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Operator: Thank you for standing by. My name is Tina, and I will be your conference operator today. At this time, I would like to welcome everyone to the LandBridge Third Quarter 2025 Results Call. [Operator Instructions] It is now my pleasure to turn the call over to Mae Harrington, Director of Investor Relations. Ma'am, the floor is yours. Mae Harrington: Good morning, and thank you for joining LandBridge's Third Quarter 2025 Earnings Call. I'm joined today by our Chief Executive Officer, Jason Long; and our Chief Financial Officer, Scott McNeely. Before we begin, I'd like to remind you that in this call and the related presentation, we will make forward-looking statements regarding our current beliefs, plans and expectations, which are not guarantees of future performance, and which are subject to a number of known and unknown risks and uncertainties that could cause actual results to differ materially from results and events contemplated by such forward-looking statements. You are cautioned not to place undue reliance on forward-looking statements. Please refer to the risk factors and other cautionary statements included in our filings with the SEC. I would also like to point out that our investor presentation and today's conference call will contain discussion of non-GAAP financial measures, which we believe are useful in evaluating our performance. These supplemental measures should not be considered in isolation or as a substitute for financial measures prepared in accordance with GAAP. Reconciliations to the most directly comparable GAAP measures are included in our earnings release and the appendix of today's accompanying presentation. I'll now turn the call over to our CEO, Jason Long. Jason Long: We're pleased to report another strong quarter, marking our sixth consecutive quarter of revenue and EBITDA growth since going public. In Q3, revenue increased 7% sequentially, adjusted EBITDA rose 6% with contributions from all of our key revenue streams. Our growth strategy remains focused on maximizing the economic output of our surplus position. In the near term, we continue to focus on delivering a differentiated value proposition for our pore space offering. To summarize three core advantages of our approach, First, we control over 300,000 highly contiguous acres, largely insulated from the elevated pore pressure challenges impacting other areas of the statewide region. Second, our partnerships, particularly with WaterBridge enable critical transportation of produced water to underutilize pore space our acreage. WaterBridge, one of the largest produce water infrastructure operators in the U.S. continues to expand its footprint on our land, reinforcing mutual growth. Third, our development strategy aligns with recent guidance from Texas Railroad Commission, which emphasizes responsible pore space management. We actively avoid overconcentration of produced water handling assets by our customers to preserve pore space integrity. Further, this quarter demonstrated the value of our active land management strategy beyond the oil and gas industry. We continue to unlock new opportunities with leading developers across energy, infrastructure and environmental sectors, creating diverse and resilient cash flow streams that we believe will continue to compound over the long term. Let me highlight a few of our recent and ongoing commercial developments. First, we finalized the sale of a 3,000 acre solar energy project in Reeves County with the proposed generation capacity of up to 250 megawatts. The transaction includes an upfront payment and contingent milestone based payments. We also entered into a new long-term lease with a subsidiary of ONEOK for a natural gas processing facility in Loving County, Texas. Further, we continue to execute our strategy of accretive land acquisitions as demonstrated in our recent acquisition of approximately 37,500 acres for Mike's 1918 Ranch & Royalty. This acquisition brings immediate cash flows and long-term growth potential. The Loving County acreage enhances our force-based offering, while the Reeves County position is well suited for future alternative energy development. We expect this acquisition to contribute approximately $20 million in EBITDA beginning in 2026. And finally, our progress on power infrastructure and data center initiatives is accelerating, and we're eager to keep you informed as new milestones are achieved. Before I turn it over to Scott, I want to briefly address our approach to transparency. We remain committed to keeping investors informed and we'll continue to share meaningful updates on our commercial progress. At times, the level of detail we can provide may be limited due to commercial sensitivities, contractual obligations or legal constraints. We appreciate your understanding and continued engagement as we balance transparency with these considerations. With that, I'll turn the call over to Scott to talk through the financial results. Scott McNeely: Thank you, Jason. We delivered another quarter of strong financial performance with total revenue reaching $50.8 million, up 7% sequentially and 78% year-over-year. Quarterly growth was broad-based across all three revenue streams. Surface used royalties and revenue increased 2%, driven by higher commercial activity, new project easements and increased royalties from WaterBridge's BPX cracking development, which commenced operations early in the quarter. Resource sales and royalties also rose 2%, supported by a rebound in water sales from Q2 levels. Oil and gas royalties posted a 22% sequential increase with net royalty production rising from 814 barrels of oil equivalent per day in Q2 to 912 in Q3. Importantly, our direct exposure to commodity prices remains limited, with oil and gas royalties representing approximately 7% of year-to-date revenue. Adjusted EBITDA for the quarter was $44.9 million, up 6% sequentially and 79% year-over-year with a margin of 88%. The strong margin performance underscores the efficiency and scalability of our operating model. Cash flow from operations totaled $34.9 million and free cash flow was $33.7 million. Capital expenditures were $1.2 million and net cash used in investing activities was $1.1 million. At quarter end, total liquidity stood at $108.3 million, including $28.3 million in cash and $80 million in available borrowing capacity. Total borrowings outstanding under our term loan and credit facility were $369.3 million, down from $374.3 million at the end of Q2. Our net leverage ratio was 2.1x at the end of the third quarter compared to 2.4x last quarter. We continue to deploy free cash flow in a disciplined and balanced manner, focused on three priorities: First, pursuing accretive M&A opportunities, particularly in acquiring underutilized and undercommercialized land where we remain committed to rigorous underwriting criteria. Second, maintaining a strong balance sheet with an optimal capital structure, targeting a net leverage ratio of 2 to 2.5x. And finally, returning capital to shareholders through dividends and opportunistic share repurchases. This quarter, we declared a quarterly dividend of $0.10 per share payable on December 18, 2025, to shareholders of record as of December 4. Finally, we are reaffirming the midpoint of our full year 2025 guidance with adjusted EBITDA expected between $165 million and $175 million. We're proud of our consistent performance and remain focused on executing our growth strategy, expanding our asset portfolio and delivering long-term value to our shareholders. Thank you for your continued support. With that, we'll now open the line for questions. Operator? Operator: [Operator Instructions] Our first question comes from the line of John Mackay with Goldman Sachs. John Mackay: Can we talk about the new acquisition a little bit? You framed up some related to EBITDA for '26. Maybe you can kind of talk about your visibility on that visibility of growth on the footprint. And maybe more broadly, as part of that, how you think right now about kind of what's the right kind of price to pay for some of these acreage packages out there? Is it multiple? Is it dollar per barrel pore space available? Maybe just walk us through the framework as well. Unknown Executive: Thanks for the thoughtful question. Yes, so really excited about 1918, as we kind of think through it here, kind of conservatively expecting $20 million of EBITDA being contributed from that acquisition to next year. That's not really predicated on any growth relative to the run rate when we bought it. And so kind of conservatively forecasting that flat. But that said, the economic profile of this acquisition is very similar to what we've seen previously. When we acquired Hanging H Ranch, we acquired East Stateline Ranch is two good examples kind of stepping in at 12-ish x investment multiple and then through driving growth, getting that down to more of a 3 to 4x investment multiple over several years. When you think through what is driving the potential there I'd really categorize it into two buckets. The first on the eastern portion of the footprint, there's roughly 900,000 barrels a day of incremental pore space capacity that not just adds to the depth of our pore space inventory, but also gives us additional reach into the Southern Loving County, which really unlocks some new commercial opportunities. So that pore space just at today's prevailing market rate for royalties could generate mid-50s of EBITDA. And then on the western side of the footprint, there's already a very impressive but down of transmission and power infrastructure that makes it a very attractive location for clean energy and energy transition projects. And then incremental to those two, I've just summarized by also saying this is a fantastic surface as you think through potential for digital infrastructure. So all of that would be obviously very additive incremental growth. And so yes, as you know, as we see kind of the investment here, again, it's very similar to the underwriting thought process that went into those prior investments that have worked out well for us, and we're excited to get this one done. Now to the second part of your question, how do we think through acquisitions. There's no magic formula. Ultimately, we look through underwriting each acquisition a bit differently, and it's really a function of ensuring the land we're buying has both an attractive entry point as well as a lot of upside that we can capture through our active land management strategy. 1918 is a great example of that, where the sellers very sharp group of folks, but not necessarily folks that look to monetize it in the same way and same fashion that we did. And so we think there's a lot of upside there. So when we think through kind of stepping into new M&A deals, very similar. We're going to look for the right land in the right locations that have just been undercommercialized historically relative to our expectations. And as long as the math works and we feel good about that option value, the M&A could opportunities could make sense in that context. John Mackay: I appreciate those comments. Maybe just a second one for me. I understand you guys aren't really ready on this call to talk about anything kind of formal on the power side. But I guess if we look more broadly, compared to a year ago, we are starting to see a bunch of kind of power and data center projects pop up kind of more formally across the Permian. Can you just walk us through one more time when you guys are having these conversations, what are you seeing you're bringing to the table relative to some of those other kind of locations or partners out there? Unknown Executive: Yes. I mean the announcements have come out recently are no surprise. I mean, the economic fundamentals of West Texas just made that inevitable. And as I've said before, it was always a when, not if discussion, and we're starting to see those come to fruition here. I mean, from our seat, we are further along into existing conversations and also engaged with a number of new blue-chip counterparties in these discussions. And so we're very excited and very optimistic about the progress we're making, and we look forward to sharing new milestones when the time is right. Ultimately, being able to deliver what is a packaged solution of land, power via our power partnerships and water as well as in locations that are very conducive to both power and data centers, particularly as you think through things like fiber availability. It really just allows us to deliver this, call it, derisked package that's just challenging for others to match. And that's something that's been very well received by counterparties. Again, several processes kind of fairly far along, and we're really excited about what's to come. Operator: The next question comes from the line of Theresa Chen with Barclays. Theresa Chen: I have a follow-up to the 1918 transaction. Scott, specifically to your comments about the southern portion of Loving County, unlocking new opportunities and reaching potentially that incremental mid-$50 million of EBITDA. What kind of time frame or cadence are you expecting for that how much commercial visibility do you have on inking those agreements? And then on the Western side, as far as opportunities for incremental transmission and power it sounds like these could come as more discrete events, if you will. How much visibility do you have there as well, please? Scott McNeely: Yes. Theresa, the -- on the Western side of the pore space, we're already actively engaged with discussions on opportunities for folks to unlock that pore space. And so while we're not baking that into the $20 million figure, we've included for next year. I certainly think we could start seeing, call it, incremental EBITDA outperformance, particularly in the back half of the year, just given the pace of those conversations at this point. When you think through growing to kind of the levels you alluded to, we think that's, call it, a 3- to 4-year timeline in terms of our ability to go out and action that. On the western side on those energy transition and clean energy projects, those are just inherently longer runway projects but ones we're actively engaged on now. And so when you think through the ability for us to get those commercialized here over the next, call, 6 to 12 months. We'll certainly kind of make those announcements, let the public know the progress we're making, although the material EBITDA contribution on those types of projects are typically 3 to 4 years out, just given the development runway. Theresa Chen: And on your solar project transaction, understanding that there are many commercial sensitivities here, but if you can help us frame up even qualitatively, what this economically means for your company? Or what are the next steps or milestones that would be really helpful. Scott McNeely: Yes. I mean this is one that we're excited to get done. We've voiced over both with you all on the analyst side as well as the public effectively since our IPO that we have been working towards this towards getting this opportunity across the finish line. We're excited about the counterparty, the large, very reputable public clean energy developer and operator out of respect to their ask for confidentiality here. We can't share their name or were too much about the details on the project. But that said, I'll just say we're excited to get it done. I think it's a great win for the company as we kind of see the project come online here and get developed out over the next several years, we would expect to see those milestone payments hit. And then once the project is online and running, we would expect to see more recurring revenue as a result of that. Operator: Next question is from Alexander Goldfarb with Piper Sandler. Alexander Goldfarb: Just a question for you -- just two questions. First, just going back to the amount of the number of people talking about building power data centers in West Texas. Is this one of these things like sort of field of dreams, if it's built, the hyperscalers will come? Or are the hyperscalers already like committing that they want to access West Texas and therefore, it's just a matter of people coming online and building the facilities and then the hyperscalers will be there. I'm just trying to figure out the sort of field of dreams or the hyperscalers are already out there and they want to be and they're just waiting for someone to build. Unknown Executive: Yes. I think the kind of chicken and egg dynamic you're speaking to was more prevalent last year when West Texas really kind of got on the map, so to speak, when it relates to data centers. I mean, the engagement we've seen call it, over the last 6 to 12 months has shifted a bit, where typically these hyperscalers or the data center developers and operators are partnering directly with power providers. And so it's more of a package negotiation, not necessarily waiting for the power to be committed to in the hopes that the data center comes. And so I would say it's a much more sophisticated, call it, packaged approach now. And as a result of that, I think you're seeing just a lot more willingness for folks to kind of move quickly and get these projects across the finish line. Alexander Goldfarb: Okay. And then can we get an update on the existing data center deal that you did. I think it's been a few quarters since you received the initial deposit. And I think Five Point is still in sort of that option window. Are they -- do you think they're close to getting everything signed and fully committed and rolling out? Or just what's the update on their process? Unknown Executive: Yes. Just to kind of remind the group. It's a 2-year option period, that partnership between Five Point and Commonwealth Asset Management, which also works in partnership with Silver Lake still active. I can't provide any specifics on where they're at in their process, though. Operator: Next question comes from Charles Meade with Johnson Rice. Charles Meade: Jason, I want to ask a question about the natural gas processing lease with ONEOK. And I respect in your prepared comments, you have to balance transparency with, I guess, your commercially sensitive terms. But can you give us some detail on how those sorts of deals are typically structured whether it's an upfront payment, an annual payment duration? Just anything you could add to just kind of help size that, at least in our mind? Jason Long: Yes, no problem. These are all usually upfront payments for long-term lease and we have additional payments per year. The other thing that opens up a big opportunity here is just the amount of infrastructure associated with these plants, the pipelines, the electrical, et cetera. So there's a recurring revenue associated with these. Charles Meade: Got it. Got it. So it's not just -- if I understand you correctly, it's not just this processing plant, but it's all the infrastructure and pipelines and electrical transmission that needs to get there. That's all other revenue opportunities for whether gas... Unknown Executive: Yes. Charles Meade: Okay. Great. And then I want to ask a question about just this new slide or is at least new to me on Page 15 where you guys are putting out the long-term, I guess, shortfall of disposal capacity in the Delaware Basin. And I think I get the main point of the slide, which is access pore space is going to become more valuable over time not less. But I wonder if you could just give your interpretation of why you guys put this slide together and also maybe talk through what some of the important assumptions are? Like I know it looks like this is specific to the Delaware Basin. So this is -- does that shortfall exclude the possibility of moving, say, Delaware Basin produced water up to the Central Basin platform, things like that? Scott McNeely: Charles, I'll take this one. Jason is struggling with his voice from a cold, if you can pick up on that. So yes, we take -- continue to take a close look at pore space in the Delaware Basin. And I think the punch line on this slide is that, that pore space is not a commodity. There truly is a differentiation as it relates to pore space. and the approach with managing that pore space. And we've spoken in the past about the overconcentration of assets along the state line and just the negative pore space or the negative geology reaction as a result of that. And as a reminder, the recognition of that is ultimately what drove us to start LandBridge initially in 2021 as we wanted to ensure that we did have a very different differentiated pore space solution. We wanted to have large amounts of contiguous acres. We wanted to have geographic proximity to operations, and we wanted to have not just a clean slate from a pore space perspective to ensure it's unencumbered by historical mismanagement, but control of that pore space to ensure that going forward, we weren't going to be burdened with the mismanagement of other landowners or other operators. And so what we're really showing on this slide is the byproduct of some of that overconcentration, again, particularly along the state line and what it's doing to pore space capacity and operating capacity of existing produced water infrastructure assets. And so on the bottom left, we're showing a chart of just produced water growth that's expected in the Delaware Basin through 2035, after 2026, this is effectively assuming a 1% growth rate on oil. And this was a forecast that was put out by a combined effort between the Pickering Energy consulting arm as well as B3 Insights, which is a great consulting firm that's very sharp on this type of stuff. And as you can see, I mean, there's a healthy amount of produced water growth, but the unfortunate byproduct of these pore space issues is the existing produced water infrastructure today represented by that yellow line is going to be losing operating capacity going forward. And you see that delta continue to grow over time. And by the time you're at year-end 2035, there's going to be a 9 million-barrel a day shortfall between the produced water that's expected in the Delaware Basin and the infrastructure based on what's currently in place today. And so it really drives two very real needs. The first is just the need for more produced water handling infrastructure. But the second, more importantly, in this context, is the need for access to the kind of pore space that LandBridge offers to serve as an outlet. And so we really like this slide because it really does highlight not just the fact that pore space isn't a commodity and a differentiated approach matters, but also that the macro tailwinds are really going to drive the need for further pore space access, and we're in full position to capture a lot of that. Operator: Next question is from Derrick Whitfield with Texas Capital. Derrick Whitfield: Congrats on all of your operational accomplishments over the last quarter. With my first question, I wanted to focus on your outlook. While I realize you're not offering 2026 guidance today, how would you frame the step-up in EBITDA in next year -- over the next year, kind of based on the line of sight growth you have from WaterBridge, the acquisition you've recently closed and the other service agreements you recently announced? Scott McNeely: Yes. No, great question. When we look through next year and kind of the primary growth drivers, obviously, the 1918 acquisition is going to be an immediate step change. But in addition to that, just given the line of sight on produced water volumes we have from WaterBridge, we would expect to see pretty healthy growth through the course of the year on the surface use royalty side. And I want to -- we're going to wait to provide full year 2026 guidance. And when we do that, we'll break down kind of more quantitative specifics. But I do think the surface use royalties piece is worth calling out because we have line of sight there and that is going to be a meaningful driver. But incremental to that, we've got a great backlog right now of commercial opportunities on the other surface-use revenues piece. So we continue to see both the surface use royalties as well as the other revenues be the primary growth driver for our business stepping into 2026. It continues to exceed our expectations. I think that, generally speaking, not just the oil and gas industry, but more broadly, the economic industries out in West Texas are eager to partner with landowners like ourselves who have the right surface in the right areas. And are very eager to do commercial deals. And so I would expect the surface use side, both -- again in both on royalties as well as the rents and other revenues to be the main growth driver stepping into next year. But as it sits today, I would say our 2026 expectations are certainly exceeding what they were a year ago. Derrick Whitfield: Terrific. And as my follow-up, I wanted to take a slightly different approach on the power and data center discussion. As you guys kind of think about the sheer magnitude of power and AI developments that have recently been announced across West Texas, and the implication it has for the opportunity set for LandBridge. How do you -- I guess, how do you see that? I mean while we've clearly seen the size of data center development double since we first started talking about it, I mean do you still see a pathway to 2 to 4, 4 to 6 developments? Just how do you think about it? Scott McNeely: It's a great question. I would say we've got a number in the pipeline right now, and I don't want to give what that specific number is, but it is an opportunity set that has only expanded, I would say, relative to what we thought when we initially started exploring this opportunity initially. I would add outside of just those primary opportunities, there are just so many secondary opportunities that exist because of the compounding ecosystem that's kind of growing in West Texas as a result of all this activity. And when you think through just what's going to be needed to support these data centers outside of just the direct power, but just the broader commercial ecosystem, the broader industrial ecosystem, all of that is going to necessitate land access. And again, we are in the best position to be the providers of that. And so we obviously will continue to pursue, and we're very excited about our direct opportunities as it relates to power and data centers, but we are also going to catch the broader macro tailwinds that are benefiting West Texas as we continue to see the ecosystem out there compound. Operator: Your final question comes from Kevin MacCurdy with Pickering Energy Partners. Kevin MacCurdy: I wanted to dig in a little bit into the segment results. We see easement and other surface-related revenues, it's kind of outpacing our expectations pretty handily this year. And I wonder if you could talk a little bit about the drivers of growth in that segment over the last several quarters? And was there anything that kind of surprised you guys to the upside there? Scott McNeely: Yes. It's a great question, Kevin. I appreciate you hopping on. I would say when we put out expectations at the beginning of the year, coming off of the back of both the Wolf Bone acquisition as well as the larger a series of acquisitions earlier. We took a conservative stance on expectations there, obviously, relative to what's come to fruition, very much by design. And I think kind of with where we sit today, we've got a really healthy view of that commercial backlog stepping into next year. But ultimately, that outperformance we saw this year is going to be driven by call it intentional conservatism coming off of acquisitions. But as we've said many times over, there is a very high demand for access to our surface by a number of different counterparties. And what you're really seeing is the financial impact of that reality coming to fruition here. Kevin MacCurdy: I appreciate that, Scott. And then maybe on the produced water side, going back to the forecasted shortfall in disposal capacity, I mean, is there anything that you can share like high level on what you're seeing on royalty rates on new contracts versus legacy contracts? And do you think that the market is kind of beginning to forecast and realize those constraints in pore spaces? Scott McNeely: Yes. As it sits today, we haven't seen, call it, any meaningful shift in the prevailing market rate for royalties relative to within the last 1 or 2 quarters, call it. Obviously, supply-demand economics continue to play out. That is certainly subject to change. And just base on the dynamics we spoke to just a few minutes ago with Charles. That's certainly very real potential for us to capture additional econs going forward. Now does the market generally, call it, recognized pore space constraints going forward? I would say absolutely. And I would say the prudent operators out there are the ones that are getting ahead of it. Like we announced last quarter, Devon is a fantastic example of a forward-thinking operator in our area who is very intentional about securing pore space that they need access to over the long term, and that led to the minimum volume commitment and pore space access agreement directly with LandBridge rather than with WaterBridge or another water infrastructure company. And so there's absolutely an acknowledgment of the criticality of what it is we bring to the table. It's already been validated commercially, again, by Devon and others, and we expect that trend to continue. Operator: With no further questions in queue. I will hand the call back to Scott McNeely for closing remarks. Scott McNeely: Yes. Thanks again for joining us today. Again, we're very excited about the quarter. We're very excited about what we're working through commercially at the moment and across multiple opportunity sets, and we look forward to circling back and sharing more news with you here in the future. But again, I appreciate you all's efforts on learning more a bit about us and look forward to staying in touch. Thanks. Operator: And this concludes today's conference call. You may now disconnect.
Operator: Thank you for standing by. My name is Tina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Via Third Quarter 2025 Earnings Call. [Operator Instructions] Thank you. It is now my pleasure to turn the call over to Via. The floor is yours. [Presentation] Gabrielle McCaig: Good morning, everyone, and welcome to Via's Third Quarter 2025 Earnings Call. I'm Gabby McCaig, Via's Chief Corporate Communications Officer and Head of Investor Relations. With me today are Daniel Ramot, Via's Co-Founder and CEO; and Clara Fain, Via's Chief Financial Officer. During today's call, Daniel will review our third quarter 2025 business update before handing it off to Clara to discuss financial results and our guidance for the full year 2025. Daniel will end with some additional comments before opening it up to Q&A. In addition to prepared remarks on this call, additional information can be found on our investor presentation, press release and SEC filings on our Investor Relations website at investors.ridewithvia.com. Before we get started today, we want to draw your attention to the safe harbor statement included in our press release and investor presentation. Items we discuss today will include forward-looking statements about topics, including, but not limited to, our future financial performance, projections, and management's plans and objectives for future operations. Actual results may differ materially from those presented in the forward-looking statements, and are subject to risks and uncertainties described more fully in our SEC filings, including our S-1 and quarterly report on Form 10-Q. Any forward-looking statements that we make on this call are based on our assumptions as of today, November 13, 2025. Unless required by law, we undertake no obligation to update or revise these statements as a result of new information or future events. We would also like to point out that our discussion today will include certain non-GAAP financial measures in addition to, not as a substitute for, financial measures calculated in accordance with generally accepted accounting principles. Definitions of these non-GAAP financial measures, along with reconciliations of non-GAAP to GAAP financial measures are provided in our press release and our investor presentation. And without further ado, I'll now hand it over to Daniel. Daniel Ramot: Thanks, Gabby, and thank you, everyone, for joining us today. We're delighted to host our first public company earnings call, and we're very pleased to report that Via delivered another strong quarter, exceeding expectations on both top and bottom line performance. In Q3 2025, our revenue grew 32% year-over-year. Platform annual revenue run rate, which is our quarterly platform revenue multiplied by 4, was $439 million. The number of customers on our platform grew to 713, a year-over-year increase of 11%. Our results demonstrate the durability of our growth as we transform a vital and underpenetrated market, and customers increasingly embrace our cutting-edge platform. To provide additional insight into our performance, the increase in revenue in Q3 was driven by strong growth in our government business. Revenue from government customers increased by $26.5 million or 34% year-over-year. We also saw outstanding results in the United States. Revenue from our U.S. customers increased by $23.1 million, or 42% year-over-year. Taking a step back. Via provides the world's most advanced platform of software and services, transforming antiquated public transportation systems into efficient digital networks. We've built a single unified platform that replaces fragmented legacy systems across multiple transit verticals. Our platform automates key workflows, consolidates operations across verticals that have historically operated as a distinct silos. Via's vertical stack is deployed globally. It can be configured to support the broad and diverse local requirements of our customers without the need for software customization. We are fundamentally transforming the way governments and cities operate through automation, advanced algorithms, data and AI. Transit is a critical public service. In the United States alone, public transit systems provide 8 billion trips each year, and yet 45% of Americans do not have access to transit. For anyone who cannot afford a car, this gap severely limits their ability to get to jobs, educational opportunities and health care. We believe that after decades of underinvestment in technology, cities across the globe are poised to upgrade their -- and digitize their transit infrastructure. This transformation is already in progress and will only accelerate in the coming years. In our core geographies of North America and Western Europe, our serviceable addressable market is estimated at $82 billion, based on a report commissioned by us from a major consulting firm. Today, we capture less than 1% of this market. We also estimate that there are approximately 63,000 potential Via customers in North America and Europe. As of Q3 2025, we had 713 customers on our platform, representing approximately 1% of these potential customers. As the established category leader, we're extremely well positioned to capitalize on the digital transformation taking place within our core markets, and we are still in the early innings of capturing this very large opportunity. More than 90% of our revenue is derived from selling our solutions to cities, transit agencies and similar government organizations. Public transit generally and Via services, in particular, are in the unique position of enjoying broad bipartisan political support. One way to visualize this. In the U.S., 55% of Via services are in red congressional districts and 45% are in blue congressional districts. This bipartisan support has helped ensure that as reported by the American Public Transportation Association, funding for public transit has grown an average of 4% per year since 2012. This trend appears to be continuing with the Trump administration's latest 2026 budget proposal, including a $310 million increase in federal funding for public transit. Bipartisan support for transit extends well beyond the federal government. This is critical since more than 80% of government funding for Via services is provided at the state and local levels. We have consistently seen a broad consensus by voters in support of public transit in local elections. Earlier this month, 16 of 19 public transit ballot measures successfully passed, approving a total of $11.8 billion in transit funding. In addition, several major pieces of legislation in support of public transit have recently been passed by state and local legislatures, including in Illinois and Oregon, where billions of dollars in transit funding were approved. Importantly, we have not seen any impact from the federal government shutdown on Via services. At the Federal Transit Administration, it is our understanding that no employees were furloughed during the shutdown. Let's take a couple of minutes to deep dive into the Via platform. Over the past 13.5 years, we have, in a very deliberate way, through organic investments and strategic acquisitions, built a comprehensive end-to-end category-defining platform of software and services for public transit. Our platform is highly modular and can support the transit needs of any size city or community, from rural to suburban to major metropolitan centers. We provide software that allows transportation planners to design more livable cities. A one-stop shop for planning and scheduling both fixed routes and dynamically routed transit networks. Transit planners can leverage models trained on billions of data points to rapidly quantify the impact as they make changes to their network. Once a city, or transit agency, has planned its transit network, it can, with a click of a button, begin operating that network using our operating software. Via's operating software supports multiple transit verticals, including microtransit, paratransit, school transport and nonemergency medical transportation. Our software is powered by advanced algorithms and AI, which are used by customers to digitize and automate work streams across passenger reservations, dispatch customer support, program eligibility, government reporting and compliance. We also provide consumer-grade mobile apps and web-based interfaces for passengers to seamlessly plan, book and pay for their transit journeys across multiple modes of transit. When customers adopt our platform, their ability to visualize their data and derive actionable insights from that data greatly expands. This improved access to data can be transformational. Our analytics tools include prebuilt dashboards that allow customers to track their essential KPIs. Our customers can also easily build their own reports directly within our products to create bespoke analysis, or to meet specific funding and compliance obligations. These tools are intuitive and easy to use, even for those who may not be as data or tech savvy. In addition to software, our platform includes a suite of technology-enabled services which facilitate and accelerated adoption of our software. 100% of our customers buy our software. Approximately 20% elect to also procure services. These services are delivered to our customers by a curated ecosystem of third-party providers, or in some cases, directly by Via. Our ability to provide services alongside our software is a critical element of our customer-centric go-to-market strategy. Our services enable adoption of our software, allowing us to win customers who lack the staffing or expertise to use the software, or leverage its full capabilities. Our services also increased the stickiness of our products and accelerate growth. And by broadening our platform and reach, they represent a strong point of differentiation in the marketplace. Via's platform is the product of an investment of hundreds of millions of dollars and over a decade of intensive efforts in research and development. Our data is derived from multiple sources, publicly available data sets such as demographic information from the U.S. Census, and proprietary data produced by our hundreds of services across the globe. Over the years, we have collected billions of data points from over 150 million trips. As we expand our customer base, we also continue to scale our data advantage. We have leveraged this data to create the world's first LLM for cities, an AI model trained on our proprietary data, which provides multiple capabilities that can meaningfully improve the way transit planners design their networks. From ridership modeling to bus speed prediction, to proactive and conversational transit planning recommendations, a transit planning co-pilot, if you will. A recent and incredibly exciting example of Via's platform in action comes from Springfield, Ohio. I love this case study, as it illustrates the power of our end-to-end platform. First, using our transit planning software, the city was able to rapidly analyze their existing transit system and model the impact of potential changes to their network. What became very clear very quickly was that in Springfield, there simply isn't a sufficient population density to support buses. You can see the bus network on the left, with the circuitous routes typical of a transit system, trying to use buses to provide transportation in low-density areas, where buses don't really work. The small black icon you see on the map surrounded by a small blue area is Jane. We've dropped Jane in East Springfield and asked how far can she travel using public transit? With the original bus system, it's clear that she can't go very far at all. When the buses are replaced by Via's microtransit system, the picture is very different. Now on the right, Jane can access a much larger area of Springfield using transit, and a car is no longer a prerequisite to having a job or getting to school. Needless to say, this has real impact for Jane and more importantly, since Jane is fictional, for the residents of Springfield. Based on this analysis, Springfield decided to fundamentally redesign their transit network, replacing all of their buses with the Microtransit system powered by Via's platform. Now for the same annual operating budget, the city is able to provide transit access to 40% more of the city and has dramatically improved the passenger headways, reducing them by a factor of 4. For those of you who aren't transit nerds, passenger headway is the average time a passenger has to wait for a trip. This is a remarkable transformation for Springfield and its residents. Even more importantly, we know it is applicable to so many more cities in America. Our business is characterized by consistent and durable revenue growth. This growth is driven by landing new customers and by expanding within our existing customers. Expansion within existing customers is driven by both volume expansion, as customers add more vehicles or vehicle hours to the platform, and upsell as customers increase the number of modules included in their solutions. In Q3 2025, we continue to land multiple new and strategic customers. The launch of our microtransit service in Omaha is a great example of a partnership that goes well beyond the transit authority and extends into the local community. In this case, the services received key support from a local nonprofit that is keen to expand access to jobs and other opportunities for Omaha residents. The early success of our Omaha service rapidly led to another opportunity in neighboring Council Bluffs, Iowa, demonstrating the potential for strong regional network effects for our platform. Council Bluffs will launch a new and modern paratransit service, leveraging Via's platform in Q4. We have also seen an exciting acceleration of our business in the U.K., where government initiative to bring transit networks under control of regional authorities is meaningfully expanding the pool of potential customers seeking Via solutions, with Birmingham representing a key customer. In Q3, we also continued to grow rapidly within our existing customer base through both volume expansion and upsell. The city of Mobile, Alabama launched Via's microtransit solution in March 2024, building on that successful launch the city adopted Via's planning solution, which allowed it to critically analyze the performance of its transit network, unearthing that only 45% of residents and 55% of the city's jobs were accessible by bus. In Q3 2025, the city added Via fixed-route scheduling and paratransit solutions, and committed to implementing a full network redesign with a focus on streamlining bus service, expanding microtransit and hugely increasing access to jobs. In 1.5 years, we've grown revenue with this account by 17x. Looking ahead, we believe Via wins through innovation and more specifically, by continuing to innovate across three key areas: one, broadening our platform; two, deepening our vertical stack; and three, being nimble and creative on our go-to-market strategy. Broadening our platform, both through organic product development and strategic acquisitions, allows us to increase our competitive advantage, grow our share of existing customers' wallets and drive margin expansion through new higher-margin software products. As we develop new product capabilities and features for our customers, this deepening of our vertical stack drives customer satisfaction and increases the stickiness of our platform. Investing in go-to-market innovation allows us to reach new government customers and reduce our customer acquisition costs. We believe this growth framework is key to our continued success, and we consistently evaluate opportunities and initiatives through this lens. One area where we have been investing in broadening our platform is our newest vertical, student transportation. Q3 was a very strong quarter for this vertical, which saw more than 2x growth in the number of customers subscribing to our solutions. Our efforts in the schools vertical are still nascent, but we're very encouraged by the initial results and believe this can be an engine for growth in the future, as well as a template for expansion into other new verticals. In Q3, we added multiple new product capabilities and features to our platform. These new capabilities have been extremely well received by customers. We are relentless about innovation and continue to invest in all parts of our products, even those that provide well-established functionality to our customers. Last quarter, we rolled out major upgrades to our core dispatching interface, allowing dispatchers to more intuitively visualize vehicle routes, handle passenger queries and cope with delays and disruptions in real time. Whether they're a parent, case manager, or front desk staffer at an adult day care center, our Caregiver App allows caregivers to manage trips and receive real-time trip updates for the individual in their care. In our agent AI suite, new features help our customers streamline PDS manual processes. Tools like the eligibility application scanner, automate the processing of paper applications into digital files for assessment. Our agent chatbot is helping to automate how our customers handle passenger calls. We continue to roll out advanced self-service capabilities for our customers, shortening the loop between planning a new transit systems and deploying it. We're also very pleased to announce the launch of our European Advisory Council. The goal of the council is to bring together prominent leaders from the transit, technology and academic worlds to generate thought leadership on how integrated digital networks will transform the modern European public transport landscape. The 3-member board is chaired by Dr. Rolf Erfurt, CEO of Toll Collect, who previously served as a Chief Operating Officer and Board member for the BVG, the Public Transit Authority of Berlin. Additional founding members include Professor Andreas Hermann, Director of the Institute for Mobility at the University of St. Gallen, and Professor Barbara Lenz, Senior Advisor and former Director of the Institute of Transport Research at the German Aerospace Center. We believe this high-profile Board can play a key role in advancing transit innovation and digitization in Europe, and ensure public budgets continue to be directed towards this important area. Last, but certainly not least, we were pleased to announce a new strategic partnership with Waymo to advance the use of autonomous vehicles in public transit. There is no question Via has a key role to play in the introduction of autonomous vehicles into public transit. And our partnership with Waymo is a step in that direction. Through this partnership, government agencies using Via software can now incorporate Waymo's AVs directly into their public transit networks. Chandler, Arizona is the first city to benefit from this framework, integrating Waymo's service into the city's Chandler Flex microtransit service. Public transit riders and the government agencies who serve them are too often the last to have access to cutting-edge technology. We're delighted that this partnership with Waymo paves the path for AVs to become accessible to millions of global public transit riders, enhancing mobility, lowering operating costs and improving safety outcomes. And with that, I'll pass it over to Clara to review the financial highlights for the quarter. Clara Fain: Thank you, Daniel. We are very pleased with our performance in Q3, where we exceeded expectations across top and bottom line metrics. Now let's dive into our results. In Q3 2025, our platform annual run rate revenue, which we defined as our quarterly platform revenue multiplied by 4, was $439 million, representing a year-over-year increase of 32%. As a reminder, we generate revenue primarily through recurring subscription fees for access to our platform. Our customers subscribe to one or more solutions, which consist of the combination of software and tech-enabled services tailored to each customer's needs. All of our customers subscribe to our software and approximately 20% of our customers bundle tech-enabled services. Contracts with our customers are typically multiyear and structured with a committed budget and a volume-based component. Pricing is generally based on a number of factors, such as fleet size, minimum number of vehicles or total vehicle hours. Each contract comprises one bundled price for the combination of software and any tech-enabled services selected by the customer. We are very pleased with our revenue growth of 32% this quarter. As you can see on our historical performance, our quarterly revenue growth can fluctuate quarter-to-quarter. Our business is mostly driven by public procurements, which have a certain cadence, and happen when their existing contracts terminate, which is not always consistent throughout the year. Our revenue is highly predictable. The unique nature of our market, customers, combined with our leadership platform position, the contracting nature of our revenue and mission criticality of our products provide us with significant visibility into future revenue. At any given time, over 90% of our projected revenue for the next 12 months is contracted. This is a testament to the high quality and durability of our business model. Our rapid revenue growth is driven by landing new customers and expanding with existing customers. We delivered strong results on both fronts this quarter. In Q3 2025, the number of customers leveraging our platform was 713, representing a year-over-year increase of 11%. As you can see, our year-over-year growth in new customers has historically ranged between 8% and 12%, which aligns to the cadence of our unique market. We also continue to experience rapid growth with our existing customers, driven by a combination of volume and product growth, as well as continued stickiness of our platform. In Q3 2025, the majority of our 32% revenue growth was driven by growth with our existing customers, in line with our historical performance as a private company. In particular, I want to highlight our strong momentum in the United States, and with our core government customers. In the long term, we expect that our business will generate consistent and durable revenue growth as we continue to digitize one of the last pen and paper industries, and penetrate our $82 billion serviceable addressable market. Our sales and marketing efforts are highly efficient for a number of reasons. We're addressing a very large market, which provides many opportunities for growth with both new and existing customers. The breadth of our platform and our position as a category leader provides Via with a strong competitive advantage and drives meaningful expansion opportunities. The mission criticality of our platform and ability to generate meaningful ROI for our customers, combined with our ongoing investment in innovation, drive that stickiness of the platform. And last but not least, the particular nature of our customer base, government and government agencies create a virtuous cycle of growth through word of mouth and referrals. In Michigan, you can see on the slide, we have begun to experience a flywheel effect. While the success of existing customers in the state is driving new customer opportunities without the need to invest further in sales and marketing. As you can see, we have witnessed a 200% increase in revenue per head in that state, and a 20% decrease in S&M as a percentage of revenue, highlighting the incredible efficiency of our team in this market. Let's dive into our operating expenses, which we're presenting on an adjusted basis. As of Q3 2025, we spent 14.1% of our revenue on sales and marketing, compared to 15% in Q3 2024. Over time, we expect to continue to invest efficiently in S&M to capture our market opportunity. As of Q3 2025, we spent 14.4% of revenue on G&A, compared to 16.7% in Q3 2024. Our research and development efforts have been our #1 area of investment since the foundation of Via 13 years ago. We have invested over $500 million in R&D. And as of Q3 2025, R&D expenses represented 19.1% of revenue, compared to 24.7% in Q3 2024. We are now harvesting a decade-long investment in R&D. And as we continue to adopt AI, automate our processes and expand our product suite, there's a significant opportunity to increasingly drive efficiency in our R&D spend. As of Q3 2025, our adjusted gross margin was 39.6%, compared to 39.2% in Q3 2024. In the near term, we are focused on landing our market opportunity and penetrating our customer base further. In the medium to long term, we reiterate our commitment to an adjusted gross margin of 50%, driven by 3 levers: one, transitioning lower-margin services to third parties; two, continuing to expand our platform with higher-margin products, notably our software offering through internal development; and three, continuing to explore strategic and accretive M&A. As a reminder, we have established a playbook to execute on M&A with the Remix and Citymapper acquisitions, which were both highly successful on all counts. Our industry is highly fragmented, and there are many point solutions which will not make it as stand-alone companies in the long term, and might be excellent additions to our platform. Our IPO was a powerful moment for brand awareness and has generated significant inbound interest for potential M&A targets. With mature customers, we have a proven track record of successfully being able to increase gross margins over time. In this example, from a customer in the Western U.S., the customer started with a software and services microtransit solution in 2019. In 2022, the customer had reached a maturity, whereby they were able to contract for certain services directly, rather than through Via. We were also able to add additional product upsell to the partner for several higher-margin SKUs. In the past 3 years, we have been able to double run rate revenue on this account, while expanding gross margin from 40% to 50%. We believe that this is a formula we can successfully replicate with other customers as their accounts reach maturity. While generating rapid and durable revenue growth, we have benefited from significant operating leverage in the business. This operating leverage supported a continuous improvement in net loss margin and adjusted EBITDA margin. In the last year alone, between Q3 2024 and Q3 2025, our adjusted EBITDA margin improved from negative 17% to negative 8%. We are pleased about our continued ability to deliver operating leverage, as the business scales. Now turning to guidance. For the fourth quarter, we expect platform revenue to be between $114.6 million and $115.1 million, representing 25% to 25.5% year-over-year growth. We expect adjusted EBITDA to be between negative $7.5 million and $8.5 million, and adjusted EBITDA margin to be between negative 6.5% and negative 7.4%. For the full year 2025, we expect platform revenue to be between $430 million and $430.5 million, representing 30% to 30.2% year-over-year growth. We expect adjusted EBITDA margin to be between negative 8% and negative 7.8%, compared to negative 16.1% in 2024. Now I'll pass it to Daniel for some concluding remarks. Daniel Ramot: Thank you, Clara. I just want to reiterate again how pleased we are with this quarter's performance, and to express my confidence in our ability to maintain strong performance as we continue to transform our massive and hugely important market. Our team remains incredibly passionate about building best-in-class technology for those that the tech industry has long neglected, local governments and some of their most vulnerable citizens. We believe that our financial success is directly correlated to the meaningful impact that our solutions deliver. In the course of our IPO, I had the opportunity to discuss with some of you our views on the importance of making sure that governments are not left behind in the AI revolution. Our customers, not by nature, an early adopter of new technology. And for good reasons, the government agency is responsible for providing public transportation, operating complex and demanding environments, where risk is rarely rewarded. The use of machine learning and AI has always been core to Via. But given the complex environment in which our customers operate, we believe it is our responsibility to help them gain access to this new technology. As we continue to broaden our platform, AI will enable our customers to generate a virtuous cycle of planning, operating, and optimizing their entire networks, leading to smarter and more efficient transit. As the category leader, we believe we are very well positioned to capitalize on the AI and autonomous vehicle opportunities in our space. We're excited to continue to work hard to help our government customers adopt new technologies and meaningfully increase the value they deliver to their constituents. And with that, I want to thank you all again and turn it back to the operator so we can take some questions. Operator: [Operator Instructions] Our first question comes from the line of Adam Hotchkiss with Goldman Sachs. Adam Hotchkiss: Great. It's great to speak with you all in a public forum. Daniel, you mentioned the 63,000 customer opportunity. How would you characterize both the catalysts, but also maybe the barriers you've experienced as you think about the next steps in converting more of that opportunity? And then Clara, just briefly, how do you balance growth and investment within that context? Daniel Ramot: Adam, thanks so much. Great to speak with you here. I think when we focus on the opportunity ahead of us, the barriers are similar to what we've experienced historically. Primarily the customer that we're dealing with has an aversion to risk fundamentally and reluctance to change, and that is usually the highest barrier for us to overcome. I will say that over the years and certainly in this last quarter, we have seen that barrier start to come down, and we're able to accelerate our ability to convince our customers to adopt new technologies And certainly, when we look at regions in which we have established any presence, and even more so when we've established a meaningful presence, that barrier can come down meaningfully and really help us accelerate through these regional network effects that we talk about. So fundamentally, the same. We need to keep doing a really good job explaining the value of the ROI to our customer, and showing them how it works in nearby cities, that's always very helpful. And that, I think, will help us continue to accelerate the progress. Clara Fain: Yes, Adam, great to reconnect, and thanks for the question. When it comes to the investments, we are very focused on putting the dollars where the growth is, and we have a very detailed framework of investment behind the new products that we're launching, focused on our core geography of North America and Europe, and some of the products that we went through together, including our -- obviously our microtransit product, our paratransit product, but also some fixed-route products, but also some new products notably around the school business and some other interesting opportunities that we've identified. So definitely putting the dollars behind the customer opportunity. Adam Hotchkiss: Great. That's really helpful. And then just on the quarter itself, how would you frame the makeup of the 24 net new customer addition sequentially you had? It was the largest number, I think we've had in recent company history. So was there anything notable about these customers, either from a product or geography perspective? Did student play more of a role? Or is it just where RFPs happen to fall in the calendar year? Any more detail on that makeup would be helpful. Clara Fain: Yes, happy to break it down further for you. As you saw, we're very pleased with the performance in North America, continuing to see very strong demand there, and that is reflected in the customer growth. And we're also seeing some good traction around new products, including the schools product, which has driven some of that growth as well. So I would say both of these are definitely drivers of the customer growth. Operator: The next question comes from the line of Josh Baer with Morgan Stanley. Josh Baer: Great. Daniel, Clara, Gabby, the whole team, congrats on a strong quarter and welcome to the public markets. I know you have great visibility on the pipeline. I was hoping you could share some of what you're seeing with us from an RFP perspective, or customer decision and implementation timing perspective. Ultimately, what do we need to look out for from the customer adds over the next several quarters? And then my follow-up, Clara mentioned the IPO as a branding moment more from an M&A perspective. I think I'm wondering if you've noticed a change in inbound conversations from customers as well? Has the IPO changed awareness and interest in the platform? Daniel Ramot: Josh, thanks so much. We're happy to be a public company. It's exciting. Looking at the customers and looking forward, I think we'll continue to see very positive trends across all of our markets. We are seeing -- and I think it ties to your follow-up question, too. We are feeling that the IPO was a moment for us. It's hard to quantify, but the reception on the customer side, definitely feeling sort of a different timber to it, if you will. And I think that's helping us also develop the pipeline and continue to push in that direction. As Clara mentioned, the U.S. in particular, we've seen really strong dynamics, and that's been true for the quarterly results and looking ahead at pipeline, so we're very pleased with that. And we're seeing some good dynamics in Europe, too, as well, especially in the U.K. So looking ahead, I think that's a market we're very interested in focusing on. Operator: Our next question comes from the line of Michael Turrin with Wells Fargo. Michael Turrin: My congrats as well on the first quarter as a public company for Via. I want to go back to the customer metric. I think given you had some commentary, we've been fielding questions around central government shutdown impacts. It doesn't sound like there was any real impact there. But I'm just curious how much of the bigger sequential adds you're seeing is tied back to some of the commentary Daniel is making around, just increasing referenceability, and just your view on us assessing that as a good leading indicator for the durability of future revenue growth, or maybe other indicators you would point investors towards as they're getting to know the company. Daniel Ramot: Michael, thanks for the question. I think -- I do think the referenceability is key. And I know we've been talking about that quite a lot. But the way that we are approaching this market, those proof points that we can point to for customers, whether it's in new conversations and also when we're talking to existing customers about expanding, the fact that they can see what's happening nearby is extremely important. And I think we talked a lot about the Mobile example a bit earlier. I think the fact that in Mobile, they were able to see what we did in Sioux Falls just as an example, and we're able to visit. That is incredibly impactful when they're making -- what is, frankly, a huge decision from their perspective to pass on to us basically management and the design of their entire transit system. I think the influence that these types of conversations that they can have with peers, incredibly important. So that referenceability is really key. And our hope is that we can continue to build on that over the coming years to really drive rapid adoption. Michael Turrin: And just on the Waymo partnership and autonomous in general, I think that sounds exciting and maybe a bit more advanced than we tend to think about within public transit agencies. Can you just expand on how you're thinking about the evolution of that opportunity and what that does for Via's TAM overall over time? Daniel Ramot: Yes. Thanks. I think autonomous is a huge opportunity for us. I also think it's incumbent us to play this role on behalf of our customers and help them adopt this new technology. So we're working very hard to build. Obviously, the partnership with Waymo is exciting. Chandler, Arizona is a first step, but I think with Waymo expanding around the country and now into Europe, lots of opportunity there to continue to expand that partnership. And we're looking to broaden our partnership base so that we can be that partner to our customers who enables them to adopt autonomous vehicles. We're seeing interestingly quite different dynamics in the U.S. versus Europe. U.S. is very focused on robotaxis and we can bring the public sector in. Europe, we're seeing much more of a top-down sort of drive from the government to push autonomous vehicles in the public transit sector. So that may actually be an early adopter of autonomous vehicles and lots of funding going into that. So I think a lot of opportunity in Europe from the autonomous vehicle space. And overall, what we've seen is when we help our customers reduce their cost they're willing to invest more and they see the ROI. So if autonomous vehicles can bring down costs, certainly improve safety, there's just a lot of opportunity there from our perspective. Operator: Your next question comes from the line of Brad Zelnick with Deutsche Bank. Brad Zelnick: I'll echo my congrats to you all as well, exciting to finally be out and a great quarter to start. Mike -- I've got two questions and ironically, they piggyback on Michael's last question. So first, on customer count, just given the very strong customer additions this quarter, how should we think about the cadence of customer count going forward? And please remind us of any seasonality here or anything else that we should keep in mind? And then I've got a follow-up. Clara Fain: Brad, thanks for the kind words. So we're very pleased with the results this quarter out of the gate. So thank you for the support. On the customer account, you've seen the chart, and we've discussed this quite a lot. There is some cadence to the market. We have certain quarters that are very strong on customer additions and some quarters that are strong but may be lower. The general range for customer additions is 8% to 12%. And when you look back at the last 10 quarters, that's been fairly consistent. So I would expect that we continue to remain in that range. This quarter was very strong. Some of our new products could be seasonal, but we are very early in the penetration of those markets. So there's still a lot of white space overall across the platform, and I feel very good about that range. Brad Zelnick: Okay. That's very helpful. And actually, I'm going to pivot. I was going to ask a Waymo question, but I'll save that for another time. But maybe a bigger picture for you, Daniel, not that you don't already have an enormous opportunity to pursue. But when you talk about leveraging billions of proprietary data points to bring AI to government and delivering LLM for cities, what's the even broader potential over time, perhaps even in addressing needs that are adjacent to transit? Daniel Ramot: Yes. Thanks very much, Brad. I think that's a great question. We are very focused on our current market, which, as you mentioned, you talked about a lot, is huge, and we're not seeing that kind of opportunity for durable growth diminish anytime soon in our view. I think the -- with AI and the ability to become much more efficient in developing products, which I feel like in the last quarter, we're starting to see an acceleration our product road map. And in part, I attribute that to our ability to develop code more quickly using these tools. You could imagine that given the customer relationships we have and the opportunity ahead of us, we could more quickly expand into other areas in the government technology space. So I don't think that's necessarily an immediate thing that we would work on, but definitely something on our minds as far as the broader opportunity and how quickly we can move into it. Operator: Next question comes from John DiFucci with Guggenheim. John DiFucci: And I'd like to offer my congrats to the team too. These are really impressive results across all metrics. And Clara, thanks for that customer example, going from 40% to 50%. It really helps with that bridge, a real-life example there. But my question -- my first question anyway is more on the growth. And it has been brought up several times here. This is the greatest sequential increase in customer count we've seen, and our model goes back almost 3 years. But if I wanted to look for anything that may raise questions from investors, the ARR per customer actually declined a little bit sequentially for the first time in 8 quarters. Is that simply because you added so many customers that didn't have a full quarter's worth of revenue in there since your ARR calc is just simply revenue times 4? Or is there something else affecting that we should be thinking about, perhaps the new school product and maybe that's a lower ASP? Or how should we be thinking about that? Clara Fain: Absolutely. Thanks, John. It's a great question and happy to give you more color on ARR per customer. First of all, we're very pleased with the customer adds this quarter, very strong demand across the board and the revenue growth as well. But you're right, platform ARR per customer did decline slightly quarter-over-quarter in Q3 versus Q4, some 1%. And that's generally driven by, one, normal seasonality patterns of our existing contracts. In Q3, we tend to have universities, schools, corporate contracts, that have lower volumes during the summer. So that seasonal -- that slight seasonality drives lower ARR per customer in Q3. And then the growth in our schools business, where we saw a significant increase in the number of customers and the schools product is relatively new. These customers launched their services in Q3, coinciding with the start of the academic year and, therefore, contributed to more limited revenue in that quarter. So that drove the slight decline in ARR per customer. Over time, we expect these customers to ramp up. John DiFucci: Okay. Great. And Daniel, you said there was no impact from the federal government shutdown in this quarter. But we've been just looking closely at all the government funding. And do you see any impact from like COVID era funding that I think, in some cases, is going to start expiring over the next year or so? Perhaps maybe you can share your experience in similar situations, when there are funding pressures, where does mass transit sit as far as priorities among competing alternatives for funding? Daniel Ramot: John, thanks. It's a great question. When -- maybe I'll try to answer that in a few different pieces. So specifically to the government shutdown, we haven't seen any impact at all so far. And we don't expect to see any impact from that. The way that funding for transit works, it's long-term funding typically appropriated at the federal level, appropriated every 5 years. This sort of -- it was a very long shutdown obviously, but we don't believe that it will have any impact on our business even as it ends and looking into this quarter and the next quarter. So that specifically to the shutdown. I think more generally, you're asking a general question of what is happening to -- with transit funding, especially some of those funding bills from previous administration start to expire and longer term. There's sort of, I'd say, some puts and takes there. There's some of this funding that's expiring. There's some other funding that we talked about, whether through ballot measures or other sort of state legislature approvals that is coming in that is growing the overall pot. Overall, I think what's key for us and what we've seen consistently is that we just need to identify, and it's a little bit on a city by city and transit agency by transit agency basis. We need to identify where they are in their budget cycle. At any point that you're going to look to see -- there may be an overall trend. We've talked about it maybe in Germany, there was a period last year or so where the overall trend was downward. There's still some cities that have more budget, some cities have fewer. The U.S., I don't think the overall trend is downward. I think it actually continues to go up overall. And then -- but within that, there's still individual cities or transit agency that may be in their budget cycles sort of up or down. And the key for us is to identify where they are in the budget cycle so we can honestly provide them with the right solution, adapt our pitch, if you will, if you think of it from a sales perspective, but in reality, find the right solution for them. If they're in a downward trend, we need to help them save money, we need to help them become more efficient. And I think we're extremely well positioned, sometimes kind of counterintuitively, that's our biggest opportunity because they have to change something. They're under budget pressure and that's where we can come in with our solution and really help them avoid service cuts while they're reducing their budgets. Obviously, in an expansion kind of phase, that's also a great opportunity. We can launch new microtransit services, we can do lots of stuff with them. So it's really about identifying where they are versus being worried about the budget going up or down. Does that makes sense? John DiFucci: That does make sense, Daniel. Operator: Your next question is from the line of Patrick Walravens with Citizens. Patrick Walravens: Let me add my congratulations [indiscernible], the perfect debut. Can you guys comment on -- and I know you'll guide next quarter, so we're not asking for that. But can you just comment on what the durability of the growth looks like in this model? And also what the pace of margin expansion looks like? Just sort of any broad points you can share with us would be super helpful. Daniel Ramot: Pat, thanks for the question. We feel very good about the durability of the growth long term. Just given the scale of the market, our very limited penetration. And the fact that it's not -- we don't see our current cohort of customers as being any different from the next cohort of customers, if you will. I think I talked about Springfield, Ohio and that opportunity. There are so many cities like Springfield. So it's not that there's something unique about our current customer that won't apply to the next 100, 200, 1,000 and 2,000 customers. We really believe that there's a tremendous opportunity to continue doing what we're doing today just at a much larger scale. Now if you add on top of that, all the product innovation that we're driving the new products, other opportunities, we're very optimistic about what's possible here. Patrick Walravens: That's fantastic. And Clara, maybe pace of margin expansion? Daniel Ramot: Yes. I'll leave that to Clara. Clara Fain: Thanks for the kind words as well. So in the immediate term, so we're focused on organic operational improvements to enable modest gross margin expansion, and we achieved that successfully this quarter with a 0.4% margin expansion. In the medium to longer term, we are working to improve gross margin to 3 levers. One, transitioning our lower-margin services to third parties; two, continuing to expand our platform with higher-margin products, notably our software offering, which we're investing heavily into; and three, continuing to explore strategic M&A. We've established this playbook with Remix and Citymapper acquisitions, which were both highly successful on all counts. And the industry continues to be highly fragmented. So there's an opportunity to acquire point solutions, which may not make it as a stand-alone companies, but have excellent products and teams and may be very accretive additions to the platform. We reiterated on this call the commitment to the long-term target of 50% and our commitment to margin expansion. And again, we'll take two phases, the first phase where we continue to land customers and with modest gross margin expansion, and then the second phase where we start to see the impact of those three levers, and have more meaningful step function expansion of the margin. Operator: Your next question comes from Scott Berg with Needham & Company. Scott Berg: Really nice quarter here out of the gate. I wanted to probably take Brad's Waymo question here. But I think the partnership is super interesting, but knowing how those contracts are constructed within the Microtransit area, how do your contracts change in that type of scenario? Are these contracts probably -- my guess is they're more weighted on the software side of what that offering looks like than some of the peer services side. But just trying to understand how that may or may not shift in that scenario. Clara Fain: Well, that's a great question, Scott. And that's absolutely right. When we partner -- so we think of Waymo as one of our potential fleet providers. We can have a human-driven vehicle with a fleet, we can have a Waymo vehicle. And those would be equivalent solutions for our customers, and we offer them both. And in that contract, basically outsourcing to Waymo, the fleet and the vehicle means outsourcing a large chunk of our COGS to a third party. So those contracts tend to be higher margin. Obviously, we have a small sample today, so there's some room to explore there, but they have very high margin and allow us to bring this incredible technology to our customers with our vertical software layer on top, so they can actually use it as part of their transit system. Scott Berg: Understood. Helpful. And then many comments on the strong customer additions in the quarter. I guess as you think about the growth algorithm over the near term, maybe 2 to 4 quarters out, does that algorithm kind of shift towards more net new customer opportunity, or more revenues coming from net new customers? Or the really predictable cross-sell model, is that still the way we should think about maybe the next several quarters? Daniel Ramot: Yes. Great question. From our point of view, the growth algorithm stays pretty much the same. We're very focused on continuing to grow within our existing customers and also add new customers in the same way that we talked about. And if I'm looking forward a few quarters, the feeling is that it should stay about the same as what you've seen in our historical results as far as the distribution between the two. Operator: The next question comes from Brian Schwartz with Oppenheimer. Brian Schwartz: Echo great results out of the gate. Two questions. First for Daniel on AI. I know it's early, but how do you envision discussing pricing for AI functionality with your clients? Clearly, it's a differentiator of the business. But is it all about stickiness of the platform? Can it help you take up price since you're giving clients more value? Just thinking about as you bring in more AI functionality into the product suite and your core offerings moving forward? Daniel Ramot: Brian, thanks so much. Great question. I think we can do so much with AI to continue to evolve and transform the product in something that's increasingly even more useful to our customers. So there's definitely a lot of value that we're delivering there. On price specifically, at least for now, we are trying to be extremely customer-centric. Our customer is very sensitive to feeling that they're in any way being nickeled and dimed. And so our approach has been for our entire history to say we deliver a solution, and we will continuously upgrade that solution for you so that you're extremely happy with that product. That makes it very sticky. It builds real trust with our customer. And we have so much other opportunity to grow with them beyond simple price increases to our software, that's been our philosophy. I think that should apply to additional AI features that we're adding into the platform despite the fact that I do agree they can contribute enormous amounts of value to the customer. Now that said, in parallel, we're able to use AI to launch, what I think of as sort of, new products. And those, I think we can sell separately as individual SKUs, increasing the revenue that we're able to generate from each one of our customers. These are also very high margin to Clara's point earlier. So I would separate from taking existing functionality, upgrading it sometimes very significantly with AI, at least in the short to medium term, that really isn't our philosophy to try to charge for that. And I think it's had -- add a lot of value. Some new products, I think, are real opportunities. Brian Schwartz: Thank you, Daniel. And one question for Clara. Following up on Pat's question, but maybe specifically about the gross margin line. We saw a nice lift to gross margin this quarter and over the past 4 quarters, too, for the business. Beyond scale, are there other drivers for greater gross margin efficiency that you can foresee taking hold for the business over the next 12 months, or maybe over the medium term? Clara Fain: Thanks, Brian. A very thoughtful question. So happy to address it. I think there are several drivers that we're looking at to continue to drive gross margin beyond scale and beyond the three levers that we just discussed. One is obviously the mix shift towards higher-margin contracts we're seeing, and you saw this great case study of a customer that went from 40% to 50% gross margin and is continuously improving. And that customer's growth -- revenue growth will drive further margin expansion. So continuing to look at the mix shift, which is a really nice driver of near-term margin expansion is quite interesting and focusing on those customers where we can drive an uptick in margin through changes in operational metrics. And second, we are continuing to work on cost improvement on our cost to serve our customers. AI has brought a lot of new opportunities to reduce costs in our cost of serve. So while on the top line, Daniel just discussed, we're just adding more value to our platform and bringing and continuing to penetrate our TAM, which will drive a lot of revenue growth going forward and hopefully, durable growth, strong durable growth. On the cost line, we're actually using AI to reduce our costs, and that is valid for, obviously, our COGS and our OpEx, and trying to continue to generate examples, obviously, customer support, customer success infrastructure costs, the ability to better manage and control all those costs has increased substantially with AI tools. So we're definitely focused on that. And I think that will drive margin expansion. Operator: Your next question is from the line of Brian Peterson with Raymond James. Brian Peterson: Congrats on the really strong results here. So I wanted to double-click on the schools opportunity. It's encouraging to hear the momentum there. Is there any way to help frame that opportunity relative to what you have today, either in terms of fleet size or spend? And as we think about that go-to-market, is that more of a net new dynamic where you're selling to a new buyer? Or is there a cross-sell potential relative to some of your existing public sector customers. Could you guys unpack that a bit? Clara Fain: Yes. Thanks, Brian. Happy to give more color on that opportunity. I would start by saying that we've been investing in the product and the technology for that end market for a significant amount of time. But the go-to-market motion is still very nascent for schools. So we're in the early stages of capturing this opportunity. And to answer some of your question and that opportunity is quite meaningful and it is part of our overall TAM, and definitely very attractive across all fronts. The way we look at it is the buyer is -- can be different, it depends. We're looking -- in general, we tend to go to school districts, or DOEs or head of schools. And they are definitely different than the mayor, or the head of the transit agency in terms of who is actually buying the platform. So that is definitely a new customer and a different buyer in most cases. However, there is a halo effect and the referenceability of our platform within a city. So there are certain cities where these may be kind of living together in these various functions and these people may be sitting together and discussing their solutions. There are other scenarios where they're quite separate. So I would say, there's a bit of a range of buyers. But I would say in most cases, it's a slightly different buyer, although once we have existing presence in that region or that city would definitely benefit from the network effect and the referenceability of our platform. More to come on that as we continue to grow that business. Brian Peterson: No, that's great to hear, Clara. And maybe just sticking on the referenceability point. Daniel, I know you mentioned the European Customer Advisory Board. You're very strong in Germany. The tone on the U.K. is not lost on us. But I'm just curious, as you think about those proof points in those markets, how do we think about a potential groundswell into other geographies? Congrats on the strong results. Daniel Ramot: Thank you so much, Brian. I think specifically within Europe, maybe I'll just give an example on the school bus. That's a market where school bus operates quite differently. They don't have yellow school bus as well. In the U.S., yellow school bus, there are more buses, if you just count the number of buses than there are transit buses. So it's a huge opportunity. In Europe, typically, school bus is much more integrated. They don't have yellow school bus, much more integrated into their sort of traditional public transit system. With a lot of special education, school transport being provided. So there, there's an opportunity and that gets the referenceability to sell the school bus product to the same customer, to the customer that we already work with. So that's a much more direct sale. There's a lot of product work that's still complete there to make that opportunity to accelerate, but I think that's an area that we can see some really good growth. And overall, I do think that while, yes, every place you go, they say, "Oh no, no, here, we're different than we are in this other country." There's no question that when we have success in one region, it influences all the other regions as well. Operator: Your next question is from Jonathan Ho with William Blair. Jonathan Ho: Let me echo my congratulations as well. Maybe just starting out with the strength you saw in the U.S. market this quarter, what maybe stood out, or maybe surprised you in terms of win rates or utilization? Just want to understand the drivers for that geographic strength. Clara Fain: Thanks, Jonathan, and good to connect. From our perspective, Q3 was business as usual. We saw very strong demand for the platform across all metrics and across all of our solutions. You can see historically, there's a cadence to the market, certain quarters that can be very strong, certain quarters are a bit slower. And this quarter turned out to be very strong with lots of additions and growth. But the growth algorithm is the same and the opportunity continues to be very large, supporting durable growth, and we'll continue to be very excited and confident in this opportunity. And I think Q3 is no different than the prior quarters and really a strong testament of that market opportunity. Jonathan Ho: Got it. And then in terms of the timing for ballot measures that you referenced. Like what is the time frame for that to translate into contracting and potentially RFP opportunities? It would just be helpful to understand what that process typically looks like. Daniel Ramot: Yes. Thank you, Jonathan. Great to connect. Great question. That's worth clarifying. That is a very long-term process. So it takes months, sometimes years for that funding to sort of really become available, then there's the procurement process and so forth. So we're looking at -- and then the funding is often over many years that it's available depending on the specific ballot measure. So we're looking at a very long-term impact. Generally, in our business, everything we're doing is fairly long term and we're always thinking ahead. And in many cases, we're increasingly finding ourselves involved in these ballot measures and helping to support them and maybe even initiate them in some cases. So I think that's something that we'll look to do more of and really thinking 1, 2, 5, 10 years ahead in some cases as to when it will have a material impact on the business. But that's just -- that's sort of the time scale that we need to think of... Operator: And your final question comes from Aleksandr Zukin with Wolfe Research. Aleksandr Zukin: Congrats. Maybe, Daniel, first one for you. The Waymo partnership feels like a seminal moment, partially because it seems like it enables you to kind of even more, maybe aggressively fulfill your vision for solving what seems to be an extraordinarily difficult kind of algorithmic and services challenge for your customer base? And maybe just elaborate, if you can, both the potential marketing and pipeline opportunity that, that partnership is driving from awareness in terms of your customer base? And then from both an accretion perspective to the contract, which I think you guys mentioned earlier, how do we think about as more of potentially these autonomous contracts roll out across your customer base, how do we think about the revenue uplift opportunity? And I've got a quick follow-up. Daniel Ramot: Thanks, Alex. I really appreciate it. I agree with you. I think there's a real opportunity in autonomous. It's just starting, but I agree with everything you said. I think there's a -- there can be a real impact, both in the way that our customers perceive this opportunity. I would say -- what I've seen from talking to customers, and that's true here and in Europe, as these autonomous vehicles become available, the demand for them from the public transit sector is very high. I think it's really just limited by the availability of these vehicles. And there are even some of our customers that have indicated that -- and sometimes it's not even yet a budget matter. It's just a matter of wanting to be ahead on this technology that they would be willing to launch certain services of autonomous vehicles that they're not -- it may take them a lot longer to agree to launch with human-driven vehicles. So I feel that the opportunity is very large, I totally agree with you, and it really is at the moment, depending on the availability of these autonomous vehicles. So as quickly they can become available in the different geographies, I think we'll see an acceleration. Aleksandr Zukin: Perfect. And then maybe, Clara, the large upsell that you guys talked about for Mobile, Alabama, it feels like that was also a competitive displacement of a larger -- or a large competitor. Maybe just talk through as you continue to take share, when does that kind of click happen in the mind of a customer to really move and scale from a legacy operator to Via in those situations? Clara Fain: Alex, thanks for the question. And you're absolutely right. This was a takeover. I mean that some of the expansion was a takeover from a legacy player in the transit space. It's a really interesting market that we're in, where it's probably the last pen and paper industry in terms of technology and you have a number of very large legacy players that are all, obviously, very large in scale that have been established in this market for a very long time. And so it is a process to displace them, and displace them with these very large contracts. I would say demand for these very large contracts is the strongest it's ever been. So we're starting to see a halo effect of some of the takeovers. We've taken over several of those contracts already, and the performance is extremely impressive in terms of both taking transit systems that actually do not work that our ridership are declining -- ridership is declining, cost is increasing, consumers, residents are not aware of it and not happy with it and turning that around within a year or 2. So we're starting to see outstanding results for those very large takeovers. And as we see more -- as we get more data around that, we are seeing the referenceability kick in and the flywheel effect work. And so today, we have probably the strongest pipeline in this type of opportunities we've ever had. And obviously, it's on us to execute on that, and there's a sales cycle, so it will take some time, but we're very confident in our ability to continue to push on that front and get very large contracts for the business over time. Operator: This concludes the Q&A session for today. I will now hand the call back to Via for closing remarks. Daniel Ramot: Thanks very much. So thank you all for listening and for the great questions. As we said, we're very pleased with our first quarter results as a public company, and we're excited for the road ahead. Look forward to doing many more of these calls with you. Thanks, everybody. Operator: Thank you again for joining us today. This does conclude today's presentation. You may now disconnect.
