introduced an extra element through our partnership with [ Metlen ]. We are also providing extra value through a number of different verticals, be it on the delivery, be it on the insurance. So we feel that we have a very compelling proposition that is keeping our customers satisfied, providing a lot of value, hence, being in a position to defend our customer base, but also you can tell from our performance, our momentum going forward. This is what differentiates us in the market has been differentiating us for quite some time now, and we are trying to further strengthen that going forward. John Karidis: I don't know, if I may, sort of follow-ups, if you want to comment at all, but a bunch of clients are simply sort of taking the retail price of the latest entrant and adding it in the retail prices of our Mobile and Pay-TV and they're still coming out with some that's less than the bundle that COSMOTE offers, and that's sort of a cause of concern for them. And then the second thing is, I just sort of wonder, I think regarding my second question, do you feel that you can -- FWA is a good enough alternative in the middle of Athens, potentially sort of where the parliament is and the customers that you have around there. I mean, FWA is good enough for that, too, you think? Kostas Nebis: FWA for us, it's more of a bridge technology. So it is used in order for us to buy time until we manage to roll out FTTH or either us or a wholesale partners. This is how we have been using it. And based on what we have seen so far, I mean, we have more than 40,000 customers on fixed wireless access in less than a year's time, with very impressive NPS, these customers are very happy. So if it works well as a bridging technology, I'm not recommending a fixed wireless access to be used instead of FTTH. But it is helping us to bridge the timing gap until FTTH is available either in our networks or in other networks that our wholesale partners will be building. Operator: [Operator Instructions] Ladies and gentlemen, there are no further questions at this time. I will now turn the conference over to management for any closing comments. Thank you. Kostas Nebis: Thanks a lot for your attention, your questions and your interest in OTE, and we are looking forward to our next discussion, which is in February for our fourth quarter as well as the full year results. Until then, have a nice day. Operator: Ladies and gentlemen, the conference has now concluded, and you may disconnect your telephone. Thank you for calling, and have a good evening.
Operator: Good afternoon, ladies and gentlemen, and welcome to the Tidewater Midstream and Infrastructure Limited and Tidewater Renewables Limited Third Quarter 2025 Financial 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 Ian Quartly, Chief Financial Officer. Please go ahead, sir. Ian Quartly: Thanks, Chloe, and welcome, everyone, to the joint conference call for the third quarter 2025 results of both Tidewater Midstream and Infrastructure Limited and Tidewater Renewables Limited. Joining me today is our CEO, Jeremy Baines, who will provide an update on operations during the quarter. I will follow with the financial results, and then we will open the line for your questions. This morning, both Tidewater Midstream and Tidewater Renewables reported results for the third quarter ended September 30, 2025. A copy of the news releases, financial statements and MD&A may be accessed on SEDAR+ or on their respective company websites. Before we get started, I'd like to note that today's call is being recorded for the benefit of individual shareholders, the media and other interested parties who may want to review the call at a later time. The recorded call will be available through Cision. Some of the comments made today may be forward-looking in nature and are based on Tidewater's current expectations, judgments and projections. Forward-looking statements we express today are subject to risks and uncertainties, which can cause actual results to differ from expectations. Further, some of the information provided refers to non-GAAP measures. To know more about these forward-looking statements, non-GAAP measures and risk factors, please see the company's various financial reports, which are available on their respective company websites and on SEDAR+. I'll now turn the call over to Jeremy. Jeremy Baines: Thanks, Ian, and thanks to everyone for joining us today. During the third quarter, we continued to advance our strategic initiatives, including the acquisition of the Western Pipeline, which successfully closed on September 25. Across our portfolio, we delivered consistent operational performance in our midstream assets and solid financial results at Tidewater Renewables, all while executing planned maintenance and turnarounds to ensure long-term reliability and efficiency. I'll begin with Tidewater Renewables, followed by Tidewater Midstream, covering regulatory and strategic developments, operational performance and maintenance activities and followed by commercial updates. Starting with regulatory developments. On September 5, 2025, the government of Canada announced a $370 million biofuels production incentive program to address the economic challenges caused by U.S. subsidies and policies. The incentive program is expected to provide per liter support for qualifying Canadian producers of renewable diesel and biodiesel from January 2026 through December 2027. With the HDRD complex expected to produce between 150 million and 170 million liters annually during this period, Tidewater Renewables is well positioned to benefit once the program is implemented. In addition, the government of Canada also announced its intention to make targeted amendments to the clean fuel regulations to further support Canada's biofuel sector. We understand the government will develop the amendments in consultation with industry stakeholders this fall, and we are actively planning to participate in this process. Moving to operations at the HDRD complex. Throughput during July and August averaged 2,920 barrels per day or 97% of design capacity prior to the scheduled turnaround in September. The turnaround was originally expected to last 3 weeks, but was extended by 2 weeks due to higher-than-anticipated following in the hydro deoxygenation reactor beds. Following the planned turnaround, there was a 2-week unplanned outage during October due to an equipment anomaly, which was temporarily repaired to resume operations. Throughput has averaged approximately 2,330 barrels per day to date during November with rates expected to return to full capacity in December 2025 after the affected component is reinstalled. Utilizing the learnings from the first 2 years of operations, including insights gained from this turnaround, we have optimized the turnaround schedule to extend the catalyst life to approximately 2.5 years. This means that the next turnaround at the HDRD complex is planned for the spring of 2028, which allows us to maximize production during 2026 and 2027, while the biofuels production incentive program is in place. And lastly, for renewables, a few comments on commercial progress. We have significantly increased our contracted offtakes, which now cover 100% of forecasted renewable diesel production for the remainder of 2025. This compares to 70% of forecasted production for the second half of 2025 as disclosed in Q2. Looking ahead to 2026, over 80% of forecasted renewable diesel production is expected to be directed toward renewable diesel sales inclusive of environmental attributes. All of these sales are structured with U.S. import parity pricing benchmarks aligning pricing of prevailing U.S. market values and reducing our exposure to Canadian emission prices. The remaining volumes are expected to be sold into the spot market where current Canadian pricing remains favorable. Tidewater Midstream regulatory developments and strategic initiatives. Starting with regulatory and strategic developments on November 12, 2025, Tidewater Midstream executed an initiative agreement with the government of British Columbia to provides BC-LCFS credits to support the production of both carbon renewable diesel and renewable gasoline from the hydrotreater coprocessing unit at the Prince George Refinery. These BC-LCFS credits are expected to fund approximately 50% of the cost of renewable feedstocks required to operate the hydrotreater coprocessing unit during 2026 and 2027 at previously achieved rates of 300 barrels per day. In addition, the sale of co-processed, low-carbon transportation fuels into the British Columbia market will generate CFR emission credits and additional BC-LCFS credits for Tidewater Midstream. On the strategic front, we closed the acquisition of the North segment of Pembina's Western Pipeline System on September 25, 2025. Now that the transaction has closed, our immediate focus is on integration activities and having our team take over operations of the pipeline in November. Once that occurs, we expect to be able to start realizing the expected operational synergies and the $10 million to $15 million of anticipated annual cost savings we announced previously. We also continue to advance our noncore asset sales program. On October 21, the Sylvan Lake gas processing facility was sold for cash proceeds of $5.5 million. We continue to work on further divestiture opportunities, including growing market interest in repurposing energy sites for data center development. We look forward to updating the market as discussions progress. Next, let's turn to the operations at the Prince George Refinery. Throughput at the Prince George Refinery averaged 10,313 barrels per day in the third quarter of 2025, a 4% increase from Q2 2025, though lower than Q3 2024 due to differences in feedstock composition and operational adjustments. The semiannual heat exchanger cleaning was completed in early October, and throughput levels have since normalized to approximately 12,200 barrels per day. As part of our ongoing maintenance optimization strategy, we have transitioned PGR to a 5-year turnaround cycle with the next major turnaround plan for the second quarter of 2028. While refined product margins remained under pressure during the third quarter driven by wider wholesale discounts and an oversupply of diesel in Western Canada stemming from U.S. renewable diesel imports and elevated regional refinery utilization, we are encouraged by the stronger crack spreads observed recently. Prince George crack spread averaged $90 during the third quarter, which increased to 93% for October and has been over $100 during November. These improving market conditions are expected to contribute to better realized margins in Q4 and into 2026. Now I'll move on to our broader midstream operations. At the BRC gas processing facility, throughput averaged 124 million cubic feet per day in the third quarter, up from 95 million cubic feet per day in the second quarter of 2025. As disclosed last quarter, the increase was expected following the repair work completed at Plant 3 in late June. Ram River gas plant remains temporarily curtailed. We have experienced record low natural gas prices during the third quarter and operations have not yet presumed. Once we see natural gas market conditions improve on a substantial sustained basis, combined with the more supportive sulfur markets we are experiencing, Ram River is expected to return to prior throughput levels, enhancing overall midstream gas processing capacity. Commodity markets in Western Canada remain challenging with low AECO spot prices leading to selective shut-ins. However, we remain optimistic longer term as LNG Canada and other export projects ramp up, supporting higher forward AECO prices and renewed demand for processing capacity. Looking ahead, we remain focused on driving operational excellence, enhancing margins and executing strategic initiatives, including maximizing efficiency at PGR and HDRD complex, strengthening commercial platforms and offtakes, advancing our SAF project while managing capital prudently, progressing noncore asset sales to unlock liquidity and continuing to advocate for a fair regulatory environment. We believe these building blocks position us for both revenue growth and margin expansion during the remainder of 2025 and beyond, ensuring we continue to deliver value for shareholders while advancing our long-term strategy. With that, I'll now turn it to Ian for the financial review. Ian Quartly: Thanks, Jeremy. I'll begin with Tidewater Renewables financial results, and then we'll discuss Tidewater Midstream's consolidated financial results. Tidewater Renewables reported a net loss of $1 million during the third quarter of 2025 compared to net income of $13 million for the second quarter of 2025. The decrease in net income is primarily due to 2 noncash items, the first being a significantly smaller unrealized gain on soybean oil derivative contracts in the current period and the second being a loss on the warrant liability revaluation, which resulted from the significant increase to Tidewater Renewables share price during the third quarter of 2025. Adjusted EBITDA was $16.5 million for the third quarter of 2025, a 54% increase over the second quarter of 2025, primarily due to higher player contributions from the equity investment, which totaled $7.9 million during the third quarter. As Jeremy mentioned previously, we continue to have success selling renewable diesel, inclusive of all the environmental attributes, which we call R100. There are a number of significant advantages to this commercial structure compared to selling the emissions credits separately, which I want to quickly highlight. The first benefit is that R100 sales result in faster cash collection and reduced working capital, as the total cash proceeds from the sale of the diesel and all the environmental attributes are received within a week or 2 of the physical sale. The second benefit is that R100 is priced of highly liquid and observable U.S. benchmark prices. In the future, we may hedge a portion of contracted R100 sales and the corresponding feedstock purchases to effectively lock in the gross margin on contracted sales. And the third benefit is that our customers are used to purchasing under this commercial structure as it mirrors how they purchase the import alternative. As a result, Tidewater Renewables expects to sell over 80% of forecasted 2026 production is R100. Turning to Tidewater Midstream. The third quarter consolidated net loss attributable to shareholders was $34.1 million compared to a consolidated net loss attributable to shareholders of $16.3 million for the second quarter of 2025. The increase in net loss is primarily due to the unrealized gain on derivative contracts that was recognized in the comparative period. Consolidated adjusted EBITDA was $16.2 million for the third quarter of 2025, consistent with the $16 million reported in the second quarter of 2025. A higher contribution from the equity investment in the third quarter was offset by lower midstream margins resulting from the historically low AECO pricing and higher corporate costs. On September 30, 2025, with the support of our syndicated lenders, the Tidewater Midstream senior credit facility was amended to waive the requirements to comply with the quarterly financial covenants at September 30, 2025 and December 31, 2025. The amendments provide Tidewater Midstream with added flexibility as we continue to execute ongoing strategic initiatives. And finally, on August 28, 2025, following the special resolution approved by the Tidewater Midstream shareholders at the May 27, 2025 Annual and Special Meeting, Tidewater Midstream completed a share consolidation on a 20-for-1 basis. Proportionate adjustments were also made to the conversion price of the corporation's outstanding convertible unsecured debentures as well as the corporation's LTIP plans. That concludes our prepared remarks. Chloe, please operate the line for questions. Operator: [Operator Instructions] Our first question comes from the line of Rob Hope from Scotiabank. Robert Hope: Maybe on the $370 million biofuels program incentive, how have discussions with stakeholders progressed on that? When could we see some additional clarity on that? And is the expectation that it will be in place for Jan '26? Jeremy Baines: Yes. So we are waiting for the final release of the details, but they have clearly stated it will be in place for January 1, 2026. We expect to hear late this year or early in the new year, but government seems very committed to this, and they announced it in the fall economic statement a year ago. And then with the announcement by the Prime Minister, it's all moving ahead. There are -- we are waiting for final details of exactly how it works, but it looks like it's going to be a very good support for the Canadian renewable diesel industry. Robert Hope: And would you be willing to give an estimate of just assuming it is laid out as planned, how much of a benefit it will be in '26 for LCFS? Jeremy Baines: Yes. We're not 100% -- we haven't seen the final rules and regulations, so we don't know exactly what's included or what's not included. But based on us back calculating into the potential liters of production of renewable diesel and biodiesel that we see that could be in place for this program, our best estimate is it somewhere between $0.15 and $0.21 on per liter. Operator: [Operator Instructions] Our next question comes from the line of Maurice Choy from RBC Capital Markets. Maurice Choy: Sort of come back to the PGR move to a 5-year turnaround cycle from 4 years previously. Can you speak to that position as well as if there is a trade-off in terms of utilization rate? For example, do you need to run at a lower rate in order to have a longer turnaround cycle. And just more broadly, I think you mentioned in the MD&A that 5 years is well within the industry norms. What was the reason why it was 4 years in the past? Jeremy Baines: Yes, it's a good question. Thanks for the question. It's hard for me to speak to a lot of the past practices. But with advances that are being made in catalyst technology and industry advances. We always are monitoring the performance of these things. And we've seen at many other refineries go to these 5-plus year turnaround cycles, and we've been doing a very heavy risk sort of evaluated determination of is this appropriate for us. We think we can go all the way without seeing impacts to throughput and yield. So obviously, we're going to monitor performance. We always monitor the performance of our catalysts and so forth as we go, and there's a couple of sort of call it, critical spare pieces of equipment based on what we saw last turnaround that we might look to put on hand just to make sure that if something on that front went wrong, we could quickly address it. So we're very confident that we've done the right risk-based approach that we can make it without impacting throughput yield and that we -- obviously, this extends the -- lowers our maintenance CapEx at the refinery almost 20% over a 5-year cycle. So it's what was previously a 4-year cycle. So it's very meaningful. It is industry -- pretty much industry standard, and we are managing it appropriately. Maurice Choy: I understand. Maybe as a quick follow-up. So I guess, Jeremy, you're coming up to your 2 years as CEO here. And I wonder whether or not like comments about the past management. Anything that you are now seeing that it's worth changing in terms of whether it's turnaround, whether that's culture, whether it's people, anything of that sort that you want to tackle in your third year? Jeremy Baines: Yes. I mean we've already made a significant amount of changes around people. I believe we made a lot of changes around culture, and we're focusing on -- it's continuing to move that focus on real cash flow generation and efficient and reliable operations at our facilities, making sure we're doing the appropriate risk things and coring up our assets to make sure that all the assets are actually generating an appropriate return or that we're turning them into cash. So it continues. We've done -- when you start looking at the long list of changes we've made in, I guess, it's almost 2 years, maybe call it, whatever, 19 or 20 months that we're at now. It's a continuation of that program. There were a lot of things that needed to be changed, and we've made a lot of progress, and we're going to continue that path. Maurice Choy: Understood. And if I could finish off with -- I think, Ian, you made a comment about the benefits of selling your production as R100. Can I ask what was the obstacle from selling this as R100 in the past that perhaps has changed to allow you to do so now? Or was it a strategy decision not to do so in the past? Ian Quartly: Yes, Maurice. The reason we didn't previously sell R100 is we had the contract with Tidewater Midstream to sell essentially all the LCFS credits produced from July 2024 to March 2025 under the transaction that was completed kind of mid-2024. So we couldn't produce a fully loaded barrel. So that ended in April, and we essentially transitioned to R100 sales from that point forward. Jeremy Baines: And just one other piece, I guess, to add to Ian. The change in the long Canadian renewable mandate made it a little bit easier to do that as well. But it's been -- it's extremely helpful to the business and to keep sustainable reliable cash flow throughout the year with a quick cash level. Operator: There are no questions at this time. I would now like to turn the conference back to Mr. Quartly. Please go ahead. Ian Quartly: Thanks, everyone, for joining the call. The team is available to address any outstanding items with our contact information at the bottom of each company's press release. Thank you. Operator: This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a wonderful day.
Operator: Good morning, ladies and gentlemen, and welcome to the FrontView REIT's Q3 2025 Earnings Call. [Operator Instructions] This call is being recorded on Thursday, November 13, 2025. I would now like to turn the conference over to Mr. Pierre Revol, Chief Financial Officer. Please go ahead, sir. Pierre Revol: Thank you, operator, and thank you, everyone, for joining us for FrontView's third quarter 2025 earnings call. I will be joined on the call by Steve Preston, Chairman and CEO. Drew Ireland, our Chief Operating Officer, will be available for Q&A. Before we get started, I would like to remind everyone that this presentation contains forward-looking statements. Although we believe these forward-looking statements are based on reasonable assumptions, they are subject to known and unknown risks and uncertainties that can cause actual results to differ materially from those currently anticipated due to a number of factors. I refer you to the safe harbor statement in our most recent filings with the SEC for a detailed discussion of the risk factors relating to these forward-looking statements. This presentation also contains certain non-GAAP financial metrics. Reconciliation of non-GAAP financial metrics to the most directly comparable GAAP metrics are included in the exhibits furnished to the SEC under Form 8-K, which include our earnings release, supplemental package and investor presentation. We have also furnished a press release and 8-K for the $75 million delayed-draw convertible preferred equity investment. These materials are available on the Investor Relations page of our company's website. With that, I'm now pleased to introduce Steve Preston. Steve? Stephen Preston: Great. Thank you, Pierre, and good morning, everyone. I'm very pleased to talk about our third quarter today as it marks a powerful, transformative quarter for the company. As a reminder, our portfolio is built around smaller, highly fungible net lease assets, typically located in front of major retail nodes across the country. This real estate positioning gives our tenants visibility, traffic and staying power, which is why we emphasize frontage. The format of these properties makes them easier to recycle, re-tenant or reposition quickly. And that flexibility is an important part of our strategy. Our tenant base is broad and generally necessity and service-oriented, allowing for consistent demand through the phases of economic cycles. Today we have 323 leases, with the top 10 contributing just 24% of ABR; our top 60 at 74% of ABR; and our largest tenant at only 3.6% of ABR. That diversification is a real strength. Just as important, this approach is unique in the public REIT market as few peers are focused on small format, necessity-driven retail and service tenancies. FrontView has now been public for just over 1 year. Over these last 12 months, we have experienced and worked through a number of circumstances that have made FrontView a stronger company today. To highlight, we have optimized our portfolio. We have an effective C-suite with industry-leading talent. We have been intelligent stewards of capital. We have kept a low-levered balance sheet with ample liquidity. We have demonstrated the value, fungibility and desirability of our frontage assets. We have focused on operational excellence to support increased AFFO per share guidance, all while recycling assets. We have thoroughly revamped our external materials, including our investor presentation, supplemental and website. We have shown through dispositions that there is currently a significant dislocation in our share price relative to NAV. We have maintained a conservative dividend payout ratio. And finally, we have carefully tailored a perpetual preferred equity investment to have capital in place to accretively grow throughout 2026. I am excited for what lies ahead for FrontView as a public company. During the third quarter, we acquired 3 properties for approximately $15.8 million at an average cap rate of 7.5% with a weighted average remaining lease term of approximately 11 years. From an industry perspective, we continue to add diversification, adding financial, fitness and discount retail uses. There were several acquisitions planned for the third quarter that shifted into the fourth quarter as reflected in our guidance. The acquisition market remains very open to FrontView with our competitive advantages in tow. So our timing in securing this accretive capital is particularly well suited to continue to take advantage of our buy-side opportunities within the marketplace. In terms of property dispositions, we sold 15 properties for $32.9 million during the quarter. 13 were occupied properties, generating proceeds of $30.1 million at an average cash cap rate of approximately 6.78%. These properties have an average weighted lease term of 8 years. Our current target dispositions are assets with lower walls and/or less optimal concepts. For example, through our recent dispositions, we have eliminated all portfolio exposure to the following concepts: Ruby Tuesday, Red Lobster, Bob Evans, Red Robin, Freddy's, Denny's, Dairy Queen, Hardee's, Cafe Rio and [ Rogers ]. Although these concepts are household names, national or regional tenants that were rent-paying, we are focused on optimizing the portfolio by disposing of concepts that we think are or could become under pressure in the future. These asset sales demonstrate the continued desirability and liquidity of our real estate assets and highlight the meaningful spread between our stock's implied cap rate of approximately 9% and where our assets are transacting in the market, where our peers' implied cap rates are, both of which approximately 6.75%. Looking at net investment levels, we were again net sellers this quarter and our debt to annualized adjusted EBITDAre fell to 5.3x with an LTV below 35%, leaving the company's balance sheet profile and liquidity in fantastic shape. Turning to the portfolio. We closed the quarter with occupancy north of 98% and just 6 vacant assets, an improvement from last quarter. We have resolved the 12 previous reported troubled assets with 10 either sold or leased and 1 under contract to sell, with an overall recovery rate of approximately 85% for these 11 assets. Additionally, as has been broadly highlighted in the media, Tricolor's alleged fraud impacted several large financial institutions with losses in the hundreds of millions. We had 1 Tricolor property, and we have already received multiple offers to buy and multiple offers to lease the property. And based upon these prospects, we are confident we will have an excellent outcome with minimal downtime and affirmation of our frontage-based strategy. Our assets are located in high-visibility, high-traffic corridors, properties that attract a diverse mix of users. That allows us when necessary to re-tenant, repurpose or sell efficiently to unlock value. As we've optimized the portfolio, what remains is a higher-quality, better-tenanted portfolio with stronger concepts. As a result, we don't see any material additions to our watch list at this point. And to be clear, we see bad debt in the approximately 50 basis point range for 2026, more in line with historical averages. Simply put, this is what disciplined capital allocation and active portfolio management look like: a stronger, higher-quality platform positioned for sustainable growth, resulting in us raising our earnings guidance for the year. On the capital side, last night, we announced a $75 million convertible preferred equity investment. This is a bespoke instrument that we spent a considerable amount of time negotiating over the last couple of months. Pierre will provide more of the details on specifics. But from a bigger picture strategy standpoint, this security is unique in its simplicity with generally superior terms to that of comparable instruments. One, we anticipate the pref will fund our 2026 net acquisitions. Two, the capital is accretive when deployed. Three, we can draw down capital in tranches over time as we acquire assets, without paying any penalties or expensive carrying costs. Four, the transaction costs are well below market. Five, after 2 years, we have the ability to force-convert the pref to equity at a $17 conversion rate if the shares are trading at a 17.5% premium. Six, the security is open for repayment after 3 years at par. Seven, there are no make-whole provisions. And finally, there are no onerous governance requirements. This capital raise was led by Maewyn Capital Partners and its founder, Charles Fitzgerald. Charles has nearly 3 decades of public markets investing experience, including founding V3 Capital and co-managing REIT portfolios at High Rise and JPMorgan. Charles is joining our Board as part of this investment. Maewyn also owns just under 1 million shares of common stock, roughly 3.4% of the fully diluted shares. That alignment with both common and preferred capital at work, at the level of discipline and capital allocation focus, that should benefit all shareholders. To wrap up, I believe that FrontView is stronger today than at any point since our IPO. We have a portfolio with flexibility, a top-tier management team with deep industry experience and a balance sheet that positions us for growth. Our goal is straightforward: to continue to build a best-in-class net lease REIT that can grow faster, allocate capital smarter and maximize shareholder returns. Today's valuation gives investors an opportunity to invest in our company at a price well below today's standalone asset values. And certainly, the valuation does not properly reflect the quality of what we've built or the growth and opportunity ahead. With that, I'll turn the call to Pierre to go through the quarterly numbers and guidance. Pierre? Pierre Revol: Thank you, Steve. As part of this quarter's release, we introduced several enhanced disclosures within our investor presentation designed to give investors deeper insight into the quality and productivity of our real estate. These include detailed disclosures of our assets across the top 100 MSAs, Placer.ai visitation rankings highlighting property productivity and historical recapture performance. We have also refreshed our company website to include a portfolio-level page to view 100% of the concepts by city and state, underscoring the visibility and quality of our footprint. Turning to the quarter. Annualized base rent was $61.3 million as of September 30, compared to $63.2 million at June 30. The decrease in ABR primarily reflects the company being a net seller of assets during the quarter with $32.9 million of dispositions and $15.7 million of acquisitions. Excluding the Tricolor property, which vacated post quarter, ABR would have been $60.7 million, which serves as a solid baseline for modeling the fourth quarter. Total cash rental income totaled $15.4 million, compared to $15.7 million last quarter, which included $73,000 of variable rent. Our nonreimbursed property cost or slippage was $405,000, slightly better than expectations of $500,000, helped by the dispositions in the quarter. On the expense side, cash G&A was $2.1 million and $6.3 million year-to-date, with no adjustment to our cash G&A guidance of approximately $8.9 million at the midpoint. Quarterly cash interest expense declined by $100,000 sequentially to $4.2 million, driven by a $21.2 million reduction in net debt to $288.9 million. In September and October, we also completed 2 amendments to our credit agreements with both the revolver and the term loan. These amendments removed the 10 basis point SOFR adjustment and improved our pricing grid for LTVs below 35%, producing an expected 15 basis point savings across all our debt upon submission of our Q3 covenant package this week. Additionally, in early September, we hedged an incremental $100 million of 1 month SOFR exposure through March of 2028, further reducing rate volatility. Turning to the balance sheet. Net debt to adjusted EBITDAre reduced by 0.2x to 5.3x. That's the lowest leverage since the IPO, LTV of 33% based on our bank covenants. Our fixed charge coverage ratio remained at 3.3x with 100% of our assets unencumbered. We ended the quarter with $161.1 million of liquidity, including $141.5 million of undrawn revolver capacity and $19.6 million of cash and equivalents. Including the recently closed delayed-draw convertible preferred equity, our total liquidity increases to $236.1 million. As a brief housekeeping note, having passed the 1-year mark since our IPO, FrontView is now shelf eligible. We will be filing the S-3 registration statement shortly, and once accepted, we'll request authorization for a $75 million ATM program. Additionally, we have received Board authorization to repurchase up to $75 million in shares, providing us with flexible tools for future capital markets activity. As Steve mentioned, our announced $75 million convertible preferred equity investment provides long-term growth capital with near-term accretion. This security carries a 6.75% dividend rate and a $17 conversion price, no make-whole penalties and no restricted governance features. This structure allows us to draw capital in tranches as acquisitions close, making each draw cash flow accretive. On a converted basis, the effective cost of equity net of fees is approximately 7.5%. And with modest leverage, our weighted average cost of capital is in the mid to high 6% range. We anticipate using the equity capital to acquire $100 million of assets net of dispositions. Currently, we are making conservative assumptions on the cash cap rates of acquisitions, 7.25%, versus our existing pipeline which ranges from 7.25% to 7.75%. Once the capital is deployed, it will drive 3% annualized AFFO per share accretion, utilizing modest leverage of 25%. This accretive equity positions us to capitalize on a compelling acquisition environment and to deliver sustained AFFO per share growth supported by our nimble scale, access to granular frontage assets and disciplined capital deployment in a fragmented market. Turning to 2025 guidance. For the full year, we expect acquisitions to range between $115 million to $125 million, and dispositions to range between $70 million to $80 million. For the fourth quarter, at the midpoint, this implies $37 million of acquisitions and $17 million dispositions. Our AFFO per share guidance range increased by $0.01 to $1.23 to $1.25. We expect approximately $0.30 in AFFO per share in the fourth quarter. That's primarily a function of timing as the dispositions were more heavily weighted towards September where the acquisitions are anticipated to close towards the end of the year. Looking ahead, when we exit December, our run rate AFFO per share will be slightly above $0.31, including the full impact of acquisitions and dispositions for the third and fourth quarter. And this includes no NOI for a Tricolor asset that Steve discussed earlier. Turning to 2026. With the preferred equity capital secured, we expect approximately $100 million in net acquisitions, driving AFFO per share range of $1.26 to $1.30. This represents 3.2% year-over-year growth at the midpoint compared to $1.24. We believe this acquisition pace is highly achievable and, once fully deployed, will expand our asset base by more than 10%. Our results reflect the power of disciplined execution. Over the past quarter, we've enhanced transparency across our disclosures, strengthened our balance sheet and secured long-term, accretive equity capital all to support sustained earnings and portfolio growth. With a high-quality real estate portfolio and a flexible capital structure, FrontView is positioned to compound AFFO per share growth faster than peers. Our smaller scale is a structural advantage as it allows us to move with precision and capitalize on opportunities in frontage retail real estate where we continue to see strong fundamentals and high demand. With that, I'll turn the call back over to the operator to open it up for Q&A. Operator? Operator: Thank you, Mr. Revol. [Operator Instructions] Your first question comes from Anthony Paolone with JPMorgan. Anthony Paolone: First question relates to 2026. Can you just give us a little bit more on -- you mentioned it sounds like Tricolor is kind of out and maybe it gets backfilled. But also just with 20 lease expirations next year, kind of what's on the organic sort of core portfolio side you have baked into the guide? Pierre Revol: Tony, thanks for the question. Good to hear from you. In terms of the guidance, it's pretty simple. As we exited this year at $0.31 roughly with all the asset dispositions, that annualizes to $1.24. And as mentioned, it doesn't include any income from Tricolor. We do expect to -- hopefully, we'll be able to provide an update, that will be a bit better depending on how the resolution ends up happening. We anticipate 0 equity. We are fully funded with this new capital deployment, and that's really what's primarily driving. In terms of expirations, we're ahead of all of that. And I can let Steve talk about our expirations. Stephen Preston: Yes, sure. Thanks, Pierre. And yes, Tony, we view the expirations historically as a positive. And just remember that we do have quality real estate, it's desirable, it's a fungible portfolio and we maintain excellent diversification. What I would say is that since 2016, some data points, we have had 49 lease expirations, with only 8 expiring, 41 of those renewed to the same tenant, 3 renewed to a different tenant. And that represented about 105% recovery rate, with 5 that have been sold or are working to be sold off. 2 sold, 1 under contract and 2 underway. So we look forward and we see that the renewals are an asset to bolster income based on historicals. Anthony Paolone: Okay. And then just a follow-up is if you can just describe kind of your deal pipeline and where cap rates are trending and just kind of how the pipeline is coming along now that you have the capital. Do you have a lot to spend it on? Stephen Preston: Sure. Great. Yes, good question. Thanks, Tony. Yes, I'd say that the market for us continues to be fluid. We expect cap rates for Q4 to come in similar to Q3, somewhere in that 7.5% cap rate range. I think we've all seen increased institutional interest in net lease, with abundant capital available for acquisitions. And that's really setting a tone for the marketplace. What I would say is, importantly, we typically do not compete against the institutions in our marketplace just due to our property size. So that gives us a bit of that competitive advantage. Now for those smaller buyers, leverage just has opened up a little bit. It is a little bit easier for some of the smaller buyers to obtain lending from community banks, et cetera. But we still see lots of opportunity. We've got a strong pipeline, similar assets that we've acquired along the way. And we certainly can increase the pace of acquisitions at any given time. And just remember, back in Q4, almost about a year ago, with the existing team that we had in place, we acquired a little over $100 million in acquisitions. So we do have that capacity, we do have the team in place, and we do have the relationships to turn on that faucet if we need to. Operator: Your next question comes from John Kilichowski with Wells Fargo. William John Kilichowski: Maybe if we could start back on the guide, you guys provided some helpful color around cap rates and credit loss. Could you talk to maybe what the high end and low end for the guide represents on each of those metrics. And if there's any other color you could give around what helps formulate your guide? Pierre Revol: Sure, John. Good to hear from you. So in terms of the low end at $1.26, it's really about the timing of the deployment of the capital. So we are -- we set an investment guidance of $100 million next year, and it really depends on how quickly we deploy it. We do have some dispositions as well in our guidance next year and so we'll continue to do some asset recycling. But on the low end, the way to think about a $0.31 run rate, $1.24, we do think that this is accretive at least $0.02. I feel very comfortable at $1.26 even if we deploy the capital a little bit later. On the high end, what will really drive that is a little bit of favorable resolutions on any sort of credit issues and earlier acquisitions, higher cap rates. And that would be the predominant drivers between the low and high end. William John Kilichowski: Okay. Very helpful. And then maybe if we could just jump to the preferred. It looks like great execution here. Just kind of curious if you can give some color on the relationship with Maewyn, how you got to this number? I think the Street would have guessed something a little bit higher, so great job on your part. But just curious how you got to these terms and what the relationship was that get you here? Pierre Revol: Sure. So we've known Maewyn and Charles Fitzgerald for a while. He's been an investor and a good partner since the beginning, since the IPO. I've worked with Charles prior when I was at Spirit so I knew him from that point as well. We sat with him, we met with them multiple times and we were discussing price and cap rates. And ultimately, just to steal a line from one of our colleagues, Shankh Mitra, he said "We're in early stages of a long journey of delivering compounding per share cash flow growth for our existing shareholders. And that's our North Star." Now I'd agree with this statement and I think that is what we're trying to do here. We're trying to create a vehicle to get us back to growth. This is accretive per share capital growth that we think will drive a higher valuation. He understood that. He thinks that with this portfolio, that he completely underwrote and he completely understood our business plan and was extremely supported of giving us this capital and understanding that, at $17, it was very attractive for him as an equity capital. And for us, it made sense to issue it, so we're fully funded and we can get back to growth. Because given our size, which I do believe is a structural advantage in net lease, especially when you consider that 98% of net lease market cap is trading above NAV, having a small size allows us to deliver faster growth than all of our peers. We just have to get there, and I believe this is the first key step to do it. Operator: Your next question comes from Jana Galan with Bank of America. Jana Galan: Congrats on a nice quarter. Thinking about the dispositions you made this year, you kind of leaned away from casual dining, just curious on that 50 bps of bad debt in 2026. Could it potentially be better than that given that the portfolio composition is different than the historical? Stephen Preston: Yes. No, I think that's a good question. And I think we feel like that's a conservative measure at this point. And selling off the concepts that we mentioned before really did help to optimize the portfolio. And we're going to continue to optimize the portfolio with select dispositions moving into 2026. Jana Galan: And then maybe just more color on what categories that you're looking to expand in. You mentioned kind of this quarter: financial, fitness and discount. Stephen Preston: Yes. No, I mean, it's -- we still like the same type of industries that we've been buying in. We like medical, we like financial, we like automotive service. We don't have any veterinarian. We look closely at acquiring or adding that as a concept. I think fitness seems to be strong. Fitness is back to COVID -- or pre-COVID levels. Class concepts getting added to some of the larger formats has been taken on well. And then certainly, QSR, we still like that. I mean Taco Bell still has -- their sales are up with traffic, notwithstanding the consumer. And just a little bit of fast casual. So similar industries as we continue to go. We're going to be careful with pharmacy, careful with car wash. And certainly certain restaurants, as you've noticed, and concepts that are a little bit tired. And certainly, of course, small franchisee credit. Operator: Your next question comes from Ronald Kamdem with Morgan Stanley. Ronald Kamdem: Just a quick follow-up on the pipeline. Maybe just talk through sort of, whether it's WALT or escalators, how you're thinking about those assets? And then the 40 basis points escalator on the acquisition, which I know is small, just what happened there? Stephen Preston: Yes. No, I think the 40 basis points was just a timing. We had some assets that got pushed. The bulk of them got pushed into Q4. And I think when you see Q3 come together with Q4, you'll be a little bit more normalized with our typically 1% to 2% escalators, of course. When we're acquiring assets, having escalators built in is a key component. So focusing on longer-term WALT, we continue to build our weighted average lease term. And then also to continue to have those embedded rent bumps are, of course, critical to our acquisition criteria. Ronald Kamdem: And then my quick follow-up on the pref. Just can you remind us where that gets to in '26, just what that level of debt-to-EBITDA that ends up getting you to, if you include that? Pierre Revol: So as we ended this quarter, I thought one of the key priorities for us was to enter the end of this year at a very low leverage point. So at 5.3x, to me that's a very productive print, along with being able to increase our acquisition -- increase our AFFO per share guidance. When we think about using the pref, which I do view as equity, and it's 100% equity from how our accountants treat it, it's going to effectively lower our leverage because we're going to be funding it at a bit lower rate than the 60-40, and more like 25-75. Now we do have some acquisitions baked in, in the back half this year in terms of the guidance. So we do expect leverage to tick up into the fourth quarter. But after that, it will stay well below 6% all of next year. Operator: Your next question comes from Daniel Guglielmo with Capital One Securities. Daniel Guglielmo: Although you've been in a bit of a holding pattern on acquisitions, I know you remain engaged with the brokers across the country. So over these past few quarters, which states or regions have you seen kind of these frontage outparcel properties that you focus on come up for sale? Is there anything of note there? Stephen Preston: Yes. No, I don't think there's anything state specific from the marketplace. I think we're going to continue to target strong-growth states. We're going to probably start to maybe reduce exposure just because we have a little bit more of that to Illinois. But the general marketplace, there's general opportunity really across the space and across states. I wouldn't think it's really anything state specific. I think it will generally follow, call it, that same progression of assets that we've acquired throughout the portfolio. Daniel Guglielmo: Great. And then you touched on it in an earlier question, but the portfolio occupancy has improved kind of sequentially over the last 3 quarters. Can you just talk about, are there any kind of industry mixes where you've seen something new this quarter? Maybe areas where Drew and team are spending more time with tenants to understand their needs and consumer patterns? Stephen Preston: Yes. I'd say that by optimizing the portfolio and taking out some of those concepts that we mentioned earlier, I think that certainly helped the way that we look at the portfolio going forward. And that 50 basis points isn't a ton of action at the end of the day. So the good news is, and we'll keep the fingers crossed, but we seem to be a little bit quiet there right now, and we hope that continues. Operator: There are no further questions on the phone lines. I will turn it back to Mr. Steve Preston for some closing remarks. Stephen Preston: Great. Thank you, and thank you all for joining. We look forward to continuing to add value for the shareholders. And we hope to see you all at NAREIT in December or at our upcoming NDR with BofA. Thank you again for your time, and please be safe. 