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Operator: Hello, and welcome to the Alstom Half Year Results for Fiscal Year 2025-2026. My name is George, and I'll be your coordinator for today's event. Please note, this conference is being recorded. [Operator Instructions]. I'd now like to hand the call over to your host, Mr. Henri Poupart-Lafarge, CEO; and Mr. Bernard Delpit, Executive Vice President and CFO. Please go ahead. Henri Poupart-Lafarge: Thank you. Good evening, everybody, and thanks for joining Alstom's first half results conference call. I'm Henri Poupart-Lafarge, Group CEO, and I'm joined by Bernard Delpit, EVP and CFO. I will first comment on the highlights of the first half before Bernard will walk you through the financial results. I will then comment on guidance before opening the floor for your questions. So let me start with the key figures for the first half. Orders reached EUR 10.5 billion with strong commercial momentum in Q2, particularly driven by Rolling Stock and North America. The book-to-bill ratio stood at 1.2, fully aligned with full year guidance. Sales came in at EUR 9.1 billion, reflecting 7.9% organic growth with all product lines and regions contributing. Adjusted EBIT was EUR 580 million, up 13% year-on-year, representing a 6.4% margin compared to 5.9% in the same period last year. Free cash flow was negative EUR 740 million as expected, reflecting typical in higher seasonality. The solid performance underscores the strength and resilience of our business model. Let me highlight 3 key competitive advantages that I believe will continue to drive commercial and operational success. First, the multi-local footprint is more relevant than ever in today's macroeconomic and geopolitical environment. It allows us to win business and execute projects effectively, and we are continuing to expand in this direction. Second, the integrated approach across Rolling Stock services, signaling and systems is delivering strong sales synergies. In particular, most of our Rolling stock orders are now linked to long-term service contracts, reinforcing revenue visibility. Third, the harmonization of the Rolling Stock portfolio is delivering results, particularly in high-speed rail. Progress towards the homologation of the Avelia Horizon platform is encouraging, and we have secured additional orders for the platform in the recent months. In the meantime, we continue to execute on our strategic priorities. With the Bombardier Transportation integration now complete, we are focusing on driving industrial and development performance. The transformation plan in Germany, in particular, is progressing well, and we are rolling out efficiency initiatives across engineering and manufacturing. Looking now at Page 6. Alstom's addressable market remained stable for the 3 fiscal year beyond March 2026 at around EUR 200 billion. Europe continues to stand as our first market, concentrating many Rolling Stock commuter and mainline signaling opportunities. American customers will tender train replacement opportunities in the North with mainline and urban network expansions being expected again in the South. Half of AMECA's EUR 31 billion pipeline will be made of turnkey projects, and Alstom stands ready to tap into those. In Asia Pacific, Australia and India will continue to be our main markets with India focusing on freight and urban developments, while Australia could see the exercising of several Rolling Stock optional tranches. Now turning to Slide 7, focusing on orders in the second quarter. The Americas region had a very successful semester this year with 2 landmark orders. This includes a EUR 2 billion Rolling Stock contract with MTA in New York, EUR 1 billion Rolling Stock option exercised by NGT in New Jersey. In Asia Pacific, commercial activity was also strong in the second quarter with key wins such as another metro project in India, confirming Alstom's long-lasting presence in the city of Mumbai, EUR 500 million Rolling Stock and maintenance contract in New Zealand in addition to the KiwiRail signaling project signed by Alstom in 2022, a signaling order in Singapore, enabling faster travel times from the Shanghai Airport. Together with other small order, Alstom recorded EUR 6.4 billion in total orders for the second quarter. This brings the book-to-bill ratio for the first half of the year to 1.2. Moving to Slide 8, highlighting large orders announced and booked since the start of the second half. Let me start with Eurostar. Eurostar has placed an order for 30 Avelia Horizon double-decker, very high-speed trains for a total value of EUR 1.4 billion. The agreement also includes an option for the purchase of 20 additional units. This is a strong validation of the Avelia Horizon platform, which is now close to homologation and has built a very solid order book of more than 170 trains, serving multiple clients, both in France and abroad. On the right-hand side, Polish operator PKP awarded Alstom a contract worth EUR 1.6 billion for the supply of 42 Coradia Max trains together with 30 years of maintenance. This award illustrates the strength of the Coradia platform as well as the increasing share of Rolling Stock contracts being bundled with long-term maintenance. The agreement with PKP also include an option for the