Operator: Ladies and gentlemen, welcome to today's conference call of Wienerberger's Q1 to Q3 2025 Results. I'm Sarah, your operator for today. [Operator Instructions] And the conference is being recorded [Operator Instructions] We're looking forward to the presentation. And with this, I hand over to Therese Jander. Therese Jander: Good morning, everyone, and warm welcome to Wienerberger's Q1 to Q3 results update. Thank you for taking the time to join us today. My name is Therese Jander, and I'm pleased to be hosting this call from the headquarters in Vienna. I'm joined by our CFO, Dagmar Steinert; and a special welcome also to our CEO, Heimo Scheuch, who is calling in today from Hungary. We will begin with a brief presentation of the key developments and the financials for the period. And afterwards, we will open the line for questions. With that, I will hand over to Mr. Scheuch. Heimo Scheuch: Thank you, Therese, and a warm welcome also from my side. You will wonder why I speak from Hungary. As you recall, we explained to you that the roofing is a very major attention point for our future development. And as you are well aware, we have been working on two new factories for concrete roof tiles and one is in Hungary, one is in the Southeast of London. Both of them are now operational. The one in England is already fully on the market and the one here in Hungary is about to go on stream. And so we are glad to say that in a record time of more or less 1 year, we have put two new factories up in this market, and we grow our exposure to this very important segment of ours, the roofing segment in Europe. So that's why I'm here today with our Hungarian management. But let's go now to our set of results for quarter 3. Ladies and gentlemen, if you look at our results and operating EBITDA was EUR 202 million EBITDA in the third quarter comes in more or less or roughly on the level of 2024, so in line with last year's performance, a slight margin expansion when you compare to last year, and the revenue is pretty much on the same level of last year as well. All of this is a very strong performance if you look at the underlying market. Why? Because we have seen, as we have told you, in the New Residential Housing segment, no major developments as far as uptick is concerned. On the contrary, if we move, first of all, to North America. The North American market has suffered considerably in the segment of New Residential Housing, 1 and 2 family houses, especially. Let's start for a change with Canada, Ontario, the Toronto market, down compared to the previous year, 2024, this year with more than 30%. So we had to digest quite a significant decline in activity in this very important market. That's the major market of Canada anyway, Ontario. So you've seen here a strong decline in the new residential housing market. The U.S. as such, has also suffered due to a lot of reasons. The mortgage rates are still pretty high. You have here also the instability, volatility, politically speaking. I don't have to expand on that. Everybody follows it very clearly and in detail. So this is obviously also an impact on the new residential housing market in the U.S. And therefore, we have a decline of about 10% in this market as well to digest when it comes to our activities. Keep in mind that this North American operation is the most exposed one to new residential housing market as it comes to Wienerberger because this is where we still have a majority of our business that is exposed to new residential housing. If we move now more to Europe, we have here, I would say, a situation where we see in the U.K. and in Ireland, a different market development. We have seen that especially now in -- after the summer that the U.K. is also dropping in activity rate. That's due to mortgage rates have not come down as everybody has expected. There's also some instability in the marketplace. And here with about -- when we compare running rates about 9% down in new residential housing market when we talk about September, October in this period of the year. So we have seen no pickup; on the contrary, a decline in activity. And also in Ireland, a slight decline in this new residential housing market. However, and this is now important because this is a major difference. If you look at the U.K., Irish operations of Wienerberger, they have a majority of its exposure already in the roofing and in the piping business. So renovation, infrastructure plays an important role. And therefore, this business has performed overall better because here, stability in turnover and in profitability. So we have not suffered so much when it comes to the profitability of the business in this region due to this new business that we have, a business that is far more oriented to renovation and to infrastructure. So a very important point to mention here to the respect of U.K. and Ireland. On the continent, as such, we have seen a mixed picture. All of us have expected a better running rate when it comes to new residential housing in all of the European markets. This has not happened. The only market actually that performed according to our expectations is the Netherlands. So the rest of Europe, Western Europe, especially was down. There's no sort of uptick in the market as we speak. There are, however, some encouraging signs, if I may say so, in Germany and France because the permits are up in these two countries. So we can expect, hopefully, into the next year, a little better development in new residential housing. Renovation has supported the strong roofing performance in the region. So there's a lot of activity, as I may say so on the roof maintenance. So this has helped our business there. And infrastructures have been more or less stable, the spending. So here, a trend that we have basically built on the beginning of the year. And if you look now to Eastern Europe, Eastern Europe has been also a market where we have not seen any expansion of new residential housing. So I would say, a rather stable, subdued market in a lot of these Eastern Europe economies. The only country where we have seen a little uptick is the one I'm currently in, in Hungary. This is to political reasons. Next year, we have Hungarian elections. So the Hungarian government has launched a special initiative to give sort of better mortgage rates to be first-time homebuilders and buyers. So all-in-all, when you look at Wienerberger's performance in these geographies, and we have added some charts in the presentation. I don't need to go into the details, but you see actually three things. First of all, that the mortgage rates have not come down as we originally expected them to do so in order to stimulate new residential housing. So that's the first very important point. The second one is that the new residential housing markets, nearly in all of the markets except, as I mentioned, the Dutch market and the Hungarian are down. So there's no uptick in these markets. So we were confronted with markets that are below the '24 levels. And thirdly, which is also very positive, that Wienerberger in ceramics and pipes outperformed the underlying market due to our focus on innovation, very strong focus on our customers. And therefore, we were able to outperform the underlying market. So I think this is the nutshell of the current environment that we are in. I don't see any major changes, by the way, for the rest of the year. So after the third quarter into October, November, December, we will see the same trend. So this declining environment will continue for the rest of the year. So this is, I think, from my perspective, the major sort of underlying developments. If we now move a little bit on from the macro and the sort of performance-oriented one to some of the numbers that Dagmar will elaborate a little later. So from a revenue perspective, you see here that we are more or less a little bit up by 4% compared to last year to about EUR 3.5 billion. EBITDA is slightly down from last year. This is obviously due to the fact that we have a lesser contribution from the new residential housing segment and also some cost pressure when it comes to labor cost and energy costs. But here, Dagmar will elaborate a little bit more in detail. On the profit after tax side and the earnings per share side, we have a strong increase due to the fact that, obviously, there's no impact on some of the balance sheet issues that we had due to the sale of the Russian business last year. This year, obviously, is a normalized year. So it will be a strong uptick in these two aspects. If we now move on a little bit more to the migration, as I call it, from Wienerberger's perspective, you see here that over the years, and I explained this already a few times, but you see it, especially in these tough market environments that Wienerberger is operating in, how important it is and it was to migrate the business from a purely New Residential Housing business to now a much stronger resilient business based on new build infrastructure and especially renovation. So I think this has shown clearly that from a strategic path, we are on the right way forward. We will continue to do so. And I think the current environment offers us opportunities. Let's move a little bit on in this external growth field. We have done several acquisitions. I mean when we look at Wienerberger over the last 10 years, it's by far more than 41 (sic) [ 40 ] acquisitions that we did. So all of them are very strongly value enhancing. We have been very disciplined first of all, with the purchase price, with the integration and the synergies. When we take the biggest one that we did, Terreal last year, we are fully on track with respect to synergies. So all the synergies that we have originally planned for are coming in actually a little bit better already. The market as such, the underlying is obviously weaker. I don't have to explain that. I did it already at the introduction. So here, in this difficult market environment from a pricing perspective and synergy perspective, we are doing better as we originally planned. So here, we see the strong operational leverage that we have when we do such acquisitions. So they are from the first day onwards value enhancing. When you look at Terreal, I would say, what the difference or what the changes in prediction is that we see that the full contribution in EBITDA due to the fact that the markets are not yet picking up. It will be probably a year more that we gain this EUR 150 million EBITDA contribution. So we have put here the chart clearly in line for you that we expect this contribution a year later. However, as I said, from a synergy and cost perspective, we have already achieved all of it. Let's look a little bit what we have done so far in this year 2025. Again, here, an interesting set of development because we have focused on water management, clearly when it comes to all sorts of innovative features like creating a scalable platform for capturing growth when it comes to water quality to measure the volume of water and to help water companies in managing their water systems. So that's WIONIQ, a strongly growing business when it comes to IT-based and artificial intelligence-based solutions for water management. Then we have done a very important step in Ireland in order to consolidate further the market when it comes to infrastructure, drainage, roofline and cable duction systems as a consolidation in this market, so fully effective there as well. And then we have bought 100% of our GSEi business. That's a framing business for solar panels. That's not solar panels as such. It's a framing operation where we have now 100%, which is growing fast because here, we have this integrated solution for roofs, and we grow not only in France, but especially also outside France very quickly. So when we look strategically speaking, infrastructure and renovation are the key drivers also this year in this market circumstances where new residential housing is under pressure. So we will focus on this more in -- when we talk about infrastructure, it's the expansion of our piping operations, water management, especially. Here, we see a high degree of growth potential in all of our markets that we are active in. Keep in mind that Wienerberger is now with its operations in the north of Europe, now clear #1. We grow our business strongly in U.K. and Ireland, and we are also very strongly growing in the Benelux, especially in the Netherlands. And the next focus areas will be the Eastern part of Europe where we want to grow this business and obviously also in Western Europe, where we see still potential for further growth. So here, organic and inorganic growth is on the list for Wienerberger in the years to come. Let's move then a little bit to the renovation market. The renovation market is for Wienerberger, especially the roof market. Here with the acquisition of Terreal and now the Framing business for solar panels, we see here a strong potential for further growth. We will focus on accessories and the parts that the roof needs on the roof and under the roof. We have here the necessary platform to do so. And we have seen that especially in situations where the markets get a little tougher, we have now strong market shares in order to have pricing power on one side, but also to push innovation and solutions through. So these are two especially very important markets for growth for Wienerberger. And if I may, before I hand over to Dagmar, say a general word with respect to acquisitions as such. When we look at the current market environment in North America and in Europe, it offers unique opportunities for Wienerberger for attractive growth. Why? Because a lot of small and midsized companies, family-owned businesses in such difficult moments, they are not only driven by the macroeconomic development, but also the regulatory development, especially in Europe with all the new regulations coming its way. So here, we have a strong potential for further growth in order to expand our operations and to deepen the value creation when we talk about Solution businesses on the roof and in the infrastructure field, but also in new residential housing. So I think here, we are ideally positioned as Wienerberger to grow. We have shown that we are a world-class operator when we integrate all these sort of operations very quickly, very efficiently on the platform side when it comes to systems, like the whole back office, but on the front office as well due to our strong sales approach in the different geographies that we are active in, so a good base for further growth at Wienerberger. So Dagmar, I may hand over to you to elaborate a little bit more on the financials. Thank you. Dagmar Steinert: Yes. Thank you very much, Heimo, and a warm welcome from my side here from Vienna as well. I will go now a little bit more into details about our financials. And just to sum it up a little bit, our first 9 months result shows a really solid performance in this weak new build market, as Heimo explained. And our group revenues increased to EUR 3.5 billion, and operating EBITDA came in at EUR 584 million. Our margin amounts to 16.6%. So let's now look a little bit more into detail and let's have a deeper look at the revenue and operating EBITDA bridge. Our revenue development. We increased our sales by 4%, and that is driven, as you can see, by scope. And that's mainly due to our Terreal acquisition, where we have a strong roofing performance and which pays off in the renovation volume increase. Organically, we grew by 1%, what we lost as well on the currency side via translation. If you look at the operating EBITDA, it is slightly below previous year. And organically, we missed our previous year's performance and show there minus 4%, and that's due to still ongoing cost inflation and that our pricing overall for the whole group is more or less in par with previous year. And therefore, we didn't manage so far to cover our cost inflation. On the currency side, it's minus 1% or minus EUR 5 million. And our M&A activities gave us EUR 13 million additional EBITDA. Overall, our profitability remains robust, and it's overall demonstrating the flexibility of our operations. If we now have a look at our segments, starting with Western Europe. There, as you can see, our revenues increased by 8%, and that's a result of strong renovation activities. Roofing is there the main driver and Belgium, Netherlands as well as France remain there the top performers. The new residential housing market, of course, is, as already explained, really weak, but we see a meaningful growth in Netherlands there. The U.K. market is difficult for us, especially in new build. But as we are strong in renovation and piping activities there, we outperformed that market as well. Looking at the operating EBITDA, it's up 15%. Of course, part of that is a result of our acquisitions of scope. But we continued to show a solid performance. We have a solid cost management. And therefore, due to higher utilization, we managed to increase our margin. With that, I would like to come to our development in Eastern Europe. In Eastern Europe, our revenue grew by 2%, and that was mainly supported by slightly higher clay block volumes. On the earnings side, operating EBITDA, it's down by minus 7%, but we are still showing a margin of 18.1%. In Eastern Europe, we have very high burdens on cost inflation, especially on the energy side. And there, it's mainly gas. There, we increased. There, we had to face a very deep increase of prices. Markets are difficult in Eastern Europe as well. And in the new residential housing market, only Hungary shows a significant growth, and that's due to government support because there, they support fixed interest rates for first-time house buyers. Let's now turn to the development in North America. North America at the moment is quite a difficult market. And of course, what you see in these pictures as well is a negative impact from currency translation. Our external revenues came down by minus 8%, and that is due to weaker brick demand and yes, the difficult markets. Our piping volumes improved, but we faced there due to lower raw material prices as well lower prices on our side. Operating EBITDA came in at EUR 106 million, and we still show a very healthy margin of 19%. North America remains for us a really profitable and strategically important region, and we are well positioned for recovery once new residential housing market returns. In this challenging environment, we have set up a new program Fit for Growth. And that program Fit for Growth that will deliver structural savings across all regions. And what are we doing with that? We are focusing on processes. We want to simplify processes. We want to reduce overhead. We want to become a much more agile organization, and we want to be as fast as possible towards our customers. Part of that program as well is the topic of optimizing production. We target EUR 15 million to EUR 20 million annual savings. That definitely is a run rate. And with that, of course, we want to ensure that we are best-in-class serving our customers and have a really lean organization. I already said -- mentioned in our half year call, and of course, it still remains as it is, we face very high cost inflation, especially on the gas prices. And therefore, I would like to give you a little bit deeper insight how it works. As you know, we are fixing prices for our future volumes of gas, which we need. And in the past, we benefited from that quite a lot. So in the years 2024 and 2025, for instance, we are buying gas for prices below market price. Anyhow, the prices we are paying today in 2025 are far above the levels we used to pay in the last year. Giving you a little bit of an outlook for the year 2026 due to the development of the market prices for gas prices compared with the year 2025 came down. We still, of course, fixed a certain amount. But there, in the next year 2026, as far as we are able to see it as of today, we will not benefit as much as we did in this year and the last years. I hope that will give you a better understanding how energy costs work within our group. With that, let me turn to our free cash flow. Our free cash flow came in at EUR 155 million, and that's reflecting a solid cash generation for the first 9 months. As you might see, we are a little bit more investing in our working capital compared to this previous year, but that's just a seasonal thing because as you know, we are always building up inventory during the year, especially during the first 9 months. Maintenance CapEx is on the level of previous year, and there's no bigger change in lease payments as well. Having said that, I would like to move over to our net debt development. Our net debt at the end of September amounts to EUR 1.9 billion. And the leverage of that is 2.5. By the year-end 2024, we showed a number of 2.3. As you can see within the development, we have our free cash flow of EUR 155 million. Our growth CapEx and M&A amounts to EUR 105 million. And of course, we paid dividend and we did some share buybacks, which amount to EUR 135 million. And I can assure you we have an ongoing disciplined CapEx and cash management, and we will keep the leverage stable and of course, I'm sure that we won't increase last year's number. So with that, before we come to the outlook, I would just like to sum up the -- for me, most important topics of our performance for the first 9 months. Looking at our macroeconomic environment, we are still facing high mortgage rates. On the other hand, new residential housing market is developing not as stable or positive as we originally expected, except the Netherlands and Hungarian market. And I would like to point out with our performance with these 9 months, we, as Wienerberger, outperformed the ceramic market and the pipe market regarding the market environment. And with that, I would like to hand over again to Heimo. Heimo Scheuch: Thank you, Dagmar. And I think you made it very clear, and I can only sort of add to that, that in this complex, volatile and really fast-changing environment, Wienerberger has proven that our not only strategy mid and long term, but our sort of proactive management style focusing on costs and being very quickly when it comes to adjustments and efficiency improvements have proven right. Some of you will say, why didn't you start earlier to talk about a change in the outlook because at half year, we said, listen, from a perspective that we see summer months, July, August are always weak months and don't give a lot of indications. When we look at the performance of quarter 3 and the September, especially, we were hopeful that actually the markets as such were picking slightly up or were developing in a better way. However, we have unfortunately seen that especially in North America and the U.K. were driving in the other direction. So again, we had here, obviously, to experience not only further declines but a much weaker environment in new residential housing that we originally anticipated. Obviously, when we gave the full year guidance, we said at the beginning of the year, under two assumptions, that interest rates would come down and that the new residential housing market will slightly improve, especially in the second half of 2025 and show positive trends. Both didn't materialize. On the contrary, and this is, I think, the strong message that we can send to you, we had to suffer a completely different environment than we originally planned for. And under these circumstances, I think this performance that we show that we are actually better performing than last year in an even lower market environment shows that we really work hard on our things that we can influence. As Dagmar has shown, we have already implemented a Fit for Growth project again in order to make us even more efficient in more of the businesses. We have proven that from a pricing point of view, we are very disciplined when it comes to pricing and obviously, also in digesting a very significant cost increase when it comes to wages, especially labor costs and on the energy side. So all of this coming our way, we had to digest this year. And so I think it has to be seen under these circumstances that we have a very solid, strong performance. The renovation markets are the only markets that remain stable as we have foreseen it. The infrastructure markets took a slight hit also due to the budgeting constraints that especially European countries imposed due to the shift more into defense budgets and to defense spending away from infrastructure. So these are things that we have to look at also from a perspective of current development. Let's then summarize everything as the performance goes for the rest of the year. Some of you will ask Dagmar and myself already in a couple of minutes, are you really sure you will achieve the EUR 750 million? Yes, we will. The impact of FX, as Dagmar has explained in detail, is also an important one which we need to consider. But like-for-like basis, I think the EUR 750 million is the number that we will achieve. We are working hard. It means also for us a good and very strong quarter 4, where we work on right now and where, as I said, all the measures that we implement ourselves and with which we can influence are playing out in our favor. The rest we have to take as they come. So this is, I think, a very important and clear message that Wienerberger does everything in order to improve its business in this, I would call it, a significant slowdown in new residential housing around our markets. However, if I think -- and very important also, I think that what Dagmar says and she is keeping really a strict discipline in the company on the net debt position here. You have seen how disciplined we are on the CapEx and the spending side. So at the year-end, we will be in the range of 2.2 to 2.3 EBITDA to net debt. So here, again, strong performance when it comes to the financials of the company and the balance sheet discipline. Let's not keep out of mind also the midterm and our development. Some of you will say, do you still have the EUR 1.2 billion as a midterm target in mind? Yes, of course. Why? Because obviously, the company has this potential to grow to this number, provided that some criteria play out. And we've put here, I think, four, that are very clear to determine on this slide. First of all, further interest rates cut have to happen. You have seen how high actually the mortgage rates are. So we need to keep more an eye not only interest rates in general, but especially mortgage rates and the mortgage policies in the different geographies that we are operating in because it gives a signal of affordability for people to buy into the housing -- new residential housing market or not. Then something which is very interesting to monitor for us is this European Social Housing plan that might kick in. There's a lot of discussions. We have meeting at the month end again in Brussels with the commissioner and the commission about this. So this could also be of a very important part for the new residential housing market for us in the not-too-distant future. Obviously, potential peace in the Ukraine will boost the whole region of Eastern Europe. And therefore, we hope for that and for the people, especially in the Ukraine. And then also the U.S. market recovery because the potential and the demand level is substantial also in these geographies in Canada and the U.S. However, as I said earlier, the mortgage rates need to come down and a little bit more political stability should be also in the U.S. in order to stimulate the new residential housing market. Under these conditions, I think we are very well positioned in order to achieve this number. And Wienerberger from an efficiency perspective, cost base perspective and also the very important industrial base that we have now is a very strong one that we can work on and continue. I think what you should take away from this call, it is more than a quarter call because we gave you some update on strategy, also the importance of the migration of this business, Wienerberger from new residential to a much broader business and a resilient business proves right, gives the group a very strong direction when it comes to stability in cash flows and in margins, but also a growth base for the future. And I think the U.K. and Ireland is a very, very good example if you compare the two, the U.K. and Ireland to North America. North America, we are still very exposed to new residential housing. That's why we'll take a hit there as far as profitability is concerned. And when we look our performance compared to the competitors that are more into new residential housing in U.K., especially, it's a much stronger one. It's a much more resilient one and margin-wise, a much better one because the business is already very balanced when it comes to infrastructure and renovation. So I would like to close on these statements strategically, and thank you very much for your attention. And Dagmar and myself, as always, will take your questions. Operator: [Operator Instructions] The first question comes from the line from Yassine Touahri from On Field Investment Research. Yassine Touahri: I think I would have two questions. First, I think you had cost inflation of 4%, 5% in 2025. You're expecting, I understand a bit more energy inflation in 2026. Should we expect more of a mid-single-digit cost inflation next year? Or should we expect something similar to what we've seen in 2025? That would be my first question. Then my second question is that we've seen so far that prices has been very broadly stable. So I think you've not been able to offset this cost inflation and all the benefits from the savings that you've been implementing have been absorbed by this cost inflation. How do you think about next year? Have you already started to announce price increase? Do you see your competitor announcing price increase in an environment where the volume is a bit more muted that you were initially expecting? Do you believe that any price increase that have been announced could stick? It would be great to get a sense of the scenario that we've seen in 2025 where a lot of your efforts are absorbed by cost inflation could be [ overproduced ] or not next year? Heimo Scheuch: Thank you very much, by the way, for these very important questions. I will leave, if I may, Dagmar, to you on the cost inflation side, and we'll focus on the price side to start with. I think we have shown a great discipline in pricing throughout the group this year. And you are absolutely right in such an environment, especially in the new build sector, it's difficult to increase prices. However, we were able to do so in some geographies, so that cannot be sort of said with respect to the whole group right now. And 2026, it's too early to give here a statement. However, as always, we start in November working on the markets, working with our customers to prepare them. So you will see a more detailed picture, I would say, in March of next year. If they stick or not, we will certainly do something in the pricing. It's not going to be huge steps, but I would say sufficient steps, and this is what we are going to work on for '26. But as I say, it's a difficult market environment when we talk about new residential housing. So I don't expect here big jumps, but we always work on this very hard in order to improve renovation and infrastructure will be a little different. I hand over to Dagmar. Dagmar Steinert: Yes. Well, regarding cost inflation, yes, we face cost inflation between 4%, 4.5% for the running year. And yes, we will see some cost inflation, of course, next year as well. But I don't expect it to be at the level of the cost inflation 2025. And regarding the energy, what I tried to explain regarding our gas price, what we are paying in the year 2026 that will be not above market price. But as we benefited from energy fixing in the running year, we will face some kind of inflation regarding the energy prices in the year 2026. Yassine Touahri: So just to understand on inflation, how the -- the 4% to 4.5% that you're seeing in 2025, is it mostly -- it's a mix of labor cost and energy costs. When you look at 2026, what would be the difference? You would see less labor cost inflation and energy inflation, something similar. So overall, you would expect something which is less than the 4% to 4.5% that we're seeing in 2025. Is that the right way to look at it? Dagmar Steinert: That's the right way to look at it, yes. Yassine Touahri: And -- but it's too early for you to give an idea if it's closer to 2% or 3% or 4%. Dagmar Steinert: Yes, that's too early because we are still in the phase of preparing everything. And of course, there are price movements on the cost side as well. It will be below the inflation of the running year, but it's too early, far too early to give you a decent number. Operator: So -- and then we have the next question from the line from Cedar Ekblom. Cedar Ekblom: I just had a question on that cost point again. Just to confirm that 4% to 4.5% is across all buckets of costs, so energy, labor, et cetera. Could you give us a little bit of color on what the actual portion was for your fixed cost buckets? So that's the first question, just to get a little bit of differentiation there. And then can you just remind us, there's a couple of cost-cutting programs that are now in the business. And we've got the new announcement today. Can you just remind us how to think about efficiency gains into next year? Is it just the EUR 15 million to EUR 20 million? Or is there anything also coming from other programs that have been in place in this business for some time? Heimo Scheuch: Thank you, Cedar, for the very spot on questions. Let me say something on the cost savings side and the program. The Fit for Growth is obviously, as Dagmar explained, the new program that will be added on to the existing ones. You remember that we said that the existing ones have come to an end and have proven to be very effective in the business. So they will obviously produce some additional input also next year because they are running these programs and they're not finished yet, as you correctly pointed out. So these will be to be added on and Dagmar will give by all due means and respect a number at the beginning of next year. And I think if you bear with us a little bit, I think we are putting together budgets right now in this volatile times, it's not easy. We have also indicated to you that we would like to give you a much more detailed outlook and overview of the business early next year in a Capital Markets Day. So I think if you can sort of be patient with us on this subject to give you here a clear update. But to answer the question, the EUR 15 million to EUR 20 million will be the new program running rate for -- as we speak from next year onwards and some inflow comes also from the existing programs. And for the cost structure and the fixed cost, I hand over to Dagmar, please. Dagmar Steinert: Yes. Our cost structure is mainly dominated by personnel expenses. They account for roughly above 30% of our overall costs and our energy costs are 10% of our overall costs. And these two portions dominate, of course, our cost inflation. And all the rest, if it's like raw material, if it's rents, if it's consultants, IT costs, whatsoever, of course, there we face cost inflation as well. But on the other hand, if we have a very disciplined way to approach that, we manage to keep it low. And therefore, I would like to reduce for you our main cost drivers regarding inflation just to energy and personnel expenses. Cedar Ekblom: That's really helpful. What I'm trying to understand is, can you give us a bit of color on what the sort of personnel expense inflation is? Because what I'm trying to break out is cost inflation on items that are within your control relative to cost inflation on the energy side of things, which obviously, you can do your hedging, but to some extent, that's much more a factor that you can't control. So could you give us a number for personnel cost inflation if the overall cost is 4% to 4.5%? Dagmar Steinert: Well, the cost inflation regarding personnel expenses in the running year in 2025 is roughly for the group overall at 5%, and it will be below 5% 2026. Cedar Ekblom: That's helpful. No more questions from me. Heimo Scheuch: Cedar, keep in mind that we had higher cost inflation, obviously, in Eastern Europe also this running year. You remember when we told you that there is a pressure in the labor market and especially in Eastern Europe, strong increases on labor and the collective bargaining agreement. So this is, I think, what Dagmar was referring to. Operator: We now have a question from the line -- by now the last question from Julian Radlinger. Julian Radlinger: A couple of ones left for me. So first of all, the implied Q4 guidance means that EBITDA in Q4 could actually be up year-on-year despite all the headwinds you've called out. And so if that's the outcome, I'm just wondering what would that be driven by? Is that volume? Is that cost management? And what scenario would EBITDA be up in the fourth quarter? And then secondly, so your margins actually expanded in Western Europe in Q3 on a year-on-year basis. Is that a clean result? Is that just higher capacity utilization like you wrote in the presentation? Or is there any kind of one-off effects in there that we should be aware of? And then just maybe a very quick last one. How much of your energy costs are now fixed for 2026? So how much visibility at this point do you have? I know it's usually quite a lot on a 12-month forward basis. Heimo Scheuch: Dagmar, may I hand over to you to do this or if you want me, then you say. Dagmar Steinert: No, no, that's fine. I do it. I will start with the energy. There, we fixed roughly overall for the whole group between 50% and 60% of the volume. And so there is still a lot of room for movement. Your question regarding our Q3 results, if there are any major one-offs? No, there are not any major one-offs included in our Q3 results. And it's a result of our strong performance in renovation and outperforming the market environment. And of course, regarding our cost discipline, things starting to pay off. And if we look at our adjusted full year outlook for the running year, if we deliver EUR 750 million operating EBITDA. That, of course -- it's mathematic. It's very easy. It means that we have to reach in the first -- in the fourth quarter of the running year, something between -- above EUR 160 million EBITDA. And that, of course, is above previous year. And I mean, we -- yes, at the moment, we are overall in our pricing more or less stable on the previous year's level. But as we told you, we see markets where we a little outperform even on the pricing side, the markets, we have our initiatives, the running ones, the Fit for Growth where we benefit from. And therefore, we are confident to deliver. Operator: There are no more virtual hands at this time. I would like to turn the conference back over to Therese Jander for any closing remarks. Therese Jander: Thank you. I would like to state firstly, that our -- you should save the date for our next Capital Markets Day, which we have scheduled now for the 24th of February next year. So I just wanted to add that to the conversation, and we will get you more information when it's a little bit closer. And by this, I would like to thank you all for joining us today and for all your questions, and we truly appreciate your engagement. And therefore, we also hope to see you again for our next results call, which is on the 18th of February. Until then, take care and goodbye from all of us here at Wienerberger. Heimo Scheuch: May I just add something Therese in the name of Dagmar and myself. We all wish you a happy ending towards the year because with some of you, we won't meet personally. So enjoy this season and all the best in this very volatile times and exciting times. But I think we gave you a good outlook for Wienerberger as far as our markets are concerned and be assured that Dagmar and myself will have our hands full for the rest of the year, as she said. So all the best, and see you soon. Operator: Ladies and gentlemen, the conference is now over. You may now disconnect your lines. Goodbye.
Operator: Good day, and thank you for standing by. Welcome to the AtkinsRéalis Third Quarter 2025 Conference Call. [Operator Instructions] Please be advised today's conference is being recorded. I would now like to turn the conference over to your speaker today, Denis Jasmin. Please go ahead. Denis Jasmin: Thank you, Kevin. Good morning, everyone, and thank you for joining us today. For those dialing in, we invite you to view the slide presentation that we have posted in the Investors section of our website, which we will refer to during this call. Today's call is also webcast. With me today are Ian Edwards, Chief Executive Officer; and Jeff Bell, Chief Financial Officer. Before we begin, I would like to ask everyone to limit themselves to 1 or 2 questions to ensure that all analysts have an opportunity to participate. You are welcome to return to the queue for any follow-up questions. I would like to draw your attention to Slide 2. Comments made on today's call may contain forward-looking information. This information, by its nature, is subject to assumptions, risks and uncertainties, and as such, actual results may differ materially from the views expressed today. For further information on these assumptions, risks and uncertainties, please consult the company's relevant filings on SEDAR+. These documents are also available on our website. Also during the call, we may refer to certain non-IFRS financial measures. Reconciliation of these amounts to the corresponding IFRS financial measures are reflected in our earnings release and MD&A, which can be found on SEDAR+ and our website. And now I'll pass the call over to Ian Edwards. Ian? Ian Edwards: Thank you, Denis. Good morning, everyone, and thank you for joining us today. I'm going to begin today's call by providing an overview of our company performance in the third quarter, including our record backlog and margin as well as performance highlights across the Engineering Services regions and Nuclear businesses. I'll then pass it back to Jeff to provide more detail on our financial results and our updated 2025 outlook before we open it up for questions. Let's get started on Slide 3. Our third quarter performance highlights our ability to both grow and operate more efficiently across the business. We delivered another strong quarter of services revenue growth, up 17% year-over-year or 11% on an organic basis. Engineering Services regions revenue reached a record high of $1.9 billion, while nuclear revenue organically grew 60% to a quarterly record high of $596 million. Linxon continues to perform well and organically grew 15% -- we also had a strong increase in adjusted EBITDA from PS&PM of 21%, a record high adjusted EBITDA from PS&PM margin of 10%, highlighting the work that we have done across the business to improve margins. Our total backlog reached a new record high this quarter as our expertise across Engineering Services and Nuclear continues to be in demand. AtkinsRéalis Services backlog recorded a 24% growth versus the backlog as at September 30, 2024. The continued revenue growth and increasing backlog in our Nuclear business has led us to increase our Nuclear revenue outlook to $2.2 billion to $2.3 billion for 2025. On the other hand, due to lower year-to-date revenue growth in our USLA and EMEA regions, we've decreased our 2025 organic revenue growth outlook in our Engineering Services regions business to a low single-digit year-over-year percentage increase. We expect the full year impact of these changes on profitability to be neutral. Jeff will provide more details of this later. Subsequent to quarter close, we announced the acquisition of C2AE, which advances our land and expand strategy in the U.S. and is in line with our stated capital allocation priorities. Our pipeline of potential bolt-on acquisitions remains robust, and we would expect to announce further acquisitions in the coming quarters. We're extremely proud of our accomplishments this quarter, generating record revenues, backlog and margins while utilizing strong operating cash flow to invest in M&A opportunities to expand our footprint in geographical white spaces. Our Delivering Excellence, Driving Growth strategy is creating value for shareholders. Turning to Slide 4. Revenue in our Engineering Services regions business increased 8% year-over-year. But if we exclude David Evans, revenues and positive FX impacts, organic revenue was basically flat. Segment adjusted EBITDA over net revenue margin was 17% for the third quarter, up 30 basis points versus the prior year period as operating margin improvement initiatives are bearing fruit. specifically through optimized cost, enhanced bidding discipline, artificial intelligence and continued leveraging of digital tools for more efficient project delivery. Notably, we continue to increase our backlog, which now stands at a new record high of $13 billion, representing an 8% increase versus our backlog as at September 30, 2024. Beginning on Slide 5, we provide an overview of each of our 4 regions and their performance this quarter. In Canada, revenue organically grew 1%, while segment adjusted EBITDA grew $36 million with a 17% margin, 180 basis points increase, highlighting our continued efforts on our margin improvement plan. Backlog grew 5% year-over-year and now stands at $7.8 billion. Given market dynamics, we are focusing on growing our presence in the buildings and places, transportation, industrials, power renewables and defense end markets as we believe these areas offer good opportunities in the near future. We saw growth this quarter in Transportation and Power and Renewables, while softness in the Industrial end markets remain. Separately, recent NATO commitments by the Canadian government are likely to yield further opportunities for our defense expertise. And looking out, the opportunities that will come from Building Canada Act are set to have a positive impact on AtkinsRéalis. The government's focus on accelerating domestic funding for large-scale projects is exciting and due to our well-established foothold in the market and our historical success across the entire infrastructure life cycle, we remain bullish about the near-term opportunities that may present themselves from this bill. In U.K. and Ireland, revenue grew 10% and organically grew 5% year-over-year, primarily driven by strong demand in aviation, water and defense. Segment adjusted EBITDA grew $102 million in the quarter, representing an 18.6% EBITDA margin as the business continues to improve the efficiency of project delivery. Our concentration and flexibility in the region enable us to consistently position our people in areas with the highest demand, which helps underpin strong operating margin delivery. Backlog grew 15% year-on-year to approximately $1.9 billion, driven mainly by wins in the defense and transportation markets. Our expertise in water is creating significant opportunities with the AMP8 investment program as evidenced by our recent win with the Anglian Water Services, representing a more than $1.5 billion opportunity over the next 15 years. As mentioned on prior calls, there have been several commitments by the U.K. government to increase funding for defense and infrastructure spending over the next decade. Demand in power and renewables is rising with early-stage activity in grid investments, while the established long-term U.K. industrial investment strategy will yield enhanced opportunities in the industrial end market. We have a strong and growing presence in U.K. and Ireland, and we are focusing our efforts on enhancing our capabilities across the transportation, defense, buildings and places, water, power and renewables and industrial end markets as they present the most opportunity over the next several years. Turning to Slide 7. Our U.S. Land and Expand strategy continues to make strides, and we recently announced the acquisition of C2AE, which strengthens our presence in the Upper Midwest and expands capabilities in key growth end markets such as water. During the third quarter, revenue increased 36%. However, excluding David Evans acquisition and favorable FX impacts, organic revenue was flat year-over-year as softness within our global Minerals & Metals sector weighed on the results. If we exclude that, our global -- if we exclude our global Minerals & Metals business, our underlying engineering services business in the U.S. organically grew about 4%. We experienced slower framework agreement conversion to projects and procurement disruptions which were primary growth detractors in the quarter. But that being said, we believe these headwinds are temporary, and we remain confident in the near-term and long-term growth opportunities in the U.S. for our services. Segment adjusted EBITDA was $66 million, which translates to a 15.8% operating margin, an improvement of 30 basis points on the previous year. Margin improvement was driven by sustained project execution and overhead control. The backlog increased 11% year-over-year to nearly $1.8 billion as we continue to prioritize client engagement and leverage our unique end-to-end capabilities. We continue to build our backlog in the U.S., particularly with the departments of transportation. We have continued to deepen our collaboration with David Evans team to win incremental new work, which the pipeline of opportunities continues to increase. Financially and operationally, the business is performing in line or ahead of our expectations. While we are not directly affected by the recent U.S. government shutdown, federal funding to states has slowed, impacting some of our client at state level. As a result, we're experiencing some delays in receiving contract awards and commencing projects. In the meantime, our pipeline is growing, and we are actively investing organically and inorganically to expand our position in the marketplace. And regardless of the macro dynamics, our conviction in the long-term growth of our USLA business in end markets remain strong. We are strategically positioning ourselves to win new business in the Transportation, Buildings & Places, Industrials, Minerals & Metals and Water end markets given the new opportunities we see. In EMEA, revenue declined 9%, while segment adjusted EBITDA declined to $34 million, representing a 16% EBITDA margin over net revenue. Revenue declined primarily due to lower volumes on large-scale Building & Places projects in the Middle East, where our involvement has reduced compared to this time last year. The total backlog in EMEA was approximately $1.5 billion, up 15% versus the third quarter of 2024, mainly driven by new bookings in the Buildings & Places and Industrials end market. In the Middle East, while opportunities still present themselves in Buildings & Places, we're seeing increased demand for our services in large-scale transportation projects, such as our focus is on transportation projects in the near term, but we will continue to closely monitor substantial building opportunities, such as preparing for the 2034 World Cup in Saudi Arabia. In Asia, we're seeing sustained investments in infrastructure and transportation, mainly fueled by Hong Kong's Northern Metropolis. In Australia, we are focused on expanding our presence through opportunities that leverage our global expertise in transportation, power and defense. I'd like to now move to Slide 9 and discuss our third quarter results for our nuclear business. The business continues to demonstrate exceptional growth, achieving organic revenue increase of 60% compared to the third quarter of 2024. Our Nuclear backlog totaled $5.4 billion, 68% higher than our backlog as at September 30, 2024. Segment adjusted EBIT grew 44% to $66 million and segment adjusted EBIT margin was approximately 11%. Segment adjusted EBITDA grew 40% year-over-year, and the margin now stands at 26%, almost 300 basis points higher than this time last year. On Slide 10, we highlight the achievements across our nuclear CANDU and services portfolios. In our CANDU business, we have several projects ramping up that give us excitement about the near-term revenues. We renewed a 10-year master service agreement with Bruce Power. We are continuing to work on C3, C4 at Cernavoda in Romania, and we're making excellent progress on the Pickering life extension. Our optimism in the continued advancement of CANDU projects is further underpinned by the recent issuance of more than $2 billion in purchase orders by AtkinsRéalis to over 548 companies in the CANDU supply chain during the last 18 months, with 90% of these orders to Canadian suppliers. CANDU is a world-class homegrown nuclear technology, fueling high-paying jobs and economic growth for Canadian workers and businesses. We are in ongoing discussions with several countries across the globe regarding potential new builds. While they are taking place, we remain focused on the development of the CANDU Monark. For services, we continue to offer new build support at Hinkley Point C and Sizewell C. Also in the U.K., we're driving growth in the region through our decommissioning waste management services at Sellafield, for which we've just recently renewed our framework agreement. Lastly, we extended our global strategic partnership with robotic developer, Kinova, for 3 years. Our collaboration is showcasing cutting-edge robotic innovation to perform high-performance remote operations at nuclear facilities. This technology will enable cost-effective operations at reactors and more importantly, enhance the safety of this work. 2025 has been an exceptional year for our Nuclear business. The revised revenue guidance for the year I mentioned earlier, exceeds our original estimate at the beginning of the year by more than 30%, further highlighting the opportunities in front of us to generate real revenue today across the Nuclear sector. Turning to Slide 11. You can see our pictorial reminder of these near-term CANDU revenue opportunities within our nuclear business. The potential CANDU contracts you see on this slide showcase a massive opportunity for AtkinsRéalis and could deliver significant growth for the foreseeable future. Our $5.4 billion nuclear backlog achievement is just the start as customers are continuing to recognize our nuclear expertise. We've been working hard to bolster our backlog with high-quality wins. Total backlog does not include follow-on phases for our recent wins and a very small amount of CANDU new builds. We cannot overstate the massive opportunity in front of AtkinsRéalis in the Nuclear sector. Now moving to Slide 12 and our Linxon LSTK projects and capital businesses. In our Linxon segment, revenue organically grew 15% year-over-year. Linxon realized 230 basis points of EBIT margin expansion year-over-year as operational improvements continue to positively flow through the business. Backlog increased 50% to a record $2.4 billion at the end of the quarter. We are seeing backlog improvement across the Americas, Europe and Middle East. On LSTK Projects segment adjusted EBIT was in line with expectations. And with that, I'll now turn it over to Jeff to discuss our financial results and our 2025 outlook. Jeffrey Bell: Thank you, Ian, and good morning, everyone. Turning to Slide 14. Total IFRS revenues increased 15% year-over-year, totaling $2.8 billion, which included revenue increases of 8% in Engineering Services, 62% in Nuclear and 19% in Linxon. Total segment adjusted EBIT for the quarter increased 9% to $269 million as the decrease in Capital segment adjusted EBIT was more than offset by a $41 million increase in AtkinsRéalis Services. Corporate SG&A expenses from PS&PM totaled $26 million in the quarter, in line with the previous year. We continue to anticipate these expenses should be between $120 million and $130 million for the full year 2025. Note that following the sale of our interest in the Highway 407 ETR, corporate SG&A expenses from capital decreased to $1.5 million this quarter and are expected to remain at this level. Net financial expenses for the quarter were $22 million compared to $41 million in Q3 2024, mainly due to the repayment of all outstanding borrowings under the La Caisse loan and the company's term loan in the second quarter. We believe Q4 will be a similar amount. The income tax expense was lower than Q3 2024, mainly due to revised estimates on certain tax liabilities and geographic mix. The tax rate for adjusted PS&PM net income was approximately 16% in the quarter and 17% year-to-date. And therefore, we now expect the tax rate for the full year 2025 on our adjusted PS&PM net income to be approximately 20%. The IFRS diluted EPS this quarter increased by 49% to $0.88 compared to $0.59 in Q3 2024, while the adjusted EPS from PS&PM increased 68% to $1.06 per diluted share compared to $0.63 in the third quarter last year. And as Ian mentioned, our backlog ended the quarter at a record high of $21 billion, 23% higher than at the end of September 2024, with strong increases across all our businesses, Engineering Services, Nuclear and Linxon. Let's now move on to Slide 15 and free cash flow. Net cash generated from operating activities totaled $123 million for the quarter. This was mainly driven by a stronger AtkinsRéalis Services EBITDA delivery, partially offset by the timing of working capital usage and an LSTK project's cash usage. We continue to expect operating cash flow to be in excess of $300 million for the full year 2025. After CapEx of $45 million, which included $15 million for the development of MONARK and the payment of lease liabilities of $22 million, our free cash flow stood at $56 million for the quarter. I'd like to now turn to my final slide, Slide 16. As you've heard Ian say on Nuclear, the demand for our services continues to grow, and our backlog is at a new record high. Therefore, we are again increasing our Nuclear revenue outlook to between $2.2 billion and $2.3 billion for the full year 2025 from the previous range of $2 billion and $2.1 billion that we outlined last quarter. On the other hand, we are decreasing the Engineering Services region's 2025 organic revenue growth outlook over 2024 to a low single-digit percentage from the previous range of mid-single-digit percentage, reflecting lower-than-expected revenue growth in the USA and EMEA segments. Note that we continue to expect David Evans revenues, which is excluded from this organic revenue growth to be around $300 million for 2025. We remain confident in our medium-term target of 8% plus revenue growth for Engineering Services as outlined in our Delivering Excellence, Driving Growth strategy and see the lower growth rate in 2025 as temporary in nature. All other financial outlook metrics for full year 2025 are maintained. And with that, I'll now hand the presentation back to Ian. Ian Edwards: Yes. Thank you, Jeff. We're extremely proud of our success in the third quarter, achieving several record results on the top line and on the margin front across our Engineering Services and Nuclear businesses. The combination of these 2 businesses provides us with a unique competitive mix. Also, the improvement on margin stems from the operational plan we put in place at our June [indiscernible] real tangible results. No matter the geopolitical tension that may exist or arise in the future, global energy transition and infrastructure redevelopment are fueling growth in our markets, where we have built a strong foundation or are landing and expanding. Our balance sheet and appetite for growth puts us in a distinct position to capitalize on M&A opportunities that may arise in this current macroeconomic landscape. Our team is working tirelessly to continue executing our delivering excellence and driving growth strategy. And I want to thank our 40,000 employees for their hard work and dedication. We are proud of our performance to date in 2025 and are actively positioning the company to capture real revenue across our engineering services business in '26 and beyond. So with that, let's open it up for questions. Operator: [Operator Instructions] Our first question comes from Chris Murray with ATB Capital Markets. Chris Murray: Maybe starting with the organic growth profile. So a couple of questions around this. One, you talked about it slowing a little bit in Q3. And I'm just wondering a couple of things. So one, as we go into Q4, you called out a couple of different spaces. But just kind of curious to see, are you seeing in Q4 an extension of the same trends? Or is there something different? Just wondering maybe if there's anything around the U.S. government shutdown that's maybe slowing things and leading to your view? And then more importantly, I think you described this as sort of a temporary slowdown. Can you maybe give us some more color on why you have the confidence that as we enter 2026 that you think it should maybe revert back to what we've talked about kind of those historic mid-single-digit levels for the Engineering Services business? Ian Edwards: Yes, for sure. And this is presumably the questions relate to Engineering Services, right? Chris Murray: It does, yes, please. Ian Edwards: Yes. So look, I mean, obviously, through the kind of journey of 2025, we've had some challenges to overcome. But they are specific challenges. They're not underlying issues that are going to take us through into the future. And those specific regions, as we've said in previous quarters, we've had some pretty hard year-over-year comps because of really 3 large projects in our Canada region, in our Middle East region and in our Mining and Metals. But we've worked our way through that. So those are behind us now. And then there's clearly been some kind of disruption to the U.S. market, which I'll come back with. So the quarter, we've actually seen a continuation in Q3 of disruptions in the U.S. And as we think about those disruptions going forward, which have really been about states sitting on project releases and sitting on project awards. It's the volatility connected to tariffs that shut down The Big Beautiful Bill. But what we're seeing now is that actually being overcome. And we're seeing definitely in Q4, a return to wins, a return to orders coming through. And you got to remember that the fundamentals in the U.S. that drive our markets in energy and in replacement of infrastructure resilience work are all really good. And also, we've got to remember the IIJA is only actually about 40% expended so far. So -- and that bill has still got support. So that's specifically in the USLA region. And in EMEA, we've actually kind of started reprioritizing the way we look at EMEA because we were heavily dependent on some very big jobs in KSA in Saudi Arabia. And one of those jobs, we've closed out Phase 1, and we're seeing a lot more diversified opportunity, both in the UAE and both in transportation. So we're pretty confident going forward in that region as well. So looking at our backlog and particularly looking at the backlog, I won't counter through each region because I'm sure there'll be another kind of question on that. But if you look at our backlog, it's 8% up. That's a leading indicator for me. And as we look at performance in Q4, we're getting back to growth. And obviously, our revised guidance isn't 0, but we are -- we will end with positive growth. And that will take quite a bounce back in Q4 to get there, which we're confident we're going to do. And then moving into '26, obviously, we're looking at development