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: Ladies and gentlemen, welcome to the Aareal Bank 9 Months 2025 Investor and Analyst Conference Call. I'm 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 Jurgen Junginger. Please go ahead, sir. Jürgen Junginger: Good morning, everybody. I'm pleased to welcome you to our today's conference call. The agenda covers our results for the first 9 months of 2025 together with an outlook for the full year. I'm joined by our CEO, Dr. Christian Ricken; and our CFO, Andy Halford. They will take you through our presentation, which will be followed by a question-and-answer session. Now I'm pleased to hand over to Christian. Christian Ricken: Yes. Many thanks, Jurgen. Good morning to everyone, and thank you all for attending today's call. I'm very pleased to present our results for the first 9 months of 2025. The good developments we reported for the first half continued in the third quarter. Adjusted operating profit for the first 9 months of 2025 is up by 15% compared to the same period last year. Therefore, we are confirming the outlook for 2025. The economic and geopolitical environment remains challenging, but as always, we are, of course, taking a very conservative approach to risk. I would like to highlight some key features in the good results we are reporting today. Net interest income is stabilizing and in line with expectations, reflecting lower market interest rates, while loan impairment charges are markedly down on last year's first 9 months. In addition, admin expenses benefit from the ongoing tight controls that we have put in place. In the Structured Property Financing segment, we recorded good margins and conservative loan-to-value ratios on newly acquired business. Overall, we achieved EUR 8.5 billion of new business in the first 9 months of the year, which is substantially ahead of the same period in 2024. Our capital and liquidity ratios are very robust, and the 2025 funding plan has already been executed. We also strengthened housing industry deposits, which reached an average of EUR 14.2 billion in the third quarter. I will now hand over to Andy, who will provide further details on the results for the first 9 months of 2025. Andy, over to you. Andrew Halford: Thank you, Christian. Turning to Slide 5. Aareal continued its good progress throughout the first 9 months of 2025, as Christian has just referred to. Whilst net interest income is down by 13% to EUR 691 million, this is entirely as we expected. I'll say a bit more about net interest income when we turn to the next slide. Loan impairment charges are down by 34% to EUR 190 million. This is a significant decrease when compared to 2024's first 9 months and reflects the work we have done and continue to do in carefully managing the loan portfolio. The cost measures, which we have put in place have led to a reduction of 8% in adjusted administrative expenses, which are down to EUR 229 million for the 9-month period. The other components line includes a EUR 20 million positive one-off from Q2, which came from the successful restructuring of a former legacy nonperforming loan. So overall, adjusted operating profit of EUR 306 million is up by 15% over the same period last year. The effective tax rate for the 9-month period was 27%. AT1 costs are up by EUR 8 million compared to the first 9 months of 2024, but most of this increase is because our new AT1 issue overlapped with the previous AT1 for about 3 months. Taken together, the adjusted return on equity was 8% compared to 7.6% in the first 9 months of last year. In addition, our robust CET1 ratio fully phased increased to 15.5% at the end of September from 15.2% at the end of last year. Now let's take a look at Slide 6 and at the key profit and loss account elements. Net interest income, as I mentioned, is down by 13%. This is in line with expectations and reflects a significant decline in most European interest rates compared with the first 9 months of 2024. There are 2 other important contributing factors, namely the interest effects of proactively strengthening our Tier 2 and senior non-preferred funding positions over the last 12 months. And secondly, foreign exchange rates with the euro strengthening against other currencies, notably the dollar in the second and third quarters of 2025. In the second chart on this slide, we've shown the stepped effects on the net interest income of the main factors driving change between this year's first 9 months and the comparable period in 2024. An increase in our loan book margins added around EUR 16 million, whilst the effect of lower interest rates in our Banking & Digital Solutions segment reduced net interest income by EUR 23 million. Returns on treasury assets declined as a consequence of lower market interest rates and led to a reduction of EUR 68 million, whilst the strengthening of subordinated funding, which I've just mentioned, explains a further EUR 18 million reduction. Turning to admin expenses on Slide 7. They continue to be tightly controlled, and we are benefiting from the efficiency measures that we have put in place. Our adjusted administrative expenses are down 8%. This excludes one-off charges of EUR 25 million in the first 9 months compared to EUR 5 million in the same period in 2024. Our cost-income ratio for the first 9 months of 2025 was 32%. Let's now turn to risk provisioning. The loan impairment charge is down 34% to EUR 190 million. Impairment charges on non-U.S. portfolio are running significantly below long-term averages. Provisions on the U.S. office portfolio continue to be the majority of the charge. Management overlays stood at EUR 14 million at the end of September compared to EUR 17 million at the end of June. The remaining management overlay relates to the U.S. office market. I'd now like to hand back to Christian, who will talk about business developments in more detail. Christian Ricken: Yes. Thank you, Andy. Now let's turn to new business on Slide 9. We achieved a strong EUR 8.5 billion of new business in the first 9 months, and we are well on our way to meeting our outlook of EUR 9 billion to EUR 10 billion of new business this year. Looking at the geographical distribution of new business in the first 9 months of 2025. 3/4, 74% was in Europe; 22% in North America, which includes Canada; and 4% in the Asia Pacific region. Around 1/4 of the North American new business originates from Canada. As planned, we reduced activity in the U.S., concentrating on premium assets and long-standing trusted partners. Our strategy on asset classes has also evolved. Hotel finance continues to be our largest area of new business; however, we are currently taking a more selective approach to new office financings while maintaining our increasing conservative financing of logistics and retail properties. The average loan-to-value ratio for newly acquired business in the first 9 months was a conservative 56%, which provides a comfortable risk buffer. Margins were also good, averaging 245 basis points. These figures continue to demonstrate that we are actively identifying attractive market opportunities. Let's now turn to the next slide, which shows our current portfolio. The portfolio, as shown on Slide 10, totaled EUR 32.9 billion at the end of September, which is down when expressed in euros; however, a EUR 1.3 billion reduction, clearly more than the net decrease is explained by foreign exchange rate movements. As you can see from the 2 pie charts at the bottom of the slide, we are still broadly diversified both by region and property type. We continue to have a clear focus on properties in the major metropolitan areas. We are not financing new construction and have exposure of only around 9% in Germany and no exposure at all to Russia, China or the Middle East. Green loans stood at EUR 9.5 billion at the end of September. The next slide tracks 2 key performance indicators for our performing portfolio, loan-to-value and yield on debt. Our conservative approach is reflected in the indicators shown on this slide, which are both at very healthy levels. The average loan-to-value ratio for our overall performing portfolio stands at very respectable 56%. At 61%, the loan-to-value ratio for the office asset class continues to improve. I also like to highlight the development of yield on debt, i.e., the ratio of a property's net income to the amount of the loan. This is a key indicator for assessing a property's profitability relative to the financing structure. Yield on debt for the entire performing portfolio is now at 9.8%, up from 9.6% at the end of 2024. Hotels, shopping centers and logistics properties have particularly good yield on debt ratios. The ratio for offices is currently a little lower, but has improved over the last 9 months. Residential with a yield on debt of around 8% is also in a satisfactory position. Let's now turn to nonperforming loans on Slide 12. Our nonperforming loans stand at EUR 1.25 billion. This is down compared to the balance at the end of June and compared to the balance at the end of last year. The coverage ratio remains at 28%. We are continuing very active management of nonperforming loans. The U.S. office market remains challenging and continues to represent around 2/3 of total nonperforming loans. Other asset classes and geographies are operating normally. The nonperforming exposure ratio according to the EBA's methodology stands at 3.5%. Let's now turn to our Banking and Digital Solutions segment on Slide 13, where business with clients from the housing and energy industries have been very encouraging. First Financial Software, our joint venture with Aareon is also successfully attracting new clients. The average deposit volume further strengthened to EUR 14.2 billion in the third quarter. Rental deposits and maintenance reserves have increased yet again, confirming 2 particularly granular and sticky components of the deposit structure. To remind you, deposits come from around 4,000 clients managing more than 9 million units. BDS net interest income for the first 9 months of the year is down 11%, driven by lower market interest rates. We expect net interest income to be around current levels for the rest of the year or better looking at deposit volume development. Now let me hand over to Andy for an update on our funding, liquidity and capital positions. Andrew Halford: Thank you, Christian. Slide 15 shows our broadly diversified funding mix, solid liquidity ratios and capital markets activity. Following a very active funding program, we have executed our full year funding plan and liability terms have been successfully extended. Deposits now total around EUR 18 billion, representing around 45% of our total funding volume. The largest part comes from the housing industry and an additional EUR 3.2 billion is from retail deposits via platforms like [ Horizon. ] These retail deposits have an initial term of at least 2 years. Our liquidity ratios are solid with the net stable funding ratio at 121% at the end of September and average liquidity coverage ratio at 237% for the third quarter. We are also pleased to report that Fitch recently upgraded our outlook to Positive from Stable, whilst affirming its senior preferred rating at BBB+. As I said, our full year funding plan has been executed. We increased our AT1 capital by approximately EUR 100 million by replacing the former outstanding EUR 300 million issue with a new issue of USD 425 million earlier in the year, and we issued EUR 100 million of Tier 2 capital. In addition, we placed Pfandbrief equivalent to around EUR 2.1 billion in total. This included both euro and Swedish krona issues. This was Aareal's first Swedish currency issue since 2006. Next, let's look at our treasury portfolio, which is shown on Slide 16. The treasury portfolio stood at EUR 9.6 billion at the end of September, up from EUR 8.2 billion at the end of 2024. In terms of asset classes, the portfolio comprises public sector borrowers, covered bonds and a very small portion of bank bonds. It, therefore, has a strong liquidity profile. High credit quality requirements are reflected in the ratings breakdown. 100% of the portfolio has an investment-grade rating with 89% having a rating of AA or higher. Asset swap purchases ensure that there is low interest rate risk exposure. The portfolio is almost exclusively in euros and has a well-balanced maturity profile. Turning now to capital on Slide 17. First of all, I'd like to reemphasize that last quarter, we moved from phase-in numbers in the charts on this slide to fully phased Basel IV figures. Now looking at our ratios, they continue to be strong. Our CET1 ratio was up at the end of September and stood at 15.5% on a Basel IV fully phased basis. The increase over the first 9 months of this year is mainly driven by a decrease in risk-weighted assets from the lower lending portfolio caused by foreign exchange rate movements. Both the Tier 1 and total capital ratios were further supported by additions to AT1 and Tier 2 capital during the first 9 months of the year, as I have just mentioned. Our capital ratios are significantly above SREP requirements. Positively, the Pillar 2 requirement for 2026 has been reduced by 25 basis points. And our leverage ratio of 7.1% at the end of September is also well above regulatory requirements. The results of most recent ECB stress test were published in August and demonstrate the strength of our balance sheet. After the end of the third quarter, active management of our balance sheet has been extended to include our first significant risk transfer transaction. Investors have assumed a portion of the credit risk attached to a high-quality EUR 2 billion portfolio of European commercial real estate loans in return for a risk premium. This transaction has strengthened our capital efficiency and freed up equity, which we can invest in attractive new business. We were delighted that the offer was oversubscribed and that we were able to implement the SRT and introduce this efficient tool to our bank management. Now I'll hand back to Christian for an update on our outlook for the year. Christian Ricken: Thank you, Andy. Now let's turn to the 2025 outlook. Our results for the first 9 months of the year are in line with expectations and, therefore, we are confirming the 2025 outlook. We recognize the uncertainties evident in the economic and geopolitical environment and remain vigilant. So let me summarize our outlook. In the Structured Property Financing segment, we aim to expand our credit portfolio to between EUR 34 million and EUR 35 million. Recognizing foreign exchange movements over the course of the year, this might translate to EUR 33 billion and EUR 34 billion. We are targeting between EUR 9 billion and EUR 10 billion of new business. In the Banking and Digital Solutions segment, our conservative estimate of deposits continues to be between EUR 13 billion and EUR 14 billion on an annual average. All in all, we are targeting an adjusted operating profit of between EUR 375 million to EUR 425 million for 2025, excluding expected one-off charges of around EUR 25 million. I would like to thank you all very much for your attention, and Andy and I are now very happy to answer all questions you might have. Thank you very much. Operator: [Operator Instructions] We have a question from Sharada Patel, Citi. Sharada Patel: I have 2. So firstly, on the NPLs this quarter, obviously, they've come down both in the U.S. and Europe. Can you give us some color on what those sort of individual files look like? And then a second more kind of broader question. I see that the new business has picked up in terms of your exposure to the U.S. So what's the appetite to grow in the U.S. like? Obviously, it's well flagged, but a competitor of yours is selling or trying to sort of exit the U.S. business. What would Aareal's perspective on that be? And what's the appetite to grow there? Andrew Halford: Yes. So let me just pick up on the NPLs. As you've seen from the slides, we've got a further reduction in the overall NPL values during the quarter. It's been a big area of focus, as you know, over the last several quarters, and we are pleased to see the overall trend on that coming down further. So we're now at about EUR 1.25 billion. We continue to lean into that. And as quickly as we can economically resolve some of those situations, we will do so. Majority of the nonperforming loans, the vast majority of the nonperforming loans are in the U.S. and particularly in the U.S. office space. So a lot of the workout activity is actually happening in that area. And I think it's sort of worthy of note that actually, if you look at the rest of the world outside of the U.S., the nonperforming loan levels are very, very low and the provisioning, hence, very, very low as well. So the key for us really is working down the U.S. office, particularly, which has come down quite significantly over the last 12 months, and we are continuing to focus heavily on further improving that over the coming quarters. Christian Ricken: Yes. Thank you, Andy. On the U.S., I can only repeat what I said last quarter. So we remain committed to the U.S., but we are significantly more selective as far as new business is concerned, which will result in a recalibration, let's say, of the portfolio size, but also in the portfolio composition as far as asset classes are concerned. So we have a USP in hotel financing, as I have said, maybe that is also then the focus of new business in the U.S. going forward. So no exit is being planned, but new business will be done in a much more selective fashion. Sharada Patel: And would that sort of new business growth be obviously -- clearly, the prime focus is organic, but would you be open to inorganic growth in the U.S.? Christian Ricken: Inorganic growth in the U.S., no. Operator: [Operator Instructions] We have a question from Corinne Cunningham, Autonomous. Corinne Cunningham: Just on the new business side again, can you comment on what you're doing, if anything, in data center lending and maybe describe to us some of the sort of underwriting thought processes there? And then a couple of technical ones. Your Pillar 2 reduced by 25 bps. Are there any other changes to the SREP this time around? And then on the SRT that you were able to undertake, what has -- what pro forma impact does that had on RWAs and capital ratios? And then just a quick follow-up on the U.S. asset quality. I think, not sure, if it was yourself or your competitor was talking about more weakness on the West Coast coming through. Are you able to say anything about the geographic trends on asset quality in the U.S.? Christian Ricken: Yes. Thank you very much. I would take the first and the last one, and then you may comment on the SREP and the SRT impact. Data center, yes, is a new asset class. We have done our first transaction. I think we published the respective press release. So data center financing here in Germany. It's a new and exciting asset class. That's a positive. And there's much more to come in terms of volume, which is also positive. On the other hand, not everybody is jumping on it as it is new and interesting, and the development and construction phases are much shorter than with other property classes. Yes, but given the competition, you have to have a close look on the margin side still. So that's why we have done 1 transaction so far, and we may do more of it, but it may not become a major new asset class in the coming years, but a nice addition. That's how I would phrase it. Then on asset quality in the U.S., yes. So I think that's a common narrative that you have more weakness on the West Coast as compared to the East Coast. If you look at the office sector, for example, in New York, there is a clear and a continuing tendency of people moving back into the offices, which is less pronounced at the West Coast. And also the economic dynamics are taking more place in the, let's say, Sun Belt areas, where you have more business supportive governments, regional governments as compared to the West Coast. So -- and then that is telling you something that the U.S. market is extremely fragmented in terms of regional attractiveness of property class attractiveness. So you really have to have trophy assets in major metropolitan areas with a good economic momentum. And that is the, let's say, art of also selecting new business. And that also, of course, refers to hotel financing and other asset classes. So yes, so it's not 1 market. It's a lot of different markets, which have the currency, the language and the legal system in common, but you have to understand the regional markets and you have to be very selective. On SREP and SRT, please, Andy? Andrew Halford: Yes. I mean, the answer to those, I think, fairly straightforward. There's no particular changes on capital requirement other than the SREP one. If there were, we would have read them out. So that's the primary one. The SRT, we would expect the transaction was booked in Q4. So obviously, the impact will be in Q4 numbers, not in Q3 numbers, but we'd expect roughly EUR 0.5 billion, maybe a fraction over reduction in the RWAs. If you work the math through, that probably gives us 40, 50 basis points uplift on the CET1, something in that range. Corinne Cunningham: Are you able to actually say something on the margin that you're achieving on the data centers in Germany or in general? Christian Ricken: Yes. As I said, margins are tighter than in other asset classes, but we have our very stringent risk return requirements. So we are doing also these transactions selectively if our risk return requirements measured in RAROC are being met. And that is not the case for each and every transaction, and we would not enter into low-margin new business only because it's a new and fancy asset class. Operator: This was the last question. I would like to turn the conference back over to Mr. Junginger for any closing remarks. Jürgen Junginger: Thank you a lot for joining this morning. As always, the IR team is happy to take up follow-up calls if you have further questions. So have a good day, and thank you again for listening. Operator: Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in conference. You may now disconnect your lines. Goodbye.
Operator: Good morning, and thank you for joining the Tetra Tech earnings call. As a reminder, Tetra Tech is also simulcasting this presentation with slides in the Investors section of its website at tetratech.com. This call is being recorded at the request of Tetra Tech and this broadcast is the copyrighted property of Tetra Tech. Any rebroadcast of this information in whole or in part without the prior written permission of Tetra Tech is prohibited. With us today from management are Dan Batrack, Chairman and Chief Executive Officer; Steve Burdick, Chief Financial Officer; and Roger Argus, President. They will provide a brief overview of the results, and we'll then open the call for questions. I would like to direct your attention to the safe harbor statement in today's presentation. Today's discussion contains forward-looking statements about future business and financial expectations. Actual results may differ significantly from these projected in today's forward-looking statements due to various risks and uncertainties, including the risks described in Tetra Tech's periodic reports filed with the SEC. Except as required by law, Tetra Tech undertakes no obligation to update its forward-looking statements. In addition, since management will be presenting some non-GAAP financial measures as references, the appropriate GAAP financial reconciliations are posted in the Investors section of Tetra Tech's website. At this time, I'd like to inform you all that participants are in a listen-only mode. At the request of the company, we will open the conference up for questions and answers after the presentation. With that, I would now like to turn the call over to Dan Batrack. Please go ahead, Mr. Batrack. Dan Batrack: Thank you very much, Melissa, and good morning, and welcome to our fourth quarter and fiscal year 2025 earnings conference call. And I'd like to start this morning with sharing with you that I'm very glad to report that we had an excellent fourth quarter and record financial performance for all of fiscal year 2025. But before I actually get to the numbers, I'd like to take just a moment here at the beginning to discuss how we successfully navigated this extraordinary year and ended up with these record results. By staying focused on our high-end consulting and our leadership in water, we've built an enduring competitive advantage and a long-term client base of trust with our end clients that we work with. Our leading with science approach has provided us with a significant competitive advantage and highly adaptive workforce, long-standing client relationships that have ended up resulting in sustained demand for our services over decades. It is this focus that has allowed us to successfully navigate the recent changes in the U.S. federal government's priorities and emerge with financial records and financial performance for fiscal year 2025. More importantly, as I look into fiscal year 2026 and beyond, I see our high-end water services in higher demand and more critical than ever, the fastest-growing markets in the United States and internationally. Today, Steve Burdick, our Chief Financial Officer, will provide additional details of our financial performance, both in the quarter and the year. And I'd also like to welcome today with us Roger Argus, our newly appointed President here at Tetra Tech who I personally have worked with for over 30 years here at Tetra Tech directly. Obviously, Roger goes back in the market and industry even farther than that. He brings a great understanding of our clients and our business worldwide and he's spearheading some of our highest opportunity growth initiatives that we have in the company today. Roger will provide an update of our water-focused growth markets during this presentation this morning. And now I would like to share with you an update of our financial performance and our business. We had record results for the fourth quarter and for the entirety of fiscal year 2025 with record highs across the board for net revenue, operating income and earnings per share. The fourth quarter results provided us with strong momentum as we exit the fiscal 2025 fiscal year and enter fiscal year 2026. These results are very broad-based, demonstrating the strength across all of our business sectors and our markets globally. We finished fiscal year 2025 with a strong fourth quarter, resulting in record net revenue, record operating income and significant operating margin expansion. We had record net revenue of $1.07 billion, which is up 10% from the prior year. We significantly expanded our margins to the highest level in more than 30 years, which results in our operating income being up 23%, more than double the rate of revenue growth and reaching $168 million for the first time. And finally, the growth rate for earnings per share was even higher, up 29%, reaching $0.44 for the quarter. I'd like to present our performance by our segment or our client segments. The Government Services Group had an excellent year and delivered an extraordinary fourth quarter. In the fourth quarter, our GSG segment revenue grew by 17%, rising to $396 million compared to $338 million last year. GSG segment also set a new record for margin performance at 22.9% or up 330 basis points from the prior year. This performance was driven by strong execution of our water infrastructure and our digital automation work for state and local clients, high utilization across our U.S. operations during the completion of our fire disaster response work, and the reduction in our low-margin USAID work. The Commercial/International Group also delivered a strong fourth quarter and a strong year. Our Commercial/International Group's fourth quarter revenue was up 7% to $676 million, and the CIG or Commercial/International Group's margin, excluding Australia, was up about 60 basis points in the quarter. Now I'd like to provide an overview of our performance by our end customers. In the fourth quarter, international work was about 45% of our overall business and growing at a 9% rate. International organic growth included increases in the United Kingdom's water business and strong growth in our Canadian clean energy practice. In the United States, our state and local markets continue to be very strong with a 19% growth rate driven by municipal water treatment and digital water modernization, especially in the water-stressed regions of Texas, Florida and California. Without the contribution of the disaster work in the quarter, our state and local work was up 13% year-over-year. The U.S. commercial work overall was down slightly. Driven by reductions in renewable energy work, but partially offset by growth in other sectors. Our U.S. commercial work includes some sectors that had extraordinary growth rates in the quarter. For example, our high-voltage transmission work in the United States is rapidly growing due to expanding energy demand, which is often associated with data centers. And finally, our U.S. federal work is now 21% of our business compared to 31% a year ago. This quarter, our federal work was up 22% from the prior year, primarily for work with the U.S. Army Corps of Engineers designing flood protection structures and providing disaster response services. I'd like now to discuss our backlog. We had a strong quarter of contract awards, ending the quarter with $4.14 billion in backlog during a record revenue quarter. As I've stated previously, we use a highly conservative approach to backlog reporting by including only work that is contracted, funded and authorized. The backlog we have today is of higher quality than ever before with higher embedded margins and with a higher portion of fixed price contracts, which gives us even more opportunity for margin expansion. This quarter, we were awarded over $1.2 billion in new contracts with U.S. defense agencies that cover both U.S. domestic and international operations. We announced another great win with United Kingdom for Portsmouth water with a $23 million contract that you can note on the webcast that we have here. And we won 2 new awards for high-voltage transmission work in the United States and Ireland both areas where data centers are driving investments in power generation and transmission. Our U.S. high-voltage transmission practice is now growing their backlog at 120% rate year-on-year here in the U.S. At this point, I'd like to turn the presentation over to our Chief Financial Officer, Steve Burdick to take us through the financials for fiscal year 2025. Steve? Steven Burdick: Thank you, Dan. I'd like to now provide an update of our fiscal 2025 results, working capital, cash flows and capital allocation. But before I dive into these results, I want to point out and remind us all where we started the year. We initiated our 2025 revenue and earnings guidance in line with our longer-term 2030 goals. Now despite having our largest single client cancel hundreds of contracts midway through 2025 and other headwinds that could have knocked out to anybody else, Tetra Tech delivered all-time high revenue in earnings. And because of our high-quality clients and talented project managers across the globe, we generated a record setting cash from operations that approached $0.5 billion. Not only am I proud of our team's ability to execute on our 2025 results, I'm even more positive on our team's ability to execute on our long-term strategy in 2026 and beyond where our market-leading services are focused either directly or as a first derivative to our clients' water investment opportunities. Now as Dan discussed earlier on this call, our market-leading focus on the front-end consulting and design for water and environmental projects are carrying higher margins across all of our end markets. As such, even as the fiscal 2025 revenue was up a solid 7% over last year, our operating income increased at a higher rate of 18% and EBITDA for the year increased 13%. These results for the year further support our long-term strategic goals to increase net revenues while improving EBITDA margins by 50 basis points annually. I do want to point out that, as you can see here, our 2025 EBITDA margins and net revenue came in at a better 14.3%, which is an increase of over 80 basis points for this year as compared to last year. As a result of our ability to enhance our profit margins and further manage our working capital, we were able to increase EPS by 24% over last year to $1.56. Now regarding our working capital. Cash flows generated from operations for fiscal 2025 were $458 million, which represents a 28% improvement over fiscal 2024. And consistent with the last 20 years, these operating cash flows have continued to exceed net income by more than 100%. Our focus on working capital and cash flows has resulted in our DSO reflecting an industry-leading standard of 55.7 days. This lower DSO metric provides significant insight into our core business as it reflects the outstanding work that our project managers lead relative to higher-quality projects and highly satisfied clients in our broad portfolio across all of our end markets and geographies. Our net debt amounted to about $600 million, and our net debt on EBITDA was at a leverage of 0.9x, which is lower than our leverage 1 year ago when it stood at 1.0x. As we continue to execute on high-quality operating results with increasing margins, operating cash flows in excess of net income and lower working capital KPIs, we will continue to provide higher returns for our shareholders. Both higher shareholder financial returns are reflected in an improving return on capital employed which stands at over 20%, which is among the best in the industry. For those following along in the presentation, I would like to now present our capital allocation overview. We have a very strong balance sheet, probably the strongest balance sheet in our history, with well over $1 billion in available liquidity as we have revised our capital structure in the last year to take advantage of the credit market to support our strategic growth opportunities. Now Roger will discuss our strategic growth areas later in this presentation, but I do want to point out that we have a significant amount of liquidity available to invest in organic and acquisitive growth opportunities in order to take advantage of these key business opportunities. These opportunities include the technology and automation, which continues to provide us a dominant position in the market and for acquisitions of technical leaders such as SAGE and Carron & Walsh. Regarding our dividend program, I want to announce that our Board of Directors approved the fourth quarter dividend, which is a 12% increase year-over-year to be paid in the first quarter. This is our 42nd consecutive quarterly dividend with annual double-digit increases in the amounts paid. Based on the lower leverage, we have contributed -- we have continued our stock buyback program this year. In 2025, we bought back a total of $250 million, which includes $50 million in stock buybacks in the fourth quarter. We do have about $598 million available in the stock buyback plan approved by our Board as part of our capital allocation strategy. I'm really pleased to share these financial results for fiscal '25, which has enabled us to increase shareholder returns as we pay -- we're paying increasing dividends, increasing our stock buybacks, engaging in accretive acquisitions, all the while deleveraging our balance sheet. So I want to thank you for your support. And I'll now hand the call over to Roger to discuss Tetra Tech's future opportunities in 2026 and beyond. Roger R. Argus: Thank you, Steve. I'd like to highlight today's major growth drivers that will fuel Tetra Tech's growth in FY '26 and beyond. For those of you following along on the webcast, I'd like to first draw your attention to the center of the slide. Greater than 85% of Tetra Tech's business is providing water services to our clients. Our high-end water services cover the full life cycle of water use from sourcing and management to reuse and treatment. These services also include coastal resilience for flood protection, expansion of ports and harbors, digital automation and control systems to optimize water management and efficient use as well as water for mining, power generation and manufacturing. The drivers shown here represent large global investments in water-reliant infrastructure and share a few common characteristics. These drivers represent a total addressable market for Tetra Tech services measured in hundreds of billions of dollars. Tetra Tech is already performing work in each of these markets, and is well positioned to benefit from these growing investments. In fact, Tetra Tech currently holds that contracts, master service agreements and frameworks with more than $30 billion in capacity to perform these services for our clients. Global investment in each of these markets supports the demand for Tetra Tech's high-end water services and is driving Tetra Tech's growth. In the next 2 slides, I'd like to highlight 2 of the fastest-growing areas and illustrate how Tetra Tech is capitalizing on these trends. First, I'd like to talk about the data center market. Their estimates as high as $1 trillion to be invested over the next 10 years to expand data center processing capacity to address the needs of AI. The water demand for these systems is enormous. A large data center, for example, consumes about 5 million gallons of water per day. This sector's growing water footprint is reshaping how and where communities invest in water-related infrastructure. This slide illustrates that the data center market is not just the building housing the chip stacks. In fact, many data center operators are using in-house template designs for these buildings. More importantly, the data center market includes resource management needs for water and power, which are geographically specific for each facility. Petrotech's high-end water expertise and geographic footprint allow us to address these requirements, which are unique for each data center. As we look at this figure from left to right, first, it's important to note that more than 97% of water used by major data center operators is currently purchased from municipal drinking water systems, many of which are already under stream. Let me provide you with just 1 example of how water demand for data centers is driving growth for Tetra Tech. Just last week, it was announced that Texas will make the largest investment in its water supply in the state's history. Voters approved a proposition authorizing $20 billion to be spent on water systems, including water supply projects to address the growing requirements of data centers. Tetra Tech currently holds more than 60 state and local contracts in Texas. We are already working with these clients, providing our full suite of water services, and we will directly benefit from