purchases of 30 additional trains. Turning now to the backlog on Slide 8. The average gross margin in the backlog stands at 18% at the end of the first half compared to 17.8% at the end of the same time last year. This represents a 20 basis point increase compared to the end of the last fiscal year. Considering the weight of Rolling Stock orders in the first half, the increase in the gross margin in backlog demonstrates the quality of the order intake across all product lines. Our commercial wins this semester have shed a particular light on the North American rail market, as explained on Slide 10. We have seen over the recent years, ridership increasing closer to pre-COVID activity with Amtrak ridership in the U.S. already exceeding the pre-crisis level. The need for enhancing passenger experience and upgrading aging train fleets remain a powerful commercial driver, with 50% of the U.S. installed base needing replacement in the short to medium term. The U.S. railway supply market, as addressed by Alstom has witnessed further concentration with the 3 largest players accounting for about 3/4 of all orders in the last 3 years. Finally, in Canada, Alstom enjoys a unique position, thanks to 5 main sites and 5,000 employees. Continuing with North America on Page 11. On the delivery aspects, we celebrated in August the debut of the Amtrak's high-speed Next-Gen Acela on the Northeast corridor. These are the fastest and most technologically advanced trains in the U.S. that Alstom manufactured at its own hub. This facility in Upstate New York is the largest dedicated passenger rail manufacturing facility in the U.S. Hornell is also where the trains from the newly signed MTA's M9A order will be delivered with further investment made there to manufacture carbody shells. On the West Coast, the Bay Area Rapid Transit, BART in California accepted the 1,000th car from the fleet of the future. This railcar came from Alstom's Plattsburgh facility, where the group is also manufacturing the NGT multilevel 3 double-deck EMUs. Turning our attention to France on Page 12. The first MF19 Metro interlink service on Paris Metro Line 10 has brought the focus back on the widest generation of train innovations that Alstom has seamlessly matured. Within the time frame of only 5 years, no less than 5 new train platforms will have reached operational service stage, among which MF19, AriaNG and Avelia Horizon for high speed. The AriaNG, in particular, commuter trains have been running on the Aria E line since November 2023 and on Aria D line since December 2024. Combining single and double-deck cars, this train embarks numerous capacity, comfort and accessibility innovations. And last, the Avelia Horizon platform witnessed several further milestones with TGV M starting endurance tests in France following completion of certification test and with another high-speed commercial success achieved with Eurostar. On Page 13, we reflect again on car production levels, providing insights into the Rolling Stock business, which together with the train components represents about 50% of sales. Production volumes were broadly stable in the first half compared to last year. Some projects saw an increase in production, including our RER NG and TGV M in France, commuter trains for BART in the U.S. or several German projects where volumes are on the rise. At the same time, some large projects that contributed to volumes last year have now been completed. This includes some tighter metros in Paris, some metros in Sao Paulo, the Tren Maya project in Mexico or the Avelia Liberty for Amtrak in the U.S. In addition to a favorable mix of cars on sales, it's worth noting that more cars produced in the first half were part of projects in ramp-up phase compared to same period last year, which also contributed to Rolling Stock sales growth. Overall, we continue to expect stable production for the full year. Let me now pass it on to Bernard, who will comment the first half results. Bernard-Pierre Delpit: Thank you, Henri. Good evening, everyone. Let's start with the order intake as shown on Slide 15. We recorded EUR 10.5 billion of orders in the first half. The book-to-bill ratio that was 0.9 for the first quarter accelerated to 1.4 in the second quarter, resulting in a book-to-bill of 1.2 for the first half, of which 1.4 for Rolling Stock. The backlog reached EUR 96.1 billion, up from EUR 95 billion at the end of March. This increase was driven by the strong book-to-bill, but partly offset by negative currency effects. Looking at the regions, the Americas had their best semester ever with large orders from New York and New Jersey. Europe remains the largest contributor, supported by strong momentum in France. And the Signaling business had a solid start to the year with contract wins in Italy, Taiwan, Brazil and Singapore. Turning to sales on Slide 16. Sales reached EUR 9.1 billion in the first half, up 7.9% on an organic basis. All product lines contributed to sales growth. In particular, Rolling Stock sales totaled EUR 4.7 billion, reflecting 6% organic growth. This was driven by a strong ramp-up in Germany with double-digit growth across multiple regional train projects, continued momentum in France, notably supported by the RER NG program. In the Americas, increased production volumes for