of pipeline and our kind of preparation for the Q4 outlook already. And we're seeing pretty good growth, and we're fairly confident going forward that we're going to return to some good growth numbers. So it's a few specific challenges this year, but very confident going forward that we're going to return to growth in ES. Chris Murray: All right. That's helpful. And then maybe turning to nuclear. A couple of pieces of this question. So first of all, I wonder if you can maybe add your take. There's been a lot of discussion around nuclear services more broadly, particularly in the U.S. with some of the SMRs. But you've also got, I think, lots of opportunity even with the CANDU technology and other things that you've been able to work on. Can you maybe walk through maybe high level, your thoughts around the nuclear industry and penetration of nuclear and how you think Atkins maybe fits into this whole ecosystem from the perspective of either supporting some of these newer proponents with smaller technologies or having the Monark able to address different segments of the market. So just thoughts about like how we should think about where Atkins can go in the Nuclear business over and above where it is today would be helpful. So I'll leave it there. Ian Edwards: All right. This is probably going to be a fairly long answer, but that's fine. It's a good start. Look, I mean, we're in a super cycle. The two world conferences were in Q3 in Nuclear. Where one in London called the Symposium and one in Paris called the Exhibition. And what's really clear to me, having attended and spoke at those conferences is AtkinsRéalis and the CANDU technology operates on the world stage as a leader. And I think that's the first thing I would say. And when we look at our business, as I've said before, we're not just a nuclear OEM of CANDU. We are a full-service nuclear business in addition to being an OEM in CANDU. And this puts us at a very differentiated place in the nuclear market. And I'll call out a couple of our differentiators because these are really important. And I'm not sure that they're fully understood by everybody. The first thing is that capacity for nuclear companies is going to be everything. There's clearly a strong demand. All countries that signed up to the tripling are looking for new nuclear. Hyperscalers are looking for nuclear -- it's very, very real. We have got 40,000 professional people in our company, 6,000 to 7,000 of those are nuclear professionals because we build capacity through the life extension program here in Canada. That's not unique because the French and the Chinese clearly have a big nuclear program, too, but it puts us up there at the top with capacity. We have a supply chain in Canada. There's got 90,000 people in it doing manufacturing and actually professional skilled labor in the nuclear industry. That, again, it's not unique, but it's up there with some of the best countries in the world that can deploy nuclear technology. We have a world-class technology in CANDU. And it's differentiated because it uses natural uranium, which gives countries energy security because an abundance of natural uranium. There is not an abundance of processed uranium. In fact, there's a shortage. And we can produce medical isotopes, which countries and customers are very interested in. And Canada has a unique advantage in the way that it operates with countries around the world because where we've built CANDU in India, Korea, China, Romania, Argentina, we've left behind decades of relationships between Canada and those countries and decades of relationships between AtkinsRéalis and the utilities, which is well renowned and it's recognized by new countries that are coming into the technology. So I guess the last point, I would say, I mean -- and just to remind everybody on Slide 11, this growth that we're experiencing right now is no new build in it. And we're all over the map now trying to sell the CANDU technology. And we're getting very good traction. Clearly, there's nothing to announce, but in the coming years, there will be. And our services business is a full services business that supports SMRs in U.K., in U.S. and here in Canada. We have a business in services, which supports EDF, Hinkley and Sizewell with hundreds and hundreds of engineers deployed on those jobs. We do processing of waste and we're even in infusion. So all in all, what I'm trying to explain here is we've got a really differentiated business here. And I'm glad you asked the question at the beginning. I know that was a long answer, but that is what is the reality of where we're at. Operator: Our next question. Our next question comes from Krista Friesen with CIBC. Krista Friesen: Maybe just going back to the first question and looking at EMEA. Can you provide a little bit more color just on the margins in that segment and how you're expecting those to trend over the next year and maybe what you've put in place to kind of help those margins? Ian Edwards: Yes. So let me do the market and how we're repositioning the business. And Jeff will comment on the margin front and how we see that kind of in our margin expansion program. So I mean, basically, our EMEA business historically has been heavily focused on Saudi Arabia. Now Saudi Arabia itself has done some reprioritization of spend and of projects they're going to focus on. They want to focus on Riyadh. They're focusing on the World Cup '34 and Expo '30. So it's not that the place has gone flat from a market potential. It's actually just reprioritized. And we're really well positioned. But we have finished out a huge project that has given us the kind of decline in that KSA business this year. Now the UAE is also really interesting because they are actually seeing themselves compete with Saudi Arabia, and they're putting investment back into the UAE, both in buildings and places, but interestingly in transportation. And we're bidding numerous kind of rail jobs there right now. And obviously, we've got that global capability. So it's easy for us to be agile and kind of exploit those opportunities as the market kind of pivots and the opportunities change. But as far as the EMEA region is concerned and its growth plan in the future, we're really opening up Australia and the Asia region. And Australia is really important to us in terms of our energy capability and our defense capability, where a lot of the funds are going now from government, where historically it was all about transportation. So we feel we've got a really good opportunity there. And then in Asia, Hong Kong, we've always had a good business. They are developing a new city on the border with China called the Northern Metropolis, and we're winning work there now. So we're pretty optimistic about the region of EMEA -- but obviously, we've had a bit of a reprioritization and challenges to work through this year. So we're pretty confident going forward. And Jeff, maybe you could just talk to the kind of margin expansion. Jeffrey Bell: Yes. So I think what we'll see, and as Ian has said, we're transitioning the business, particularly in the Middle East. There have been some very large, very profitable projects there. And so as we head into next year, we'll have to see the business transition away from those. So we may see a bit of headwind margin-wise in the Middle East. But as Ian said, as we grow other parts of the EMEA region in Australia, in Asia, those are good margin geographies. And as they start to take a larger proportion of that region, that will help underpin margin delivery in EMEA there. So over the longer term, we don't see any reason why EMEA wouldn't be part of our 17% to 18% target in the long term. Krista Friesen: Okay. That's great color. And then maybe just -- just one last one for me, maybe a higher level one on nuclear. Obviously, you've increased your guidance significantly throughout the year, I think roughly 36% from what you started with. Has the mix evolved as you have expected it to evolve for your nuclear business? And does it change how you think about the margins at all over the medium term? Ian Edwards: Yes, that's a very good question. I mean I think as the year has evolved, what we've been awarded in terms of life extension and services businesses is not different from what we expected, but it has come sooner. And even the progress on the Pickering life extension, we're getting better progress than we thought. And also at the beginning of these life extension projects or any kind of nuclear power project, there's a lot of procurement you've got to put in place for long lead items where the margins on that work are not as good as the actual engineering and execution work that we do ourselves. So I think that's probably where we've evolved through the year, and you're seeing that in our results. But that's good news. I mean things are happening quicker than we thought they would happen. Operator: Our next question comes from Yuri Lynk with Canaccord Genuity. Yuri Lynk: Maybe one for Jeff. It looks like to get to the midpoint of your Engineering Services region's EBITDA margin guidance for the year, 16%, 17%, it's going to require 80-ish basis point step-up in margin in the fourth quarter, which is not the typical seasonal pattern that we've seen in the past. So just wondering if there's anything unique in play in the fourth quarter that would drive the margin sequentially higher? Jeffrey Bell: Yes. Thanks. As you say, I'll take that, Yuri. So we do typically see stronger margins in the second half of the year than the first half of the year. You saw that in Q3. And we are -- we remain very confident in delivering that 16% to 17% for the full year. And as you say, that does mean strong fourth quarter operating margins. But with all the work we've done on our initiatives through the year and that you've seen coming through in Q3, we see an absolute continuation of that in the fourth quarter. And that's everything from continued better and more sophisticated pricing with our clients. It's better productivity and utilization. It's higher utilization of our global technology center in India and the continued work on our overhead cost base. So the work that we've delivered through the year and in the third quarter, we see that absolutely continuing in the fourth quarter and remain very confident in delivering that uplift in Q4. Yuri Lynk: Okay. Second one is just on the U.S. region within Engineering Services, USLA. Can you talk about -- a little bit about when you've done your portfolio reviews, including Linxon and Capital and stuff like that, why the mining business, the mining and minerals business never didn't come up in those -- I'm sure they did, but you decided to keep it. And I guess, why keep that business? Is it scaled properly to compete with the bigger mining-focused engineering houses? And is having it in the U.S. segment appropriate, I guess? Ian Edwards: Yes. All our businesses, we review regularly. I mean we review the whole mix of portfolio to make sure that the long-term strategy of the company has got the right portfolio of businesses going forward. And absolutely, the Minerals and Metals business, we've reviewed a couple of times, and we will continue to do that to make sure that it can get to the profitability and the growth that makes it meaningful and at scale. It was a business that we had to repurposed from an EPC business a long time ago into a pure-play services business. And that's taken time, frankly. But I think we're getting some good traction now, and I think we're getting some better profitability. We are winning some work. In actual fact, we've been picking work up recently in the sector. Whether it belongs in USA, it's just a question of putting it with one of the presidents. And it is a global business because the business has to be client focused. There are a handful of large mining operators around the world. So you can't really regionalize the business. It's got to be a global business that follows clients basically. So -- we're happy with it right now. It's in the business right now. We do see this need around the world for critical minerals. We don't really do coal. We do the specialized critical mineral kind of mining projects supporting customers. And we're happy with it where it is right now. Operator: Our next question comes from Sabahat Khan with RBC Capital Markets. Sabahat Khan: Just, I guess, looking ahead to '26 a little bit just on the broader setup. You obviously indicated that the IIJA, a good chunk of it hasn't been spent and/or even allocated. Can you maybe just talk about the outlook for rest of that larger infrastructure bill to be rolled out and sort of your early thoughts on that region on a potential new infrastructure bill at some point? Just trying to gauge the demand drivers for the U.S. market for next year. Ian Edwards: Yes, yes. So look, there's a couple of things that are specific to ourselves, which I'll probably say at the beginning. Our business has got 6,500 people in it. Some of our peers have got over 20,000 people in their businesses. So the way I think about our strategy in the U.S. is that we've got a long way to go and a long runway to go. Our ambition in the near term once 2 years is to get the business in the top 10, which would require us to have 10,000 people or more. And obviously, beyond that, in the longer term, we want to be in the top 5. We want to be a serious player in the U.S. The fundamentals of the U.S. market are really, really strong. The need for energy security, they've got an aging infrastructure problem in the U.S. with actually a $3.7 trillion gap in infrastructure investment, which ultimately will play through to a deterioration of roads, water, rail infrastructure, which they will have to spend on to bring it back to operable state. resilience work in the U.S. for flooding, flood defense and hurricanes, unfortunately, present an opportunity, obviously, at the expense of disasters, which is not great, but it's an opportunity for us. So the IIJA is 40% allocated and spend. That will continue to fund states. For ourselves, I don't think The One Big Beautiful Bill will have a specific impact on us. I mean I think it will have an impact on industrials perhaps and maybe the energy sector, which will have less impact for us, I think. But we're really confident in our strategy, and we will continue to invest in M&A, and we'll continue to land and expand across the states. As I said before, the issues, we really do see them as temporary, and we are actually seeing an increase of flow-through now, particularly as we're getting into the fourth quarter, and we're picking up work. So all in all, it's probably been a bit of a disruptive time this last year, but I think we're going to get back to some good growth opportunities. Sabahat Khan: Great. And then just on the sort of the last comment around M&A, just given where the balance sheet is, you were active on the buyback this year. How do you think about potentially reactivating that buyback just given the number of M&A opportunities out there? Just how are you going to balance the two at this point in cycle? Jeffrey Bell: Yes. It's Jeff. Why don't I take that? I think as we've said earlier and to what you've referenced, we have taken advantage of that share buyback significantly over the course of the year. And as we said in the last quarter, our focus really from a capital allocation perspective is around growing and investing in the business, primarily through M&A and inorganic activity. And as Ian has said, we see real opportunity to continue to land and expand in the U.S. We see opportunity in other geographies or areas of capability where we have white space. And the pipeline of opportunities is really strong. We're seeing lots of good potential organizations that we're in discussions with, we're in processes with. And therefore, we're very confident in our ability to continue to deploy capital in a value-creating way and a strongly value-creating way like that going forward. So that will continue to be our area of focus. Operator: Our next question comes from Benoit Porier with Desjardins. Benoit Poirier: Just on the nuclear, it seems like your main Canadian nuclear reactor competitor has signed an MOU agreement with 4 potential large-scale Alberta nuclear project you were previously involved in. So can you give us an update on the current competitive dynamics in the Canadian nuclear market? Ian Edwards: I actually thought that announcement that came out was American. But -- so I understand exactly what you mean. You're talking about our competitors' announcement to partner with the U.S. government to deploy reactors in the U.S. And I think this is a good thing. I mean I think it just shows the momentum in the nuclear industry. I mean, clearly, the U.S. government is highly committed to new nuclear. There are executive orders that are signed. And I think that partnership is a really smart partnership for the deployment of new nuclear in the U.S. And as I've said in the past, I mean, capacity is everything and initiatives like that to enable capacity to be built and meet the demands of the new nuclear market is very good. But for ourselves, we are Canadian. Our business is Canadian supply chain, Canadian jobs. and the technology is Canadian. It's actually owned by the Canadian government, but we have the sole rights to deploy it. And all the reactors in Canada right now are Canadian and CANDU. So the way that I would see this from a competitive perspective in Canada is I would hope that our utilities and our provinces here in Canada choose a technology, which is Canadian, which will supply jobs to Canadians because no other technology will do that. The jobs will go down south with the company that you're referring to for manufacturing and for engineering. So from a competitive edge, we kind of hope that sense will prevail and we'll support our own technology here in Canada, if that's at the heart of the question. Benoit Poirier: Yes. Okay. That's great color, Jeff. And obviously, you have ongoing discussion with several countries on new builds with CANDU. There's a big potential, obviously. I'm just wondering if the -- is it dependent on your ability to secure first the MONARK in Canada? Or any color about the potential timing for new builds, what we should expect in terms of timing for announcing new builds? Ian Edwards: Yes. So outside of Canada, I mean, obviously, we're working hard in Canada. We are in competition. I mean that's a fact. But we're working hard in Canada for deployment of the MONARK. Outside of Canada, we're seeing numerous opportunities in Eastern Europe and potentially Asia. Actually, the technology that is wanted is actually our EC6 existing technology, which is a 700-megawatt reactor. And the grids in the countries that we're discussing are more suited to a small reactor, which is a different situation than it is in Canada. And the other advantage of the EC6 is deployable now. It's existing technology. It's the technology that we're delivering in Romania for the 2 new builds in Romania. So I mean, there's nothing to announce today. We're working very hard. We've got very detailed technical and commercial meetings ongoing with several countries. The first stage of anything would be an MOU announcement, and then there would be a development through to what we would call a feed contract or an initial contract, which, again, it would probably be certainly back end of next year, if that was to happen, but we're working hard on these things. And there are numerous opportunities to be clear, for the EC6 out there. Operator: Our next question comes from Michael Tupholme with TD Cowen. Michael Tupholme: Ian, you spoke earlier in the call on several occasions about your capabilities in the defense arena and some of the opportunities you see there. I'm wondering if you can add on to that and speak in a little bit more detail about exactly where you see AtkinsRéalis as having strong capabilities in defense. And to what extent you think we could see defense be a growth area that really contributes in 2026 and beyond? Ian Edwards: Yes. Yes. No, for sure. I mean our current real strength in defense is in the U.K. And where we play is in the facilities to operate, maintain and house assets. So assets being aircraft, submarines, ships, even people, barracks and the like. And what we've experienced in the U.K. over the last few years is a fairly significant upgrade of existing dockyards, existing air fields to take on the new evolution of assets. A good example of that and how we will move from the U.K. to other countries would be the AUKUS submarine program, where we are the engineer of physical infrastructure assets to support that program in the U.K. And having got that experience, we are in a very good place, I think, in Australia, where the AUKUS submarine is being deployed also. And they're going through a big program to build ports actually to support ours and maintain their first nuclear submarine in Australia. And the same in Canada. I mean, new aircraft in Canada, new ships in Canada, new potential submarines in Canada, all of the physical infrastructure will need upgrading to be able to operate and maintain those assets. And probably the fact that really isn't well known is that when you buy a bunch of assets in the capital -- sorry, in the overall cost of deploying those assets, well over half of it is in the physical infrastructure and the operations and OpEx to operate that over its life. So there is quite an investment that goes into the kind of non-equipment asset when defense programs are being put through. So clearly, with the U.K., Australia and Canada having increased commitments, those are the countries that we see the best opportunity for ourselves. Michael Tupholme: Okay. That's perfect. And then as a follow-up, you had a number of questions earlier about the organic growth in the ESR segment. Wondering if you can talk a little bit about David Evans. I know at the moment, it's contributing to acquisition growth. But within its underlying operations, what have you seen in the third quarter in terms of its own underlying organic growth? Ian Edwards: Yes. I mean, good growth. They continue to perform in line with our expectations. the integration piece and the cooperation between our U.S. business and David Evans is going well. And probably going forward, the most important thing is that we've developed a pipeline of opportunities that actually David Evans wouldn't have been able to bid them because of scale, and we wouldn't have been able to bid them because of a lack of local connectivity and presence and people. So that pipeline now goes well into 2026 and it's being executed together. So we're actually putting teams on those bids. -- which are joint teams at this stage. And we would hope to start winning work, which is beyond kind of the ability that David Evans would have had on their own. And those revenue synergies were part of the whole thesis of buying David Evans in the first place. Operator: Our next question comes from Jonathan Goldman with Scotiabank. Jonathan Goldman: You revised the organic growth guidance in Engineering Services to low single digit. That does seem to imply a pretty significant growth in Q4, double-digit growth. I know part of that is just an easy comp last year. But what visibility do you have as we sit here today on getting to that sort of level of growth in Q4? Jeffrey Bell: Yes, Jeff, why don't I take that? We have really good visibility, Jonathan. And you are right. We are lapping a less strong quarter in the previous year. So that clearly underpins some of that growth increase quarter-over-quarter that we'd expect in Q4. But as you heard from Ian earlier, we are finished off some of the projects that were creating some of that headwind. But we are seeing real increase in activity in the markets that we're in. We're seeing higher levels of backlog. We are seeing contracts and framework agreements that we've now won -- that we have won that had some delay is particularly true in the U.S., now actually turning into revenue. So now that we're the better part of 6 weeks halfway through the quarter, we are definitely seeing an uptick in contracts into revenue, higher utilization and productivity. And so we, therefore, are very confident in that return to that underpins our overall full year guidance of growth. Jonathan Goldman: Okay. That's helpful. And maybe, I guess, talking about the backlog, Engineering services kind of flat quarter-on-quarter. Is some of that maybe timing related and kind of near the cadence that you're seeing on the top line organic growth guide, but on the backlog side as well? Jeffrey Bell: Yes, a bit of that. But I think it's fine we've seen this over the last 2 or 3 quarters, just this lengthening of clients taking pieces of work that we've won and just taking disproportionately longer to turn that into actual purchase orders or statements of work that we execute against. Now we're seeing that starting to flow a lot more like we had seen previously. Jonathan Goldman: Okay. That's really helpful. Makes a lot of sense. And I guess maybe a higher level one for you, Ian. The 40% of IIJA money that's only been spent so far does seem to set up well for the next few years. But is there a risk that the balance of the money does not get deployed given all the uncertainty in the market and kind of things that are happening with the U.S. administration? Ian Edwards: Well, there's always a risk. But what we're hearing and what we understand is that the bill has got support and that the bill is necessary to try and fill this infrastructure investment gap that is across the country. Operator: Our next question comes from Devin Dodge with BMO Capital Markets. Devin Dodge: I was going to ask a question on Nuclear. So the 2027 revenue target, $2.2 billion, $2.5 billion, and you're in the low end of that range in 2025. So I'm just wondering if we should be expecting revenue growth to be, we'll say, relatively more muted in '26 and '27 off of a pretty high pace in 2025? Or should we be assuming there's some conservatism still baked into the 2027 target? Ian Edwards: So obviously, we've seen phenomenal growth year-over-year, '24, '25. And we will continue to grow revenues even with the backlog we already have. And on Slide 11, you can see that sort of visibility of the follow-on phases that will fuel our revenues and backlog into -- through to 2027. But we're not going to see the kind of growth that we've seen year-over-year '24 to '25 because we're obviously comparing next year against very good growth in '25. You will see growth, but it will be very different than you've seen this year. I mean -- and also, I would say that repeat what I said before that on the Slide 11, the backlog and the near-term revenues are really about the new build that and about the life extension projects. If and when we start winning further new builds, the revenues at the beginning will be quite low because the engineering phase and the feasibility phase of these projects are not going to bring significant revenues until towards the end of this decade, where they really will bring significant revenues. So the way we see it is we've got great growth potential for the medium term in this business through into the next decade, but it's not going to be what you've seen recently. Devin Dodge: Yes. I mean, fair enough. I mean -- but do you see maybe a mix shift more towards, we'll say, services versus procurement as you think about '26 and '27. Ian Edwards: Well, I see both actually. I mean the CANDU technology, obviously, as I said, we're in discussions in Canada, we're in discussions around the world for new builds. But the services business, which supports other technologies and decommissioning and waste management and even fusion programs is also winning work. And so the whole industry is really going through this super cycle, and we're seeing good opportunities all around. And our U.S. business is relatively small right now, but with a very strong commitment in the U.S., we're taking the CANDU technology through the licensing process to ensure that we are able, if utilities and clients want the Canadian CANDU technology in the U.S., we're able to deploy it there as well. So I think it's the whole industry is pretty buoyant. Devin Dodge: Okay. Fair enough. And then switching over to maybe Engineering Services. Obviously, it seems like a pretty active M&A market there. What do you see as the drivers for sellers coming to the market now? And what's your pitch to them to select Atkins to be the buyer of choice? Ian Edwards: Yes. I mean at the scale of deals that we're doing at the moment, I think owners of privately owned companies at the 1,000-ish size, they get to a point where they've got to do something different to continue to grow, either get investment from private equity or join a strategic such as ourselves. And I think the advantage, particularly in the U.S. for ourselves is that we've got a lot of white space geographically. So they're not going to get absorbed into a machine that gives them no unity and gives them no kind of identification of what they have become and what they are. So for our strategy, it's a matter of stitching together geographic targets to give us a complete picture across the U.S. And something like David Evans, there was high competition for that acquisition, but we managed to work together to ensure that what they wanted for their future and what we wanted for our future became aligned. Now it doesn't always work. I mean -- but the good news in the U.S. is there's numerous targets that are in that situation like numerous and that are continually coming on to the market. And then, of course, you've got the recycled assets from private equity that come on to the market at the end of that investment cycle. So it's a very buoyant and quite exciting market for us at the moment, but that's our strategy. Devin Dodge: Okay. Good color. And then maybe just one quick clarification, and apologies if I missed it, but are you still expecting to reach the targeted 1 to 2 turns for net debt to EBITDA by the end of 2026? Jeffrey Bell: Yes. We didn't comment on it, but I would say our comments remain the same that we laid out at Q2 and that I commented to then is that largely, we expect to be -- to deploy capital in line with the capital allocation framework we laid out such that by the end of 2026, we at least be at the -- around the bottom end of the range of our 1 to 2x leverage. Operator: I'm not showing any further questions at this time. I'd like to turn the call back to Denis Jasmin for any further remarks. Denis Jasmin: Thank you very much, everybody, for joining us today. If you have further questions, please do not hesitate to contact me. Thank you very much, very. Bye-bye. Operator: Ladies and gentlemen, this does conclude today's presentation. You may now disconnect, and have a wonderful day.
Per Plotnikof: Hello, and welcome to this presentation of ALK's Q3 results and full year outlook, and thank you all for joining us. Let's turn to Slide #2 with the agenda and speakers. My name is Per Plotnikof. I'm Head of Investor Relations. And with me today are CEO, Peter Halling; and CFO, Claus Steensen Solje. We'll first share a couple of quarterly highlights, followed by a closer look at markets, products and financials. We will detail some of our strategic focus areas before we cover the new full year outlook. As usual, we'll end the presentation with a Q&A session. And to get us started, I'll hand over to Peter and Slide #3. Please go ahead, Peter. Peter Halling: Thank you, Per, and thank you all for joining this call. Q3 was characterized by a strong focus on execution of our key strategic initiatives. The pediatric tablet launches, a new partnership for China and the commercialization of neffy. Market responses to the tablet launches for children are truly encouraging. The rollout of the house dust mite tablet, ACARIZAX for children progressed well and continue to contribute to the inflow of new patients in Q3. Moreover, ACARIZAX is attracting new prescribers, not at least amongst pediatricians, suggesting that the children indications have the potential to expand ALK 's addressable markets. We also saw encouraging early uptake of the tree tablet ITULAZAX children and adolescents. In China, we entered into a partnership with GenSci, a strong local Chinese partner, committed to accelerating the uptake of ALK's house dust mite allergy products. GenSci has already taken over sales and marketing of ALUTARD, our SCIT product and skin prick tests. The partnership is projected to become margin accretive to ALK's midterm, largely driven by cost savings in China, combined with the income from product supply as well as upfront and milestone payments of up to DKK 1.3 billion. A couple of weeks ago, we introduced EURneffy, the adrenaline spray in the U.K., Europe's and ALK's largest anaphylaxis market. Meanwhile, EURneffy is gaining traction in Germany, our first market entry. The product was launched in July. Other market introductions are imminent, while still very early days, market response so far confirms the product's long-term potential despite long-standing clinical practices favoring traditional anaphylaxis products, which we will need to work carefully with. Financial results in Q3 were strong with double-digit growth across sales regions and product groups. Revenue grew by 18% and was higher than expected, while earnings were up 41% in local currencies, yielding an EBIT margin of 28%. Based on the Q3 result and the outlook for Q4, especially in Europe, we have adjusted the full year outlook. Revenue is now expected to grow 13% to 15%, while the EBIT margin is expected to increase to approximately 26%. Now we'll detail all of this later. But first, I'll hand it over to you, Claus, and Slide 4. Claus Solje: Thank you, Peter. So let's take a closer look at our 3 sales regions performance. Our main region, Europe reported 18% growth. The revenue growth was driven by sales of tablets, anaphylaxis products and SLIT drops. Q3 growth was, to a minor extent, positively influenced by some phasing of sales between Q3 and Q4. Tablet sales was up 23% on a broad-based growth across brands and markets. Let me also point out that we did observe that wholesalers carry slightly higher inventories, potentially indicating slightly increasing trading patterns, which is natural in a launch situation like we are in with the children tablets right now. Growth of the tablet business in Europe was, first and foremost, linked to higher volumes, driven by more patients on treatment, whereas prices and rebate adjustments had a much less impact. Volume growth was powered by new patients with the highest contribution coming from our house dust mite, ACARIZAX and the tree pollen ITULAZAX patients. The children indications for ACARIZAX contributed positively across markets, while the recent launch of ITULAZAX now has started to contribute to the patient inflow, especially in the key German market. Combined sales of SCIT, SLIT drops were up 7% in Europe. SLIT drops sales continued to benefit from an expansion of patient and prescriber bases in France. SCIT sales picked up temporarily due to one-off changes to patient supply patterns, but the underlying growth was still hampered by fewer patients starting up on our legacy products. Sales of other products grew by 39% in Europe, led by 44% growth in the anaphylaxis portfolio. Sales of Jext auto-injectors were driven by strong commercial execution, including newly won tenders in Southern European markets as a consequence of recent supply issues at our competitor. Revenue also included a modest contribution from neffy. If we turn to North America, then revenue increased by 20%. The U.S. business continued to bounce back from last year stagnancy, while the Canadian business sustained its growth. Tablet sales in North America grew by 20%. The pediatric indication for ODACTRA continued to drive a higher uptake among allergists and to a minor extent, new pediatric prescribers in the U.S. Growth in Canada was higher, driven by continued demand and volume growth, combined with some destocking at wholesalers. North American sales of SCIT bulk increased by 1%, while sales of other products were up 41% on higher volumes and better pricing of our life science products. Revenue from other products also included, as planned, a modest cost reimbursement from ARS Pharma related to our co-promotion agreement for neffy in the U.S. Revenue in international markets was up 14% due to the increased SCIT shipment to China. We resumed shipments to China in Q2 after the renewal of ALK's import license, and these continued in Q3, so that SCIT revenue in this region increased by 43%. In-market sales in China continued to grow by double digits. Tablet revenue in international markets was down 4% after decreasing shipments to minor markets, while revenue from the primary market, Japan, was unchanged. In-market sales in Japan grew by double digits, although capacity constraints still prevented our partner, Torii from fully meeting demand for the CEDARCURE tablets. Torii's new API manufacturing facility is now becoming fully operational, but it will still take some time before the extra capacity flows through the manufacturing cycle. Now let's turn to a brief update on the product lines on Slide 5. Global tablet revenue was up 17% on solid growth in Europe and North America, predominantly driven by higher volumes. All brands grew by double digits, except for CEDARCURE, which saw modest growth, as I just touched on. Combined revenue from SCIT and SLIT drops increased by 11% after progress in all sales regions. The main growth driver were the resumption of SCIT shipments to China and a very solid growth in SLIT drops in our big market, France. Revenue from other products increased by 42% and the anaphylaxis portfolio was at the front with 68% growth. It did actually very well across markets, and neffy also contributed to growth at this early stage of the commercial rollout. In conclusion, strong growth in all product lines and in all sales regions in Q3. After these quarterly updates, let's move to the year-to-date results on Slide 6. Revenue for the first 9 months of 2025 exceeded DKK 4.5 billion after 14% growth in local currencies. Growth mainly echo higher sales of tablets and anaphylaxis products. A gross profit of DKK 3 billion yield a gross margin of 67%, a big increase of 3 percentage points. These improvements reflected higher volumes, changes to the sales mix where especially European tablet sales contributed to the positive development. We also saw good production efficiencies coming through. The gross margin was also indirectly helped by the muted growth in tablet sales in international markets, which holds lower margins as a consequence of the partnership with Torii. In addition, we currently only have a minor contribution from the neffy business, which also holds lower gross margins compared to our European tablets. Capacity costs increased by 5% to DKK 1.8 billion. At the Q2 earnings call in August, after we upgraded the full year outlook, we said that we plan to take advantage of the higher-than-expected revenue to further invest in various growth initiatives. We started doing so in Q3, where R&D expenses were up 16%, while sales and marketing costs increased 3%. Still, the cost increase was lower than planned, meaning that you should expect higher capacity cost in Q4. I'll come back to that later. The operating profit, EBIT improved by 44% in local currencies to almost DKK 1.3 billion, raising the EBIT margin from 22% to 28%. The EBIT margin progressed due to higher sales, gross margin improvements and modest increase in capacity cost. Moreover, no one-off costs to optimizations were recognized, opposite to last year, where one-offs amounted to DKK 49 million. Free cash flow almost doubled to DKK 836 million. Higher earnings offset investment to scale up tablet production, upgrade legacy production and expand the anaphylaxis operation. We continue to use some of the cash generated to repay our debt. Cash flow from financing was minus DKK 736 million. This means our net debt-to-EBITDA ratio right now is down to minus 0.1, i.e., we do not have any debt at this stage. So all in all, a solid set of results, which further solidified ALK's financial position and confirm that we are on track to deliver on our long-term financial targets. So with this, I would like to hand it back to you, Peter, and Slide 7 for a status on our key strategic initiatives. Peter Halling: Thank you, Claus. Let me start by providing some additional insight into the important launches of our respiratory tablets for children. In September, the house dust mite tablet, ACARIZAX was made available for children in 21 markets, including 14 markets served by ALK and 7 partner markets. The more recent rollout of the tree tablet, ITULAZAX for children and adolescents now covers 11 markets with 2 more launches scheduled for Q4. So far, key indicators continue to perform well across metrics, including new patient interactions with caregivers, doctor visits, sales, prescribers, et cetera. In September, around 3,000 unique prescribers in markets served directly by ALK were estimated to have prescribed at least one of the two tablets for children. The prescriber base includes new pediatricians, indicating that we are gradually expanding markets. While it is still early days, the market response is encouraging. And if we are capable of sustaining these trends, the pediatric indications will become a very important contributor to ALK's future growth for many years. Within respiratory allergy, things also progressed in China. In China, we initiated a bridging trial to facilitate the approval of ACARIZAX. Recruitment of around 300 subjects is progressing well, and the trial is set to complete around '26, '27 turn of the year, so around January '27. Subject to approval, ACARIZAX could be launched in Mainland China in '28, where the tablet will be added to the portfolio marketed by our new partner, GenSci. Also a brief update on Japan, where our partner, Torii has become a subsidiary of Shionogi. Shionogi has expressed its commitment to our tablet portfolio and sees it as a core business pillar going forward. The ongoing Phase III trial with GRAZAX in Japan continues as planned. Now let's move to anaphylaxis and the commercialization of neffy, the nasal spray for emergency treatment of acute allergic reactions, branded EURneffy in Europe. We launched EURneffy in Germany in June and the market -- or the market share has increased steadily since while it is encouraging for longer-term potential of the product, it is still early days. A couple of weeks ago, EURneffy was also introduced in the U.K. So we now cover two of three key markets. The third market is Canada, where the regulatory review is still pending, but progressing as planned. Additional introductions like in Denmark are imminent and further launches are lined up for '26. In all markets where pricing and reimbursements have been settled, EURneffy has secured a price premium relative to adrenaline auto-injectors. We now also have real-world evidence from the U.S. supporting that neffy's effectiveness is consistent with the one of adrenaline auto-injectors, but neffy has advantages over auto-injectors in the form of user-friendliness, longer shelf life and temperature stability. Despite these positive achievements, it is most likely or will most likely take some time to secure market access and change long-standing clinical practices, such as automated renewal of prescriptions for traditional anaphylaxis products. That said, we are encouraged by the first indications that we've seen in Germany and the positive feedback we are getting from the medical community to this new treatment. We will build on this positive feedback, work to change the habits and behaviors and furthermore, allocate resources to pursue opportunities in other channels, including airlines and schools to name a few. Moving to food allergy. The U.S. FDA has granted a Fast Track designation to our peanut development program. This allows ALK to benefit from more frequent interactions with the FDA, and it highlights that the agency acknowledges that food allergy represents a significant unmet medical need. We expect this to support the time line for the program. The ongoing Phase II trial with the peanut tablet in North America is on track to report top line data in the first half of '26, most likely towards Q2. At the same time, the planning for Phase III is ongoing. So to sum up, then we, in general, see good progress across all disease areas. And with this, I'll hand it back to you, Claus, on Slide 8. Claus Solje: Thank you, Peter. So let's end with the outlook for the year. As Peter said previously, we adjusted the full year outlook slightly. We are now looking at 13% to 15% revenue growth in local currencies versus the previous outlook of 12% to 14% growth. The new outlook is based on a few things: double-digit growth in tablet sales, driven by more patients and prescribers. Single-digit growth in combined SCIT and SLIT drops sales, double-digit growth in sales of other products, particularly anaphylaxis. During the spring, we indicated that the children indications and neffy launches would contribute with around 1 percentage point of the growth in 2025. Based on what we have seen over the past quarter, we now believe that these 2 items will contribute with 2 to 3 percentage points of the anticipated revenue growth. In parallel, we adjusted the EBIT margin outlook to around 26%, up from the 25% we expected before. This corresponds to an improvement of 6 percentage points, fueled by sales growth, gross margin improvements and the optimizations. Also, we don't expect any one-off this year, opposite to last year, where our one-offs cost totaled DKK 75 million. The new outlook implies that total revenue is projected to grow by around 13% to 18% in Q4. We expect the strong underlying momentum for tablets to continue into Q4 with a strong inflow of new patients during the ongoing initiation season in Europe. However, please notice that Q4 growth in tablet sales is expected at a slightly lower level than in the first 9 months due to phasing of product shipments to Japan and potentially inventory fluctuation at European wholesalers. The Q4 EBIT margin is expected to be lower than in the first 9 months, reflecting what I mentioned before. We are increasingly allocating funds to growth initiatives like the children launches, neffy and the Phase II peanut trial. This includes new hires, which will lead to increased capacity costs in Q4. We will obviously carry these costs into 2026, but we will do so without jeopardizing our financial ambitions. A 25% EBIT margin target for the next years is still our expectation. We believe the new outlook for 2025 adequately balances risk and upsides. Hence, we expect 2025 to mark the seventh consecutive year of revenue growth and improved earnings, fully in line with ALK's long-term financial ambitions. And with this, I would like to hand it back to Per and Slide 9. Per Plotnikof: Thank you, Claus, and thank you, Peter. And we will now turn to the Q&A session, and I kindly ask the operator to go ahead, please. Operator: [Operator Instructions] The first question today comes from Thomas Bowers with SEB. Thomas Bowers: I have 3 questions here. So firstly, just if we look at your new patient starting in '25. So you are stating that it's well above 10% the outlook of tablets in '25. So what if you exclude the impact from the pediatric indications, would you still say that you are still above that 10% of new adults starting for this initiation season? And then second question, just on gross margin. And of course, now we're looking at 2 percentage points year-over-year. So that's, of course, quite impressive. But how much is -- first of all, how much is structural improvements, so the scrapping -- less scrapping and yields and compared to what you see here from the product mix? And also, how should we think about gross margin improvements in '26? Will this then be flat also because we are facing maybe some headwinds on product mix with Japan, China and neffy here? So any color would be appreciated. And then my final question here for now. So just on the R&D spend. So first of all, what is driving this extreme back-end loaded R&D spend phasing into today -- well, implied for the Q4 in order to stick to that 10%? And maybe also in regards to your midterm guidance or targets. So going for that 10% in '26, is that still achievable with the quite strong top line performance you have here? Because I guess most additional investment you can plug in is related to sales and marketing. So any color on how you are trying to keep that 25% EBIT would be appreciated. Peter Halling: Thanks, Thomas. This is Peter. So let me just start out with your patient question. And Claus, maybe you can jump in on the gross margin, and we can -- one of us can take the R&D spend as well. So just on the patients on the adults, we expect approximately 10%. Do keep in mind that it's still initiation season. So we're still kind of seeing the intake of patients and obviously learning, but we expect it to be around the 10%. And then to your first part of the question, yes, we saw, as we also stated, a positive surprise in terms of the intake of children. I think it's important to say that part of the reason for why we have been a bit conservative around this has been we had obviously an assumption that there could be this famous catch-up effect where you see a big inflow with people on waiting. But so far, it has continued, especially with what we've seen on the house dust mite. So that has obviously been positive and driving it upwards. So that's the patient side. On the gross margin? Claus Solje: Yes, Claus here, let me take that one. Thomas, it's a good question. And you're completely right that we are seeing a better gross margin improvement than what we had expected. And that's also why we have been able to lifting the outlook for the EBIT. To your question about what is it actually that are driving it, most of those 2% are actually, if you look at it, coming from the volume mix of products here. So we are simply selling products with a higher margin. And then you can say, so what about the yield and the scrap and variance improvements and so on. They are also there, but it's important to understand that we also have the inflation increase on our production inputs into the manufacturing area. And actually, as it stands right now, then we expect for this year that the increase in inflation to our manufacturing input is being counterbalanced by the improvements in the variances and the scrap and so on. So these two are actually outweighing each other. And that means that the approximately 2% net that you then see is coming from the product mix, selling more tablets to a higher margin. If you look into '26 on that one, we are not guiding on '26 right now. That's a bit early. We will do that in February. But I can put a bit more flavor on it. You are right that when we come with improvements, as you can say here, around 2%. Then remember, we have normally said that we would like to increase the gross margin 0.5% to 1% year-on-year. That's how we try to improve the gross margin year-on-year. But of course, with such a significant increase in '25, then there could be some headwind next year. And you're also pointing actually to the right reasons, and that's respectively our partner markets. So next year, you will see an increase in shipments to Torii for lower-margin products. You will see now our partnership with GenSci that also has a lower margin. And you will also see increase in neffy sales also to a lower margin in '26. So these trees are actually, you can say, a drag on our gross margin. We will still have increased tablet sales. So don't worry. We will also work on lower scrap and improvements in the yield and variances. So we will also have that to counterbalance. But it is a good idea to take those partner markets and partners into consideration when trying to forecast on the gross margin next year. Peter Halling: And I think, again, just repeating our long term is obviously the 25% EBIT, but we are making active choices in investing in the business back to what we also stated during Capital Markets Day. But obviously, we are happy with both where the gross margin is and also the ability to deliver above the 25% on EBIT. Just to your last question on R&D spend, I can start and also on the sales and marketing and Claus can chip in and Per. But basically, you see the increase due to the trial activity. We just talked about China. We also talked about the continuation of peanut et cetera, and the investments into those, that is naturally increasing. We are preparing for the next phases of the study. So overall, that is part of driving the cost upwards. We've said long term that we will be between 10% and 15%, but we also said that the 15% is more on the extreme end, we should expect more the 10% to 12% overall. Do remember that with the Phase III trials coming in, then obviously, R&D spend will go up. They are naturally more expensive. So anything to add, Claus? Claus Solje: No, I think it's very right what you're saying. And just to maybe add, besides the Phase III trials that we are starting up next year, and we are already starting to prepare for those even actually before we know the results from the Phase II because we, of course, feel comfortable around that. So we have to start planning and that will then hit the 2026 numbers. And then you are right, we will also see an increase into the commercial space next year, like we will see in Q4, children launches, neffy and so on. So when you combine both the Phase II and Phase III next year and the extra investments into our 2 very important commercial launches and activities rest of this year and next year, then we feel quite comfortable about the long-term financial EBIT around the 25%. So that is still the plan. I hope that explains Thomas, for all your questions. Thomas Bowers: Very good. Maybe if I can just ask a follow-up in regards to -- maybe we spill over to the product mix comment. So I'm just curious on Japan. So some very upbeat comments from Shionogi recently. But of course, there's a standstill. So anything we should look into in regards to product mix? Because I guess probably we could see still some low numbers in Japan already from the beginning of the year. So any comments on when that standstill will potentially end? Peter Halling: No. So I think that the short answer there, Thomas, is that we do expect to see growth in Japan. And the facility that Torii is inaugurating is expected to come online. So we actually believe that next year is going to be a good growth year in Japan. But obviously, there is a timing element to it, and that is key for us going forward. When will the cedar pick up based on the pass-through of the manufacturing of the API. So that is coming. But we do see that things are coming online. Shionogi committed to both the partnership, but certainly also to the market. And hence, we are very positive around the future trajectory in Japan. Operator: The next question comes from Jesper Ingildsen with DNB Carnegie. Jesper Ingildsen: I also have 3 questions. Firstly, coming back to the pediatric launch. So you highlight now that you are expecting to see 1 to 2 percentage point contribution from that launch in this year, considering sort of like the momentum we're seeing here and continuous rollout, any flavor you could provide in terms of sort of like what we should expect going into next year? I guess, Thomas' question to some extent in terms of new patient starts alluded a bit to that as well, but just any more -- if you can give any more flavor on that? And then secondly, on neffy, I think ARS Pharma the other day mentioned that the launch in Germany is off to a strong start. I think they even said the market share capture was 3x higher than what they have seen in the U.S. just in the first few months. If you could give a bit more flavor on that launch and what's potentially driving that faster share gain compared to the U.S. in your view? And then lastly, on capital allocation, your balance sheet is obviously looking increasingly strong. Just any update on what we should expect there in terms of buybacks, dividends and then just M&A in general. So like what's your view at the moment? Peter Halling: Thanks, Jesper. Let me -- it's Peter. I'll start out with the first 2, and Claus, if you take the capital allocation, then and chip in any time. But just on the first, as you know, we cannot guide on next year. But obviously, we have upgraded what we saw this year on the [ P ] side. This is, as we also stated, driven mainly by ACARIZAX, and we saw the continued influx of patients, obviously, positive. Early on the ITULAZAX initiation season in terms of getting data, we are positive. We have seen a good influx, but I think it's premature to say a lot more on that one at this stage. But I'll just say, overall, we remain positive also due to the fact that we've seen these 3,000 unique or new prescribers coming in. So overall, positive. But I'll just caution that we still have data coming in, and we need to be a lot wise on that one. So that's as much as we can say. Then neffy and ARS' comment on Germany. It is correct that we've seen a good start in Germany. The game right now is very much around market access. It is very much around securing that we also have an inflow or we make a move into the automated renewals. That is where a lot of the existing market lies. So we need to continue to focus on that. But we are also encouraged not only by the uptake we've seen in Germany and the market share gain we've had so far, smaller volume market, though, but actually also in terms of the mix of the prescribers, both a strong growth with general practitioners, which is not where we send our people physically. So our online effort and digital effort has worked well, but also in other prescriber groups. So that is obviously a positive. But I'll just again, especially because it's early days and the volumes are a little more up and down in markets -- in smaller markets, I'll also caution that we'll see some swings, obviously. But that being said, ARS and we appreciate the positiveness on their side, then it's absolutely good to see so far. So I'll leave it there. Claus, on the capital allocation. Claus Solje: Yes. Thanks for the question, Jesper. Good question. There's no doubt, as we have also said, then this is a quite unique year for ALK on the cash situation. If you go a few years back, then that was not a big challenge for us related to cash because we didn't have that much. This year, we are guiding for more than DKK 1 billion in free cash flow related, of course, to the much higher sales, the gross margin and the EBIT coming in. So a strong year this time. Related to how we are going to spend it and how we are looking at it, then we have already communicated around our long-term financial targets and when we had the New Allergy Plus strategy back at our Capital Markets Day that first, we would like to invest into our commercial opportunities, the children, the neffy and so on and then the R&D. We will, of course, also invest into tablet manufacturing and make sure that we invest for the future there. Right now, we have capacity. We are producing 300 million to 400 million tablets every year. We can go up to 800 million, and we need to make sure that we can continue to deliver the millions and soon billions of tablets to the market. We also have, as we have communicated, activities on the BD, business development part. You saw the neffy collaborations, you saw the China one. There could be some activities there where we would like to invest into. And then when we have looked at all this, then we have also said very clear that we don't want to be a bank. We will not sit with cash on the balance sheet for a long time. So if we are in a situation where we cannot spend our own cash flow coming in, including what we have in the bank already on the things I just mentioned, then we are, of course, looking into dividends, share buybacks or what it will be. But this will be a discussion with the Board, of course, here around the Annual General Assembly, and then we will come back with an answer there. I hope that explains, Jesper. Operator: [Operator Instructions] The next question comes from Sushila Hernandez with Van Lanschot Kempen. Sushila Hernandez: Just 1 on neffy as well. So you mentioned in Germany that there is a long-standing clinical practice favoring traditional adrenaline products. So what is your strategy to move away from this? And also any color on how this is looking for the U.K. market? Peter Halling: Okay. So I can start on the neffy. Firstly, thanks for the question. Good question. So this is obviously a -- for classical, I'll try to just dial it back. What we are seeing is, obviously, you have a pattern with the prescribers where they are doing automated renewals. So as a patient, you will call down once a year and you'll get your renewal on your adrenaline pen. What we're seeing, obviously, now coming in with a new product is that not only the doctor, but the whole practice needs to be educated and you need to get in the system, including also ensuring that the patient, on the sense, have seen the product. That is part of changing the existing prescription patterns. Then there's the whole influx of new patients created through patient awareness, a lot of attention from doctors in terms of new products, et cetera. This is where we obviously have a big focus, that is ensuring that there's education, training of doctors, KOLs, et cetera, ensuring that we are present at conferences, et cetera, and also that there's a general awareness in the public. This is back to my comment around the digital effort where we are putting a lot of focus on this. And then obviously, with the nurses and the other practitioners, this is where our team have an ongoing dialogue with the clinics, and we ensure that both KOLs and others are participating in the training. That goes not only for Germany, that goes for any of the markets we are present in. So that's the answer on neffy. Yes, Per, please jump in. Per Plotnikof: Maybe add on U.K., which was also part of your question. And as you know, we have launched in U.K. We secured pricing. And now the next step is to make sure that it's also anchored in the local formulary listings. And that is going to be the key focus here over the coming months in the U.K. So before we get a sense of how it fares in the U.K., I mean, we are into next year in reality also now considering that we are moving into the low season, the classical low season for anaphylaxic product in Europe. But here, in the short term, the focus is really on making sure that it's anchored in the local integrated care trust and systems on the formularies. Peter Halling: Did that answer? Operator: This concludes our question-and-answer session. I would like to turn the conference back over for any closing remarks. Peter Halling: Thank you, operator, and thank you for your good questions. Before we end the call, I would just like to draw your attention to our Q3 road shows, which brings us to Copenhagen, to Canada, to London, Oslo, et cetera. And we hope certainly to see you around some of these events. As always, you're most welcome to contact either one of us if you have additional questions. And with this, we will end today's session, and we wish you all a good day. Thank you very much.