this new funding. In addition, within the data center itself, Tetra Tech provides water handling, digital control system automation and commissioning services directly to the building operations. In fact, we currently hold contracts with more than a dozen of the major data center hyperscale and colocation operators to provide these services. And ultimately, these facilities require our expertise for water reconditioning for reuse or treatment for disposal. This work will be done through contracts with data center operators or with local municipalities to expand their wastewater management capacity. Defense budgets in each of our major geographic markets is up significantly. The U.S. is up $150 billion, the U.K. is up $4 billion, and Australia is up $4 billion on already large annual budgets. These funding increases will be used to expand defense facilities, including ports and harbors, strengths in coastal resiliency in flood protection and address water contaminants of concern such as PFOS. The expansion of naval facilities is included as a key focus of this funding. This will result in the growth of Tetra Tech's work in ports and harbors, including evaluation, planning and design of marine infrastructure. We currently provide these services to our defense clients in the U.S., U.K. and Australia through contracts with an aggregate available capacity of more than $10 billion of the $30 billion I referred to earlier. I'd like to provide 1 brief example of how Tetra Tech is benefiting from this increased funding. In fiscal year '25, the Australian Department of Defense awarded Tetra Tech a $67 million contract to support infrastructure upgrades to facilities along the Northern shore of Australia. The scope of this contract includes front-end studies, analytics and project management to support governmental, regulatory and community approvals for these critical upgrades, which will ensure safe, secure and resilient operation of these defense facilities. Coastal resiliency work, which includes flood protection to strengthen the facilities and safeguard the lives of military and civilian populations will also receive additional funding. Tetra Tech has long been a leader in flood protection. And in fact, in the fourth quarter, we've been awarded about $1 billion in new contract capacity from the U.S. Army Corps of Engineers. Additionally, these increased defense budgets will provide greater funding to Tetra Tech's ongoing defense contracts to eliminate sources and clean up water contamination related to PFAS and other persistent chemicals in the environment. In the fourth quarter, we were awarded a new $240 million contract with the Navy, which is intended to focus on assessment of contamination in water that enable installations, including PFAS. In summary, we are very excited about the opportunities these growth drivers present and the resulting growth that Tetra Tech can achieve. I will now turn the presentation over to Dan. Dan Batrack: Thank you, Roger. Thank you very much. I'd now like to provide an overview of our outlook for fiscal year 2026 by each of our end customers. Each of our customer sectors have growth drivers relevant to our business, as you've heard from Roger and myself, and I'll start with our international growth. International growth is forecasted to grow at a rate between 5% and 10% in fiscal year 2026, supported by $130 billion in AMP8 program in the United Kingdom. Programs like the $200 billion Canadian infrastructure program has just recently been passed. And in Australia, the spending in preparation for the Olympics that are going to take place in Brisbane. Our U.S. commercial work is forecasted to grow in fiscal year 2026 at a rate between 5% and 10%, supported by water demand for data centers and advanced manufacturing and power-related services to address the U.S. energy demand that is increasing so quickly. Our U.S. state local work is forecasted to grow at a 10% to 15% rate, which is very consistent to what we've seen over the past several years. That's being driven by strong and sustained budgets for municipal water supplies and digital water modernization. And finally, our U.S. federal work is forecasted to grow at a 5% to 10% rate and is expected to ramp up over this range throughout the year as the procurement processes align with the new priorities of the new administration and budget increases are implemented that are associated with the One Big Beautiful Bill Act that's passed just recently. Now I'd like to present our guidance for the first quarter and for the entirety of fiscal year 2026. Our guidance is as follows: for net revenue, for Q1, it's for a range of $950 million to $1 billion with an associated earnings per share of $0.30 to $0.33. For the entirety of fiscal year 2026, our net revenue range is $4.05 billion to $4.25 billion with an associated earnings per share of $1.40 to $1.55. Now if you're following along on the webcast, you can see these assumptions, and I'll highlight them very briefly. It is assumed within this guidance, a charge for intangible amortization of $27 million, we anticipate depreciation of approximately $25 million, interest expense of $30 million, an effective tax rate quite similar to this last year of 27.5%. And does assume that we have 264 million shares of Tetra Tech stock outstanding. And as in the past, these guidance numbers, both for revenue and earnings per share do not include any anticipated contributions for acquisitions, but they will be -- we do expect them to contribute to the year and we'll update our guidance accordingly as they join the company. In summary, we had a record fourth quarter and record fiscal year 2025, which most importantly, has positioned us for an excellent beginning to the 2026 fiscal year. Our focus on high-end consulting for water and environmental priorities is absolutely aligned with the long-term trends of supplying clean water to our communities, water supply for manufacturing and a healthy environment for our children, all of which are enduring drivers and are not measured in years but are measured in decades. The company has never been in a better financial position as Steve Burdick, our CFO, just outlined, and we're in an excellent position to support our organic growth and to invest in having the best partners out in the industry actually come join us here at Tetra Tech actually improving our growth rates, improving our margins and making Tetra Tech even more competitive in the future. And with that, Melissa, I'd like to open up the call for questions. Operator: [Operator Instructions] Our first question comes from the line of Tim Mulrooney with William Blair. Benjamin Luke McFadden: This is Luke McFadden on for Tim. So it looks like your backlog was about flat year-over-year. Your guidance calls for organic growth of 8% at the midpoint for fiscal 2026. Both of these figures exclude USA, so it fuels apples-to-apples. So can you maybe just help us understand in a little more detail why you'd expect revenue growth to be so decoupled from backlog growth this year? Dan Batrack: That's a great question. That's actually a really good question. In fact, we began the foresight and expectation of that decoupling actually in our last investor call 90 days ago. I think in the call we had on the previous quarterly results, we actually indicated that expected backlog to be flat, in fact, even down. And with it coming out flat, in a certain extent, it actually was at the upper end or surpassed our expectations. And if you take a look at the backlog, there's a couple of things going on. Number one, the U.S. federal government's backlog or the funding of their tasks have become much shorter. So instead of being funded for a quarter or for 6 months or for a full year, we're being funded for almost like a book and burn 1 quarter at a time. So we're seeing the visibility actually shrink with the U.S. federal government, but not the actual spending of revenue. We're just getting the work in smaller pieces and more frequent quarterly task orders. I will say that if we actually tracked and reported our backlog similar to most others in this industry, our backlog would be up very, very significantly. It's been an amazing federal government quarter of new orders -- of new contracts that have been awarded. And so our contract capacity has gone up a lot. In fact, we've seen it grow by about 15%. And I think the comments I had earlier that we had well over $1 billion in new contract awards with the Corps of Engineers, although the task orders coming out are much smaller, shorter duration and a quicker burn. Now you think that if that was the case and the rest of our business was static, you'd actually see the backlog go down. But we've seen our state and local work and our U.S. commercial and international backlogs actually growing fast. In fact, they've grown enough to keep our backlog flat sequentially, which is what you've seen in the results, as you've just indicated. So that's why we're actually seeing growth in, as I've just indicated, 5% to 10% in U.S. commercial, in international, 10% to 15% in state and local, all with growing backlog. And in fact, that growing backlog has been enough to offset the reduction in the duration of the task orders we've been getting from the federal government. So that's where you see the decoupling. And it sounds like a lot of detail but it's something we've seen coming since this new administration has been in. We've been watching the backlog drop irrespective of international development with the federal government, but it doesn't mean less revenue. It just means that we're getting more smaller task orders on larger contracts that we've actually had. So I know that's a bit of detail. But I think that decoupling is going to be for a good portion of this fiscal year 2026. But I think as the U.S. federal government gets its sea legs under it with respect to our contracting officers in place, gets the cadence of task orders that actually come out a little bit longer duration, you're going to watch the federal government's task orders get larger through the year, and you'll actually watch that begin to climb, not driven so much by commercial, state and local and international because they're already very strong but actually returning a contract cadence with the U.S. federal government. I know there's probably a lot of detail, but there's a lot of pieces we're looking into that, that actually underpin how we're seeing very strong organic growth, but it's not being seen as directly correlated to the backlog, which we've seen the case for many, many decades here, but this new administration has really changed that because of the U.S. federal government's task order issuance. Benjamin Luke McFadden: That's really helpful color. Appreciate it. And maybe pivoting to performance in your international business for my follow-up, which came in stronger than we were expecting for the fourth quarter and had a nice pickup from the third quarter as well. Can you walk us through some of the puts and takes on each of your 3 business lines in a little more detail here, where you saw strength and how you're thinking about the 3 main geographies as you move through fiscal 2026? Dan Batrack: Yes, it's interesting. It's really that, that growth was really driven by a change in one geography, but I'll start with the strongest areas for us. The water programs, those have been the biggest underlying drivers for our United Kingdom and Europe, which is primarily Ireland and Netherlands operations. That's been growing at about a 10% rate has been the strongest. And in fact, the water component of our U.K. and Europe operations have been even at a higher rate than that. So that's continued. I would say there's been a little change in the previous quarters. So that's really been our top growth rate and top performer of our international geographies. Canada has been good, and I actually think it's going to get better for those that I've spoken with at different conferences and seminars. I think on a relative basis, Canada may be the biggest -- one of the biggest drivers. And I think that the short-term disruption of tariffs between the United States and Canada, have caused some disruption. I am totally convinced that Canada is going to remain a major trading partner with global economies. And if it can't come down south, it's going to go east and west and in fact, north to the Arctic trading routes that are now open. And you saw that Canada just passed its largest infrastructure and spending bills at USD 200 billion, Canadian of course, much larger numbers. And Canada is growing as it has been at about 5%, 6%. That's been very strong for us. But the item that's been -- that was a change this last quarter has really been Australia. And Australia had gone from shrinking or reducing its revenue contribution by 10% to 15%. I think we've seen it kind of bottom out. And so on a year-on-year comparison, it's getting closer to flat. We did have a couple of percent contributed by the SAGE acquisition that came in, in the fourth quarter. So it really didn't add much at all for fiscal year 2025 a little bit for the fourth quarter, but Australia actually hitting the bottom with respect to reductions as that is the big change. So if you go from a minus 10 or 15 in Australia and you move that to a 0, that largely accounted for that 9% increase. And I actually think that during the year, fiscal year 2026, is going to start ramping up, now one, in Australia specifically because that one, when you're at the bottom, there's not really too many directions to go from there, I hope. And two, as we're seeing more funding and actually infrastructure projects moving forward at the very front end for the Olympics that are going to take place in Brisbane. And so who's the firm that would be engaged in it very early on? That's upfront planning, permitting, geotech, all the initial design, technology selection for all the different venues, transportation and others. So I think that's going to be a good number for us. And it was Australia was the change in the quarter that drove that number. Operator: Our next question comes from the line of Sabahat Khan with RBC Capital Markets. Sabahat Khan: Great. Just kind of following on the same line of questions along the outlook. I guess, just given some of the moving pieces in the backdrop, how did you sort of build out that range for the fiscal '26 guidance, more thinking on the top line versus the EPS line. If you can just maybe walk through as it kind of relates to disaster relief, some of the other moving pieces, how should we think about the low end versus the high end? Or what needs to happen for you to come somewhere in the middle of that range? If you can just share some of the puts and takes that you consider as you build out that range for the top line? Dan Batrack: Yes. So top line or revenue growth. I'll start with what's sort of the midpoint. So I would say that the numbers I just ran through, 5% to 10%. So if you want to pick a midpoint of that 7.5% I'd say that's sort of the number we're looking at for international, U.S. commercial and for U.S. government. And the 10% to 15% for municipal, you pick a sort of 12.5%. If you took out disasters for this last quarter, they were at 13%, so right there. So we -- so the midpoint is actually the midpoint of those growth. And if you take those numbers from this last year, imply those growth rates, you'll find that we actually get to that midpoint or just over $4.1 billion for fiscal year 2026. Now what could cause us to deviate up and down from that? It's not going to be perfectly linear. I will say that the U.S. -- let me use an example of the U.S. commercial. You saw this last quarter, we were at minus 2%. I expect that it's going to remain very low. It's going to be below that 5% to 10% rate in the first quarter or to a fiscal year 2026. Because a year ago, we had a lot of renewable energy work. And some of the biggest projects were offshore wind. Now these areas have been significantly impacted by policy and executive orders and other items. And so the big headwind or the difficult year-on-year comparisons are Q1 and Q2. Now we've got a very fast-growing transmission, practice high voltage transmission other programs that we have here in the U.S. that I thought Roger did a great job of outlining with respect to water supply for different manufacturing, which includes data centers, chip fabs and other reshoring. So I think we'll be at the high end of that 5% to 10% in the latter quarter, so quarter 3 and 4. So look for that to ramp. I think the same is going to be true with the U.S. You've had, call it, some dysfunction. Obviously, a 6-week shutdown here with the U.S. government in Q1, which has already been included in our guidance for Q1. And some of the questions I've had are what's the impact of the shutdown and life got a little bit easier on that forecasting with the government opening up just last night. And so we had a small impact that's actually embedded in our guidance, both for the quarter and the year. For us, it was probably $15 million to $20 million, and most of it came in the latter part of that 6-week shutdown. We were really unaffected early on. So I think you'll watch a federal government ramp also during the year. So we've got our 5% to 10%, and I would say we're not going to start with a 0 like commercial up to 10%, but we'll start at 5% ,6%, and we'll end up at 10%. International, you've already seen, we're at the upper end and same is true with the midpoint on state and local. What would drive us to the high end of this, I would say actually a little bit more clarity on international. I think international could move to the high end, and I'd like to see the baseline be 8%, 9%, 10% and actually, the performance come out above that. And I think it will just be clarity with respect to tariffs and trading so that individuals can select what they're going to move forward with respect to their manufacturing. And I would say in case of Canada, how quickly they can actually deploy what's just been authorized with their infrastructure work. I would say what would also could take us to the high end. We've not included really any material dollars for the U.S. State Department. And we are still present, although I would say close to dormant in places like Ukraine specifically. But if that actually became more constructive or more funding came through it, that certainly could push it to the upper end. With respect to what could bring us to the low end? Well, they passed a continuing resolution to the end of January. And if we're right back here at the end of January and that they want to eclipse the new record they just set for the past 6 weeks is something we'd have to take a look at. And that's not really been much of a financial impact to us. This first 6 weeks of shutdown, but you have to take a look at each one of these as they come and what's impacted. So I think unusual things like recessions and unusual things like a prolonged shutdown could drive us to the low end. Things that could drive us to the high end is a little bit more clarity on tariffs, which will help both on acceleration of U.S. commercial for reshoring here in the U.S. And honestly, a lot of activity internationally with respect to what they're going to move forward with, with respect to their own manufacturing. And is it going to come to the U.S. irrespective of the price increases on the tariffs, or are they going to have other trading partners. So a little more clarity on that. I'm not saying that high or low tariffs make a big difference, just clarity of what the number is that actually make a very positive construct for moving us to the high end. Sabahat Khan: Great. And then sort of just continuing on that discussion kind of post this continuing resolution. Is it I guess based on your past experience with such government closures is a 2-part question. One, is it usually a smooth sort of turning on of all the functions that were stopped? And then secondly, we've been hearing some commentary about with the EPA just taking a while or just kind of shutting down on issuing permits, et cetera? Has that been a headwind? And where do we stand on that now on the EPA front? Dan Batrack: Yes, good question. I would say that when we're in what I would call discretionary revenues from the federal government, it ramps back up slowly. But most of our revenues now have actually transitioned because of what took place in fiscal year '25 to essential services. So we really didn't have that much of it put on hold for the federal government because a lot of our revenues being driven by Department of Defense. So you say, is it going to ramp back up? My comment would be it didn't ramp back down. So we didn't really see that as an impact. So I think the federal government is not going to see much of a disruption from having gone down and back up. Now with respect to permits coming out of EPA. We don't do a lot of work that is driven by petrol regulation that requires EPA or national U.S. federal either headquarters or region approval before it goes forward. There's a little bit of it where they're co-regulated to compliance, both at the federal and state level, and you need sort of 2 sign-offs, so that's actually affected some of the dollars. But for us, it's been pretty small. But I would say the one that's been -- it's going to be seen a little bit more interestingly enough is actually in our state and local. And you would think that a government shutdown would not impact state and local. What do they got to do with the federal government? There's a lot of projects that have co-funding with the federal government. And I would say Department of Transportation, where you have large grants or other funding incremental funding as part of projects to go forward. When those grants and other things are completely put on hold or you had to go back for sign-off or next milestones, you saw those projects put on pause that are on hold until the government workers were actually back in place. So I think the impact for us is going to be the federal government workers weren't there during the first half of our Q1 or the federal government's Q1 with respect to pushing out orders. And last I looked at the calendar, we're only a couple of weeks away from Thanksgiving here and then we're going into Christmas. So it's not like you did a 6-week shutdown and then you're moving into blue skies. You're moving into holiday time. So I think the optics of backlog or task order issuance could be impacted in Q1. And again, I think that's mostly optics because we've got plenty of backlog to drive revenue right through this. But if you'd ask what are you going to see from the impact of this slow comeback. I think you're going to see the optics on your backlog, and you may see some optics or short-term impact on funding through state and local for us. Permitting approvals for commercial clients and others, de minimis, de minimis. There just aren't that many programs, except for super fund that are driven by the federal government EPA approval process. So I think it sounds like it's a big driver, not so much. Sabahat Khan: And just one last quick one on sort of capital allocation and M&A you've highlighted M&A as a focus, firms call it, in the medium-sized range. But can you talk about the general pipeline of those opportunities that meet your criteria? And then does things like the government shutdown influenced that either up or down in terms of the opportunity set or seller willingness? Dan Batrack: Well, I'm going to -- I'll just say a few words on the -- from a 100,000 foot sort of on the landscape, and then Steve can talk about the financial dollar satisfied. But well, this -- the disruption and the volatility that's taken place in the markets because of the new administration have sent some shock waves through some firms have impacted them more than others. And I think for some, they've actually felt that through this volatility, a place that's safer is on a bigger ship. So if I'm in a small robot or middle-sized boat and the waters get really choppy. Maybe I want to get on a bigger vessel. So we've actually seen these small firms or even middle-sized firms actually come to market and be more transactable. So if they were not selling -- for sale before and all of a sudden, you don't know what's going to happen either on your federal government, state or commercial. Maybe I'm going to go join a bigger partner who has a bigger platform, has access to clients that are maybe outside the U.S. or that are more stable. And no doubt, Tetra Tech, if you're looking to join a technical leader and a market leader and you're in the fields that we're interested in, we're about as safe and as prosperous of a firm to join to progress where you're at and actually make your business even better and reduce your risk. So I'd say there's more opportunity today because of this. And the other thing is that there's more available and for those that are looking for the sale, not to be their last move but their next move to become better, Tetra Tech is the right home for them. So I think pricing has become more moderated, our valuations have come down a bit. I would say that the investment bankers are still asking for an unbelievable dizzying valuations if you're in power or if you're in data centers. But other than those 2, I think valuations have gotten quite more modest. And the number of firms that are small to midsize have actually grown quite a bit. So I think our pipelines actually look bigger than we've seen before. No doubt, with consolidation in the market, there are fewer large firms, the ones that, of course, the scarcity premium for these really large firms. But when those fit right for us, we'll look at those, we'll be opportunistic. If it fits right, we'll look at it. And maybe Steve can just say a word about -- is there anything outside our range or with respect to the ability that we could become constructive on? Steven Burdick: Yes. So I think as I talked about in my earlier comment, we've got a really strong balance sheet and we're going to be able to use our balance sheet to make acquisitions that we think are going to have a long-term benefit. When I look at the capital markets and how we want to finance that, we have a bank credit facility that has 100% dry powder on our revolver and it has options to increase it beyond what's in the facility now. So that's available. And outside of the bank market, you see that we -- 2 years ago, we entered into a convertible debt. That capital is available at probably better terms today than 2 years ago. And so there are various capital markets and funding vehicles for us to really address anything that makes sense for Tetra Tech either small, medium or even larger firms in terms of who can join Tetra Tech. Operator: Our next question comes from the line of Sangita Jain with KeyBanc Capital Markets. Sangita Jain: So one, I want to ask about GSG margins. Outside of the elimination of USAID, can you tell us if there are other factors contributing to that margin expansion? Maybe it's an evolution of the mix of projects or more fixed price work that is driving that? And how we should think about it for '26? Dan Batrack: Yes. It's -- well, no doubt, as you commented, we're finishing up a number of deliverables and items for the disaster response, which drove really high utilization in GSG. So that was, I would say, the single figures driver that drove it up near 23% in the quarter. But the other 2 are just what you said is, one, we have more fixed price work. One of our goals for a while has been to take our fixed price amount of the work that we have. It has historically been, if you follow Tetra Tech or investor reports that we have online and attached to our press release. Historically, we've been around 35%, a little more than 1/3 fixed price. It's been a really focus over the past 2, 3 years to move that to more fixed price as we've actually develop more tools that will make us more efficient. So we can get our clients a better price point with respect to performing the work and gives us higher margins. So we did hit essentially 50% of the revenue that we had this last quarter was fixed price. That's the highest we've seen in I don't know I want to say ever, but certainly in many decades. So that actually was a big contributor to it. And the other is mix. It is that we have time and materials contracts on where there's a very competitive rate structures. We do a bit of upfront design work. Actually, about 30% of it is very high-end upfront design but when we move into what I'll call a more detailed design, we end up being compared on a price point to some of these low-cost offshore design centers. And those carry lower margin, and we've been migrating out of doing that and moving our design work to earlier in the project execution cycle. And those that are already early, we're moving them into consulting or even advisory. So it is mix shift. We are moving to where it's higher margins for the work, more differentiated work. Work is not generally competed. It's sole sourced. It's we're under existing contracts and frameworks. And then the work that is closer to being commoditized, we're moving it more to the front end. So mix, number one. Number two, more fixed price. And then the third, of course, is when we do have very high utilization driving lower indirect cost, it then shows up in our margins, which was like the firework by this last quarter. So those are sort of the 3 big drivers. I will say we still have a lot more upside with respect to margins. One of it, I had aimed 50% for a target for fixed price work, even though we'd hit that this last quarter, I want to see us stay there for a few quarters in a row because some of that's individual project driven. But I think we're going to move our target from 50% up to 60% since that will be our next milestone we'll move. So we have more margin expansion there. And I think there's still a lot more margin contribution opportunity by using more of these digital tools. And yes, that includes AI and yes, it includes different SaaS products we have. But I think the next phase that will contribute is being much more efficient. And if we can apply more efficient execution to a fixed price contract, I think that means more margin expansion for the company and its shareholders. Sangita Jain: That's super helpful, Dan. And if I can follow up on the U.S. commercial business and the puts and takes that you talked about renewables kind of like becoming a little bit softer in data centers and power transmission picking up. Can you compare for us if the scope of what you're losing on the renewable side is similar to what you're picking up on the power and data center side and if also the margin profiles are similar? Dan Batrack: Yes. I will say of any of the areas that we have flex or change taking place. That's one of them that we're still -- we're sort of in the middle of this transition. So the -- we were doing much more full-scale permitting for siting, construction oversight, for permit compliance, for these renewable energy projects. And I'd say one of the examples, of course, is offshore wind, where we have marine vessels and many other items. I thought Roger did a really good job of identifying that the work that we're looking to grow our data center work, in particular, and I would say the high-voltage engineering is much less on environmental compliance, which was being driven by -- which was what we were doing for renewable energy and much more for design for the commercialization in getting these different facilities online. So I think that's the difference. So on high-voltage transmission, we're actually doing the high-voltage engineering. We're doing the actual design of the transformer stations and the interconnect. So we're actually doing what I would call very high end. It's limited in service availability in the marketplace. There just aren't that many people that can do this. We're one of them. And so that's what I would say is different margins. I think, are actually a little better because of the scarcity of people doing this type of work for the grid and for high-voltage transmission. And I would say that it's just emerging now with our engagement in the data centers, which is not in the building itself. I thought Roger made a good point. The gold rush to do detailed design for the data center buildings itself. There's a lot of people rushing to that gold strike. But a lot of that work is being done internal. And a lot of it has been standardized so that all of the data centers are similar. And maybe that there's more miners than there are gold in that area. But actually, those selling the products in order to go mine for that gold is how do you get 5 million gallons per day for a large data center where do you get that from? And as Roger commented right now, it's from the municipal -- municipalities. As water becomes more scarce, they're going to be looking for us to find other water -- dedicated water supplies. Groundwater, surface water, water reuse, water recycling. So I think it's going to carry higher margins. So what we're migrating into is higher margins and, frankly, less competition. Operator: Our next question comes from the line of Maxim Sytchev with National Bank Capital Markets. Maxim Sytchev: I was wondering if it's possible to get a bit of an update on your digital initiatives. And maybe if you can talk about the clients where the adoption rates or the velocity is a little bit higher? And why that potentially could be the case? Maybe any color there would be much appreciated. Dan Batrack: Well, the -- I can just clarify and define the question because if it's -- our digital products is in our recurring revenue or SaaS. If -- just to clarify. Maxim Sytchev: Yes. Dan Batrack: It's interesting. That's been the one area that I would say we have been stymied or that has -- it's the smallest area of revenue that was one of our growth areas. I will say that if you went back to May of 2024, our SaaS or recurring revenue or our software products for subscription by our end clients. We've reported was about $25 million a year at, I think, on an overall EBIT margin of about 50%. I regret to say that 1.5 years later, there's still about $25 million and where the margins are about the same. I will say what's been disruptive for us is our #1 strategy was to take the software products, which were developed for our U.S. government clients, primarily the government was the subscription, and I would say U.S. federal government. I would say the new administration has actually created more of a disruption there than anywhere else for us. The good news is it's $25 million out of our total revenues at well over $4 billion. So it's the smallest of small revenue numbers. But I will say our strategy to actually take it and to bring in unique products that would help the government in these areas dramatically has actually been put essentially on hold. There's been an essentially a moratorium on new software packages for being purchased or leased or subscribed to at the federal government. We are retooling very quickly our go-to-market strategy to go to what we had called Phase 2, which has now become -- so Plan B has now become Plan A, which is for things like OceansMap instead of having it placed with the U.S. Coast Guard and the Navy and other specialty agencies within the federal government. We're going to ports and harbors and individuals who actually have requirements to understand what's the impact of an oil spill or of builds discharge or anything else of man overboard actually in the local port and harbor environment. So there's a lot more of them. It is a different approach for us. And I'd say that's also true where we've been placing software packages with Department of Defense for our FusionMap. And I could go through FAA with respect to our Volans environmental air traffic approach lanes. So we are moving to what I would call secondary, which were originally our Phase 2 but we've been taking things like Volans for the FAA, and we're now actually having it deployed across Europe. And we're using it in places like Heathrow right now and other major cities across Europe. So I will say that just because it looks like this road has -- the federal government has slowed or not gone through right now. We've -- we are taking, I'd say, 2 steps back, 1 over and 3 or 4 steps forward. So I expect that to be much more productive and have some better growth rates here over the next year or 2. But I would say the good news is it's only a small part of our revenue. In fact, the smallest of small. But the bad news is it has pushed us back, I would say, at least a year from what we expected to be at this point. Maxim Sytchev: Sure. That's very helpful. And maybe one quick one if I can squeeze on for Steven. In terms of obviously, the balance sheet is extremely healthy and delevered. In terms of the desire to do anything more or of size relative to your history, do you mind maybe providing some guardrails in terms of how we should be thinking about that? Steven Burdick: Well, I think if you look over the Tetra Tech's history, we've -- our acquisitions have been kind of that medium size add 2%, 3%, 7% of revenue per year when you add them all up. But what you have noticed also over the last couple of years is we have acquired other public companies that were larger than normal. That took a bit more creative financing, regulatory approvals. And we brought them into Tetra Tech and turned them around and they're performing at much better rates than they ever were as their own public companies. And those were on the much larger size comparatively speaking. So I would say that our strategy and appetite is anywhere from the small to medium-sized companies to the larger public or private equity health companies that -- and I believe that both with our current balance sheet, our current bank credit facilities and the capital markets that are available to us. We have a lot of different choices with at significantly bigger sizes than even RPS, which was our largest acquisition in the history of the company just 3 years ago. Operator: Our next question comes from the line of Michael Dudas with Vertical Research Partners. Michael Dudas: I guess, 1.5 years ago, we had your Investor Day in New York, how much has happened since then and how much has happened since then. Just wanted -- maybe you can share a little reset. As you look out your 2030 targets, I'm more confident, less confident are you given all the disruption that you've witnessed and successfully overcoming during fiscal year 2025. And as we think about that, does because of where your balance sheet is and the opportunities, does acquisitions become a little bit more important to achieving those longer-term goals and maybe it would have been 18 months ago? Dan Batrack: That's a great question. So I've been asked that question in many different ways really since probably February of this year with the new administration coming in and with USA actually being eliminated as a federal agency and I bet even asked as directly as you regret having come out with those targets for 2030. And a nice reversion of that is, do you want to do a reset and actually put your number at different set of numbers up there. My comment is well, I don't know if I should put a bigger numbers quite yet. But I will tell you that there's no doubt that it's been an interesting year. And what's the old adage, the Chinese proverb, progress, "may you live in interesting times." This has been the most interesting of times. But what interesting times do get us, and I'll tell you one thing I'm so proud of the management team here at Tetra Tech and all of the employees that we've lived through in change, change represents opportunity. And for each door that's gotten closed and one has been completely closed with AID, we didn't close the door, someone closed it on us. I'll tell you, those same staff have actually been able to find new opportunities or new windows that have opened, and the windows are actually larger than the doors that were closed. For instance, the margins that we -- the doors that was closed in AID, has actually been opened. The windows that have been opened have new opportunities that have much higher embedded margin, in fact, double, even triple the number that we had. So there was 2 numbers on the 2030 plan. One was the total growth and no doubt that's been impacted, and I'll come back to that, which is top line. But the second was margin basis points. And Steve Burdick very eloquently presented how we were going to expand 50 basis points per year over the 5 years from that time of the presentation to 2030, I don't know, someone else closing out U.S. AID for us actually took us almost a 50 basis points jump on a baseline up. And then on top of that, we've said we now look like we're going to grow more like 60, 70, 80 basis points. So as far as the margin goes, I think it wasn't actually a headwind. It actually became a tailwind and somebody gave us a boost up on that. With respect to top line, no doubt, someone says if you just had $550 million subtract from you and the rule of compounding is going to make that even more difficult on you, my comment would be that the rule of compounding all is going to hurt me if I don't actually close that gap in the next couple of years. And we only had a 4% to 5% contribution from M&A for our mergers and acquisitions, and I'll focus on acquisitions, people joining us. Steve just went over, we have more this vernacular dry powder, which is access to capital. I'll comment that while you'd say, if you go to market right now and you have excellent credit rating, you'll get 4%, 5%, 6% interest rates thanks to Steve's foresight, Tetra Tech had a 2% interest rate because of the convert that we put in place 1.5 years ago. So we have the lowest cost of capital. We have -- we could actually do acquisitions at half again or double the 4% to 5% presented in the 2030 plan that we presented in May of 2024. So we could do double that number and not actually go outside the range of 1 to 2 leverage that we identified. So with respect to closing the gap that's just created, I don't see that as an issue. Yes, it means that we'll turn up our M&A a bit. But as my comments on an earlier question on this, this call is -- are there actually firms available that in as a price point? I think I answered that, I hope, in enough detail to say, absolutely, and even at a better multiple -- and by the way, someone who's going to join Tetra Tech isn't getting a lower multiple. They're getting a better home. And so I think that, yes, M&A will become a bigger part, and I think we can get to that number without having put any additional pressure on our organic growth targets, which is 6% to 10%. I think you've seen even in this period of great turmoil or may live in interesting times, we're coming right out of the gate, we're right at the middle of that range organically at 8%. So yes, M&A will have to be a bit larger. But I don't see financially or opportunity availability being an issue for that. Operator: Thank you. Ladies and gentlemen, that concludes our question-and-answer session. I'll turn the floor back to Mr. Batrack for closing comments. Dan Batrack: Great. Thank you very much, Melissa, and thank all of you for joining us on the call today. Thank you for being supporters of the company through all the fiscal year 2025. I'd like to reiterate that I could not be prouder of the performance of the Tetra Tech employees all around the world and really how we navigated 2025. And I can't see a better demonstration of how that performance actually was other than the all-time records, nearly every field. As I just indicated in this last question came, how is it looking with all the changes? I do think that there's more opportunities there for Tetra Tech, particularly in the market leadership positions we're in to make 2026 just a fantastic year. And I really look forward to reporting back to all of you in roughly 90 days from now or at the end of Q1 to report how we started out in fiscal year 2026. And with that, I hope you all have a safe and a successful day today. I will likely not talk to you collectively before the holidays. So I hope you have a great holiday wherever you happen to be located. Thank you very much, and have a great week. Operator: Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.