BART in San Francisco offset the completion of other projects, including Amtrak. In Asia Pacific, the locomotive business in India remains an important growth driver. Service sales reached EUR 2.3 billion with a 6% organic growth, supported by strong performance in Italy, the U.K., Australia and airport people movers in the U.S. Sales in Signaling came in at EUR 1.3 billion with 17% organic growth, driven by robust execution in France, Italy and Germany. Reported growth in Signaling was more modest at 4%, mainly due to the deconsolidation of the North American conventional Signaling business as of September last year. Finally, Systems sales totaled EUR 0.8 billion, representing 10% organic growth. Second quarter performance was impacted by the ramp down of the Mexico Tren Maya contract, which was not fully offset by ramp-ups in the Philippines, Taiwan and Brazil. The trend seen in Q2 will continue into the second half. Looking now at inorganic items. Foreign exchange was a 3.3 point headwind driven by euro appreciation against most currencies and scope had a negative 1.2% impact due to the deconsolidation of the U.S. Signaling business that I mentioned above. Scope will be neutral in H2. So as a result, sales grew 3.2% on a reported basis. Looking now at the P&L on Slide 17. Gross margin reached EUR 1.2 billion, representing 13.6% of sales, a slight decrease compared to the prior fiscal year. In absence of a scope and FX impact, the gross margin percentage would have remained stable. The improvement in project execution and industrial efficiencies was offset by regional mix headwind with, for instance, Asia Pacific being broadly flat at current FX rates, while Germany grew solid double digits in the first half, but at lower gross margin. Net R&D costs accounted for 2.7% of sales, notably due to cost discipline, project phasing, but also to the disposal of the North American Signaling business, which was more R&D intensive. Selling and administrative costs have reduced both in absolute terms and as a percentage of sales, now representing 5.7% of sales in the first half, demonstrating continued efforts on cost efficiency. We also benefited from a solid EUR 100 million contribution from the joint ventures. These demonstrate both the resilience of the Chinese market and the dynamism of the broader Asia region to which several of those JVs are exposed. Taken together, the adjusted EBIT increased by EUR 65 million, reaching EUR 580 million this semester. Turning to Slide 18 and the analysis of adjusted EBIT margin development in the first half. The 50 bps improvement to 6.4% is the combination of 40 bps headwind and 90 bps performance. On the one hand, adjusted EBIT margin faced a couple of inorganic headwinds. Scope had a negative 20 basis point impact, slightly less than the impact on gross margin due again to the higher weight of R&D for the North American Signaling business compared to the group average. FX had a negative 20 basis point impact from a translation effect. On the other hand, these headwinds were more than offset by progress on project execution and industrial efficiencies contributing around 20 bps to margin improvement. Fixed costs, looking at R&D and SG&A together contributed to a 50 basis point increase. Other elements, including the increase in net interest and equity investors pickup contributed 20 basis points overall. Looking at net profit on Slide 19. Nonoperating expenses have reduced further to EUR 37 million in the first half. Nonoperating expenses mostly relate to the impact of the German transformation plan and some legal costs. As a reminder, integration costs were nil in the first half of this year as Bombardier Integration program was concluded last year. Net financial expenses decreased to EUR 75 million from EUR 107 million as a consequences of deleveraging plan that occurred in H1 last year. Effective tax rate came back to a structural level of 28% compared to 37% in the same period last year. Finally, adjusted net profit increased by 51% to EUR 338 million for the half year, and net profit group share after PPA reached EUR 220 million, 4x last year net profit. Turning now to free cash flow on Slide 20. Free cash flow came at a negative EUR 740 million, consistent with expected seasonality. Let me highlight a few moving parts here. Adjusted EBITDA, including dividend payment from JVs reached EUR 800 million versus EUR 708 million last year. CapEx and CapDev together amounted to EUR 225 million or 2.5% of sales with some favorable phasing impact of investments that will reverse out during the second half. Financial and tax cash out together amounted to EUR 152 million, coming in close to the P&L expense. This results in a solid increase of funds from operation to EUR 411 million for the first half, up more than EUR 100 million compared to the same period last year, confirming the trajectory observed over the last 3 years. Finally, working capital was a EUR 1.2 billion headwind, slightly better than expected. Talking trade working capital on Slide 21. Trade working capital stood at 43 days of sales at the end of September, broadly stable compared to the first half of last year. The increase compared to March '25 represented a EUR 500 million headwind for cash generation in H1 this year. Inventories