Operator: Good day and thank you for standing by. Welcome to the 3i Group plc Half Year Results Presentation Webcast. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand over to the Chief Executive of 3i Group plc Simon Borrows, to open the presentation. Please go ahead. Simon Borrows: Good morning. Welcome to 3i's interim results presentation. This was another good half for 3i. We delivered a total return of 13% and that gives us a net asset value per share at the end of September of GBP 28.57 compared to GBP 22.61 at the interims last year. That's after the payment of 42.5p per share second dividend and a 78p per share gain on foreign exchange translation. We ended the half with a gross investment return of 14% from private equity and 9% from infrastructure. Private equity delivered another good return with 98% of the portfolio by value, growing earnings in the 12 months to the end of June 2025. Action continued to deliver a very good performance, and we saw good growth from the broader consumer portfolio. We secured 2 good realizations in the first half as well as a significant capital restructuring and distribution from Action in October. Our private equity portfolio is defensively positioned, and is generally trading resiliently. The challenges we see for a limited number of assets are reflected in their valuations. We remain cautious about the general macro environment and continue to be careful in evaluating new investment opportunities. Earnings growth across our top 20 private equity portfolio has been good. Companies making up some 86% of the portfolio value have been growing earnings by more than 10% over the last 12 months. We have only 4, mostly smaller companies where earnings have declined over this period. We saw earnings momentum drive positive portfolio value moves in the half, and there were no notable write-downs in this period. Action has continued to expand and grow. In the first 9 months of the year, net sales were up 17.4% and operating EBITDA up 16.3% to GBP 1.563 billion. Like-for-like sales to the end of September were up 6.3%. Once again, the volume of transactions has been the prime driver of like-for-like growth across Actions estate. LTM operating profit at the end of P9 grew to EUR 2.3 billion. P10 was a challenging month. That's due in part to last year's very high like-for-like growth. And perhaps this year's unusually mild and very un-Christmasy weather. Net sales to the end of October stood at EUR 12.54 billion, year-to-date like-for-likes to the end of P10 were 5.7%, reflecting the high growth hurdle from last year and the continuing softening consumer environment in France, in particular, Upturn including last week, we've added 272 new stores. We're now on track to add approximately 380 new stores by the end of the year. That will be a 13% increase in store numbers over the calendar year. We now have 180 stores in Italy and 90 stores in Spain as well as 8 in Switzerland and 5 in Romania. These 2 new countries have started very well. We do believe Action's like-for-like sales of 5.7% are well ahead of many European retailers, a number of whom are experiencing negative nonfood like-for-likes. And that performance by action is very impressive when you set it against Actions cumulative 56% growth in like-for-likes. Over the previous 4 years, Action's low prices and mix of necessities and surprising products continues to attract a growing volume of transactions in all 14 countries where we operate. The French like-for-likes are positive to the end of P10, but they are some way below the rest of the group. France accounts for about 1/3 of like-for-like sales. That means that the non-French network is delivering like-for-likes of almost 8%. So France is a challenge, but we are well set for a big sales season to come with a strong Christmas assortment, good availability from the supply chain and some very competitive prices. 3i acquired a further 2.2% stake in Action in September from GIC. We settled that transaction by the issuance of 19.9 million shares and took our holding up to 60% of Action at the end of the first half. Action completed another financing in October, raising EUR 1.6 billion in the U.S. and European debt markets. Once again, demand for Actions debt was strong. Over 2/3 of that new debt was fixed at an all-in euro cost of under 4.6%, and pro forma leverage stood at 3x at the end of October. Action also took the opportunity to undertake EUR 3.1 billion of leverage-neutral repricing and extension of part of its current debt package, that delivered a further interest cost savings of EUR 14 million on top of the EUR 33 million we've achieved previously. We used GBP 755 million of our GBP 944 million distribution to increase our stake in Action further to 62.3%. That left us with net proceeds of GBP 189 million from the share redemption. And I'd like to end this section on Action by commenting on Action's March CMD guidance. Firstly, this year's store opening program is going well. And as I said a minute ago, we now expect to open approximately 380 new stores. That's an increase over the March guidance we gave you. It is also worth highlighting that trading from these new stores, which are not in the like-for-like numbers has been ahead of our expectations so far this year. On like-for-likes, while most countries in our store network are broadly in line or ahead of plan, the market in France, our largest store network is clearly challenging. We've seen a meaningful step down since the second week in September, which continued through P10. Food inflation is very challenging for those on low and average incomes, and the savings rate is at an all-time high in France, reflecting those with more cash having concerns with the political situation. So there is a risk that France pulls us below the 6.1% like-for-like guidance for the year. But frankly, it's too early to tell. On EBITDA margin, the sales mix is supportive. We've had good higher-margin category performance over the first 3 quarters and good trading from new stores. But the final outcome as with like-for-likes will be determined by trading in the last period given its very high level of sales and very high level of margin. Okay, I'd now like to move on to Royal Sanders, our second long-term hold asset. Royal Sanders is having another strong trading year. They've delivered good organic growth and excellent cash flow so far this year. Our private equity portfolio, ex Action and Royal Sanders was valued at GBP 4.7 billion at the end of September. The portfolio is invested in broadly equal parts across our 4 sectors. And as I said earlier, we're seeing good overall momentum in the private equity portfolio despite anemic growth in Europe and the challenges of the U.S. tariff policy. We certainly have more than our fair share of companies which are still able to grow in this tricky environment. And we secured 2 good realizations with healthy uplifts over their marks and returns well in excess of our 2x target. The Infra team is also producing a good performance with some excellent returns from their portfolio and a good level of fee income. On that note, I'll hand over to James who can fill you in on more detail. James Hatchley: Thank you, Simon, and good morning, everyone. Our total return on equity for the half year was 13%. Again, that demonstrates the ability embedded in our portfolio to deliver consistent compounding returns year after year. You can see the details here. The increase in NAV was principally driven by value growth of 250p per share. During the half, foreign exchange movements were positive, driven by the depreciation of the pound against the euro. That gave us a positive contribution of 78p the dividend payment in the half-reduced NAV by 43p. That meant we closed the half with an NAV per share of GBP 28.57. You can see the components of the 250p per share or GBP 2.5 billion of value growth here. As Simon said, Action continued its growth trajectory with the contribution of GBP 2.1 billion in the half. The PE performance increases of GBP 219 million, significantly outweighed the performance decreases of GBP 43 million. And that was despite a challenging macroeconomic background in many of our core markets. Royal Sanders and Audley were the standout contributors to the GBP 219 million increase. There were no material detractors in the half. As part of the valuation process, we took 4 multiples down, but the combined impact was relatively modest to GBP 24 million. The quoted investment portfolio had a good half. with a positive contribution of GBP 139 million. That came from the combination of increases in both the 3iN and Basic-Fit share prices. The uplift to imminent sale of GBP 25 million relates to the premium we received on the sale of MAIT. The portfolio ended the period with a value of GBP 29.3 billion. We continue to apply our valuation process consistently and markets have been broadly supportive over the period. So starting with Action, we continue to value Action on a post-discount multiple of 18.5x LTM run rate EBITDA of EUR 2.5 billion. As at 30th of September, that gave us an enterprise value for Action of EUR 46.9 billion. The value on the 3i balance sheet, which takes into account our increased shareholding level, as of 30th of September of 60% was GBP 21.5 billion. If we look back a year to September 2024, when Action was valued as an EV of EUR 38.2 billion and compare that EV to the outturn for the LTM run rate EBITDA this September, you arrive at a forward multiple of 15.1x. These are then the multiples we consider when comparing action to the peer group. These are the usual 2 charts we present this time covering the period from September 2024 to September 2025. Whilst there have been some movements within the peer group. We continue to see that the average multiple is stable. So we remain comfortable that Action with its strong operational KPIs should trade at a premium to the average. The other important point to note is that there have been 2 third-party trades in Action's equity since our last year-end, one in September with GIC and one in October with a broader group of LPs. In that second case, there were both buyers and sellers among the LP group. Both transactions were completed at valuations corresponding to the -- to Actions June NAV, which reflected the 18.5% multiple we use today. Let's now have a look at the valuation multiples of the rest of the portfolio compared to the peer sets. This chart shows the valuation multiples for our PE assets in dark blue and the average of the multiples from the relevant valuation peer sets in light blue. The red arrows highlight assets for which the multiple was actually reduced in the half. In each case, these decreases reflect company or market-specific factors in combination with an assessment of proximity to exit. The weighted average multiple ex-Action is 13.1x, which for a portfolio aiming to double value over a 4- to 6-year time period, we think is fair. During the period, we secured the sale of MPM and MAIT, those transactions reinforce the integrity of our valuation policy. We gave the detail behind these transactions at the recent CMD presentation, so I won't go over that again. It is, however, worth noting that both assets were sold at good premiums that opening book values. In MPM case has commanded an 18% premium and to MAIT a 34% premium. Whilst this has been a consistent feature of nearly all 3i exits over time, I think it is particularly impressive when you consider that these transactions were executed against what remains a alleging environment for exits. So turning back to the business line performance for the half year. Our private equity portfolio generated a gross investment return of 14% for the half. The gross investment return was GBP 3.2 billion. Of that GBP 3.2 billion, GBP 805 million was the positive impact of FX. The cash realization of GBP 391 million was mainly from the sale of MPM. Investment of GBP 732 million included our purchase of an additional 2.2% of Action in the period. The overall PE portfolio value ended the period at GBP 27.1 billion. In terms of the leverage position, we show that on the next slide. As of 30th of September, there was very little change from the position of the full year. For completeness, I've added a couple of extra bars setting out the pro forma leverage position, including the action refinancing, which took place in October. The maturity profile continues to be very well managed. I'd also like to remind you of our overall approach to leverage across the portfolio. Our debt team covered this in detail a couple of years ago in the PE CMD in September 2023. We favor a prudent approach to leverage assessed on a company-by-company basis. Action remains one of the largest names in the syndicated leveraged loan market in Europe, and today, Action now has a meaningful presence in the low market in the U.S. Its debt is well syndicated with over 150 leveraged loan investors. For the PE portfolio, ex Action, we value a diverse mix of lender types, but we're always focused on simple senior-only financing structures with over 2/3 of overall lending provided by relationship banks. Just to be clear, today, we have no external subordinated debt or unitranche lending in the portfolio. So on to Infrastructure. It was a better result for the Infrastructure segment in the period. That improvement was largely driven by the performance of the 3iN share price, which increased by 14% over the period. The underlying 3iN Infrastructure portfolio as a whole is doing well, and TCR is a standout performer. Despite some continued weakness in the freight market, Scandlines also continued to deliver a robust performance. Including Scandlines, our infrastructure portfolio is valued at GBP 2.2 billion, and it produces a very useful cash income contribution, as you can see on the next slide. Overall cash income totaled GBP 87 million, and we ended the period with a small GBP 12 million cash operating loss. Our expectation remains for a cash operating profit for the year. So now let's take a look at the balance sheet. The group's approach remains one of conservative capital management with net debt of GBP 772 million and gearing of 3%. We remain well within our trend lines. A slightly larger RCF gives us liquidity of over GBP 1.6 billion at the end of the period. As of 11th of November 2025, the group's cash balance was GBP 777 million. Before we leave the balance sheet completely, I thought I'd give you a quick update on the net exposure by currency and the hedging position. In the 6 months to September 2025, we experienced a currency tailwind of GBP 802 million. That principally reflects the 4% depreciation of sterling against the euro during the period. Hedging has reduced this gain by GBP 31 million, resulting in a net gain after hedging of GBP 771 million in the half. That GBP 771 million compares to a net currency loss of GBP 466 million in the same period last year. As you know, sterling has continued to weaken. And you can see the updated sensitivities net of our hedging program at the bottom of the slide in the banner. So finally, let's turn to the dividend. Here, you can see our dividend policy. In line with that policy, we will pay our first FY '26 dividend of 36.5p per share in early January. That 36.5p per share, is half of last year's full year dividend total. Now before we get into Q&A, I will hand back to Simon. Simon Borrows: Thank you, James. As I said right at the start, this was another good first half for 3i, and we're expecting a second half of more good progress. Action and Royal Sanders are 2 long-term hold investments are both trading well, and they remain focused on their long-term growth plans. Actions expansion is ahead of plan this year and most retailers I know would give their eyeteeth for 5.7% like-for-likes in these markets. Let me put the very recent like-for-like numbers in some perspective on this next slide. We've seen very strong like-for-like over the last 4 years. This is a compounding measure and results like that are bound to moderate as Action store base grows. Nonetheless, we remain convinced a strong retailer should be capable of compounding like-for-likes at 5% over time in a low inflation environment. But as you can see here, the like-for-like performance has been completely eclipsed by new store growth at Action. In fact, we estimate the net store growth will amount to 13% this year. This is the largest driver of Action's growth and is likely to remain that way for many years to come. While like-for-likes are a good measure of the health or pulse of a retailer, are you winning share? The ability to roll out a format unchanged across multiple countries is the holy grail of retail. And that's the real power of the Action format who successfully opened in 14 countries to date. Ultimately, the ability to do that supports decades of substantial growth as ALDI, Lidl and IKEA have demonstrated over the last 50 years. So when we model Action's development over time, we use these basic assumptions. 10% store growth per year, 5% like-for-likes, high free cash conversion and a nudge to the EBITDA margin every so often. These 4 elements are all you need to confirm the enormous potential of Action. Action's extraordinary growth over the last 5 years has been a key contributor to 3i's compounding returns. And we are confident that Action will continue to support strong returns for 3i as a result of its customer focus, white space potential and remarkable store payback periods. With that, we will now close the presentation, and we'll open the lines for questions. Thank you. Operator: [Operator Instructions] We will now take the first question from the line of Manjari Dhar from RBC. Manjari Dhar: I just have 3, all on Action, if I may. My first question is just on the seasonal performance. I suppose, given the softer seasonal start you've seen I just wondered about how you're thinking about the ability to sell through seasonal ranges for the remainder of this period and how you feel about the likelihood that Action might have to clear some of that product at lower margins later on? And then my second and third question are both on France. So I just wondered if you could give some color on margin mix by country and maybe how the French margins compared to group average? And then finally, I just wondered, given the challenging backdrop of France and the fact that France is such a significant part of Action's sales exposure, does that change the way that the Action thinks about distribution of future store openings near term or sort of do you think that maybe you might shift those openings away from France now? Simon Borrows: Thanks, Manjari. I think on the seasonal performance, I mean it when I say it's simply too early to tell. We really can't tell how much people are holding back from these more seasonal Christmas categories because they've literally got no money or because it's the weather or because it's something else. But these -- you often get Christmases where trading can be pretty back-end loaded. So we need to wait and see, frankly. In terms of seasonal write-downs, we have a very modest history of this. We've got a great set of products for Christmas, and I would be surprised if it means anything significant in terms of seasonal write-downs. . In terms of the France margin mix, it sort of reflects a lot of features. There is a good level of FMCG purchasing that goes on in France, which takes the margin in one particular direction. But we have some of our -- many of our biggest, highest volume stores in France, which trade at very strong margins given the sales leverage and sales densities those stores achieve. And they're almost unmatched anywhere else. But we do see more of those sorts of store contributions cropping up in some other urban centers in other countries, as well as in the Swiss stores, which are very much ahead of that. So it's a curious mix, France, but the margin is still a very healthy margin in terms of store EBITDAs, et cetera. In terms of the store expansion, we were still set on opening 1,200 stores in France. It's a remarkable business for us, and we believe it will continue to be so. we are still, in our view, taking share even at the current like-for-like level. And we've been voted France's favorite retailer for the last 3 years on the trot, so the customers clearly like us. Operator: We will now take the next question from the line of Haley Tam from UBS. Haley Tam: Could I ask one on Action or a couple of Action, please? So to start with, just to clarify on the like-for-like slowdown in October, which was clearly focused in France. Can we just confirm whether like-for-like was negative in France in October and perhaps help us to understand what the particular challenge was for you in France? Because I think we've heard from some other retailers that consumer confidence and political uncertainty clearly had an impact on higher value spend, but there's been more resilience in staples. So just trying to understand why your experiences differed. Second question, just in terms of the increased stake in Action, which is now 62% approximately. Could you give us any update on the split of the remaining 38% in terms of what portion might be LPs versus other GPs and how long on average or the spread of duration of investment that there is in the other 38%. And then if I can just ask a final question actually. In terms of very clear comments you've given about 2025 on Slide 13. Thank you. And Simon as well, thank you for your longer-term comments towards the end of the call. I just want to clarify, again, then, therefore, there is no change in your medium-term ambitions for Action. Simon Borrows: Thanks, Haley. Let me talk about our French like-for-likes in October. They were indeed negative, and that's why the group was at a low single-digit positive number. As I said, they are about 1/3 of the like-for-like sales basket of stores. I think the 2 previous P10s in France have both been 13% and 13%. So these were very significant sales levels to be on top of and unlike previous October, we saw very little buying of the seasonal products focused on Christmas. So they had really quite a lean year, and that's made all the difference. We haven't seen as big a difference in other categories. But that's where we really saw the difference. And having seen lighter baskets at certain periods of the month prepay checks and things like that in prior months, as we've talked about before, we saw lighter baskets in all weeks in France. So that was another defining moment. And we've seen that since the second week in September. So they are the reasons for that, I would say. Our knowledge is that some of the domestic discounters have got very significant negative like-for-likes throughout the year. and some of the supermarkets despite food inflation have negative like-for-likes as well. So we don't think this is necessarily at odds with what's going on in the rest of the market. In terms of the stake, so the other 38%, broadly speaking, 13% is held by Hellman & Friedman and the balance by the LPs with some smaller stakes held by management. And then the last question was our ambition, et cetera. There's no change to the ambition at all. The white space ambition is as big as it's ever been and is only likely to get bigger over time, the more we see how strongly the stores are received in new markets. Operator: Our next question comes from the line of Gregory Simpson from BNP Paribas. Gregory Simpson: Again, a few questions on Action from my side. Firstly, on the 380 new store target, can you give some color about how this is mixing by country, Spain, Italy versus Eastern Europe? Second question is on gross margin. It was just over 40% last year. How has that trended this year? And can you give some color on what you're seeing in the supply chain in terms of pricing from China and outlook into next year? And then finally, just any update on Action U.S. thought process, time line? Simon Borrows: Thanks, Gregory. The 380 new store target, I -- the country which is having the most new stores opened is Italy, there's a good number of new stores in Southern Europe generally. There are a good number opening in Poland, in Germany and in France, so it's the usual crowd. It's the 5 big markets and then there's a consistent number of other stores occurring in the smaller markets as well. But the big opening number, along with our new DC is in Italy this year, which is trading very strongly indeed. Gross margin is slightly above 40.0%, it's slightly higher than that because we have actually had very good category sales in the higher-margin categories this year. So that has moved that across a bit. In terms of pricing from China, we've bought very well this year, in particular, relative to previous years, but that stock is going to be coming into the stores next year rather than this year. And we've got nothing to add to Action in U.S., but I know management is going to speak about that at the CMD in March. Operator: We will now take the next question from the line of Andrew Lowe from Citi. Andrew Lowe: Just stepping away from France. It's been about 3 months, I think, since Lidl opened its non-food, sort of Home & Living store, sort of test concept in South Germany. I wondered if you could talk a little bit about that and sort of what you've seen in terms of any change of consumer behavior around those stores and just what you think they may be doing there, trying to defend against you guys. And then the sort of second question is just a clarification. I know that you said that we need to wait until March to hear more on the U.S. But could you just clarify, do you have any employees in the U.S. at the moment? That would be great. Simon Borrows: Sure. Thanks, Andrew. I mean on the Lidl store, we're obviously aware it's opened. We've visited it. It is reflecting much of the private label categories, if you like, it is only 1 store. We obviously have over 600 in Germany. So I don't know whether they're going to continue to roll it out. It's really not clear to us. So I can't really add any great insights to it. But I don't think it raises any major issues for us at the moment. I'm pretty sure that we have employees in the U.S. carrying out our research. As you know, we're doing a research project there. And we're sort of -- we're dipping into various pools of capability when we assess the market. So there will be a range of people that are working on that project. Andrew Lowe: Great. That's really helpful. And then just maybe on that latter point, just to clarify. So there are sort of employees rather than like consultants that you might be using? Simon Borrows: Yes. But whether they've got their house there at the moment or anything like that, I don't have that detail, Andrew, but we certainly have people on the ground consistently doing some work on the market, as we would in any new market. . Operator: Our next question comes from the line of Jeremy Kincaid from Van Lanschot Kempen. Jeremy Kincaid: I just have one more on France. Obviously, France has gone through political unrest in the past. And maybe 2018 or 2019, is a nice parallel with the yellow vest movement. So I was just wondering if you could share what's the like-for-like sales growth for Action was like during that period? Is the current political situation worse or not quite as bad as that? And the second part is how long does it usually take for your like-for-like sales to improve when the political situation stabilizes? Simon Borrows: Jeremy. We certainly had difficulties during the yellow vest periods. And in some ways, logistically, it was more of a challenge because we had a number of our DCs barricaded and we were not able to supply stores. So in individual regions, we saw a very material drop off in sales as a result of that set of disturbances that lasted for several months. So -- and we saw a little bit of that in September with some of the general strikes that were called. I would say this is slightly different. This is clearly a -- we're seeing a ratchet up of a problem that's been in France for some time. We talked about this going back some months, which is people there are very highly taxed at all levels, and they don't have much spending money. And it is affecting a large part of the population. And when you put high food inflation into that mix and high services inflation and various other things. I think it is leading to people being careful. Now how quickly that's turned around because of a different government or a different leader? Who knows. But it's still a very big market for us. We sort of represent the market now with 900 stores, and we believe it will come back. We've seen this sort of thing before. We had similar instance of this in the late teens where we had some very low like-for-like periods. So it's nothing that you don't encounter from time to time in retail, and we'll just grind our way through it, and I'm sure we'll come out a bit at some point. But when that will be, I'm not sure. Operator: Our next question comes from the line of Christopher Brown from JPMorgan. Christopher Brown: Yes, just a couple of quick questions. So in France, just wondering whether the new stores there that you've opened over the last 12 months or so, were they faring any better in terms of like-for-likes? Simon Borrows: Yes. As we said, the general category of store openings has been very positive. I don't -- we've opened about, I would say, getting on for 40 stores in France to date. I don't have the detail of that. I've only seen the aggregated numbers, Chris. Christopher Brown: Okay. And just moving on away from Action on to realizations. I mean a lot of your private equity competitors are talking up the sort of realization environment. And clearly, you've had a couple of really good realizations. Can you say a little bit more about what might be in the pipeline on realization front over the next 12 months or so? Simon Borrows: Yes. I mean, we would certainly expect to be bringing some other companies to the market on sort of 12-month time scale. I think in terms of the broader environment, I don't know which markets people are talking out. But it has still been a generally very quiet and bitty period for realizations, particularly in Europe. There have been some mega deals done in various places, which maybe skew some of the statistics. But in general, it's pretty subdued. I think the banks are receiving more mandates towards the end of this year for stuff to happen next year, and some of them have received stuff from us. So there is going to be a pickup I would expect, but I think it's much more about next year than about this year in reality. Operator: Thank you. We have no further questions on the line. So I will now hand over to Silvia Santoro, 3i Group Investor Relations Director to address any questions submitted online via the webcast page. Silvia Santoro: And first of all, there's a question on a clarification on France. Could any of the weakness be attributable to maturity? And can you evidence that perhaps with performance in other mature markets? Simon Borrows: The best comparison to make is with the Netherlands, where the store estate really dates back to the early 1990s. And we're seeing very good like-for-likes there this year in line with -- broadly in line with the group average, I would suggest. So we don't believe age is the issue. We believe it's to do with the macro in France. Silvia Santoro: And another question is what needs to happen over the next few months for you to hit your like-for-like guidance? And how would that compare to prior years? Simon Borrows: I haven't done the detailed math. But if we were around budget or slightly better, we'd be pretty much in line with guidance. So we're not looking at anything truly exceptional, but there does need to be a focus on some Christmas purchasing in France, in particular, to turn this around. Silvia Santoro: The next question is, can we extrapolate the improved store growth for March 2026 into March 2027, i.e., can you grow store openings by another 30 stores to open 410 stores. I think they mean probably calendar year '26. Simon Borrows: I think I don't want to steal anyone else's thunder, but the intention is obviously to open more stores next year on top of this year's number. And that doesn't sound completely crazy to me, but I'll leave that for the management to talk about. Silvia Santoro: Can you provide any update on the trading seen so far in November? Simon Borrows: We don't have -- we're not giving out that update. P10 is pretty, pretty darn recent. So we're not going to go further than we've gone already. Silvia Santoro: Can you expand on the traction you are seeing in Switzerland and Romania? Simon Borrows: Yes. I mean in Switzerland, where we now have 8 stores, we're seeing very high sales per store. So it looks very encouraging and perhaps reflects how expensive that market is and how attractive Actions prices are in that market? And in Romania, likewise, we now have a couple of stores and people have been buying way ahead of our expectations in those stores. Silvia Santoro: How much more of Action is there to buy? And over what time period might you be able to buy it? Simon Borrows: Well, we don't own 38%, so that might be one number out there. But we only get opportunities now and then to buy more equity we have an ongoing appetite to do that, and we have the resources to do that. So we will take advantage of it. But it's very hard to predict when others will want or will need to realize their position in Action. Silvia Santoro: Are you taking any specific measure in France to improve like-for-like or do you think it's entirely macro related and nothing needs to be done? Simon Borrows: I think we're making sure that the availability is very good that the whole supply chain is working in a very slick manner, and we are rechecking all our pricing to make sure they're as sharp and as competitive as possible. So we're doing all the things that you would expect as we move into our biggest sales season of the year. And it's really the next 6 or 7 weeks, which really makes the outcome or not in that market given the year we've had to date. Silvia Santoro: What gives you conviction in the 5% like-for-like in the medium term? Can you give color in terms of the different levers, example, basket size, frequency, geographies, et cetera? Simon Borrows: We've studied other great retailers and some of those retailers that sit above us in the valuation charts have decade runs of like-for-likes, which are in excess of 5%. So we've made a study of that, and we feel confident that we can emulate what those people have achieved over a very long-time scales. Silvia Santoro: Can you share some color on the EBITDA multiple at which the additional action shares were published -- were purchased from GIC and other LPs? Simon Borrows: As James said, it was purchased at the June valuation. Silvia Santoro: Please, can you talk about how you think about allocating capital to Action versus investing in existing portfolio or new assets? Simon Borrows: We are not short of capital. So we look at new investments and we look at investments into situations where we already have an ownership position and Action is one of those positions. They always have the benefit of us having a deep and real understanding of the performance under our ownership. So they are pretty straightforward judgments to make. And as I said before, we see very long-term compounding coming out of Action, and that is a particular attraction that you find particularly difficult to find. So that is always near the top of our priority list. Silvia Santoro: On the U.S., could you give a general comment on how you view the competitive landscape, especially against stores like Walmart, Amazon, Costco, that are very entrenched and dynamic? Simon Borrows: I mean it's a very competitive place. It has, by comparison with France, at the moment, it has very high levels of disposable income. So shopping dollars are much, much bigger. There are all sorts of formats there, but there are no formats quite like Action, interestingly enough, Dollar stores are quite distinct from Action. Costco is obviously very distinct from Action. Walmart is very distinct from Action. So there are some very strong businesses there. There are some less strong businesses there, but there's actually nothing there that's quite like Action. Silvia Santoro: You have spoken to your relative performance versus strange supermarkets. The Carrefour traded broadly in line with your recent like-for-like performance in France. Should we now think about the French business trading in line with the market from here? Simon Borrows: I don't think we trade like supermarkets. I think supermarkets have been beneficiaries of inflation. Broadly, our store is slightly cheaper this year overall than it was previously. So we don't really benefit from inflation in that way, and we have some much higher margin categories than many of the food categories in our stores. So I would expect us to be able to trade above the supermarkets, but I'm not sure when this persistent food inflation is really going to come to an end. I guess people have to eat first, and that's something that's affecting the French market. Silvia Santoro: There don't seem to be any further questions from the webcast. Operator, back to you. Operator: There are no further questions on the telephone line. Please continue. Simon Borrows: Okay. Well, let me just wrap up. We appreciate the interest, and we appreciate all the questions. Thank you for joining today. Have a good day. . Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Christopher Laybutt: Okay. Good morning, everyone. It looks like we've got most people dialing in. So terrific. Thank you. Thank you very much, and good morning. Welcome to the United Utilities Fiscal '26 Interim Results Q&A session. My name is Chris Laybutt, as you all know, and I'm delighted to play the role of host for this session. Today, I'm joined by Louise Beardmore, CEO; Phil Aspin, CFO. We'll stick with the usual format. Christopher Laybutt: So if you'd like to ask a question, please raise your hand or shoot through an e-mail or a Bloomberg. And I think leading us off this morning is Julius. You were first off the rank. So please go ahead. Julius Nickelsen: I guess 2 for me. The first one is you mentioned in the presentation that like the emergence of new investment drivers that I think there's also PFAS mentioned on the slides. So just wondering, are you referring to this more like after AMP8, like into AMP9? Or is that something that we could already see now through the reopeners in AMP8? And if so, give you us any indication on how sizable that could be? And then secondly, I mean, given that I'm the first on the line, obviously, I have to ask on your expectations on Cunliffe and the white paper that comes out in December, just in terms of like which recommendation do you think we'll be taking? And what's the process? What's the time line? Any color would be appreciated. Louise Beardmore: Fantastic and nice to see you this morning, Julius. Thanks for the question. Let's take the reopeners and the growth first. I think as we went through AMP7, there were a number of opportunities for additional growth items. We saw that with green recovery. And we've been really clear both when we spoke to the capital markets and also in terms of interactions with regulators that we see lots of opportunities for growth drivers as we move forward, both in terms of additional housing, new legislation that's coming through, whether that be new drivers that we can see emerging data centers, additional areas of growth from the government. And we are engaging with regulators, as you'd expect us to in terms of those opportunities, and we expect them to play through just like they did in AMP7. You're absolutely right with AMP8, there were a series of reopeners that were actually stated in addition to those and they're particularly around asset health and the opportunities to drive asset health improvements. And so we are engaging with regulators with those conversations. In relation to Cunliffe and the white paper and the time line for the white paper, I think, look, in terms of when the recommendation of the report that came out in the summer, there were lots of recommendations, 88 in total, many of which very investor-friendly in terms of the things that Cunliffe was promoting and suggesting. And we're now obviously waiting for the government's response. We expect that to be in December. But what I think is probably useful is to just look at what am I seeing and feeling in relation to intent. And I think there's a couple of things I'd point to. The first is Emma Hardy, when she spoke at the Moody's conference, was very, very clear about her desire to drive those recommendations and also for the white paper to be out before Christmas. I met with Emma Reynolds last week as the new Secretary of State. And again, she is very, very clear. She's picking up the recommendations. She's driving those hard with the team in terms of coming out with both the white paper and the implementation plan. And also, you may not see, but she was also at the EFRA Committee this week. And again, on record was very clear about her intent in terms of driving those recommendations through. So I think what we can expect to see in December is that white paper and transition plan. And at the same time, I think what we're also expecting is that we will also see a strategic policy statement for both Ofwat and the EA. Christopher Laybutt: Okay. Thanks very much, Julius. Jenny, over to you. Jenny Ping: Two questions. One, just around politics. Obviously, we're getting more and more noise around the energy side in terms of government treasury want to do something deflationary on bills on the energy side. Are you thinking or hearing anything with regards to water, any noise there in terms of support on the affordability aspects? And then just coming back on the uncertainty mechanism, is there any firm time line in which you will be going to Ofwat to apply for the reopeners? And what should we be watching out for on sort of getting the clarity on the size of potential investments there? Louise Beardmore: So look, to pick those up in order. I think the first thing I'd say is from a bills perspective and a cash performance perspective, I've been really pleased actually with the way that cash performance is maintained with the increase that we've seen in bills. Team have worked exceptionally hard. We've doubled the number of customers who are on affordability schemes, et cetera. So we've not seen any degradation in cash performance. In fact, it's held extremely strong, and that's down to the way that, that's been managed. But one of -- Sir John's recommendations was very clearly the need for a national social tariff. And again, we expect that to come through as part of the white paper. You know that, that's something that United Utilities has long pushed for and is something that would be an extreme benefit, particularly in terms of here in the Northwest. So we continue to influence and discuss how that could look as we move forward. So I'd expect that we may well see some movement on that or clarity on implementation of that as the white paper comes out. In relation to the uncertainty mechanisms, the conversations are ongoing. You know as well as I do what our CapEx profile looks like. It goes up and then it comes down either side. It's in everybody's best interest to smooth that out. We've talked about AMP9 and AMP10 and what we can see coming with the Environment Act legislation, along with everything else that we can see. So it's in nobody's best interest to have a CapEx profile that looks like it does. And again, there were opportunities last time around, particularly in terms of things like transitional investment and the green recovery, and we expect those to play through. So conversations are ongoing. Christopher Laybutt: Okay. Thank you, Jenny. Sarah. Sarah Lester: Yes. Sorry, just to come back to the white paper. I think it's going to be a massive document, a lot of noise in there. So just to make it really simple for us, please. Three simple questions. What specifically should we be looking for? What will you be looking for? So if we can do a control find, is there something you can point to that if we see it, we can go, okay, this is good for you. Louise Beardmore: Sarah. I'm probably not expecting it to be hundreds and hundreds of pages long. So just to give you an indication, I think it will be thematic in terms of what comes forward and what they are proposing to set out. I think we're all clear that we want to understand what the regulatory regime looks like as we go forward, how that's going to be managed and how that's going to be coordinated, what supervisory regulation starts to look like and more importantly, essentially what the structures and the time lines look for as we move forward. So I think what we're all looking for is exactly the same thing, which is clarity around the time scales and what that transition plan looks like. So I think it is not going to be hundreds and hundreds and hundreds of pages long. I expect it to be thematic to set out the direction of travel, the things that they're taking forward and at pace. I also think it's important to point out, there's a number of things that can be done without legislation change. And again, I think I'd be looking to see how much of that, that they're making a commitment on and moving on ahead of any of those legislation windows as well. Christopher Laybutt: Terrific. Thank you very much, Sarah. Pavan. Pavan Mahbubani: I have 2, please. Firstly, I'd like to ask about the EPA and the 2-star rating from a few weeks ago. I can imagine you found that outcome, sorry, disappointing. And I wanted to just get a bit more color from your perspective on what drove that rating and whether you see there's anything in your underlying performance that you think you need to reprioritize? And on a related question, can you provide some color on the potential EPA reforms that we should be seeing in terms of those ratings in the coming years? That's my first question. And then secondly, I wanted to ask about funding and the balance sheet. Can you remind us if you see yourself as fully funded for AMP8? And does that change in a scenario where you have additional, whether it's reopeners or transition spend? And how should we think about your balance sheet and funding options, particularly as we look into AMP9 and beyond? Louise Beardmore: Thanks for those questions. I'll take EPA, and I'll hand over the balance sheet to Phil. So I think first things first in terms of EPA, yes, we're obviously disappointed. But we are the second highest company in terms of EPA performance. So 13 out of a possible 16 stars for this EPA period. The underlying performance remains on track. What we have seen is a change in methodology and particularly in relation to definitions on pollution. So things that were driven by both storms and power interruptions are now included in EPA. 1/3 of our pollutions are actually caused by issues with energy resilience that we're seeing up here in the Northwest. And there are 2 drivers to that. One is storms and the fact that we're on an overhead network, and that's particularly a challenge in some of our more rural areas of Cumbria and Cheshire. And secondly, the balance loading that we're seeing between renewables and the grid. So we've got some real specific challenges. And actually, Phil Duffy referenced that himself just recently at the EFRA committee, and it's something that we're focused -- very focused on both in terms of what could we do, but also working with the energy companies as well because I need to see better levels of resilience in terms of driving those improvements. We are extremely focused though on what it is we need to do. I'm really pleased to see the improvements that we're seeing in terms of combined overflow reductions, some of the areas of focus where what we're actually seeing is some of the early investment that's going in and more importantly, the improvements that we're seeing as a result. You're absolutely right. We now have a new methodology that is being consulted upon. That sees a series of changes again, most notably a change in categorization of pollutions. So currently, we have pollutions categorized 1 to 4. It's categories 1 to 3 that count for EPA. Going forward, there will be no category 4. That will all become category 3. So again, it's going to be another change. So I think we're going to continue to see the methodology change and evolve. That's out for consultation at the minute. And United Utilities, along with lots of others will be making obviously representation about its implementation. But I think what is -- there is some good stuff in the EPA too. It's going to, for example, include details about combined overflows. That's not included at this minute in time, and I think that's important. And I think what is important is anything that drives greater transparency is something that we all embrace, but we do need to understand when methodologies are changing because as a result of that, what's important is that we're tracking underlying performance, and we can see where that's improving and more importantly, if there's areas that we need to focus. So the results of the consultation are due to be published early next year, and then that will drive in terms of the implementation of the new methodology. I'll hand over to Phil in relation to balance sheet. Philip Aspin: Nice to see you. Yes, sort of as you know, we've got a very, very strong balance sheet. So today, we're reporting 60% for net debt to RCV gearing, benefiting slightly from a little bit of an inflationary tailwind at the moment. So that's sort of feeding into the numbers a little bit. And as you know, we're very comfortably within our 55% to 65% range as we look through this AMP in terms of the funding of the AMP8 program. And it's probably worth just reminding you that the headroom extends beyond that because the Moody's Baa1 threshold is 68%. So there's quite a lot of flexibility there. Clearly, in terms of any reopeners, there'll be a lot of discussion around the context, the scale, the size of that, how Ofwat may or may not fund that in period, in-period revenues. So there's quite a lot of moving parts to all of that. But I think we're approaching that from a really, really strong position. And then just longer term in terms of AMP9, clearly, we all expect a lot of funding, a lot of investment continuing into AMP9. But we also are very, very positive around the Cunliffe recommendations in the context of Cunliffe calling out the need for the sector risk profile to be looked at. And I think specifically, you cited the Moody's work that has been done where effectively, they progressively downgraded the quality of the regulatory framework over the last 2 price reviews. So if we have some reversal of that, that will extend that sort of capacity as well. So as a reminder, if we were to revert back to a Moody's position that was more in line with energy, then that 68% will become 75%. So that's worth bearing in mind. There's a lot of moving parts and understanding how that price review in the future lands is going to be a big part of that as well. Christopher Laybutt: Thank you, Pavan. Mr. Freshney. Mark Freshney: Myself, you hear me okay? Louise Beardmore: We can now. Mark Freshney: Can I ask on -- went to the hypothetical of the hypothetical when we're talking about the white paper next month. But I mean, it's clear that normally, I mean we're already starting to talk about AMP9 now. Normally, the next review should start next year, right? The regulator should -- once they're done, CMA should be moving across to the next review. Yes, the primary legislation is probably not going to be done next year for the Cunliffe implementations and then the regulator has to be set up. So it would seem that at some point, we may be looking at a rollover review or a 1- to 2-year, likely 2-year extension of this review. What are your thoughts on that? And the reason I would ask is because your returns have been fixed relative to what CMA and Ofgem are doing at fairly low levels. And this review doesn't appear -- we're yet to see outperformance. So I'm just wondering what you guys would like to see on any potential rollover review and what your thoughts are there? Louise Beardmore: Thanks, Mark. I think there's 2 things. I mean, obviously, we've guided to 100 basis points of outperformance. But just in terms of the 2 years versus 5 years in terms of the regulatory cycle, I mean, I think what matters for us is that any growth that we have to deliver is facilitated. So whether that be within a 2-year or a 5-year cycle. And we've got very strong relationships with our regulators. And I think what's important is that we get clarity over the funding mechanism. And I think it probably brings me back to one of the questions that Sarah asked me in terms of what am I most looking for in terms of the white paper is clarity around some of those time scales actually and how that evolves over time. And I think that's something that we're all looking for. CMA obviously, will publish its final outcomes in March. And I know there's already a lot of conversation going on with DEFRA, with the Cunliffe implementation team about both the regulatory cycle and some of the inputs in, particularly in terms of the long-term strategic plans for both water and wastewater. So I think we're all looking for that clarity on that time scale. But I think what's important, whether it's 2 years, 5 years, a rollover or whatever, is that the growth that is to be delivered is facilitated and recompensed accordingly. Christopher Laybutt: Terrific. Thank you, Mark. Mr. Nash. Unknown Analyst: A couple of questions from me, please. Firstly, can we go back to the CMA. They published in their initial findings what I thought was quite an interesting study on coming up with a new sort of frontier modeling sort of tool for your totex. And usually, at this point, I'm usually in front of you going, Louis, why did you not appeal the FD? And on returns, maybe clearly, you would have got higher, but the totex one was a bit of an eye opener for me because it looked to me that they seem to think that Ofwat had awarded you more totex than they would have given you if you had a CMA appeal. And so the question I've got for you on that one there is that how -- how much indication does that give to us or how much does it give to us potentially that you could be -- you should be coming in line more with the CMA number than the Ofwat number and that we could probably see a totex outperformance come through? Secondly, I like your term, I think, environmental super cycle that you have in your presentation. And you talk about PFAS. There's very little in PFAS in AMP as I understand it in spend. And I know we had a couple of questions earlier about your reopeners, but I'd be interested in what sort of scale -- what actually is the scale of the reopeners that we could potentially look and particularly with things that aren't in AMP at all like the PFAS one. I mean I've been reading some reports that the industry could be up to sort of GBP 10 billion a year of PFAS that's clearly across the whole country, but does have a reasonable PFAS exposure. So some color on that would be great. Louise Beardmore: Great. Thanks, Dom. So look, I think first things first in relation to CMA. The decision that we ultimately made was around the overall package rather than each individual item. And we've talked quite a bit about that. Obviously, it's remembering that going to the CMA opens up everything, not just the particular item that you may be appealing. And we felt that the FD for us was balanced. We saw significant movement between the interim and final position, particularly on totex allowances. And we were able to negotiate some company-specific targets on things that were important to us, both in terms of combined to overflow spills, internal flooding and also some changes to the economic models in relation to rainfall patterns. So those were things that were really important. You're absolutely right to say that when you look at some of the outcomes from the CMA, there is a number of companies where when you look at the models that they've run, they've suggested a different totex allowances. I think everybody always points to models and sort of says, well, they're very, very simplistic. And I'm sure that's what the economic regulation teams will be saying too, particularly in terms of some of those broader conditions that those models need to take into consideration. And I think what is important that is something that Cunliffe brought out in his review is that you need to understand the regionality in the context of which you're operating on. So I'm expecting there to be lots of representation on that, Dom, as part of the response that's gone back in from companies. In relation to your questions about low, should that give us some confidence about totex outperformance? I think there's 2 things. One is, look, we've got a number of transformation projects growing -- running where we are driving transformation in relation to totex delivery. And I talked at the Capital Markets Day, particularly around driving standard assets and standard deployment as a way of managing costs and managing costs within profile. I think long of the days have gone where you can deliver big totex outperformance and not continue to reinvest in your assets. There's always more that needs to be done. And so I think it's incumbent on us to continue to do the right thing. But rest assured, there is a huge focus on cost and cost delivery. In relation to the scale of the reopeners, look, PFAS is one that's talked about. And there's both obviously PFAS in water, and we've got 2 projects in there. You may have seen something on the BBC recently about well, what are these projects and one of these notices. That was the regulatory notice to enable us to access the funding to get those projects in and they're purely precautionary. But there's a couple of elements. One is PFAS in the actual water supply itself, but also in terms of biosolids. And that is an area that is continuing to emerge and evolve. We're also seeing quite significant increases in relation to housebuilding in terms of new housebuilding targets. My -- our previous Secretary State, who's now got the housing portfolio has just announced 10 cities, 2 of which in the Northwest region. So it's really an emerging and changing picture as we go through. In relation to scale, it's a bit hard to scale at this moment in time. And I think -- but rest assured, those conversations are ongoing with the regulator on those topics, driven by those areas that they're focusing on growth. We've had 35 applications, for example, for data centers. There is a huge volume of additional work that we're seeing in terms of demand, and we're now working through and prioritizing that. Christopher Laybutt: Thank you, Dom. And last but not least, James. Unknown Analyst: Very kind. A couple of questions. Firstly, on reopeners. There's been a couple of questions already on reopeners. But -- and I guess this has been touched upon a little bit. But I was wondering whether you had any visibility on how the split might look for reopeners between fast money and slow money. Obviously, the biggest theme in a way in Cunliffe was spending more on maintenance of assets. So maintenance CapEx is normally treated as OpEx. So maybe that points to a bit more kind of fast money bias, but maybe you could share some thoughts on that, if that's possible. And then the second question was just touched upon. I can't believe I'm at the end of the queue and has asked this already, but the topic of the moment data centers, which you just mentioned, you had a lot of applications. Obviously, data centers use a lot of water. Could you talk us through how we should be thinking about data centers in the context of United Utilities. Is this going to be a big driver of investment for you of demand? You mentioned the applications. Are they ones that are likely to be progressed in the near term? Or is this further out, that would be super useful. Louise Beardmore: Great. Thanks so much, James. Do you want to pick up the sort of fast and slow money and I'll pick up on data centers, Phil? Philip Aspin: Yes James. So I mean, as I alluded to with Pavan, the split of how Ofwat intend to fund any reopener is clearly one of the things that we'll have to consider in terms of how that impacts funding, et cetera. And clearly, a lot of the investment would go into CapEx and would typically be slow money. But clearly, we'll be pushing to make sure we've got the right balance between fast and slow in the context of what that means for financial ratios and the performance of the business. And as always, that Ofwat will be looking to balance that with the impact on customer bills in the near term as well. Louise Beardmore: And James, just in relation to your comments about data centers, look, they're all at various different stages of maturity. We've done 2 things. We've sort of identified areas in the region where we have spare water capacity. They're not necessarily always aligned with areas where people want data centers, but we've done a huge amount of work in that particular space. But in relation to the data centers that we're seeing, it also generates an opportunity for us as well. So how can we potentially use storm water in terms of those -- the cooling that is required. So if you think about combined sewer overflows and the challenge that I have and the fact that our sewers are never more than about 15% to 18% fall, the challenge we have is one of rainfall, and we have the highest combined rain network in the U.K., there's a significant opportunity here for how we potentially think about this slightly differently. So there's some really interesting engineering that's happening in this particular area as well. But they are all at different areas of maturity. There are certain areas where we're going to have to put in additional water resources to provide the capacity that is actually needed. But I also think it's a bit of an opportunity for the U.K. to think fundamentally differently. And we're working with a number of international organizations looking at how can we use -- there was an awful term in the sector called final affluent. But in other words, what's come out of your treatment works then gets returned into the environment, how could we use that? They don't necessarily need potable water. So just looking at this differently from an engineering perspective as well. So there's a huge opportunity in there for us to both innovate at the same time as growth infrastructure as well. Christopher Laybutt: Thank you, James. Back for another bite, Mr, Nash. Yes, we can't hear you, Dom. Unknown Analyst: I'm trying to make sure it overruns, Chris, as much as possible. Yes. One question from me, please. Supervisory regulation. Clearly, we are in some negotiations with the regulatory bodies and governments as to how that will work. What sort of options are you potentially looking at? And/or what would you like to see to come out of supervisory regulation? And do you see it as a potential sort of hindrance or a help in the way that you're actually going to perform your functions going forward? Louise Beardmore: Look, Dom, I see it very much as a help. There is a regionality about these businesses that we run, both in terms of the context of the infrastructure and even within region. You've heard me talk about the fact that we've restructured the business to be across 5 countries. Merseyside has got 84% of its wastewater system is a combined system. It's on the West Coast. Those storms hit it every single day. Even within region, it performs very, very differently. And I think regulation that understands the context of what's going on within a region, what those local priorities are, the ability to understand both the performance of the assets and the cost base is hugely important. Sir John talked a lot about moving away from notional models and the need to really understand those cost drivers, and we're hugely supportive of that. We saw the benefits some of that from the work that we did in AMP and particularly the allowances that we got in relation to some of the rainfall patterns we're seeing, CSO targets and things like that. But this moving away from this ability to just think of something being notional and really understand and both supervise and regulate accordingly, I think, is something that we would really, really encourage. Christopher Laybutt: Thank you very much. Next, Ajay. Ajay Patel: Look, I get the argument of like the scope and need for more CapEx and an improving return profile even for the sector. But the bit that always seems to be at [indiscernible] is the affordability and how this clashes with those aspirations in some respects. I'm trying to understand where -- what do you need to see happen in regulation to ensure that these are more aligned with each other? And not a series of a case of we move 5 years from now, we're asking for higher returns. We're asking for more investment, but there's a consequence of higher bills and the clash with that. And ultimately, it just adds to the risk to the sector. Louise Beardmore: Great question. And I think some of this comes back to what Jenny said a little bit at the beginning in terms of what needs to happen. We have seen a level of resilience as bills have increased, but bill increases are a challenge. And I think does a huge amount in relation to affordability support. We've doubled the number of customers that we're helping. But I think that is where a national social tariff can really play its part because I've been very, very clear that water is the only sector that doesn't have that level of universal support and that isn't right. From an energy perspective, we have warm homes discount. It isn't a postcode lottery according to where you live. And therefore, it won't surprise you that I continue to advocate for that because to some degree, that provides some additional capacity that's absolutely required. I think the other thing to remember is we all got really strong customer support in terms of the bill package that was put forward. So 3 and 4 customers supported the increase in bills and more importantly, the improvements that they would see as a result. And so I think it's also about making sure that you're spending customers' money wisely that we're driving efficiency, we're driving innovation. But at the same time, there is a cost and there is a cost for the infrastructure that's needed. And we are seeing the impact of climate change in a way that continues to evolve and to grow. And as water companies, it's essential that infrastructure is in place so we can enable a growth that we want to see, whether that be new housing targets or industrial growth targets. But at the same time, how do we make our assets more resilient. And just to give you an indication of some of the things that we're seeing, you may have heard on the news last week, there was a train that derailed up here in Cumbria, but I saw 8% of the annualized rainfall for the year fall in 1 day just in Cumbria. So the volume that is coming at us is very much changing. And the infrastructure is going to have to change and evolve to be able to cope with the climatic patterns. So I think that national social tariff is going to be key in terms of how do we maintain that balance. Christopher Laybutt: Terrific. Bartek. Bartlomiej Kubicki: I hope you can hear me well. Just to maybe talk a little bit about how you have started AMP8 in terms of the potential outperformance. Obviously, you have given a guidance on ODIs in year 1. But I just wonder, if we think about your latest debt issuance, where do you see the cost of debt versus the benchmark, meaning what kind of implied outperformance or underperformance we have here? And also similarly, if we think about your totex performance, are there any surprises to the upside or to the downside so far into AMP8 versus the allowances in terms of costs inflation or in terms of CapEx inflation? And maybe lastly, also on ODIs. Obviously, for FY '26, we know it will be negative. But shall we expect FY '27 to be already positive in ODIs? Or it's too early to say? Louise Beardmore: Bartek, do you want to pick up the first 2 and I can pick up on ODIs, Phil? Philip Aspin: Yes. So just picking up on the debt side. So your question was around how we're performing in terms of recent debt issues, Bartek. And I think probably the simplest thing is to refer you back to our Capital Markets Day slide that we sort of tabled where we showed how our performance was tracking against the Ofwat index. and that was a very, very positive position. And I'm pleased to say that existing debt issues that we've issued in this half have continued to perform in line with the expectations that we had at that time. So basically continuing to perform as we expect. On the totex side of things, I think Louis has already touched on this a little bit in the context of Dom's question around totex outperformance. And I think we are very focused on managing our cost position and living within the totex envelopes. We don't particularly see huge scope to outperform. So I think there, that's probably all I'll add to the totex position. Louise Beardmore: In relation to ODIs, Bartek, I mean, I think we've been really clear in terms of we put the 100 basis points on the table. We see that coming both from financing outperformance, ODIs and PCDs. There are some ODIs that are in penalty this year, some that are very much in reward. And we're very clear we're driving against very hard against targets. Obviously, as the infrastructure goes in the ground, you start to see the benefits of that and those ODIs continue to build. We've made a really great start. So for example, on leakage, we'll deliver a leakage benefit this year alone that was bigger than what we delivered last AMP. So there's some real great progress and work that is happening, but they continue to build as we go through the AMP period. Christopher Laybutt: Okay. Heading back to Julius with a... Julius Nickelsen: I'll try and go for a second. Maybe just on the last point on ODIs you've seen some improvement in the first half year, but could you maybe give us some indication how much of that is driven by weather? And then maybe also, I mean, the guidance hasn't changed overall on the net penalty. But has there been some change given that we had like some warmer weather this [ far ] that there will be maybe some improvements on the waste side? Just some color. Louise Beardmore: Yes. Thanks, Julius. I mean, look, we've been really clear that we expect that we will be in a penalty position for this year, but they build over the AMP, and we will be in a net reward position over the AMP period. The weather, although we have seen some dryness to the weather, we've seen some significant storms, too. So there are some areas we've made great progress and great delivery where we're seeing real improvements. We've made great strides in all of our customer service targets. We're in reward on all of those. We will deliver our targets this year in terms of CSOs, for example. And we've seen some other areas where we've got challenges driven by some of those storms. So it is a series of ups and downs. And as infrastructure goes in the ground, we continue to see that build and that delivery. But we are extremely focused on driving the benefits and that contribution to the overall 100 basis points. Christopher Laybutt: Okay. Thank you. Thank you very much, Louise, and thank you, everyone, for joining today. As always, if you have any follow-up questions, please feel free to reach out to the team and all of the materials that Phil mentioned are on the website in relation to the CMD. I'll hand back to Louise. Louise Beardmore: Brilliant. Thanks, Chris, and thanks very much to everybody for joining this morning. I suppose just to summarize really, we've made a really great start to the first year of the AMP, really strong operational and financial performance. The AMP program is going really well. I'm really pleased with the way that the organization and the supply chain have mobilized, our CapEx is all in line with expectations. And we feel that we're really well positioned to -- as we move forward in relation to the transformative period for the sector. So thank you so much for joining us this morning. No doubt, we will get the opportunity to speak in the coming days. But I know there's a lot going on and it's busy, but thank you so much, much appreciated. Philip Aspin: Thank you, everyone.
Operator: Good day, ladies and gentlemen, and I warmly welcome you to today's conference call of the Friedrich Vorwerk Group SE following the Q3 figures of 2025. And as always, I'm delighted to welcome CEO, Torben Kleinfeldt; and CEO, Tim Hameister. So the gentlemen will speak shortly and guide us through the presentation and the results. And afterwards, we will be happy to take your questions if you may have. And having said this, Mr. Kleinfeldt, the stage is yours. Torben Kleinfeldt: Thank you very much, and also a very warm welcome from my side. My name is Torben Kleinfeldt, CEO of the Friedrich Vorwerk Group SE. I'm on board Friedrich Vorwerk already since 2001 from profession civil engineer. And I'm responsible of the total overall strategy of the company group and also still focused on a lot of hydrogen projects, which are in progress here in our company's group. Yes, a little bit about Friedrich Vorwerk in detail to all of us who have not seen us yet, Friedrich Vorwerk Group is active since 60 years in the industry of energy infrastructure. The company group is very well represented in the northern part of Germany with 40 locations, about 2,200 employees by today. And we can look back on a very strong growth over the last 5 years with an annual growth of above 20% each year. Our main markets here in Friedrich Vorwerk is, as I said, energy infrastructure, mainly covering natural gas, electricity, hydrogen and we have a -- other piece of adjacent opportunities where we cover all our expertise and services in biomethane treatment and also in district heating. And the business update will today will shine another light on some upcoming projects, which would be within our adjacent opportunities here as well. Main customers, of course, the large TSOs operating here in Germany. So on the electricity side, we see TenneT, Amprion, 50Hertz. On the gas side, it's more Open Grid Europe, Ontras, Gascaribe, these are our main customers, but for very special services also serving the chemical and petrochemical industry here in Northern Europe. Due to the energy transition going on here in Germany and in Europe, we can look back on a very strong order backlog today, still having more than EUR 1 billion of orders in the book by today. So what is Friedrich Vorwerk actually doing? Very short update on that or not an update, but a very short introduction to our business. This slide basically represents what we are doing. On the top, you can see our activities within the natural gas infrastructure. So usually, we are able to set up LNG plants or cross-country pipelines and cross-country stations where Germany is taking over natural gas from various sources outside Germany. Then we are able to engineer and also construct large diameter pipelines to transfer the natural gas to, for example, storage facilities or compressor stations, which are needed roughly all 200 to 300 kilometers in the pipeline to boost the flow of gas and finally bring the natural gas to the consumers. And right at the edge of the consumers, which could be a big city or an industrial plant, it requires also gas pressure, let down and regulator stations to supply the natural gas in the right pressure and the right volume. And of course, there, it needs to be metered for later invoicing as well. So Friedrich Vorwerk is basically able to engineer and also set up, maintain and operate all these components of the natural gas split. Pretty much the same activities. We can supply on the future hydrogen grids, which you can see at the very bottom of this slide, except that, of course, hydrogen cannot be found in nature. So it has to be made by splitting water into oxygen and hydrogen. This is basically done by large electrolyzer stations, where we are also able to supply engineering services, and we have a full range of small to medium electrolyzer arrays from 1 megawatt to 5 megawatt, which we can supply to the market. Business in electricity infrastructure, which is shown here in the middle of this slide, looks a bit different. Usually, our services start when we take over underground cable lines from offshore units. So when new wind farms that are situated outside in the North and the Baltic Sea, cables have to be transferred to land. There's a so-called landfall, which is typically done by a horizontal directional drilling method to under board the crucial environmental areas on the shores of the North and the Baltic seas. And then we are able to engineer and also run underground cables to the next transformer of converter stations with laying cables, we can handle up to 525 kilovolt in transmission voltage. And we are also able to engineer and set up transformer inverter stations, inverter stations unnecessary to switch the current from AC to DC. And of course, in today's grids, we can also connect the electricity grid to the heat grid. So we are also able to engineer and set up large-scale power to heat stations. Okay. Short business update, this time, not on our core markets, electricity, natural gas and hydrogen, but on some adjacent opportunities, which came up lately. First of all, I want to focus on what we call the NATO grid. The NATO grid here in Northern Europe has been set up in the cold war area. So in the -- starting in the '70s and '80s, on the right hand, you can see a sketch of the existing NATO pipeline grid, which is basically transferring jet fuel to crucial air fields of the [indiscernible] and the allies as you can see, basically, the NATO pipeline grid ends pretty much in the -- at the former inner-German border. And now since activities are going more to the east, this nature pipeline grid will be expanded by another 300 kilometers towards the Polish German border and then also into Poland and possibly also to the Baltic states. Since this is the pipeline system, pumping fuel, this is, of course, within our scope and it's a very nice addition to our usual portfolio estimated costs to set up this pipeline grid is roughly EUR 5 billion and also the first steps and the signing of contracts with Poland has been done in October. So we really see that this project is being kicked off, and we'll probably see tenders from the NATO grid in 2027. Next and also very interesting for us is decisions made by the German government concerning ramp-up of hydrogen activities here in Germany. First of all, of course, German government has emphasized that they're still looking for further investments in the pipeline infrastructure and also the plant infrastructure mainly focusing on setting up new electrolyzers to fill the hydrogen core grid, which is planned to be set up here in Germany until 2035, which, of course, requires not only the import of hydrogen, but also the production of hydrogen. They also made decisions to accelerate the tenders by digitalization and which is, I think, the most important decision which has been taken that they also accept not only green hydrogen, but also other colors of hydrogen to be transferred in the corporate and make it available for the consumer. So that's very important decisions for our hydrogen activities. And at the moment, we really see that both on the pipeline side and on plant construction sites, new projects pop up, and we received quite a bit of inquiries for setting up electrolyzers and also pieces of pipeline grid, which is summarized under the core grid here in Germany. And the third outlook I want to show is activities in CO2 transport because also here, very important decisions by the German government have been made in early November. So for example, they've agreed in general that we are able to split up the CO2 for certain industries, which cannot eliminate the emission of CO2. So for example, the cement industry is one of the core industries where you cannot get rid of the CO2 except to capture it and then transfer it to a storage facility. And of course, one of our largest customers, Open Grid Europe is already looking into the future CO2 grid, which will connect the emitters of CO2 to the neighboring country, Belgium and Netherlands because these countries are able to take CO2 and pump it in former gas and oil wells to store there for a long, long time. And also one of the CO2 clusters, which is planned is the so-called Elbicluster, which is pretty much in front of our doorstep to transfer CO2 from the cement industry to the ports on the North Sea and then, there it will be liquefied and brought by shipped to Norway, and Norway is able to take over the CO2 and also store it in old natural gas wells. That's it from my side for the moment. And with the update of our future -- possible future activities, and I would then hand over to my colleague, Tim, who will present the financial performance of the company's group for the third quarter. Tim Hameister: Yes. Thanks a lot, Torben . Good afternoon, ladies and gentlemen, and a very warm welcome to our earnings call and the Q3 figures. My name is Tim Hameister, CFO of Vorwerk. And I'm very pleased to walk you through our extremely strong Q3 figures and the updated outlook today. After reporting record revenue in the second quarter, we once again managed to beat that figure in the third quarter, achieving quarterly revenue of more than EUR 200 million for the first time in Vorwerk's history. Despite ambitious year-on-year figures, this represents growth of a fantastic 39%. Although the start of the third quarter in July was mixed due to challenging weather conditions, this was more than offset in August and September. The continued success in recruiting contributed significantly to this, enabling us to hire more than 100 new employees in the third quarter alone, also including a small M&A transaction consisting of roughly 35 employees. From a project perspective, the largest revenue drivers in Q3 were, of course, still the large-scale Anord project, followed by a number of pipeline projects, such as the EWA pipeline as well as several large volume gas pressure regulating and metering stations, which ensured high capacity utilization for our plant construction division. Consolidated revenue for the first 9 months of the year amounted to EUR 505 million, representing growth of 49% compared with the previous year. In both percentage and absolute terms, our electricity segment was once again the growth driver. However, it's also noteworthy that absolute revenue in the natural gas segment increased slightly again compared to the previous year, particularly due to the high number of plant construction projects. Revenue in the clean hydrogen and adjacent opportunity segments is roughly on the same level as the previous year. However, the development of profitability in the third quarter is particularly remarkable. Once again, the already very solid EBITDA margin of 21% in the second quarter was improved by another 4 percentage points to 25.4%, compared to the previous year, this represents an increase of 8 percentage points and a doubling of absolute EBITDA to over EUR 50 million. The EBIT margin even rose by 5 percentage points to a new record high of 19.1%, corresponding to EBIT of EUR 45 million alone in Q3. All segments contributed to this improvement in earnings are the largest increases that were achieved in the pipeline construction projects. In addition, the share of profits from joint ventures, [indiscernible] doubled compared with the previous year due to the higher number of projects awarded in this specific contract structure. Accordingly, the 9-month period closed with EBITDA of EUR 105.8 million, corresponding to a margin of 20.9% and adjusted EBIT of EUR 87.3 million or an EBIT margin of 17.3%. These fantastic results include minor catch-up effects in the mid-single-digit million euro range from variation and change order negotiations, but as already in Q2, the vast majority was achieved with our ongoing projects fueled by our high-quality order backlog. Now let's take a look at the development of order intake. In addition to the conventional order intake figure, we've introduced a new KPI with the half year figures, the total project volume acquired. And I would like to use the opportunity to once again explain the differences between the two key figures to all shareholders who were not present at our last earnings call. So there are basically two different types of project structures. In Option A, Vorwerk acts as a general contractor and handles the entire project through its own P&L statement, which means that 100% of the order value goes into order intake and later into revenue. And the second option, the client awards the entire project to a joint venture. And in this constellation, we do not show the proportional share of the total order volume and conventional order intake. Instead, we are only allowed to show the supply of personnel and equipment to the joint venture, which can, in some cases, be significantly lower than the proportional share of the total project. The order intake figure, therefore, does not reflect the actual project volume handled by the Vorwerk Group, which is why we also report this new K figure. And this KPI also includes the proportionate project volume from the joint ventures in which Vorwerk involved. And therefore, in our opinion, provides a more transparent view of the actual order situation, regardless of the type to contract structure. So the total project volume acquired rose by 45% to EUR 886 million in the first 9 months of 2025, while conventional order intake at EUR 419 million is around 20% below the same period last year. The main reasons for this are, on the one hand, the shift in the order structure toward joint ventures, especially in H1 2025. And on the other hand, our already well-filled order book. Nevertheless, we've also acquired many new and attractive projects in 2025. Some of them, Torben will present later in this call. The order backlog, which corresponds to order intake declined slightly to EUR 1.1 billion for the reasons stated before and currently consists of around 70% order volume attributable to the electricity segment. In addition to the strong development in both revenues and profitability, the development of net cash is impressive as well. Compared to Q3 2024, we've increased net cash by EUR 80 million to EUR 112 million. And thereby creating an excellent basis for further organic and acquisition-driven growth. The main reasons for the significant increase are, firstly, significantly higher profitability. Secondly, an improved negotiation position with regards to the payment terms in the contracts and thirdly, improved working capital management with regards to our internal processes and project controlling. Yes. And based on the strong performance in the current year and especially in Q3 and an unchanged positive outlook, we raised our guidance already for the second time this year, a few weeks ago. We now expect revenues in the range of EUR 650 million to EUR 680 million with an EBITDA margin of 20% to 20%, 22%, which corresponds to a margin improvement of 5 percentage points at the midpoint year-on-year. Now let me now hand it back to Torben for some updates on the ongoing and upcoming projects before we open the floor to your questions. Torben Kleinfeldt: Tim, thank you very much. Yes, very proud to present another major pipeline project, which will be executed in 2026. It is a project driven by German Gasunie division. The project is strongly in conjunction with the ETL 182, which is a 56-inch pipeline running from Stuttgard at the river banks of the Elbit towards the city of Bremen. In the end, this pipeline will be constructed also by a joint venture driven by Friedrich Vorwerk to bring regasified natural gas from Stuttgard to a hub in close to Bremen and the ETL 179.200, which has been awarded in the last month also to the same joint venture will basically connect the Dow Chemical facility, which is located in the northwest of the city of Stuttgard to this new pipeline grid. It is a 900 so 36-inch pipeline, roughly length is 18 kilometers, very difficult terrain for constructing pipelines. But since it is tight conjunction with the ETL 182. This is a very nice top-up to the existing project and we are actually managing this project also with the same resources as the other project. So second project I would like to represent is the TenneT project, which has already been ongoing this summer. It is one of the landfall projects, which is driven by TenneT, basically a framework contract where we are entitled to cross different islands north of the mainland of Germany in the North Sea by means of horizontal directional drilling. We have to execute in total 39 boreholes for the later use of -- with the cable -- with the high-voltage cables. We have already executed five drillings under the island of Baltrum this year and basically stopped operations now over the winter and we'll continue with the operations on the island of Baltrum next year in May when the window for working in the [indiscernible] is being opened. And once all the cables under the island of Baltrum have been laid, we'll shift to the next islands and then also to Buzon, which is shown here on the top right side of the picture. Friedrich Vorwerk and [indiscernible] share here in this joint venture is roughly 40%. So we'll also be entitled to do most of the drillings, which are necessary to complete all landfalls. Third project I want to focus on today is also from natural gas or hydrogen market. It's a plant construction project, a rather large gas metering stations and pressure letdown station, which is located at the compressor station in Boa, which is in former Eastern Germany. This project is set up by Ontras Gas Transport, and it is necessary to transfer hydrogen, which is taken over from the YAGAL pipeline and will be supplied into the grid of Ontras Gas Transport, where it is then transported to numerous industrial consumers in Sachsen and Sachsen-Anhalt. Friedrich Vorwerk not only has the contract to set up this plant, but also to do the full detailed engineering scope. And we have already started executing the engineering part of the project and will then be executing the actual project in 2027 and 2028. So here also a very nice project for our Plant Construction division, not only here in Halle Saale, but also in [ Vismore ] for the prefabrication activities, which are necessary to perform this project. Final project I want to focus on is another district heating project. You know that we have just finished the so-called [indiscernible] in the city of Hamburg, which is a large diameter district heating system, bringing heat from industrial producers in the port area of Hamburg to the north. And the follow-up project is, so to say, the -- it's called the [indiscernible], which in the end then transports the heat from these industrial consumers more in the middle of the city of Hamburg. This is a project in tendered in 3 lots. We have actually been awarded with lot number three. Pipeline here is also flow in the return line, diameter DN600 and 700 millimeters right in the middle of Hamburg. So very difficult inner city terrain to execute. But since we have a very well trained and very well executing district heating team here, we are really happy to have won this project so they continue -- they can continue their good work from the previous projects. And also looking in the future, there will be numerous district heating projects, especially in the city of Hamburg. For example, we are at the moment working on the tender for constructing also a large diameter pipeline grid towards the airport of Hamburg, which will later on supply the actual airport and also the Lufthansa facilities, which are located right at the Hamburg Airport. Yes. Now final slide from my side, at least on the technical part, is a short update on our newly developed welding system, the so-called PX2. PX2 has been developed and is also operated by our subsidiary, 5 CTECT welding system, fully automatic, being able to trace the actual well, so it can adjust automatically. It doesn't need an operator anymore to be run around the pipeline. system has first been tested on the EWA pipeline this year and has now continued on the pipeline. First experience, very high productivity, very little weld defects. We had a defect quota of below 1%. So repair rate below 1%, which is very unusual in the past with other welding systems, we had almost double-digit repair rates. So we are very, very happy to have developed the system, and we were already able to receive contracts outside Germany, for example, in Croatia and Turkey. And at the moment, we are actually supplying welding services in Turkey to a 40-inch pipeline and quite happy with the production. We are doing almost 100 wells a day, which is a very, very good performance and still with a very low repair rate. So the investment in the development of the new PX2 system is, in general, very good for us and opens up a complete new market also on international projects. And of course, finally, switching back to our HR department, I think Tim already focused on it. We have grown by more than 13% in the third quarter of 2025. So taking on a lot of new employees. And in the end, that has really helped for numerous projects, and we are -- we hope we can keep up the pace with our employees and hope with all these people on board for a very successful 2026. This is the end of our presentation, and we are, of course, very happy to take your questions. Operator: [Operator Instructions] We received the first question, or hand from Mr. Stueben. Lasse Stueben: I'll have three questions, please. First of all, the margin profile in the natural gas segment, it was really high again in Q3. I know that's probably in part due to those negotiation payments. But I'm just wondering, can you just give some more explanation to that? And what we should be looking for in terms of the margin profile going forward? The second one is you spoke in the past about a potential delay on the Anord project. I just wanted to ask how that is looking or if there's an update there and what the possible impact is for you? And the third one is the duration of your backlog now. That EUR 1.1 billion that you have in terms of the phasing, does that already cover you for potential double-digit growth in 2026? Or is there still, I guess, some gaps to fill with some short-term projects for 2026 to potentially achieve double-digit growth? Tim Hameister: Yes. Thanks for joining today, Lasse. I would like to start with the first question regarding the segment profitability. In Q3, there were actually two drivers for the strong margin for the natural gas margin. On the one hand side, I already mentioned, there were some negotiation one-off effects from change in variation orders from past projects. And the second effect here was the high share of joint venture profits because this structure is mainly used at the moment in pipeline construction projects. Regarding your second question, Anord, I still foresee that there will be delays in construction due to a lack of building clearance, especially in terms of missing permits, and we are still in constructive discussions with the client to adjust also the relevant targets for the bonus-malus clause since it's not our risk here in the end. So the customer is responsible for obtaining the permits. And we expect to have a result here on this before Christmas this year. Regarding the third question, the backlog. There are just a few projects such as the [indiscernible] project, Torben , as presented, the [indiscernible] duration until 2028. But apart from that, the majority of the backlog will be transferred into revenue in 2026 and 2027. And therefore, we have a very strong basis for further growth in both of the 2 years. Operator: All right. Thank you so much. Yes, no, we did not receive any further questions. So having said that, we received -- yes, just go ahead with you. The follow-up. Lasse Stueben: Yes. Just a follow-up, please. And then just on guidance, revenue guidance for this year. I mean, we've seen in last year, I know it was probably a bit special with Q4 being stronger than Q3. Guidance this year implies that Q4 is quite a bit weaker. So I'm just wondering, sort of -- what the thoughts are behind that and what that kind of means in terms of also potentially a contribution from Anord. I saw it was roughly EUR 180 million in 9 months. I think originally, you were guiding for I think, EUR 250 million or above for this year. So I'm just wondering if that's still current or if we should be modeling a bit less than EUR 250 million from Anord. Tim Hameister: So based on the current forecast and the Q3 figures, this would imply revenues between EUR 145 million and EUR 175 million for the last quarter this year. When you think about the usual seasonality of our business, Q4 is easily weaker than Q2 and Q3, although we had an extraordinary strong Q4 last year. But in general terms, it's are more likely to expect a weaker Q4, at least in terms of revenue due to the weather conditions and less working days since we usually close the construction sites mid-December. And of course, we also try to reflect risks and uncertainties from our project business within the guidance. Regarding Anord due to the missing permits on some of the sections on the track. There will be shifts of revenue to 2027 as well, at least to the first half of 2027. And therefore, we expect that the revenue contribution this year will be a bit lower compared to previous expectations. Operator: And in the meantime, we received questions in our chat box. And the first one is, to put it simply, which is the better leading indicator of future revenue recognition, the order intake or the new KPI total project volume in your opinion? Tim Hameister: So in our opinion, it's of course, the total project volume acquired. That's the reason we have introduced this figure because can transparently show how much project volume is in the end, handled by the Vorwerk group. Although it's important to say that the total project volume is not the figure that will translate into revenue in the next years. Only the order intake will translate into revenue. However, you will see higher profit shares from these joint venture constructions so that in the end, the total EBITDA will be the same regardless of the contract structure. Operator: Next question, how likely is it that you will be able to generate revenues with the CO2 transport network already next year, assuming the Federal Council's approval is greater this year? Torben Kleinfeldt: We do expect not to have any revenues in CO2, at least not in the pipeline business because the first project is being set up here between cement industry farm in [indiscernible] in the Port of [indiscernible] We do expect that public permits for this projects will be applied for next year. We expect to have a duration of about 12 months to get the permits approved. So construction will probably be '27, '28, '29, but we already have some revenues in the CO2 business, we are delivering CO2 purification and liquification plans, especially as an add-on to our biomethane treatment plants. So this liquefied CO2 goes in the food and also in the beverage industry. And we have already supplied a couple of CO2 electrification plans to the market until today. Operator: And the next question, what are your plans for share buybacks? Tim Hameister: Well, we have plans for at least capital allocation, not necessarily for share buybacks our priority number one, to use our cash is, of course, still organic growth, which means that we continue to invest primarily in technical equipment and machinery. In addition, we have to take into account the working capital swings across the year and maintain a very solid balance sheet at all times as this is part also of the pre-liquification processes for our projects. Yes. In addition, we are keeping certain amounts of cash available for potential M&A transactions. And we also expect to pay a higher dividend in the next year since this is linked to the net profit of the company. Operator: And another last question. Do you expect a higher margin in the electricity segment from H2 2027 onwards. Once Anord is completed and follow-up projects will not be executed via IPA? Torben Kleinfeldt: Yes, of course, once the dilutive effect from the Anord project has run out in the next years, and there are no follow-up projects with this specific contract structure. We will, of course, expect higher margins in electricity as well. Operator: So with you now chat and in the queue, there no further question pops up and that seems, we will come to the end of today's conference call. So thank you, everyone, for your showing interest in the Friedrich Vorwerk Group SE and also a big thank you to you, Mr. Kleinfeldt and Mr. Hameister for the time you took today. It was a pleasure to be a host, wish you all a lovely remaining day or evening and hand back for some final remarks, which concludes our call. Torben Kleinfeldt: Yes. Thank you very much for hosting us. Also thanks for listening today. And I can only say let's keep fingers crossed that the weather stay with us to make it a very, very successful year here in 2025 for Friedrich Vorwerk and hope to come back with good news in the beginning of next year. All the best and bye-bye.