Operator: Good morning, ladies and gentlemen, and welcome to the North American Construction Group conference call regarding the third quarter ended September 30, 2025. [Operator Instructions] They are free to quote any member of the management, but they are asked not to quote remarks from any other participant without that participant's permission. The company wishes to confirm that today's comments contain forward-looking information and that actual results could differ materially from a conclusion, forecast or projection contained in that forward-looking information. Certain material factors or assumptions were applied in drawing conclusions or in making forecasts or projections that are reflected in the forward-looking information. Additional information about those material factors is contained in the company's most recent management's discussion and analysis, which is available on SEDAR and EDGAR as well as on the company's website at nacg.ca. I will now turn the conference over to Jason Veenstra, CFO. Please go ahead. Jason Veenstra: Thanks, Joanna, and good morning, everyone. As we did last quarter, I'll start off with the financials and pass the call to Joe for the operational and forward-looking commentary. Starting on Slide 4. The headline EBITDA numbers of $99 million and 14.6% gross margin were generated by a strong operational quarter and were much improved from the second quarter of 2025. We will discuss the specifics of the margin performance later, but in general, the operational teams were able to execute their plans effectively given steady weather conditions and consistent customer demand. You can see from the graph that we continue to post continuous revenue growth as we posted $390 million of combined revenue, a 6% sequential increase from the second quarter, despite the seasonally lowest demand during the third quarter in the oil sands region. Australia continued its consistent growth trajectory with a 12% sequential increase and an impressive growth of 26% compared to Q3 of 2024. To put our top line performance in perspective, this quarter's $188 million in revenue we generated in Australia is nearly 2.5 times the 2022 run rate, an increase achieved in just 3 years. The MacKellar Group generated over $65 million in September alone and set another company record for monthly revenue as they continue to grow. September's strong top line bodes well heading into the fourth quarter, and this growth profile is indicative of the demand we see in Australia. The 26% year-over-year increase reflects 2 significant contracts secured in 2024: one expansion at an existing site; and one new project, as well as the growing production profile of our largest customer in Australia. Enabling and bolstering these increases are the units of fleet we transferred from Canada and are now operating in the region. Moving to Slide 5 and our combined revenue and gross profit. As mentioned, Australia's margin of 19.6% benefited from both productive weather conditions, but also strong operational performances across the sites. And specific to last quarter, we actively increased maintenance headcount in early Q3 and subsequently were able to rely less on higher cost external maintenance service providers. The oil sands region posted a solid quarter at 9.2%, up significantly from the challenging second quarter of 2025. Demand for our equipment was consistent through the quarter, which allowed our operators to properly plan and execute the scopes of work. Our share of revenue generated in the third quarter by the Fargo, Nuna and other joint ventures was $74 million in the quarter. Our Fargo team completed a strong quarter of work and progressed the project from 70% to approximately 80% at the end of the quarter. Stepping back, combined gross profit margin of 14.6% reflected steady weather conditions, consistent demand, increased internal maintenance headcount and reduced reliance on third-party heavy-duty mechanics. Of note, the 8.9% posted in Q2 was restated from the 10.6% reported as certain expenses in the Fargo joint ventures had been classified as administrative when, in fact, should be included in the determination of gross margin. Moving to Slide 6. Q3 EBITDA and EBIT were down from their 2024 comparables, as already indicated in our discussion, but importantly, in line with our guidance for the second half of 2025. The 25.3% margin we achieved is indicative of the commentary thus far and a significant improvement from the 21.6% posted in Q2. Included in EBITDA is direct general and administrative expenses of $13 million in the quarter and equivalent to 4.1% of reported revenue, which is essentially at the target we've set for ourselves. Going from EBITDA to EBIT, we again expensed depreciation equivalent to approximately 14% of combined revenue, which is consistent with the 14% posted in 2024 Q3, consistent with our expected run rate moving forward, given historically we've been between 13% and 15%. Adjusted earnings per share for the quarter of $0.67 reflects EBIT generated by the business, net of the expected interest and taxes. The average interest rate for Q3 remained consistent at 6.4%. Moving to Slide 7. I'll briefly summarize our cash flow. Net cash provided by operations prior to working capital of $72 million was generated by the business, reflecting EBITDA performance net of cash interest paid. Free cash flow of $46 million for the quarter was based on EBITDA and the disciplined sustaining capital maintenance spend in the quarter. Moving to Slide 8. Net debt levels ended the quarter at $904 million, a slight increase of $7 million in the quarter as free cash flow generation was used on growth capital, share purchases and dividends. Net debt and senior secured debt leverage ended at 2.3x and 1.6x, respectively. When taking into account the $125 million reopener we completed in October, senior secured leverage decreases to 1.3x with no change to net debt. Senior unsecured debt now accounts for approximately 40% of our overall net debt, and we've been pleased with the demand for that source of financing as it provides the ability to confidently grow our Australian and infrastructure businesses. With those comments, I'll pass the call to Joe. Joseph Lambert: Thanks, Jason, and good morning, everyone. I'll start on Slide 10, where our Q3 trailing 12-month recordable rate of 0.45 continues our almost decade-long trend of bettering our industry-leading target frequency of 0.50. It has been particularly pleasing to see our safety management systems and processes remain successful as we have expanded and diversified our business across multiple commodities and into the U.S. and Australia. The exposure hours now exceeding 7 million is about 7 times our 2016 low and demonstrates the scalability of our safety systems and consistency of our safety culture regardless of the country or the commodity. On Slide 11, I'd like to highlight the strong operational quarter and gross margin achieved about 15%. The continued high demand driven predominantly from the 30% year-over-year growth over 3 years in Australia and the result of $1.5 billion record top line over the last 12 months. The 100% renewal rate, average 5-year contract terms and scope expansion opportunities continue in Australia and the $2 billion add to our backlog, provides the stability and visibility for several years to come. We also added another $125 million in liquidity from senior unsecured notes and believe we are well set up for growth opportunities we see in Australia and in infrastructure. On Slide 12, we believe our H1 issues are truly behind us. We have a strong Q3 in the books, are in line with expectations and have a keen focus on delivering a safe and efficient end to the year. On Slide 13, our equipment utilization, which jumped in late 2023 with the MacKellar acquisition, is expected to lift into the target zone in Q4 as our rapidly growing Australian demand is offsetting reductions in our Canadian demand. Fleet utilization drives our return on capital and our asset management team is keenly focused on a clear execution plan for putting assets back to work, transferring assets to higher demand markets and extracting the highest value from the consumption and sale of excess assets. As we start to look forward, I would like to reiterate that similar to last year, we have a large amount of predominantly oil sands work scopes that remain in tender process, and we will await those results before providing our 2026 outlook, which we expect to provide in early to mid-December. On Slide 15, we move into looking at the macro tailwinds that we believe will be driving all of the markets we operate in for the next few years. In Australia, we expect to see the continued growth in demand driven by the resource richness of the country and the speed at which new projects are built or existing mines are expanded. We believe Queensland thermal metallurgical coal demand will remain strong with 5% to 10% annual growth potential and the biggest opportunities in Australia coming from gold and iron ore in Western Australia and copper opportunities in New South Wales. We likewise see growing civil opportunities in Australia with increasing new mine site development and expansions driving civil earthworks constructions, such as site access roads, tailing storage construction and facility expansions. Western Australia is also rich in resources like nickel and lithium and has many mines on care and maintenance status due to current commodity pricing. Should those prices increase, Western Australia will be booming even more. Altogether, Australia has become the strategic hub for Western allies seeking to secure their critical mineral supply chains with demand for large-scale moving -- earthmoving ever increasing. In the U.S., we see the biggest opportunities in the infrastructure markets with federal investments being streamlined for prompt construction of climate resiliency projects, like our Fargo-Moorhead flood diversion project. Energy transition projects like pump hydro and other major earthworks construction required for Western U.S. water conservation and transportation. Although mine development in the U.S. does not advance nearly as quickly as in Australia, we do expect to see increasing demand in U.S. mining and civil contracting, predominantly supporting the Western U.S. gold and copper markets. In Canada, we see increasing resource development, defense projects and infrastructure work with major works planned in the far north, providing what we think will be a competitive advantage to our Nuna partnership with the Kitikmeot Inuit Association. As mentioned in my letter to shareholders, we believe these type of nation-building project opportunities will come to market quickly with the support of government leadership, and we are positioned to execute at scale. Moving into Slide 16. We highlight our strategic priorities for closing out the year and heading into 2026. These priorities simply feed into the market assessments and opportunities we see by region, as discussed on the previous slide. In summary, these priorities are growth in Australia led by Western Australia opportunities, advancing teaming agreements and subcontracting opportunities in our infrastructure business, targeting the 25% revenue contribution by 2028, leveraging our Nuna experience and indigenous ownership for expected increases in Arctic opportunities, rightsizing our Canadian equipment fleet to meet current run rate and increasing development and application of low-cost purpose-built technology to provide better data for asset and project management. We believe executing on our priorities will drive revenue diversification and margins. Slide 17 simply provides more data and detail into what we see as fantastic opportunities for organic growth over the next couple of years, and Slide 18 identifies our top 10 infrastructure projects by name, location and proponent so we can track progress more specifically in what we believe will be an exciting next couple of years in the infrastructure market. Slide 19 shows our bid pipeline of over $12 billion, which is a $2 billion increase since Q2 and includes increases in both the active tenders and 2026 opportunities. This record bid pipeline puts the revenue numbers to the opportunities previously identified and positions us well for growth and stability with material expected wins over the next couple of years. Lastly, on Slide 20, we reiterate our H2 2025 outlook with nearly all metrics unchanged and strong free cash flow consistent with our historical profile. That ends the Q3 presentation. We'd be happy to take any questions you may have. Operator: [Operator Instructions] The first question comes from Aaron MacNeil at TD Cowen. Aaron MacNeil: In the prior quarter, you had said that you were confident in securing 2 memorandums of understanding by the end of this year. How should we think about the progress there? I know you mentioned on Slide 19 that you had prequalified for a mining infrastructure project in Arizona. I assume that's one of the 2, but maybe you could just give us an update there? Joseph Lambert: Yes. We -- there's different levels of agreements we seek with different partners. Obviously, some of these that, we may be looking at doing on our own, we won't have that. But I think our progress has gone well. I think our discussions with other potential partners we target for, especially some of the projects up north, have gone well. I'll probably provide that with our year-end exactly where we sit on those. It's really a first state step in the infrastructure side. And we're having the discussions with general contractors who have existing contracts to see if we can bring in some subcontracting opportunities sooner and hopefully in 2026, but certainly nothing inked on that right now. Aaron MacNeil: Fair enough. And then, can you just remind us of the timing of when Fargo-Moorhead will wind down? And how should we think about the sequencing of sort of other infrastructure projects backfilling that revenue? Joseph Lambert: We see it reaching substantial completion next fall. Operator: The next question comes from Adam Thalhimer at Thompson, Davis. Adam Thalhimer: Congrats on putting the Q2 issues behind you so quickly. I wanted to ask first on the U.S. infrastructure opportunity. Does that potentially include work for private sector customers as well, such as data centers? Or are you just looking at large civil projects? Joseph Lambert: The ones we have targeted in the deck are all public projects. We certainly look at private ones. It's just a matter of getting on those bid lists and spending more time with the customers there. Adam Thalhimer: And how near term -- you said you were positioning to support major GCs across North America who are at capacity. Just curious how near term that particular opportunity could be Joseph Lambert: That's pretty much the stuff we see in 2026 potentially being subcontracting work where there's -- yes, we -- there's -- the general contracting community is pretty full, and there's projects still rolling out. So we think that's going to open up some opportunities to support projects that are already in progress or soon to be. Adam Thalhimer: All right. And the last one for me on Australia, the mechanics situation, are you where you need to be on that now? Or do you still need to hire more folks to fill those slots? Joseph Lambert: We're where we need to be. We'd still like to keep bringing on more. I mean we kind of budget a certain level of subcontractors in the business, and we do the same thing here. But we're certainly looking at opportunities to reduce costs further, but we're at our -- what I would call our historical levels. It's just upside potential or improvements that we can continue to make. Operator: The next question comes from Maxim Sytchev at National Bank Capital Markets. Maxim Sytchev: I was wondering if we can circle back to Australia just for a second. I mean, obviously, you're highlighting coal and iron ore opportunities. But I was wondering in terms of precious metals, I mean it seems to be like a very active space right now. Is there anything brewing on that front? Anything you can share with us in terms of potential pipeline there? Joseph Lambert: Yes. There's actually a massive pipeline in the Western Australia gold market as well, Max. That's a big area. The lithium is actually still being mined in Western Australia. It's probably the higher grade stuff. But certainly, with the lift of lithium and nickel, we'd see those commodity markets open up. The biggest driver in Australia right now on the precious metal side is gold. And as you would expect with these gold prices, there's quite a few people that are doing expansions and opening up new mines there, which moves a lot faster than it does in North America. Maxim Sytchev: Right. And I guess, I mean, like in terms of equipment, et cetera, like I mean, it's still the same process, similar contractual structure, et cetera, for those brownfields, right? Joseph Lambert: Yes. I would say that what we find slightly different in Western Australia is that there's a lot more unit rate work, very little rental, a lot more unit rate work down there. And that's really where we brought our systems and processes over and been able to -- we won the first one last year with that copper project and taking that unit rate model into Western Australia is what we would look to be doing. Maxim Sytchev: Okay. That's good to hear. And then in terms of Canada, when we look at some of the critical mineral opportunity, the budget that just was released, I mean, it seems to be pretty constructive. I was wondering how do you think about potential timing of the inflection point here? And I don't know if you want to maybe attribute some stuff to Nuna, some to the core business, whichever way you think is -- makes the most sense? Joseph Lambert: I'd say we're a bit unclear on the timing. We've seen a lot of projects and there's a lot of talk of support. But yes, we're looking for once the shovel is going to be in the ground date. And I don't think we're expecting anything in 2026. I think it's probably more 2027, but I'd love to be wrong about that, and certainlyif they can speed these up and give us opportunity sooner. But right now, we don't -- we haven't heard a lot of definitive dates. And so we're -- I'd say, we're being a bit more conservative in believing they're going to kick off in 2027. Maxim Sytchev: Okay. Makes sense. And then lastly, in terms of Canada, in terms of the right sizing of the fleet, I mean, where are we in terms of that process? Are we kind of done or you're still waiting depending on the allocations on equipment for 2026 that you still have to make some adjustments? Or how do you feel from that perspective? Joseph Lambert: There's some of that fleet we know what we have to do with it. We're building strategies by each individual fleet. But yes, we're waiting to find out these last bids to figure out what the consumption of the remainder of the fleet is. And we'll have a much better idea of that come mid-December. But we're executing -- I can tell you that there's -- we've got 3 more dozers we're looking to send over to Australia because they haven't been in high demand here, and they've been crazy demand down there. So that kind of stuff is going on every day. And we'll have more of a, again, a wholesome picture of the whole -- of the fleet probably in that mid-December discussion. Operator: The next question comes from Sean Jack at Raymond James. Sean Jack: So just thinking about how Canada and Australia, are both seeing their own macro tailwinds split between nation building and critical minerals. Can you touch on the priorities for NOA and how we should expect the company to invest across either geography to get the best, most visible return? Joseph Lambert: Yes. For me, it's getting -- especially in the mining sector, it's getting the maximum out of the assets we have and creating the highest return. We think there's a lot of growth potential we can do in Western Australia, in particular, with very little growth capital. And that creates the highest returns for us. Those are our target markets. I think we can walk and chew gum at the same time, too, is there's -- these infrastructure jobs tend to be very low capital intensity and they free cash flow very quickly. So certainly, we'll be pursuing all aspects of those along with the critical minerals and the commodity opportunities we see in Western Australia. Sean Jack: Right. Perfect. And flipping to Australia, I know it's already been asked, but just thinking about the contractor usage in the period. There's been 2 quarters now where they've impacted margins. It sounds like they were actually on 2 different functions. Wondering what the strategy is going forward to mitigate just overall impact from contractor usage going forward? Joseph Lambert: We've been through this more than once in -- both in Canada and down there. It's just building up your skilled trades workforce through apprentice programs and bench hands. We've done this. We're at the levels we budget to be, but certainly, we see more opportunities for continuing to increase the skilled trades in areas that have high demand, which Australia has been the biggest one right now. So it's following our HR programs and bringing in apprentices and building them up quicker. Operator: This concludes the Q&A section of the call, and I will pass the call over to Joe Lambert, President and CEO, for closing comments. Joseph Lambert: Thanks, Joanna. Thanks again, everyone, for joining us today. We look forward to providing next update upon closing of our fourth quarter results. Operator: Thank you. This concludes the North American Construction Group conference call regarding the third quarter ended September 30, 2025. You may now disconnect.
Operator: Thank you for standing by. This is the conference operator. Welcome to the Pan American Silver 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 Siren Fisekci, Vice President, Investor Relations. Please go ahead, Ms. Fisekci. Siren Fisekci: Thank you for joining us today for Pan American Silver's conference call and webcast to discuss our third quarter 2025 results. This call includes forward-looking statements and information and references non-GAAP measures. Please see the cautionary statements in our MD&A, news release and presentation slides for the Q3 2025 results, all of which are available on our website. I'll now turn the call over to Michael Steinmann, Pan American's President and CEO. Michael Steinmann: Good morning, everyone. I'm glad you could join us to discuss Pan American's Q3 2025 results. Over the past quarter and into Q4, we have benefited from the increase in silver and gold prices and a solid performance on cost. As a result, we achieved record attributable free cash flow of $251.7 million in Q3. On September 4, we completed our acquisition of MAG Silver. While we have had only a 1-month contribution from our 44% interest in the Juanicipio mine in Mexico, we're already seeing the impact on lowering costs and improving margins, underscoring the strategic rationale for this transaction. We account for Juanicipio using the equity method, but report production, cash cost, all-in sustaining costs and capital expenditures on an attributable base to reflect our 44% interest. I'm pleased to say that we have delivered another quarter of strong financial results. Attributable revenue in Q3 was a record of $884.4 million. Net earnings were $169.2 million or $0.45 basic earnings per share. This includes a $21.7 million loss from the sale of a subsidiary and $16.3 million of income from Juanicipio. The loss from the sale of a subsidiary is primarily due to a $28.6 million reduction to the $137.4 million gain we had previously booked on December 2024 of the sale of La Arena related to net working capital adjustments. This was partially offset by a $6.8 million gain on the sale of our 80% interest in La Pepa, a noncore development stage project in Chile, which we've sold for $40 million in cash proceeds in September 2025. Adjusted earnings were $181 million or $0.48 basic adjusted earnings per share. Attributable cash flow from operations was a record of $323.6 million. Cash and short-term investments at the end of Q3 totaled $910.8 million, plus $85.8 million of cash at Juanicipio for our 44% interest. This is after spending a net of $409.3 million on the MAG acquisition, including transaction costs. With $1.7 billion of total available liquidity, we remain in a very strong financial position. Given the strong financial position and cash flow generation, I'm happy to report that the Board has approved an increase to the dividend to $0.14 per common share with respect to Q3 2025. Despite the cash balance at the end of the quarter, reflecting the impact of the cash paid for the MAG acquisition, the Board exercised its discretion with respect of the dividend this quarter given the strong cash flow being generated. While we did not repurchase any shares in Q3 due in part to the blackout associated with the MAG acquisition, we remain prepared to act opportunistically. During the first 9 months of 2025, we have returned $146.9 million in dividends and share repurchases to shareholders, and we will add another $59.1 million with the dividend payment approved yesterday. Turning now to operations. Attributable silver production in Q3 was 5.5 million ounces, including 580,000 ounces from Juanicipio's 1-month contribution. We continue to be pleased by the performance at La Colorada, where the improved ventilation conditions are allowing mine rehabilitation and development rates to accelerate, thereby increasing the number of production areas, particularly in the deep high-grade zones of Candelaria East. Silver production was impacted by lower silver grades at Huaron, reflecting increased development and reduced stope ore mining rates in order to grow the inventory of prepared high-grade stopes, which are expected to enhance future production stability and reliability beginning in mid-2027. Silver segment cash costs were $10.41 per ounce and all-in sustaining costs were $15.43 per ounce. These costs are lower than Q2 2025, already demonstrating the positive impact Juanicipio is having on reducing silver costs and improving margins, even though it has only been in our portfolio since early September. The quarter also benefited from low all-in sustaining costs at Cerro Moro due to high by-product gold production and prices compared to Q2. Partially offsetting these factors was the lower silver production at Huaron and the royalty expense at La Colorada of $8.3 million in Q3, largely payable to a third party as part of a profit-sharing agreement for mining on an adjacent concession. Attributable gold production was 183,500 ounces. As we mentioned during our Q2 call, various technical issues at Cerro Moro, Peñon, Timmins and Minera Florida, as described in our MD&A, were expected to linger into Q3, consistent with our expectation of a back-end weighted gold production. The technical issues at Cerro Moro and El Peñon also reduced silver production in Q3. Gold segment cash costs were $1,325 per ounce and all-in sustaining costs, excluding NRV inventory adjustments were $1,697 per ounce. Overall production and cost across both the silver and gold segments remain in line with our 2025 operating outlook. However, we have raised our attributable silver production guidance to 22 million to 22.5 million ounces and lowered Silver segment all-in sustaining costs to $14.50 to $16 per ounce to incorporate Juanicipio's contribution. All other cost and production guidance remain unchanged. We invested $35.3 million in capital projects this quarter, mainly at La Colorada and Jacobina. At La Colorada, we continued exploration and equipment investments to further expand access to high-grade zones in the deeper eastern extents of the Candelaria ore zone. In September, we announced new high-grade drill results and added 52.7 million ounces of silver to inferred mineral resource, which substantially extend resource potential to the East and Southeast beyond our current mining areas. This is an exciting development that offers significant synergies through a potential 2-phase development approach to our large La Colorada Skarn project. The first phase would combine development of the Skarn with the vein mine, which is expected to result in a higher grade, lower tonnage and less capital-intensive development to what was described in our 2024 PEA. The second phase would involve the cave mine expansion. This phased development approach allows an enhanced vein mine to operate in parallel, utilizing shared infrastructure synergies and enhancing overall project value. A PEA for this 2-phase development approach combined with enhanced vein mining is underway and is expected to be issued in Q2 2026. Furthermore, we are well advanced on partnership discussions that consider this enhanced development approach. At Jacobina, results from the extensive optimization study have identified a number of opportunities to relieve constraints that could potentially benefit mine life, production and operational efficiencies. These opportunities include, but are not limited to: a tailings filtration and filter stack project to relieve existing long-term tailings capacity limitations; mine paste backfill plant project to take advantage of the tailings filtration circuit, thereby enabling an increase in ore recovery in selective high-grade ore zones; and a significant process plant streamlining project to improve reliability, release throughput constraints, reduce mine operating costs and enhance gold recovery. We have recently commissioned a pilot plant on site to demonstrate the benefits that can be obtained by streamlining a planned flow sheet, which has been defined through branch scale metallurgical laboratory testing. We have also engaged a leading engineering firm to develop detailed designs, schedules and cost estimates for completing these optimization projects. We will continue to provide updates on implementing these exciting projects as these engineering efforts advance over the next year. At Escobal, the Guatemalan Ministry of Energy and Mines has held several separate working meetings with the ministries involved in the ILO 169 consultation process, representatives from the Xinka Parliament and the company. The Ministry of Mines has also made several appointments of key personnel to oversee and continue activities for the Escobal consultation process. The ministry has not provided a time line for the completion of the ILO 169 consultation, but discussions remain active and respectful. Before closing, I would like to recognize Steve Busby for his remarkable contributions to Pan American Silver over the past 22 years with 17 years spent as Chief Operating Officer. Steve is transitioning to the role of Special Adviser to the CEO, and I'm grateful we will continue to benefit from his deep technical expertise. I also want to welcome Scott Campbell as our new Chief Operating Officer. Scott brings 25 years of operational experience in Latin America, and I look forward to continuing to work closely with him as we advance our strategy. I will now be happy to take your questions together with the other members of our management team. Operator: [Operator Instructions] First question is from Wayne Lam with TD Securities. Wayne Lam: Just curious on the guidance increase. Would it be safe to assume that the prior guidance for Juanicipio has remained the same as under MAG previously? And just wondering if there's been some modest tweaks for within the Silver segment on the guidance. Just given the deal closing in September, I would have thought the pro forma silver guide would have been slightly higher. So just wondering if there are any other offsets from the other operations in the portfolio? Michael Steinmann: No, it's pretty similar to what MAG had. Obviously, as you can imagine, this is -- we're only in the second month really of having that operation with us. But we assume that the production should be pretty similar to what we've seen in September for the remaining months of the year. Wayne Lam: Okay. Great. And then maybe at Huaron, just on the grades and the increase in the development ore being processed. It's been a couple of quarters now where you've encountered a bit higher dilution on the mining front. And just wondering if that maybe has also a bit a function of the reduction in the cutoff grade just in terms of the process grades come down a bit? And just curious if we should expect a bounce back in grades over the coming quarters or if that's more of an active strategy that you guys are employing to lower the cutoffs to bring in a bit more economic material? Steven Busby: Wayne, this is Steve. I can address that one. Yes, the initiative we started last quarter was to accelerate developments, trying to get ahead, trying to get some high-grade stopes prepared and develop an inventory of stopes to give us more reliability on production. This initiative is going to take us through all of '26 into '27. And so what you're seeing is a lot more contribution of ore from development, which is more diluted than from stope mining. And it's really an initiative to try to build inventory of stopes in the mine that will give us more flexibility in the future once we get all this development ahead of ourselves. That's what you're seeing. Wayne Lam: Okay. Great. And then maybe just last one, just at Jacobina on the optimization studies that are being undertaken. Can you give us a bit more detail on what's being optimized on the mine or at the plant and how that might impact the future operations, if that will be on additional tonnage or lower costs and when we might be able to see the results of that? Michael Steinmann: Yes, great question. And there's a lot of work going on at Jacobina. I'll pass it on to Steve. As you heard there, Steve will retire here as the COO, but he will stick around with us with his incredible wealth of knowledge. Steve will be very important for that kind of expansion work at Jacobina. So Steve, maybe if you want to answer that question? Steven Busby: Sure. I'd be happy to, Wayne, great question. It's very exciting what we're seeing there. The mine itself, the -- it's pretty flexible because we're really mining 7, we'll be bringing on an eighth mining area with Maricota, and it gives us a lot of flexibility in terms of how the mine delivers ore to the plant in terms of throughput expansion, tonnage and that sort of thing. The main focus of the optimization is around the plant itself. This is an old plant. It was originally built in the '80s as a less than 4,000 tonne a day plant. And it's been piecemealed over the years. A lot of components have been added. A lot of circuits have been added to the flow sheet. And it's kind of a complex network of flow, if you will. So we see an opportunity to go into the plant and streamline that plant, remove some of the circuits we don't need, clean up some of the circuitry, try to go to bigger machines, less numbers of them, reduce maintenance costs, improve reliability, improve efficiencies and reduce costs overall, coupled with -- when we look long term at Jacobina, we really see an opportunity to go to a filter stack tailings facility. That opens up a lot of disposal space for us. Conventional tailings, we're going to run out of capacity here probably in the mid-2030s. So we want to bring a filter plant into this flow sheet. We've been working hard. We're looking at vacuum filters like we run at El Peñon. They look quite favorable, and we're kind of proposing a vacuum filter plant that would be situated down at the tailings facility, and it allow us to put a stack that we're designing down below the B2 dam, we call it. And the location of this also provides benefits to us because we can add a modular temporary paste plant and use some of the tails to build cemented paste that we can pump into the north part of the mine where some of our higher-grade mining areas are, and it allows us higher recovery of some of the higher-grade stopes that we wouldn't get without some type of cement at backfill. So that's where all this optimization is coming together. I hope you can appreciate it's a significant brownfield project in and around the plant. So it's going to be -- it's going to require some very careful planning, very careful sequencing of how we make these modifications. And that's where we're working intensely with an engineering company. And as we start to get the designs and the sequencing and the costing sorted out, we'll start to deliver truly what the value of this project is going to be overall. But we're very excited about it. Wayne Lam: Okay. Great. That's a lot of good detail. And best of luck to you, Steve. Steven Busby: Thank you, Wayne. Operator: The next question is from Fahad Tariq with Jefferies. Fahad Tariq: Maybe just on the gold guidance, which didn't change. Can you talk about how you're thinking about the fourth quarter in the context of some of the dilution that you cited at Timmins, El Peñon, some of the development delays you cited at Minera Florida? Just trying to get a sense of kind of the confidence in the fourth quarter on the gold side? Scott Campbell: Yes. Scott Campbell here. We had our challenges certainly in Q3, but we're maintaining the guidance for Q4, and we're confident that, that will be achieved. We did have some dilution in Peñon, and we had some challenges and slight delays when it comes to ground support at both of our mines in Chile, but we're maintaining guidance and things in November have already started to look up for gold production in the southern countries. Fahad Tariq: Okay. And then maybe just switching gears to the updated development approach at La Colorada Skarn. Just in the opening remarks, you talked about the partnership discussions are well advanced. Maybe just any detail you can provide would be helpful. Michael Steinmann: Yes. Look, it's a bit -- well, the discussions are very advanced, but it's too early to share them here publicly. It's looking very interesting. I think that new approach, which we had an eye on, obviously, for a long time to see how we can advance the really high-grade part of our Skarn ore bodies. If you recall, we published a few press releases over the last couple of years with some very impressive long, very wide high-grade intercepts in 2 of the 3 Skarn ore bodies that we discovered. Really the discovery of those high-grade structures in addition that we found during 2025, and we published in September and increased our resource there by, I think, about 53 million ounces already. Really that combination of that high-grade discovery close to surface together with the high-grade wide intercepts of the core part of the Skarn really allow us to go to this phased approach and look forward here to 2 phases, as we said, smaller tonnages will still be an impressive mine, very similar silver output than the original plan we had envisioned, but obviously, higher grade, less tonnage, less capital and then go to the larger cave mine later on in time. So very interesting advances. As we indicated, we'll come out with the PEA in Q2 next year, but a very positive advance on La Colorada and looking forward here to look at those partnership agreements and involve a very strong partner for this really exciting project as well. Fahad Tariq: Okay. Great. And then maybe just lastly, is it fair to say that the partner would only be really for Phase 2? Or are you envisioning them also contributing to the CapEx and being involved in Phase 1? Michael Steinmann: I could very well envision a phased approach there, too, with a more reduced partnership option in Phase I and a larger one in Phase 2, but that still remains to be determined. Operator: The next question is from John Tumazos with John Tumazos Very Independent Research. John Tumazos: We know that you produce a little bit of base metals, too. And a large differential exists with zinc at $1.44 and lead at $0.93. Why do you think the zinc price outperformed where world steel output is down a couple of percent this year? And why do you think lead lags when world auto output is strong, China trending towards 33 million cars record, et cetera? Michael Steinmann: John, look, obviously, the base metals -- and by the way, it's I think, at the moment, only about 8% of our revenue. That will, for sure, increase once we have the La Colorada Skarn in production, but it's a small part of our revenue. When you look at the base metal, I'm sure zinc is pushed and outperforming as being included in several countries in their list of critical minerals. By the way, I'm sure you have noticed that silver got included in the U.S. as well on that list. But as you know, the base metal prices really reflect the outlook on the world economy and where that's moving. And I guess there's still some people worried about where this is going over the next few years, and that's reflected in those prices. But for sure, the inclusion of zinc and critical minerals helps the price. Operator: The next question is from Ovais Habib with Scotiabank. Ovais Habib: Michael and Pan American congrats on a good quarter, leading to a good free cash flow as well. Scott, congrats to you on your new appointment as well. Michael, a lot of my questions have already been answered, but some follow-ups to those questions. Starting off with the question on Cerro Moro, El Peñon, Timmins and I think Minera Florida as well. Obviously, they've had some issues in terms of reconciliation, geotech issues. Do you see these issues lingering into Q4? Or have most of these issues now been resolved? Just to clarify on that front. Michael Steinmann: Ovais, and you recall in Q2 and actually some of those technical issues started, we already mentioned that they will linger into Q3, which we see. So that's obviously the reason why our production profile, especially on the gold is more back-end loaded. As Scott mentioned, we see already an uptick on those grades. So looking forward to meet those guidance goals that we have. And maybe, Scott, do you want to add a bit more color to this? Scott Campbell: Sunil (sic) [ Ovais ], thanks for the kind sincere words. Regarding Timmins, some of the issues -- some of the geotechnical challenges we have involved the squeezing of our production drill holes in the deep central mining zone at the Bell Creek operation. We've been mitigating that through the use of casings, PVC casings and in some cases, we use a sealant or a polymer, and we've had some success with that. We're also installing additional ground support in development headings as we pass through high strain and stress areas using dynamic support. The paint backfill system at Bell Creek recently commissioned is also becoming more and more utilized. We're getting better utilization and the learning curve has really flattened out on that facility. And so we're getting some -- we're seeing a lot of success. And again, the numbers are looking favorable as we head into November, sort of halfway through Q4. Ovais Habib: And just going into 2026, I mean, is this more in terms of getting -- obviously getting ahead of production and development and accelerating development going into 2026? Scott Campbell: Yes. Generally, yes. At several of our operations, we've initiated additional development programs in Q4 to really give us more optionality as we head into 2026. In a couple of cases, we got behind in our development. So we had to acquire new equipment, in some cases, hire external third-party contractors to do that. Huaron and Timmins included. But yes, it's all in our best interest to really ensure our success coming up in later in -- at the end of 2025 and really into 2026. Ovais Habib: Okay. And then just moving on to Juanicipio on the closing of the MAG transaction. Michael, is everything progressing according to your expectations? I mean, are you looking -- how involved are you with operations? And is there a push to get more exploration started around the area? Michael Steinmann: I'm incredibly happy where it stands. I think we all saw a glimpse here what Juanicipio will do for us with only 1 month in Q3, and you see the strong production, strong cash flow coming out of that operation. You can imagine that even higher metal prices right now, how well that asset is doing. Actually, I was just there like last week, and it's just again an impressive operation. And a lot of involvement on the operational teams here on all levels really from operation to metallurgy to geology to exploration, a lot of exploration going on as well. So I'm really, really happy how this has worked out so far. I'm really looking forward to see a full quarter of Juanicipio in Q4, as I said, with a combination of very favorable metal prices as well. Obviously, we come out in early January or mid-January normally, mid- to late January with the forecast for next year, which will include also our -- in our budget, our exploration spending. So you will see all the details there, Ovais, how it looks like for the production profile. But yes, it's -- I would guess it's -- I would say it's at least met or quite a bit exceeded my expectations at Juanicipio. Ovais Habib: And my last question is on La Colorada Skarn. You're looking to announce the PEA in Q2 of next year. Is the announcement of the partnership exclusive of this event? Or you will need to see the PEA before you kind of come to some sort of terms with the partner? Michael Steinmann: No, I think we will be able to announce the partnership earlier. I think as soon as we have a document executed on that, we will release that information. Operator: The next question is from Cosmos Chiu with CIBC. Cosmos Chiu: Michael. Thank you, Steve as well, and congratulations, Scott. Maybe my first question is also on the Skarn technical report that's potentially coming out next year or not potentially, it is coming out next year. As you mentioned, Michael, you got to take a phased approach now with a higher grade lower tonnage deposit upfront. I seem to remember the Skarn deposit is centered around some high-grade centers, the 901 zone, 902, 903. So is there one particular zone that is higher grade? I don't know if you have that answer yet. Are we looking at higher-grade portions from all 3 areas? Are we looking at the upper portions of all 3 areas? How should we incorporate what I know about 901, 902 and 903 into what we can see next year? Michael Steinmann: Yes, Cosmos. The high-grade