Operator: Thank you for standing by. This is the conference operator. Welcome to the Ballard Power Systems 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 Sumit Kundu, Investor Relations. Please go ahead. Sumit Kundu: Thank you, operator, and good morning. Welcome to Ballard's Third Quarter Financial and Operating Results Conference Call. Joining me today is Marty Neese, Ballard's President and Chief Executive Officer; and Kate Igbalode, our Senior Vice President and Chief Financial Officer. Before we begin, please note that we will be making forward-looking statements that are based on management's current expectations, beliefs and assumptions concerning future events. Actual results could be materially different. Please refer to our most recent annual information form and other public filings for our complete disclaimer and related information. I'll now turn the call over to Marty. Marty Neese: Thank you, Sumit, and welcome, everyone, to our third quarter earnings call. Today, alongside our quarterly financial and operational highlights and updates on our market verticals, I'll share progress on our recent restructuring and strategic alignment, discuss our path toward becoming cash flow positive and provide updates on key developments across our global organization. I'll begin with an overview of our business and markets. Overall, I'm pleased with our performance in the quarter. We continue to progress on pace with order delivery resulting in a 120% year-over-year revenue increase, largely from our deliveries to the bus and rail segments, representing more than 70% of this quarter's revenue. Net order intake was approximately $19 million, and we achieved a positive gross margin of 15%, reflecting meaningful progress in reducing product costs and a net reduction in onerous contract provisions. While this margin result may not represent a new ratable baseline, it demonstrates the progress of our product cost improvements and overall profitability trajectory. Our revenue makeup highlights the importance of the bus market, a market we expect to continue growing in the coming years. I recently had the opportunity to attend Busworld and meet with bus OEMs and transit operators. What was truly eye-opening was the interest in electrification for buses has grown substantially with combustion engines largely absent from the show and an almost exclusive focus being on electric alternatives, including fuel cells. This is not surprising when considering that nearly 60% of new bus sales are now zero emission. In this electrified space, the advantages of fuel cells to serve a wide variety of routes, short refueling times and the increasing infrastructure costs in face of grid constraints is becoming ever clearer. As the market attractiveness and technical and competitive merits of fuel cell buses grow, so too is the competition in the fuel cell bus engine space. With new entrants coming in, it is more important than ever for us to continue to differentiate ourselves as the fuel cell industry leader. Here, we believe that our decades of innovation and hundreds of millions of delivered kilometers positions us well. Having the most experienced and most durable, reliable products with the lowest demonstrated total cost of ownership sets us apart. We are also ready for the next generation of buses. At Busworld, we launched the FCmove-SC, and initial feedback from OEMs has been very positive. Customers recognize the potential benefits of higher power density, simpler and more integrated functionality, a smaller, lighter footprint and higher operating temperatures. These are all features that lower their total cost of ownership. Further, we continue to improve our core stack lifetime and industry-leading durability. Taken together, our customers are excited with these innovations. In terms of timing, product availability is expected to line up well with OEM timing for homologation into their next generation of vehicles. Additionally, we are enhancing our product cost leadership and long product life with a more comprehensive focus on delivering best-in-class service. We are complementing our products with additional services, including digital operations and maintenance services, extended warranties, spares management and on-site and virtual technician training and support. Our strong balance sheet and commitment to long-term service and support sets us apart, and our customers are eager to engage with us further to enhance these offerings. Moving briefly to our rail and marine segments. We continue to see momentum for freight and passenger rail locomotives. Recently in a milestone for sustainable transportation, Stadler's FLIRT H2 hydrogen-powered train officially entered service in San Bernardino, California, another important step towards carbon-free public transit. The train sets a new benchmark for clean, efficient and passenger-friendly rail travel in the region that we are proud to be powering. In the marine segment, during the quarter, we recorded our largest order ever to the marine market with our order totaling 6.4 megawatts to eCAP and Samskip. These are both interesting markets for Ballard, though I would add that both these markets remain at early stage of development and customer adoption. For the stationary power market, let me address the topic that is particularly hot at this time, AI data centers. It is clear that the rapid growth and the need for data centers and related infrastructure is creating challenges for local grids, and there is a shift to evaluate potential sources of off-grid power as well as address CO2 emissions rules and noise requirements in many jurisdictions. This applies for both backup and primary power sources. Ballard's stationary solutions to date have demonstrated that we can supply kilowatts to megawatts of power. Our near-term product offering for this market is focused on backup power solutions to replace diesel generators. Unit volumes in our forecast continue to increase as does our product evolution from hundreds of kilowatts to multi megawatts. We are leveraging these factors to innovate further with our stationary power and data center customers. Our FCmove-XD product enables us to increase power densities today to 500 kilowatts and up to 2 to 3 megawatts in a small form factor module in the near future. This leading power density in a compact footprint opens the door to potential additional use cases. Hydrogen supply partnerships are essential, and we are actively working on collaboration opportunities in this area. This is an exciting area of product innovation. We will continue to provide updates as customer engagements develop further. Turning to our strategic realignment. We are making meaningful progress as we work toward cash flow positivity. On the cost side, our recent restructuring actions are delivering tangible benefits with significant reductions in cash operating costs and total operating expenses, excluding restructuring charges. On margin and revenue, we remain focused on driving down product costs and expanding our order book and total order back -- excuse me, backlog. Building out our order pipeline is taking additional time as we work with current customers to secure more sustainable contract terms, and some orders have shifted to Q4 2025 or Q1 2026. We believe this extra time is well invested to ensure long-term sustainability and appropriately balanced commercial agreements. Looking ahead to 2026 and '27, we anticipate further improvement in gross margins, supported by ongoing pricing and growth initiatives, additional product cost reductions and the initial sales of our FCmove-SC product. In addition, we expect further growth as we reenter the material handling market. We are seeing interest in our extended durability stack offering, which more than doubles current material handling stack lifetimes available in the market today. Customers see this product as an excellent way to increase their delivered value and lower their overall costs, especially related to stack service and maintenance. As mentioned, as we further refine our product offering for the stationary power market, we expect growth in this market as well. For both material handling and stationary power, we will provide more details on pipeline and order book conversion efforts as these potential opportunities mature. Taken together, these efforts are critical in moving us towards our goal of cash flow positivity. While there is still work to be done to achieve long-term sustainability, we are taking the right steps to grow our business in areas that make strategic sense, all while maintaining a strong balance sheet for our long-term resilience and in support of our customers. Moving to 2 other items of note for Ballard's global operations. First, due to changes in funding options and updated capacity outlook, we have decided not to pursue the Texas gigafactory development. Our analysis shows our existing global manufacturing capacity with minor adjustments will meet forecasted volumes. This decision underscores our commitment to capital discipline and focus on efficient execution. And second, as part of our strategic focus, we are further reducing our involvement in the Weichai Ballard joint venture in China, allowing us to concentrate resources on North America and Europe. Before I pass the call to Kate to review our financials, I would summarize this quarter as showing progress on our turnaround efforts. Year-over-year growth in shipments and revenue, progress on margin expansion, executing disciplined capital spending and launching compelling new products and services that deliver lower costs and more value to our customers is a really good start. There is much more to do to further transform the company and get to cash flow positivity, and we are committed to this overarching goal. With that, I'll turn the call over to Kate for a detailed review of our financial results. Kate Igbalode: Thanks, Marty, and good morning, everyone. For the third quarter of 2025, Ballard delivered revenue of $32.5 million, an increase of 120% year-over-year, driven primarily by the bus and rail deliveries. Gross margin improved to 15% compared to negative 56% in Q3 2024, a 71 point improvement. This reflects lower manufacturing overhead, continued product cost reductions and a net reduction in onerous contract provisions. This reduction in onerous contract provisions, coupled with a higher margin onetime off-road sales transaction contributed to the outsized gross margin performance in the quarter. Without these onetime benefits, our gross margin would be slightly negative, still illustrating a market year-on-year and quarter-on-quarter improvement. As Marty highlighted, we continue to make measured progress towards gross margin expansion and expect this to be reflected in our 2026 outlook. Total operating expenses were $34.9 million, down 36% year-over-year or 55% lower when excluding restructuring costs. Cash operating costs declined 40% year-over-year as the benefits of restructuring actions flowed through to our results. The rightsizing of our corporate cost structure, while never easy, was critical for our long-term sustainability and financial health. Adjusted EBITDA improved to negative $31.2 million compared to negative $60.1 million in the prior year. Cash used by operating activities was $22.9 million, an improvement from $28.6 million in Q3 of 2024. We ended the quarter with $525.7 million in cash and cash equivalents, no bank debt and no near-term financing requirements. Our strong balance sheet and firm hand on prudent capital allocation is a key differentiator amongst peers and provides us with business flexibility and resilience in this dynamic macro environment. Looking ahead, consistent with prior practice, we are not providing specific revenue, net income or margin guidance given the early stage of market development. We continue to expect revenue to be back half weighted for the year and total operating expenses, excluding restructuring charges, are expected to be below the low end of our $100 million to $120 million guidance range. Including restructuring costs, expenses are expected to be towards the high end of the guidance range. We now expect capital expenditures of $8 million to $12 million, down from our prior guidance of $15 million to $25 million, reflecting disciplined capital allocation and deferred facility investments. Looking to 2026, you can expect us to maintain our lean organizational cost structure and continue to demonstrate capital discipline. Maintaining a healthy balance sheet and accelerating our pathway to profitability is critical for our success and to deliver value to our shareholders. With that, I'll turn the call over to the operator for questions. Operator: [Operator Instructions] The first question comes from Rob Brown with Lake Street Capital Markets. Robert Brown: Just wanted to get your thoughts on the growth kind of rates in the bus market. Are there additional kind of growth [ order ] activity that you're pursuing and get a successful [ conference ] activity? But just wanted to get your sense on the growth rate in the bus market going forward. Marty Neese: Yes. I would answer that, Rob, by saying that the reception at Busworld was tremendous. The new product is being very well received, and that's by both existing OEMs and some OEMs in development, if you will. Further, the constraints I mentioned around infrastructure pinch points for battery electric charging infrastructure, if you will, is starting to change the dynamics for fuel cells where we look much more compelling than previously outlined, if you will, relative to battery electric. So I would say that that's a good news for fuel cells story and starts pointing towards a larger fleet size adoption, especially where the infrastructure constraints can be overcome by adopting fuel cell buses. So in general, I would say Europe is making steady and improving progress and adoption rates for fuel cells. North America is essentially flattish year-over-year. And that's -- yes, that's where I'd leave it. Robert Brown: Okay. And then quickly on gross margin. I think you talked about a slightly negative sort of adjusted out. Is that the baseline you expect to grow from or improve from going forward? Marty Neese: The short answer is yes. But Kate, maybe you could provide some more details on the gross margin bridge for Q3 and then kind of what you're outlooking from there. Kate Igbalode: Yes, absolutely. So you're spot on, Rob, in that in our remarks, we did highlight that without this kind of onetime pieces in the quarter, it would be slightly negative. I think that's kind of where we expect to close out in Q4 as well. And looking into 2026, again, I think you can expect low to mid-single digits on our gross margin. We don't provide margin guidance, but I think you do expect us to see incremental progress going forward from here on out. Operator: The next question comes from Jeff Osborne with TD Cowen. Jeffrey Osborne: I was going to ask on the former Project Forge and the Texas facility, some of the targets that were laid out for the restructuring there. Are those still achievable without the Texas facility? Can you remind me how important that was as it relates to getting gross margins higher than what Kate just mentioned? Marty Neese: Yes. I would say Project Forge is primarily automation and materials efficiency. And that is, in fact, still in flight, yielding well, heading in the right direction and not dependent on Texas in any way, shape or form. Texas was more of an integrated view for complete stacks and modules with Project Forge and the automation being a core attribute. But that's being done in Canada as we speak. So we're good on that front. Jeffrey Osborne: Good to hear. And then, Marty, you mentioned reentering the material handling space. I think from memory years ago, you were just in the liquid-cooled side for sort of the [ ride-on ] units versus, I think, the smaller pallet jack lifters were air-cooled. Are you doing both? Or are you just doing the liquid-cooled? Can you just further detail what specifically the strategy is on material handling? Marty Neese: Yes. The near-term interest we're seeing is for air-cooled. And so air-cooled with additional durability is resonating well with a handful of new customers. And when I say additional durability, I mentioned at least 2x the state-of-the-art as we see the market today. That really is attractive when you think about the service obligations for customers over the long run. And so different customers are really valuing that in a more thoughtful way as they get more and more experienced servicing and managing a long lifetime fleet. And so that durability equation is starting to show economic clarity for them. Operator: [Operator Instructions] The next question comes from Craig Irwin with ROTH Capital. Andrew Scutt: It's Andrew on for Craig. One quick one for me. Congrats on signing your largest marine order to date with the Samskip vessels. I know you've been working with this partner for a couple of years now, I think, since 2021. So can you kind of talk about the -- just evolution of this agreement, how it came about and maybe what you can take away from it and learn from -- for other customers? Marty Neese: Yes. I might pass that to Kate for additional clarity. But the headline is we have been developing this opportunity for a couple of years. And the product, FCwave product is DNV certified for a marine application. And so that took a good bit of time on certifications and standards bodies, but we were the first ones to do that. And after that heavy lift was complete on the certs, then we started seeing an adoption rate like the Samskip order. Noteworthy is that FCwave product has additional use cases beyond marine, and that certification of DNV, if you will, for the marine application, provided a lot of comfort to other customers in using that product and the approach that we use relative to that product. So that's kind of what I know from a background or context standpoint. If there's more relative to the contract evolution, Kate, that you want to add, feel free. Kate Igbalode: No, I think those are excellent points, Marty. And I think I'm glad you asked about this, Andrew, because I think there's a number of key learnings, not only on a technical basis, but also commercial and contractual and how we work with customers. I mean these are large projects. They take years to develop and form. And I think for me, one of my big takeaways was how are we listening to our customers in terms of what's important to them from a technological point of view and how we're using that to inform our next generation of product development. And then I think the other piece, too, is understanding their entire ecosystem around how they're getting hydrogen supply at a cost that is affordable to them. So it's kind of looking at the whole holistic view of what it really takes to get these projects across the goal line. And it's a very collaborative effort for us with our technical teams, our commercial teams and also on the aftercare and service piece is incredibly important in these types of applications, which really require very high reliability and ease of maintenance. So I was really happy to be involved on this across the last number of years, and I'm thrilled to see it come to fruition. Operator: This concludes the question-and-answer session. I would like to turn the conference back over to Marty Neese for any closing remarks. Please go ahead. Marty Neese: Thank you, everyone, for participating in today's call. Really appreciate it, and we look forward to providing additional updates in the future. Operator: This brings to a close today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.
Operator: ladies and gentlemen, thank you for standing by. At this time, I would like to welcome everyone to the Taseko Mines 2025 Third Quarter Earnings Conference Call. [Operator Instructions]. I would now like to turn the conference over to Brian Bergot. You may begin. Brian Bergot: Thank you, Jericho. Welcome, everyone, and thank you for joining Taseko's Third Quarter 2025 conference call. The news release and regulatory filing announcing our financial and operational results was issued yesterday after market close and is available on our website at tasekomines.com, and on SEDAR+. With me in Vancouver today is Taseko's President and CEO, Stuart McDonald; Taseko's Chief Financial Officer, Bryce Hamming; and our COO, Richard Tremblay. As usual, before we get into opening remarks by management, I would like to remind our listeners that our comments and answers to your questions will contain forward-looking information, and this information, by its nature, is subject to risks and uncertainties. As such, actual results may differ materially from the views expressed today. For further information on these risks and uncertainties, I encourage you to read the cautionary note that accompanies our third quarter MD&A and the related news release as well as the risk factors particular to our company. These documents can be found on our website and also on SEDAR+. I would also like to point out that we will use various non-GAAP measures during the call. You can see explanations and reconciliations regarding these measures in the related news release. And finally, all dollar amounts we will discuss today are in Canadian dollars unless otherwise specified. Following opening remarks, we will open the phone lines to analysts and investors for questions. I will now turn the call over to Stuart for his remarks. Stuart McDonald: Great. Thanks, Brian. Good morning, everyone. Thank you for joining our call today to discuss the third quarter financial and operating results. As usual, I'll provide some commentary focusing on the operational results, and then Bryce will get into the financial performance for the quarter. As outlined in our release yesterday, third quarter results were definitely an improvement over the previous 2 quarters, both operationally and financially. Mining in the connector pit had presented more challenges in the early part of this year than we'd anticipated. But on the positive side, the higher mining rates in the last 2 quarters have opened up higher-grade benches that we've been anticipating. In the third quarter, grades increased to 0.22%, which is up from 0.19% in the first quarter and 0.20% in the same quarter. This higher grade ore and less transitional oxide material both benefited mill recoveries, which increased to 77% in the third quarter. Mill throughput has been very steady this year, consistently operating at around design capacity. So overall copper production in the third quarter was just under 28 million pound and that includes 900,000 pounds of cathode production from Gibraltar's SX/EW operation. Molybdenum production in the quarter was 560,000 pounds, which is also a big increase from prior quarters due to higher moly grades, which typically track copper grades. Costs in the quarter were USD 287 per pound, an improvement over the quarter. Total site costs in the quarter was $7 million higher than the previous quarter, mainly due to SX/EW costs now being expensed as well as increased maintenance costs. Maintenance costs, including parts and major components is one area where we continue to see steady inflation. And all of that translated into $62 million adjusted EBITDA for the third quarter. Looking ahead, we expect to finish the year with a strong fourth quarter. Gibraltar produced 11 million pounds of copper in October, which was the mine's highest production month in 2 years. So the quarter is off to a good start. We will provide formal guidance for 2026 in the new year as we normally do. But generally, we're looking for a more consistent year next year with less quarterly volatility. Now shifting over to Florence, where we have achieved a number of major milestones recently and the operation is now well on its way to producing first copper. In September, our general contractor achieved substantial completion of the SX/EW plant in plant area. This is a huge accomplishment for the project team. In just 18 months since we broke ground to Florence, our team has been able to deliver this major capital project on time and in line with our previous cost estimates. So it's really a great achievement and the project is now into the commissioning phase. In mid-October, we received the final regulatory approvals we required to commence wellfield operations. We then initiated a short commissioning period, which included pumping water from the offer to establish hydraulic control in the wellfield. A number of normal course commissioning issues were identified and resolved and in early November, so about a week ago, we began acidifying the commercial well field. Overall, we're a few weeks behind our original plan, but we're very happy with the wellfield performance so far as initial flow rates in the wellfield are in line with and even exceeding our expectations. So it's early, obviously, but the operation is off to a good start. About half of the wellfield is being acidified now and the second half will start up in the next week or so. And in the weeks ahead, we expect to see the grade of copper and solution or PLS grade from the wellfield start to increase to a point where we can turn on the SX/EW plant and start plating copper cathode. Commissioning of the plant area is advancing in parallel with initial wellfield operations, and we expect to be producing copper early in the new year. An important aspect of the production ramp-up in 2026 will be our ability to develop and integrate additional wells into the operation. We're now preparing to restart drilling activity with 2 drills planned to start up here in November, and an additional 2 drills will be added early next year. The operating team in Florence continues to grow. Recruiting has gone very well, and we're up to about 140 employees on site now. Needless to say, it's a very busy and exciting time for all of them. It's great timing to be starting up a major new supply of refined copper inside the U.S. Obviously, copper markets and pricing remains very strong. And there are some interesting dynamics in the U.S. cathode market. Although there are no U.S. import tariffs on refined copper right now, the possibility of tariffs in the future has led to some speculative trading activity and growing capital inventories inside the U.S. The COMEX space has continued to trade at a premium to the LME recently at a 4% premium or roughly $0.20 a pound. However, our understanding is that the quoted COMEX price may not reflect what can actually be realized in the physical market, and capital sales in the U.S. maybe at a higher discount than normal -- higher than normal discounts that you might normally see to the COMEX price. Although we're still seeing a premium to LME pricing. This is a situation we're going to continue to monitor as we start cathode sales from Florence in the next few months. The U.S. government has aided that it plans to revisit tariffs in middle of next year with the potential for 15% tariff on cathode at the end of 2026, increasing to 30% potentially at the end of 2027. So in the longer term, this shows the strategic value of Florence, which will become one of the few U.S.-based suppliers of refined copper. Before I pass the call over to Bryce, I wanted to say a few words about our recent equity offering that was completed in October. The proceeds of that raise have significantly strengthened our balance sheet. We've now repaid the $75 million that was drawn on our revolving credit facility, and the remaining funds provide additional working capital support ahead of the Florence ramp up next year. We're also planning additional spending at Yellowhead next year on environmental and engineering work to support the environmental assessment process. In the third quarter, we held open houses in the local communities and initial feedback has been quite positive. So Yellowhead project permitting is off to a good start, and we continue to view Yellowhead as an important longer-term growth project for us. And with that, I'll turn it over to Bryce. Bryce Hamming: Thanks, Stuart. Good morning, everyone, and thanks for joining us today. Total copper sales for the quarter were 26 million pounds, which includes 900,000 tons of cathode. This was slightly below production due to shipment timing at the end of the quarter. We achieved a strong average realized copper price in the quarter, just shy of USD 450 per pound, in line with the LME average. And this has still continued to strengthen since the quarter end. This strong copper price translated into total revenue of $174 million, which includes $14 million from moly sales. Combination of higher sales volume and strong pricing drove a 50% increase in revenue quarter-over-quarter. On an adjusted basis, we reported net income of $6 million or $0.02 per share. For GAAP purposes, we reported a net loss of $28 million or $0.09 per share, and that was primarily due to unrealized foreign exchange losses on our U.S. dollar denominated debt and an unrealized derivative loss related to our copper collars we have in place. Adjusted EBITDA came in at $62 million, a significant increase over prior quarter, driven by the higher sales and stronger copper price. Capitalized stripping for the quarter was only $6 million, and it was substantially lower than the previous 2 quarters, and that reflects our progress deeper into the connector pit, where the strip ratio has declined and access to ore has improved. Turning to Florence. We spent USD 27 million on the commercial facility this quarter, and that brings our total capital spend since the start of construction, USD 267 million. We achieved substantial completion with our contractor in Q3, and we only have a few million more on this capital project to finish the year. This is within a few percentage points of our original construction budget since the start of 2024, and it's a testament to the execution of our capital projects team. Operating costs at Florence were $8 million in the quarter, and these will increase as we continue hiring full-time staff and ramp up our well field operations, and that will include the procurement and consumption of asset going forward now our operations are underway. We ended the quarter with $91 million of cash. In October, we closed an equity financing, USD 173 million, and we used $75 million of that to pay down our revolver. And with capital spending at Florence largely behind us now and improving production at Gibraltar. And coupled with this cash injection from this financing, our liquidity outlook is robust. We're well positioned to support the ramp-up at Florence and advance our work at Yellowhead. That concludes my remarks, and I'll now turn it back to the operator to begin the Q&A session. Operator: [Operator Instructions] Our first question comes from Duncan Hay from Panmure Liberum. Duncan Hay: Just a quick one on the wellfield drilling. What's the -- can you talk through the benefits of accelerating that and bringing that forward? I mean, presumably, you're constrained by capacity in the plant. But yes, what sort of flexibility or comfort does that give you? Stuart McDonald: Well, I think initially in the ramp-up period, the key for us is going to be opening up additional wells. The constraint is going to be not the plant, but the amount of solution flows that we can get off the wellfield. So it will be key to be advancing that forward. So we've got 2 drills starting up here in November, an additional 2 early in the new year. And in Q2 and Q3 next year, we'll see those additional wells start to come online and contribute to the ramp-up. So no, it's a big part of the plan. I think it's always been part of the plan. But yes, glad that we've got a solid balance sheet, and we can move forward confidently with that work now. Duncan Hay: You could see -- I mean you're going to put guidance out in the new year, but that -- if you look at what you were thinking, say, 6 months ago, you could have more production next year given the position you're in? Stuart McDonald: Well, yes, we'll see. I mean we're not -- we're giving -- we're actually not going to give production guidance today. Obviously, the technical report is out there and that had some assumptions about drilling as well. But no, we're optimistic certainly what we see today, the early results from the well field are positive, but it's early days. And yes, we're keep pushing forward. And obviously, first copper is going to be a big milestone for us early next year. Operator: Our next question comes from Craig Hutchison from TD Cowen. Craig Hutchison: I realize you guys aren't going to provide guidance for next year until, I guess, early next year. But just curious how you guys think about the kind of milestones for declaring commercial production. Obviously, ISRs are relatively new for most people. Just how do you guys think about that in terms of production rate you need to get to, to clear commercial product and is it the 60% of design? Or is there some kind of metric that you guys look at to determine that? Stuart McDonald: Yes, Craig, we're not thinking about it in that way. I know that's a conventional way it's been done in the past for concentrators. It's going to be a steady ramp-up of production through 2026. And yes, as I said, the key is going to be bringing on new wells, but we should see sequential growth each quarter in the copper production. I don't know, Bryce, do you want to make a couple of comments about the accounting? So we see, I guess, the rules have changed in recent years. Bryce Hamming: Yes. I think the real focus will be on our -- obviously, our C1 costs. We're going to be looking at what point that our production generates operating cash flow, operating profit. And with this project, given the nature of the operating costs, that happens relatively back from what we're seeing, like we could see that by midyear. And then I think as we continue to do the ramp-up, it's really about free cash flow and making enough money there to pay for the ongoing sustaining capital with the wellfield development. And that we see sort of later by the end of next and then onwards, , of course. So those are kind of the 2 key milestones. I think first is operating profit, operating cash flow and the second really being generating free cash flow. And so that's what we're really kind of targeting as we think about that ramp up into commercial operations. Craig Hutchison: Okay. So I guess until you reach your mid next year, do we assume that some of the costs will be capitalized or the moment you guys are producing sellable cathode, you'll start booking revenues right way in terms of kind of accounting? Do we think about revenues next year? Bryce Hamming: Yes. On the accounting side, the standards changed a few years ago. We now recognize revenue once it's sold. So even the first pounds of capital will be sold. From a capital perspective, there'll be some of the -- until the plant is fully up and running, there will be some of the plant costs which get capitalized until it's sort of available for its full intended use. . But the key, I think, with this operation, as we've looked at it, is the wellfield development cost. So that's the drilling and development of the wells, that is capitalized. So there will be significant ongoing sustaining capital that's put to the balance sheet and then amortized over the life of the well. Craig Hutchison: Okay. Great. And maybe just one last question for me. Just in terms of the capital, you effectively now complete the initial capital spend at this point? Or is there still some lingering costs into Q4? Stuart McDonald: Effectively, the work is complete. There'll be a few costs, commissioning costs that kind of trickle in, in Q4. I think we still probably have some of the cost and payables, right, that will come through the cash flow. But effectively, the construction piece is complete. Operator: [Operator Instructions] There are no further questions at this time. I would now like to turn the call back over to the Taseko team for closing remarks. Stuart McDonald: Okay. Thanks, everyone, for joining. And yes, if there are other questions, feel free to reach out to any of us. And otherwise, we will talk to you next quarter. Thanks, again. .
Hannes Wittig: Good afternoon, and welcome to Deutsche Telekom's Third Quarter 2025 Conference Call. With me today are our CEO, Tim Hottges; and our CFO, Christian Illek. As usual, Tim will first go through his highlights for the year-to-date, followed by Christian, who will talk about the quarterly performance and our group financials in more detail, and then we have time for Q&A. Before I hand over to Tim, please pay attention to our usual disclaimer, which you'll find in the presentation. And please also note that this conference will be recorded and uploaded to the Internet. And now it's my pleasure to hand over to Tim. Timotheus Höttges: Thank you, Hannes, and welcome to our results call for the first 9 months. Amidst various headwinds, we continue to deliver consistent, reliable growth. As usual, I will start with the year-to-date view for the group before Christian will dive into the details of the quarter. In the first 9 months of 2025, we delivered 3.7% of organic service revenue growth, 4.4% organic EBITDA and 6.8% growth in free cash flow and 9.5% growth in adjusted earnings per share. With these results, we remain on track for the midterm targets of last year's Capital Market Day. Also today, we raised our guidance to reflect T-Mobile's guidance increase. Despite a weaker than usual quarter in Germany, we talked about that last time, we keep our full year DT ex U.S. guidance unchanged, thanks to the good developments in other areas. We made progress with our strategic agenda in the U.S. with our successful acquisitions in Germany with a record fiber build, new collaborations and Europe's first industrial AI cloud across the Atlantic with significant progress in AI-driven digitization and our disciplined financial execution was recognized by Moody's with a credit rating upgrade to A3. Last not least, the Board of Management is proposing a dividend increase of 11% to EUR 1 per share for 2025. In addition, we plan to buy back EUR 2 billion worth of our own shares in 2026 together amounting to a shareholder return of nearly EUR 7 billion. As you can see on the next page, all our segments are contributing to our EBITDA growth. T-Systems leads the table with 11.7% year-to-date EBITDA growth. DT ex U.S. grew by 2.9% in the first 9 months. Moving on to our networks, where we continue to extend our leadership. In the last 12 months, we passed 3.6 million additional European homes with FTTH. We now nearly reached 23 million homes, of which nearly 12 million is coming from Germany. In the U.S., our joint ventures are delivering as expected, and we now have 934,000 fiber customers. Our mobile networks are leading across the footprint, and we are confident to maintain this leadership in all our markets. Let me now dive a bit deeper into a German fiber plan. We made some encouraging progress this year. And I know this is a big question mark for you what we are doing here and how are we reacting on the developments. First, we passed a record numbers of homes year-to-date, plus 17%. We connected more homes than ever before, plus 9%. And we achieved this with lower total CapEx, resulting from fiber CapEx savings, minus 9%. We achieved the savings through a variety of measures, AI-powered digitization, I talked about that, process industrialization, more shallow digging and better purchasing. This slide here is to illustrate that our fiber build has become much more efficient. This is a very important building stone for our strategy going forward. Another important building stone going forward is the tax benefited grant, which the German government developed over their accelerated depreciation model. We plan to reinvest this benefit into higher CapEx and thereby step up our fiber build-out without any changes in our DT ex U.S. free cash flow outlook as stated at last year's Capital Markets Day. So what do I mean by stepping up? First, we maintain our 2.5 million homes passed run rate. That's very important. We will increase the share of rural homes and the SDUs in the mix. And further, we will accelerate at homes connected with regard to the MDUs. So we are changing the way how we are building out fiber in our German footprint according to the current developments which we are seeing and the adoption rates of these fibers. With our new fiber strategy, we plan to strengthen our German broadband performance in the medium to longer term, both in terms of value and in connected volumes. Based on the efficiency improvements, we have already seen and the tax relief granted us that we can deliver a more effective fiber build, increase our fiber CapEx in the coming years, while -- and this is very important, confirming our stated free cash flow outlook of EUR 3.6 billion in 2025 and EUR 3.7 billion to EUR 3.9 billion in '27. At last year's Capital Markets Day, we talked a lot about how AI is accelerating our digital transformation. Throughout the year, we have shown a lot of examples of our AI initiatives. On Page 8, you can see that we have made further progress on all initiatives this quarter. We are seeing multiple strong use cases delivering tangible results. And this across the whole value chain of our companies in all our markets. I'm just coming back from a 5-day trip to Israel, where I have worked with our partners, with our ecosystem down there, how we can integrate their initiatives into our further digitization efforts. And I can tell you the agent model is offering us big time new opportunities, which we haven't considered yet. At the Capital Markets Day for DT ex U.S., we estimated the financial benefits of around EUR 800 million in cost savings by 2027. Based on the progress already made, we are very confident in delivering this target and even see more potential, more upside here. Last week, we launched Europe's first industrial AI cloud together with NVIDIA with a combined investment of EUR 1 billion. This is Europe's largest AI factory to date, by the way, opening up in the first quarter next year already. We also remain in the running for one of Europe's planned AI gigafactories, and we should talk about that later in the Q&A. Our customer growth continues on both sides of the Atlantic. Our mobile customer growth remained very strong with another record quarter in the U.S. And in broadband, we had a steady performance in Europe, while we suffered another small customer loss in Germany. Moving on to ESG. Despite rising data usage, outside of the U.S., we were able to slightly lower our energy consumptions in the first 9 months. Our ESG commitment has been rewarded with various awards such as the NetFed Sustainability Award and the award for Corporate Engagement for our initiative against online hate. Let's now move on to our guidance update on the next page. Our guidance remains based on last year's average of a foreign exchange ratio of $1.08. And as always, in the sum of the guidance for DT ex U.S. and for T-Mobile US adjusted by the U.S. GAAP IFRS bridge. T-Mobile once more raised its guidance for customer and financial growth, and we are passing this on in the group guidance today. T-Mobile raised its '25 EBITDA guidance by $300 million at the midpoint and its free cash flow guidance by $100 million at the midpoint. T-Mobile's new guidance now also includes the expected contribution from the recently completed acquisition of Metronet and UScellular. Our 2025 DT ex U.S. EBITDA guidance remains unchanged at $15 billion EBITDA and $3.6 billion free cash flow. With that, let me now hand it over to Christian for a deeper dive into the third quarter. Christian Illek: Thanks, Tim, and hello, everyone. So as usual, I'm going to provide you with an overview on the segment performance in the third quarter and then present some selected group financials. And as usual, let's start with the U.S. who have reported their numbers already on October 23. And you know that those numbers include a 2-month contribution from UScellular. Still the numbers, I think, are really impressive. You've seen according to U.S. GAAP, a service revenue growth of 9.1%. If we're taking a look at the postpaid service revenues, they even grow at close to 12%, and this is coming from volume as well as ARPA growth and the core EBITDA grew at 5.6%. Where is this all coming from? Take a look at the growth numbers on customers, and I think they are record-breaking. The postpaid net additions were 2.3 million, which was significantly higher than the consensus, which was 1.6 million. The postpaid account growth was almost 400,000, which is the highest number ever. The postpaid phone net adds were 1 million, which was also 150,000 higher than consensus and the best quarter since 10 years. And finally, the broadband net adds, which also include fiber, grew at 560,000. So I think what you've seen is a stunning customer result in the third quarter. The churn rate actually grew slightly vis-a-vis the previous years. But bear in mind, it was the lowest one among the 3 MNOs, which we have in the U.S. And the ARPA is now expected to grow at 2% vis-a-vis 1.5% in the previous quarter. So based on these very strong results, T-Mobile once again raised its net add customer guidance. They now intend to get to 7.2 million to 7.4 million postpaid net adds, which is up more than 1 million at the midpoint relative to the last guidance. And the phone net add guidance has been increased to 3.3 million, which is also up by roughly 300,000 at the midpoint. So a very, very strong third quarter. And now we're getting to Germany, a segment where we have to report some different figures, I would say. So if you take a look at the Q3 financials, you see there were impacted by prior year comps, but also by our cost phasing. And I indicated this already in the Q2 call that we have the double whammy coming from the wage increase, which obviously hit the EBITDA growth. So if you take a look at the headline growth in Germany, it's actually declined by 1.8%. And there are 2 factors which are responsible for this. In '24, you had the one-off revenues from the European Championships TV rights. And secondly, we have another, I would say, lower revenue contribution from third-party equipment sales, which are all low margin. We're taking a look at the EBITDA growth, which is slightly above 0. You can say it's stable and it's the lowest since many, many years. This is coming from a very low contribution from service revenue where we're getting into and the double whammy from the wage cost headwinds. You know that we increased the first wage increase in October '24. And then we had the EUR 190 one-off payment starting from August, and they both collapsed together in the third quarter, impacting the EBITDA quite significantly. Both of those quarters, the service revenues, especially the comp factor, but also the wage increases will roll over in the fourth quarter. So for the fourth quarter, we expect an EBITDA growth of above 2%, of at least 2%, above 2%, 2% to 2.5% of -- it's definitely above 2% to reiterate this for this community. Also, if we basically fast forward into 2026, bear in mind that we're not only facing headwinds from the wage cost increases, which are rolling over. We're also facing headwinds from the higher energy costs in '25. Both of them will obviously roll over in the next year and will help to support a better EBITDA result than the '25 EBITDA result. On top, we have launched an additional cost savings program, which is targeting only non-personnel costs, which will also support the EBITDA growth in Germany in the year '26. Let's move over to service revenues. And you see it on the right-hand side, the service revenue growth in the third quarter '25 was really low at 0.4%. It was all driven or largely driven by the negative contribution from the fixed line business. And there are 2 major explanations for this. One is the comp from Q3 '24, which was largely driven by B2B business. You see that we have a very strong growth in the third quarter of the previous years. That obviously has an impact on the year-on-year growth for this year. And the second one is we have to actually acknowledge that the German economy is weak right now. And we're seeing this in the number of insolvencies in the German market. So I think this is also something which is impacting us in a negative way. Secondly, the service revenue is impacted by the lower volume trends, which we're seeing in broadband, but also in wholesale. And this basically collapses to that negative growth in fixed line of negative 0.3% in this previous quarter in Q3. For Q4, we have a pretty high confidence that we're going to have a meaningful trend improvement. And for mobile service revenues, we absolutely remain consistent with the guidance which we have given, which is 2% to 2.5%. Let's move over to the broadband revenues. And you see that the retail broadband revenues obviously have come down. Also, the wholesale revenues have come down, and this is pretty much driven by negative volume impacts. What you see is that the ARPA-up strategy, so the more-for-more strategy is working. The ARPA growth in the consumer space grew by 3.6% in the previous quarter. So upselling is working and has to contribute a large part of the broadband growth. Despite the volume pressure, you see us discipline on pricing. We maintain our promotional period at 3 months. You know that we have taken this down since April. It was coming from 6 months. We have increased front book prices for single play between EUR 2.5 to EUR 3 a month. We also, in October, have increased the broadband front book prices by EUR 1. So we are playing the value game. We're playing the long game. We're not fighting for every incremental volume, and we hope that the market will stabilize in that sense. On wholesale revenues, what you can see is there's a significant step down relative to the previous quarters. We are basically flat as we guided it to be at the Capital Markets Day, but we do not expect any significant deterioration in the upcoming quarter. Let's move over to the fixed line KPIs. And you see that the monetization works upper right-hand side, 54% of our customer base on our customers with at least 100 megabits per second. And you see this continuous trend happening since quite a bit. And what you also see is that we're still not mitigating the negative broadband net adds. We're remaining at that 20% to 25% trend. And to be honest, we don't expect a significant improvement short term despite the fact that we're working on quite a significant amount of measures, which is digital retention management, extension of our distribution and more localized pricing. But what is important is obviously, since the market is slowing down and since we are facing ongoing pressures from the overbuilder that we have readjusted our build-out strategy on fiber. We're not only spending more on fiber. We're shifting the mix towards more rural areas and SDUs because we know that the connection rate is coming in much faster than it is with the MDUs. And we're stepping up the initial connections of MDUs. Even if we don't have a customer, at least a home is prepared and we have a connection there so that we can actually act on customer demand fast. So -- and you see that -- and I think that is kind of for me the bright spot in the quarterly numbers on the customer numbers that the fiber strategy is working off. We added another 155,000 fiber customers. This is the best quarter which we ever had. That remains the key focus area, and you know that we have given a commitment for '27 to add 1 million fiber customers over the course of the full year. Let's move over to the mobile commercials. And you see we're back as we indicated in the last call, we know that we have elevated competition quite a bit, but our commercials actually remain strong. You know that in the second quarter, we lost a very large customers. We said we will return back to the, let's say, usual run rate, which is somewhere in between EUR 250 million to EUR 330 million. And you see us now coming in at EUR 314 million. And this is also driven by a lower churn rate, which has been reduced from 0.9% to 0.8%. So that is pretty much it on Germany. So not a very good result on Q3, but a much better outlook for the fourth quarter. Let's move over to Europe. Europe has provided another excellent quarter, 31 quarters with consistent EBITDA growth. If we just take a look on an organic perspective, which is the lower part of the chart, you see that overall revenues grew by 2.2%, service revenues by 3.3%, and EBITDA has grown by 4.6%. You see that there is a sequential slowdown in the EBITDA growth, and this is obviously coming from the progressive rollover of inflation-driven price increases in some of the European markets. Moving over to the commercials in Europe. I think what you see is overall very good results across all categories. I think one has to highlight that the mobile net add is actually being impacted by negative cleanup ahead of the Romanian disposal of 60,000. If you would basically exclude this, there would be close to 190,000 of customer growth in the mobile space. And you see also steady and strong performance in broadband and TV and in fixed mobile convergence. Moving over to T-Systems. And T-Systems continues to be on a positive track. I'm really happy with the performance of T-Systems. Last 12 months order book is up close to 4%. The organic revenue is up by 3%. It's the middle column. If you take a look where it's coming from, T-Systems is actually benefiting from the AI-driven digital solutions, and we're talking quite a bit about AI, but also from the sovereign cloud services, which we're providing that supported this growth. And they had a very stunning organic revenue growth of close to 23% in the previous quarter in Q3, gets us to a year-to-date EBITDA growth of close to 12%. And this is coming not only from top line growth, but also from cost efficiencies. But bear in mind, this is a project-driven business. So there's quite a bit of volatility in there. But I'm completely confident that they're going to make and beat their commitments they have given at the Capital Markets Day. So that basically concludes my operational review, and we are moving over to the reported financials. I think, first and foremost, I think we have to acknowledge that we're negatively impacted by a weaker dollar. Last year, the dollar was at $1.10. This year, it's at $1.17. So it's a depreciation of $0.07. That impacts the reported figures. It's partly mitigated by the contribution from T-Mobile's M&A activities. And you see also that there is some phasing. But bottom line, I don't want to go through all the details here. I would say we're broadly on track with all of the targets. and you're going to see us confirming the CMD targets later on as well. Moving over to the usual Q-over-Q annual comparison of free cash flow and net profit, and I'll keep it short. You see there's a reduction of 9% in the free cash flow. This is very much driven by 2 factors. One is the weaker dollar, which impacts us with negative EUR 500 million and a stronger CapEx volume. And you know that we, in the previous quarters, have reported kind of CapEx, which was below the average what you would expect in a given quarter, and there is a catch-up, which you can see here. And if you take a look at the year-to-date numbers, they grew at close to 7%. So this is very much in line with the increased free cash flow guidance Tim was talking about earlier on. Same holds true for the adjusted net profit. It grew by 14%, but very much driven by the financial result and despite a headwind from a weaker dollar. Moving to the next page, which is leverage. So the overall, the leverage has increased by EUR 5 billion. Everything was driven and more than driven by M&A activities, which was obviously UScellular and Metronet. And you see the impact of EUR 8 billion. Nothing of the other contributions to the net debt are a surprise. You see us moving within the corridor, which we indicated, we're below 2.75, including leases. Excluding leases, we are 2.23, sorry for that. And I think that also led to the decision of Moody's to basically give us an upgrade in our rating. So I can only encourage the other rating agencies to take a closer look at our balance sheet and our financial discipline. So finally, on the last page, the key takeaways, we're confirming our midterm adjusted EPS target, which is around EUR 2.5 by the end of '27. Tim was talking about the consistent reliable growth despite some headwinds which we are seeing in Germany. But other than that, I think all the other segments are performing well. We have confirmed our targets which we have given ourselves in the ex U.S. business, and we have increased the guidance in the U.S. business, and we confirm our midterm CMD guidance. The flywheel works. We're working on our -- expanding our network leadership on both sides of the Atlantic. That drives customer growth as we've talked about this. And we have a massive initiative running on AI in order to not only drive efficiency but also top line growth. So I think this is something where you basically should remind us on every quarterly call, this is kind of what we call a drumbeat when it comes to AI. We are reinvesting, and we weren't clear about this in the last quarterly call, we are reinvesting the German tax relief into CapEx and into adjusted fiber rollout strategies. We remain comfortable with our comfort zone in the leverage. And obviously, I think we have proposed an attractive shareholder remuneration package with an 11% dividend increase to EUR 1 and an up to EUR 2 billion share buyback program for the upcoming year. With that, I hand it over to Hannes. Hannes Wittig: Okay. And now we can start with the Q&A part. [Operator Instructions] I think we start with Andrew Lee at Goldman Sachs. Andrew Lee: I had 2 questions. Two questions, one on capital allocation and one on the U.S. Just in terms of the capital allocation, you're obviously giving an 11% dividend growth guide for 2026. So I don't want to mean that and reloading on the EUR 2 billion buyback. But if we look at what that leaves -- where that leaves you in terms of your net debt to EBITDA for next year, even if we take out the positive effects on -- or the reductive effects of FX on net debt, you seem to be leaving yourself with more balance sheet flexibility into 2026 than you did a year ago. Could you just take us through why is that? What is the strategic flexibility that you need into 2026 that's maybe a greater pull on your balance sheet than last year and where that's coming from? And then just secondly, on the U.S., clearly, that's been, along with Germany, a kind of major source of concern in terms of the sustainability of growth from investors. And that seems to have narrowed down into a major concern around your Verizon competitive intensity. The question is just pretty broad and straightforward. What's your take on the degree of change that we've seen in terms of imminent competitive threat in the U.S. market and risk to your to derailing the TMUS growth story? Christian Illek: So let me start with the capital allocation question. Andrew, we actually have a slightly different view. If the weaker dollar is rolling over, so to give you the calculation right now on the leverage ratio, the EBITDA is calculated at 1.13 and the debt is calculated at 1.17. If you basically adjust both of them for the same rate, which will happen over time, we are 2.72. This is one. Second is, look, there's always projects coming up, which you don't know. And so for example, take a look at the Gigafactory, which we didn't have on the radar screen. And therefore, I want to have some flexibility. Thirdly, I think if you take a look at the shareholder remuneration program, which we have articulated yesterday, it's an 11% dividend increase. It's the highest dividend ever in the history of this company. And the EUR 2 billion share buybacks, if you assume that the EPS is around over the next 24 months at [ EUR 2.25 ], [ EUR 2.30 ], gets you an 8% yield on that share buyback program. But we feel comfortable with the volume, and we don't want to, let's say, be super volatile on this one. We want to be consistent. So it's a combination of, first of all, we're not as optimistic on the leverage ratio as your calculation is. Second one, it's prudent. And thirdly, I think it's still an attractive program. Look, we are basically distributing EUR 6.8 billion next year, which is quite a significant number, at least from our point of view. Andrew Lee: Just a quick follow-up on that, Christian. So the TMUS buyback is done, decisions are made on a seemingly quarterly basis. The DT buyback decision is currently on an annual basis. Can you see a time where that's made more flexibly, i.e., on a half yearly basis or quarterly? Or do you still expect to announce buybacks on an annual basis? Christian Illek: Both are being decided on an annual basis, but the programs are more flexible in the U.S. So we can course correct on the program. So for example, you know that we stopped the share buyback in the U.S. for quite a bit because we had a leadership change. And therefore, we have adjusted the share buyback program now for the remainder of the year. So the U.S. has more flexibility because we always have this freeze period or this grace period of 90 days. So we have to file 90 days before we actually can execute. So we have less flexibility on the ex U.S. side. but both programs are being decided on an annual basis. Timotheus Höttges: Andrew, I do not want to tell you a fairy tale in investor call, but it's a little bit, let's say, the second question like the hedgehog and the rabbit. And if you look back, the U.S. market has always been very competitive. It is recently very much focusing on device promotions, and that is, let's say, where it's going. And we were a share taker in this environment over the next. Now what we seen this quarter, it was that we were attracting more customers to us, and we had lower churn than before, which is resulting in a much better performance. We did that at the same time with a significant increase on our EBITDA growth with 6%, so which is giving us the opportunity to invest into the infrastructure and our network leadership has improved as well. Now it is not only about, let's say, subsidization or the money which you put into the market. It has a lot to do about, let's say, how good you are perceived from a brand, how good your network is improving compared to the others. It is about, let's say, how you enter into the smaller markets or the rural areas, how you're attracting business customers or even the broadband customer numbers is quite encouraging. We will probably see 1 million next quarter already. So this is all, let's say, growth, which is not coming only from price competition, but as well from quality and investments which we have taken before. Now coming back to the hedgehoc, I think we have heard about, let's say, the new announcement from Dan Schulman, which I know for years about what he is doing. And he has laid out his plans about that Verizon's ambition is to win back shares and moving away reasons to churn and focusing on customer centricity to grow his cash flow and his leadership over the next years. Now this sounds very reasonable to me. But the hedgehog is on a path already. So he is already running in another direction. So I think they are all well at this point. But I think what Srini and what the team is doing is this way of finding a new digital customer experience the way of serving customers in a new kind of Un-carrier way. This way of surprising customers with new propositions, this is what we are about. It's not about, let's say, that this is wrong what these guys are announcing. But customers are looking on other things as well and what is new with their brands. And I can tell you, I'm very encouraged about -- for instance, the efforts with regard to digitization. It's an outstanding achievement that 80% of the upgrades are done digitally within 1 year. So it shows to me even that the skills are within this company to reinvent the way how they're performing. They have cost potentials which they can reinvest. We have a super network leadership, which we have strengthened these days. All of this is coming together. So we are used to competitive environments. I don't think it's only about money. It has a lot to do with propositions which we have played out very well in the last years. And we stay -- remain focused on a thoughtful balance of commercial and financial growth in the U.S. market. Hannes Wittig: Okay. Thanks, Andrew. Thanks, Tim, and Christian. And move on to Ottavio at Bernstein, please. Ottavio Adorisio: Two questions. The first is on the domestic business. You highlighted the good performance on the ARPA. The 3.7% is welcome because that's compensated for your negative net adds. Today, you're somewhat guiding for a continuation of negative net adds, and therefore, the ARPU increase will be very crucial going forward. During the call, you attributed the main drivers to the upselling, not just the price increases. So your upselling will be very key for your growth. So my question is, how fast you can increase that upselling because it's still running significantly lower than you project for 2027 for around 1 million. You go into rural. So the question is there, how much the increase because you said that rural would be a better take-up rates. So someone would expect that the overall take-up of fiber vis-a-vis the overall base will increase. So that should be good for ARPA. And also you can update on the plans by the German Digital Ministry to weaken the landlord ability to stop in-house fiber rollout. Last quarter, you were very vocal. And I don't know if it's still a discussion or any decisions been made because that I think will be crucial for you to improve the upselling and therefore, of course, to improve the ARPA trends going forward. The second question, it's going back to the capital allocation strategy. But this time, I would like to do a bit more with numbers. You -- in the CMD, you're talking about a precise number, the EUR 15 billion surplus. I follow the logic. And at that time, you basically were thinking of unchanged gearing. And Christian, you've been very clear on the fact that 2.64 is misleading because you have to put the debt and the EBITDA on the same currency. That's fine. So if you do, you ended up effectively around the same gearing that you expect to go, 2.75. So therefore, last year, you allocated around EUR 4 billion for additional shares into TMUS and the EUR 2 billion buyback of last year was already included. So the additional EUR 2 billion that you announced today will be against the surplus. So effectively, you used up around EUR 6 billion roughly or EUR 6.5 billion of the surplus. So my question is, there is still around EUR 8 billion left there. Now is the intention to see TMUS share price relatively low for you to go for more shares in TMUS rather than the buyback considering for last year? Or it's still undecided what are you going to do next? Christian Illek: Ottavio, complex questions, to be honest. So first of all, on the ARPA increase, I think if you basically go back into the previous quarterly reviews, you basically see a linear increase of customers adding faster lines. So obviously, we're working on better monetization, especially when it comes to fiber because as we're moving into SDUs, obviously, we can monetize that fiber much faster also if we connect on the MDUs, that should give a contribution. The second one is obviously related to the price increases, which have recently been introduced, right? So you don't see any impacts on them right now. And obviously, we expect a net-net positive effect, which will drive also the revenue. And on the volume trends, look, I'm a finance guy. I'm a little bit conservative, let me put it this way. As long as I don't have line of sight, I don't want to promise you anything other than what you've seen in the previous quarters. And therefore, we don't predict anything as long as we have good evidence that the volume trend is actually moving in the right direction. And it's not too far away, to be honest, right? Just -- let's assume it's 15,000 more, then you're getting closer to the 3%. Right now, I think the 3% to 4% broadband growth is not being achieved right now. But I think on a CAGR basis, we have no indication or at least we believe this is still an achievable target. So this is the combination on how things are evolving. I don't know whether our signals to the markets like on single play on broadband will be received by others in -- let me put it this way, in the right manner. So that could help to basically go for a little bit of market repair. We will see whether it's going to happen. But that is kind of the basis we're working on. And the biggest lever for us is churn management, right? If we get the churn management on our broadband base, just a notch down, that will immediately turn quite a bit on the volume. So this is kind of the equation. I can't give you a mathematical equation, but this is the equation on the levers we're working on. Timotheus Höttges: Look, let me add update on the plans with German Digital Ministry. Yes, it is -- and I was, by the way, not vocal last week. I was vocal this morning already again in the press. It cannot be that we are paying the bill of building a fiber network, not only on the Level 4, but even -- sorry, Level 3, but even Level 4 in the houses. That we pay tons of money for connecting the country into the next-generation infrastructure and that then the landlords are sitting there and asking for a revenue share or asking for an installation fee for the apartments. If Germany really wants to get digitized, they have to support the environment. And by the way, the German Digital Ministry is already on our side. He had put a paper [indiscernible] into the discussion, which is clearly enabling and accelerating the build-out in the multi-dwelling units, which is the main part of it. So to be honest, I cannot tell you when they're coming to decision. I have the feeling that the German government is under a lot of pressure and taking a lot of decisions every single day. Next week, on Tuesday, there is the digitization Summit with Chancellor Scholz and with Macron and a lot of, let's say, other players. I promise you, I will address this topic there again. And I have the feeling that there is a big understanding. The problem here is that Vodafone is trying to defend their position in the houses with their coax, which is nothing else than copper, and this is not fiber. But I think more and more people tend to understand that, that they are not investing into the next-generation fiber, that they're just trying to defend their position here. And I make sure that we will, by the way, with the other fiber investors in Germany fight for this initiatives. Let me make a general comment at the end because Christian laid it out. Guys, since the last quarter, 3 months, we have worked intensively, intensively on reshaping the way what we are doing with the fiber rollout. And we have laid it out in the presentation today that the CapEx per connection has gone down. We expect further reductions being possible. Second, that we are now changing the rollout areas. Thirdly, that we are building more fiber, multi-dwelling units, homes connected and more homes connected with regards to the SDUs, so in the rural areas and single households because we see here a higher acceptance rates. Thirdly, to stop that the altnets are eating our cake. Fourthly, we have a total new go-to-market with regard to additionally to the ranges, we have now enabled our sales organization, our retail organization to meet people at their homes. Fourthly, we have allocated additional people to this one. On top of that, we have a new churn program, as Christian laid it out, and so on and so on. So we were very unhappy and we are unhappy with negative net adds. This is not acceptable. And therefore, I can promise you that there is a big program up and running within the financial commitments which we have given to improve the situation here in Germany. Christian Illek: So on the capital allocation, let me try to answer that question, at least partly. So first of all, we want to keep the flexibility. So if you take a look what I said earlier on, the share buyback program, which we decided or which we consulted with the Supervisory Board and obviously then decided on later, as a Board, will give us an 8% return, which is obviously a pretty good return relative to other means. Secondly, what we have not decided yet, we want to keep that flexibility for good reasons on whether we should basically continue with the share buyback program beyond the EUR 2 billion we have just announced or basically put everything into the T-Mobile US shareholding. Look, none of us in the summertime would have estimated that the share is going down to $203, right? None of us. So I think this flexibility is prudent to have and obviously, it has to be taken into account for. And the third one is, if you take a look at the current run rate, we indicated 4% to 6% EBITDA growth, we're around [ 4.4% ]. So we're not at the midpoint. So that -- obviously, that surplus is also coming down. And therefore, we take it -- let me put it this way, 1 year for another and explain why we're doing what we're doing instead of giving you a midterm outlook, what we're planning to do with the surplus. Hannes Wittig: Thanks, Christian. Thanks, Tim. And next, we move, I think, to Robert Grindle at Deutsche Bank. Robert Grindle: Sorry, no video, it's usual WebEx versus the issue here. Two questions on the increased attention to fiber in rural areas and stopping the altnets, eating your cake as you say, Tim. Are you thinking more greenfield sites here or looking to defend in areas already under threat from the competitor build? And secondly, you acquired a call option over 10 million TMUS shares owned by SoftBank last month. Is there an ongoing cost to that? Have you thought about buying out the residual stake? Hannes Wittig: It's both, is the answer. There is greenfield. I mean, basically, we're looking at areas which are most likely to be overbuilt and then we build there. That's kind of a big part of this change in mix. And if it involves overbuild of an existing plant where we feel that we have an attractive interest business case, then it will involve overbuild. Timotheus Höttges: With regards to the SoftBank question, at the beginning of October, SoftBank granted DT 10 million call options in TMUS that can be exercised at market price until -- and now listen April 2029. This is a very, very long-term option. And you know that we have a very good partnership with these guys, which has worked even without buying them out. So there is no read across to our target TMUS stake. What I can tell you, this is more a sign of the partnership, which we have built for a much longer-lasting relationship. So that said, as stated at the Capital Markets Day, TMUS stake increased remain one of the preferred uses of any surplus capital alongside M&A and DT level share buybacks. And therefore, there's nothing to say. The only thing is I think there's no need to make any kind of short-term speculation on activities here. Operator: Great. And with that, I think we move to Paul Sidney at Berenberg. Paul Sidney: I had 2. Firstly, we've seen more and more European telcos announcing their AI initiatives, talking about data centers, et cetera, yourselves, you're partnering with NVIDIA going live in Q1 next year. So I was just wondering, is it possible to put some numbers around this opportunity? I'm not looking for specifics, but just in terms of what the opportunity could be for Deutsche and perhaps the industry? And then secondly, you're one of the last European telcos to report. And on our calculation, European service revenue growth has worsened versus Q2. I was just wondering, what do you think yourselves and your peers need to do in Germany and the rest of Europe to maintain healthy service revenue growth and keep it in positive territory. We talk about value over volume playing a value game, prices are going up. But a lot of this stuff just doesn't really seem to stick. And I just wonder, it would be great to get your views on what you think the industry needs to do or change. Christian Illek: Okay. So I think, first of all, there is no single answer for each country. I think you have to take each country, country by country. And let me start with the largest one. Look, the indication, Paul, which we have given to the market is we would appreciate market repair in broadband, right? And we're doing this both on single play, where obviously, we don't have a lot of competition, to be honest. But also in broadband, and we have to see whether actually the other guys are following this direction, yes or no. We don't know. We cannot influence this. But I think in a slow growth market like the broadband market in Germany, that is the only way that you either upsell or that you have market repair on the overall market. And I think as the market growth rates, especially in broadband are coming down, it's not true for every Eastern European market, by the way. I think I would clearly favor value over volume. In mobile, it's a different answer. You've seen the net adds from our 2 competitors, negative 1 and plus [ 157 ]. Our segmentation is working, the conjunction of B2B vis-a-vis B2C and the separation between, let's say, single households, which are predominantly addressed by Congstar and family plans, which are predominantly addressed by the first brand, it's working out just fine. And this is why we're growing where the others are not growing. So therefore, I think we don't see any necessity right now to basically change that proven model, especially given the fact that we have our network optimization program, Nemo, which gives us the capacity to actually fuel those future demands. So I think you have to answer this country by country. And to be honest, I wouldn't be in the position to give you an answer in every European country. But overall, I think it's only working if the market, let's say, environment is also reacting in a rational manner. Because what you're seeing in many markets is that GDP growth is much faster than, for example, mobile service revenue growth. And I think that shouldn't be -- given the importance of that service, which we're providing, that shouldn't be the case. So we have to work on and especially market leaders have to work on repairing the market and actually getting the right value from the service. And then it's all about value-added services, especially in the B2B space, right? It's, for example, adding security on top. Security is a massive issue across the Board, especially for smaller companies because they don't have the capabilities to basically have an own staff, which is dealing with that security by adding IoT services on top, where we're seeing quite a significant volume impact here. So these are the things where I would say in our core business, I was just talking about mobile and fixed, how you basically put additional and adjacent services on top. Tim? Timotheus Höttges: I'd like to address your AI question. Look, by the way, the first one is you mentioned that telcos are going into AI on Giga in AI initiatives. Yes, that's true. But then you mentioned NVIDIA as an example, which is data center capabilities. In this case, I would say no, because Deutsche Telekom is the trailblazer here in this industry. I don't know whether others are following, but we are the early mover in this environment. There's not a single other telco who had made a commitment or partnership with NVIDIA committing 10,000 GPUs being available from first quarter 2026 for the industries here in Europe already. So let me talk about the AI Gigafactory for the first step. I think this is where we are unique. Maybe Telecom Italia is a little bit comparable here because they have this governmental commitment that all the data is moving into their inference centers, data center infrastructure. But no GPUs so far as I know it. We have now the partnership with NVIDIA, where we started with 10,000 GPUs. And I think Jensen and NVIDIA selected it very wisely because they are going to the industrial core of Europe, which sits in Germany. They're going to us and with us with the biggest market access to business customers. We can offer a sovereign solution, network infrastructures, the [indiscernible] 400 giga -- connectivity coming from us. The data center infrastructure is something which we know already because we are running 186 data centers across the globe. I'll go into that in a second again. The sovereign cloud, which we are offering already is now almost a decade in the market. So well known to a lot of, let's say, classified services. Our partnership with SAP on the BTP side is enabling the customers with their applications to go into this ecosystem. And NVIDIA is providing their latest Maxwell chips into this industrial environment in Germany. So I think this is a great opportunity now for us to see how the Industry 4.0 is becoming real in automation and digitization here. For us, this is a kind of good learning case. for the next step, which is the AI Gigafactory. Together with our partner, Brookfield, we have submitted a consortium bid for this Europe's planned AI Gigafactories. The size of the location is expected to be around 100,000 GPUs. We expect any investments here together with them off balance. But nevertheless, the distribution and the go-to-market will be facilitated by our T-Systems arm. So therefore, this is a big opportunity for us even to participate in this new high compute and digital ecosystem. We call it physical AI or we call it, let's say, participating in this environment of robots and the Industry 2.0, however you want to call it. Look, we do that step by step. We do that with strong partners. So it's not that we are going alone here and in a big risk. And this is a big opportunity. Now you can judge what you get for 10,000 GPUs on the market price today for revenues that would give you an indication about how much money we earn with that. We have a deal with NVIDIA that almost 50% is getting invested from them, 50% from us, and we have a revenue share model established so that we are cautious with regard to all the upfront investments here. But I think this is a unique proposition, which gives us as well credibility for the second step, which is the Gigafactory. On top of that, by the way, Maincubes, and sometimes we always forget that, Maincubes is with over 200 megawatts of capacity in operations or in development in Frankfurt, in Berlin. And GreenScale, it's another subsidiary of Deutsche Telekom and is with 170-megawatt project in Ireland and a 300-megawatt project in Norway on its way. So it's -- this is something where I think Deutsche Telekom is building on their infrastructure experience, something new where we have a lot of, let's say, competencies already scaling it up. And we only scale with commitments from customers. That's the good thing in this industry. It's not that we have to build a mobile network first, and then we will see whether we get customers. So we will learn on the run. So I think, yes, that's an opportunity for T-Systems business. Yes, we want to do that as cash cautious and CapEx cautious as well for our business frontline. And -- but nevertheless, we want to -- under the frame of building sovereignty for Germany, we want to scale that here in our industrial environment. Hannes Wittig: Thanks, Tim. To be clear, Maincubes and GreenScale are held through DTCP, right? And thanks for the questions. And we move on with James at New Street, please. James Ratzer: So actually, the first question I'd like to ask is to follow on precisely, Tim, from what you're actually just talking about that. I'm excited to learn more about the kind of NVIDIA project because the financial analyst would like to just go a bit further on the numbers from what you said just now. So I think the initial project with NVIDIA, you said it's about EUR 1 billion, of which maybe now Deutsche Telekom is going to be putting in 50% of that. But you said you could scale up with Brookfield now to 100,000 GPUs. Could we take that as saying that if that's successful, that becomes a EUR 5 billion investment we see from Deutsche Telekom? I would therefore love to just also understand a little bit more about some of the specifics about how you see the return on capital on that project. And then the second question I had, maybe one for Christian. But Christian, in one of your answers earlier, you seem to link the EUR 15 billion of surplus capital that could be used to the EBITDA growth of 4% to 6% range. So I suppose the question is, if actually EBITDA ends up being at the lower end of that range of 4% growth, what does that imply for the EUR 15 billion of surplus capital? And is there actually a commitment that all that money would be spent somehow by the end of 2027? Christian Illek: Do you want to start? Timotheus Höttges: Look -- by the way, I'd like to start with the first question. Again, these are 2 separate projects. The first project is 10,000 GPUs. It's going to be a data center being based in Munich. It is using an existing facility, which we have renovated. It's 3, 4 floors under the city. It is using 100% renewable energy and cooling from water, which is available. This 10,000 GPUs is something which we have in our planning, in our financial envelope, which we have laid out. No additional funding or concerns which you should have with regard to the envelope which we have laid out. The -- this project is now the first step. And that is, by the way, 100% on balance because this is a project which we run out of the system. The project #2 is the planning and the preparation for the AI Gigafactory, which is a European RFQ for 6 data centers across Europe, where the EU is committing to a certain utilization of their public domain data on this -- in this environment. In this case, we are planning an off-balance solution. In this case, we are not planning automatically, let's say, a high ownership on the infrastructure investments because we have said that we are going to take Brookfield as a partner into this ecosystem who is taking, let's say, a significant portion of the investments. We might even consider other partners who are building this infrastructure. It is too early to give you now the financial construction about how that is taking place, but the infrastructure will be built off balance. And it will be supported with public sector money or utilization, which is helping that. We are now in the selection of the real estate. We are in selection of where we are building it. We are in the selection about how this consortia would look like. There's an application, which is taking place in January. Then there is the decision from theEuropean Commission who is taking the offer. And then we will see whether we are successful or not. Until then, we will decide on -- the financials is something which we then have to release at a later stage, but not -- it's too early now. Let's focus on the Munich side first then. Christian Illek: So James, without declaring the detailed numbers, what is our planning assumption. Obviously, you can assume that we haven't built on the low end nor on the upper end on the EBITDA corridor. But there are several factors which are basically impacting the surplus. The second one is obviously our adjusted EPS because that impacts our dividends and the adjusted EPS is very much driven and impacted by the U.S. dollar. At the time where we have given the Capital Markets Day, we said we don't see any auction in the U.S. in the foreseeable future after the One beautiful Bill Act. Obviously, there will be spectrum made available in the U.S. You see there's quite a bit of activity also on the satellite side from SpaceX. So these were things which can also be used for that surplus. So -- and in that given chart, which I presented, I said it's predominantly meant to be used for either share increases or buybacks on the DT side -- share increase on the U.S. side or buybacks on the DT side, but we also want to have strategic flexibility in terms of assumptions are changing. And especially when it comes to U.S. spectrum, I think I would say we don't see a spectrum auction up until end of '27, I would be less optimistic that this is going to happen given what we know right now. So therefore, this is how we want to use the surplus, and this is why we are wake in how we want to use the proceeds. Hannes Wittig: Thanks, Christian. And with that, we move on to Polo at UBS, please. Polo Tang: I've got 2 questions. The first question is Rodrigo Diehl has taken over as CEO of Germany. But can you comment on how the strategy for the German unit is evolving? And what are Rodrigo's priorities? You've obviously already flagged a change in terms of the German fiber strategy, but what else is changing in the German unit? Second question is actually just on Starlink. So investors have had a number of questions on how Starlink will impact both broadband and the mobile markets in both Europe and the U.S. So I'm just interested in your perspective. Do you see Starlink as complementary? Or do you expect Starlink to take share? Timotheus Höttges: Look, I'd like to start with Rodrigo. And I told you that we're going to see a reinnovation of our team within Deutsche Telekom over the next years, and that is taking up here. And I have to say I'm very, very happy how the first weeks with the new team is. Being at Srini now in the U.S. with all his experience and his track record in Europe and Germany, plus his insights into fiber, being at Rodrigo now in Germany, taking over the lead. He's, by the way, hiring a new B2C head, who is there, the former Congstar manager, which we have seen. And then we have Abdu, who is the new CTO in the group, another young man with a lot of experience running or being in charge for the infrastructure and the network before. And we have a new CIO in the group, KD, who is coming from India with all his experience about using AI for software development and accelerating this business. There are a lot of people who are now trying to build their own legacy, and that is definitely something which is very encouraging. What we have talked or discussed today about the new direction with regard to fiber is definitely Rodrigo's work. He has intensively spent the first weeks on looking what is working, what's not working, how can we improve the homes connected, how can we improve the take-up rates on the numbers. I do not want to repeat all the initiatives which we are driving here these days. So that was, I think, a tough start for him. He's as well focusing on B2B and the capabilities of stepping up in new services beyond connectivity because traditionally, this market is somewhat competitive on the pricing side on the connectivity. And the third thing is he's very much focusing on culture in the organization. So the way of becoming more uncorporate, this element about becoming more collaborative across the teams. And the third one, digitizing the efforts, digitizing the organization, using AI, modernizing the way of how we're doing things, learning from the U.S., by the way, in this regard. This is something which he's driving actively at that point in time. So I think these are already 4 big initiatives, which is on. So we will bring him up into one of the investors call next year to get to know him, but I gave him some relief to work first on the operations and on his team before he's coming here and committing. But what you see, what we are announcing today is already his work. With regard to Starlink, to be honest, we can now highly speculate about what's going on there and what is Starlink doing and where is he going to. The first thing what I want to say is that Starlink -- and for us, very much relevant is the direct-to-sell connectivity. And this is definitely a very attractive complement to our wireless service. Because in the U.S., in large parts of the country, there are no mobile infrastructure, there are no emergency calls possible. And for this service, Starlink entirely makes sense. That is why we made that deal and why we're collaborating with them on the Gen 1. They are using our spectrum in this regard. So that is then possible that you have an immediate connectivity in these areas. I think that's very important to know that this has to play on the same bands as the bands which you're having in the phone. Otherwise, you have a very complicated switch and a complete registration service. The second is Starlink has now stepped up by buying Dish EchoStar spectrum. So for Gen 2, my understanding is this will not be deployed before '28, '29 with new satellites. With this, they might have a different position to play because they have more spectrum. But we should not forget that satellite providers are fighting with some technical issues as well. The first one is that there are limitations with regard to the capacity. Look, we have today 350 megahertz of spectrum, while these guys are coming with 40, 50 megahertz of spectrum. Second, they have latency issues. Thirdly, they have disruption caused by weather or line of sight issues compared to the networks. And in the cities where you have this dense traffic, it's very hard to substitute our services. So I see that as a very logical adjacency for telecommunication operators. We are very interested to further collaborate with Starlink as we did in the past. In Europe, the situation is -- and by the way, whatever we are talking about is very much U.S. because the spectrum which he has now is very much American spectrum. It's less of really globally used spectrum. The one which globally is available from EchoStar is for renewal in 2027, at least for a lot of European markets. So there are regulatory discussions coming up. With regard to the rest, European, I think the homes in Europe are much better served by terrestical services than in the U.S. So the substitution risks to a fiber line from satellite, I don't see that. It is only for houses which are really, let's say, rural, unconnected. In this case, a Starlink might make sense. But if you have a fiber or a 5G coverage at your house, I don't see a big risk on this one. On top of that, spectrum for Europe is limited in this regard as well. So it's not that they can have unlimited spectrum for satellite. So I would say the market potential in the U.S. is in this very uncovered areas. It is an adjacency to communication, mobile communication services. And in Europe, I really see that as a niche play. Hannes Wittig: Okay. Thanks, Tim. And now we move on to Josh at BNP -- Exane BNP Paribas. Joshua Mills: The first was just on the updated fiber strategy and the second on fiber CapEx. So on the fiber strategy, it looks like you're playing a mixture of offense in the MDU areas and defending more in the rural areas. Is that a fair characterization of how this new strategy has evolved? And perhaps to help us think about the impact of this. Could you maybe give us a bit of a steer on what your market share in MDU areas is, what your market share in some of the rural areas you're now targeting is and how that compares to your nationwide broadband market share would be very helpful. And then secondly, on the fiber CapEx, I know you haven't quantified this explicitly, but I think you were due to receive a tax benefit of about EUR 0.5 billion over the next 3 years from these fiscal rule changes. Is that the right proxy for how we should think about the increased fiber CapEx? Would you go above that tax saving envelope as it were to do more fiber if you needed to? And beyond 2027, should we now be thinking of EUR 100 million, EUR 200 million higher German CapEx as a fair run rate? Or is this really just a pull forward of more expensive homes that you would have gotten to later in the decade anyway? Christian Illek: I start with the second question. And I will never call this a pull forward if the build-out is not ready by 2030. So what kind of pull forward are we looking for then? So I would say an indication of around EUR 200 million a year is, I think, a good indication. So I would use this as a proxy. We haven't finalized our planning session yet completely nor have we discussed it internally. But I think that is -- so the EUR 500 million, maybe EUR 550 million, something around EUR 200 million is the right indication for an annual, let's say, increase of the envelope. But it's not going to be a pull forward because that program is running for so long that I wouldn't call this a pull forward. Hannes Wittig: On the other hand, tax benefit from the accelerated depreciation comes to an end in 2028, the -- from 2028, the corporation tax rate in Germany will come down progressively by 5 percentage points, which is also then resulting in a tax relief -- in progressive tax relief. So if you -- therefore, there is a longer time line for this equation that we have outlined today, although we have basically been specific on the next 3 years. Christian Illek: Since we're playing ping pong here, I think we're hopeful that this accelerated depreciation will be extended, especially if you see that the money which you basically get is being reinvested into Germany, and we can prove that. And I think that's a good argument to basically make this like the immediate expensing in the U.S. a more permanent vehicle or tool. Timotheus Höttges: Look, the answer to your first question is, you're right. In the rural areas, we have to defend our position. If you look that they are very stable and gaining market share from us where we are not covering. In these areas, we have traditionally high market shares, and we want to stop that bleeding by building out in these rural areas. And in the MDUs, we have a lot of MDUs where we have homes passed, but we have no homes connected. If you ask me about, let's say, the market share in MDU areas, it's traditionally very low because this is Vodafone area and the cable area. So therefore, we have their opportunity to grow market share. And if you ask me about, let's say, where can we invest in this area, I would call the mix would be with this additional money 50-50 in MDUs connected and in rural areas as well. So it's not -- I've just looked up the numbers here, so it's around 50-50, if that helps you. So I think that is the new allocation of the additional money. What we urgently need is definitely this kind of getting access to the apartments and to the houses. That's definitely something which -- where we need the political support. Otherwise, these investments are very difficult to monetize. But anyhow, we should give you an update about all the details when implemented. I do not want to release all details here because that from a competitive angle is as well something relevant for us that we have a little bit surprise factor as well. Hannes Wittig: Okay. With that, we move on to -- thanks, Josh. We move on to Carl at Citi, please. Carl Murdock-Smith: Two questions, please. Firstly, in Germany, on the wholesale access revenues, what drove the slowdown in Q3 or recognizing that your CMD guidance was stable? Maybe the better question is why was the wholesale access revenue growing faster than anticipated in the first half? And then secondly, I was wondering if you can talk a bit about T-Systems, both the growing disparity between public sector and corporate revenue growth rates and also EBITDA growth. I'm used to talking about margin dilution in enterprise telecoms divisions. So can you talk a bit to the margin growth you're seeing there? Year-to-date, margins have improved by 100 basis points. Is that just phasing? Or are we seeing a structural shift in T-Systems margins going forward? Timotheus Höttges: Look, on the wholesale side, our capital markets guidance was for stable wholesale access revenues for the period of 2023 to '27. That is what we always have said. So far, we have outperformed the guidance. But now we're seeing volume losses overcompensating ARPA growth in these areas. And that is mainly coming from the weakness of our competitors in the broadband area. So it's a little bit, let's say, the indirect impact of the development of the retail broadband situation here in Germany. In the third quarter ' 25, our wholesale access revenues were essentially stable. So we are expecting somewhat a similar picture for the next quarter. And here, we are focusing on monetizing our fiber footprint with our partners as well. So what we are doing for us should be, let's say, accessible and available for our wholesale partners as well. So Telefonica or Hansenet or alike. And we are discussing now how they can improve their fiber utilization as well. But so far, I think -- I know that we are in line with our expectations here. Christian Illek: So Carl, let me try to give you an answer. I'm not sure whether I'm satisfying or whether you're going to be satisfied with the answer. Look, first of all, we have a mix of different businesses within T-Systems. So you have infrastructure-like business like the cloud services business or the road charging business, which is obviously very much depending on the capacity utilization of a given infrastructure. The second one is digital solutions, which is predominantly driven by utilization and rate card performance, right? How good is your pricing lever you're providing to your customers, completely different businesses. The third one is the team around Ferri is laser-focused on efficiencies. So he's probably one of the hardest guys when it comes to cost reduction because he knows that his margins are razer sharp and thin. So therefore, he has to prepare also for quarters where things are not happening the way how he wants to see it. And the fourth topic is the nature of projects. Look, first of all, it's the mix I was talking about, whether it's infrastructure-led or more digital solutions led. Obviously, digital solutions coming in with lower margins relative to the infrastructure. The second one is, do you have a lot of A-deals, which are very large deals? Or do you have a contribution from smaller deals who usually have a better profitability. This is why I was causing (sic) [ cautioning ] you don't read too much into that 23% EBITDA increase because there's volatility coming from different angles, and you don't know how the business mix is going to look like in the upcoming quarters. And therefore, it's much, much harder to predict relative to the infrastructure business, which we're running outside T-Systems. But what I'm seeing is, look, we're coming from negative cash contribution from T-Systems, and we are now in positive territory. The operating free cash flow is actually growing. And I think this is where I'm saying as a finance guy, I don't expect you to give me 10% of the overall pie on EBITDA, right? But I want to see a continuous trend improvement so that we don't have to discuss T-Systems as a financial, let's say, challenge. And they are helping us in kind of pull-through by selling other businesses because they're solving complex issues, especially with the public sector. For example, remember the COVID app, which was basically being built between T-Systems and SAP that helps you in those sectors. So this is kind of a pull-through effect, I would say, you're going to have from the infrastructure business. So this is why I'm happy, but I can't give you kind of an equation whether it's accretive or dilutive because it depends on the mix of the business, which is coming in every quarter and that changes. Hannes Wittig: Okay. Thank you, and thanks, everyone, for the Q&A, which is now coming to an end. I think Tim would like to make a few closing remarks, and then I take back from you. Timotheus Höttges: Thank you for the questions. Look, my summary of this quarter and even looking for the end of the year is, this is -- everything is well on track with regards to the overall capital markets targets. We had this concern about the German broadband market. We have a great plan now worked out, which is in execution. We have a good team, which is now pushing for that one, young fresh leaders here. On top of that, we are able to increase our dividend to EUR 1, which is another commitment. It is the highest dividend ever paid in the history of Deutsche Telekom. And on top of that, we are committing to the share buyback, which was highly and well received from the market environment. All the acquisitions are well on track. No kind of negative surprise. The opposite is the case. For instance, with UScellular, we have a very good development as lighting out one issue. And we have cleaned up the portfolio again because after a long, long painful period, Romania is out of the portfolio, which is now -- which has now resolved as well. And then the Deutsche Telekom is quickly taking the opportunity of the sovereignty discussion here in Europe, where we see big opportunities. There is definitely the AI factory, which I want to mention here. We were able to develop this whole concept to implementation, ready to use within 6 months, 10,000 GPUs. That is the biggest GPU in Europe at one single place. And on top of that, it's increasing the capacity of GPUs in Germany by 50% in one single step. And I can tell you, this is giving us huge credibility, not only in the public environment, but as well for business use. And we are going in the defense sector, both on the T-Systems side and as well on the DT Capital Partners side, which is helping. And the last thing which I want to mention is expect more from us with regard to AI and the AI implementation. Great ideas in the organization, agent models enabling new opportunities here for us, which we are evaluating a strong momentum here in our company, good use cases and success cases as well from the U.S. now swapping over here to Germany and other markets. So next year, it's going to be an AI year. And that is something which is helping us to not only increase our customer retention, but as well our efficiencies here, which is well on track. So I'm overall very happy with the situation here. We will do everything to improve the financials, not doing the stupid and ridiculous things here, and we like to thank you for your trust. And have a nice day, guys. Christian Illek: Thank you, guys. Hannes Wittig: Thank you. And now just if you would like to ask further questions, please contact the IR department. And we look forward to hearing from you again and see you soon. Thank you very much. Bye-bye.
Kaarlo Airaxin: [Foreign Language] Excellent. Well, Luis, please walk us through the Q3 and give us a glimpse on the future ahead. The floor is yours. Luis Gomes: Thank you very much. Just asking the slides. Thank you very much. If we go on to the next -- to the first slide. So we had a strong or reasonably strong third quarter for the year. Our net sales were slightly down on last year for the same quarter. But last year, we're coming back off a bad second quarter. So we had a bit of a spike in the third quarter. We usually expect this to be a quarter with slightly slower in relation to others because there are holidays, summer holidays, summer breaks for ourselves and for our suppliers and also for our customers. So we usually expect to be a slightly quieter quarter. But nevertheless, we maintained the positive EBITDA. And -- the thing that we were less happy about was the cash flow that was very negative, but we expected that to some extent because we had large prepayments on many projects that were now -- we were now paying suppliers, we were paying subcontractors. And that is part of the reality of our business that this goes up and down during this period. Our order backlog has also gone down mostly because we are now waiting for new orders that we have been working on for quite some time. So we have focused our sales force in addressing those big orders. We are waiting for them. They are later to be contracted than we wanted. They are still there. We are still working with them. We are still going through negotiations and discussions with the customers. Probably chief among those orders is Sterna that has been commented quite a lot. We are still waiting for that. And because of that, our order backlog is waiting for those large new orders to come on, but they are late. And of course, our sales force has been very focused on that. But overall, for the year, we are still ahead of last year. We are doing bigger net sales. We are still in positive EBITDA territory. So in general, things are going okay, good even. We have had to announce a reduction in our guidance. I'll get to that in a bit. But that reflects the later arrival of new orders. We can go on to the next slide, please. So as I said, for the year, we have a strong positive EBITDA ongoing. And a lot of this is coming from the -- on the back of our sales of data and services. Not only that is growing in terms of net sales, but we still maintain a very good profitability. And that is contributing very positively to the overall performance of the company and particularly for our positive EBITDA. And this is now the fifth quarter in a row that we have maintained positive EBITDA. And this is something that for us represents quite a positive outcome over the last few years after many years of very variable results. On to the next slide, please. So as I mentioned, we had to announce new guidance for the year, largely due to the fact that some one large new order Sterna is delayed, but also because we have an issue with one of our suppliers on the SKAO project. And those 2 things have reduced our guidance for net sales for the year because we have not been able to do as -- or to recognize as much revenue as we would expect. And we also do not believe that we can maintain a positive operational cash flow for the year, but we still maintain the guidance of a positive EBITDA. Now we have done several actions over the year to mitigate these. We have been waiting until -- the last quarter was the one -- the Q4 was the one where we expected this -- both Sterna to come on and also to have a big revenue recognition from this one project, SKAO project. So when we realized that, that was not happening that we could not meet that, that's when we provided the update. We have nevertheless taken some measures. So there are people that we have not increased our staff, for instance, in preparation for Sterna. We are delaying hiring people to meet the start of that project. We have also done -- we have trimmed our workforce across the Board throughout the different sites to become more efficient throughout the year. So we have taken a few measures to actually mitigate to some extent these delays that we are seeing. Going on to the next slide, please. So just to give an update on Sterna. This is a big European program. It's a big European project. It requires the agreement of different countries. It requires the agreement of different meteorological services around Europe. And what EUMETSAT, the organization that ultimately is the customer has told us is that in July, when they tried to actually secure the agreement of all these countries, 5 countries did not commit and one in particular, needs to commit because not only of budget, but also of their importance in the European meteorological sector that is France. So France, as many might know, has had some issues with the government, and there have been a [ refugee ] issues in the country. And this has all made it harder for the country to commit to the project. We believe still they are still interested. They have committed in the past, said that they would support it, but we have to wait. And what that has meant is that EUMETSAT could not actually give the go-ahead to the project. This doesn't mean that we are not working on it with a prime contractor with ISA, the European Space Agency that is responsible for the implementation of the Sterna project. So that is discussions, negotiations are ongoing. So there are many, many ongoing activities around Sterna, but the reality is that the project -- the award of contract is late. We expect it to have it in quarter 4 this year, and we are now expecting it in quarter 1 next year, subject, of course, to the EUMETSAT Council agreeing this that the project can go ahead. If we go on to the next slide, please. Other events. So the other big event that had an impact on our net sales for 2025 is the SKAO project. So this is a program that we are doing supplying equipment for telescopes, radio telescopes actually on the ground. And what happened there is that one supplier was selected by the customer. The customer said you have to work with this supplier. And there has been a technical disagreement between them in terms of performance about what they are delivering. So we are basically between these 2 parties. But we are -- we believe we are closing on the resolution. But what this has caused is that about SEK 30 million in revenue that we expected to recognize this year, we could not recognize. So that -- this has had a big impact on our net sales for the year. As I say, we are working with both parties to resolve the problem. So we are doing tests. We are doing simulations to show that things work. But this is an ongoing process that we are currently undertaking. So we expect to resolve it, but it's just taking longer than what was planned. And in view of all of these changes, we have actually -- and I know that I have mentioned that I will be presenting a long-term outlook for the company. But because of these changes and because of the changes like, for instance, Sterna has quite a big impact on our forward look. We have decided to delay that presentation that show of what -- where we are going just to let us to see how things happen, when they happen, what are the timings as they have quite a lot of impact on our workload. And so the way we go forward depends on that. At the same time, as I mentioned, we have been streamlining throughout this last year, our operations on missions and systems and products, sorry. As many of you will know, we have shown a reduced order intake, particularly on missions. So we have reduced the amount of staff that we have dedicated to that part of the business. But at the same time, we have had quite good news on our product side. So we had the first CubeCATs delivered earlier this year. So that's our laser communication system. So the first 2 have been delivered. And looking more towards our services side, things continue to grow, to expand and to be very successful. YMIR-1, our dedicated VDES test bed satellite has demonstrated link -- VDES link for the first time in orbit. We are now doing several tests and evaluations with potential customers. We are working with some coast guards. We are working with organizations that are trying to bring in VDES into their operational day-to-day setups. And so we are actually seeing quite a lot of demand for those services, and we see that as a very successful outcome for the last few months for the company. And in that vein, in our maritime intelligence side, we also announced recently that both Sedna-1 and Sedna-2 are now fully operational. So that's quite good for us for our -- particularly our ship tracking AIS business. That is something that having more data is an important part of our business and to grow that side of the business. So we are seeing quite a lot of success in our data and services business. And -- also product admissions, although we are in a right way right now in a bit of a waiting period, we still expect it to be very successful, and we have quite a very strong pipeline on that part of our business. We go to the next one, please. So looking ahead, what we expect to see in the next few months coming. We do expect our order backlog to recover in 2026. As I said, we have a strong pipeline, both on the data and services, but also on the products and missions that we are building. So we expect that recovery to happen. We have launched of VIREON-1 forecast for quarter 1, 2026. So that is something that our teams are focusing very much right now on, preparing the satellite for launch. And INFLECION Phase 2 is approaching. So we are now in contract discussions. We are now with proposals. So we are now just in that final point of securing that second phase with our customers. So that -- all these are quite a lot of -- this represents quite a lot of activity for our teams right now. And next one, please. I think -- the next one, please? Or is this the last -- so I believe this is -- it might be the last one. So this is where we are right now. And I'll open the floor for questions. Kaarlo Airaxin: Right. Thank you. Yes, exactly. I believe there was a last slide saying that this was the last slide. But we have received a lot of questions ahead of this broadcast, and I can see that people are using the live chat as well. But I'll just make a reflection here. And so this result was a bit of a mixed bag because the Q3 was down year-on-year, whereas the 9 month was up year-on-year. So what do you think that we in the market should be looking for? Shall we not focus so much on the quarterly and then see this as, let's say, a long-term business and perhaps look at the 6 months and 9 months? Luis Gomes: I usually say that my preference is to look at on a yearly basis. Of course, when we are just coming from restating our guidance or changing our guidance for the year, this might sound strange. But I still think that as a business, if you look at the types of projects we are working on, the types of deliveries we do for our customers, quarterly tends to be quite a narrow time frame. Things change quite dramatically in a quarter. So usually, I prefer to look at on a yearly basis. That's a more -- or a 12 months basis. That's a more accurate way of seeing how our business is doing. Of course, we are still -- if a quarter is the last quarter for some reason, some orders move to the next year, we have a big change. But yearly is a better time scale. Kaarlo Airaxin: Right. But then again, if you're listed on the market, the curse is the quarterly. So I will just throw in a couple of questions here. So margins in the segments, data and services fluctuated significantly between quarters. Why and how should we think about this as the constellation grows going forward? Luis Gomes: So data and services, there have been a few one-offs on our data and services that have improved dramatically our profitability. But it is still a strong profitable business. Our EBITDA there are still in the 36%, I believe. So there are events sometimes that increase that. On the other hand, we have also increased our sales force, for instance. We have grown our team that is actually on the ground, talking to customers, selling more services in preparation for the new satellites for the new constellations. So we expect to maintain a strong profitability and actually grow the profitability in the future. But it will vary, particularly now while we are building the business, that part of the business. Kaarlo Airaxin: And also, I'll just throw in another question that I just received here from the sideline, and that's a more general question. Would you be able to elaborate a little bit of orders from the defense side? Any comments, any updates? What can you tell us? Luis Gomes: We can't talk too much about what we are doing on defense right now. There are several conversations ongoing. It's an area of interest for us. We already do work, particularly on our ship tracking business. A lot of it already goes to the security, defense and security market. Many of our products end up in defense-related satellites, but we do have a few other conversations ongoing. We can't talk much about them right now, but I can assure you that there is quite a lot of interest from that side on our products and our missions and our technology. Kaarlo Airaxin: Okay. And I have a couple of questions here from EUMETSAT and Sterna. And just to recap here, if I understood you correctly here, it's the delay of the decision is very much out of your hand. So it's more of a European community problem where we have an internal problem in France. So it's not really connected to Sterna. That would be the right interpretation. Luis Gomes: Yes, it is. So these big programs usually require full agreement from all countries on EUMETSAT, unanimity. And sometimes that is not reach -- that cannot be reached. And that does create an issue. I believe this was the first time that in a program of this magnitude that was seen that happened. So it was a bit unexpected from everyone, but it's something that is outside our control. We can help by making sure that what we are offering is good and it is appealing, but we can't control politics at European level. Kaarlo Airaxin: No. Well, maybe they can't either. But -- and also, this is -- I'm just reading from one other question here. And I think that, that is also connected to Sterna and the contract. Despite the fact that there is no decision, can the contract still be negotiated ahead of any award? What is the process there? Luis Gomes: So the process is that we are discussing with the European Space Agency, they are with our prime. So our prime is OHB Sweden. So we are discussing with the prime, and they are discussing with the European Space Agency. So discussions -- the setup of the contract, the technical discussions are all ongoing. It's just that we don't have yet the go-ahead. But all the preparatory work is being done now. Kaarlo Airaxin: Okay. And I have some cash flow discussions here, but I'll just pop one up that I received ahead of this, and that's you've been given extended overdraft facility by the banks, I take it. What does that mean? What can we read into it? What would you like us to read into it? Luis Gomes: It means that the space business is very what we call lumpy. So you have large orders, you have -- sometimes you have to pay suppliers quite a lot of money in times when you need a certain amount of flexibility. At the same time, we are also investing in our own constellation during that period. So having that -- having those facilities gives us the flexibility to be able to manage our cash and not having to stop investing, for instance, because we have a big outflow to our subcontractors. So it allows us that flexibility. And that's what we have been trying to build is that flexibility into the business. That is naturally quite variable in terms of cash. Kaarlo Airaxin: So it gives you, let's say, a cushion to continue with operations and perhaps expand operations there. And maybe that, in a way, answered the next question, which is you're not able to have a positive cash flow from operations and the mechanics there. So basically, it's you -- would that be a quarterly situation that you would have a negative cash flow in one quarter and then you have a positive due to the lumpiness of the business? Luis Gomes: Yes, that's usually what happens. So quarters are very variable when it comes to cash. So we expect that our target for not this year probably, but for the years following is to continue to have annual positive operational cash flow. So that's something that we want. That's something that we have thought very hard for. But we are still very dependent on large programs coming in coming then payments to subcontractors. So it's very variable. And in that context, quarter-to-quarter, we'll still see some very big variations. Kaarlo Airaxin: And I would just read a couple of questions here from the chat as well. Although we have talked a little bit of data services net sales, can we expect the data services net sales to stabilize or grow quarter-to-quarter going forward? Or should we be more patient and perhaps look half year and 12 months? Luis Gomes: We expect -- in terms of sales, we expect it to start growing next year. I would expect with new satellites coming online, we have -- middle next year, I would expect it to start seeing an uptake of our data and services. But that's because new satellites are coming online, and that should also improve our profitability at the time. So I do expect it to grow probably on a quarter-to-quarter, but you'll see it more on an annual basis. Kaarlo Airaxin: And we have a technical question here. Well, more or less technical. So have you decided on the number of satellite in INFLECION yet? Luis Gomes: So the baseline continues to be 12, but we do have a few opportunities to grow that number. So we stick to 12 for the time being. That's our design target. There are options for more. Kaarlo Airaxin: Yes. So yes and no. 12, but it could be increased. Luis Gomes: Yes. It's something that we are still in Phase 2. We are entering Phase 2 of INFLECION. So this is when we will probably make the decision. Kaarlo Airaxin: Yes. Another way to -- well, or a segue to that question would be then, so you have decided on 12, but if there is an opportunity to increase that, you would be able to do that. Yes, all things considered. Luis Gomes: And also, even outside the INFLECION program, we have options to actually include. We could build more satellites, for instance. So we have been looking at that possibility. So there are opportunities even without INFLECION. But within INFLECION, yes, we could have more satellites if we decided that there was a market for them. Kaarlo Airaxin: Yes. And if we look at the order backlog, you have previously stated that you have a good visibility and this time, it has decreased and well, connecting that to the visibility, could you just walk us through why? And what can we expect in the future? Do you address that? Do you need to address that? Luis Gomes: So as I say, probably the big item has been Sterna on the order backlog. It is a huge thing. As I say, because we are in negotiations, we are in discussions, a lot of our sales force, a lot of our people that actually -- our sales and business development people have been involved in that. And we are focused on that work. It is the case that sometimes we have to focus on some of these bigger orders. And then if they don't come through, then we have a delay on our reduction on our order backlog. But nevertheless, the pipeline remains very strong. Kaarlo Airaxin: So more to come. And I'd just like to -- well, highlight because I observed that DNB Carnegie recently initiated the coverage of you with a fair value of 106, which is above today's print. And I don't really need you to comment on their target price. But if you don't mind, I would like you to comment on 1 or 2 of their assumptions, if that's okay with you. And in case of Sterna, they expect -- well, or mention initial order value of around EUR 5 million to EUR 6 million for the first 6 satellites while you as a company have previously communicated a total project value of around EUR 60 million. That doesn't necessarily mean a contradiction in terms because there's a difference between 5 and 6 satellites and you are mentioning 12. But could you elaborate a little bit on that? Luis Gomes: I would say that, that guidance is incorrect. So we stick by the total project is worth a lot more. It's worth more than EUR 60 million. So I think they underestimated quite badly the number. Kaarlo Airaxin: And in the report, they compare you to several international satellite operators. And when you look at the stock market, it's -- well, we're in the stock market, we like peer groups. Do you agree with their peer groups? And if anyone wants to know them, I refer them to the report because there's a number of peer groups. Are you comfortable with peering? Luis Gomes: In general, yes, I think they are representative of our sector, even if in some cases, they -- the mix of their business is a bit different from ours. But they represent different parts we operate in. And in that sense, yes, I'm satisfied with that. Kaarlo Airaxin: And they use key metrics would be EBITDA margins and sales. And yet again, not going into your internal key metrics, but for the market, that would be good metrics to look at, I take it. Luis Gomes: Yes. Kaarlo Airaxin: And in that case, would you expect -- would it be possible for you to reach some SEK 370 million, SEK 375 million in sales for the next years -- for the next year, I should say? Luis Gomes: Yes, I think so. I think that's a perfectly achievable number if we look at the kind of pipeline we've got right now. So yes, I'm fairly comfortable with that assumption. Kaarlo Airaxin: Yes. And then also, I received an interesting -- well, an interesting question for many companies listed in Sweden and reporting in Swedish krona. Do you expect the exchange rate difference to further impact Q4 and 2026? Luis Gomes: As always, you're asking me to guess the international markets that is something that is quite difficult. We try to hedge a lot of our debt on currency. We also operate a business that is very varied across different countries. So yes, we expect it to have an impact. But at the same time, we usually are fairly comfortable because as I say, we buy and sell in many different currencies, and we always -- we tend to hedge all of those. But when it comes to reporting, yes, we expect that to have an impact. Kaarlo Airaxin: And one of the key words there were many currencies. And forgive me my ignorance here, but would it be fair to say that particularly towards the Swedish krona, that would be more, let's say, a translation rather than a transaction, you buy and sell in euros or dollars, but you report in krona? Or should I look at it in another way? Luis Gomes: No, it's exactly that. So we tend to operate very much in euros, British pounds, in dollars. That is a lot of our operation maybe that's in those currencies. So it's more how we translate that into our reporting. Kaarlo Airaxin: All right. All right, Luis, thank you for that. Considering the time here, it was very educational. And there's a lot of questions out there. And any one of you who needs to have more information or granularity when it comes to the satellites and other programs, we would guide them towards yourself, and that will be your web page, I take it. Luis Gomes: Yes, that would be a great place to start. And if you want any more -- if you want to discuss anything, Håkan will be more than willing to actually direct you to the right people. Kaarlo Airaxin: Excellent. And Håkan, that would be the Head of IR. So with that, Luis, I thank you so much, and I wish you the best. Luis Gomes: Thank you very much.
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.
Operator: Welcome to the Northland Power conference call to discuss the third quarter 2025 results. As a reminder, this conference is being recorded on Thursday, November 13, 2025, at 10:00 a.m. Eastern. Conducting this call for Northland Power are Christine Healy, President and CEO; Jeff Hart, Chief Financial Officer; and Adam Beaumont, Senior Vice President of Capital Markets. Before we begin, Northland's management has asked me to remind listeners that all figures presented are in Canadian dollars, and to caution that certain information presented and responses to questions may contain forward-looking statements that include assumptions and are subject to various risks. Actual results may differ materially from management's expected or forecasted results. Please read the forward-looking statements section in yesterday's news release announcing Northland Power's results and be guided by its contents when making investment decisions or recommendations. The release is available at www.northlandpower.com. I will now turn the call over to Ms. Christine Healy. Christine Healy: Good morning, everyone. Thank you for joining us today. I will begin with our business update, and then Jeff will provide more details on the financial results. Just a quick note that with our 2025 Investor Day coming up next week, today's remarks will focus on Q3 results and details behind the change to the dividend. We will share more detail on strategy and growth priorities on November 20, and we hope to see you there. After our prepared remarks, we'll open the line for questions. So I'll start with health and safety because, as always, safety remains a core value and top priority at Northland. This quarter, Northland and our partners at the Oneida battery storage project received an Ontario Electrical Safety Award, recognizing the project's safety practices. With nearly 300,000 worker hours and 0 lost time incidents, Oneida has set a new standard for field safety on large-scale builds. We're very proud of that. And during my visit to site, I saw firsthand the team's strong commitment to safety and performance. The executive team and I are looking forward to sharing our new strategy at Investor Day next week. We'll be presenting a plan that capitalizes on the growing demand for power globally and particularly in our core markets of Canada and Europe, and this is driven by electrification, energy security, data center and decarbonization trends. This demand for power, particularly in our core markets, offers a number of organic opportunities and value enhancement opportunities within our existing fleet. Northland's strong capability as a global power operator across multiple solutions allows the company to execute on this strategy. I will add that as part of our new strategy, we have been assessing growth opportunities in our core markets. And we have line of sight to multiple value-accretive opportunities where Northland's capabilities can be deployed to deliver long-term value for shareholders. To provide greater financial flexibility for self-funded growth and maintain an investment-grade balance sheet, the Board of Directors, including me, has decided to adjust Northland's dividend to $0.72 per share on an annual basis. We are committed to this sustainable dividend, and it remains an important component of our long-term value proposition. So I'm going to pause here because as you know from my previous comments and from my history, changing the dividend is not something I wanted to do. In my career, I have always resisted this. And I can tell you that I have resisted it here at Northland, too. But my goal and our goal at Northland is always to deliver best value for shareholders. And after much analysis and assessment, I'm convinced that this is the best way to do that. Since arriving at Northland, I've had hundreds of meetings with investors, partners, suppliers, governments and competitors. I brought Jeff in and I tasked him with analyzing where we are with our current assets in our pipeline. And he and the teams have done a great job to give us a clear picture of what's happening. We've also completed our strategy deep dive and our planning cycle now for 2026 to 2030. I also stood up this task force, and we've been screening hundreds of opportunities, large and small, in Europe and in Canada, and they have found several value-accretive opportunities, and you're going to be hearing more about these in the coming weeks and months. These opportunities are better than any we've seen in the last 5 years, and indicate to me that having the flexibility to move on those opportunities is important. And so I contrast that against the backdrop that we've seen in 2025, which I would refer to as a year of volatility. We saw historically low winds in the North Sea in more than the front half of the year. We saw a dramatic shift in sentiment in the United States related to renewables. We've seen a softening of corporate PPA activity in Europe, and we see, in many of our core markets, increasing divergence in electricity pricing forecasts. In parallel, we have 2 very large projects in construction. And while they remain on track, and our teams are delivering, in the words of Robert Frost, there are miles to go before we sleep. So when I'm looking ahead at how are we going to deliver best value to shareholders over the 5- and 10-year horizon, we established some financial guardrails. We will maintain an investment-grade balance sheet. We will provide flexibility to deploy on value-accretive growth that is self-funding without reliance on equity markets, and we will maintain a sustainable dividend, all of which is achieved with this change. We believe this recalibration brings the payout ratio to a level that is prudent for a capital-intensive growth company. This plan does not rely on external common equity, and it enables us to fund a project pipeline that will generate highly attractive risk-adjusted returns. And I will reiterate that the dividend remains an important component of Northland's capital allocation framework. Turning to our third quarter results, they were strong. Our global operations performed again to a high availability, over 95%, and the stronger wind in September led results to surpass last year in the same quarter. That good wind has carried into October, which we were happy to see. Turning to our projects in construction. At Hai Long, our 1.1-gigawatt offshore wind project in Taiwan, over half of the wind turbines have now been installed. As you will note from the press release, though, pre-completion revenues have been lower than expected due to longer commissioning times for installed wind turbines and certain technical components of the onshore substation needing to be replaced. We expect this to be resolved, and it will enable us to remain on track. And so the overall message is that the project remains on track for full commercial operations in 2027. In Poland, our 1.1-gigawatt Baltic Power Project installed both offshore substations, each weighing in over 2,500 tonnes and located about 20 kilometers offshore. These substations will collect energy from our 76 turbines and transfer it to the onshore grid. That project also remains on track, with full commercial operations expected in the back half of 2026. Turning to development and growth. We continue to advance and refine our development pipeline, pursuing opportunities in our core markets of Canada and Europe that meet our investment criteria and deliver shareholder value. In Canada, we see opportunities across all our generation and storage technologies, leveraging our small -- our strong domestic platform and brand. In Europe, we're evaluating several renewable power and battery storage projects where we can apply our project execution and operational expertise. In Scotland, the 1.4-gigawatt floating foundation project, Havbredey, has been deprioritized as part of our disciplined capital approach. At the same time, our 900-megawatt fixed bottom offshore wind project, Spiorad na Mara, has completed community consultation and is progressing toward consent submission with the government. Global demand for reliable, affordable, sustainable power continues to rise, and Northland is well positioned to capitalize on this trend. I also reiterate that we have access to a growing number of opportunities, including what we call value enhancement projects that offer short cycle opportunities to deliver higher returns from our existing fleet. We see organic growth opportunities within our own pipeline and opportunities for acquisition of projects in mid- to late stage on attractive terms. So with that, I'm going to turn it over to Jeff for a detailed update on our financial results. Jeff? Jeffrey Hart: All right. Thanks, Christine, and good morning, everyone. I'll take some time to discuss our third quarter results, which were positively impacted by strong wind resource in September. And as Christine mentioned earlier, our strong availability of over 95% allowed us to capture much of the benefit. The quarter also benefited from the Oneida battery facility operations commencing in May. Performance was partially -- that performance was partially offset by planned grid outage at DeBu and lower solar and wind resource at our operations in Spain. Northland generated adjusted EBITDA of $257 million, a 13% increase compared to the same quarter of 2024, which was mainly a result of higher production at our 3 offshore wind assets and an outage last year at Gemini, and the additional contributions from Oneida, which came on earlier this year. During the third quarter, we generated free cash flow of $45 million, which was approximately 130% higher than the same quarter last year. And on a per share basis, free cash flow in the third quarter of this year was $0.17 compared to $0.08 in the third quarter of '24. The increase to free cash flow was primarily related to the higher adjusted EBITDA that I mentioned earlier. And the net loss for the quarter was $456 million compared to a net loss of $191 million in '24, and this is primarily due to a $527 million noncash impairment that was recognized for the Nordsee One offshore wind facility, resulting from the transition from the initial subsidy pricing regime to market pricing by May 2027. We have also updated our long-term production forecast and anticipate an increase in operating and maintenance costs. Turning to our investment program at the Hai Long and Baltic Power projects. As of the end of the third quarter of 2025, we have spent approximately $12 billion to date, with remaining expected gross capital expenditures for the 2 projects to be $5 billion. At Hai Long, we've started to see the first revenues post first power, although lower than we expected, as Christine mentioned, impacting the pre-completion revenues by approximately $150 million to $200 million Northland share. Overall, the project is continuing on track and on budget. At Baltic Power, we continue to advance to first power in '26 when grid connection is planned. Our financial guidance for '25 is unchanged with adjusted EBITDA expected to be in the range of $1.2 billion to $1.3 billion, and free cash flow is projected to be between $1.15 and $1.35 per share. Now turning to the balance sheet and updated capital allocation plan. As Christine mentioned, the announcement of the decision to recalibrate the dividend was not easy, but provides the company a sustainable financial framework and provides funds to make accretive investments, which are underpinned by the cash flows of our business and an investment-grade balance sheet. Our plan is expected to be self-funded with no reliance on common equity issuances. I'll be happy to share further details with you and lay it out at Investor Day next week. I'll hand it back to Christine to conclude the call. Christine Healy: Thank you, Jeff. I'm also looking forward to our Investor Day next week, and we will then be providing deeper insight into our focus areas, the progress we're making across the business and our growth plans. That concludes our prepared remarks. So I'll turn the call over to the operator. Operator, please open the line for questions. Operator: [Operator Instructions] And our first question comes from Baltej Sidhu of National Bank of Canada. Baltej Sidhu: Could you shed some color on the magnitude of the impairment at Nordsee One? And what are the factors that led to the recalibration of the write-down? Was prior market expectation of the market price is elevated? And how are conversations evolving with respect to recontracting opportunities? Jeffrey Hart: Yes. No, thanks, and it's Jeff here. Yes, the impairment was primarily related to the pricing that we've gone out, and I'll remind you, we're stepping down from the initial contract period from EUR 194 per megawatt hour. And ultimately, there's a phase step down to EUR 154 per megawatt hour. And then ultimately, we go to market pricing in 2027. Now we've been out in the market on the PPAs. And I would expect something in the weeks and actually days. We're fairly close. And so we really, with those benchmarking, as Christine alluded to in the script, the PPA markets, and so we've triangulated, I'll say, broadly, I'd say, into a market price in and around the PPAs of of EUR 60 to EUR 70 per megawatt hour. And so really, it's a reflection of that step down and this is the only asset we have in the 5 years in the offshore that's stepping down. Baltej Sidhu: Okay. And then just as a follow-up to that and then just appreciating the last comment that you made on the 5 years for the assets that are stepping down. When we're looking at Deutsche Bucht, which is still recontracted out until, I believe, the early 2030s, are there similar assumptions that were made prior given the pricing dilemma dynamic and curtailments that are evident as well? Jeffrey Hart: No, I think, what you alluded to curtailments in the German market. And I think year-to-date, we've probably seen a 7.5% negative price curtailment. I think our long-term assumptions aren't really far off of that, plus or minus 0.5% to 1% on it. We've really focused on where we have contract renewals coming here in the first 5 years. And that's where we look at the PPA market, isn't really, I'd say, a longer-term market. It would be more into the 5-year frame. And that's really what's setting it and impacting N1. Operator: And our next question comes from Sean Steuart of TD Cowen. Sean Steuart: Christine, on the rationale for the dividend cut, you touched on a few points. I guess a part of it here is freeing up more capital to feed an expanding investment opportunity set and the risk of front-running the Investor Day next week. Can you give a perspective -- on the 8.5 gigawatt pipeline, beyond the under construction stuff, any perspective over the next 5 years, how much of that might be advanced? And I ask only because it seems like there was a line of sight on this payout ratio coming down as Hai Long and Baltic Power reach commercial operation. Just trying to gauge how much of that growth opportunity set you might expect to come into the midterm development pipeline? And how much of this is just aligning the payout ratio with industry norms? Christine Healy: Thanks for the question, Sean. And I do want to make sure that you come to Investor Day, so I don't want to give too much of it right now. But I think it's -- part of it is that we have, I would say, a couple of types of projects. First of all, I alluded to the fact that we've been looking externally at what other people have and what projects are for sale in the market, and there's a real opportunity set there that did not exist even a year ago, but certainly not a couple of years ago. And from a pricing perspective, very attractive if you can by now. So that's interesting to us. And if we can high grade through that, we like to. We also have a set of initiatives that we've been working on through our existing fleet that we call it value enhancement initiatives, and these are things that we would do that are near term, short cycle and that deliver a demonstrable rate of return in the existing fleet, and it's just getting more out of what we already have. And so some of those projects require capital, and we've been doing a lot of work to understand the capital those projects require. But this is -- from my perspective, it's value lying on the ground, and we would be foolish not to take it. So we wanted to find a way that we could invest in those projects and ensure that we have -- still we keep the balance sheet flexibility given the projects that we have still in construction. So the idea that we would pass up on all of these opportunities or push them well out into the future, when we modeled it, it was just a poor use of funds than investing in them sooner. Sean Steuart: Okay. Understood. I guess, we'll get more detail next week. Jeff, can you give any perspective on, I guess, discussions with the rating agencies, and appreciating the investment grade is paramount to what you guys are focused on. Do those discussions have any bearing on the dividend decision? Jeffrey Hart: Yes. So thanks for the question. We're obviously in constant communication with our rating agencies, and have open dialogue with them. I'll kind of go back to what Christine said and reiterate. For us, it's making sure and reinforcing, from our perspective, the best use of resources on a risk-adjusted basis. And so for us, an investment-grade balance sheet is important, I think, ultimately, to ensure funding through cycles, number one. And then number two is with the opportunity slate in front of us, rebalancing to capture those in a growing market is really the drive here. And so it's all of it together. And it's really from our perspective of reinforcing the investment-grade balance sheet and ensuring funding certainty there. And then I think capturing the market opportunities is really the main driver of that, and we felt this is the best use of shareholder resources. Christine Healy: I guess I'll add on to that, Jeff, to say that this was very much a Northland decision, and it was driven by an enormous amount of work that's been done, and we looked at many different options of how we could deliver best value for shareholders. So it was -- that was the driver for this decision, full stop. Operator: And our next question comes from Robert Hope of Scotiabank. Robert Hope: Can you add a little bit more color on the specific issue driving the delayed pre-completion revenue on the onshore substation, and when you expect it to be rectified? And if you have any recourse through insurance or warranty with the manufacturer on both the cost and lost revenues? Christine Healy: Sure. Thanks very much for the question. I love the technical and detailed questions. It's -- so basically, with the onshore substation, when we were installing some cabling, we were doing normal course testing, and we were dissatisfied with some of -- we were seeing some -- we were dissatisfied with the results of some of the tests. And when we investigated further, we saw that there was a bushing that we felt could create problems for us over the long term. So it was functioning effectively, but it created a risk for long-term reliability. So we, in fact, insisted that, that get changed out. So the supplier for that component is a subcontractor to one of our suppliers. And so we don't have a direct contractual relationship with them, but we've been working with them to make sure we're satisfied with the replacement. So in order to do that replacement work, though, we have to shut down the onshore substation for 20 days-ish. I think. I can't remember the exact number, so don't quote me on that. But we have to turn off the -- turn down the -- turn off the onshore substation in order to complete that. But then we can be assured that the solution is there for the long haul. So I think it's the right thing to do. The question of insurance and the rest, I think that it would be more a question for our supplier because this is part of what our supplier has to deliver for us. Robert Hope: I appreciate that. And then maybe just 1 more follow-up question there. Just given the long lead times on some equipment items, when would you expect the 20-day outage to occur? And just given its onshore, I guess you don't have to wait for any weather windows and that can be done at any time? Christine Healy: Yes. No weather windows, and that's going to be done before the end of the year. And we already have all of the components. We have those in our [ top little hand ] at our warehouse as we speak. Robert Hope: Okay. So is the impact then in -- just in 2025 then? Christine Healy: So we have -- there's 2 things going on at Hai Long, so we have this issue at the onshore substation. The commissioning of the turbines that both Jeff and I referred to, that is an issue that is continuing into 2026. And in fact, we see the financial results of that in 2026 instead of in 2025. But basically, this is a situation, again, managed within the perimeter of our supplier for the turbines. They have an obligation to deliver turbines to us that have been installed and commissioned. And in fact, they've passed a reliability test, and they've been running for a number of days before we accept them in the handover. So the planning for that commissioning was based on typical North Sea performance, which would be they would typically commission 2 to 3 a week. But I think in the Taiwan Straight, the weather conditions have been more challenging and it has been slower than anticipated. So the -- our supplier has, I think, a robust plan in order to improve on that. But right now, we are in the poor weather time. So they will be delivering on that in 2026. And hopefully, they will be able to start delivering the commissioning pace that we expect to see. So -- but right now, we've seen disappointing performance on the commissioning. And so they are not where they were meant to be at this point in time. Again, it's fully within their contract. So it doesn't have an impact for us on the budget. And we have enough float still in the schedule that it does still fit within our schedule, but it does affect on pre-completion revenues, and pre-completion revenues were part of our funding model for the project, and we're still working through that. Operator: And our next question comes from Nelson Ng of RBC Capital Markets. Nelson Ng: I had a quick follow-up question on the Hai Long commissioning of the turbine. So I think you mentioned that -- Christine, you mentioned over half of the turbines are now installed, and I believe you stopped installing turbines like early October or late September. So how many of the installed turbines are currently commissioned roughly? Christine Healy: So thanks for the question, Nelson. I'm the -- what I -- fully commissioned right now the challenge that we're having is that they have to do what we call a soak test, and so they have to run continually over a period of time with no alarms. And so quite a few of them have started the test and then alarms go off, and this is again a difference with the weather impact. Because in the North Sea, if you have those alarms, it's pretty quick, you can go out, you can check it, you can remedy it. And typically, it's not anything wrong with the turbine, it's often something wrong with the sensor. So that gets calibrated, that gets fixed. It's a really quick turnaround. Right now because the weather conditions have been very tough, getting out to check those alarms has been quite difficult. So in terms of maybe the better answer, we have -- so 14 of them have been commissioned, but they continue -- but they've continued to have alarms. So in terms of energized, right now, we have only 2 that are energized. I would -- energized is probably for me, that's the most important one. Those are the ones that are generating revenues. So right now, we have 2 that are energized and producing revenues. Nelson Ng: Okay. So 30-something installed, 4 commissioned, but 2 feeding power to the grid. Is that the right way of thinking about it? Christine Healy: We have 14 that are commissioned, but they're under warranty as well. So just because they're commissions doesn't mean that the supplier is off the hook with them. So right now, of the 14 commissioned, 2 of them are energized and functioning the way that we expect them to. Nelson Ng: Okay. But over half of the turbines are installed, so that's like 30-something turbines installed? Christine Healy: Yes, 37 turbines installed. So the installation went very well, and this is, I would say, a learning for our supplier about commissioning activities. So they have a good recovery plan. So I just want to be clear about that. They have a very strong recovery plan. They've got their A team on this. They will do a good job of this, but we probably won't see a huge amount of progress until the weather window opens up again in the new year. Nelson Ng: Okay. And then I know in the past, you talked about the winter. Obviously, the weather isn't great, but you have the option to work during the winter, right? So is that supplier pretty much like if they see a window of opportunity during the winter, they would go and try to commission more or energize more projects? Is that what you're referring to in terms of the plan to... Christine Healy: So yes, they have a team in country, and they are available to go when the weather window opens. So whether it's open for a day or 10 days, then they -- and they can do that in short bursts of time. But the reality is that the weather has been pretty harsh the last couple of weeks, and there's only been 1 day in the last, I think, I want to say maybe as much as 3 weeks now, but there's only been 1 day that they've been able to get out there. Nelson Ng: Okay. And then just overall, I think in terms of the guidance, you guys talked about how the pre-completion revenues might be $150 million to $200 million lower than expected next year. Can you just talk about what the new assumption is? I think in the financing plan, roughly 1 -- there was an estimate of, I think, roughly $1 billion of pre-completion revenues. Jeffrey Hart: Yes, that's right, Nelson. So where we're at is, you're right, it's [ CAD 1 billion ] at a 100%. And the reason we're talking about the impact into 2026 is the any PCRs we would generate this year would actually be collected in the cash generated next year in conjunction with effectively Q1 and Q2 PCRs as well. And so that's why we're talking about the 2026. And the $150 million to $200 million is our share, and that's 31%. So you can kind of back into the range there on a gross basis. Nelson Ng: Okay. So I guess, less than half of like so... Jeffrey Hart: Yes. Anywhere from half to 60% impact, give or take on the current expectation. And as Christine said is this, obviously, the supplier weather windows and to see how we could potentially close the gap in other alternatives, right? But that's effectively the good way to think about it. Nelson Ng: And as a result then there will just be a larger draw on the non-recourse debt or... Jeffrey Hart: Well, we're evaluating what we could do. Number 1 is the recovery plan and then looking at what we can do on the project side of it as well. And then obviously, we've got the financial capability to manage it as well. So we're looking at all the different avenues there and monitoring the technical situation. So we'll obviously keep everyone abreast as that's updated. Nelson Ng: Okay. And then switching gears a bit. In terms of the dividend, so the decision -- like in terms of the sizing of the dividend cut, so is the main target to internally fund all equity requirements going forward for the next 5 years, is that how the dividend was sized? Jeffrey Hart: Yes. So it's Jeff here. Absolutely. I think our view, and I think I've reiterated this is, I believe, in self-funding model. And I think it's an effective way to execute the plan and create what we view as a solid accretion and shareholder value. So that is the intent is self-funded plan, and that's what we intend on delivering. Operator: And our next question comes from Mark Jarvi of CIBC. Mark Jarvi: So Jeff, you talked about maybe compensation on the pre-completions contingencies in the project funding. How would you handicap the likelihood that Northland would have to put some incremental capital into Hai Long at this point? Jeffrey Hart: Look, I'm not going to get into hypotheticals and percentages. What I will say is I will always make sure -- as a CFO, you need to make sure that you've got the liquidity and capital resources and the funding strategy to manage contingencies like this. And so we have the capability to manage it corporately. We'll continue to progress it. But I always have to manage on the view that I need and have to have the liquidity to manage that, but we're looking at avenues within, Number 1, on the technical recovery plan; Number 2 and other things we can do at the project level. But I'm not going to give percentages on that right now, but I have to make sure we've got the resources to handle it. Christine Healy: Well, I'll just add to that, Mark, that this is back to the whole idea of we have to be prudent. These are large projects and they're being delivered very, very well, and we stand head and shoulders above many others who have -- who are delivering similar projects. But there are bumps in the road in every project I've ever been involved in, in my career. So that's why we have to be ready to adjust to that when they come. Jeffrey Hart: And maybe I can -- I'll reword it this ways. I -- from my perspective is we'll look to mitigate and manage impacts and look at the best alternative, but I also have to make sure that I can manage it as if there is an injection required. Mark Jarvi: Got it. So like this as a component of the dividend cut would be sort of a minor element kind of the messaging? Jeffrey Hart: Yes. I mean, I'll go back to what Christine and I reiterated is this, number one, it's rebalancing, I think the payout to a capital-intensive industry, and we also see lots of opportunity, both organic and inorganic in the markets we're focusing on. And so it's really to capture that opportunity, rebalance to, I'd say, a sustainable financial framework that allows us to capture those opportunities. And then ultimately, with that, it's the virtuous circle that gives you a balance of protection and resources to handle contingencies as well. Mark Jarvi: And then just going back in terms of the timing announcement, we can debate about when it should happen. But it sounds like you're trying to position this that do you have a use of capital for new growth that's showing up on short-cycle projects and other opportunities. Any consideration was put into whether or not you should have announced this concurrent with new investments? And how close are you on things like those short-cycle needs or potentially acquiring advanced stage projects? Christine Healy: Mark, we had a lot of debate about that. And I can tell you, there's no right time because I can honestly say that if we waited to Investor Day, then I would have expected somebody would have asked me the question then of why didn't you tell us this a week ago when you had your quarter closed because -- so they -- I think, we're being transparent. We -- there's never a good time for this. So we decided to to disclose the decision when the decision was made and the decision was literally just made. So we've -- we want to make sure that we're transparent about that. But I think you should not be surprised to hear some new announcements in coming days. Mark Jarvi: Okay. And then last one, just, Jeff, in terms of the IG rating, is there a view that you'll use a little bit more on balance sheet debt going forward versus how much nonrecourse debt you used? And is that sort of factored in, in the decision on the dividend level? Jeffrey Hart: No. Look, I think obviously, we'll get more color on it at Investor Day here on details on overall funding. But I would still expect the majority of our, I'll say, leverage or debt funding to be in the project finance realm. Clearly, the corporate balance sheet is an option for different opportunities, but that balance won't materially change. It's just to reiterate the point is the execution, the opportunity in front of us go forward and setting up the guardrails and framework that were sustainable through cycles. Operator: And our next question comes from Benjamin Pham of BMO. Benjamin Pham: I just want to go back to the dividend side because obviously market is quite perturbed today with the messaging and more to come next week on some of the rationale. But I'm curious when you think about the payout ratio, it's 60% this year on your guide. And it's reason to, I think, it's going to come down to through 2027. What do you think is the appropriate payout ratio for you? Because the way we were thinking about is you're generating $200 million of incremental free cash flow based on your guidance. And you can lever that up that and you can still sell fund growth under that alternative, so love your comments on the payout? Jeffrey Hart: Yes. No. And thanks for the question. And ultimately, we'll provide color on the funding and correspondingly read through to payout at Investor Day and to provide that color. And I'll reiterate back, this is to give a financial framework and foundation that we feel is balanced through the cycle and has guardrails, but we'll provide more color on that next week then. Benjamin Pham: Okay. Got it. And I'm also -- I mean, 40% seems to be a magic number for a lot of folks that have cut dividends in the past. I mean, when you did your analysis, can you talk about the other alternatives you were looking at, I think, you mentioned that earlier? And then how do you kind of think about just -- there's a lot of history, too, from companies that cut dividends and same thing. There's more growth coming. And it just doesn't seem the public markets really care for a few years. Can you just talk about that as you think about your -- I guess, your own patience with this? And how do you maybe differ from those case studies because there's been a lot out there? Jeffrey Hart: Look, and we -- I'm not going to -- and Christine will obviously add on to this. We looked at several different scenarios, looked at the best options that we felt an aggregate, balancing growth, cash returns to shareholders and felt the plan that we'll be putting forward in balance and coming to this is the best value creation and value proposition on balance. And really, for me, it's about being disciplined through this is we need to be -- have keep strength on the balance sheet. We need to have a sustainable payout ratio and then ultimately be able to capture opportunities in a growing demand market and be disciplined on returns. We won't chase returns down and all of that kind of goes together. We looked at a bunch of different modeling and analysis on this. And feel we've landed in the best path forward for the company. Christine Healy: So Ben, I do want to take the opportunity to add on to that because I can tell you that all those things that you say are very much on my mind is we've been having this big internal review and assessment of what the best thing to do in this circumstance is. And frankly, there are easier things that we could do, but they would not have been as value accretive to shareholders. So fundamentally, then I had to take a very hard look into the abyss and say, what is the right thing to do here? And fundamentally, I believe that this company is very, very good at building and operating projects. And the world has a huge demand for what it is that we do. And the idea that we would hunker down and not grow for a big chunk of time doesn't make a lot of sense to me. And in fact, when you model it out on the numbers, it doesn't make sense on the numbers either. And then when you look at the different ways you could fund that growth, the most value accretive way for shareholders is to do it the way that we're doing it. So there's no question that we take the pain now. And I am a shareholder, too. And I got to tell you, I'm a shareholder who really likes dividends. So I can say that I am definitely in the camp right there with people who are unhappy about that. But I have to say again, what are we trying to do here, and we're trying to build long-term value for shareholders. And that's what this plan does. So I will be talking more about that at Investor Day. But I can say hand on heart that if there was a better way to do it, I was definitely looking for it. Benjamin Pham: Yes. No, absolutely. And it seems like the old school model of high payout and issuing equity, that's kind of old days and high growth companies like yourself should have a lower payout ratio from a long-term perspective. So I could appreciate that. Maybe just 1 quick 1 for me. I get the PCR situation at Hai Long and the technical issues, and you got to manage that. That does prove that these are large projects that can go sideways. But is there a scenario there where you're thinking about that there could be even more impact from this technical issue where you have to actually repair the station, there's more CapEx, there's delays, like there's -- is that a scenario that you -- that could be in the realm of the possibility? Christine Healy: So Ben, this particular issue that we're having with the onshore substation is completely contained. And in fact, it gives me more confidence in the project team that they spotted this and we're able to respond to it so effectively and so quickly. So in fact, I view it as a very positive thing because it was only -- it was through very, very good work at the onshore substation and very good inspection work from our teams that we found the issue. So I don't see it as indicative of a bigger problem. I think it's a very discrete problem related to a very small bushing. And so it has been addressed and remedied and no indication of any kind of larger problem there at all. In fact, I think it was well contained and well managed. Operator: I'm showing no further questions at this time. I'd like to turn it back to Christine Healy for closing remarks. Christine Healy: I just want to say thank you to everyone for your great questions and your engagement in joining us today. And hopefully, we will see you at Investor Day. Thanks very much. Operator: This concludes today's conference call. Thank you for participating, and you may now disconnect.