core zones are mostly 901 and 902. We are actually doing quite a bit of drilling still on 903 and some pretty interesting success here with the Skarn seems to even further extend by quite a good distance. So I think on 903, it's still out there to see if there is a high-grade zone there as well. But when you look at the press releases we put out over the last 2 years on those high-grade intercepts of the Skarn, they're all of them located in 901 and 902. But as I said, it's really the combination together with those high-grade closer to surface structures that we published in September. And then after that showed in a big increase in resources with our reserve and resource update. It's really that combination that allowed us this phased approach. As you can imagine, we were trying for a phased approach from the beginning on it with -- obviously, a very strong project, if you can do it in a phased approach, less capital upfront and increase later when you really understand an underground and you know the orebody well. And as I said earlier on, that doesn't mean that our production profile of silver will be much lower than what we had envisioned in the full large cave option. So there's less execution risk, less capital, probably faster in bringing the project on. And overall, just an exciting development at La Colorada Skarn. Cosmos Chiu: Yes, that sounds great. Maybe a follow-up then. Michael, as you mentioned, with this phased approach, the possibility is that the vein mine could run parallel with both Skarn phases. So is there some thinking in terms of some of that ore from the Skarn could actually go through the current mill? Michael Steinmann: No. The current production mill capacity is around 2,000 to 2,500 tonnes a day. I mean we're talking here about a multiple of that. So we will build a new mill much larger and then have that mill build with the potential to expand down the road way bigger to the Phase 2. But yes, the current operation, the current mill is too small. But the metallurgy is very, very similar mineralization of the Skarn and the veins. So it's an easy project for us to kind of commingle the veins and the Skarn and put that through the same mill. So it's not -- the metallurgical difference is just the current mill is too small for that. Cosmos Chiu: Okay. Okay. Sounds good. So it's going to be a new mill from day 1 for the Skarn, but it could still run in parallel with the potential expansion later on? Michael Steinmann: Yes, that's the exciting advance here is that, obviously, putting the cave mining a bit later allows us to continue to mine those high-grade veins, which it seems like with the exploration, we keep finding more and more of it. Cosmos Chiu: Yes. Maybe I do apologize. I do have a long accounting question here. I just want to get a better understanding of the equity method of accounting for Juanicipio. I was looking at Note #9, and I could kind of follow through. My understanding is that it's 44% of what Juanicipio report 100%. So I can understand the $72 million in revenue, $11.9 million in production costs, $15.1 million in depreciation, so $45.1 million in mine operating earnings. But then it jumps to $37.1 million in net income and comprehensive income, and that's a gap that I don't really fully understand, which drives the $16 million pickup for Pan American Silver at the consolidated level. So could you maybe help me out in terms of that little gap? Ignacio Couturier: Cosmos, it's Ignacio here. And if you want, we can take this offline as well. Yes, if you want, we can take this offline because there's a lot of detail. But basically, we -- this is -- the reporting requirements are -- don't require us to put all the detail in there, but some of the lines that are missing are taxes and other items that are material. But yes, basically, there's a whole bunch of other stuff there that's not included in the income and comprehensive income. Cosmos Chiu: So I work it out to about 18%. Is that a good number to kind of use in terms of that difference or each quarter is a bit different? Ignacio Couturier: I think let's give it a couple of quarters here because this is only 1 month of results. So I would say let's see what the next quarter looks like. And as I said, I'm happy to take this offline with you, and we can talk a little bit about. Cosmos Chiu: I do apologize before asking the question. So I knew it'd be a little complicated. Any other accounting nuances that we should be aware of in terms of Juanicipio? Ignacio Couturier: No, I would say, look, this is the same method that MAG used to report Juanicipio. And yes, it's a little bit tricky because we haven't had this before. And it is difficult to talk about the company performance now given that the performance of Juanicipio is buried into the equity line or the investment in Juanicipio line, both in the income statement and the balance sheet. So we've introduced a few new non-GAAP metrics, including attributable revenue, attributable free cash flow and attributable operating cash flow to help us better understand and talk about the company performance, including Juanicipio. And another thing to keep in mind is really the cash from Juanicipio doesn't -- that's sitting at the JV level is buried in the interest in Juanicipio -- investment in Juanicipio line in our balance sheet. That -- only once Juanicipio JV distributes dividends, will that cash appear in the cash and cash equivalent lines in our balance sheet. Cosmos Chiu: And that cash distribution is somewhat discretionary, correct? Ignacio Couturier: Yes. No, they're on the schedule. Given the transition between MAG and ourselves, it's been a little bit delayed. So it's been a couple of quarters since they haven't -- since the JV has not issued dividends, but there should be a catch-up in Q4 on that. Cosmos Chiu: Okay. Great. And then maybe lastly, on the dividend. Great to see that you've increased it again the second consecutive quarter in terms of that increase. But in terms of the calculation, the $0.14 is a bit of a detour away from the matrix that you've given to us in the past in terms of dividend based on net cash. So I guess my question is, how should we not predict, but what should we expect for the next quarter? That's number one. And number two, how much of the fact that you were not able to use your NCIB in Q3, does that factor into you increasing on a discretionary basis, your dividend in Q3? And will you use the NCIB again in the future? Michael Steinmann: Yes. Look, regarding the dividends, great news. And that's really -- this is kind of a departure from our dividend policy for this quarter and this quarter only. And the reason for it is a very simple one, very strong cash flow generation. You see we nearly recovered already a large part of the $500 million that we used the cash portion that we used for the acquisition of MAG. So it was the Board's view that with this incredible strong cash flow generation, it's just the right thing to depart from the dividend policy for 1 quarter and have the shareholders participate in that a bit earlier. It has nothing to do with the blackout we were in until the transaction closed on the NCIB. We will obviously look again at the NCIB from now on and like before, make share purchases on an opportunistic way. So that is not the reason for the increase. The reason for the increase is that we look at our cash forecast. We look at a strong Q4. And it was just the right thing to have our shareholders to participate a bit earlier in that really, really strong quarter. Cosmos Chiu: I agree as well. Congrats again on a very good Q3 and look forward to the rest of 2025. Operator: The next question is from Don DeMarco with National Bank. Don DeMarco: First off, we saw consolidated AISC guidance lowered substantially. Was there any other contributors to this other than the addition of Juanicipio? Michael Steinmann: No, it's the strong impact of Juanicipio. I mean we will be on track with what we had in our original guidance like we are on the gold side. But as we alluded to when we announced the transaction that this transaction will have a meaningful positive impact to our cash cost on the silver side. And that's really the result that you've seen only with 1 month on it, you already see that result and calculating in the advantage of having Juanicipio for a full quarter in Q4 led us to the lower guidance on our costs. Steven Busby: Yes. I was just going to add, Don, this is Steve. Just to a lesser extent, we are enjoying the benefit of the higher gold prices as well relative to what we use for guidance. So that is helping to offset some of the cost increases we're seeing is that byproduct gold price. Michael Steinmann: And just to remind everybody again, I said that probably every call, there's a lot of factors, important factors on our cost. There can be tailwinds or headwinds that are out of our control and one is exchange rates. Of course, when the U.S. dollar declines, normally our local currency increase and that automatically is a headwind on our cost. But as the added benefit with a lower dollar that we see higher precious metal prices. So that's kind of the system how it plays. When we see a strong dollar, we see pressure on the metal price, but we see a tailwind on our costs in local currencies and vice versa. So keep always in mind that exchange rates are an important part as well. Don DeMarco: Okay. And we look at Minera Florida and Timmins, costs are a bit elevated in the quarter, but of course, the margins are still good. Do you have any performance criteria to identify potential divestment candidates? And can you walk us through your potential divestment pending order? Michael Steinmann: Look, I mean, we did a lot of divestments over the last few years. You probably saw we divested a project in Chile, La Pepa as well for $40 million cash in the quarter. And there's quite a few other smaller projects that are in the pipeline in the works right now by our business development team. I'm pretty happy with what we have right now on our operational side in our portfolio. So looking forward to continuing with those assets. Don DeMarco: Okay. And then on the flip side of that, after MAG and previously the Yamana acquisition, what's a good long-term silver or gold production level that you'd like to achieve or maintain? Michael Steinmann: I think we need to see the final budget on the Juanicipio side before I can answer that question. As you can imagine, it's a very large and important part of our silver production going forward here. Don DeMarco: Okay. Great. Well, we'll keep an eye out for guidance next year on that then. And good luck on the rest of the quarter. Operator: This concludes the question-and-answer session. I'd like to turn the conference back over to Michael Steinmann for any closing remarks. Michael Steinmann: Thank you, operator, and thanks, everyone, for calling in. And another great quarter, record revenue of nearly $890 million, record operational cash flows of $323 million, record attributable free cash flow of nearly $252 million, very strong numbers. That obviously led us to increase for the second time in a row now since Q2 to increase the dividend. It's great to have our shareholders participate not only in increase of our share price, but also in additional return to our dividend policy. So great quarter. I'm really happy where it stands. As I said, we saw the first glimpse of what Juanicipio is able to do here in the full quarter, which will be the first full quarter in Q4. We only had 1 month of the mine in Q3, and we see already a very positive impact. And just to the last question there from Don, we will see an important impact to our silver production here from Juanicipio looking forward. So I'm very happy where we stand. looking forward to a great and strong Q4 and report that early next year, but also report our outlook for '26 and show you in detail how our guidance for that cost guidance and production guidance looks like. So thanks, everyone, for calling in, and have a good rest of the year, and we'll talk in early year, I guess, February or so for our Q4 results. Thanks, everyone. Operator: This brings to a close 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: Good day, and thank you for standing by. Welcome to Better Collective Q3 2025 Presentation. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Better Collective VP, Investor Relations and Communications, Mikkel Munch Jacobsgaard. Please go ahead. Mikkel Jacobsgaard: Thank you very much, and good morning, and welcome to Better Collective's Q3 webcast. My name is, as you just heard, Mikkel Munch Jacobsgaard, and I'm the Vice President of IR and Corporate Communications here at Better Collective. I'm joined today by our Co-Founder and Co-CEO, Jesper Sogaard; and CFO, Flemming Pedersen, who will provide today's business update in connection with our Q3 report that was disclosed yesterday. Please follow me to the next slide. We ask you to pay attention to this slide where we display our disclaimer regarding any forward-looking statements in today's webcast. Please turn to the next slide as I hand over the word to Jesper for the third quarter highlights. Jesper Søgaard: Thanks a lot, Mikkel. Good morning, all, and thank you for joining today's webcast. Let's dive into the Q3 highlights, and please follow me to the next slide. Overall, we are happy to show good underlying growth in Q3 when normalizing for the sports win margin. During especially September, the Sportsbook saw player-friendly results, which dampened revenue and earnings by EUR 10 million when comparing to the same period last year. Group revenue reached EUR 78 million and EBITDA came in at EUR 21 million. I'm very satisfied with this performance despite the low sports win margin, which is an external factor we cannot control and also that normalizes over time. In Brazil, we continue to see good activity levels in line with recent quarters with revenue above our expectations. Although the market remains affected by the ongoing regulatory transition, dampening our ability to send new customers to our partners. In North America, revenue share more than doubled compared to last year, further strengthening our base of recurring revenue in the region. Our new KPI, the value of deposits reached EUR 726 million, up 2% year-over-year. Considering the continued regulatory transition in Brazil, this stable development is a strong achievement and confirms the solid quality of our underlying player databases. On the cost side, group costs continued to trend down, reflecting the successful execution of our cost efficiency programs. Finally, we maintain our financial guidance for the year and continue our share buyback, which we announced with the Q2 report. Please turn to the next slide. On this slide, you can see the main factors influencing our revenue performance in the third quarter. First, the sports win margin reached a record low in Q3, impacting revenue negatively by EUR 10 million. Secondly, the ongoing regulatory transition in Brazil continued to weigh on performance, contributing with EUR 4 million negative impact, although this is better than expected. Thirdly, we had an FX headwind of EUR 2 million. On the positive side, the North American revenue share doubled, showing EUR 4 million of growth. Furthermore, we saw underlying growth in the business of EUR 9 million. This was particularly within Paid Media, Sports Media and our talent-led media. Altogether, this brought us to a Q3 revenue of EUR 78 million. Please turn to the next slide where we look at the development in EBITDA. EBITDA was largely flat with key components being the revenue-related effects just discussed accounted for a EUR 3 million negative impact, where the sports win margin had full negative effect. Last year's cost reductions included temporary one-off items such as variable pay reversals, which created a EUR 6 million positive effect last year. We also continued to invest in growth, particularly within Paid Media, where higher activity levels led to EUR 2 million in additional costs. Lastly, our cost efficiency program launched in October last year delivered EUR 8 million in cost reductions. Altogether, this brought us to a Q3 EBITDA of EUR 21 million. Please turn to the next slide. Following Q3, our 2025 and 2027 financial targets remain unchanged and are shown here. We remain confident in delivering on our 2025 guidance with Q4 expected to be our largest quarter of the year, consistent with prior years. The quarter will be supported by a higher top line in the busy sports season and continued cost discipline as demonstrated in Q3. Please turn to the next slide. In September, we reached one of the most defining milestones in Better Collective's history with the launch of Playbook, our new AI-powered betting solution. Playbook marks the beginning of a new chapter for Better Collective as we expand beyond customer acquisition to also include user retention and long-term engagement. This is a vision my co-founder, Christian and I have shared since founding the company to empower fans with smarter, more personal and more intuitive ways to engage with sports and betting. By using AI to understand intent and context at scale, Playbook transform fan engagement into real-time data-driven experiences. This allows fans to seamlessly make bets directly from the communities and platforms where they already spend time, whether that's on X, in messaging apps or across our own media brands. Our partnership with X in the U.S. positions us exactly where sports conversations naturally happen, giving us access to unmatched scale, data and first-party insights. Within just a few weeks, Playbook has already generated millions of bets placed and shown exponential growth, clearly validating both the product and the vision behind it. Ultimately, for me, Playbook represents the next evolution of Better Collective, transforming how we connect with fans, deepening engagement and creating lasting value for users, partners and shareholders alike. Since launching Playbook in September, we have seen exceptional and rapidly accelerating growth. This measures when a user is directed to a sportsbook after choosing a bet slip suggestion. Very encouragingly, almost all of these clicks result in bets being placed, which clearly demonstrates the strong user intent and conversion rates of the product innovation. We are very pleased that only a few weeks after launch, Playbook has already generated millions of bets placed with our partners, a very encouraging start for what we see as a long-term growth driver for Better Collective. Please turn to the next slide and let Flemming take us through the financial performance for the quarter. Flemming Pedersen: Thank you, Jesper, and good morning to you all. Please follow me to the next slide as we dive into the financials. As Jesper mentioned earlier, the result ended in a 4% revenue decline to EUR 78 million. However, when we normalize the sports win margin impact, which hits both revenue and EBITDA, the picture changes and on a normalized basis, we would have seen organic growth. As Jesper mentioned, we do see fluctuating sports win margins from time to time, and it is something we cannot influence and it is just dependent on sports results, which in this quarter and in September, in particular, have been in players' favor. Let's turn to the next slide. A key strategic focus for us continues to be the expansion of our recurring revenue base, which provides a solid and predictable foundation for the business and represents significant unrealized value over time. Year-over-year, recurring revenue declined by around 5% to EUR 50 million. This was primarily driven by the lower revenue share, reflecting the unfavorable sports win margin in the quarter as well as the ongoing regulatory transition in Brazil, where the market was reset by 1st of January following the new market regulation. Importantly, we continue to send new customers on revenue share agreements. In this quarter, the ratio was more than 80% of NDCs sent to partners operating on revenue share terms. A significant portion of this revenue is still unrecognized and will materialize over time, further strengthening our long-term earnings potential. In the last 12 months, we have generated EUR 160 million in revenue share income. Please turn to the next slide. Continuing on recurring revenue, let's take a look at our North American revenue share development. Back in Q3 2022, we began shifting our U.S. business model towards revenue share agreements, gradually moving away from CPA agreements to the extent possible. During 2023, parts of our revenue share agreements included upfront components, which temporarily boosted our reported revenue share income to levels similar to what we are seeing today. However, that structure is now almost fully transitioned to pure-play revenue share. Today, the revenue share we generate in the U.S. mainly comes from pure-play revenue share and only a small degree upfront payments. This entails a significant improvement in the quality of earnings as it means that the revenue we recognize is fully recurring and directly tied to player performance over time, providing more stability, predictability and long-term earnings potential. Due to the nature of the U.S. market where players are often incentivized by large bonuses, it has taken quite some time to get here. But we knew this when we started, and now we are seeing the returns coming. As you can see on this slide, revenue share income in North America doubled compared to last year. We expect this steady buildup to continue, further strengthening the foundation for our recurring revenue base. Please follow me to the next slide. Let me then turn the focus to our cost base. Our cost base reached its peak in mid-2024 at EUR 70 million per quarter. In Q3 2025, costs were 18% lower compared to that peak, now standing at EUR 57 million. This reflects a leaner and more efficient operating structure that positions us well to the future growth. We have communicated a lot about this in previous quarters. And while we are still focused on optimizing the business, we feel that we are in a good place now with the right organizational structure in place for the coming years. Included in the costs during the past quarters are also investments in new business initiatives such as the growth investments in paid media, the development and launch of Playbook as well as a number of new other initiatives. Please turn to the next slide. EBITDA before special items was largely flat year-over-year, resulting in a margin of 27%. However, when we normalize for record low sports win margin, the underlying performance is strong and the result of the business ability to drive new business across platforms and the disciplined cost management. As a reminder, a negative sports win margin impacts both revenue and EBITDA with equal impact. Please turn to the next slide. Take a look at our free cash flow development. Starting from Q3 year-over-year, EBITDA before special items of EUR 65 million. We saw a positive change in net working capital of EUR 7 million. Net financial expenses and tax payments each amounted to EUR 13 million, so EUR 26 million in total. In addition, we had EUR 14 million in other investments where the major part is related to our media partnerships. Altogether, this brings us to a free cash flow of EUR 32 million year-over-year, fully in line with our expectations and supporting our full year free cash flow guidance of EUR 55 million to EUR 75 million. Not shown on this slide, but worth mentioning is that our operational cash flow before special items was very strong, ending in a cash conversion of 168%, which reflects a healthy underlying cash generation from our core business. Lastly, regarding financing, in September, we entered into a new 3-year committed bank facility of EUR 319 million with an additional EUR 80 million accordion option. This facility strengthens our financial flexibility and supports our ability to execute on strategic priorities. We are very happy with this strong backing from our main banks. Please turn to the next slide. Over the past year, we have seen a decline in NDCs largely driven by the slow dropdown in Brazil, where welcome bonuses remain prohibited. However, as we mentioned in our previous webcast, while NDCs continue to be an important metric, the value of deposits provides a more meaningful view of the actual performance of our revenue share databases. As shown on this slide, the value of deposits has continued to grow consistently over time, underlining the health and quality of our recurring revenue base. Even more important to highlight, the value of deposits grew year-over-year, which is a solid achievement considering the ongoing regulatory transition in Brazil. A key driver of growth in the U.S. market characterized by significant higher player values compared to other markets as well as the Brazilian growth in past years. Please turn to the next slide and I hand the word back to Jesper for the key takeaways of today. Jesper Søgaard: Thank you, Flemming. And please turn to the next page. Before we close, let me summarize the key takeaways from the third quarter. Group revenue came in at EUR 78 million and EBITDA at EUR 21 million, both impacted by the record low sports win margin. Despite that, the underlying business showed solid growth across core markets and businesses. Brazil remained active, though still affected by the ongoing regulatory transition, while North America revenue share more than doubled compared to last year, further strengthening our recurring revenue base. Our new KPI, the value of deposits reached EUR 726 million, up 2% year-over-year, confirming both the quality and stability of our player database. Group costs continue to trend down, reflecting the ongoing execution of our cost efficiency program. During the quarter, we launched Playbook, which is a significant milestone for our company. Finally, we maintain our financial guidance for the year and initiated a new EUR 20 million share buyback program, bringing the total share buyback programs launched this year to EUR 40 million. All in all, we are entering the final quarter of 2025 with a leaner structure, a stronger recurring base and positive momentum heading into 2026. Thank you for your attention. Let's move on to the Q&A. Operator: [Operator Instructions] We will take our first question, and the question comes from the line of Hjalmar Ahlberg from Redeye. Hjalmar Ahlberg: Maybe to start a few questions on the Playbook product there. What do you see in terms of operator feedback this far and maybe some comments on how they potentially can pay for this product in terms of the retention you provide? Jesper Søgaard: Well, thanks, Hjalmar. First off, we -- I think what really matters and where this start is that there's great user adoption, like we are really pleased with how the sports betters are utilizing this product and basically are able to place bets more conveniently. And then on our partner side, we are seeing good feedback. And basically, I'm pleased with how they also engage with this product. I think when you consider the current sort of quality of Playbook is that it makes it super convenient to place a fairly complex bet, say you want to put on a bet on a single game with many different parts of that single game parlay. That's very cumbersome to actually place within a sportsbook app, and especially if you have seen on X, where we have partnered, some experts sharing their bet slip with, let's say, 10 different picks, it will take you a lot of time to place that, so we really create convenience about placing that particular bet. And for the sportsbooks, these single-game parlays or multi-game parlays are quite attractive due to the margin profile of such tickets. Obviously, they have higher odds and basically are more like a lottery ticket, but that also leads to an attractive margin profile for the sportsbooks. And we really facilitate a higher number of such bets flowing through to the sportsbooks, so it's -- it has been well received. And yes, we are well aligned with the sportsbooks on this product. Hjalmar Ahlberg: I'm just curious about this product. I mean, how long have you been working on the development of the product? And also, interesting to hear if you have any -- I mean, in terms of product development, are you looking to do more in terms of products that are focused on retention compared to acquisition? Jesper Søgaard: Yes. So, this is actually a product evolution, which started with our quick slip integrations that we did and then basically applying AI as the big unlock here, which allows for that context recognition and matching on the sportsbook side. And no doubt, we are really excited about this product, and I'm so impressed by our product organization who've done a great, great job of delivering this product in a short period of time, ready for the start of the NFL. And we'll continue to invest in this product and develop it, and ultimately, it's about creating convenience for the sports punters and help them place the bets they want to place, but also in the future, place the kind of bets they probably had not considered and could be inspired by our product. So, we're investing a lot into this product and definitely see still a lot to be done in developing the full vision of Playbook. Hjalmar Ahlberg: And also on North America... Flemming Pedersen: No, I think just to be fair, you also asked the question to monetizing, Hjalmar. And I think you can say -- we actually you can say went slow in the beginning, but we have been surprisingly -- positively surprised, I would say, about both the adoption, but also the partner engagement. So, we are already seeing, you can say, that product monetizing. Still, it's in the early phase, of course. And as Jesper said, it's focused on user adoption. But I can say, from my chair, we are quite pleased with that already. Hjalmar Ahlberg: Sounds good. And also, good to see some really strong revenue share income in North America. I just wanted to hear if you can maybe elaborate a bit. I mean if you compare North America, if I understand it correctly compared to Europe, it's maybe not always the same length or lifetime permission contract. How do you think that will evolve over time? I mean, do you think that will -- I guess it is still a long time before that make an impact. But yes, if you can comment anything how we should view that compared to Europe, for example, if you understand my question. Flemming Pedersen: Yes. I think for revenue share in the U.S., as I also mentioned, it has taken us a long time where we have been sort of not seeing a lot of revenue from all our investments we have made in revenue -- sending revenue share players, if you like. Because of the nature of the market where bonuses are so big in comparison to other markets, so it takes a long time before the player becomes profitable. But now we are seeing that, you can say, coming into the positive territory, and of course, that's very pleasing to see and also the player values that we have we assessed in the beginning, we are also happy with what we are seeing eventually. Hjalmar Ahlberg: Got it. And a final question, just on the costs there. I mean you see continued good progress on cost savings. And it also looked like the staff cost was down quite a bit compared to Q2 this year sequentially and also the number of employees, Is that something temporary in Q3? Or is it more like costs that will remain even going into Q4? Flemming Pedersen: Yes, I think it is, you can say, a reflection of the cost efficiency program we have been running. So, I think that's just, you can say, the new base basically. Operator: We will take our next question. Your next question comes from the line of Edward James from Cantor Fitzgerald. Edward James: Great. It's just primarily on guidance, and I'd be interested if you could just unpack what is baked into both the low end and the high end of guidance for fiscal 2025, both on revenue and for EBITDA margins and just to understand that bridge because obviously, the guidance is unchanged, but it leaves quite a wide range of outcomes for the single quarter of Q4. So, any comments there would be appreciated. Flemming Pedersen: Yes. Flemming here. You can say the guidance will basically be that we perform as expected in what is our biggest quarter by seasonality. If you look at the Q4 last year, it's sort of more or less in line with that with some bit of growth. So, we are pretty confident on that. Of course, there is also, you can say, to the higher end, sports win fluctuations. Now we have seen a very low sports win margin in September. So, you can say within that range, there's, of course, also the win margin fluctuations. So, I think that's the comments I can make to that. Operator: [Operator Instructions] Your next question comes from the line of Poul Jessen from Danske Bank. Poul Jessen: Yes. I have 2 questions. Coming back to the Playbook, could you put a little more color on how it works if a client go on to accept a suggestion for multi-bet and that is then placed at non-par at a sportsbook where you have no agreement, it's still put on. But what is then your intention to showcase in the future that you will generate traffic and then make a deal? And then secondly, if he has no -- if he's not a registered player at a sportsbook then you will see revenue from those new players maybe in 2 years. Is that the way we should understand? Jesper Søgaard: Poul, thanks for the questions. Yes, so there are actually different monetization models in place. And like starting with the last one, we obviously have sort of the normal affiliate deals in place with our partners. So, if we send a new customer to them, that player is being tracked to us. And then we also have sort of more retention-based models, where it's based on volume, and where we can also make money from players that we have not sent in the past. But of course, there are different models in place, and we work with several sportsbooks on this. So, there are basically different models in place. But I think overall, we are quite pleased with sort of the ways we can monetize this product and also basically just gaining a lot of very attractive and interesting data insights on this particular audience. Poul Jessen: Okay. And the second question is about the prediction markets. That has been putting a lot of pressure on the betting companies during October and into November. So how do you look at it? Are you totally neutral, so you don't care if it's one or the other who wins that game? You're just happy that it will create more competition and therefore, improve your value. But are you having a partnership across the full space? That's question number one. And then the second is on Flutter yesterday, saying that they're going to launch prediction-based betting nationwide in December. Yes, if you could put some views on that. Jesper Søgaard: Yes. Yes, sure. I can do that, Poul. And I think it is, of course, a very big theme right now, the prediction markets, and clearly, a win-win for us. At a high level, prediction markets are gaining traction in the U.S. because they give a real-time view of what people actually think will happen, not what polls or headlines suggest. They let people express their expectations in a transparent way. And this isn't a new territory for us. I can say personally, I've been betting with Betfair for more than 20 years, and Betfair has been a customer of ours. So, we are very used to the European side of our business, to the prediction markets where you have betting exchanges. From a U.S. sports industry perspective, the growing attention around prediction markets underlines a very strong underlying demand for bet-type products. As these platforms become more visible, they can help push momentum for broader regulation of online sports betting in more states. And I have probably one particular state in mind, like California, being the single biggest opportunity in the U.S., and that would be very positive for the whole ecosystem, including us, if we were to see any progress there. And as I said, for Better Collective, this is clearly a win-win. We already work with the key players in prediction markets and monetize traffic in States where online sports betting is still not regulated. And if prediction markets help accelerate the regulation of online sports betting, we benefit from that as well. So, regardless of which way the market develops, we are in a strong strategic position to capture value on both sides. And also alluding to Flutter that you mentioned, they are also signaling increased spending related to this ecosystem. And I think books have been speaking to increased spending related to this ecosystem. And obviously, I do believe suppliers will benefit from that. Poul Jessen: And in the prediction part, is that revenue share as well? Jesper Søgaard: Well, in general, we have affiliate models in place, and the way we monetize this is not something we specifically comment on. Poul Jessen: And then the final one, just a clarification about the headwind of EUR 10 million in revenue share. Is it fair to assume that more or less all of that is coming from Europe and the rest of the world, as the U.S. was already very low last year? Flemming Pedersen: Yes. Flemming here. Thanks, Poul. It's basically on both sides of the Atlantic, if I can put it that way, that we have seen headwinds. And also, to be transparent, you can say on a normalized win margin, you can say we would have seen a EUR 7 million decline. So actually, we had some tailwind in the previous year's Q3. Hence, why the year-on-year comparison is a bit bigger. But yes, it was basically both in the U.S. and the rest of the world. Poul Jessen: But if you only had EUR 4 million in the U.S. last year, then there is a limit on how much you could lose over. Flemming Pedersen: Yes. But you can say it is growing, and more and more partners are coming into positive territory, hence, where we see the impact. You don't see the impact on a partner where you are in negative revenue share territory. So that's sort of the shift. But I think going forward, we will include the win margin comments. We have only done that when we have seen some sorts of exceptional moves. So, to put a bit more color on that. Operator: There seems to be no further questions from the phone lines. I would like to hand back for any webcast questions. Mikkel Jacobsgaard: We have a few online here. So, if we start with one here, I guess, for you, Jesper. What is the reason for the NDC trend? And last quarter, you reported a split for the NDCs in Brazil and the rest of the world. Why is that not shown this quarter? Jesper Søgaard: Yes. First off, like we don't intend to show that every quarter. But I think the main message from that was the impact of Brazil and no sign-up bonuses, and we are seeing a similar picture in Q3. And then obviously, also last year with Cap America and the Euros, also NDC drivers. So, I think more or less, it's as expected in Q3, what we are seeing from NDCs. Mikkel Jacobsgaard: Thank you. And then we are getting a few questions that I'll bundle into one in terms of what the expectations are for sports win margin heading into Q4, and what normally also happens when you have such a low sports win margin in one quarter? Flemming Pedersen: Yes, I can take that. Normally, we forecast sports win margin on a historical basis, and that's also the case for Q4. So, no extraordinary, you can say, in that for the full year forecast. Mikkel Jacobsgaard: Thank you. Then we have a bunch of questions related to the Playbook that I think have already been answered earlier on in the call in terms of monetization and partners and so on. So, I think we'll leave it at that. But we do have a question on the guidance as well. Also, I think that was also answered. I think Ed asked us that question from Cantor in terms of Q4 and what our guidance expectations were. Then there is a question related to prediction markets, more specifically in terms of new depositing customers, whether that's something that we're seeing already now, and at what levels? Jesper Søgaard: Yes, we can confirm that we are sending NDCs also to prediction markets. Mikkel Jacobsgaard: Then there's a question related to our NDCs and the mix between revenue share and CPA, and that was around 80% for this quarter. So, I'll take that one. There's also a question, I guess, for you, Flemming, related to cost savings. We are being congratulated on the work. And it seems like the question is about whether staff costs will stay where they are or if we have more expectations for those going forward? Any expectations for those? Flemming Pedersen: Yes. I think we have sort of also, in connection with Q2, stated that now we have sort of ended our cost efficiency program. So now we sort of see a normalized level of cost, and that is also what we have built into our future guidance. Mikkel Jacobsgaard: Thank you. Then we have a question, I guess, for you again, Jesper, turning back to prediction markets and whether we expect both to work with prediction market platforms and sportsbooks on, and to work with prediction markets. Jesper Søgaard: Yes. I think right now, it's quite clear that the entire market is being embraced by all participants, both in sports betting and also more on the financial side. And as I alluded to earlier in -- sorry, it’s a bit lengthy reply to Poul's question about prediction markets is that it's essentially a win-win for us as we can work with all of them. When you look at the audiences we have across our big brands in the U.S., this is like key audience for these products. And we also have a significant audience from all states in the U.S. on our platforms. Mikkel Jacobsgaard: Thank you. There are no further questions online. So, thank you very much for showing interest in Better Collective. Have a nice day. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Hello, and thank you for joining us for i-80 Gold's 2025 Third Quarter Conference Call and Webcast. Today's company presenters include Richard Young, President and Chief Executive Officer of i-80 Gold; Paul Chawrun, COO; and Ryan Snow, CFO. Before we continue, please note that some of today's comments may contain forward-looking statements, which involve risks and uncertainties. Actual results could differ materially. I ask everyone to view Slide 2 of the presentation, which is available on i-80 Gold's website to view the cautionary notes regarding the forward-looking statements made on this call and the risk factors related to these statements. Following today's formal presentation, we will open up the call to your questions. I will now hand the call over to Richard. Richard Young: Ludy, thank you very much, and hello, everyone, and thank you for joining us today. Looking at Slide 3. The third quarter marked another solid quarter of execution with visible progress toward the key milestones within our development plan that we launched 1 year ago today. We continue to advance towards our goal of creating a Nevada-focused mid-tier gold producer. At Granite Creek Underground, project ramp-up continues. Mine grades and tonnages continue to reconcile well against the model. And groundwater is being managed with greater control, thanks to the newly improved infrastructure installed in Q3, while we make progress on a permanent disposal solution, which is on track for the end of Q1 2026. As a result, we expect to meet our 2025 consolidated guidance of 30,000 ounces to 40,000 ounces of gold. Importantly, gross profit continues to improve as we stabilize Granite Creek, moving from a loss a year ago to a small profit, still a long way to go. On the development front, in September, construction commenced at Archimedes as planned, which is an important milestone marking the start of our second underground mine. Start-up activities and decline development are tracking very well. The Lone Tree plant refurbishment study is substantially complete. At the same time, drilling programs, technical studies, and permitting activities also progressed across the portfolio during the quarter, keeping us on track towards our key project milestones. The prize here is to realize the net asset valuation of the 5 gold projects as outlined in the most recent PEAs, which indicate a total valuation of approximately $5 billion under a $3,000 gold price scenario. Looking at Slide 4. I believe that the company's success depends on its people and culture. In this quarter, we continue to strengthen both. Beyond geology, Nevada's skilled workforce is a key reason it remains one of the best mining jurisdictions in the world. We've hired quality talent over the past 3 months in key roles from engineering, geology, construction management to permitting and community engagement that will help drive project execution from the ground up. With our focus on long-term value creation, we continued with steps to further mature as a company. During the quarter, we advanced an initiative to refresh our mission, vision, and values and establish a sustainability strategy with ERM, one of the leading sustainability firms in the field based on our new development plan. In addition, we're in the process of expanding our focus on performance-based culture across the organization. All of these initiatives will be rolled out shortly, and they are very important as we look to attract and retain the best people in Nevada to execute on our development plan. As i-80 grows, we're building a company that reflects not only operational excellence, but the values that we stand for. We also continue to evaluate ways to accelerate value creation, such as the potential to bring forward a pre-feasibility or feasibility study on Mineral Point, our most valuable asset to enable earlier permitting. That leads me to the recapitalization plan. We're engaged with a number of groups and remain confident that we'll secure a financing package by mid-2026 to support Phase 1 and Phase 2 of our development plan as well as the engineering and permitting efforts required for Phase 3, which is Mineral Point. I'll now turn the call over to Paul to expand on the project updates. Paul? Paul Chawrun: Thank you, and hello, everybody. Turning to Slide 5. Operations at Granite Creek and Archimedes have made good advances over the quarter. There are many moving parts across the portfolio, but we continue to execute and derisk the plan with the necessary work underway. At Granite Creek Underground, mining activities continued to ramp up during the quarter with increased access to mineralized material from ongoing stope development, assisted by improvements to the dewatering infrastructure installed during the quarter. September was a particularly strong month for advancement of the main decline with record monthly development. Total mined ounces and tons continue to reconcile well on a level-by-level basis when compared to the current geological model. As we continue to ramp up operations, we continue to increase the drill density to improve ore control and the overall mining productivity. In the quarter, we mined approximately 15,000 tons of oxide mineralized material at a grade of about 9.8 grams per ton of gold. Note, we continue to encounter higher-than-anticipated high-grade oxide material at depth. We also mined approximately 20,000 tons of sulfide material at a grade of about 10.7 grams per ton, plus an additional 15,000 tons of incremental low-grade oxide material of just under 3 grams per ton of gold. Gold sold totaled 7,400 ounces and 16,400 ounces for the quarter and 9-month period, respectively. The stockpile of sulfide material, which is processed by a third-party autoclave was normalized by quarter end. Regarding the dewatering program, we've made significant progress and are now able to remove this from the underground workings as needed. A more reliable pumping system was commissioned during the quarter, enhancing operational efficiency and enabling more effective water management in the active mining areas. Of the 2 additional surface groundwater wells planned, one is now complete, and we are currently drilling the second. To support long-term groundwater management and future operating stability, installation of a second larger water treatment plant remains on track for completion at approximately the end of the first quarter of 2026. This plant is designed to enable the ultimate discharge of water to prevent it from re-entering into the underground workings. At Lone Tree and Ruby Hill, we continue recovering gold from the existing leach pads with a total of approximately 2,000 ounces recovered and sold in the third quarter. Moving to Slide 6. Drilling of the South Pacific Zone continues to progress well at Granite Creek underground. Just under 10,000 meters of core drilling was completed by the end of the quarter from 20 of the 40 planned holes. As of today, we have completed 35 holes, but have added an additional 7 holes to the program. As outlined in a press release in September, initial assay results from the first 6 holes confirm robust high-grade mineralization throughout the South Pacific Zone with several strong intercepts that confirm continuity and the potential for expansion to the north and at depth. The deepest and furthest step-out hole intersected primary fault structures where expected and returned standout grades, including 33.6 grams per ton over 2.9 meters and 29.7 grams per ton over 3.6 meters. And overall, this intercept was over 21 meters at just over 10 grams per ton. A summary of the assay results are outlined in the September 10 press release available on our website. Encouraged by these results, drilling advanced beyond the current structural boundary, opening a new untested area to potentially expand the known mineralized areas. The program remains on track for completion in December of this year, supporting a feasibility study with an updated mine plan targeted for completion late in the first quarter of 2026. Overall, we're very excited with the turnaround progress and longer-term potential at Granite Creek. Turning to Slide 7. Things are off to a great start at Archimedes underground. In early September, we received permits to the mine -- to mine the upper level above the 5,100-foot elevation to initiate construction. Underground development is advancing above expectations, reaching approximately 300 feet at the end of the third quarter and over 1,000 feet of drift advance as of early November. Work is underway on the geochemistry and hydrogeological technical studies required to secure permits below the 5,100-foot elevation. Beyond permitting and development, infill drilling commenced in the Upper 426 zone, the first week of November as planned. Initiation of drilling in the Lower Ruby Deep zone is scheduled for the second quarter of 2026. In total, the program comprises of over 175 holes and 55,000 meters of core, forming the basis of a feasibility study targeted for the first quarter of 2027. Next, let's turn to Slide 8 to discuss the progress at the remaining projects. At Cove, over 40,000 meters of infill drilling was completed on a 30-meter spacing across the Gap and Helen zones. The results of this work delivered meaningful advances for the Cove project, which significantly strengthened our geological understanding to improve confidence and continuity and grade, improved understanding of the metallurgical response to optimize feed and gold recovery in the autoclave and positions Cove for a strong resource conversion from inferred resources to higher confidence categories. The feasibility study is progressing as planned with completion expected in the first quarter of 2026. Major permit applications are also underway in anticipation of an EIS process. Moving to Slide 9. At Mineral Point, engineering work continues to progress to support permitting and define the timing of a pre-feasibility or feasibility level study. Given the project's strong economics and potential valuation uplift, a review of the completed technical work is underway to assess opportunities to accelerate drilling and the timing of studies subject to available capital. Moving to Slide 10. At Granite Creek Open Pit, the technical baseline work to advance the project towards pre-feasibility or feasibility study continues. An initial project narrative was provided to the regulatory authorities in the quarter to initiate field studies, and we anticipate an EIS process will be required. Geotechnical drilling and other field studies have been deferred into next year due to ongoing updates to the Granite Creek Underground operating permits, which are a priority. As a result, we are currently reviewing new timing for study completion with a lens to optimize future growth plans. Granite Creek Open Pit remains a Phase 2 opportunity with the potential to contribute to company-wide production towards the end of the decade. Turning to Slide 11, for an update on the refurbishment of our Lone Tree plant. Early works progress is on track and the updated Class III engineering study is substantially complete. The study updates an internal feasibility study that was completed in 2023 with design optimization and value engineering initiatives, includes a filter tail system, updates cost estimates with significant detail as there are approximately 14,000 lines for the project controls and a detailed execution plan completed jointly with our owners team leadership. Overall, the results are largely in line with our expectations. And once finalized, we expect to share these results in the coming weeks. In the meantime, the Board approved a limited notice to proceed in the third quarter, allowing detailed engineering to begin and enable the procurement of long lead equipment, which is progressing this quarter. The plant is permitted for the existing operational components in use. However, new and revised operating permits will be needed updating for the air, water, a new mercury abatement system, and revised closure plan that incorporates dry stack tails. The necessary environmental permit application are underway for the initiation of construction. A construction decision is anticipated in the second quarter of 2026 and a plant commissioning is targeting in the first gold pour for the end of 2027. Restarting the Lone Tree Autoclave is a cornerstone investment for the company, providing increased processing capacity and higher anticipated margins for the high-grade material feed from our underground operations. And with that, I'll now pass it over to Ryan for a financial overview. Ryan Snow: Thank you, Paul. Starting my review with Slide 12. Third quarter gold sales nearly doubled over the prior year period to approximately 9,400 ounces. In addition, the company had approximately 3,400 ounces of gold in finished goods inventory at quarter end due to the timing of sales. Total revenue from gold sales increased to approximately $32 million for the quarter, driven by higher ounces sold and a higher average realized gold price of $3,412 per ounce. Cost of sales for the quarter rose over the comparative prior year period, mainly due to higher processing fees from increased toll milling of sulfide material. As Richard highlighted, we have seen a swing in our year-to-date gross profit from a loss in 2024 to a gain in 2025, a roughly $24 million increase. And Q3 marks our fourth consecutive quarter of gross profit. For the quarter, the company reported a net loss of approximately $42 million or $0.05 per share, which is similar to the prior year period. This net loss reflects the development stage of the company and our current period of strategic investment. Also, under U.S. GAAP, which we transitioned to last year, predevelopment, evaluation, and exploration costs are expensed until we declare mineral reserves. Cash used in operating activities of approximately $15 million compared to about $24 million in the prior year as a result of higher gross profit and higher working capital, partially offset by increased predevelopment, evaluation, and exploration costs that were expensed. We closed the quarter with a cash balance of approximately $103 million, a decrease from the previous quarter due to development spending and continued investment in drilling programs to support our technical studies and development plan. This balance is in line with expectations in our recapitalization plan. Moving to Slide 13. We're actively moving our recapitalization strategy forward. During the first half of the year, we secured sufficient capital to fund just over $90 million in construction activities, drilling, permitting, and technical studies across all 5 gold projects as well as the Lone Tree plant from May 2025 through mid-2026. We continue to execute a strategy that is focused on funding Phase 1 and Phase 2 of our development plan, which could include a new senior debt facility in the range of $350 million to $400 million, a royalty sale, and the potential sale of our non-core FAD project. The positive response from lenders and capital providers to date reinforces the strength of our assets and the significant value creation opportunities we see ahead for i-80 Gold. With that, I will now turn the call back to Richard. Richard Young: Well, thank you, Ryan. Looking at Slide 14, you'll see a number of catalysts on the horizon. We're entering a transformational period with a clear line of sight to major milestones over the next 12 to 18 months. During this time, we expect to complete the recapitalization to fund Phase 1 and Phase 2 of our development plan, complete the engineering study for the Lone Tree plant and commence the refurbishment, achieve steady-state production at our first mine, commence production at our second mine Archimedes and ramp up, and lastly, complete feasibility studies for our 3 underground mines as well as the Granite Creek Open Pit and possibly Mineral Point. These efforts will run in parallel with permitting and ongoing drill programs. From a valuation perspective, i-80 Gold continues to trade at a deep discount to comparable developers despite a significant resource base with a growth profile that few can match, all within one of the world's best mining jurisdictions. And at today's valuation, we think the market is only beginning to recognize the potential. That concludes my remarks. We'll now turn it over to Q&A. Ludy, please, can you open the line for questions. Thank you very much. Operator: [Operator Instructions] With that, our first question comes from the line of Omeet Singh with SCP Retail. Omeet Singh: Thanks for the update on the question. Congrats. I had 2 questions around Granite Creek specifically. So the first was, where are you mining now? And when do you expect to be mining from some of the longer levels in the South Pacific zone? And then maybe the follow-on to that would be, it seems like you continue to be finding oxides even as you go deeper. So what is your thinking around that? And do you expect that to be, say, impacting plans for the autoclave at all? Paul Chawrun: Yes. These are great questions. So first off, we're mostly in what's called the OG zone now. We have started the upper zone to South Pacific. And then next year, we're probably around 60% -- 60-40 South Pacific and then 40% on the OG zone. And then as time goes on, we'll be more and more on the South Pacific zone in the longer-term plans. And then regarding the oxidation, so it's primarily in the OG zone. There's a little bit of oxidation in the South Pacific. But fundamentally, what's happening is you get the surface water, the meteoric water and then it can oxidize some of the sulfide into oxide ore. And longer term, that represents an opportunity for us, as you point out, in the autoclave. But for the moment, we're feeding that off to our third-party processors, and we get slightly lower margins depending on the grade as the sulfide. So that's where we're at. And then would we stockpile? I think your question was, would we stockpile this ahead of our autoclave? Perhaps, and that's something we're evaluating. Omeet Singh: Can you talk about the steps you're taking to put the oxide through the Lone Tree plant? Paul Chawrun: Yes. So the autoclave can be bypassed with oxide ore. And so we're evaluating, once we get close to commissioning of that plant, there's potential for us to feed that through. Operator: [Operator Instruction] The next question comes from Don DeMarco with National Bank. Don DeMarco: So looking at the recapitalization plan, you have a number of different options to increase liquidity. One of them is a potential disposition of the non-core FAD asset. And we saw recently that the research -- the high-grade resource that was published. But in light of this resource, are you reconsidering maybe not divesting this asset? Or has your expectations, in the event of monetizing it, has your expectations increased? Richard Young: Don, that's a great question. We've always been aware that it's a high-grade resource. Unfortunately, when we look at the development plan, we will not be able to get to that until probably the end of 2030s, early 2040s. And so if there is an opportunity where we can get fair value for it, we will look at it as part of the recapitalization. But again, if we don't get a fair price, we paid $88 million for it 2 years ago in shares. It is a high-grade resource, both the polymetallic and the oxide at surface. So we'd consider it, but we are evaluating all of our options with respect to the recapitalization, and that is one potential source of capital that minimizes dilution for shareholders. Don DeMarco: Then looking at the Lone Tree Autoclave engineering studies pending release later this quarter. Of course, we're looking forward to a decision in Q2. So I guess for the sake of our modeling, how should we think about CapEx for the refurbishment and also for Archimedes development in 2026? Richard Young: So looking at the autoclave refurbishment of $400 million, to use a round number, we believe that roughly $175 million will be spent in '26 and the balance in '27. And with respect to Archimedes, we would expect the development to be roughly about $40 million in line with the PEA, and then there will be some ongoing development. The way we see our communities today, Don, is very much in line with the PEA in terms of the spend. While we did commence construction later than as disclosed in the PEA, the team does appear to be making up that ground. Paul Chawrun: Yes, yes. So in fact, if we may spend a little more in 2027 because we're advancing the development quicker. But for your model, I would use the PEA numbers. We're -- even though we started a bit later, we're more or less on track. Operator: And I'm showing no further questions at this time. I would like to turn it back to Richard Young for closing remarks. Richard Young: I'd like to thank everyone. I know it's a busy morning for conference calls. But as we close out the quarter, it was another solid quarter for us. And a year ago, we announced the development plan, and we've made great progress over the last 12 months. And we're very confident that we can execute on this plan, which will require the recapitalization, which is well underway. So we do believe that as we move into '26 and '27, we will be able to unlock the value of this significant resource base. But thank you, everyone, for your time. And if you've got further questions as you digest the materials that we've published yesterday, please give us a call. Thank you. Operator: Thank you, presenters, and ladies and gentlemen, this concludes today's conference call. Thank you all for joining. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the NanoXplore First Quarter 2026 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Pierre-Yves Terrisse, Vice President of Corporate Development. Please go ahead. Pierre-Yves Terrisse: [Foreign Language] Good morning, everyone, and thank you for joining this discussion of NanoXplore financial and operating results for the first quarter of fiscal 2026. The press release reporting these results was published yesterday after market close and can also be found on our website along with our financial statement and MD&A. These documents are also available on SEDAR+. Before we begin, I'd like to remind you that today's remarks, including management's outlook and answers to questions, contain forward-looking statements. These forward-looking statements represent our expectation as of today, November 13, 2025, and accordingly, are subject to change. Such statements are based on assumptions that may not materialize and are subject to risks and uncertainties. Actual results may differ materially, and listeners are cautioned not to place undue reliance on these forward-looking statements. A description of the risk factors that may affect future results is contained in NanoXplore Annual Information Form available on our corporate website and in our filings with the Canadian Securities Administrator on SEDAR+. On the call with me this morning, we have Soroush Nazarpour, CEO; Rocco Marinaccio, our COO and incoming CEO; and Pedro Azevedo, our CFO. After remarks from Soroush, Rocco and Pedro will open the call to questions from financial analysts. Let me turn the call over to Soroush. Soroush Nazarpour: Thank you, PY. As many of you already know, we announced back in September that I would be transitioning the leadership role to Rocco. This transition marks the next chapter in NanoXplore journey, one that builds on our strong foundation of innovation, operational excellence and disciplined growth. This strategic transition is nearly complete and being done with NanoXplore long-term growth and success firmly in mind. Over the past 15 years, I've had the privilege of founding and leading NanoXplore from a bold idea to the thriving company we are today. During this period, NanoXplore evolved from a small R&D venture into a publicly traded, vertically integrated materials company with around 400 employees, multiple production sites and global partnerships. We became the world's largest graphene producer, commercialized graphene-enhanced products at an industrial scale, achieved around $130 million in annual revenue and established a strong foothold in both transportation and industrial markets. A pivotal moment in our recent success came in September when we announced our largest ever graphene powder sales agreement with Chevron Phillips Chemical, a contract that's progressing very well. That brings me to the news I mentioned. After deep reflection and discussion with our Board, I have decided that it was the right time for me to step aside from my day-to-day role as CEO and transition to Vice Chair of the Board. Effective December 4, 2025, I will focus my energies on long-term strategic growth plan and closely work with current management to achieve our long-term objectives of organic growth and financial performance with a clear objective of creating shareholder value. I would like to extend my gratitude to the Board, management, employees and shareholders for all these years of dedicated collaborative work and support. I'm deeply proud of what we have achieved together and confident that NanoXplore is well positioned for its next phase of growth. With that, I will turn it over to Rocco. Rocco Marinaccio: Thank you, Soroush, and PY, and good morning to everyone joining us on the call. As Soroush mentioned, effective December 4, 2025, I will officially assume the role of Chief Executive Officer. I greatly value the continuity and strategic insight that Soroush's continued involvement as Vice Chair of the Board will bring to this next chapter for the company. Our company is stronger than ever, supported by a robust commercial pipeline, a growing and diversified revenue base, strong IP portfolio, industry-leading graphene manufacturing capabilities and a culture of innovation and excellence that's ready to accelerate. As I take on this new role, I bring the same energy and dedication that I've applied over the past 7 years as COO, driving scale-up efforts across North America and Europe. Since 2021, we've achieved significant operational efficiencies, improving gross margins by 11 percentage points while expanding our customer base. Looking ahead, my focus will remain on execution, innovation and growth, continuing to strengthen our position as a global leader in graphene materials, particularly in applications such as drilling fluids, insulating foams and plastics. As I step into the CEO role, my focus is clear; to build on our growing momentum, deliver sustained value for our shareholders and continue pushing the boundaries of what is possible with graphene. Looking at the first quarter, our graphene-enhanced solutions business was again impacted by softness in the transportation sector, particularly from our 2 largest customers. However, we're beginning to see early signs of stabilization, and we expect demand to gradually recover during the second half of fiscal year 2026. On the positive side, we have started supplying Chevron Phillips Chemical and all indicators point to significant growth opportunities as we work together to identify additional applications. In addition, yesterday, we announced Club Car as a new customer, which we are supporting from our new facility in Statesville, North Carolina. This long-term contract is expected to generate approximately $15 million in annualized revenues, and I'm pleased to report that production is already underway. This is a significant development for the company, clearly demonstrating our graphene-enabled differentiation translating into a major win. We look to build on this momentum as we pursue additional opportunities. We recently completed a $25.7 million equity financing, supported by new and existing shareholders, including a pro rata investment from Martinrea, our largest shareholder. This financing strengthens our balance sheet and provides us the ability to scale dry process graphene production, enabling us to pursue new and larger market opportunities. We remain on track to have our first fully commercial dry graphene module installed by March 2026, with initial revenues expected to begin by the end of our fiscal year 2026. This first module represents an important milestone for NanoXplore, adding between 500 to 1,000 tons per year of new capacity, depending on product grades. This positions us to meet growing customer demands in markets that were previously not addressable and further solidifies our leadership in high-quality, high-volume graphene production. Looking ahead to the full fiscal year, we anticipate 2 distinct phases of performance. In the first half, our graphene-enhanced solutions business faced volume reductions from our 2 largest customers, leading to softer Q1 results than expected. However, we are encouraged by early signs of market stabilization and expect sequential improvement in Q2 as new customer programs ramp up and underlying demand begins to recover. As we move into the second half of the year, we expect growth to accelerate, driven by increased graphene powder sales, the ramp-up of production at our Statesville facility and the recovery of volumes in our graphene-enhanced solutions business. Together, these catalysts position us for a strong finish to fiscal 2026 and set a solid foundation for sustained growth into fiscal 2027. In summary, while we experienced a temporary pause in growth over the past 3 quarters, we are entering a period of renewed momentum. We secured a major new customer in CPChem and are advancing additional opportunities within our highest margin business segment. At the same time, we are ramping up production for Club Car at our new Statesville facility and making meaningful progress on our dry graphene initiative. Overall, we expect both growth and profitability to be weighted toward the second half of the year. We are energized by our recent customer wins, which open new growth markets, and we remain focused on optimizing operations, building strong customer partnerships and converting top line progress into sustainable bottom-line performance. With that, I'll now turn the call over to Pedro to walk you through our financial performance. Pedro Azevedo: [Foreign Language]. Good morning, everyone. Today, I will begin with a review of our Q1 financial results, followed by an update on financial aspects of our 5-year plan and conclude with some commentary on near-term CapEx spending and revenue guidance for fiscal year 2026. But before jumping into the details, I wanted to highlight that the contract with Chevron Phillips Chemical is very important financially for NanoXplore. Selling price is in line with the previously stated range for graphene powder. And as volume ramps up over the year and into future years, this contract will produce strong cash flows and drive higher margins and operating leverage. We have already received and delivered orders and expect growth to be strong, but not yet easily predictable as CPChem is in its initial phase of product rollout and marketing strategy. Total revenues in Q1 were 30% lower than Q1 2025 at $23.4 million. This decrease was mainly due to a reduction in demand from our 2 largest customers as volumes have slowed to historically low levels after strong demand last year. Our 2 largest customers, along with others in medium-duty and heavy-duty transportation sector have reported layoffs and cadence reductions due to the current economic environment. Adjusted gross margins, which exclude depreciation as a percentage of sales was 17.3%, a decrease versus 21% last year. This was mainly driven by lower manufacturing overhead cost absorption resulting from lower volumes, partly offset by a favorable product mix effect resulting from higher graphene powder sales. This lower adjusted gross margin broke a multiyear quarterly improvement streak, but we expect that this is a temporary situation with a resumption of the streak by the second half of the year. Adjusted EBITDA was a loss of $1.4 million, a decrease of $2.5 million versus last year, and was comprised of a loss of $1.3 million in the Advanced Materials, Plastics and Composite Products segment, a decrease of $2.8 million versus last year and by a loss of $71,000 in the Battery Cells and Materials segment, an improvement of $320,000 versus last year. Regarding our balance sheet and cash flows, we ended the quarter with $10.1 million in cash and cash equivalents and $7.7 million in short-term and long-term debt. Our cash, along with the unused space in our revolving credit lines, resulted in total liquidity of $20.1 million at September 30. Our recent $25.7 million equity financing closed on October 30 is not included in these numbers. Operating cash flows were negative $6.2 million, mainly from changes in working capital items and is typical in the first quarter. Cash flows from financing activities were positive $1.4 million, resulting from equipment lease financing advances inflows of $3.2 million and debt and lease repayments of $1.6 million. Finally, cash flows from investing activities were negative $3.7 million, mainly due to capital expenditure payments. At the end of September, the company had used a cumulative cash amount of $7 million on capital expenditures for projects in progress that will be financed during Q2 with the RBC credit facility. Moving now to an update on financial aspects of our 5-year strategic plan. With regard to the expansion of graphene-enhanced solutions capacity in Sainte-Clotilde-de-Beauce, this expansion increased our capacity to produce parts for one customer by 50%. As a reminder, a large portion of this capacity expansion was paid by our customer. However, the capacity expansion currently remains underutilized due to reduced demand in the medium-duty transport sector. We expect capacity utilization to increase during the second half of our fiscal year 2026. Our U.S. expansion, which includes both graphene-enhanced SMC as well as additional capacity for the graphene-enhanced solutions business was completed during the quarter. Start of production for Club Car began in early October in our new plant in Statesville, North Carolina. Including Club Car, we currently have an incremental $40 million per year of awarded programs that will start production over the next 18 months. Turning now to our near-term CapEx spending and fiscal year 2026 guidance. CapEx spending during the quarter was as expected. We spent $3.7 million and expect to spend another $4 million in each of the next 2 quarters as we complete the spending on graphene-enhanced SMC initiative and the first module of the dry process grade graphene line. As previously mentioned, this will be financed through our RBC credit facility. Regarding our fiscal year 2026 guidance, the economic environment remains unclear and forecast from customers in the transportation sector remain volatile. While forecasts from our 2 largest customers indicate volume growth in the second half of our fiscal year, these could be delayed to later in 2026 as we experienced last year. New business starting in Q2 will partially offset the current volume reductions, but growth rate and order frequency from these customers are not yet established. We believe Q1 revenues will be the trough of the fiscal year with sequential quarterly revenue growth thereafter. As such, and based on the visibility we have today, we are cautious in our expectations and guide to full year revenues between $115 million and $125 million. PY? Pierre-Yves Terrisse: Thank you, Pedro. Operator, we can now open the lines for questions. Operator: [Operator Instructions] Our first question comes from the line of Amr Ezzat with Ventum Capital Markets. Amr Ezzat: Now that we're more than a month into the CPChem deliveries, can you walk us through whether early volumes are tracking to the commercialization curve you and CPChem envisioned? Then in the same vein, I'm wondering if you have any operational feedback from the first batch of wells that informs your scaling plan? Rocco Marinaccio: Sure. Good question, Amr. So we're a month into the contract. We signed it late September, started October 1. How we're tracking to initial projections, I'll tell you, we're tracking higher than what we believe we would be. The rollout has been quicker than anticipated, which is obviously positive. Feedback from customers that have trialed the material has all been positive, in line with expectations as to what the customer can expect. And again, all the feedback that we've received so far are positive. Marketing from CPChem is starting early December, so they haven't even started officially marketing the product, and that will occur in December. So we expect demand to continue to increase and in line with expectations. Amr Ezzat: Okay. That's great news. How is it that demand is tracking ahead of expectations if they're not marketing the product? Then like can you help us understand, is that contract structured in a way that allows accelerated volume pull forward if CPChem wants to move harder on their own commercialization? Or is it like a ramp that's strictly linear? Rocco Marinaccio: Yes. So how are they achieving greater than expected volumes? Well, word of mouth. When the initial trials were done with NanoSlide, they were done in the most stringent areas in the U.S. The community -- the oil drilling community understood the results, and that's how the demand has increased pretty quickly. Not uncommon in the industry for competitors to purchase competitor material and label it themselves. That is underway as well. Our competitors are trialing products. And if they feel a need, they're more than able to purchase the product and label it as their own. And we see that early signs of that occurring as well. Amr Ezzat: Fantastic. Maybe one on the guidance. The revenue range that you guys gave, like at least if I use the midpoint, implies an average of $32 million per quarter over the next 3 quarters. I'm assuming like you guys are saying Q2 is a bit of a recovery, but H2 stronger. But I'm wondering if you could unpack the building blocks here. How much of that sort of jumped to an average of $32 million a quarter versus the 20-ish you guys reported, is uplift driven by powder versus composites versus recovery, I guess, from your 2 largest customers? Pedro Azevedo: So if I can answer that. So the average is correct. That is the average for the rest of the 3 quarters. But as we said, it will be a ramp-up. So you should expect Q2 to build on Q1 and then Q3 and Q4 to build on each previous quarter. I think you can ramp it up that way to get to that $120 million, let's say, midpoint. Most of that revenue growth is going to come from the recovery from the volumes from the 2 largest customers. We expect some recovery. We just don't know to what extent, which is why the range is somewhat wide right now. The growth of CPChem will come, but the values that we're talking about are not going to be so material to be influencing that much the guidance. They're going to be there. They're going to be important and they're going to contribute more to the bottom line. But in terms of top line, the majority of that is going to be from the addition of Club Car from the recovery of the sales volumes to the 2 largest customers. Amr Ezzat: Okay. That's very clear. Then like on the Club Car, like how quickly do you expect that to scale towards steady state? And I just want a point of clarification. Is this additive to the $40 million composites target that you guys spoke to in the last conference call? You guys said in the next few years, you've got a few programs that sort of ramped you to like $40 million. I'm assuming that $15 million is included in that $40 million that you guys spoke to because you guys were already speaking about a new customer that you guys haven't announced or haven't announced. Rocco Marinaccio: Yes, Amr, you're correct. So the $15 million is inclusive of the $40 million. So it's not incremental to. We announced in the release yesterday that this was takeover work. So it's not a traditional business that you win and the launches in 2 years. We, essentially -- early October, we launched and the ramp-up went from 25% of the volume to 100% within a week. So there's been a ramp. We're already at full volume, I'll tell you that. The ramp has been quick, and we're very excited. I mean it's -- if you look at the volume of golf cars produced, everything coming out of Evans, Georgia, we're supplying every single one of them. So it's a great business for us. Operator: Our next question comes from the line of James McGarragle with RBC. James McGarragle: I just wanted to follow up on that question on the revenue guidance. You mentioned in the press release, the guidance is based on your customers' near-term forecast. So can you just kind of share what those forecasts are a little bit more specifically? And a quick follow-up. Is it the new module, is that in guidance? Or would that be upside to your guidance for fiscal 2026? Pedro Azevedo: James, so first to your first question, the volume is based on what we see from our customers without the expectation of significant recovery of volumes. It is based on what we believe is a more appropriate forecasting for the rest of the year of growth from these 2 main customers, right? So it can be upside, which is why the $125 million could be on the upper end. It could even be exceeded, but we're not ready to guide that, and we're guiding the $115 million to $125 million. When it comes to Club Car, the business is there. So we -- and as Rocco just explained, the business has hit its normal rate for the rest of the fiscal year. There is a seasonality to it. We know that it's going to be a little bit higher over the next 2 quarters -- our fiscal quarters and then kind of dip down a little bit after that. So we can predict those kinds of volumes to some extent. And finally, your question on dry process graphene. Right now, we expect dry process graphene to start generating some sales in the fourth quarter before the year-end, as we've talked about. And the volumes that we would expect to sell at first are going to be fairly small. They're not going to be material to the sales levels, but they're going to be important as a step stone, as a milestone for the company to start generating those revenues. So you could argue that they're not included in our numbers, so they could be upside, but they would not be material to influence $125 million to $128 million or $130 million or something like that. But to be honest, it is possible that it will contribute to the guidance that I provided. James McGarragle: And then in terms of the margin recovery, I guess, 2 things. One, you mentioned the gross margin streak, the improvement should resume in the back half. I guess the first part of my question is, does that mean Q2 margins should be lower versus Q1? And then in Q3 and Q4, as volumes start to recover, top line starts to recover, should we start anticipating margins more closely in line with last year? Or do you still expect margins to be down year-over-year, but just improving quarter-over-quarter? Pedro Azevedo: Yes. So the answer is that the growth into next quarter will be better than what we have. So the 17.5% that we had this quarter was really because of the volume levels. And in your initial report, you kind of commented that they were down versus expectations, but it really was mainly driven by the volume and nothing else. The recovery that's going to happen in Q2, you should -- it will start growing back. And the streak will resume, but only in the second half because my comment on the streak is that it relates to last year's Q1 or in this case, last year's Q2. So we expect Q2 to be a little bit lower than the Q2 of last year or very close to it. And then in Q3, resume that year-over-year quarterly improvement in margins. So that -- I don't know if that's clear, but we expect by the end of the year to be upwards of 24% again and resume that streak into fiscal year 2027, growing into the 25%, 26% as such as the proportion of graphene powder sales increases. Operator: Our next question comes from the line of Melissa Deane with National Bank Capital Markets. Melissa Deane: Could you provide some clarity on the CapEx expectation for the graphene and anode material initiative and namely on the dry graphene side of things? Is it the entire $25 million of equity financing that you issued? And with that, if you can kind of give us an estimated capital layout timeline, if possible? Pedro Azevedo: Yes. So you have a few questions in there. So first, the expectation for the next 2 quarters is that we're going to focus on completing our graphene-enhanced solutions investments, which is the investments in our Statesville site and SMC materials in the Beauce plant. So that's going to be the majority of the amounts in Q2 and Q3 as we finish those initiatives. That represents, give or take, $3 million or so out of the $4 million in each of the next 2 quarters. The extra amount to get to $4 million represents the dry process graphene, the first module line that we are putting in. We're about halfway in terms of cost, let's say, maybe a little bit less than halfway. We will complete that by the end of the third quarter, and that represents the 4 and 4 that I mentioned. After that, we plan to grow the CapEx mainly on the dry process graphene expansion, and that will be dictated by the demand that we see from our customers and the acceptance into the market of this new grade of product. So each module will be about $2 million. And each of these modules, as Rocco mentioned, is somewhere between 500 and 1,000 tons. So depending on the growth, we will be putting in the second and third and potentially fourth line over time. The time will be dictated by the demand. But the growth of that capacity will really be on a modular basis, and that's important for you to know. And the last question you were asking, the $25 million cash that we received from equity is going to be partially to support that growth. We earmarked about $20 million out of the $25 million that would be going into these modules. Now that's going to be over time. I can't say whether it's 18 months, 2 years, 3 years, but that's how we expected the equity financing to support that growth. Melissa Deane: Perfect. Understood. And with that, how is the testing and traction with this new dry process graphene going with customers and testing partners? Is it better than you expected or in line with expectations? Rocco Marinaccio: So I'll take that question. So the dry process really addresses markets that were not addressable to us previously or we didn't believe they were. So testing has been, I would say, very good in markets where previously were not achievable, if you will. So new grades of product address key markets, foams, for example. And we'll say that testing is in advanced stages with a lot of customers, and I would say it's extremely positive right now. Melissa Deane: That's great to hear. And just switching gears, can you give us an update on the insulation foam customer and the advancements you're making there? I saw you mentioned it in your press release, and you've previously noted this opportunity could be larger than the drilling solutions one, noting a minimum of $15 million per year in sales potential. So yes, just an update on that opportunity and if you're still maintaining those expectations. Rocco Marinaccio: So I don't know exactly what you're referring to in terms of that it could be bigger. We can certainly go back and review what we've said previously. I'll say that we're working with multiple customers in this space, big names, I'll tell you that. But disclosing who they are, we're not ready to do that yet. But we have multiple customers in various stages, some further along, some in advance. But it is a big, big market. Pedro Azevedo: If I may, I think what you're referring to, just to help the conversation along is I think you're talking about the addressable market is larger than what we think could be for drilling fluids. That is actually correct. The dry process graphene, as Rocco explained, addresses a market today that we can't really access. The performance of the wet process does not deliver the expectations to the level that the customer wants, but the dry process graphene is showing early signs that it does. And that's where we see a lot of possibilities down the road that could be, yes, indeed larger than the drilling fluids side, which we think is already going to be pretty big. But the $15 million that you mentioned, the only $15 million that we remember talking about either myself or Rocco is really the side related to the Club Car business. That's the only $15 million that we recall talking about. Melissa Deane: Okay. And when could we see this opportunity presenting itself in your results if you're able to kind of give any outlook there? Rocco Marinaccio: Yes. So as indicated, once the line is up and running in March of 2026, by the end of that fiscal year, so let's say, June, July time frame, we'll start initial revenues, right? So you'll see them in fiscal year 2027. Timing of that is still yet to be determined. Operator: Our next question comes from the line of Marvin Wolff with Paradigm Capital. Marvin Wolff: Congratulations on the Club Car mandate. I'm wondering with this win, is there any other potential recreational applications that are coming to your door, things like HEVs, other types of sports recreational equipment? Rocco Marinaccio: Good question. Thanks, Marvin. Yes. I mean, our team is working with many different potential customers, right? The key with Club Car has seen even with our current customers in PACCAR, they've seen the benefits of graphene-enhanced materials and they've tested, they've adopted it, right? So as we get our products into the market, it becomes much more commercial in the sense where there's more lineups of customers that want to try and understand the benefits as well. So we're in talks with multiple customers in different segments. We felt it was very important to diversify from just strictly transportation because obviously -- for obvious reasons. And I think with the Club Car win, we did that, right? And that's just a steppingstone into potential future business. Marvin Wolff: Now can you speak to in rough terms, are we talking about the front clip? Are we talking about the rear clip that covers the motor and all that kind of stuff? Or is it to the big belly pan? Rocco Marinaccio: We do front and rear underbody. So essentially, the backside where you put your golf clubs and the whole front side where you put your feet and the pedals and all that, we're doing both the whole thing. Operator: And I'm currently showing no further questions. At this time, I'd like to hand the call back over to Pierre-Yves Terrisse for closing remarks. Pierre-Yves Terrisse: Okay. Well, thank you, everyone, for participating on this call, and we wish you all a very good day. Operator: This concludes today's conference. Thank you for your participation. You may now disconnect.