Unknown Executive: Good afternoon, everyone. I think we are pretty much at 2:00, so ready to crack on. Richard Godden: Yes, afternoon, everybody. This is the Premier Foods Half Year results Bond Investor Call. We had our main webcast call of the results that Alex Whitehouse and Duncan Leggett posted this morning, which should be available to view as a replay. We're hosting this to answer any questions that anyone may have from a credit perspective. So that's the purpose of the call. Duncan is going to do just a couple of slides from the presentation this morning, and then we'll open to any questions. Duncan Leggett: Perfect. Thanks, Richard, and good afternoon, everyone. Yes, I thought I'll just do a couple of slides. Some of you may have dialed in this morning. There's a webcast on the website for anyone who wants. So I'm just going to take Slides 3 and 4 of our analyst presentation that's on the website. And in terms of the summary, we're really pleased that after a bit of a softer weather impacted quarter 1 that we've seen quarter 2 sort of snap back into slightly more normal levels. So you can see in the middle here, Q2 U.K. branded growth up at 3%, and that brings H1 up to 2%. So really good trajectory. And actually, if you look at quarter 2, July was actually pretty warm. So delivering the 3% after pretty much only August and September being more normal, we're really pleased with. Again, that's where we expect it to be, but it's always good when it comes through. Total branded revenue for the half up at 1.9%. And then market share. So we've had a really good run of market share gains. You can see 130 basis points over 3 years. And that's all around deploying the branded growth model and effectively driving growth that in most cases has been some way ahead of the market. I think we're really pleased that we've been able to hold on to that growth, notwithstanding a bit of a weather impacted first half. So I think we're really pleased we managed to maintain and keep hold of those gains. In terms of profitability, so a slightly unusual one this half because we've got this extended producer responsibility levy, you may have seen from other corporates, but this is -- this is a levy based on producers all around the packaging it uses, the energy intensity, the recyclability. And the way the accounting works is that it's forced us to take a full year's charge in our first half numbers. Now if you think about how we deal with this, we would offset it and recover it over the full 12 months. So on the left-hand side or bottom left, you can see the reported profit delivery. So we have still growing trading profit and adjusted PBT with this full year charge in. But actually, if you exclude the amount that relates to half 2, effectively, we will recover and offset it over the second 6 months of the year. So if you take half of that out on a basis that will be dealt with in H2, then actually trading profit is up 7% and adjusted PBT up 10%. So really good underlying profit generation, which we're really pleased with. And then leverage, I mean, it's been coming down for a while, isn't it? We're well in the rearview mirror in terms of the net debt that we inherited. And as long as we have associated with Premier, I think really positive news that we bought Merchant Gourmet in the half year and net debt to EBITDA is still only 1%. So in terms of strategic progress, so obviously growing the core. And again, we've got good U.K. branded revenue growth, good recovery in grocery and a continued, frankly, pretty stonking performance from Sweet Treats so that grew 9.4% from a branded perspective, really successful consumer insight-driven and BD really, really doing performing well. CapEx, we continue to deploy capital. Everyone will be aware of, this is a key pillar of how we grow our gross margin and that creates the room to reinvest behind our brands, which clearly then drives future growth. CapEx is a big part of it. We are investing in pretty high returning opportunities still in the sort of 2-, 3-, 4-year payback for many of them. And doing pretty well in terms of laying that capital down this year, so well actually that we think we might spend a bit more than we thought, which for us is really good news because it means we're spending money on the projects that drive return and therefore the quicker we can get at those, the better. Category expansion. So this is something that's been growing really well for us. It's still a relatively small base, but you can still see really good growth. So you can see a picture of a FUEL10K yogurt. This is our latest expansion, which is a sort of protein-rich yogurt with a bit of a lid that includes what is now the U.K.'s best-selling Granola SKU, which is our Chocolate Granola for FUEL10K. So a really good combo there. Pretty early days, but seems to be performing pretty well. We've also got Ambrosia Porridge and the Cape Herb and Spice really driving growth in there. International, I think it's -- from an in-market performance perspective, we're very pleased. We are gaining listings of things like Spice and FUEL10K in Europe. We are getting new listings in the U.S. as well, and North America was up -- went into double digits for the second quarter. And in Australia, which is still by far the biggest component of our international business, in market performance, we're growing at 17% for Cake, which is fantastic. That doesn't translate into revenue, which you would have picked up, no doubt because the retailers have decided to reduce their overall stock holdings, if you like. They have been holding a bit of a buffer because of the inconsistent shipping lead times as we've come out of COVID and then the Suez Canal has not been used. And now shipping times and shipping routes are becoming a bit more established and a bit more reliable, they've decided to bring down the in holding stock. So what does that mean. Clearly, it's not anything we can control, we can just control driving the model in Australia, which is working really well. All that means is they just -- the in-market forms isn't flowing through to our revenue because they are effectively -- we are selling all that -- making all those great sales out of stock that's already in market. So that's just a bit of a timing adjustment, if you like, but certainly not a reflection on the overall health of the business. And inorganic opportunities, FUEL10K and Spice Tailor are flying. So U.K. and the U.K., they are growing well into double digits. And as you will know, Merchant Gourmet we acquired in September. So really, really pleased with that, early days, but performing well, and we're getting on with the integration of that and looking to, again, use the benefit of our broader scale and our model to help grow distribution, supercharge the NPD pipeline and generate value. So really, really excited about what that's going to bring. So that's all I was planning to share. I thought it would be a good overview, but I think most important is that we have time and able to answer any questions from yourselves. So happy to pass over, which will facilitate. Richard Godden: Thanks, Duncan. [Operator Instructions] I think the first one is coming from Neill. Neill Keaney: Congrats, Duncan, strong set of results. A couple for me. On the acquisition pipeline, you've been pretty consistent on how picky you are and how that fits into the -- how your potential targeting fits into the 5-pillar strategy, et cetera. But just on cadence of acquisition, it's -- I think it's been on average one a year for the last 3 years. I appreciate the gap is wider between FUEL10K and Merchant Gourmet. But if another opportunity came along in the next sort of 6 to 12 months, is that something you would look at? Or do you worry about distraction risk and integration risk with merchants? And then just on the bridge facility and interest guidance, the interest guidance that you've given seems to indicate to me that you would not be looking to refinance the '26 notes until after the end of this fiscal year. Is that the right way to read it? Or is it just you'll be opportunistic as and when you think the right time to come to market is? Duncan Leggett: Perfect. Thanks a lot, Neill. So taking your second question first, just before I forget it. I think, yes, clearly, what we've done with the bridge facility is just sensible financial planning really, isn't it, just buys us a bit of time, gets us through audit and sign off and stuff and just make sure that we can do our best as best we can to try and pick the market at the right time. I think your interpretation of interest guidance is pretty spot on. I think we're looking at sort of back end of this year, maybe early next will be what the guidance suggests. But clearly, if we thought the right thing was to go somewhere between now and then and we thought it was the best thing to do for the business, then we would seriously look at it. And the first question... Richard Godden: M&A. Duncan Leggett: So cadence. I mean, we are always looking. And as you say, roughly one a year, a couple of years almost since FUEL10K one, and we've been looking at a lot of stuff during that time, but we've decided not to get involved or decided that some of the stuff wasn't as attractive to us or -- 2 questions. So if something comes up in the next 3, 6, 12 months, we'll be seriously look at it. Yes, we are looking at stuff now. We always are. And clearly, when we're assessing whether to do a deal, clearly, financials, our commercial criteria, financial criteria are really important as well as our facility headroom. And to your point, we would make sure we don't buy stuff more than we can chew. I think the Merchant Gourmet, we are in the middle of integration. It's relatively straightforward. It's U.K. We are relatively known. So I think in the next few months, we'll be pretty integrated and then flowing that through the existing business. So that will be dealt with pretty quickly. And therefore, yes, clearly, if something comes up. And with these things, you can never tell that something is going to come up. You need to be prepared to act if they do -- isn't it? So yes, we could considerably do another deal if we felt it was the right thing to do in the next 6 to 12 months. Richard Godden: [Operator Instructions] Duncan Leggett: In the meantime, just maybe ask a question that you may have heard from this morning, but I guess just in case anyone's got any questions on working capital. So we do build stock during the first half of the year. That's very much how we operate on the basis that going into our Q3 peak sales period, we are sitting on a lot for obvious reasons because that is when we need it and when it sells through. That's probably shown through a bit more in the cash flow than it would normally do, and that's just around, a, the stock build was a bit bigger during H1 than it was the previous before, and that's just making sure that we've got everything ready for the second half. And the other bit is we've just phased the stock build a bit more evenly through the half. So therefore, there's a bit less of a natural offset with the creditors. So you might have seen there's no change to our full year view or full year guidance. But just in case it's a bit more of an outflow than people are expecting purely just a timing piece of when we build stock during the half, and we expect that to sell-through and get the cash in by the year-end. Richard Godden: Thanks, Duncan. No hands being raised just yet. Maybe just a minute on CapEx guide. Duncan Leggett: Yes, sure. So we've -- clearly, we're stepping up CapEx investment over the last few years, haven't we. And we guided to GBP 50 million for this year. And that's all around putting -- deploying capital in the way that we see the best way back into the business and generating pretty attractive returns. We guided to GBP 50 million for this year. We're just making really good progress in putting that to work and again, putting that to work for the value-creating projects. And we actually think we're making a bit better progress than we thought we would going into this year. So we've just ticked up guidance from GBP 50 million to GBP 55 million. Looking forward, whether it's GBP 50 million or GBP 55 million probably doesn't matter too much, but it's that sort of range going forward, and we have a good pipeline of effectively margin-enhancing projects we can see over the next sort of 3, 4, 5 years, a great visibility of, I guess, the fuel that's going to drive margin growth, which is going to drive investment back into the brands and drive future growth. So feeling pretty good about that. Richard Godden: Great. One more question coming from Neill. Neill Keaney: I'll take the opportunity if no one else does. There's a lot of noise in the press around supermarket price wars, real imagined anywhere in between. In terms of what you're seeing and negotiations, I guess, ramping up around this time of year and into first quarter of next year, any change to the sort of competitive tension between suppliers and retailers that you're seeing, anything we should be aware of this time? Duncan Leggett: Yes. It's a really good question. I think short answer is no. But you're right in terms of the amount of coverage it gets. What are we seeing? I think quite a lot -- not exclusively, but quite a lot of the, call it, price war, quite a lot of it is around fresh and areas that we're not part of. So we're probably not feeling it there. Clearly, negotiations with customers are never easy, and we're not going to -- otherwise, but they're not really changing. So we just manage them in the usual way. And clearly, having market-leading brands and pretty strong relationships, I think we are pretty well placed. In terms of, I suppose, the other piece is the relative performance of the customers, that's getting probably a bit more polarized with Tesco's winning, Morrisons not having done great, but probably shown some better signs and Asda still in a bit of a trouble. And clearly, therefore, when Asda is declining, we're declining in Asda. But what we're trying to do is grow within Asda even though it might be declining so that we can help Asda help themselves turn around. So we sort of leverage the strong relationships to try and grow the people that are growing, but also help the people that are struggling a bit more to grow their categories through growth of our brands. So that's the other piece that we're just keeping an eye on. But I think summary is no real change to the aggressiveness or otherwise in terms of negotiations. Neill Keaney: And given that backdrop, is there any change to your promotional strategy? I know that's the other thing we're hearing is promotional rate is elevated and remains so. I think it was 30% in October, which I think we normally only see in the peak weeks before Christmas. Duncan Leggett: No, we generally agree the promotional plan with the customers at the beginning of the year and broadly stick to it. So I mean, things like cake are generally on promotion a bit more than the grocery, but that's no change. So I wouldn't think there's anything that was called out. Richard Godden: We did have one question come in on the Q&A unattributed how you're thinking about your short-dated October '26 bonds. I think we've already sort of essentially answered that one. Duncan Leggett: Yes, I hopefully covered it -- is where we need to refinance. We've just used the bridge facility just to enable us to buy a bit more. So yes, hopefully, that's dealt with. Richard Godden: Great. Okay. Well, we have no further requests for questions or any further questions. So I think we'll probably wrap it up there if there's no more incoming. All the documents are -- that you might want to refer to are on our website and say -- there should be a recording of the webcast from this morning as well, if that's of help to anybody on the results center of the website. So with that, thank you very much for joining. And we'll have -- next time we'll come to market will be our Q3 trading update, which will be third week in January. Thanks, everybody. Duncan Leggett: Thanks, everyone. Appreciate you joining.
Operator: Good morning, and welcome to TWFG's Third Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, today's call may include forward-looking statements that are subject to risks and uncertainties. Actual results could differ materially. For more information, please review our filings with the SEC. And now I like to turn the call over to Gordy Bunch, Chief Executive Officer. Please go ahead. Richard Bunch: Thank you, operator. And good morning, everyone. TWFG delivered another strong quarter of performance, reflecting both the resilience of our distribution platform and continued scalability of our operating model. Total revenues increased 21% quarter-over-quarter to $64.1 million, supported by 10.2% organic revenue growth and M&A revenues, while adjusted EBITDA grew 45% to $17 million, expanding margins by 430 basis points to 26.5%. That margin expansion underscores the earnings power of our distribution platform and execution on accretive M&A as we leverage scale and financial discipline. We continue to see encouraging signs of personal lines normalization. Carrier appetite has returned, rate increases have moderated, and underwriting discipline remains strong, all of which are helping to normalize retention and new business growth across our platform. Our diversified model spanning retail, MGA, and affiliated agencies, positions us to capitalize on both hard and soft market cycles. Our third quarter recruiting and M&A activities were productive with the addition of 8 new retail locations, one new corporate location, and 370 independent agents to our MGA platform. Following the quarter, we completed the acquisition of Alabama Insurance Agency, adding 23 additional retail locations and marking Alabama as our newest state expansion. These additions strengthen our foundation heading into the fourth quarter and enhance our ability to serve clients across a broader national footprint. Strategically, our priorities remain unchanged: Investing in our technology initiatives, executing our accretive M&A goals, expanding our retail and MGA distribution channels, and executing disciplined capital deployment to support these priorities. I'll now turn the call over to Janice Zwinggi, our CFO, to discuss some of the financial highlights. Janice Zwinggi: Good morning, and thank you, Gordy. Starting with our top KPI, written premium increased by $67.6 million or 16.9% over the prior year period to $467.7 million. We saw strong double-digit growth within both of our primary offerings, insurance services grew $56 million or 16.5%, and the MGA had a spike in growth of $11.7 million or 19.2%. This increase was a result of healthy growth in both renewals of $51 million or 16.4% and new business of $16.6 million or 18.7%. Our consolidated written premium retention remains strong at 91%. While a softening rate environment typically translates to increased customer shopping, our retention performance underscores the stability and engagement of our client base. Our total revenues increased $11 million or 21.3% over the prior year period to $64.1 million. This increase was driven primarily by commission income growth of $10 million or 20.8% to $58.3 million as a result of continued expansion in both of our product offerings and supported by strong renewal and new business activity. Higher contingent income and increased fee-based revenues from one of our MGA programs also contributed to the revenue growth. Organic revenues increased $5 million, reaching $54.2 million compared to $49.2 million in the prior year period for an organic growth rate of 10.2%, demonstrating solid momentum across both our agency and MGA platforms and positioning us well to meet our full year growth targets. From a profitability standpoint, adjusted EBITDA of $17 million, grew 44.7%, translating to a margin of 26.5%, which was up more than 400 basis points from the prior year quarter. This expansion reflects operating leverage, expense discipline, and an increasing mix of higher-margin corporate branch locations. On the expense side, commission expense increased $3.9 million or 13% over the prior year period to $34.6 million, tracking with commission income growth, taking into account the impact of corporate store acquisitions and programs with no related commission expense. Salaries and benefits increased $1.6 million or 19.2% over the prior year period to $9.9 million, driven by investments in new corporate branch acquisitions, headcount growth, and public company infrastructure. Other administrative expenses increased 8% to $5.2 million, reflecting technology upgrades and compliance initiatives. Net income was $9.6 million, up 40% over the prior year period, with a net margin of 15%. Adjusted net income rose 55% to $13 million, equating to an adjusted net income margin of 20%. We also delivered operating cash flow of $15 million and ended the quarter with $151 million in cash and no draws on our revolver, leaving us well positioned to fund both organic initiatives and potential tuck-in M&A. For the full year 2025, we've tightened the ranges on our guidance to reflect our year-to-date performance, recent expansion activity and current market conditions. We expect total revenues between $240 million and $245 million, and organic revenue growth rate in the range of 11% to 13% and adjusted EBITDA margins between 24% and 25%. As the personal lines market continues to soften and carrier availability expands, our current recruiting and acquisition initiatives, including the addition of new retail locations, independent agents, and the Alabama Insurance Agency provide further momentum and earnings visibility heading into year-end. Together with our balanced capital allocation and disciplined execution, these factors reinforce our confidence in achieving our full year 2025 targets. I'll now hand the call back to Gordy for closing remarks. Richard Bunch: Thank you, Janice. As we close out the third quarter, I'm proud of how our teams continue to execute. We've proven that investing for growth and focusing on margin expansion can coexist and that our TWFG family culture remains one of our greatest advantages. TWFG is squarely aligned with that playbook, focused on profitable growth, accretive M&A, deepening carrier and agency relationships, and expanding our retail and MGA footprint to sustain our long-term growth objectives. We enter the final quarter of the year with momentum, a fortress balance sheet, and a clear view toward our long-term objective: to build one of the best, high-growth, independent, agent-centric, data-driven, distribution platforms in the country. I want to thank our employees, agents, carriers, and shareholders for their continued trust and commitment to TWFG. With that, operator, let's open the line for questions. Operator: [Operator Instructions] Our first question comes from the line of Tommy McJoynt of KBW. Thomas Mcjoynt-Griffith: The first one, I think, is going to be related to the M&A front, but I just want to check on that. If I look at the statement of cash flows, there is a $10 million line that's attributed to other investments. Could you clarify what that is? Is that related to M&A? Richard Bunch: Sure. So we've long had our own premium finance operations, and we have been outsourcing operations for years and also using credit facilities to fund those premium finance notes. With so much capital in our coffers, we deployed our own capital into the premium finance operations, giving us a higher yield on that operating business. Thomas Mcjoynt-Griffith: So is that an accretive transaction? I guess, is that needle moving? Richard Bunch: I'd say it's highly accretive, yes, highly accretive for us. You're getting 4% plus interest in most interest-bearing instruments and the yield of swapping out our capital for the credit facility that was funding the premium finance notes put us well above 7% on the same deposits. Thomas Mcjoynt-Griffith: And then staying on the M&A front, you obviously are constantly looking at a pipeline of potential acquisitions. As we think about the 2026 pipeline, would your expectations right now that you guys put more capital to work on the M&A front, do more deals or how do you think about it relative to the pace that we're seeing this year? Richard Bunch: I think we'll be executing a little bit earlier in the cycle in '26 than we did in '25. And depending on how we view M&A throughout the calendar year, we should exceed '26. Operator: Our next question comes from the line of Paul Newsome of Piper Sandler. Jon Paul Newsome: Maybe a little bit of additional color on the market environment would be helpful. And I was wondering if you could kind of walk through maybe in addition to some of the pieces of rate plus -- true organic growth plus M&A, just to kind of give us a better sense of as we go into '26, what are the moving pieces that will get you to that double-digit organic growth? And what are the things that we should be sensitive to if things change? Like one of the things I struggle with is hard market turned out to be kind of bad for organic growth because of the availability issues, but now we have more availability, but soft market. So maybe some thoughts there would be helpful, at least for me. Richard Bunch: Yes. First, on the market transitioning from hard to soft, that has an impact on renewal rate and premium retention as those policies that were enforced last year come in at lower rates. As the market also then opens up, customers have more access to different carrier options than they had in prior periods, which could lead to even rewriting the account into an even lower rate than what the renewing expiring carrier offered. That cycle plays through the full calendar year. So we should see the impact of that abating once we get into the second quarter of '26. That would give us a full 12-month run of the softening of the market, which really began early in the second quarter of '25. The availability of additional capacity allows for more clients to be onboarded. The trade-off is lower average premium for the same accounts. We are seeing growth in exposure that is offsetting some of that reduced premiums. When we look at our organic going into '26, it's a combination of our same-store sales growth velocity, sales velocity as well as new program initiatives that we've launched from the MGA, existing program expansion, which then allows for more exposures to be brought in through those channels that are creating additional commission income above the base year. So it's really not one area. It's a multitude, all of the different parts of our platform executing against their growth initiatives. Jon Paul Newsome: And maybe a kind of sort of similar question. You've made a lot of additions of new agents over the last year or so. I think you've said in the past, most of them won't have an impact anytime super soon. How is that sort of waterfall of impact from those newly acquainted agents coming? And is there a point where we see some sort of inflection point where that -- those new agents you've accumulated over the last year or so start to have a measurable impact on the growth rate? Richard Bunch: Yes, their impact is baked into our forecasting. And I think as we've talked about over time, the immediate year they come in, there's not much of an immediate contribution as they grow their agency over a multiyear process, they start becoming more meaningfully contributed. Now as, like I say, we added a lot of stores in '24. So in '24 and early '25, they're not contributing a lot to the organic story. As they start getting their portfolios larger, they do become organic contributors, but at a percentage of the larger base now. So they're all part of the organic base. And so they're going to be part of the organic forecast based on our trend lines. So when we look at Agency-in-a-Box, all those recruited locations are in the AIB bucket. And so they get baked into there. We don't do cohort analysis around those, because of the vast diversity of locations, average premiums, and some of them doing their own tuck-in producer acquisitions that then skew the data points. Anyways, they're going to start being contributors, they're part of the base assumption going into the double-digit 2026 projection. Operator: Our next question comes from the line of Pablo Singzon of JPMorgan. Pablo Singzon: First, on the MGA channel. So good premium growth this quarter. I think you said 19%, but commission income actually grew much faster. I think it was about 56% and then commission expense only grew 27%. As a result, the MGA was highly margin accretive this quarter. I think net commissions over gross commissions are about 52% against, I think, mid-30s historically. Anyway, can you just talk about what happened there, business trends wise, and what drove the strong results this quarter? Richard Bunch: Yes, sure. So we launched a program in Florida at the end of the second quarter. Part of that program -- there's 2 components to it. We are an exclusive TPA, MGA for Florida Property Program. They had a takeout that materialized in June. That creates a TPA revenue stream for underwriting claims, marketing, and on the earn-out of the takeout, there's not a commission expense. So we get a commission revenue without the corresponding commission expense. As those policies renew, they do end up having a commission expense, and you'll see a normalization of that ratio between commission income and commission expense. And then separate and aside from that, there is a voluntary organic program that's writing new business, albeit in the reported quarter, not really a large contributor, should become a contributor at the end of fourth quarter and more going into 2026. Pablo Singzon: And then second question, I guess, this one is a bit bigger picture, right? So many of the public brokers have recently announced significant cost reduction or investment programs, which may be good longer term for them, but good near-term cash flow. So I guess the question is, do you anticipate something similar for your company? And if not, how would you respond to the objection that you might be underinvesting in the business compared to everyone else? Richard Bunch: Yes, we haven't announced our full year 2026 estimates. We plan to do so as we come out of the [ K ]. We're in the midst of our 2026 planning process, looking at those investments. Some of the investments we make, as you recall, our technology operation, our evolution management systems company is outside the public company. Those capital investments are made within that tech environment, which then doesn't burden the public entity with that capital spend. We will have investments similar to our peers, probably not at the scale of what they're spending. And part of that is just how we're organized, given the ability we can invest in technology outside of the public company operations and benefits of those tech investments then inure to the public company operating business units. So that's just totally different. We will have expansion of management team. You'll see an announcement later on this afternoon some roles and title changes that we put out. And then as we finish up our '26 planning, we'll be putting out the full year estimates alongside our K. Operator: [Operator Instructions] Our next question comes from the line of Brian Meredith of UBS. Brian Meredith: Gordy, first question, back on the MGA. So as capacity becomes more available, particularly in the Texas market, and I'm assuming business kind of goes back to the admitted market from the, call it, wholesale ENS market. Will that create some pressures maybe on growth in the MGA? Richard Bunch: Well, fortunately, for us, our MGA programs are currently all admitted. So if anything, the capacity that's shifting back from ENS into the admitted space inures to our benefit. So both Texas and Florida are admitted products. Brian Meredith: And then second question, I'm just curious, when we think about EBITDA margins for your corporate versus Agency-in-a-Box business, what's the difference there? And is there a difference in kind of where your Agency-in-a-Box kind of EBITDA margins can go versus the corporate margins, you think? Richard Bunch: So we've talked about Agency-in-a-Box and the passing through of 80% of the revenue and renewal kind of puts a cap on what that margin can produce. Because we are at scale as business operations, we do have a healthy net revenue margin on that business unit. On the corporate locations, our margin is going to be greater than 2x of what we achieve in Agency-in-a-Box, because we're retaining 100% of the renewal and have more control and constructive receipt of the profitability of the operations. Brian Meredith: Makes sense, thank you. Richard Bunch: And I want to circle back, Brian, while I got you, so I partially misspoke. Our programs that we originate and operate are all admitted. The Dover Bay program is indeed an ENS program. And I just wanted to clear that up. Operator: Our next question comes from the line of Charlie Lederer of BMO. Charles Lederer: Sorry, I joined late, so I apologize if I'm repeating someone else's question or if you touched on in prepared remarks. You made the comment in the press release about the product environment improving significantly. Just curious if you could break that out geographically a little bit and if you're seeing that in both the new business and renewal side? And I guess, how to think about what's flowing in the P&L near term? Richard Bunch: Sure. So we did touch on it earlier, but I don't mind repeating the hard market for personal lines started moving soft in really the beginning of the second quarter of '25, that changes carrier fostering. So think about the hard market '23, '24 and the early parts of '25, carriers are taking significant rate, carriers are restricting capacity. By restricting capacity, that means they're not writing the right new business. They're not wanting to add new production appointments, and that becomes a challenge. So as the market started to soften, carriers start reducing rates, they start opening up geographically for new business growth, they start putting out incentives to get agents to reengage in the sales process, and it becomes a highly competitive environment. Geographically, I would say that's present everywhere except California. California remains to be a hard market. You're still seeing property shifting between California FAIR Plan, surplus lines. There is fewer carriers right now operating in the California marketplace. You had Safeco make the decision to essentially exit the state by transferring its portfolio to Liberty Mutual. And so capacity is shifting from left pocket to right pocket. We are in both of those carriers' distribution. And so California is still hard on the personal lines side, it's relatively soft on the commercial lines. And then you have spotty geographical hardness where you have significant wildfire exposure regardless of state. And then I'd say largely the cat-exposed, hurricane-driven, PML geographies are relatively soft given the reduction in cat pricing and the significant availability of cat out in the market today. Charles Lederer: Maybe on the M&A pipeline that you talked about, can you give us a sense of, if it's a commercial or personal tilt toward that in terms of how your business mix might evolve in the next year or so? Richard Bunch: So when we're looking at M&A, the first thing we're looking at is the cultural fit of the organization. Secondarily, the quality of the portfolio, is it accretive, meaning, does the portfolio have similar loss ratio qualitative characteristics as our core portfolio? Is there some geographical expansion benefit of the acquisition? So does it possess unique carrier contracts and programs that benefit the large organization, so there's an immediate accretion, the EBITDA margin of the operating business and is there some internal scale lift of that post closing. We don't really focus on, is it personal, is it commercial, is it retail, is it MGA, is it network? we really look at the qualitative accretiveness of the totality of everything. And so we have in our pipe, and we have in our near term a little flavor of everything. So if I look in the rear, the last 2 acquisitions that we closed were, I would say, majority commercial lines, retail organizations. And part of that was geography. We picked up some scale in New York with the Angers & Litz acquisition that we announced in August. And then we had a larger operation in Louisiana that was also more commercially focused in the [ McGuinness ] operation we acquired in June. As I look at the first quarter '26 pipeline, I would say it's a little bit of everything. So we have one entirely commercial organization that's in the pipe, we have several that are a mix, so more of a multiline agency flavor where you have probably 40% to 50% personal, 60% to 50% commercial. And then we have some that are entirely personal lines. So I think that's a good question to ask, and I'll probably use your question as an opportunity to talk about premium projections. When we look at our acquisitions and we put together our base analyst model, I think, we use the assumption that the majority of our acquisitions and deployed capital we're going to be buying retail-oriented businesses that generate a lower, average commission but would project a higher premium. Our internal view is we're less sensitive to premium because we're not a carrier. We're more focused on the acquired revenue and the EBITDA output of the acquiring business. So when we acquire program-oriented type businesses, it's going to bring in less premium than you may have projected, but it's going to bring in a higher average commission than you projected. So when we hear or we see that there is a miss on premium, we're not a carrier. We just use premium as a barometer of how you can project future revenues and maybe we got to be a little bit more strategic about how we communicate that, because to the extent that we expand programs, and we will, because they present a higher-margin for us, it's going to be a lower premium, but a higher revenue and a higher EBITDA margin off of what we put in our base M&A assumptions. So I think when we come around and provide '26 guidance, you're going to see us trying to update those assumptions, because I think when you look at our actual results from an M&A basis, we're achieving on the acquired revenue, we're achieving on or maybe overachieving on the EBITDA margin. And then where we see various questions is what the premium number didn't come in. I think for me as an investor and owner of the business, I'm more focused on the revenue, and the net income, and the earnings and the ability to reinvest those earnings into the growth of the business long-term than the top line premium that I don't get to retain because we're not a carrier balance sheet organization. Is that fair? Charles Lederer: Very fair. Thank you. Just one last one on the contingent line of [indiscernible] and what contingents might look like in 4Q? Richard Bunch: So we do. One of the reasons we were very confident in our full year guidance as we made it through the 9-month treadmill and obstacle course known as insurance. We've got those third quarter lock-in opportunities so we can lock in some of those contingencies that are in our base level projections. So we have a high confidence in achieving what we've got in our current pro forma through the full calendar year. Operator: I would now like to turn the conference back to Gordy Bunch for closing remarks. Richard Bunch: Well, we again appreciate all of our shareholders, our staff, even the analysts, investors that are working with us. We think we have a great opportunity going into 2026 with our strong balance sheet, our very healthy M&A pipeline, our organic strategies for existing operations, the expansion of our programs. We look to execute on all the different levers that we have to ensure consistent growth and profitability across the organization. I look forward to further feedback and appreciate everybody again. And thank you for attending our call. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Good afternoon, ladies and gentlemen, and welcome to Terna's 9 Months 2025 Consolidated Results Presentation. [Operator Instructions] Please be advised that today's conference is being recorded. I would like to hand the conference over to our host speaker today, Mr. Stefano Gamberini, Head of Investor Relations. Please go ahead, sir. Stefano Gamberini: Thank you very much. Good afternoon, everyone, and welcome to the presentation of Terna's 9 month results 2025. This call will be hosted by our CFO, Francesco Beccali. Following the presentation, there will be the Q&A session. So we kindly ask you to send your question to our e-mail address, investor.relations@terna.it. Please, Francesco. Francesco Beccali: Thank you, Stefano, and good afternoon, everyone. Before moving at the figures, I'd like to take a moment to highlight some of our most recent achievements. Let's start with grid development, where we have made significant progress across multiple fronts in the past few months. Starting with the Tyrrhenian Link, one of the flagship projects in our 2024-'28 Industrial Plan. Let me remind you that before the summer, we completed the laying of the first submarine cable of the eastern section. And on September 16 Terna and Nexans began the first installation phase of the western section, connecting Sicily and Sardinia. Once completed, it will set a world record for the deepest high-voltage subsea cable installation, reaching 2,150 meters below sea level. This project will also represent a significant step towards Italy's urbanization target. On October 21, the Ministry of Environment and Energy Security formally launched the authorization process for the Central Link project, which plans to rebuild the 220-kilowatt backbone between Umbria and Tuscany, a crucial step to enhance transmission capacity, grid robustness and renewable integration. Shortly after on October 27, the Ministry initiated the authorization procedure for the Sardinian Link, a project to reconstruct and modernize Sardinia's grid infrastructure, strengthening the island transmission capacity and ensuring a more stable and resilient electricity system. These projects are included in the development plan and are scheduled beyond the business plan horizon. A distinctive feature of both the Central and Sardinian Links will be the use of Terna's proprietary 5 phases technology in their construction, an innovative design that represents a major step forward in the evolution of transmission infrastructure. These new pilots are lighter, more environmental integrated and capable of increasing transport capacity while reducing electric and magnetic fields, contributing to a more efficient and sustainable growth of the grid. Moreover, with regard to the authorization update, we signed a 5-year memorandum of understanding with the Marche region to enhance the planning of new infrastructure and the ministry kicked off the approval process for overhauling in the city of Ferrara's electricity grid. Lastly, in September, Terna completed the acquisition of part of the high-voltage [ Rome ] from Acea for EUR 227 million, an operations aimed at strengthening the continuity and security of the electricity transmission service. These acquisitions will also allow for more effective decision-making for renewal and development investments across the Central Italy Transmission Network, while having only a limited impact on Terna's financial leverage and remaining neutral for our credit rating. Beyond infrastructure development, we have also made important progress on the procurement front. Let's move to the next slide. We continue to effectively manage potential supply chain risk through timing and efficient mitigation actions. As of today, around 88% of our 2024-'28 CapEx plan is already covered by procurement contracts, up from more than 80% in March. All major projects, including the Tyrrhenian, Adriatic and SACOI 3 Links are fully contracted. For the ELMED Interconnection between Italy and Tunisia, the [ camel ] portion is already secured, while tenders for the converter stations are currently underway. The residual and sourced portion of planned procurement contracts primarily relates to projects scheduled for the latter part of the period, which procurement will naturally be finalized over time. Turning now to regulation. A few days ago, ARERA published Resolution 476 of 2025, verifying whether the conditions for the applications of the trigger mechanism for 2026 were met. As the variation in market parameters of the formula remained below the 30 basis point threshold defined in the regulatory framework, the current WACC of 5.5% for electricity transmission will remain unchanged in 2026. As regards to ROSS mechanism, the regulator published in August, the Resolution 390 of 2025 launching the experimental phase of ROSS Integrale mechanism for 2026 and 2027 period. In October, Terna submitted to ARERA its 2026-2027 business plan and proposals for incentives linked due to operational and performance efficiency. The business plan will be the reference for the [indiscernible] mechanism and for the new incentive penalty mechanisms introduced by the regulator for the accuracy of CapEx. Still on the regulatory side, in October, ARERA also published resolutions 440, recognized Terna EUR 93 million of output-based incentives for additional interzonal transmission capacity and investment efficiency. Finally, regarding shareholder remuneration, today, the Board of Directors approved the 2025 interim dividend at EUR 11.92 per share, flat compared to last year interim dividend. Please note that the new dividend policy communicated to the market in March set a minimum dividend per share equal to the 2024 dividend for the entire duration of the 2024-'28 business plan. Now let me briefly give you the usual overview of the Italian electricity market, turning to the next slide. As you can see from the chart, in the first 9 months of 2025, national demand was about 233 terawatt hour, recording a negligible contraction of 1.2% in comparison with the same period of last year when national demand was about 236 terawatt hour. Over the period, renewable sources covered about 43% of national demand, in line with the level registered last year. For what concerns national net total production, this stood at 201 terawatt hour, up by 1% compared to the same period of 2024. In the period, renewable sources accounted for about 50% of the national net total production, essentially in line with the level recorded in the same period of last year when renewable energy sources covered about 51% of net total production. To conclude, let me highlight the remarkable increase in photovoltaic production, which grew by 23% versus the first 9 months of last year, compensating the reduction in hydro generation. With renewables continuing to play a major role in Italy's power mix, flexibility becomes crucial. So before moving to the financial results of the company, let's turn the storage to storage and the progress made under the MACSE mechanism moving to the next slide. As you know, storage is the next frontier of the energy transition, essential to ensure flexibility and the system increasingly powered by renewables. As of September 30, Italy's total electrochemical storage capacity stood at 17.4 gigawatts hour, mostly small-scale systems, of which around 4.4 gigawatt hours were installed since December 2024. While small-scale installations still represent the majority, we are now witnessing a sharp acceleration in large-scale battery projects. In September, we successfully held the first auction under the MACSE framework. The auction awarded a total of 10 gigawatt hour of storage capacity, fully covering the demand. Results confirmed strong market interest in the [ mechanism ] with bids exceeding demand by more than 4x and average clearing prices around 65% lower than the reserve premium. Around EUR 30,000 per megawatt hour a year compared to a cap of 37,000 units. The contracted facilities are expected to enter into operation by 2028, alongside renewable plants from the FER X auctions, helping to balance the system and reduce reliance on fossil fuels for power generation, in line with the national decarbonization objectives. On this, the first auction the so-called transitional FER X closed in September with final rankings expected by December 11. It saw strong participation awarding up to 12 gigawatts of wind and solar capacity to be commissioned by 2028. The second FER X auction, which focused on resilient photovoltaic system was held in October and offered an additional capacity of almost 2 gigawatts. The final rankings are expected by the end of December. Overall, these results mark a major step forward in Italy's energy transition. Now let's move to the main figures of the period as Slide #8. In the first 9 months of 2025, group revenues and EBITDA increased by 9% and 7%, respectively, versus last year, increasing by approximately EUR 235 million and EUR 134 million compared to the first 9 months of 2024. We also reported a group net income of EUR 853 million with a growth of 5% compared to the same period of last year. Group CapEx reached around EUR 2.1 billion, marking an increase of approximately 23% versus the first 9 months of last year and setting a new record in Terna's history. This confirms once again our effort to accelerate investments to serve system needs. To support this CapEx acceleration, at the end of September 2025, net debt stood at EUR 11.7 billion, slightly higher compared to the value recorded at 2024 year-end of about EUR 11.2 billion. Now let's have a closer look at the results moving forward. Let's start, as usual, with revenues analysis. In the first 9 months of 2025, total revenues increased by 9%, reaching EUR 2.882 billion, up by EUR 235 million versus last year. The growth was attributable both to regulated and nonregulated activities which contributed for EUR 135 million and EUR 99 million, respectively. Let's now take a closer look at the evolution of revenues, turning to the next slide. Regulated revenues reached EUR 2.357 billion with an increase of more than 6% versus previous year. The growth was mainly driven by the RAB growth deriving from the recognition in tariff of 2024 capital expenditure, including the update and revaluation of capital cost parameter. The early recognition in tariff of depreciation related to 2024 capital expenditure 1 year in advance compared to the previous regulatory framework. And the fast-money component set on the conventional capitalization rate defined under the ROSS application. These factors more than offset the weighted average cost of capital reduction from 5.8% to 5.5% in 2025 and the lower output-based incentives contribution versus last year. Non-regulated revenues reached EUR 525 million, recording a double-digit increase of 23% in comparison with the same period of last year. The improvement mainly reflects the higher contribution from the Equipment segment, which includes Tamini and Brugg Cables and from the Energy Services segment. Now let's go to operating cost analysis. As you can see in this chart, total operating costs stood at EUR 856 million, 13% higher than last year. The regulated activities cost increase is mainly driven by the rise in the headcount and the higher average cost of labor, partially offset by higher capitalization. The non-regulated activities were primarily impacted by higher costs for materials and services related to the development of activities, mainly in the Energy Services segment and Equipment segment. This increase were driven by higher volume of activities reflected also in revenues growth. Regarding EBITDA, moving to the next slide. Thanks to the acceleration in revenues, 9 months 2025 group EBITDA reached EUR 2.026 billion, 7% higher than the same period of last year. The improvement was mainly attributable to regulated activities, which contributed for about EUR 99 million more versus the first 9 months of the previous year, showing an EBITDA of EUR 1,923 million. EBITDA from non regulated activities increased by 51% to EUR 103 million, mainly driven by a stronger contribution from the Equipment segment with improving margins from both the Tamini and Brugg Cables groups as well as better results from the Energy Services. Let's now have a look to the lower part of the P&L, turning to the next slide. D&A amounted to EUR 679 million. The rise versus last year's figure was mainly related to the entry into service of new infrastructure. As a consequence, the EBIT reached EUR 1.348 billion, 7% higher versus the first 9 months of 2024. The net financial expenses amounted to EUR 132 million. The slight, year-on-year increase of EUR 27 million is mainly due to the draw donw of new financing and the lower financial income resulting from cash investments, partially offset by higher capitalized financial charges. Taxes stood at EUR 362 million, EUR 24 million higher versus last year, essential due to improved results. Our tax rate was 29.8% compared to 29.4% in the 9 months of 2024. As a result, group net income reached EUR 853 million, marking a 5% growth versus the same period of last year. Moving now to CapEx analysis. In the first 9 months of 2025, total CapEx reached around EUR 2.1 billion up by 23% year-on-year, confirming the solid CapEx acceleration in line with planned targets. We invested about EUR 1.972 billion in regulated activities. Among the main projects of the period, it is worth mentioning the Tyrrhenian Link, the Adriatic Link, SACOI 3, the modernization of the high-voltage grid in the locations due to the Winter Olympics in 2026 and the Chiaramonte Gulfi–Ciminna power line. Moreover, we should consider the investments planned under the defense plan, which play a crucial role in reinforcing the resilience of the National Transmission System through the installation of synchronous compensators, shunt reactors and dumping resistor systems. Among CapEx categories, development CapEx represented 57% of total regulated investments. Defence CapEx stood at 13%, while Asset Renewal & Efficiency was at 30%. Non-regulated and other CapEx stood at EUR 115 million. This includes capitalized financial charges and other investments. Turning to the next slide. Cash flow generation for the period amounted to around EUR 2.2 billion. This was the result of around EUR 1.5 billion of operating cash flow and around EUR 700 million of working capital and other items. Net debt at the end of September 2025 was about EUR 11.7 billion, around EUR 500 million higher than 2024 year-end level, primarily due to the CapEx acceleration and the dividend payment. Let's now make a deeper analysis of our debt profile, moving to Slide 17. At the end of September 2025, we registered a fixed floating ratio on gross debt of around 83%, with an average duration of approximately 6 years. Consistent with Terna's strategic approach of aligning capital allocation with sustainability goals to enhance long-term value, as of the end of September, Terna's sustainable financing portfolio included EUR 3.75 billion in senior green bonds and EUR 1.85 billion in perpetual subordinated hybrid green bond. On this, let me remind you about the successful launch of the first European green bond with a total nominal amount of EUR 750 million made in July. This bonds, which received a very favorable market response will pay an annual coupon of 3%. In addition, Terna can rely on EUR 2 billion in an ESG-linked term loans, 3 ESG-linked revolving credit facilities for a total of approximately EUR 4.300 billion and a EUR 2 billion Commercial Paper Program dedicated to the issuance of short-term conventional or ESG notes. To conclude, as already communicated to the market in July, the European Investment Bank Terna, Intesa Sanpaolo and SACE have signed agreements totaling EUR 1.5 billion to support the development and construction of the Adriatic Link, the submarine power cable linking the Italian regions of Marche and Abruzzo. Thank you for your attention. Let me now conclude this presentation with some closing remarks. First of all, I would like to emphasize that we remain strongly focused on executing our industrial plan. As highlighted during the presentation, alongside delivering a solid set of results we continue to make tangible progress across all our main projects, while keeping a disciplined approach on the procurement front despite a still challenging environment. All of this confirms once again our ability to deliver on our commitment. At the same time, the broader energy transition continues to advance rapidly. The recent FER X and MACSE auctions have shown clear evidence of this progress with over 12 gigawatts of new renewable capacity awarded under the FER X scheme and 10 gigawatt hour of storage capacity contracted in the first MACSE auction, both at competitive prices well below the respective caps. These results confirm the market's strong momentum and the soundness of the regulatory framework supporting the transition. To conclude, we firmly confirm our full year 2025 guidance. We expect to achieve revenues of EUR 4.03 billion and EBITDA of EUR 2.7 billion and a net profit of EUR 1.08 billion. In terms of investment, the group has set a target of approximately EUR 3.4 billion for 2025. Thank you for your attention. We are now ready for the Q&A session. Stefano Gamberini: Thank you, Francesco. Now we are ready to start with the Q&A session. Francesco, we received many questions regarding the press rumor about potential sale of transmission grid stake. Could you comment about it? Francesco Beccali: Despite we do not use to comment on press rumors, let me be clear on this point. At current stage, this is not an option on our table. We constantly analyze all the possible instruments available to finance the development and maintenance of the National Transmission Grid and the results of these analysis are always reflected in the decision set out in Industrial Plan. In this sense, let me confirm what we have been stating since we presented the update of our plan back in March. Our CapEx plan to 2028 is fully sustainable under a financial standpoint. The upgrade of our rating to A- for Standard & Poor's and the revision of the outlook to positive from stable by Moody's registered in April are for further confirmation of our financial solidity. As of today, the range of flexibility tools we could evaluate are the remaining hybrid issuance capacity, which is worth more than EUR 2 million as well as seeking additional public contributions to strengthen the financial structure and considering options to valorize and monetize our nonregulated activities. Stefano Gamberini: Now move about output-based incentive. What is the number of OBIs accounted in the 9 months 2025? Is your expectation for the full year confirm? Francesco Beccali: In the 9 months revenues, there is no contribution coming from the output-based incentives related to dispatch and services market efficiency incentives. This will be recognized in the last quarter when we will have full visibility and certainty in line with the accounting principle. In the 9 months, we have instead registered EUR 16 million relative to the interest incentives. With reference to the full year, our expectations reflect the update in the performance estimated for 2025, which allow us to reach and possibly exceed the guidance already provided after the first quarter of 2025 of more than EUR 50 million of OBI's contribution. Stefano Gamberini: Thank you. Still about guidance. Why are you not increasing the guidance for full year despite you are already at around 80% on full year net income guidance? Francesco Beccali: Well, the strong results we registered in the first 9 months increased the visibility and the reliability of the guidance we communicated back in March. However, as I've just underlined in the previous answer, we still miss full visibility on some elements, such for example, dispatching incentives for which we need to wait the end of the year to determine the early performance with full certainty. Let me remind that this is the first year of the new dispatching incentive framework renewal. So all the incentives we will account for this in 2025, will depend on 2025 performance. Stefano Gamberini: Given our Resolution 440/2025 on interzonal incentives recognized to Terna, do you upgrade guidance on OBIs? Francesco Beccali: As we have already stated in the presentation, we wish to highlight that this around EUR 93 million of interzonal incentives improved the visibility on EUR 900 million guidance of total OBI for the 2024-2028 period. As we always reported, these interzonal incentives will be accounted for over 3 years, starting by next one. In the first half of 2025, we have already registered EUR 16 million of interzonal incentives recognized from previous years. We did not disclose the breakdown of our OBI guidance among the different mechanisms. However, let me remind you that the overall amount mostly refers to existing output-based incentive framework with a bigger contribution from the dispatching service and for a residual part relative to instead the ROSS Integrale schemes back loaded. Stefano Gamberini: Okay. Can you comment on the ROSS Integrale expected incentives and potential time line? Francesco Beccali: The last resolution published by ARERA basically confirms ARERA's focus on the need to incentivize companies to deliver strategic high-value energy infrastructure in an efficient way. ARERA allows companies to submit proposals for new reward-only output-based incentives as part of the business plan, which will be subject to the regulatory scrutiny and approval. We do not rule out the possibility the regulator will issue new incentives before the end of the current regulatory period. Stefano Gamberini: Okay. Now on data centers. Do you see any significant acceleration in data center projects? Francesco Beccali: In Italy, the connection request to the grid associated with the construction of data centers have experienced strong and continuous growth in recent years. As of the 31st of October of this year, the total high-voltage connection request reached approximately 64 gigawatt with around 378 active requests. Geographically, around 80% of connection requests are concentrated in northern parts of Italy, especially in Lombardy around Milan, confirming the region as the primary hub for data center development. For this reason, data center will represent one of the drivers together with the electrification of domestic consumption and electricity mobility, underlying the expected increase in power demand in future years. Stefano Gamberini: Now could you please provide an update of authorization and procurement status over Industrial Plan horizon? Francesco Beccali: Sure. The procurement process for our investments is progressing in line with Industrial Plan. Projects currently still in the authorization phase with expected completion beyond the plan horizon are not strategic and have a limited impact on total CapEx. The authorization processes for major projects planned after 2028 will be launched in due course. As of today, all our main HVDC projects included in the current plan, have received the necessary authorizations and around 92% of the projects in the plan have completed the approval process. Moreover, we are actively working to complete all the authorization procedures according to the planned implementation time line, both for 2030 and for the longer-term horizon towards 2024. On procurement, we are fully aware of the potential supply chain shortages and bottlenecks affecting the industry. To manage this risk, we have taken several steps to ensure continuity. Thanks in part to the support of Brugg Cables and Tamini transformers around 88% of 2024-'28 CapEx is already covered by existing procurement contracts, up from the 80% in March. Stefano Gamberini: Very well. Now moving to the working capital. Could you give a bit of color on the dynamics in 9 months '25 and your expectation for year-end working capital figure? Francesco Beccali: In the third quarter, the working capital and other item reports a decrease of about EUR 700 million compared to the end of 2024. This variation has a positive impact, obviously, on our cash flow. This result is mainly attributable on the one hand, to an increase of about EUR 390 million in net pass-through energy payables mainly due to higher debt from the essential plant for the security and electricity system, the so-called [indiscernible] and the capacity market, partially offset by higher credit from the cost of procurement of procuring resources on dispatching market services. On top of that, we have to take account of the increase in other net liabilities, essentially due to the increase in security deposits received from operators participating in the capacity market and the higher planned subsidies received from third parties. Then we also have to take into account the decrease of about EUR 156 million in the receivables resulting from regulated activities attributable to the collection of the previous year's dispatching market efficiency incentive, partially offset by the higher receivables attributable to the transmission revenues due to the tariff update set by ARERA Resolution 579 of 2024. Finally, this amount includes also the effect of the closing of the acquisition of high-voltage grid portion from Acea. Regarding working capital forecast for year-end, due to the ordinary seasonality, let me remind that we expect a significant reduction in working capital liabilities, pending payment resolutions from ARERA. Stefano Gamberini: Thank you. Finally, about regulation. When do you expect new Board of ARERA? Do you see any risk of ARERA changing approach towards the energy transition and thus support for investment in the electricity networks? Francesco Beccali: Well, as we always say, the rationale underlying the energy transition in Italy is very strong because it basically allows to reduce the dependence of the country from imported energy and commodities. The energy transition could not go ahead without investment and we play a central role in such process. We understand that the new Board of ARERA should be appointed before the end of the year, and we do not expect a significant change in ARERA's approach towards the energy transition. Law 481 establishes that commissioners must be choosing among people of outstanding competence. We are confident that what we mentioned -- we just mentioned represents good rationale to prevent regulatory risk. Stefano Gamberini: Many thanks, Francesco. Francesco Beccali: Thank you. Stefano Gamberini: So the Q&A section is now over. As always, the Investor Relations team is available to answer any follow-up questions you might have. Thank you, everybody, for your participation, and have a nice evening. Francesco Beccali: Thank you, everybody. Nice evening.