Operator: Good morning, ladies and gentlemen, and welcome to the KBC Group's Earnings Release Third Quarter 2025. [Operator Instructions] I would now like to turn the floor over to Kurt De Baenst, Head of Investor Relations. Please go ahead. Kurt De Baenst: Thank you, operator. A very good morning to all of you from the headquarters of KBC in Brussels, and welcome to the third quarter conference call. Today is Thursday, November 13, 2025, and we are hosting the conference call on the third quarter results of KBC. As usual, we have the group CEO, Johan Thijs as well as group CFO, Bartel Puelinckx with us, and they will both elaborate on the results and add some additional insight. As such, it's my pleasure to give the floor to our CEO, Johan Thijs, who will quickly run you through the presentation. Johan Thijs: Thank you very much, Kurt. And also from my side, a warm welcome to the announcement of the third quarter results 2025. And as always, we start with the net results, which stands at a very excellent EUR 1.02 billion. So once again, the KBC bancassurance machine has been firing on all its cylinders, which also means that all entities in our group have been contributing positively to this result. As a matter of fact, it's once again perfectly balanced income, 50-50 split over net interest income versus the non-interest income bearing results, which once again shows that we keep up the pace with our, let's call it, ancillary business in compensating the growth on the net interest income side. If you look at the different lines, well, then it's very straightforward. Once again, strong performance on the net interest income side, which has been growing despite the fact that there was a significantly lower net interest income on inflation-linked bonds. Consequently, we also increased our guidance from what it was at least EUR 5.85 billion to now at least EUR 5.95 billion. This income growth on the net interest income side has been triggered, amongst others, by a strong loan growth, but also again on a strong performance on the transformation results, so our replicating portfolio. Coming back to the diversification, well, both the fee business, which is generated through the asset management and bank services have been growing significantly as did the insurance business, the bit latter was also driven by good quality with a combined ratio of -- not of 8.7%, that would be ridiculously lower, but at 87%, which is indeed still excellent. If you take all those income lines in consideration, you come to the conclusion that indeed we can further increase our guidance of our income side as well we now stayed at least 7.5%. And if you then know that we stick to our guidance for the cost side, which means at least -- sorry, maximum 2.5%, we know can also conclude that the jaws will be superior to 5%, which is indeed a very strong number. Coming back to that cost side, they are perfectly under control and perfectly within our guidance. And on the credit quality side, we posted a very excellent credit cost ratio of 12 basis points, which is significantly lower than the long-term average and also consequently lower than the guidance which we provided. No big surprise that our solvency position stands solid at 14.9%. And then on the liquidity side, as usual, we are performing very well with numbers 158%, respectively, 134% for NSFR -- for the LCR and the NSFR. And then also, last but not least, we also issued the interim dividend of EUR 1 per share, which is paid on the 7th of November. And we also announced that do things. First of all, the acquisition of Business Lease in Slovakia and Czech Republic, but also our inaugural SRT, which is freeing up 23 basis points of capital, hereby fulfilling the promise which we made a more active management of our risk-weighted assets. When we go to the more digital side of our story, we go to Page 4, you can clearly see that Kate continues to grow. As a matter of fact, 5.8 million customers of ours in the meanwhile clicked on Kate and continue to use her in the further business, which we are doing with KBC. We also see clearly that the number of interactions with our customers continue to increase, and not only the number of transactions increase, but also the fact that Kate can autonomously, which means without any help of a human being that Kate can deal with those questions and provide the customer solutions in an autonomous way, 7 out of 10 times. In that perspective, it's also important to understand that since October, we start launching Kate 2.0, which is actually a fully enabled LLM, so large language model Kate, which allows us 2 things. First of all, to better anticipate the questions in the context by which they are asked, so therefore, allowing us to provide more and better answers to our customers, which intrinsically means that more customers can be helped. And secondly, that the autonomy, which now stands at 70% will further increase. So both will have a positive effect on the 2 sides of the cost-to-income ratio. First of all, it allows us to sell more via Kate, Kate 1.0, so the old version generated actually sales, which allows us to do 400,000 sales over the period of 12 months. And then on the cost side, as I already said, the autonomy actually creates solutions without human being interfering, which means that Kate today is -- Kate 1.0 today is doing the work of roughly 360 FTEs, which is already a quite a significant number, which is going to improve going forward. Let me go into the different P&L lines because there were no exceptional items this quarter, which means that on the net interest income side, we do see overall an increase of 1% on the quarter and 10% on the year. But what is far more important that is actually, if you look at the underlying building blocks, then actually the net interest income on the banking side increases with 2%. Why? Because there is a very negative impact of -- I mean, it has a positive impact on other things, but inflation was coming down. And therefore, the income, which is generated through inflation-linked bonds, was significantly down as well, EUR 20 million difference on the quarter, and that obviously has some impact on the growth. Big chunk of that is booked on the insurance side. And therefore, if you purely look at the banking side, a 2% increase. Now that is triggered by, in essence, 2 things. First of all, a further increase of our transformation results, which went significantly up due to the way how we replicate our portfolios. And the second one is a very strong performance on the lending side. As you know, there is still some competition on margins in the markets where we are present, but this is more than compensated by the loan growth. The loan growth, which stands at 1.6% in the quarter, 8% on the year, and that is indeed a very strong number. Also, when you compare that with the guidance, which we previously gave, then we also came to the conclusion that we increased our guidance to approximately 7% going forward. Year-to-date -- so after 9 months, of 2025, the loan growth stands at 6.3%. If you would include the FX effect, even at 7.3%, which is indeed a very strong number. All the other elements are mentioned on the slides, have far less impact. We are talking about better income on the dealing room side, cash management, the number of days, but let me not go into that detail. Let me go back to the margin, which now stands at 205 basis points, which is slightly down compared to previous quarter, but I have to make a caveat here. First of all, the impact here is quite clear of the inflation-linked bonds. If you -- that itself already explains a big chunk of that difference, but also the strong loan growth, which is done at margins, which is slightly below the back book. It depends a little bit on the country. And last but not least, also on the fact that we do generate net interest income by investing liquidities in bonds, so using the higher spreads. This generates normally net interest income, but at margins which are obviously lower than the 208 basis points of previous quarter. And that has a positive effect on one side, but a slightly negative impact on the margin. Just to give you some insight how it worked. What about the other drivers of that net interest income, volume on the lending side already dwelled upon. What about the deposit side? Once again, we do see an increase of our core monies with our customers of EUR 1.1 billion in the quarter. That is a bit -- that is an obvious effect that we start to see the first moves of the monies which came in, in Belgium as a recuperation of the state monies invested in 2023. Well, that money is coming to maturity, as you know, partially in the first part of this year, and the big chunk is going to mature in quarter 4. But you clearly also can see that you see some effects already in the third quarter by the savings certificates, which were entirely freed up and not reinvested again in those savings certificates. In essence, it comes down to the story that what we do see in practice is one moneys, which were recuperated on the state mature that the vast majority returns in either current accounts, saving accounts or in mutual funds, only roughly 25% is reinvested back in term deposits. And that has translated in this slide. The evolution of the current accounts here is very specific seasonal effect in corporate deposits in Belgium. This is temporary, and this will be corrected in -- by the natural flows in quarter 4 of this year. If you look at the total picture, that is even more substantial, EUR 8.5 billion of monies flowing in into our different pockets for our core customer monies. And this is translated in a fundamental increase on the current account, savings account side and the fundamental decrease on the term deposit side, which in translation of margin is good news. Last but not least, but I'll come back to that in one second, that is the inflow of those monies, which are maturing into the fee business generated through asset management and life insurance, while that has clearly also happened in quarter 3, which brings me immediately to that fee and commission business. Here, once again, a very strong result, up 6% on the quarter. Let's face it, after already high quarter 1, 2, we now have a very strong quarter 3. And also if you look at the different contributor parts here, the asset management services or the banking services, both are up significantly, 7% up on the Asset Management Services and 5% up on the banking services. Starting with the former, well, that is driven by 2 things. First of all, the fact that obviously, the management services had the fees or the management services has a positive impact on the performance of the financial markets. But also clearly, there was a strong net inflow again on the asset management product side. As a matter of fact, we have seen a growth of net inflow of EUR 1.8 billion in the quarter, which is for the third quarter, a very strong number, and it tops up the first half of the year to a total of EUR 5.3 billion of net sales. That is an all-time high after 9 months. In terms of the buildup of those monies, we were also able to do it at a stronger management fee, but also at a stronger entry fee. In terms of the split up of responsible investments, be aware that our book now -- our total book stands at roughly 50% under the umbrella of Responsible Investments, whereas the inflow on the new monies is roughly 58% Responsible Investments. The other -- so perhaps something on the assets under management, the consequence of all of what I said, obviously, are positive for those assets under management. We now stand at EUR 292 billion of assets under management, which is a strong EUR 12 billion on 1 quarter up. If you compare it with previous year, it is an increase of 8%, which is perfectly split 50-50 between inflows and so -- fees -- sorry, and performance also 50% being 4% in this case. Let me then go to the insurance side. Well, also here, very good results to use an understatement, once again, up 8% on the quarter. On the non-life side, this is due to strong performance in Belgium and our Central European countries, split up there is Belgium a bit more on the lower side, so 5%, 6%, whereas Central Europe in essence is growing more than 10%, depending on the country. The quality of that book is -- stands at 87% combined ratio, which means excellent results again and also a bit better than the period of 9 months of last year. On the life side, the story holds as well. Again, the strong performance on the total life insurance book. We went up 29% on the quarter. And if you would make the comparison with the same period last year, 7% up significantly. Now in both quarters, '24, '25, quarter 3, we did commercial campaigns. So the commercial campaigns this year was even more successful than it was last year, and this is amongst others due to the fact that we have monies maturing on the previous state note. Split up between unit-linked and interest guaranteed is roughly 50% versus 43%. Small detail, if you compare the number after 9 months with the same period last year, it's 15% up and that is indeed something which is quite remarkable after the record of last year. Going into smaller P&L impact lines, you have the more volatile financial instruments at fair value. Well, they are EUR 28 million lower than previous quarter. I can be very brief about this. This is mainly driven by the evolution of the mark-to-market derivatives in essence. And on the net other income side, we are perfectly in line with the run rate being roughly EUR 50 million. We now stand at EUR 47 million. But if you look at the underlying building blocks, when they are perfectly spot on compared to what it was before. So the leasing and the assistance company have the same outcome as what it was last year and more or less the same outcome of this year. What about the more serious stuff that is the OpEx evolution? Well, let me bring it to its essence. The costs are under control. As you remember on previous call, we always highlighted the difference, if you make the comparison of, for instance, 2025 with '24, which was the trigger for the guidance, that you need to be careful that the distribution of the costs in over the quarters is completely different comparison '24, '25. But it was more back loaded in '24, it was more equally spread in '25. In that perspective, you now start to see the effect of what we always highlighted on previous quarter announcement, that is costs evolution over the quarter 3 with quarter 3 of last year is now coming -- if you exclude bank tax, it is below 1%. And that makes it quite clear that if you look at the number over 9 months, that we're coming close to our range, our guidance. That is we are now standing at -- if you exclude bank tax at EUR 315 million, which is more or less 50 basis points higher than what it was previous quarter, but it starts to come into that range. Actually, as a matter of fact, if you look at our costs compared to the budget, which we had internally, we are better than our budget foreseen for 9 months of 2025. So we are perfectly online to make our guidance -- perfectly on track, sorry, to make our guidance less than 2.5% cost increase true. Cost-to-income ratio is obviously translated, if your income is growing more than roughly 8% and your costs are only growing 3%, then your jaws are significantly up. We are talking about 5% jaw translated in a cost-income ratio, which goes down for 43% in '24 to 41% now, which I think is indeed an excellent performance. There are always uncertainties in life, and that is bank taxes, which are always reviewed -- most of them reviewed for the upward. We do expect on the full year to pay EUR 668 million of bank taxes. Currently, we stand at EUR 615 million. In the third quarter, the back taxes were pushed up because of additional national bank taxes and deposit guarantee scheme contributions mainly in Hungary. That has translated to more detail on what is that Page 13, where you can see the split up over the different business units, but I suggest that we further continue with the credit cost ratio, where other strong performance can be mentioned. We now stand at EUR 51 million, all things combined, which is built up, in essence, about in 3 parts. The first one is the loan book with an impairment of EUR 55 million. But be aware that we deliberately took EUR 26 million to cut down the shortfall, the backstop shortfall, the tool, which is imposed upon us by the ECB. So we lowered that with EUR 26 million, which actually generates a positive capital impact on the CET1 ratio of 2 basis points. If you take that into account, then the impairments on our loan book are very, very low. If you look also at the evolution of the macro parameters, which are used in our model to calculate the geopolitical and macroeconomic buffer, well, then we came to the conclusion that there is a release to be booked for EUR 9 million, which makes the buffer now stand at EUR 103 million. There were some EUR 5 million in asset software impairments. And if you bring that all into account, then you see that our credit cost ratio now stands at 12 basis points if you include the ECL buffer. If you would exclude that, we are at 13 basis points, which is significantly lower than the long-term average, which is perfectly in line with the guidance where we said it would be indeed better than that. In terms of quality, well, it's very simple, 1.8% NPL ratio, which is substantially lower than, for instance, the European average. If we would look at the EBA definition, it would even come to 140 bps, which is 40 bps lower than the European average. For good understanding, if you look at the migration metrics of our PD classes, then we do see a positive shift towards an improvement of the portfolio overall, and that is some reassuring news given the circumstances we're all in. What about capital? Well, also there, a strong performance. We now stand at 14.9% at the end of the third quarter. This is mainly triggered by an increase of our risk-weighted assets, EUR 1.6 billion. I mean, in essence, due to the growth of our lending book, EUR 1.4 billion is entirely due to that growth. And it's also triggered by, obviously, the booking of our net interest -- sorry, not net interest income, but net result and, of course, the accrual of our dividend. Now going forward, what do we expect for the fourth quarter? So we do still see some positive effect due to the liquidation of KBC Bank Ireland. You remember that we booked deferred tax assets. Those deferred tax assets contributed positively to the quarter 3 capital position. In total, EUR 166 million, bringing it to 13 basis points. We do expect the further balance to come mainly in quarter 4, a little bit in '26, depends on the profitability in the quarter. And that brings the positive impact. We do expect further upstream of our Belgian GAAP insurance profit in -- to KBC Group. And then obviously, we do also still hope that we do get the approval in our 365 Bank that is in its process and that will generate roughly max 50 basis points on the capital side. Also, in that perspective, it has nothing to do with the fourth quarter because we think that will be cleared by the first quarter next year, that the leasing side, it has only an immaterial impact on our CET1 ratio next year of roughly 4 basis points. Now if you bring all those numbers into account, also taking into account the SREP, which was issued a couple of weeks ago, well, the MDA now stands at the same level as the OCR ratio, both at 10.85%, and that generates a buffer of 4.1%., which is indeed quite solid. In the meanwhile, also the National Bank Belgium has made statements about the review, which they are going to put into motion as of what is it the 1st of July next year. That is, I mean, some of 2 parts, the countercyclical buffer and the systemic buffer that play around a little bit with those numbers, which has for us, given the composition of our book and given the way how it is supplied, a negative impact of 2 basis points on our CET1 ratio, starting with the current number of risk-weighted assets. So to be remembered, strong performance and strong MDA buffer going forward. So that is then also translated into the solvency of the insurance side, which has increased to 216%, and then the leverage ratio, which is also 5.8% over the quarter. In terms of liquidity ratio, already mentioned that it is managed, as you know, in a very specific way. And therefore, we do see the same solid performance on the liquidity side with -- around the numbers, 160% and 130%, respectively, on the short term and on the long term. Going forward, we do expect that the economy is going to slightly pick up a little bit in 2026. That is definitely true for the Western European markets, for the Central European markets where we are present, we do see a more fundamental growth, at least double of the amount of Western Europe. Western Europe is estimated at roughly 1%. In terms of inflation, the European inflation hovering around 2% in certain Central European countries like Hungary. It can be a little bit higher, but it is at least in such a way that ECB, we do not expect further rate cuts to happen in 2025, neither in 2026. And in the Central European side, we expected Hungarian National Bank to further bring down their 6.5% policy rate. But in essence, we do expect a slightly positive view on the economic side, which also gives us the certainty to adapt our guidances for 2025 upward. I already mentioned the 7.5% at least for total income and the at least EUR 5.95 billion for the net interest income side. As you remember from previous call, as always, KBC includes a certain margin of conservatism to -- I mean, eliminates the uncertainty in certain parameters given that, that uncertainty has gone away, we have actually translated to that conservatism into a more stricter guidance, but we will -- let me say it, as follows, be sure that we will make that number happen. I would not say fingers in the nose, but with a certain margin. The insurance revenues are solid, and I already dwelled upon the 2.5% cost side. No changes on the forward looking for '27. This is something which we're going to provide to as always on the back of the fourth quarter results, which are published in February. I will wrap it up here, and I will give back the floor to Kurt, who will guide us through the questions. Kurt De Baenst: Thank you, Johan. The floor is open for questions now. [Operator Instructions]. Thank you. Operator: [Operator Instructions] We'll now take our first question from Tarik El Mejjad of Bank of America. Tarik El Mejjad: I'll stick to 2. The first one on net interest income. If we take the Q4 implied exit rates and then we adjust for all the inflation-linked bonds and so on, clearly, the run rate is quite attractive versus consensus. Could you give us some indication in terms of '26? I know you updated with the full year, but given where you see consensus and I think I see quite a lot of upside there, if you can help on seeing the upside, it would be very helpful, indication for '25, but '26 is important. And then the second question is on M&A, specifically on Ethias. This is clearly very important for your investment case and you've been always helpful giving us the latest on what government thinks and so on. Can you maybe refresh us on where we are in the process? And what do you think are your odds to run successfully that bid? Johan Thijs: Thank you very much, Tarik, for your questions. And let me provide you answers to both. So first of all, obviously, I mean, what you asked in your question and where you were making reference to the interest rate evolution, the yield curve evolution, you're 100% spot on. They are indeed better than what it was, for instance, a year ago. We do also see that translated for sure in our results of 2025. And that is also something which is indeed true for 2026 as well. Obviously, taking into account that -- I mean, there are a couple of drivers in the economic environment, which are crucial. For instance, the situation of the war in Ukraine, if that would escalate that we have completely different picture. But all those parameters taken into account being stable, then you're right in your analysis that certain of those drivers of the net interest income are evolving positively compared to a year ago. So indeed, you can expect that on the net interest income side, there is a positive effect and I can only confirm. To provide you already the detail of what 2026 is going to be, well, we are going to do this on the back of our quarter 4 results. As a matter of fact, we will have discussions on the budget. We had a preliminary discussion on the budget of '26, '27 and '28 earlier this week, but the fundamental discussions and also the approval by the Board is going to happen in the next week and the week to come. So it would be a bit preliminary to already elaborate that in an analyst call. But the first part of your question, I can only confirm as having a positive impact on the evolution of our net interest income, which, as I said, for 2025 is at least EUR 5.95 billion with a certain degree of conservatism. You could say easily EUR 6 billion that you can start to add up. Regarding your second question, the M&A, more specifically about Ethias, well, today, and that is something which I already indicated in, I think, previous call or 2 calls ago, my expectation was that Ethias would not come to the table in 2025, but it would be prepared by the government in 2026 because the urgency, Belgium is not having a favorable budget situation nor the debt GDP situation that, that is not imminently on the table for pushing 1, 2 assets out of the portfolio of the Belgian state. And I can only confirm that today. So my guess is that Ethias -- as far as Ethias is concerned that the preparation will be done by the government in the course of 2026 and then bringing it to the market by the end of the year potentially even early '27, we'll see. It depends a little bit on where the budget discussions end. On other assets, for instance, Belgium, it might be going a little bit faster, at least for a small part of it. Where are we? So we are indeed fully prepared for the file. We have a clear business case for that. And when you were asking about the ops, what we will do our utmost without doing stupid things on pricing. As always, for us, it needs to tick a couple of boxes on the strategic side. It makes a lot of sense for KBC to go for an acquisition of Ethias. It is a core market for sure. And it is delivering added values, I think, for both sides. And then last but not least, it obviously needs also to tick the boxes on the return on investment, return on equity. That is something which triggers me to say we will not pay stupid prices. I recommend everybody not to pay stupid prices. But for sure, we will not do so. So we are prepared and will be further continued. Tarik El Mejjad: So just to understand on the timing for TS from the government perspective. So you think there will not be any decision to sell it before the next budget discussions, basically, right? So with the conclusion in the second part of the year. Is that what you said? Johan Thijs: That is indeed my reading of what is happening today. Operator: Our next question comes from Giulia Miotto of Morgan Stanley. . Giulia Miotto: I'm afraid I will follow up on NII and ask about Q4 and the exit rate. So the guidance of EUR 5.95 billion is extremely conservative in my view because it would imply NII to go down in Q4, whereas I think it should increase quarter-on-quarter given the tailwind. And from that into next year, can you help us understand or quantify at least the benefit you see from the hedges? Some of your peers give a slide with some quite clear disclosure on benefit from hedges over the next couple of years, and also how you expect loan growth to evolve? Because it's very strong. And from here, perhaps it could only accelerate, I guess, with the German fiscal stimulus, hopefully helping see countries indirectly. So yes, I would love your thoughts on these moving parts. And then secondly, Kate 2.0, historically, you said that Kate helps with 1% of efficiency each year. So essentially, you managed to grow costs less than revenues. Do you already have an estimate of how much efficiency will Kate 2.0 help you with? I would expect a higher efficiency. Bartel Puelinckx: Thank you, and good morning to you all. I will tackle the NII question and Q4. So the -- indeed, the guidance that we've given is EUR 5.95 billion at least. So this is a floor. So it will be most likely higher. Also, as Johan was indicating, I mean, the difference indeed, if you just simply add the third quarter, once again to the fourth quarter, you more or less come to your -- the analyst consensus level. So there is indeed still some conservatism included in that guidance. Now as far as your question is concerned related to the hedges. So as you know, we are not fully disclosing the -- how we hedge that portfolio. Part of it is, of course, considered as being noncore money and noncore money is being replicated overnight whilst the core money is replicated, obviously, at longer terms. These are cyclical reinvestments. The average duration, as indicated before, on the current accounts is 4 to 4.5 years. On the saving accounts, it's 2.5 years. And then, of course, on the excess equity, it's about 5 years. Now basically, that is, if you have then a kind of sensitivity, what you can indicate is that we can use is that for a parallel shift of 25 basis points, you can take into account roughly EUR 50 million. Now coming back also to the recent developments with respect to the repayment or the maturity of the term deposits that were issued back at the maturity of the state bond, you remember that we lost EUR 5.7 billion with the state bonds, we recovered actually EUR 6.5 billion. Out of that EUR 6.5 billion, EUR 6 billion was reinvested in term deposits. At that time, as you will recall, negative margins. Now we issued at that time, 2 types of term deposits. There was a term deposit at 6 months and a term deposit at 12, 13 months. And so that means that the 6-month term deposit came to maturity in March. And there, what we have seen, we have seen a shift back into term deposits of only 38%. 40% went into CASA and the remainder went to in mutual funds and some outflow. Now in October this year, so a couple of weeks ago, we had the maturity of the most substantial part of the term deposits of 13 months. And there, we have some positive news in the sense that it clearly demonstrated that the market has become rational again, as we expected in the sense that out of the maturing deposits 50%, 5-0, went into CASA. Only 25% went into term deposits and then in term deposits, obviously at positive margins and 25% went either into maturity -- mutual funds or some part, small part exit. So that's a bit what you can take into account for next year for the head start that we will see next year. Johan Thijs: Giulia, I will answer your second question. So Kate 2.0 is indeed giving us productivity gain. As you rightfully pointed out in the past, Kate 1.0, I mean, generated roughly between 1% and 1.5% of productivity gains. We launched Kate 2.0 actually in October. So it's in very early days to make already conclusions what it will be and definitely make those conclusions public in an analyst call. What I can say -- so it's too early to judge. But what I can say is that given the fact that Kate 2.0, which is actually Kate 1.0 retrained in a full LLM environment. So previously, Kate was already using some LLM, but not extensively. That is -- that we do see in the trials, which we have been running over the first 5, 6 months that we had indeed an increase of our autonomy of roughly 15%, which is quite strong. If that will be translated in full of -- for a productivity gain, that needs to be further fine-tuned. But what is also important to see and that is the second element, which we tend to forget that is the fact that customers are using Kate more and more because they find solutions via Kate and don't have to queue anymore in branches or whatever, don't have to take the car anymore looking for parking places, makes them use Kate more and more, which actually means also that they are not only using it more for -- and therefore, generating cost side, but also allow us to address the more specifically, more tailor-made solutions on the back of the traces, which they leave with us, so the data analysis. And that is obviously triggering us more sales, which is the combined effect. So when we speak about productivity gain, ultimately, it is translated in the cost-income ratio. So the outlook is positive, and the outlook is if I use the floor to play at least what we guided before. Operator: And we'll now take our next question from Namita Samtani of Barclays. Namita Samtani: My first question, you flagged in your forward-looking guidance that you include no speculation on potential measures of any government. Could you please give some color on anything you're watching there that might positively or negatively impact earnings next year? And secondly, just on Ethias, if it's not coming to the market until 2027, would you consider to pay back some of the excess capital that you have as a special dividend in 2026? Otherwise, I just struggle to see how this isn't trapped capital. Bartel Puelinckx: Okay. Thank you, Namita. So as far as the potential measures of the government are concerned, it might have an impact on the earnings going forward. You're mainly referring obviously to the banking taxes and how we see the evolution of the banking taxes. First of all, as far as Belgium is concerned, we still do not see and do not expect any significant increase in banking taxes. They are already had a quite high level. Of course, also the question is going to be and remains still because there's still no clarity what the government is going to announce because basically, normally, the banking taxes to somehow drop as a result of the fact that, of course, the deposit guarantee fund in Belgium has now been replenished and actually only contribution should be limited to the increase, of course, in eligible deposits. Were it not for that one sentence, of course, in the government agreement that indicates that banking sector should at least remain at the same level. But due to the political situation currently in Belgium and the fact that the budget discussions have been postponed, there is no clarity yet on this side. Where there is some more clarity is the decision of the European Court of Justice compared with respect to the loyalty premium and, of course, also the tax benefit that you get for the first part of the savings and the saving accounts, which have been considered as indeed discriminatory. We will see what the impact of that is going to be. And we are looking now at what the impact is going to be on the loyalty premium. Most likely an alternative version of the loyalty premium will be foreseen, but we do not expect any major impact of that for the very simple reason that actually, first of all, the loyalty premium with KBC is already low, 20 basis points. But next to that, also already 95% of our deposits are eligible for loyalty premium. So the impact of that is going to be very small. Last for Belgium then at least is also the added value tax that is under discussion, but also that has been postponed as a result of the postponement of the budget discussions because it still requires, of course, the adoption of a former loan law to actually charge the taxes. And as long as you don't have that law, you cannot charge taxes. We already as KBC, so we will implement that, but it will depend, of course, at the initiatives that are being taken by the government. Then as far as Belgium is concerned, for the Czech Republic, we have some good news in the sense that basically we do not expect, and it's not part of the government agreement of the new established government under Babiš. So Basically, there is no sign of a further increase of banking taxes in the Czech Republic. And as you know, for the banking industry, the windfall tax in the Czech Republic is actually having no impact. So that's good news. Also in Bulgaria, as you know, the government for the time being is not considering implementing any banking taxes whatsoever, apart from the fact that they have established an alternative version, which is more a kind of a prefinancing of the taxes going forward. Slovakia, there basically also, there is no sign of a further increase of the banking taxes. There, the government sticks to the agreement that they made with the banking sector in the sense that it will be gradually decreasing to '27. There are also some alternative measures that are being taken, such as also having a tax-free benefit on the state bonds because they're also issuing some state bonds in Slovakia, but the impact of that is also limited. And then, of course, we come to cherry on the cake, which is Hungary, where indeed there -- that they already -- the bank -- the windfall tax that was supposed to be temporary is far from temporary that has been extended and the indication of -- is that basically they consider windfall as long as the policy rate is above 3%. And as they are today at 6.5%, this is still likely to last for a while. There are, however, some rumors, and there was indeed an announcement or at least some indication by the Minister of Finance, Mr. Nudge, that there might be going forward, again, an increase in the banking tax -- in the windfall tax and also a limitation of the mitigating measures, but that so far has not yet been confirmed, but there is a risk that, that would have a negative impact going forward on Hungary. Johan Thijs: Good morning, Namita, and also, I will take the second question. So regarding the capital position and your reference to potential trapped capital beyond 2027, well, I would use the dividend policy, which probably as good as I know is quite explicit in that perspective. So first of all, we have a couple of priorities now and that is straightforward. First, we want to grow our book in an autonomous way. And it sounds perhaps fluffy, but it is definitely not. Just look at our track record. Over the last 5 years, we have grown a company like Czech Republic, Chairs of Bay, in terms of the loan and in terms of the deposit side, autonomously, so organically. And if you then look very specifically of what we're doing this year, which is not included in those 5 years I was referring to, it's even better. So the guidance now, we're approximately 7.5%, let's round the number, 8% growth on the year. Well, that is something which we will continue to strive for going forward. The other element is, of course, that next to that organic growth, which consumes risk-weighted assets, as we all know, we will have a further eye on the market in terms of M&A. So Ethias is the one we are focusing on because that is the bigger one, which we can do, by the way, by a Danish compromise solution by our insurance company. But let's not forget that we recently also and that this approval still happening as we speak, as we did an acquisition of a bank in Slovakia and a smaller leasing company in Czech Republic and in Slovakia. Well, these are things which were officially not on the radar, but it doesn't mean that they were not becoming available. And that is something which we are going to look into going forward. So capital is used for those 2 priorities, growth autonomously and growth by M&A going forward. Let's not forget that given the strong profitability, dividend will have a very strong position given our payout ratios, which has the range between 50% and 65% without preempting now already on what the final dividend over 2025 is going to be, I mean, look at our track record over the last years, well, it is more towards the higher end of that range. So all in all, given what I should have said, there are 3 components and then the fact that we want to be amongst the better capitalized financial banks, financial institutions in Europe, we have a very solid position and not necessarily will have what you call trapped capital. And in the event, you know that our minimum is 13%. And in the event that it becomes clear that, for instance, an acquisition we have in our mind is not going to happen. Well, then the policy is quite straightforward. The Board will take that decision then as a definition of capital, which we no longer need because the availability of M&A is not there. The position is solid. So let's bring that capital back to shareholders because we cannot make it work within KBC. That's straightforward. So the risk of having trapped capital in our company is nonexistent given our policy and given how the way we are executing our business as we speak. Operator: I will now take our next question from Benoit Petrarque of Kepler Cheuvreux. Benoit Petrarque: So the first question is on the Belgium deposit market. We see a lot of discipline also in September, by the way. So it's a very attractive market currently. Looking at previous cycles where we have a bit of steepening and the curve is quite attractive. And also, yes, there's a ramp-up of the transformation results expected for next year. In such a market, would you expect discipline to be maintained? Or what is your kind of view on the deposit market into '26? Do you expect discipline to be retained like this? That's number one. And number two is on the lending NII in Belgium. It's clearly turning around, let's say, more positive in the latest quarter, especially driven by a very strong loan growth, 6% year-on-year. And I was wondering what -- where it comes from, basically. We've seen actually the competition not at that level, and you seem to be gaining market share. So I wanted to get a bit more underlying reason for that very strong performance. And just maybe also thinking about NII on '26, you have been very conservative on your guidance. You have been too conservative in '25. And I just hope that there will be a bit less conservatism in a way and more accuracy in the guidance, but that's just on a separate note. Bartel Puelinckx: So as far as your question is concerned on the Belgium deposit market, which indeed, I concur is -- remains very attractive. Also the steepening of the curve is indeed going to ramp up the deposits. Now in terms of potential further developments going forward, it looks like we are quite confident that we will be able to continue to move into that part and to, of course, raise additional deposits going forward. The only thing that is popping up somewhat more. You know that we've been reducing and all markets has been reducing the external rates on the saving accounts. We moved them from 90 basis points at the beginning of the year, 45 basis points -- loyalty program and 45 basis points base rate dropped now to 60 basis points being 40 basis points base rate and 20 basis points loyalty premium. All others -- all banks have been following on this side, apart from some smaller banks. And this has raised some attention also from the government. So the Ministry of Finance has indicated and has publicly stated that he will be looking into the further development of the external rates on the saving accounts. So we might see some drawback from that going forward. But for the time being, there is nothing specific. Johan Thijs: And then perhaps on the guidance, the side note which you made, I obviously understand where you come from. You said too conservative, make it a bit sharper going forward. But I would like to comment in 2 ways on this. First of all, to a certain degree, you're just purely looking -- I agree with what you say. On the other hand, I would like to add that given also the question about the discipline in as we speak, the biggest markets for us in terms of deposits is Belgium. The 2 combined actually triggered us to put the guidance where it was. So there was a big, big, big amount of money being freed up, as you know, EUR 6 billion. And if things would repeat what happened in 2023 or in 2024, then obviously, you would have completely different picture. We had those term deposits at a negative margin. Unfortunately, this did not materialize. And I think the main trigger for that is to be found in the results of our peers, which have been involved in that deposit war in 2024. That is quite straightforward that, that discipline is there. So it allows us indeed now to take that uncertainty out of our guidance. And as of the moment, that uncertainty is gone, you can make more accurate predictions. I would actually say, in that perspective, we will continue to make our guidances because KBC has a track record of underpromising and overdelivering. It's better than the other way around. But we take your side note or your side remark for granted. Thank you. Sorry, sorry -- in my excitement -- Sorry, I forgot about the margins on lending. Well, yes, in that perspective, so there are 2 reasons. So first of all, I think there's a bit more discipline in the market. So let's also not forget that all the banks being pushed by the ECB on risk-weighted assets. You remember what happened to KBC 2 years ago. But this is also happening to other banks, which you can clearly see in the announcements which they all make either via the mother ship, either via the local entities. So if you want to keep your capital ratios intact, then you need to achieve a return on risk or a risk-adjusted return on capital, and therefore, your margins cannot be lowered anymore. That is something which we see next to that and that is what we are striving for. KBC obviously has had a very strong loan growth in the first 9 months of the year, which allows us also to be more -- to be a bit more selective in terms of the margins. You can clearly see in the detail, which is provided in Belgium that is on Page 25. I do not make a mistake that indeed, we are pushing now for several quarters already to bring that margin to a more sound level given the capital consumption. And that is something which is also possible, given the fact of the strong performance of the loan volumes, which we have year-to-date. So yes, we are working on the margins. Yes, there is more discipline. And yes, we are comfortable giving the loan growth, which we have already realized in the first 9 months and the pipeline, which we have for the quarters to come. Operator: And we will now take our next question from Sharath Kumar of Deutsche Bank. Sharath Ramanathan: A couple of follow-ups. Most of my questions have been answered. Firstly, on loan growth, can you comment on the sustainability of the double-digit levels in most international markets? Also, is it a fair conclusion to say that the level of loan growth in 2026, 2025 level would be the floor? And if you can comment on the type of areas that you're getting this loan growth from, so it will be useful. Secondly, on M&A, can you confirm that there are any other active files rather than Ethias? Also if you could confirm there is no interest to get back into Ireland? Bartel Puelinckx: So I will take the first question on the double-digit growth. And I presume that what you're mainly referring to is the double-digit growth that we see basically in Central Europe. And there, of course, you have a particularly strong growth in -- first off, to start with in Bulgaria, where we see a year-on-year growth of 18%, which is mainly driven by the very strong growth on the mortgage side. And the mortgage side is actually due to the fact that you have the euro adoption, as you know, in Central Europe in Bulgaria and people are more or less concerned about the potential inflation after the euro adoption. So from that perspective, that explains why we see significant growth currently. We, however, expect that to continue, however, at a somewhat lower pace after the euro because, obviously, in Bulgaria, the disposable income has increased quite significantly and also the quality of housing in Bulgaria is not at the same level, of course, as the level that we see in Western Europe. So that is as far as Bulgaria is concerned. The Czech Republic there, obviously, we also continue to see a very strong year-on-year growth on -- of the loans of 11%. There, what we see is that also the mortgage business is doing and continues to do very well. There is somewhat a small impact on the margins, but the margins are well above the back book. So that continues to generate quite some nice growth. So year-on-year growth on the model portfolio is almost 7%, but also in the Czech Republic, we continue to expect some further loan growth due to the fact that also GDP growth continues to be quite significant. They recently increased actually their projections for GDP growth from 2.5% to 2.7%. And typically, as a rule of thumb, what we use within KBC is that you can see a loan growth, which is equal at the GDP growth plus inflation. Also in Slovakia, and Slovakia continues to perform quite nicely, particularly on the mortgage side, also there at quite stable margins and nice margins. On the corporate side, they have been performing quite well as well, and we expect that to continue. You know that they are in the market. The growth today in Slovakia is somewhat subdued at 0.5%, but this is expected to pick up again in the next year, particularly also because Slovakia being an open economy with also more benefit from the German initiatives in spending. And then last is Hungary. Hungary also, despite the fact that Hungarian economy is not growing significantly either, we continue to see quite some strong growth, particularly in the mortgage business. And also the recently announced new government initiative with the Home Start program, increasing the services should help further also the mortgage growth, together with also at quite attractive margins. On the corporate side, there is somewhat more competition, somewhat more pressure going forward. So basically, that as far as the expected loan growth is concerned going forward. Johan Thijs: I will take your question regarding the M&A. So first of all, we are constantly monitoring the markets. Otherwise, we would never ever have detected 365, nor the leasing activity acquisitions. But do we have interest in other files? Well, I cannot answer those questions concretely because then it would make very obvious what we are looking into and what competition perhaps should be finding interesting as well. But to be very concrete, your question on Ireland, we are not going to go back to Ireland, no. Operator: Any further questions? We now will take the line of Chris Hallam from Goldman Sachs. Chris Hallam: I just have 2, one on SRTs and then one on capital. So regarding the inaugural SRT on the corporate loans, I guess that comes back to the EUR 8.2 billion RWA add-on that was imposed on KBC back in 2023. Is that the right way to think about it, that the risk weights on those corporate and SME loans was artificially high? And then if so, how much more is there to go on those high-risk weight loans, either in terms of the amount of relevant loans you could still SRT or the amount of that EUR 8.2 billion add-on you might look to recover via future SRTs? And then secondly, on capital. You said earlier that the risk of there being trapped capital in KBC is nonexistent. Should we interpret that as a commitment that the CET1 capital ratio at the end of 2026 will be as close as possible to the target for a 13% pro forma for any announced acquisitions or distributions? Bartel Puelinckx: Thank you for your questions. I will take your first question related to the SRTs. As indeed, we announced this morning the -- our inaugural issuance of EUR 4.2 billion SRT leading to EUR 2 billion of risk-weighted assets relief and having a 23 basis points impact on our positive impact of scores on the common equity Tier 1. Your assessment is indeed correct. Basically, the higher risk-weighted asset density created is due to the add-on of 2 years ago, indeed, is impacting that. Now we always stated that we consider SRTs as a means to an end and not as a strategic development. So basically, that means it is one of the tools that we will use to further optimize the portfolio management. So if your question is, are we going to continue to do SRTs? Yes, we are continuing to launch SRTs, but this is -- we do not want to become dependent on the SRT market as some of our peers are. So from that perspective, there is going to be further SRTs. These SRTs will remain focused indeed on those portfolios that have the highest risk-weighted asset density in view of the efficiency of those SRTs. And -- but it is not going to be a major significant increase for the years to come. Johan Thijs: Thank you, Chris, for your questions. And let me come back to the very concrete topic if that by the end of, let me say, 2027, it should be somewhere in the neighborhood of 13%. Well, the -- what I said on the previous question, the previous -- and I don't remember who asked it. Actually, the dividend policy is pretty straightforward. And the dividend policy in that perspective allows us to distribute capital. There is one constraint you need to take into account as well, and that is the constraint of to be amongst the better capitalized financial institutions in Europe. We have more freedom there to decide are we -- yes or no than we did previously because previously, it was mechanically so there is more possibility to have in that perspective, a discretionary decision by our Board, but that's a trigger. So if the entire sector would go to 13%, 12.5%, whatever, and there are no M&A opportunities, there is clearly a possibility to finance our economic growth, which -- autonomous growth, which is quite significant in terms of percentages, which you know, but then the Board will take a decision in all discretion. All those elements into account, can I make a hard commitment on the execution of the policy? Yes. Can I take a hard commitment that it's going to be 13%? For obvious reasons, I can't. Operator: And we'll now take our next question from Shrey of Citi. Shrey Srivastava: Just changing tack a little bit. On fee development, you've actually managed to keep margins sort of broadly stable. And I know the very strong inflows and higher margin direct client money. Looking forward, how do you see net inflows in sort of this component versus the others? And I suppose in turn, what do you see as the outlook for margins in the asset management business specifically? Bartel Puelinckx: Thank you, Shrey, for your question. Indeed, we've seen a 3.4% growth on our direct client money. And basically, this is, on the one hand, of course, driven by the very strong net sales that we see of EUR 1.8 billion for this quarter, bringing it already to EUR 5.3 billion for the 9 months. And what is important here is that this is true for more than 1/3 driven actually by what we call our RIPs. This has nothing to do with rest in peace, but these are the regular investment plans, whereby households continue to regularly invest on a monthly basis, a relatively small amount, but this is a sustainable amount. And we actually see the number of those RIPs increasing continuously. Today, we have 2.3 million of those RIPs with an average contribution in Belgium of roughly EUR 120 per month; in the Czech Republic, roughly EUR 40 million per month; and in the other countries, slightly higher than the EUR 40 million -- EUR 40, of course, a month. So that gives you an insight into the relatively sustainable growth of that portfolio going forward. The remainder, obviously, is going to depend on the market performance. And as you know, we are not guiding on that part of the portfolio. Operator: There are no further questions in queue. I will now hand it back to Kurt De Baenst for closing remarks. Kurt De Baenst: Thank you, operator. This sums it up for this call then. Thank you very much for your attendance, and enjoy the rest of the day. Bye-bye. Operator: This concludes today's call. Thank you for your participation. You may now disconnect.
Operator: Welcome to the NICE conference call discussing third quarter 2025 results, and thank you all for holding. [Operator Instructions] As a reminder, this conference is being recorded, November 13, 2025. I would now like to turn this call over to Mr. Ryan Gilligan, VP, Investor Relations at NICE. Please go ahead. Ryan Gilligan: Thank you, operator. I'm incredibly excited to join NICE as the company's new Vice President of Investor Relations, and I look forward to working closely with all of you in the investment community. With me on today's call are Scott Russell, Chief Executive Officer; and Beth Gaspich, Chief Financial Officer. Before we start, I would like to point out that some of the statements made on this call will constitute forward-looking statements. In accordance with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, please be advised that the company's actual results could differ materially from these forward-looking statements. Additional information regarding the factors that could cause actual results or performance of the company to differ materially is contained in the section entitled Risk Factors in Item 3 of the company's 2024 annual report on Form 20-F as filed with the Securities and Exchange Commission on March 19, 2025. During today's call, we will present a more detailed discussion of third quarter 2025 results and the company's guidance for full year 2025. You can find our press release as well as PDFs of our financial results on NICE's Investor Relations website. Following our comments, there will be an opportunity for questions. Let me remind you that unless otherwise noted on this call, we will be commenting on our adjusted results of operations, which differ in certain respects from generally accepted accounting principles as reflected mainly in accounting for share-based compensation, amortization of acquired intangible assets, acquisition-related expenses, amortization of discount on debt and loss from extinguishment of debt and the tax effect of the non-GAAP adjustments. The differences between the non-GAAP adjusted results and the equivalent GAAP figures are detailed in today's press release. The information and some of our comments discussed on this call may contain forward-looking statements that are subject to risks, uncertainties and assumptions. I will now turn the call over to Scott. Scott Russell: Thank you, Ryan, and we are thrilled to welcome you on board and have you join our team. Good morning, and welcome, everyone. Well, let me start by saying the renewed strategy that we laid out for NICE at the beginning of the year is now producing clear tangible results, reflected in both our financial performance and our growing market position. We're seeing great momentum across our entire business, setting a solid foundation for sustained growth. We're pleased to report another strong quarter underlined by exceptional cloud and AI bookings, stemming from the continued expansion and execution of our AI-first strategy, our international expansion and our robust go-to-market performance. This quarter reinforced the strength of our AI solutions, driving real transformation for our customers with exceptional cloud bookings, driving a cloud backlog increase of 15% year-over-year and with our AI capabilities included in every new 7-figure CX deal. In Q3, total revenue was $732 million at the high end of our guidance range, with cloud revenue reaching $563 million, up 13% year-over-year. Our cloud revenue growth was primarily driven by our AI and self-service offerings, whose ARR accelerated to 49%, driven by sustained organic momentum and the contribution from NICE Cognigy, which closed in early September. This demand for our AI offering is reflected in strong bookings for Autopilot and Copilot deals more than tripling in Q3. We also achieved a higher win rate against our key CX competitors, underscoring the growing customer appetite of our AI-powered and domain-rich solutions. Furthermore, it reinforces our conviction that we operate in a vibrant growing market where organizations are showing robust demand for accelerating their AI transformation using our offerings. We at NICE perceive AI not only as a catalyst for our groundbreaking innovation, but more importantly, as a fundamental force for reinventing how business, technology and humans interact in each of our markets. In the world of customer experience, our leading CX AI platform, CXone, is using purpose-built AI to reshape customer journeys in exciting new ways. Our AI-powered orchestration allows us to perfectly blend human and AI agents, creating seamlessness in the end-to-end experiences that go well beyond the contact center, delivering automated workflows that move from accurately identified customer intent all the way to organizational fulfillment and resolution. We're also seeing increased demand for our leading NICE Cognigy conversational and agentic AI solutions, available for implementation on any technology environment, allowing companies to design, run and optimize AI agents quickly and simply with little to no code requirements and with specific CX-built functionality and vertical know-how. There's tremendous added value that we're seeing for the powerful combination of CXone and NICE Cognigy together. Our ownership of the point of engagement awards us a distinct understanding of customer intent, sentiment, preference and context across literally billions of engagements. This distinct AI-ready foundational data then forms the basis for automated creation of smart agentic AI, turning this data into CX-built workflow intelligence. The symbiosis of CX engagement data dynamically informing AI agent conversations and actions, all happening as a part of a single unified platform is at the core of our differentiation and what sets us apart in our markets. Our innovation road map is already well ahead with many NICE Cognigy integration capabilities already completed and many more underway. NICE Cognigy drives further growth of the CXone platform and CXone accelerates the NICE Cognigy expansion in our customer base, particularly in the enterprise segment. Combining sophisticated agentic AI with engagement-based data also enables us to change the paradigm of customer engagement from a reactive to a proactive framework identifying business-initiated intents that can utilize human or AI agents to reach out to consumers, increasing sales, reducing effort, improving loyalty and trust. Our CX AI solutions are resonating with organizations of all sizes and verticals as evidenced by some of our key deals in the quarter. In Q3, one of the leading global auto manufacturers chose CXone to transform their customer experiences as part of an 8-figure ACV deal, underscoring NICE's continued leadership in the cloud contact center transformation and reinforcing the completeness of our CX AI platform. Their decision reflects the growing enterprise shift away from fragmented legacy systems towards a unified cloud and AI platform that enables modernization, agility and superior customer engagement. In another substantial Q3 deal, AI to cruises chose NICE Cognigy for their FAQ automation initiative, creating accurate dynamic responses to customer requests. Our integration with their existing environment allowed AI to cruises to capitalize on their existing data and workflows while modernizing the overall customer engagement experience. Our AI solutions are also generating strong upsell momentum. Consumer Cellular, an existing NICE customer added AI agent augmentation using our Copilot solution in a 7-digit ACV deal, enabling real-time proactive triggering of agent guidance, injection of knowledge and conversational suggestions and improving the ongoing customer engagement. Q3 also saw continued momentum in our international business as an increasing number of organizations across the globe look to NICE for their CX transformation. DWP, U.K.'s Department of Work and Pensions, extended their CX sovereign cloud initiative with NICE's self-service solutions in another 7-digit ACV deal, modernizing citizen engagement through automation and digital self-service. They chose NICE for our compliance with sovereign cloud standards, proven public sector standards, platform scalability and our ability to execute on their AI and digital transformation road map. Our overall strong Q3 performance is further proof that our strategy is hitting the mark and that we're delivering across all our key focus areas. Our commitment to leading the AI revolution in all our markets and specifically in CX with CXone and our NICE Cognigy solutions. The emphasis on developing our ecosystem and strategic partnerships to scale our impact, leverage our collaboration with major technology and GSI partners and with many more to come. Our international expansion and cloud adoption acceleration in global markets and of course, maintaining our financial strength with both operational rigor and industry-leading profitability while thoughtfully deploying capital through acquisitions and share repurchases. This is the perfect opportunity to remind everyone that our Capital Markets Day is coming up in just a few days on Monday, 17th of November in New York City. The event will feature presentations from our executive management team covering in more detail our long-term strategy and the future of the CX market, our CX innovation road map with NICE Cognigy and our financial overview, including midterm outlook. If you've not registered yet and you'd like to attend, please contact our Investor Relations team at ir@nice.com. We look forward to seeing you all in person at this event. And with that, I will now turn the call over to Beth. Beth Gaspich: Thank you, Scott. I'm pleased to share another quarter of strong financial execution underscored by robust cloud revenue growth and continued positive momentum from our AI and self-service business. Our acquisition of Cognigy, the global leader in AI-driven customer service solutions closed in early September, earlier than originally anticipated, and Cognigy's performance is included in our third quarter financial results. Total revenue of $732 million came in at the high end of our guidance range, increasing 6% year-over-year for the third quarter. Cloud revenue increased 13% year-over-year, contributing $563 million, representing a record 77% of our total revenue. Excluding Cognigy, cloud revenue increased 12% year-over-year, in line with our expectations. Our cloud revenue growth in the third quarter continued to be driven by the strong performance of our CX AI and self-service ARR, which totaled $268 million in Q3, increasing 49% year-over-year and 43% year-over-year, excluding Cognigy. This key growth driver in our business continues to expand and next-generation CX AI now represents 12% of our overall cloud revenue. Our fast-growing CX AI is expected to becoming more meaningful in the coming years, especially with the addition of Cognigy, which we expect will further augment our AI and self-service growth trajectory. Our cloud NRR for the trailing 12 months of Q3 was 109%, reflecting continued strength in customer loyalty and expansion activity as we scale across a larger base. Our NRR is reported on a last 12 months basis and naturally lags current trends as demonstrated by our consistent cloud revenue growth year-to-date and the strong 15% year-over-year growth in our cloud backlog, as highlighted by Scott, we're seeing positive underlying indicators that our healthy NRR can inflect upward over the next few quarters. Our on-premises business performed in line with expectations as services revenue of $139 million represented 19% of total revenue and product revenue of $30 million represented the remaining 4% of total revenue. From a geographic breakdown, the Americas region, which represented 84% of revenue in Q3 increased 5% year-over-year with double-digit cloud revenue growth and strong product revenue, which was partially offset by a decrease in services-related revenue as our customers continue to migrate their maintenance to our cloud. Our international business demonstrated strong revenue growth in the third quarter as our cloud business continues to drive momentum with our continued success of large enterprise scale wins in the international markets. Our international revenue contribution increased from last year, and we expect this trend to continue. EMEA revenue increased 7% year-over-year and APAC revenue increased 19% year-over-year. Together, our international revenue increased 11% year-over-year. Our international markets represent one of our most compelling growth opportunities. These regions remain relatively underpenetrated in terms of cloud adoption, creating a significant runway for expansion. We're seeing tangible traction with large enterprise wins in both EMEA and APAC now going live and contributing to our revenue results. Our ongoing investments in sovereign cloud infrastructure are proving instrumental in securing these opportunities, offering local compliance, data residency and trust advantages that customers increasingly prioritize. In addition, Cognigy's strong presence and brand recognition in EMEA, coupled with their growing presence in the Americas, further enhance our reach in the region, serving as a powerful catalyst for growth and enabling cross-selling of our complementary AI and self-service solutions. Turning to our business segments. Customer engagement revenue, which represented 84% of our total revenue in the quarter was $613 million, increasing 6% year-over-year, driven by the continued strength of our CXone AI cloud platform across all geographies, which more than offset the continued transition from our on-prem business. Revenues from financial crime and compliance, which represented 16% of our total revenue in Q3 and totaled $119 million increased 7% year-over-year. This was due primarily to strong cloud and product revenue growth. Moving to profitability. Our total gross margin was 69.9% compared to 71.7% last year, reflecting our deliberate investments to scale international operations and to continue to expand our global cloud footprint where we are already seeing dividends as highlighted in our strong international revenue growth. Our operating income in Q3 increased 5% year-over-year to $231 million, and our operating margin totaled 31.5%. The impact of Cognigy on our profitability was immaterial on our gross margin and operating margin in the third quarter. Looking forward to the fourth quarter and beyond, we expect no significant impact to the gross margin from Cognigy. However, we do expect dilution to the operating margin, which we previously communicated and is factored into our updated guidance that I'll touch on in a moment. Earnings per share for the third quarter were $3.18, a 10% increase compared to last year. Our cash flow from operations in Q3 was $191 million, up 20% year-over-year, underscoring strong operational execution and profitability. During the quarter, we deployed significant capital to advance our strategic priorities, repurchasing $41 million of shares, fully repaying $460 million of outstanding debt and funding the acquisition of Cognigy. We ended the quarter debt-free with total cash and short-term investments of $456 million, demonstrating both the strength of our balance sheet and our capacity to invest decisively in durable, profitable growth and create long-term shareholder value. In summary, we delivered another quarter of strong execution, driven by sustained cloud growth, accelerating AI and self-service adoption and disciplined financial management. Our recent momentum, together with Cognigy now part of our portfolio and a debt-free balance sheet, we are entering the next phase of growth from a position of exceptional financial and operational strength focused on driving innovation, scale and long-term shareholder value. We're excited to share more financial details at our upcoming Capital Markets Day, including a 2026 and midterm outlook. Now I'll close with our guidance for total revenue and non-GAAP EPS for the full year 2025. Our updated guidance includes the expected results of Cognigy from the date of acquisition through year-end. We are increasing our full year 2025 total revenue guidance, which is now expected to be in the range of $2.932 billion to $2.946 billion, which represents a year-over-year increase of 7% at the midpoint. We are increasing our expected year-over-year cloud revenue growth to be in the range of 12% to 13% for the full year. Previously, we shared an expected year-over-year increase of 50 basis points to our operating margin. Our expectation for our organic operating margin, excluding the impact of Cognigy, remains unchanged. As a result of the acquisition of Cognigy, we now expect our operating margin to slightly contract. Previously, we shared an expected year-over-year growth in non-GAAP earnings per share of 12% at the midpoint. Our expectations for our organic non-GAAP earnings per share, excluding the impact of Cognigy, remain unchanged. As a result of the acquisition of Cognigy, we now expect the full year 2025 non-GAAP fully diluted earnings per share to be in the range of $12.18 to $12.32, which represents an increase of 10% at the midpoint. I will now turn the call over to the operator for questions. Operator? Operator: [Operator Instructions] Your first question comes from the line of Siti Panigrahi with Mizuho. Sitikantha Panigrahi: I just wanted to ask about Cognigy. You closed in September. So what's your expectation of Q4 revenue contribution from Cognigy? And specifically, how are you planning to position Cognigy in terms of go-to-market? And any changes to the partnership they have with other CCaaS vendors? Beth Gaspich: Yes. Thank you, Siti, for the question. So I'll start off with the financial aspect of the question. First, we are very pleased that we were able to close the acquisition of Cognigy earlier than originally anticipated. We originally anticipated a Q4 close, and we were very excited that we received the regulatory approvals earlier than originally anticipated. What it means for our revenue contribution is that in the third quarter, it contributed roughly about 50 basis points to our cloud revenue growth from the inclusion of Cognigy. And what we've anticipated and that's included in our updated guidance for the full year is that it should include an increase about 150 basis point impact and increase to our cloud revenue growth during the fourth quarter. So those are the assumptions we've made on the financial inclusion and as a result of the Cognigy acquisition. Scott Russell: And on the go-to-market side -- thanks, Beth. On the go-to-market, it is really clear that Cognigy is a world-class leading conversational agentic AI platform. And they are actively and we will expand and grow going after all of the CX market, whether NICE is the underlying CCaaS platform or not, but more importantly, going after that market because we know those companies who are running on other platforms don't have an integrated solution. They need an AI platform and the Cognigy solution is ready-made and we will go after that market. So we're excited about the potential that brings. And you can be assured that the Cognigy team are very excited to have the power of NICE behind them as we go pursue that. Sitikantha Panigrahi: And Scott, just a quick follow-up to that. We keep hearing from a lot of customers who are not yet in cloud or CCaaS. They use Cognigy for AI. Do you see this is an opportunity now for you to even accelerate or reach out to those customers and move them to cloud as well? Scott Russell: Yes, for sure. I mean if you think about it, we have 3 growth vectors for our Cognigy business that we're really excited about. First, a customer that is in the cloud that have already done the CCaaS migration, but they're looking to do their AI transformation, Cognigy is the market leader. They are fantastic at being able to provide that automation, that customer service experience. And so secondly, is the nice installed base and the tremendous opportunity in the enterprise customer base that we have, bringing Cognigy into that installed base. And then third, to your point, is we are the only company that has the combined world-leading AI platform and the world-leading CCaaS platform that we combine together. And if they want to start with their on-premise, they want to start with AI transformation, they lead the way with NICE Cognigy. If they want to do their cloud migration on CXone, they start there. But either way, we can give them the end-to-end journey on a unified platform. So it does give us real optionality for our customers in terms of their transformation journey from their on-prem. And that's obviously very exciting. Sitikantha Panigrahi: Great and look forward to hearing more on Monday. Scott Russell: Look forward to it. Operator: Your next question comes from the line of Patrick Walravens with Citizens. Patrick Walravens: Great. Congratulations to you guys on all the momentum in the business. It's great to see. So Scott, with Cognigy, as you're getting deeper into all these sales cycles, can I ask if you're seeing Sierra? And I bring it, I'm sure you're getting this question a lot, but for anyone who doesn't know, they just raised $350 million in September at a $10 billion valuation. So it would be great to hear your thoughts in terms of what the competition looks like. Scott Russell: Yes. Great question. So let me first say, the growth and the expansion of AI in the CX market is clearly evident. And we've been talking about this for a period of time. But when the introduction of new players, it's a validation of the attractiveness of the growth potential that this market brings. And I guess you can see our move of acquiring a proven market leader. Cognigy is a proven market leader in conversational and agentic AI. They're already there. They're proven with some of the world's leading brands, and it's a testament of our leadership and our ability to capitalize on the opportunity. And just as a reminder and why we feel really strongly about our competitive positioning, Cognigy was specifically targeted because of its enterprise scale. It is already delivering at the enterprise, the top end of what organizations need of scale. It's easy to adopt. There's no words like forward deployed engineers by our Cognigy team. We don't need services surrounding. It's easy to adopt, and it's proven customer value that we can scale with both CXone and non-CXone customers. So yes, we see new entrants in the market. It's a validation of the potential that market brings, but it also gives us renewed confidence about our ability to lead on an AI-only play, a CCaaS and then the combination of the 2 together. And I think we'll be able to share much more details, Patrick, in our Capital Markets Day on Monday, where we can really showcase that capability. Operator: Your next question comes from the line of Elizabeth Porter with Morgan Stanley. Elizabeth Elliott: Now that we're a few months out from the renewed and expanded RingCentral partnership, are there any changes that you're seeing in pipeline velocity or average deal size through this channel? And understanding we're probably going to get a little bit more next week, but any context for how we should think about this as an incremental driver to fiscal '26 bookings? Scott Russell: Yes. Look, it's a great question. So first of all, Vlad and I and our teams have been in really tight collaboration with the renewed partnership. We've got an updated go-to-market. We've got the real potential to have an expansion. I'll give you 2 key levers. One is RingCentral were already an existing partner of Cognigy and a proven scalable partner of Cognigy. So not only in the combined installed base that we have with RingCentral together, but as their go-to-market, as their agentic and conversational AI platform supporting their solutions, it is a great collaboration. We're doubling down on that super. And then secondly, as you rightly point out, with our renewed partnership commitment, we're able to give confidence to our customers across all segments around combining world-leading UCaaS platform with the best-in-class CCaaS and now agentic AI platform as a unified offering. So yes, identified leads, clear go-to-market momentum and collaboration between our 2 go-to-market organizations means that we do expect renewed growth, and I know that the RingCentral team feel the same way. Operator: Your next question comes from the line of Samad Samana with Jefferies. Samad Samana: Maybe one, just Beth as a housekeeping question. If I think about the guidance increase for the year, was any of that on the cloud side an organic increase as well? Or was it largely due to Cognigy? And then I have a follow-up. Beth Gaspich: Yes. Thank you. We have maintained our expectation of 12% growth in the cloud, excluding Cognigy for the course of 2025. So that is remaining unchanged. And so the increase that you're seeing in the range in the midpoint -- up to the 12.5% midpoint is predominantly coming from the inclusion of Cognigy. Samad Samana: Great. And then maybe just zooming out from that very specific question, Scott, and I don't want to front run the Capital Markets Day on Monday, where I'm sure you'll dig into this in detail. But as you think about the early days of Cognigy being folded in, and what they brought in the NICE team. How are you thinking about the joint go-to-market effort right now? What have the early observations been? Is it better together? And are customers appreciating that better together story? Or is it still today CXone and Cognite maybe going a bit separately, but you'll fill that in over time? Scott Russell: Yes. Thanks, Samad. So a couple of observations. First of all, I was really pleased, and I talked about our cloud backlog growth and the growth of it. NICE Cognigy has already been an injection of positivity to our backlog. It's -- as a stand-alone business that has a really great pipeline that has a really great brand and recognition in the market. It has not been diluted. In fact, it's been enhanced. So that's exciting because it means the acknowledgment of the market that a leading conversational AI platform in its own right, competing head-to-head with competitors in that space, they stand really, really strong. We obviously have been really active in making sure that the NICE teams are fully up to speed. So it was quite advantageous actually. We didn't expect the closing to happen in September. But because it did, we were able to get ahead of the enablement of our go-to-market, the large coverage we have, including our partners. Don't forget, our partners play a huge part of our go-to-market execution. And so through September, we really ramped that up, which means we're able to hit the ground running in Q4 and as we lead into '26, with the NICE team being really equipped about leading those conversations on the AI and the automation play that Cognigy brings. So those 2 are really good -- and the resonance that we're getting from the NICE customer base is also really strong. But the third part that I guess I want to just reiterate what I replied before to Patrick or Elizabeth when we're just talking about is there is a large -- it might have been Saudi actually. There's a large amount of market, both internationally and in the U.S., which are evaluating their transformation journey where they've got an on-prem suite, fragmented solutions and they're trying to figure out what's my transformation road map. And what it's meant for us is instead of saying you've got to do your CCaaS move to the cloud first and then do your AI, they love the optionality, "hey, I might lead with my AI, get some real productivity and automation savings that will drive through", but then the unified platform gives us that potential to have even higher. We've already increased our win rates, but we're looking at even higher win rates as a result of NICE Cognigy. So look, Samad, I guess it's -- you're right, we will share more on Monday, but we do expect that the benefits that we had planned for and expected through the acquisition, the early indicators are really positive, and that forms a big part of our growth potential not only in Q4 but 2026 and beyond. Beth Gaspich: And one additional point that I would add to what Scott just said as well is when we think about the cloud backlog, of course, we're excited about the momentum Cognigy is bringing and what that means for us. But when we looked at the cloud backlog at the end of the third quarter, it's important to highlight that the growth, excluding Cognigy, also was increasing to 13%. So when we look ahead to our expectations stepping into 2026, we see the positive sign there of the ability to inflect and see further growth in the cloud revenue, which is exactly what we'd like to see and we expect to see going forward. Scott Russell: Yes. We got the organic, the inorganic and then the better together, so really positive effect. Operator: Your next question comes from the line of Tyler M. Radke with Citi. Tyler Radke: So Scott, I think you talked about 15% cloud backlog growth. I know it's not a stat we get every quarter, but certainly 15% is higher than where you're getting -- where we're seeing cloud revenue. So could you just talk about, is there any Cognigy impact there or anything on duration? Or is that a good read for where perhaps cloud revenue growth could go going forward, perhaps into next year? Beth Gaspich: Yes. So Tyler, I'll take that question, and it's actually what I was trying to clarify after Scott made his comments in the prior question from Samad. With the cloud backlog that we referenced, so the 15% year-over-year growth, we did have inclusion of Cognigy. If you exclude the backlog of Cognigy, we had cloud growth of 13% year-over-year. So the 13% year-over-year backlog growth compares to our 12% growth expectation this year. So of course, that builds a lot of confidence for us as we look forward into 2026 in our ability to further accelerate our growth. Scott Russell: Which we'll share more details on Monday. Tyler Radke: Yes. Okay. So no duration impact, but 13% is what we should be thinking about. Okay. Perfect. And then just on the margin side, I mean, I know there's some moving pieces with the international expansion and bringing on Cognigy. But maybe just help us understand, are there additional sort of investments you're making that should pressure margins on a go-forward basis? Obviously, we can kind of see where margins are with the first full quarter of Cognigy here in Q4. But should we expect kind of additional pressure, additional kind of costs that are going to lead revenue, whether that's international expansion or AI beyond Q4? Beth Gaspich: Yes. So it's a great question, Tyler. And we'll talk a lot more deeply about this specifically on Monday as well as we start to talk more around what you should expect to see in 2026 and the midterm outlook, '27, '28. But in general, I think what you should expect is that this is an area of investment for us. When we think about this area, we've had great success internationally. And often, that requires some sovereign cloud infrastructure. So you're building that infrastructure, putting it in place internationally ahead of the impact of the positive accretion that you get from natural growth in the cloud. So we still haven't seen all of the benefit from the great business we've been signing internationally that will continue to drive leverage in that margin. But in the short term, we are going to continue to make those investments. We see tremendous opportunities internationally. We've been very successful there. And so yes, you should expect that you'll see in the near term a slight pressure that you're seeing during the course of Q4, and we'll talk more again about expectations for 2026 and beyond on this coming Monday. Operator: Your next question comes from the line of Jim Fish with Piper Sandler. James Fish: Appreciate the color on Cognigy and breaking it out. Beth, 50 basis -- I'm sorry, 1.5% impact for Q4 gets you to about $8 million. But some quick math after that would kind of point to a big ramp to get to that $85 million ARR exiting next year. I guess, how do you get there? And how should we think about the impact to expansion rate from here just because if you kind of look at that 111% last quarter that you had on cloud net retention rate, now we're talking 109%. You have the ability to cross-sell this into the base, but it did imply a fairly decent drop sequentially. So it's really 2 questions, and I'll be quiet. And it's essentially that how do you get to that big ramp? And secondly, what's going on with net retention rate? And how can Cognigy kind of fill that hole? Beth Gaspich: Yes. Thank you, Jim. I'll try to break it down. Let's start with the $85 million because it's really important that we clarify that, first of all. The $85 million, we expect as our exit ARR for Cognigy at the end of December 2026 as we exit the year. That means that's the run rate coming out of the year. It does not mean that it represents the revenue contribution we expect from Cognigy during the course of 2026. So of course, the revenue is going to be distributed and ramping up through the course of that year. And so that is the exit point. So that's the first thing that I would clarify there. I think that as you think about Q4 and what we're predicting for the fourth quarter, in particular, first, I would say it's a little bit of early days with this acquisition. So we are factoring that into our expectation in the near term, but we have already seen the positive momentum that's really exciting even out of the gate from the Cognigy business. So we do expect to see that inflection continuing to happen throughout the course of 2026. And so I think that's built into everything that I've described. Scott Russell: Maybe let me just quickly add, Jim. I just want to reiterate our expectation of our -- of the exit 2026 ARR at the $85 million, we feel very comfortable that that's on track. The early indicators, as Beth mentioned, is very positive. That's not only on the revenue that you're seeing that you mentioned in Q4, but the momentum around backlog, bookings, pipeline that then generates into revenue or more importantly, into ARR by the end of next year. Operator: Your next question comes from the line of Arjun Bhatia with William Blair & Company. Willow Miller: I'm Willow Miller on for Arjun Bhatia. Can we get an update on LiveVox? Are you seeing stability in the business after seeing some elevated churn earlier this year? Beth Gaspich: Yes. Thank you for the question. I think it's -- first of all, you'll see that our cloud revenue growth during the quarter achieved exactly as expected. We achieved the 12%. And of course, LiveVox is a part of that. So really, what it emphasizes is that the core of our cloud business is growing even better than what you see externally. With respect to LiveVox, in particular, it has a positive outlook, and it's actually forecasting ongoing growth in cloud revenue. So all good and healthy signs that we're seeing in that part of the business. Operator: Your next question comes from the line of Michael Funk with Bank of America. Michael Funk: Beth, earlier in the prepared remarks, you mentioned the NRR trends. And I think you commented some expectation or hope of positive inflection in NRR. So can you just talk through the NRR trends intra-quarter? I know your metric is a trailing 12 month. And then related, can you talk about your pipeline, the strength of the pipeline and quality of pipeline and overall feedback you're hearing from customers about their appetite for spending? Beth Gaspich: Yes. Thank you for the quarter -- I'm sorry, for the comment or the question. So for NRR, in particular, I did highlight in my comments, and it's important to highlight that NRR is not in-quarter specifically. That is looking at the trailing 12 months and of course, reflects some of the change that we saw in our cloud growth that was happening during 2024. When you look at the current impact in quarter of the NRR, we see exactly what we would expect, which is stabilization that's consistent with the 12% growth that you've seen throughout the course of this year. And we talked about the ability to positively see that inflect in a positive manner looking ahead. And of course, we're looking at cloud backlog, but some other trends that we see as well that give that positive confidence in the growth and great cross-sell and upsell efforts we have with our existing installed base. Scott Russell: Yes. Maybe I'll cover the pipeline question. So Michael, the pipeline is strong. And you can probably tell the sentiment that I'm sharing, it's based on not only execution of what we see and what we've experienced in Q3 and our execution against the strategy, but it's also based on what we're seeing in the market. I think the first thing that I will say is there is lots of questions about AI in the market, and I understand why that potentially is the case. That is not true for CX. In CX, the proven benefits that you -- with a world-class AI platform that drives automation, great experiences, reduced cost, increased loyalty, ability to be able to drive upsell and sales and benefits for your customers, we can prove that with real customer references today. So the demand of that to be able to improve customer experiences as an AI transformation initiative in the -- we -- it's positive momentum. Whereas in other parts of AI, you can question, you don't question it here. But I would also add our growth drivers, and we'll talk more about this on Monday, but if you think about the growth drivers that we have, we've clearly got still a significant market on the jump balls of on-prem to cloud. We're improving our win rates. We see increased pipeline, very good. Our international expansion on the back of the investments, we see a lot more on the international side. We see that in our pipeline. And of course, I'm very optimistic on all the things that I talked before about NICE Cognigy inside of our business, whether it be the net new market where NICE doesn't have a role today, where we're going after that, the installed base where we're going after that and then an accelerated opportunity on those jump ball scenarios. A lot of that pipeline, we haven't even put into -- we're in the early days of bringing that into our business. So I guess it's not only on the current pipeline that we see that is strong and the buying sentiment, but the potential that we have now that we've got the complete end-to-end capability. So yes, it is borne from the trends being in our favor, which we were predicting, but it's good to see that it's coming to life. Operator: Your next question comes from the line of atharine Trebnick with Rosenblatt Securities. Catharine Trebnick: I have one for Scott. Most of your Cognigy customers are using speech to text to LLM and back to speech. OpenAI and others have recently released direct real-time voice APIs. And are you seeing competition from these APIs? And why or why not? Sorry, that was more technical, but I had to ask... Scott Russell: No, no, no, very happy to answer the question, Catharine. Look, I think we've got to just pause a little bit and look at this market for the reality it is. Anyone can create a bot, anyone. I can do it myself in 10 minutes. But creating an AI agent, whether it's teach -- text to speech, speech to text and all the other capabilities, but creating an AI agent that delivers superior customer experience, exceptional customer experience, advanced from what a human does today. That takes a whole lot more than creating a bot with some simple capabilities. And so we actually don't see the LLM providers as competition in this space. In fact, we see them as partners within our ecosystems. Their models are really good. They're general purpose, they've got an expanded capability, but with NICE and in particular, with our Cognigy, we provide the contextual CX-specific AI built, that's built on rich customer interaction data. It's built on the knowledge of what that data is, the sentiments, the context as well as the intents -- and that contextual knowledge, together with the guardrails, together with the regulations, together with the knowledge and the standards inside the enterprise, integrating those also with the legacy systems that you need to connect to, to make sure that you're delivering according to the standards that an enterprise needs. No simple bot does that. You need a complete platform. And so I guess we see the goodness of the demand because what happens is a customer often says, "Oh, I'll try to build it myself on this, on -- whether it would be OpenAI or Anthropic or other platforms, fantastic. But as soon as they see the reality of you need much more richness to be able to deliver a great consumer experience with that AI agent, it quickly comes straight to us, and we're able to leverage that. So we leverage the large language models. They're super. They're really important, but also the complementary of what we bring with the contextual intelligence means that it actually drives demand for us in a really positive way. So I love the question because we get it a lot, but it immediately then translates to validation of why the domain-specific capabilities that we have are really critical when you're in delivering to your consumers because no one is going to introduce inferior customer experience to their customers, no one. Operator: Your next question comes from the line of Tavy Rosner with Barclays. Tavy Rosner: Most of my questions have been asked. I just wanted to touch on Actimize for a second. What's the competitive dynamic? It does feel like more players are trying to disrupt the market. Is there -- do you feel anything on your end? Scott Russell: Look, I guess I would say a couple of things. Obviously, we've put a lot of emphasis around the CX business. And it's obviously an exciting inflection point in the CX market with the AI potential momentum, everything that we've talked about. And we're clearly proactively positioning our leadership in that and winning, which is why we've emphasized that so heavily. But we have got a really strong business in Actimize. It's the market leader. There continues to be high demand. The regulatory environment around the standards and the expectations around compliance and avoiding financial crime and compliance continues to be a really important aspect for financial institutions. So that business is in a really positive place. It's got a lot of cloud potential and momentum still to come. But the thing I love about the Actimize business, candidly, it is the retention rates and the -- it's -- we don't lose a customer because once it's implemented, it just provides an ongoing value and model that resonates to the largest financial institutions on the planet. So that industry definitely benefits from continued focus on compliance and financial crime, and that is a driver for us. And yes, we're positive about the outlook of that business. Operator: That concludes our question-and-answer session. I will now turn the call back over to Scott Russell for closing remarks. Scott Russell: Thank you. Look, so first of all, I appreciate the time for everyone today. As you can clearly see, we're excited. We're excited about our ability to be able to execute on the strategy that we laid out, the renewed strategy that I've talked about on many times on these calls and seeing the results. And frankly, the expectations is Q3 is a part of a proof point of a long journey in front of us to really lead and win in this market and be excited about it. We're also excited to be with you next Monday to join us. I think it's really important that you can understand and see really the NICE Cognigy platform, how it then benefits with the CXone platform and how bringing the 2 together, the 1 plus 1 equals way more than 2, it's 5, it's 10 and the potential that brings, but also from Beth and I, the updated strategy, the midterm outlook and how that plays out. So I appreciate the time and look forward to seeing you all on Monday. Operator: Ladies and gentlemen, this concludes today's call. Thank you all for joining. You may now disconnect.
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.