Operator: Hello, and thank you for standing by. My name is Regina, and I will be your conference operator today. At this time, I'd like to welcome everyone to the Total Energy Services Third Quarter 2025 Results Conference Call. [Operator Instructions] I would now like to turn the conference over to Daniel Halyk, President and CEO. Please go ahead. Daniel Halyk: Thank you. Good morning, and welcome to Total Energy Services Third Quarter 2025 Conference Call. Present with me is Yuliya Gorbach, Total's VP Finance and CFO. We will review with you Total's financial and operating highlights for the 3 months ended September 30, 2025, and then provide an outlook for our business and open up the phone lines for questions. Yuliya, please go ahead. Yulia Gorbach: Thank you, Dan. During the course of this conference call, information may be provided containing forward-looking information concerning Total's projected operating results, anticipated capital expenditure trends and projected activity in oil and gas industry. Actual events or results may differ materially from those reflected in Total's forward-looking statements due to a number of risks, uncertainties and other factors affecting Total's businesses and the oil and gas service industry in general. These risks, uncertainties and other factors are described under the heading Risk Factors and elsewhere in Total's most recently filed annual information form and other documents filed with Canadian provincial securities authorities that are available to the public at www.sedarplus.ca. Our discussions during this conference call are qualified with reference to the notes to the financial highlights contained in the news release issued yesterday. Unless otherwise indicated, all financial information in this conference call is presented in Canadian dollars. Total Energy's financial results for the 3 months ended September 30, 2025, reflect improved Australian financial results following the deployment of upgraded equipment and continued strong North American demand for compression and process equipment. Offsetting these tailwinds was lower North American drilling and completion activity. On a year-over-year basis, consolidated third quarter revenue increased by 8%. Contributing to this increase was $15.2 million of increased CPS segment revenue, $6.2 million from Well Servicing and $1.6 million from RTS segment. Third quarter EBITDA decreased by $7.6 million as compared to 2024 due primarily to the relative increase in lower-margin CPS and Well Servicing segment revenues due to consolidated revenue, the $1.8 million year-over-year negative foreign exchange impact on CPS segment results, and $1.5 million year-over-year increase in share-based compensation due to increase in the market price of Total Energy shares. Geographically, 48% of third quarter revenue was generated in Canada, 27% in United States and 25% in Australia, as compared to the third quarter of 2024 when 49% of consolidated revenue was generated in Canada, 34% in United States and 17% in Australia. By business segment, the Compression and Process Services segment contributed 48% of third quarter consolidated revenue, followed by the CDS segment at 32%, Well Servicing at 12% and the RTS segment at 8%. In comparison, for the third quarter of 2024, the Compression and Process Services segment generated 46% of third quarter consolidated revenue, followed by CDS at 36%, Well Servicing at 10% and RTS segment at 8%. Third quarter consolidated gross margin was 22% in 2025, which was 209 basis points lower than 2024. Contributing to this decline was a [ 417 ] basis point year-over-year increase in third quarter revenue contribution from CPS and Well Servicing segment as these business segments historically generate lower margins than the CDS and RTS segment. The year-over-year decline in North American drilling third quarter gross margin percentage in all business segments was partially offset by improved Australian results. Third quarter CDS segment revenue decreased 5% compared to 2024. The 33% year-over-year decline in third quarter North American operating days was partially offset by a 32% increase in Australian days. Segment revenue per operating day increased 16% during the third quarter of 2025, due primarily to increased pricing on upgraded rigs in Australia that was partially offset by change in equipment operating and competitive pricing in certain areas of Canadian market. Third quarter CDS segment EBITDA decreased by 3% compared to 2024 due to lower North American drilling fees that was partially offset by higher activity and pricing in Australia. CDS segment's EBITDA margin during Q3 of 2025 was consistent with 2024, as the overall decrease in third quarter operating days was offset by higher pricing for upgraded rigs and cost management. RTS segment revenue for the third quarter increased 8% compared to 2024. This was a result of stable utilization and an increased U.S. rental fleet following the June acquisition, combined with a higher revenue per utilized rental fleet due to the change in mix of equipment operating. Higher costs associated with the change in the mix of equipment operating and competitive market conditions that did not allow for the price increases necessary to offset cost inflation, resulted in a 7% year-over-year decrease in the third quarter RTS EBITDA, and 585 basis points decrease in segment EBITDA margin. Third quarter revenue in total CPS segment was 14% higher compared to 2024. Increased fabrication sales more than offset by 3% year-over-year decline in rental fleet utilization. Third quarter CPS segment EBITDA declined $4.2 million or 22% compared to 2024. $1.8 million of this decline was due to increase in cost of services, resulting from a weakening Canadian dollar relative to the U.S. dollar. Also contributing to this decline was the commencement of certain low-margin fabrication project awarded in 2024 when industry conditions were weaker and cost inflation arising from tariff-related supply chain challenges that were not fully passed on to the customers. The fabrication sales backlog at September 30, 2025, was $380.8 million, which is $76.9 million or 25% increase and is higher compared to $303.9 million backlog at June 30, 2025. In Well Servicing, a 5% increase in revenue per service hour combined with 19% increase in operating hours, resulted in a 24% year-over-year increase in third quarter segment revenue. Increased Australian and Canadian activity was partially offset by a substantial decline in U.S. activity. Higher pricing and increased fleet utilization following the upgrade of several rigs over the past year contributed to a 162% increase in third quarter Australian operating income. Offsetting this increase was a decline in North American operating income due to competitive pricing and substantially lower U.S. activity levels. Segment EBITDA for the third quarter of 2025 was 4% lower compared to 2024 due to lower pricing in Canada and substantially lower utilization in the U.S. that was only partially offset by increased Australian utilization and pricing realized for the reactivated upgraded rigs. From a consolidated perspective, Total Energy's financial position remains very strong. At September 30, 2025, Total Energy had $115.5 million of positive working capital, including $57.1 million of cash. Bank debt less cash on hand was $32.9 million at September 30, 2025. Total Energy's bank covenants consist of maximum senior debt to trailing 12-month bank defined EBITDA of 3x and a minimum bank defined EBITDA to interest expense of 3x. At September 30th, the company's senior bank debt to bank EBITDA ratio was 0.25 and the bank interest coverage ratio was 36.47x. Daniel Halyk: Thank you, Yuliya. Total's third quarter results demonstrate the resiliency of our diversified business model. Despite challenging North American drilling conditions and margin pressure in our CPS segment as they work through some lower-margin legacy orders, Total continued to generate substantial free cash flow that was used to fund growth opportunities, pay dividends, buyback stock and reduce bank debt. Stable Australian industry conditions and specific customer needs have encouraged Total to invest substantial capital over the past year to upgrade and reactivate several drilling and service rigs under long-term contracts. The upgrade of an idle drilling rig acquired as part of the Saxon acquisition in 2024 has just been completed, and we expect such rig to commence drilling before the end of this month. This will bring our active Australian drilling rig count to 13, the highest ever. An Australian service rig is currently being upgraded and is expected to be completed and commence operations by the second quarter of 2026. North American demand for compression equipment remains exceptionally strong and continues to be driven by significant infrastructure investment related to growing LNG export capacity and demand for natural gas fired power generation. The record fabrication sales backlog, which exceeded $380 million at September 30th, provides visibility well into the second half of 2026. While the CPS segment works through some lower margin orders received in 2024 when market conditions were less favorable, such projects are scheduled to be substantially completed by year-end, and the impact on those orders -- the impact of those orders on margins will cease. Steps taken to mitigate cost inflation and tariff uncertainty are also expected to improve CPS segment margins going forward. This includes commencements of the previously announced expansion of our U.S. fabrication capacity with plant construction expected to be completed by the first quarter of 2027. In Canada, the upgrade of a mechanical double drilling rig to a state-of-the-art AC electric triple pad rig was completed in early November and such rig is currently drilling for a major Canadian producer in the Alberta Montney. This rig's unique design is expected to achieve significant operating efficiencies compared to conventional AC triples. Should its operational and financial performance meet expectations, we have identified several more idle rigs in our Canadian fleet that could be similarly upgraded should market conditions warrant. Although we remain sensitive to current market challenges and uncertainty, we will use our financial strength to pursue acceptable investment opportunities. Specifically, we continue to engage with our Australian customers in regards to future potential growth opportunities. We also continue to work to identify and evaluate North American acquisition opportunities with a view to gaining critical mass in our existing business segments. As we enter the busy winter drilling season in the northern areas of North America, I would like to acknowledge the focus and dedication required of our employees to ensure our operations are conducted safely and efficiently in often extremely harsh weather conditions. I would now like to open up the phone lines for any questions. Operator: [Operator Instructions] Our first question will come from the line of Tim Monachello with ATB Capital Markets. Tim Monachello: Just wondering about the Weirton expansion and just the way we should think about revenue cadence on your backlog. Are you capacity constrained currently? And should we expect revenue out of CPS segment to be somewhat similar from a product sales perspective to what it's been over the last couple of quarters as we go through '26 until that expansion is commissioned? Daniel Halyk: So Tim, I would say, yes, in the U.S., we're pretty much at capacity without some major, I would say, outsourcing and labor changes, including additional shifts. In Canada, we have the ability to ramp up more if we went to further and larger nighttime shifts. So -- there's a cost to doing that. So we're trying to balance the demand and putting orders through the shop with the incremental cost that would arise from adding additional night shifts, primarily in Canada. So certainly, Weirton, when we have the expansion completed, obviously, we're going to be ramping up our labor force in advance of that. And it will take some time once the shop is completed to fully realize the efficiencies and gains that come with that, just primarily due to labor. But that will certainly take a lot of pressure off of Canada and certainly increase our capacity materially in Weirton. Tim Monachello: That's helpful. And then -- I joined the call a little bit late, but I'm sure you provided some commentary on the compression margins in the quarter. And I'm just wondering if you can provide any additional commentary on, I guess, how -- the pace of expansion given some onetime items in Q3? Daniel Halyk: Yes. I think there's probably 3 components to the year-over-year margin compression and sequential quarter compression. First would be some fairly volatile FX movements. And again, we have a pretty pragmatic approach to dealing with FX changes to lock in economics on orders, but that's never perfect. And when you have volatility, short-term material swings that can impact and sometimes it's positive, sometimes negative. Year-over-year, it was $1.8 million to the negative, that goes straight to cost of goods sold. The second component would be in 2024, we made -- we took in some orders that were fairly low margin. Specifically, there was one large order that we consciously bid aggressively for some strategic reasons I won't get into, part of which was flexibility on delivery dates, and our ability to load level shop production, and that certainly helped our margins on other packages. And in hindsight, it was the right decision in the sense that the market turned significantly in early 2025. And if we wouldn't have preserved our labor force, we probably wouldn't be enjoying the success we have to date. So, we're now working on those projects. They'll have a short-term hit on our operating margins. But by the end of the year, that will be old news. And certainly, given the significant improvement in market conditions beginning in the early 2025, I would certainly hope our sales group there is bidding work at better margins, because we're running pretty hot right now. And the final point I was going to make is there's cost inflation. It's been a -- as everyone knows, a pretty interesting and dynamic marketplace. Steel is obviously a big component of the inputs within the CPS segment. There was a lot of volatility. And there's a timing difference between when an order is received, when the materials required for that order are procured, and when that order is completed. And so, it's a pretty dynamic environment. And like I said, we managed that pretty well, but no one can manage that perfectly. And I think Q3 was a bit of a perfect storm in terms of some lower-margin projects combined with a lot of volatility in the steel market. Thankfully, that settled down. Compression packages are USMCA compliant. So we haven't faced any issues on that front. But there were some serious questions earlier in the year about whether there would be cross-border issues. And candidly, one of the reasons we're expanding our U.S. production is to get ahead of any potential changes to Canadian-U.S. trade relations. Tim Monachello: Okay. That makes a lot of sense. And I mentioned -- or I'm glad that you mentioned the -- I guess, the strength of the compression market, you've been booking record order flow for the first 3 quarters of the year. Do you see that continuing in Q4? Is there any leading edge indicators that would suggest any changes to [Technical Difficulty]? Daniel Halyk: To date, we continue to see very strong demand. Tim Monachello: Okay. And so, like a booking is placed today, when would a customer expect delivery? Daniel Halyk: Depends on the unit, but -- and depends how much they're willing to pay. You want to get to the front of the line, there's ways to do that. How do you allocate scarce resource, price? One of the challenges that we're facing right now, Tim, is some of the lead times for major inputs, notably Cat Engines, are now well in excess of 90 weeks. And so, we're effectively having to make decisions on inventory and supply of inputs based on what we think business will look like almost 2 years in advance. And so -- we've been there before, we've never seen quite the lead times we're seeing now. But I can tell you, that's also a benefit to larger players. To try and compete in this market without a balance sheet is very difficult. And you see it in our inventory levels are going up. And like I said, we're having to make investment decisions on inventory 2 years in advance, which, again, I've never seen anything like that. And at some point, the music will slow down or stop. It has before. We've been through that before. You'll have the working capital unwind. And -- but so far, we've seen no signs of that music slowing down. Tim Monachello: Well, that's positive. And then, I guess the other sort of notable change in the Compression segment in Q3 was a meaningful uptick in your utilization of your rental fleet. Can you talk a little bit about what changed quarter-over-quarter and how you see that progressing as we go -- Daniel Halyk: Well, we had noted that in our Q2 call that we had a subsequent to quarter end, a pretty significant Canadian rental contract for a bunch of our nomads. And it's interesting, the nomads that went out on rent in Q3 are being used by a customer to provide temporary compression as they do a major plant turnaround. And so it's exactly the type of application that the nomads are good for to come in and basically allow a plant to continue operating as the primary compression is rebuilt. So, those things tend to come and go. What we're seeing, particularly in the U.S. is -- and we've seen it before, and it kind of comes in cycles, but pretty aggressive pricing, I'd call it by financial players in the rental market that basically are providing capital leases. We provide an operating lease in the sense we take residual risk. We also build for compression for a bunch of those companies. And so we're not inclined to compete with them. And frankly, our cost of capital is likely higher, so we don't try. So that's put a little bit of pressure on the U.S. rental fleet. But again, for short-term specific applications, that's where we're good at or where customers want the flexibility to keep the units off their balance sheet in terms of not being capital leases. Tim Monachello: Got it. And then last one for me. Can you just talk a little bit about the opportunity set that you're assessing currently? I know you don't have the '26 budget formalized yet, but just like some of the areas of growth opportunities? Daniel Halyk: So certainly, in Australia, our performance has been very good operationally. And I think the quality of our equipment is causing continued interest in us reactivating and upgrading rigs. So we're certainly active in that market and discussions. I would say it's largely market share gains as opposed to a growing market. But the overall market in Australia has been pretty stable. We haven't seen material changes there. I would say most of our -- well, pretty much all of it has been market share gains as we displace other suppliers there. Within North America, there's select targeted opportunities to upgrade equipment. I mentioned the triple that went straight to work as soon as it's done. It's in the Alberta Montney, that's a very special rig. And we're watching it keenly as I'm sure others are. And if the business case exists, we won't hesitate to do further similar upgrades. And I think the other thing we're very interested in doing is gaining critical mass in our existing business segments in North America, particularly the U.S., we're going to be disciplined and focused. So we're not going to force anything, but we were able to do a smaller deal in June on the rental side, and we're open about our interest in growing our business down there. And we continue to see opportunities, and we'll evaluate and execute where it makes sense. Operator: [Operator Instructions] Our next question will come from the line of Josef Schachter with Schachter Energy Research. Josef Schachter: Going back to Australia, you've got 13 rigs out of your 17 working utilization rate, 55%. What is potentially maximum utilization where we talk 70%, 80% in Canada and the States, depending upon what market you're in. Is that the same kind of target utilization that you could get in that country? Daniel Halyk: Yes. Certainly -- we could certainly get there. Like I said, we don't see the market growing. It's going to be more market share gains. One of the big challenges in Australia is labor. And so we've taken a fairly methodical approach to expanding our active rig count, in large part not wanting to strain our labor force, and frankly, put inexperienced people in bad positions. And I can tell you, that's our concern globally. It's less of a concern, obviously in North America, given a bit softer market conditions. But we've seen other companies take a more aggressive approach on expansion, and it usually doesn't end well. And a lot of the problems arise from straining your labor force. So we're going to take a very methodical, controlled approach. And you've sort of seen it, Josef, over the past year where it's been the rig at a time. We could certainly be more aggressive. Capital is not the issue. It's in our view, first of all, quality product. So trying to do too much at once is going to strain our supply chains. And number two, equally, if not more important, is ensuring we've got confident labor to staff the equipment. Josef Schachter: So, of the 4 rigs that are left in Australia, are any of them being looked at by people so that you could upgrade those and put them to work in 2026? Daniel Halyk: They're being looked at. I'm not going to comment on time lines. I think it depends. Again, Australia tends to be a very long-term, they call them campaigns unlike North America, while Canada is the worst where we tend to be much more of a spot market mentality, where Australia, when you commit a rig, it's for years. And so, these upgrades we're doing are substantial, and take several quarters to do, not weeks. So, I'm not going to comment on timing. I will say we are in active discussions though on a number of fronts there. Josef Schachter: Okay. Next one for me. Compression margins this quarter, 15% down from 22% a year ago. You mentioned that through year-end, it's going to be lower numbers. Do you -- what's the kind of number that you could see in 2026? Are we going to get back into the 20s? And what would be peak kind of margins in your view for the CPS business? Daniel Halyk: I think we're learning a little bit as we go. As we discussed earlier, we're starting to push the limits of our plant capacity. Obviously, there's levers we can pull to increase that, but there's cost to doing so. We're also testing continuously the market on pricing. And again, so we're learning as much as anyone as we go into what's been a very strong market. What I would say is Q3, we definitely -- let me put it this way. I hope that's bottom. And from everything I can see at this point, I expect it is. I would say we expect to revert back to margins we saw in the first half of the year. And again, that will occur over the course of Q4 into Q1. And certainly, given the strong demand and strong backlog, the projects we're bidding currently and have bid for the past several months, quoted margins would be substantially in excess of the orders that we're currently -- some of the orders we're working on in Q3 going into Q4. Josef Schachter: Okay. Last one for me. You've done -- as you said the RTS did a small tuck-under acquisition. Are you preferring to do smaller deals and put them into place or into markets where you want to get bigger up in a certain market? Or are you looking -- given your strong balance sheet, $57 million in cash, would you be looking at things of a bigger scale that would be kind of transactionally growing the company faster and bigger? What's your feeling on the M&A front, [ so ] smaller or looking at bigger deals? Daniel Halyk: All of the above. If we could do another Savanna acquisition, we're [ game ]. Josef Schachter: Is there a lot of desperation by people given the tough market, especially in the drilling side, that those would be the first opportunities that might come your way? Daniel Halyk: I would say there's starting to be some alignment between value expectations and current public market valuations for energy service companies. I think -- I would also say there's probably some private companies that are getting tired. So I don't really want to speculate more than that. I would say the pipeline is busy. And -- but it's got to work for our existing shareholders. And again, I use Savanna that we did in 2017 as a prime example where that was an accretive deal, but it also is very beneficial post closing to Savanna shareholders that stayed along for the ride. So this really -- at the end of the day, it's going to be shareholders of the target that decide what they want, and there's public and private. And you can't force those things, but we're also not going to be stupid about it. Tried not to be stupid for 29 years and don't want to start being stupid now. Operator: [Operator Instructions] Our next question comes from the line of Paul Starkman with [ Shareholder ]. Paul Starkman: You've already touched on this with the questions asked by Tim and Josef, but I was going to ask more high level in terms of the competitive landscape in various regions and why you think you're winning market share? It's a long game. You've got a clean balance sheet. You touched on that. You talked about the strong team members and employees you have driving the business. Oftentimes, there's an inflection point where you sort of start winning a lot more business and your customers start listening more and engaging more and want to work with you more. Maybe if you can comment on that sort of longer term thematic maybe by region as to why you think Total has been winning and will likely continue to do so given the disciplined approach? Daniel Halyk: So good question, Paul. First and foremost, when we accept business, we expect to execute that business at our high standards, and we won't cut corners. So, if it's in the CPS segment, it means building quality equipment. If it's on the drilling or well servicing or rental, it means providing good equipment with excellent service and safe. People don't hire us to cause problems. What I would say is good operators appreciate that value. But we also have a balance sheet where we can say no if pricing is not acceptable, because we're not going to lower our standards simply to get work. And for people like you that have followed Total over the years, you will see us lose market share in more difficult parts of the cycle, because our preference is to park our equipment rather than operate it at our standards and lose a bunch of money and end up having to recertify it and have generated no profit to pay for the recertification. I would say you've got a fairly significant portion of the market, operators that appreciate that, and are willing to pay for quality and pay for predictability. And we're really seeing that, for example, in Australia. And it's kind of timely, there was -- one of our -- there was a recent catastrophic service rig event -- service rig event in Australia that I think really opened a lot of eyes in terms of what can go wrong, and it was brand new equipment. And so again, I'm not going to get into -- I don't know all the details, but certainly, those events can spook customers, and they gravitate towards operators that have good track records. And I can tell you to have a good long-term track record, you have to be profitable, because you have to be able to reinvest in the business. And so, I think fundamentally, our discipline in terms of operations pricing serves us well in all markets. Definitely, we'll lose some market share on the bottom half of the cycle, we're okay with that, because we're in this for the long haul, not just to say we've got the best rig utilization in a tough market. So I don't know if that answers your question, but... Unknown Shareholder: Yes. No, that's helpful. I mean quarterly results can be -- can fluctuate. Your model is fairly diversified by region and by vertical. So that's been very helpful. Perfectly clean balance sheet and everything you just touched on, I think everything seems to be moving in the right direction. But it's helpful to hear you reiterate some of the reasons why, again the customers are continually engaging with you, and there's -- and therefore no surprise, there's more opportunities ahead, it seems. Daniel Halyk: Yes. And I look at our customer base in Australia or even Canada and the U.S., it's blue chip. But it's a wide range. It's private, public, small, large. So, I think it's got to work for both sides over the full cycle, and good customers appreciate that. We have the same perspective with our suppliers. We don't expect them to work for nothing, and it's not in our interest to see our supply chain condense down to one or 2 suppliers. That's not in our long-term interest. So we will definitely support multiple suppliers in weaker parts of the cycle. It's in our interest to have competition for our business. And I would assume our customers see it the same way. Operator: And that will conclude our question-and-answer session. I'll turn the call back to Dan for any closing comments. Daniel Halyk: Thank you, everyone, for joining us this morning, and we look forward to speaking with you after we release our year-end results in March. Have a good rest of your day. Operator: This does conclude our call today. Thank you all for joining. You may now disconnect.
Operator: Ladies and gentlemen, thank you for standing by. Good afternoon, and welcome to the STRATA Skin Sciences, Inc. Third Quarter 2025 Financial Results and Corporate Update Conference Call. All participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note today's event is being recorded. Please, I would now like to turn the call over to Jules Abraham, Core of IR, the company's Investor Relations firm. Please go ahead. Jules Abraham: Thank you, Arielle. Good afternoon, everyone, and thank you all for participating in today's conference call. Earlier this afternoon, the company released its financial results for the quarter ended September 30, 2025. A copy of that press release can also be found on the company's website at www.strataskinsciences.com under the Investors tab. Joining me on today's earnings call from STRATA Skin Sciences' management team are Dr. Dolev Rafaeli, Chief Executive Officer, and John Gillings, Vice President of Finance. During this call, management will be making forward-looking statements, including statements that address STRATA Skin Sciences' expectations for future performance or operational results. Forward-looking statements involve risks and other factors that may cause actual results to differ materially from those statements. For more information about these risks, please refer to the risk factors described in STRATA Skin Sciences' most recently filed annual report on Form 10-Ks and subsequent periodic reports filed with the SEC and STRATA Skin Sciences' press release that accompanies this call, particularly the cautionary statements within. The content of this call contains time-sensitive information that is accurate only as of today, November 13, 2025. And except as required by law, STRATA Skin Sciences disclaims any obligation to publicly update or revise any information to reflect events or circumstances that occur after this call. It's now my pleasure to turn the call over to Dr. Dolev Rafaeli, CEO of STRATA Skin Sciences. Dolev? Dolev Rafaeli: Thank you, Jules, good afternoon to everyone on the call. During 2025, we continued to position our business for future growth and lasting shareholder value creation. Key to the progress will be the historic expansion of CPT codes for STRATA's XTRAC 308-nanometer excimer laser, which are expected to become effective January 1, 2027. As a reminder, the revision of these codes expands reimbursement eligibility for excimer laser treatments to include multiple inflammatory and autoimmune skin conditions beyond their original psoriasis indication, enabling coverage for conditions such as vitiligo, atopic dermatitis, mycosis fungoides, lichen planus, alopecia areata, and cutaneous T-cell lymphoma, better known as CTCL, among approximately 30 indications. The implication of these changes is pivotal to our future business and that of our partners, as they exponentially expand our opportunity to provide services to patients in need while creating a meaningful increase in potential revenue from procedures, which until now would not be within reach. While the revisions are set to go into effect on January 1, 2027, we have commenced the process to expand this change to private payers as well. The latest progress of the recognition of these expanded codes is that the Centers for Medicare and Medicaid Services, or CMS, has recognized both the existing psoriasis-only codes and the expanded ones in its calendar year 2026 Medicare physician fee schedule final rule publication, which will then reflect into the 2027 reimbursement codes. As we have previously indicated, these additional reimbursement codes open our addressable markets to over 30 million patients, expanding our total available markets by threefold. In addition, we have submitted economic data to support a potential increase in the reimbursement rates for each of our codes, which the CMS 2026 final rule has indicated will be reviewed for consideration. We've also continued to strengthen our practice partners through our Elevate360 consulting model and our innovative DTC campaign. Elevate360 focuses on improving utilization of the partner clinics by supporting the implementation of best practices to drive optimal use of XTRAC lasers. Since the beginning of 2025, 99 of our approximately 838 clinics operating under our XTRAC usage agreement have entered the Elevate360 program, which has resulted in an average of 7% growth year over year for those businesses, completing a review as a part of the program's design. Additionally, average gross billings per device for all 838 of our U.S. partner clinics of $5,981 for 2025 increased 8.5% versus 2024 and represents the highest gross billings per device since 2022. Turning back to Elevate360, I want to share a specific example of a partner which began with two clinics in 2024 and after adopting the Elevate360 program expanded to nine clinics, and revenue contribution from the account increased tenfold. By providing deeper analytics, we help these partners better understand financial opportunities associated with the patients they already see in their clinics and those they have prescribed but did not follow through with XTRAC scheduling. We expect that these kinds of improvements will become exponential in the coming year with the addition of new reimbursement opportunities resulting from the extension of indications for which XTRAC treatment will become available. Turning to international expansion, while this remains a small but growing portion of our revenue, we reached an important milestone with the regulatory approval and subsequent initial commercial placements in Mexico. We believe the continued international expansion of both the XTRAC and TheraClear X technologies represents significant opportunity for growth and value generation. During the third quarter, we continued to experience challenges in our international business, which we believe is attributable mainly to the current trade policy of the United States government, creating uncertainty and pressuring our total revenue for the quarter. Turning to litigation, we offered an update on our case against LaserOptik regarding its use of false and misleading statements in its marketing. We believe we are strongly positioned in this suit and have the potential to be awarded significant damages. Additionally, an injunction issued late last year was very helpful in limiting any further damage to our domestic recurring business. We are pleased that the court agreed with our position that LezoAppe Korea, the parent of LaserOptik America, as well as another entity which was used as the base for LaserOptik's U.S. sales efforts, should be added as defendants. We believe this will result in our ability to collect damages. In the meantime, the injunction and clarity offered by the litigation allowed us to engage multiple dermatology clinics that had been previously misled by false claims about the Palace solid-state lasers. To date, over 20 such LaserOptik buyers have partnered back with STRATA under our program or have purchased excimer lasers directly from us, which represents more than $1 million in annual capital and recurring revenue, emphasizing XTRAC as the recognized gold standard in targeted UVB therapy. With that, I'd like to turn the call over to John Gillings, who will review our financial results in more detail. John? John Gillings: Thanks, Dolev. Our total revenue for 2025 was $6.9 million, down 20% compared to 2024. This was driven primarily by the challenging international environment Dolev described. That said, recurring revenue remained solid, with gross code sales up 4.1% and net U.S. recurring XTRAC revenue up 2.8%. Global recurring revenue of $5.5 million increased 3% year over year, and equipment revenue of $1.4 million decreased 60% in 2025 compared with the prior year period. Gross profit for 2025 was $4.2 million or 60% of revenue. Gross margin was roughly flat versus the prior year period. Total operating expenses were $5.4 million in 2025, versus $6.9 million in the prior year period. The meaningful reduction was primarily due to higher costs in the prior year period related to a one-time $1.8 million accrual for sales tax in New York State recorded in G&A in 2024 and settlement gains booked this quarter for roughly $680,000. Net loss for 2025 was $1.6 million or EPS of negative $0.36 per basic and diluted common share, as compared to a net loss of $2.1 million or EPS of negative $0.51 per basic and diluted common share in 2024. Adjusted EBITDA was slightly positive in the quarter compared to negative $240,000 in the comparable quarter of the prior year. The improvement was driven primarily by lower operating expenses. During the quarter, we raised $2.2 million net in a straight common registered direct offering. Cash and cash equivalents at September 30, 2025, were $7.1 million. That concludes my prepared remarks. And I'd like to turn the call back over to Dolev for any remaining comments. Dolev? Dolev Rafaeli: Thank you, John. In summary, our team is extremely passionate about our business and focused on driving growth. We are excited about what lies ahead, including a seasonally stronger fourth quarter of 2025, the tripling of our patient population with expanded indications for use of our excimer laser, and favorable reimbursement trends. That said, we believe it is important to continue to remind investors about the lingering impact of tariffs on our international business. While there were no meaningful impacts on our business in the first quarter, we saw some weakening in China in the second quarter and continued weakness in the third quarter. We hope to move past these issues and hope to be able to offer greater clarity on the fourth quarter call, which we expect to hold in early March. Operator: On for Jeff. Thank you for taking our questions. Could you maybe talk to the average revenue per device in the third quarter? And any trends you're seeing going into the fourth quarter in terms of treatment volumes? Dolev Rafaeli: Yes. Hi, Destiny. Nice hearing from you. As I mentioned in my prepared remarks, the average revenue, the gross average revenue per device was $5,981, just shy of $6,000. It's the highest average revenue per device we had since 2022. We're in a growth trend. If you follow the last few quarters, you'll see this is growing, and it's growing because of the increased utilization of devices, which is driven mostly by two things. One, we're removing non-productive devices. So we're moving them back into inventory. That helps us in not having to build new devices, not having to invest in CapEx. We own these devices. They're on our balance sheet. And two, we're focusing on increasing utilization through our Elevate360 and our normal DTC operations. And we anticipate this continuing to go up. As you can recall, just three years ago, the average revenue per device was in the range of $7,500. So we see this as a huge opportunity because if we could increase our average revenue per device from $6,000 to $7,500, that's $6,000 per device per year times the 800 and some devices. Just that is an increase in the top line of about $5 million. So we're very aggressively pursuing that, and we're using these two tools and removing non-productive devices and increasing utilization on the existing ones. We do anticipate that towards the end of this year, our installed base is going to start increasing again. I hope I answered your question. Operator: Yes, you did. Thank you. And then sticking on the theme of your DTC campaigns, I'm wondering if there has been any increase in your show-up rates and if that's helping or improving the revenue per device as well. And then can you just remind me how many clinics are part of your or clinic groups are part of your Elevate360 program currently? Dolev Rafaeli: Well, that's a very complex question. I'll break it into parts. We have, as of the end of Q3, we had 838 partner clinics that are part of our usage agreement relationship. Of these, we have managed to perform Elevate360 with 99, and I covered that in our prepared remarks. And we're actively pursuing others. As you can see in our investor presentation, we have approximately 25 territories covered by 25 territory managers. So it's approximately four accounts per territory manager that were covered from the beginning of this year. We hope to accelerate the pace and get to a much bigger number than that. Obviously, we're going after those that we see the potential, those that either had higher performance or we have reason to believe that they can grow, whether it's because of their patient population or because of the history that we had with them. So these are the more lower-hanging fruits. We're going after these, and as you can see, not only our gross and net recurring revenue grew, and I'll spend a minute talking about this in a second, but not only the gross and net recurring revenue grew, but also the average revenue per device grew, which means the utilization per device. As I mentioned in our prepared remarks, approximately two dozen devices were comebacks as a result of the litigation. We were able to bring them back. These were accounts that were very productive in the past and were approached by another company with false pretense and giving them false claims. We lost them in either in 2023 or 2024. We're able to bring them back. A big chunk of that, almost half of these two dozen devices, is coming back towards the back half of this year. And they're going to be just these 10 accounts are going to be accountable for an increase of just about $5 million a year in revenue. So, we're doing this one piece at a time, making sure that our installed base and presence in the market is ready towards 2026 for the expansion of the codes and being able to handle more patients coming in because of the expanded indications, but also being able to handle the existing patients more effectively. Now going back to the beginning of your question, which is DTC, our DTC covers nationwide. But we cover, we go in geographies. We go after the accounts that could see the benefits from having DTC patients. And these accounts would be the accounts that are already very good at converting their own patients and see the benefits of an increased patient flow and utilization. So what we do see in DTC, and that's not geography-specific, is that in 2025, because of a variety of reasons, we have much lower cost per acquisition of DTC patients, which is driven both by better cost per lead, so our cost of media, better conversion, that means the efficiency of our call center and being able to place them into appointments. And then down the funnel, better show rates and better conversion rates, and that is mostly because of the focus we have with these accounts. We stopped sending patients to accounts that are not converting. We're using these patients with accounts that do convert. Redirect patients from accounts that are not very good at converting and use them better. So these numbers are basically across the funnel of DTC. And this is why we can see with more or less the same sales and marketing expense, we're getting better results in recurring revenue, which is converting into better contribution margins from the business. And may I point out that our gross margin stayed flat even though we lost international business. So we were actually doing better as a core recurring revenue business in the U.S. Again, hope I answered the question in full. Operator: Yes, so that makes perfect sense. Thank you. And then one last one for me. On TheraClear, excuse me. Can you remind us what the installed base on that might look like by the end of 2025? And I think you previously mentioned 2026, but I'm also curious to understand how moving into Mexico and having commercial placements there may tie into the overall strategy of TheraClear. Thank you for taking the questions. Dolev Rafaeli: Sure. So let me start with Mexico. And Mexico, interestingly enough, is a country that lies just south of the U.S. So we don't need to travel far to support them, whether it's marketing-wise, clinically-wise, or even technical support. We were actively pursuing, throughout 2024 and 2025, the registrations with Cofepris, which is the registering body in Mexico. And just a few weeks ago, we were happy to announce that we got the TheraClear registered with Cofepris and are able to report the first commercial placement. Our approach in Mexico is very much like the one in the U.S. Instead of trying to sell capital equipment and run into issues of us having to get paid very meaningful sums of money. And as you probably know, because I know that you are also covering other capital equipment companies or the capital equipment markets are suffering from high interest rates, from tariffs, and so on. Our approach with Mexico from the beginning was if we can get the registrations, we can expand by placing into Mexico. We were hoping to get the XTRAC registered in Mexico first, but that did not happen. It's still in progress. We got the TheraClear registered in Mexico, and we've already announced the first commercial placement, and we hope to be able to announce by the end of 2025 a significant number of placements in Mexico, which are going to be following the same commercial relationship we have in the U.S., in which we take the risk of the equipment, we take the risk of training the accounts and supporting the account, and the account shares the revenue with us. The average rate of payments that a patient pays in Mexico for an acne visit is about the equivalent of about $140, and we don't see a reason why we cannot collect the same levels we collect in the U.S., which is approximately 40% of that, $50 to $60 of our money. And our technical support teams and our clinical support teams are able to support in Mexico. We've spent multiple visits in Mexico in the last three months getting the local sales team of the distribution partner we have in Mexico, a company by the name of MinaLabs, ready to do the sales. We've participated with them in some of the initial meetings with customers. They have access to over 3,000 dermatologists in Mexico, and they have access to many, many of them. And we believe that the belief in the technology and the need in the market are going to show up as early as in Q4 this year. We are participating with them in a national dermatology conference next week, and I think that's going to be the trigger for these placements. Now going back to the first part of your question, our U.S. installed base is about 161 devices. Even though we don't parse, we do not parse in our financials the portion of what TheraClear means inside the recurring revenue that John discussed. As I mentioned in my prepared remarks, it's still a small portion, but it's a growing portion, and more importantly, it gives us a second touchpoint within the same account. So, all of these 161 accounts are within these 838 XTRAC accounts. So our territory managers, when they visit an account, they cover both the XTRAC and the TheraClear. We have been at the process of expanding usage of TheraClear in the U.S. now for about a year. We are happy to report that the use of the dedicated CPT code 10040 is expanding. About two-thirds of our 161 accounts are using that code for insurance reimbursement. The other one-third is charging patients cash for the treatment. And we anticipate, to wrap up my answer to your question, we are still hoping to get much closer to 200 devices deployed, whether in the U.S. or elsewhere, under the usage agreement by the end of 2025. Operator: Okay. Thank you for those updates. I appreciate it. Dolev Rafaeli: Absolutely. Thank you. Operator: Our next question comes from Jeremy Pearlman of Maxim Group. Please go ahead. Jeremy Pearlman: Thank you for taking the question. Good afternoon. First one, maybe you could help us understand a little bit the delta if I heard correctly. So you said that there was 7% year-over-year growth from those businesses that were part of the Elevate360 program, but then you said overall, average gross billings were up 8.5%. So maybe help us understand where that delta is coming from? Dolev Rafaeli: Yes. So first of all, I owe a portion of the answer to the question that was asked before by Destiny. So just as a reminder, we report two numbers on the recurring revenue. We report the gross number and the net number. The difference between the gross and the net is, even though it's itemized in our financial reports and in our releases, it includes two components. One, we are netting out some of our support to the market. So, for example, our coupons given to patients for reimbursing their co-pays are netted out. But the bigger portion of changes happens because we need to defer out revenue that came in during the last part of the quarter, and we deferred that into the following quarter. So there's always going to be a difference between our gross numbers and our net numbers. In addition to that, I reported two growth numbers. One has to do with specifically these 99 accounts that were handled through Elevate360, and with these accounts, we have seen a growth of 7% in revenue. These accounts, as I mentioned before, are we break our accounts into five tiers, Tier one to Tier five, Tier one being the highest producing tiers and Tier five being the lowest producing tiers. And we are focused on, with our Elevate360, we're focused on tiers two, three, and four, being able to move accounts from tier four to tier three or tier three to tier two. And with tier fives, we're either removing them or they have to move up on their own because they're too small for us to focus on. We're not really focused on Tier one with Elevate360 deals or the accounts that got it and know how to make it work. That 7% number is a 7% growth over these 99 accounts. The 8.5% growth in average recurring revenue per device is across the 838 devices, or it's two different populations. The 7%, if you wish, is what we were able to get in growth for these 99 accounts that are mostly Tier two, three, and four, where the 8.5% is across the board. And across the board, it could be also from tier ones and tier fives. I hope that helps answer the question, and again, the 8.5% is a gross number. So, it gets netted out when we grow, actually you can actually see these in the net numbers going up slower. That's why when John went through his numbers, you saw a number that's about 4% in overall numbers. Because the average numbers are per device. I hope that the math makes sense. Jeremy Pearlman: Yes, understood. So it's how the tiered clinics are within the program versus the overall? Okay, got it. Is that 4%, is that a net revenue growth number? Is that something we could or you're not providing that number this quarter? Dolev Rafaeli: John, do you mind jumping in on gross to net? John Gillings: Yes. So, that is the 4% is the net number. And just in general terms, because anything can happen later in the quarter. But in general terms, if you see the gross number growing a bit faster than the net number, that's usually a positive leading indicator. Jeremy Pearlman: Okay. Understood. Great. Okay. And then maybe just talking about litigation, you said that you had roughly two dozen devices that are coming back on litigation. Is there anything else left in the field that you think you can pull back? And just roughly how many more devices you think you can get from? Dolev Rafaeli: Yes. So I'm not going to go into specific account numbers or quantities of accounts, but I will say that the overall damage caused by the false claims is in the range of 75 to 100 accounts. And we are actively pursuing bringing all of them back. So again, if you take a perspective over the last year and a half, even though you saw our top line number since 2024, you saw our top line number slightly decreased because of removals, you should look at what happened between 2023 and 2024, and this is when we lost these accounts. More importantly, these accounts were very productive accounts, and they were lost based on false claims. The false claims had to do with two major areas. One was the technical and clinical equivalence or superiority, which the defendants in this case cannot support because they do not have not even one clinical study to their name that shows clinical efficacy on treating psoriasis. And they have one 16-patient case done in Korea for vitiligo, and that's what they have in clinical studies. And the technical claims that have to do with speed and ease of use and performance, which are far from being substantiated. But more importantly, they claim that their device can be used for treatment for reimbursement. And the CPT codes are very specific. They say excimer laser treatment for psoriasis. And so there's no two ways to understand that. It says excimer laser. If you have something that's not an excimer laser, then it's not an excimer laser. And these very productive accounts do not want to face both the first part, which is not getting clinical efficacy for their patients and being straddled with something that works slower, maybe does not work. But also most importantly, they do not want to face the potential of being pursued for non-ethical billing of something that cannot be billed. So this is why they tend to come back and work with us, and in addition to the fact that we give them a full envelope of services that includes helping them with pre-authorization of patients and driving DTC patients to them and so on and so forth. So there's a meaningful additional upside of comebacks to come from them. Just as a reminder, in the past, we had a similar situation with a competitor, a company called RA Medical, which we ended up eventually acquiring the business in 2021. But before that, they had a few hundred devices, and we were actively pursuing them, and we were able to convert a few hundred devices of RA Medical's Steroids device into being XTRAC users. Jeremy Pearlman: Okay. Understood. That's good information. And then just two questions. I think I might have missed it on the call. Did you say how many patients the DTC marketing campaign drove through this quarter into clinics? Or I might have missed that. Dolev Rafaeli: Good catch. No, we did not. We will probably have to follow up with a press release that outlines that. Jeremy Pearlman: Okay. And then just last question from me. You mentioned, I think, last quarter that you got the CPT codes to hopefully go into effect, the expanded codes in 2027. And you did say there's a possibility of getting temporary codes. Is that something that's still on the table for 2026? And when might that be, if that's a possibility? Dolev Rafaeli: So the CMS physician fee schedule that came out about ten days ago, the final rule for 2026, CMS specifically related to our request and said that they do not want to create confusion in the market considering that there's the existing codes for psoriasis only. There is a set of expanded codes coming in January 1, 2027. And then there's the ongoing examination of the value of the codes, which is right now in the hands of the RUC committee. Between these three things, the CMS thought it would not be a good or wise thing to create temporary codes for the 2026 cycle. Jeremy Pearlman: Okay, understood. Thank you for all the information. I'll hop back in the queue. Dolev Rafaeli: Absolutely. Thank you. Operator: This concludes the question and answer session. I would like to turn the conference back over to Dolev Rafaeli for any closing remarks. Dolev Rafaeli: Thank you, everyone, for showing up for this call. I appreciate your interest in the company. We will be presenting again in the middle of March, presenting our fourth quarter results. Thank you very much. Operator: Thank you. This conference call has now concluded. You may disconnect your lines. Thank you for attending today's presentation.
Operator: Good afternoon, and welcome to Relmada Therapeutics, Inc. Third Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the prepared remarks, we will conduct a question and answer session. As a reminder, this conference call is being recorded and will be available for replay on the Relmada Therapeutics, Inc. website. I would now like to turn the call over to Brian Ritchie of LifeSci Advisors. Please go ahead. Brian Ritchie: Thank you for joining us today. This afternoon, Relmada Therapeutics, Inc. issued a press release providing a business update and outlining its financial results for the three months ended September 30, 2025. Please note that certain information discussed on the call today is covered under the safe harbor provision of the Private Securities Litigation Reform Act. We caution listeners that during this call, Relmada's management team will be making forward-looking statements. Actual results could differ materially from those stated or implied by these forward-looking statements due to risks and uncertainties associated with the company's business. These forward-looking statements are qualified by the cautionary statements contained in Relmada's press release issued today, and the company's SEC filings including in the annual report on Form 10-Q for the quarter ended September 30, 2025, filed after the close today. This conference call also contains time-sensitive information that is accurate only as of the date of this live broadcast, on November 13, 2025. Relmada Therapeutics, Inc. undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this conference call. With me on today's call are Relmada's CEO Dr. Sergio Traversa, who will briefly provide a summary of recent business highlights, Dr. Raj S. Pruthi, Relmada's CMO, who will provide an NDV-01 program update, and Relmada's CFO Maged S. Shenouda, who will provide an update on our financial results. After that, we will open the line for a brief Q&A session. Now I would like to hand the call over to Sergio. Sergio, please go ahead. Sergio Traversa: Thank you, Brian, as always. And good afternoon, and welcome everyone to the Relmada Therapeutics, Inc. Third Quarter 2025 Conference Call. 2025 is shaping up to be a standout year for Relmada Therapeutics, Inc. with excellent product development progress, driven by the effort of our outstanding team and strengthened by our recent successful capital raise. We are developing one late-stage and one mid-stage clinical program that we believe could be life-changing for patients. Each program has the potential to be the best-in-class treatment. Our lead program is NDV-01, a sustained release formulation of gemcitabine docetaxel or Gemdosi in development for non-muscle invasive bladder cancer or NMIBC, which affects about 68,000 new patients each year in the US and has a prevalence of approximately 744,000 patients in the US. Our second program is Sepranolone. It is intended to normalize GABA A receptor activity in compulsive disorder. The plan is in development for Prader-Willi syndrome, which has a US prevalence of approximately 20,000 patients. Here are the three key messages that we will cover today. Number one, we report the nine months data from the phase two study of NDV-01 in patients with NMIBC. In brief, the study showed a 92% overall response rate at any time, with favorable overall safety. We are very pleased by these encouraging and consistent data. Number two, we are pleased to have secured FDA alignment on the key elements of the phase three program for NDV-01. It is intended to enable two distinct and independent registrational tracks for NDV-01 in NMIBC. This is an important key de-risking milestone for the program that opens the door to a broad market opportunity in NMIBC. Number three, with the recently completed $100 million underwritten finance, we are well capitalized. The recent offering provides the resources to support our planned operation into 2028 and drive forward the plan of registration studies for NDV-01 and the phase two study for Sepranolone in PWS. We are preparing to initiate these studies in 2026. For NDV-01, we expect to begin two separate registrational studies for NMIBC, starting in 2026. For Sepranolone, we anticipate starting a phase two study in PWS also in 2026. We are well positioned to advance our pipeline thanks to our expanding clinical team. Earlier this year, we appointed Dr. Raj S. Pruthi as Chief Medical Officer, Uro-Oncology. Dr. Pruthi is a highly respected expert in bladder cancer urologic oncologist who brings vast experience advancing novel therapies for NMIBC. We have also established a clinical advisory board to provide additional guidance for the pivotal program for NDV-01. The board is comprised of prominent leaders in NMIBC and chaired by Dr. Yair Lotan, a renowned urologist oncologist. In October, we were pleased to welcome Dr. Max Cates to our advisory clinical advisory board. Dr. Cates brings a wealth of experience from chairing the landmark phase three BRIDGE study and leading several other practice-changing studies. I am very pleased with Relmada Therapeutics, Inc.'s work this year to de-risk our pipeline and advance two potentially life-changing therapies. We are looking ahead to 2026 with enthusiasm, with several value inflection catalysts ahead. Next, Raj is going to provide an update on the NDV-01 development program, including a nine months follow-up data from the phase two and a summary of the key highlights from the recent Type B, pre-IND meeting with the FDA. Raj? Raj S. Pruthi: Thank you, Sergio, and good afternoon, everyone. I believe this is a very exciting time for our patients based on our excellent progress with the NDV-01 development program. I want to touch on three items today. An overview of the patient care journey in non-muscle invasive bladder cancer or NMIBC, a review of the nine-month data, and a summary of the FDA meeting highlights. Let's start with the NMIBC and the patient journey. There are about 85,000 new cases of bladder diagnosed each year in the United States and 744,000 people living with bladder cancer. About 80% of bladder cancer patients have NMIBC, and recurrence rates over five years are about 60 to 80%. Relmada Therapeutics, Inc. is focused on high-risk NMIBC and on intermediate-risk NMIBC, representing about 80% of NMIBC cases or 54,000 people per year. In brief, the patient care journey most commonly begins when a patient presents with blood in the urine or hematuria. Suspected bladder cancer cases are diagnosed using cystoscopy and cytology. Treatment begins with a surgical procedure called transurethral resection of the bladder tumor or TURBT. This procedure allows surgeons to classify the patient's disease stage and risk category and define the treatment plan. After surgery, patients with high-risk disease receive intravesical adjuvant therapy with standard of care immunotherapy known as bacillus Calmette-Guerin or BCG. Patients are then monitored with regular and urine cytology every three months to assess for recurrence. Patients with recurrent disease are treated with repeat surgery alternating with intravesical treatments. NDV-01 is a novel sustained release intravesical formulation of two chemotherapy agents, gemcitabine and docetaxel, or Gemdosi, as we say. It was designed to build on data from numerous studies conducted over the past decade showing that combination use of these two agents achieves response rates and recurrence-free survival that are comparable to or better than historical standard of care BCG. And for those who are unresponsive to BCG, it can provide a second-line bladder-sparing option to avoid radical cystectomy. The sustained release formulation of NDV-01 will be provided to study sites in a ready-to-use format that does not require a specialized pharmacy or biocontainment hood to formulate the Gemdosi combination. NDV-01 is intended to be instilled into the bladder through a regular catheter in a less than five-minute intravesical installation. Upon administration, the formulation creates a soft matrix that is intended to enhance local exposure and minimize systemic toxicity. Moving to the nine-month data, we're pleased to report that NDV-01's continued positive phase two performance strongly supports its potential to transform the treatment of NMIBC. The study is a single-arm, single-center ex-US trial in patients with high-risk NMIBC. Patients are treated with NDV-01 in a six biweekly induction phase followed by monthly maintenance for up to one year. Patients receive regular assessments with cystoscopy, cytology, and if needed, biopsy. The study is designed to enroll up to 70 patients with localized high-risk NMIBC. The primary endpoints are safety and complete response at twelve months. Secondary efficacy endpoints are duration of response and event-free survival. Efficacy assessments for the nine-month follow-up included analysis of data at nine months and at any time point. These are the same safety and efficacy parameters that were applied to the six-month data reviewed during our Q2 call in August and the three-month data presented at the American Urological Association meeting in April. Looking at the data, we observed a complete response rate of 92% at any time based on 25 patients. Amongst patients with BCG unresponsive disease, we see a 91% CR anytime. At the nine-month assessment, we observed a complete response rate of 85%. No patient had progression to muscle-invasive disease and no patients underwent a radical cystectomy. Patients who had been reinduced had a 60% complete response rate. The study also includes certain defined subpopulations. For example, patients with BCG unresponsive disease, we saw 91% CR anytime and a nine-month CR rate of 88%. NDV-01 continues to demonstrate favorable safety consistent with our expectations and known efficacy and safety of Gemdosi. There were no reported new safety signals, no patients who had treatment-related adverse events that were grade three or higher, and no patients discontinued treatment due to adverse events. The most common treatment-related adverse events were transient dysuria and hematuria and asymptomatic positive urine cultures, an incidental finding observed in 9% of patients with hematuria only seen in 7%. All patients with dysuria were grade one and resolved within 24 hours. Our goal is to bring NDV-01 to patients as soon as possible. We intend to initiate the phase three program for NDV-01 in 2026. The recent positive type B FDA meeting is a key milestone that reinforces our confidence in the path forward for NDV-01. I'd like to summarize the key outcomes from the FDA meeting, a very positive, constructive, and prior dialogue discussion with them. Relmada Therapeutics, Inc. secured FDA alignment on certain key elements of the planned Phase III pivotal program for NDV-01, incorporating two separate and distinct registrational paths. Number one, high-risk second-line BCG unresponsive NMIBC patients. And number two, intermediate-risk NMIBC in the adjuvant setting. In the setting of high-risk second-line BCG unresponsive disease, the FDA stated that a single-arm trial might be acceptable in a more refractory patient population. We're excited about this approach because it could offer a rapid route to approval. In the indication of intermediate-risk in the adjuvant setting, the FDA agreed that a proposal to randomize patients post-TURBT to adjuvant NDV-01 versus observation evaluating a time-to-event endpoint is generally acceptable. We feel that the opportunity to incorporate NDV-01 into patient care after TURBT is very attractive. It could pave the way for an additional indication and broader clinical adoption. Importantly, the FDA indicated that no further clinical nonclinical studies are required to support a 505(b)(2) NDA. This is very good news. We look forward to working with the FDA to complete the study design and initiate the registrational program in 2026. Our efforts in the coming months will also focus on transferring production to contract manufacturers to complete scale-up and production of clinical batches. As I hand the call over to our CFO, Maged S. Shenouda, I am optimistic about the NDV-01 clinical development program based on the excellent nine-month results, positive outcomes with the FDA meeting, and our ongoing phase three preparation. Maged? Maged S. Shenouda: Thanks, Raj, and good afternoon, everyone. Today, I'll spend a few minutes on Sepranolone, and then provide you with an overview of our third quarter 2025 financials. Sepranolone is a member of a new subgroup of neurosteroids called GAMSAs or GABA modulating steroid antagonists. We believe Sepranolone's novel action on the GABA neurotransmitter pathway gives it unique potential to normalize GABA A receptor activity and alleviate the repetitive symptoms and disorders where compulsive behaviors are a common feature. These disorders affect millions of people in the US and around the world and include indications such as Prader-Willi syndrome and Tourette's syndrome. We have selected Prader-Willi syndrome, or PWS, as the first clinical indication that we will evaluate for Sepranolone. It affects approximately 350,000 people worldwide, including approximately 20,000 people in the US. PWS is a complex genetic disorder often defined by persistent hunger and overeating. Current treatment is focused on improving the obsessive-compulsive behaviors. Phase II data from a study in patients with Tourette's syndrome established Sepranolone's initial efficacy in a compulsivity disorder with good overall tolerability. We intend to initiate a proof of concept study in PWS in 2026. Our immediate efforts are dedicated to completing study preparations, including engaging with the FDA on our proposed trial design and in establishing a robust supply chain. Moving now to our financial results. As noted earlier by Brian, this afternoon, Relmada Therapeutics, Inc. issued a press release announcing our business and financial results for the third quarter and nine months ended September 30, 2025. As of September 30, 2025, Relmada Therapeutics, Inc. had cash, cash equivalents, and short-term investments of approximately $13.9 million compared to $44.9 million as of December 31, 2024. Notably, this excludes net proceeds of approximately $94 million from our $100 million underwritten offering of common stock prefunded warrants, which the company closed on November 5, 2025. Based on current plans, the company believes that its current cash balance, including net proceeds from the offering, is sufficient to support planned expenses into 2028. Cash used in operations in the third quarter ended September 30, 2025, was $6.7 million compared to $16.7 million for the same period in 2024. During today's call, I'll review our third quarter 2025 financial results. Information regarding the nine months results are included in our press release and 10-Q filings issued this afternoon. Research and development expense for the third quarter 2025 totaled $4 million compared to $11.1 million for 2024, a decrease of $7.1 million. The lower spend was primarily driven by lower study costs with a wind-down of clinical trials for Rel-1017 partially offset by an increase in manufacturing drug storage costs associated with the ramp-up of NDV-01 and Sepranolone study and an increase in R&D employees. General and administrative expense for the third quarter 2025 totaled $6.3 million compared to $11.9 million for 2024, a decrease of approximately $5.6 million. The decrease was primarily driven by a decrease in stock-based compensation expense as well as direct employee and administrative expense. The net loss for 2025 was $10.1 million or 30¢ per basic and diluted share, compared with a net loss of $21.7 million or 72¢ per basic and diluted share for 2024. Sergio? Before we open the call for questions, I'll turn back to Sergio for some closing comments. Sergio Traversa: Thank you, Maged. Before we go to the Q&A session, I would like to share that I'm very pleased with Relmada Therapeutics, Inc.'s work this year to advance and de-risk a portfolio of potentially life-changing therapies for patients. With our progress comes our gratitude for your support and for taking time to join today's call. 2026 is shaping up to be another very important year for the company, and we look forward to updating you on our continued progress. Operator, I would like now to open the call for questions. Operator: Thank you. Ladies and gentlemen, as a reminder, if you have a question, please press one on your telephone keypad. Our first question comes from Uy Sieng Ear of Mizuho Securities. Please go ahead. Uy Sieng Ear: Hey, guys. Congrats on all the progress that you've made over the last nine months. It takes a lot of doing. Maybe, you know, the first question we have is maybe just help us understand a little bit about, you know, the different potential market opportunity for the two, I guess, indications that you are kind of going after, and maybe also, you know, help us understand the sequence of it. Will you start the study at the same time? And when do you think that one study will finish before the other, and if you can maybe provide some guidance on when each of the studies could complete. So maybe, you know, talk about the potential number of patients in the refractory second-line setting versus the potential number of patients in low-grade intermediate risk who could benefit from the adjuvant combination of NDV-01. First question. Thanks. Sergio Traversa: Thank you, Uy, for the question. I believe Raj, who runs the clinical program, can answer your question appropriately. Raj, do you want to try? Raj S. Pruthi: Yeah, of course. So as I mentioned, there's two proposed indications. One is in BCG unresponsive, refractory to first-line therapy. And I'll talk, let me talk a little bit about this population, then the intermediate risk, and then we'll talk about timelines. So this is a relatively smaller, about 8,000 patients per year. Now with current therapies, 55 to 80% of those patients will recur after first-line therapy. So there's a growing number of patients that are needed in this second-line indication. So from 8,000, you can take that down to 55 to 80% that will each year be BCG unresponsive that fail primary therapy. High-grade and low-grade intermediate risk. Now the intermediate risk population, and this is a much larger patient population estimated about 80,000 incident and prevalent patients each year in the United States with intermediate risk NMIBC. A significant number of them, probably over half, will receive an adjuvant therapy. And so that's about 40,000. So that represents a significant market for us to address. And I think if you look at surveys of urologists, chemotherapy and Gemdosi chemotherapy is the preferred choice. Regarding your question on timing, our plan is to initiate both of these trials, although they're separate indications, both trials at about the same time in 2026. I think this will provide for operational efficiencies and cost checks, contracting, and addressing sites. And I think for the sites, it will be easier as they kind of know how to do a clinical trial one side or the other. And the unresponsive patient population, with the first patient in being Q2 2026, will likely have clinical data, three-month data by Q4 2026 to provide internally and externally. And then the endpoint is going to be a twelve-month CR. So that'll be Q2 2027, with top-line data in Q2 2028. And the intermediate risk study also initiating in Q2 2026. That's an open-label but randomized study. That'll take probably about fifteen months to complete enrollment. Within that completed enrollment, we'll need probably about 24 months of follow-up. It's, I think it's a little bit trickier. We plan to do an interim analysis that's 70% events. Regarding the ability to provide data before then, I think that's a conversation we'll have to have with the FDA. Although it's an open-label study, we certainly wouldn't want to expend alpha along the way. So I hope that gives you an idea of the size of the populations and the timelines. Uy Sieng Ear: Yeah. That was super helpful. So maybe just help us with the other element. So, you know, with J&J and Lexo, I think the price is $69,000 per dose or per one of those pretzel tubes. And the induction phase is, I think it's what you need eight of those. So that sort of rounds up to about $550,000 a year. Does that sort of make sense in terms of, I know it's probably too early to sort of speak about pricing. Just wanted to maybe get your view on what potential pricing could look like. Raj S. Pruthi: Yeah. Let me actually take a quick answer to that, and then I would like to ask our CEO Sergio to comment. So, yeah, I think if you actually add up the induction phase and maintenance phase in the first year for Inlexo, it approaches $700,000. So that certainly is now set the new benchmark above ANTIVA for one if you look at one year of therapy. The other end of the spectrum to me is Zosduri, which is in low-grade intermediate chemoablation, which the yearly cost there is about $120,000. So I think the numbers will fall somewhere between. But, Sergio, do you mind if I ask you to comment on that? Sergio Traversa: Yeah. No. Sure. Thanks, Raj. I know it look. It's a bit early to talk about pricing. Because, like, we have to, we'll be data-driven depending on what the data looks like. We will, you know, price accordingly to the value added for patients. But we do have the luxury to watch what the uptake and the penetration of J&J and the other chemotherapy origin with their pricing, and we'll base our decision based on also how their pricing will be received by the urology community. So I hope I answered your question the best way I can. But we don't really have any specific pricing orientation for now. Uy Sieng Ear: Mhmm. Yeah. Thanks for that. I know it's probably way too early. And you're right. You know, you need to look at the data, but it's, I guess it's kind of encouraging that the pricing is kind of interesting. So maybe our last question, you know, maybe just help us to kind of a little better with respect to the differentiation from, you know, the conventional Gemdosi. I think on the call, you mentioned that, you know, you need a special biochemical hood and you need a special pharmacist as, I guess, someone who maybe even licensed who needs to put the product into syringes to be used. Yeah. Just help us understand, like, because of this hurdle where the product is currently used? Is it mostly in academic centers? And if all of this goes away, like, how does it open up the market for you if it does? Thanks. Raj S. Pruthi: Yeah. That's a wonderful question. And I think that has been the hurdle of Gemdosi. Right? We know it works as urologists. We know it works well, like I mentioned, for a decade. The obstacles for the community urologist, where 70 to 80% of these patients are taken care of in the community, is you need a specialized pharmacy. And if you look at the overall procedural time of sequential gemcitabine followed by docetaxel, it's upwards of four hours. So that's very easy to do in an academic center, and I think that's where most of the uptake has been. Very difficult in the community, lack of specialized pharmacy, and room or chair time and the staff for that for four hours. So I think by having prefilled syringes, avoiding the specialized pharmacy, and having a five-minute or so installation to a catheter, removing the catheter, watching the patient, allowing them to go home, I think opens the door. This is an opportunity for academic centers as well, but I think also to meet the patients where they're at and to meet the urologists where they're at as well. So I think this opens up the market significantly. Uy Sieng Ear: Okay. Sorry. Maybe just one additional question. I know you're going after just the two indications, which is actually quite broad, particularly in the intermediate risk section. But you know, there's an ongoing study in BCG naive patients called the, I guess, the BRIDGE study. If this study succeeds, like, what does that do to the potential opportunity for this product to be used off-label even though you, you know, you won't be promoting it because every doc will probably know about your product. Sergio Traversa: Yeah. Raj, you want to give your view? Raj S. Pruthi: Yeah. Thank you, Sergio. So that's a very insightful question, Uy. And, actually, Max Cates is one of the heads in the BRIDGE trial. So the BRIDGE trial is a randomized study of BCG versus Gemdosi in high-risk disease. And it's an 800 patient trial, cooperative group trial that is near end of enrollment and will read out in two years. So timing is nice for us. It's meant to look if Gemdosi is noninferior to BCG. So we know that the obstacle with BCG now are supply issues, and that's been ongoing for fifteen years in the US globally. And, also, it does have toxicity to it. It's effective, but it does have toxicity. So if now you introduce the ability of Gemdosi to substitute in for BCG, you know, Uy, I think that especially as you said in an off-label use, an easier way to give it, I think that opens the market significantly. That's a tremendous opportunity for Relmada Therapeutics, Inc. Great question. Thank you. Uy Sieng Ear: Okay. Thank you. Operator: Ladies and gentlemen, this concludes the question and answer session. I will now hand over to Sergio Traversa for closing remarks. Sergio Traversa: Thank you very much, and thank everyone. And just an extended thank you to investors, patients, employees, collaborators, and consultants that have helped us to get where we are now, and they will continue to help us to get where we want to be. That is to bring NDV-01 and Sepranolone available for doctors and patients. Thank you very much, and I wish everyone a great evening for the rest of the day. Brian Ritchie: Thank you. Operator: Thank you, sir. Ladies and gentlemen, that concludes today's call. Thank you for joining us, and you may now disconnect.