increased by EUR 315 million over the 6 months and stand at 87 days of sales, not very different in terms from September 2024. This is largely explained by the anticipated acceleration in Rolling Stock production during the second half of the year with higher value train sets to be manufactured this year. In comparison, days of payables progressed slightly less than days of inventories. Looking now at contract working capital on Slide 22. It went from a favorable 89 days of sales to 79 days at the end of September and stands at negative EUR 3.9 billion, so generating close to a EUR 600 million headwind during the half. Net contract assets and liabilities went from negative 59 to negative 48 days of sales, just below EUR 2.5 billion. The vast majority of the decrease in the net position was driven by Rolling Stock with 3 dynamics. First, the increasing share of projects in a ramp-up phase compared to last year. During this phase, when [indiscernible] cars are being built and homologation milestone is not reached, then Rolling Stock contracts pivot from a contract liability position to a contract asset position and therefore, consume working cap. Second, the phasing of down payments this year is very different to last fiscal year, less down payments in the first half, more to be expected in the second half. And third, a few large Rolling Stock contracts have only recently reached cash milestones, including, for example, Amtrak with the launch of commercial service in August and cash-ins to be collected over the next quarters. We anticipate the 3 dynamics will remain valid through the rest of the year, but the timing of down payment will largely drive the improvement in contract working cap in the second half. Finally, provisions are decreasing as expected with the execution of the legacy backlog. Net financial debt on Slide 23, it increased to EUR 1.4 billion at the end of September, up from EUR 434 million at the end of March. In addition to free cash flow changes, leases and dividends from minorities, combined with a EUR 44 million annual bond coupon paid for the hybrid bond amounted to nearly EUR 150 million total cash outflow during the first half. And the strong appreciation of the euro had a negative translation effect on cash balances held in non-euro-denominated currencies of EUR 65 million. This translation adjustment is, by definition, noncash, but does impact the net debt in euro terms. You will find in appendix of this presentation, the updated bridge computation from EV to equity value, reflecting these evolutions. Finally, looking at cash and debt profile at the end of September on Slide 24. Cash balances stood at EUR 1.7 billion at the end of September compared to EUR 2.3 billion at the end of March. The amount of short-term debt entirely through commercial paper stood at EUR 400 million, while the balance was nil at the end of March, leading to a net cash position, excluding long-term debt of EUR 1.3 billion. These moves are explained by free cash flow consumption as detailed in previous slides, the agreement with the rating agency to earmark a portion of cash to identify future debt repayments and the need to keep a certain amount of cash to run the business. This concludes the financial review. Let me pass it on to Henri for final remarks. Henri Poupart-Lafarge: Thank you, Bernard. So turning to the outlook with first taking stock of the assumptions that we laid out in May and that underpin the full year guidance. First, commercial momentum has been particularly strong, driven by robust underlying demand and some competitive positioning in key markets. Second, car production remained stable in the first half, and we expect this trend to continue through the full year. Third, innovation remains a strategic priority for the group. However, given stronger-than-anticipated sales momentum, we now expect R&D to represent around 3% of sales for the full year compared to slightly above 3% previously. Fourth, exposure to U.S. tariffs remains limited as most projects meet minimum U.S. sourcing requirements, and we have legal safeguards through change in law clauses. Year-to-date, the vast majority of tariffs paid have been agreed for reinvoicing with clients. On that basis and in light of our first half performance, we confirm the objective of a book-to-bill ratio above 1, both at a group level and for Rolling Stock. We now expect organic sales growth to exceed 5% compared to 3% to 5% previously. We confirm the adjusted EBIT margin guidance of around 7%, and we continue to expect free cash flow generation within the EUR 200 million to EUR 400 million range. Finally, as mentioned in the press release issued earlier tonight, medium-term ambitions are unchanged, including the 3-year free cash flow objective of EUR 1.5 billion. This concludes the presentation, and Bernard and I will now be happy to take your questions. Operator: [Operator Instructions] Our very first question this evening is coming from Akash Gupta calling from JPMorgan. Akash Gupta: I've got 2. I have one for Henri and one for Bernard. The first one I have is on the pipeline of projects that you show in the presentation. So we see European pipeline reduced by EUR 12 billion in past 6 months. And the question is, is this largely reflecting the awards that we have seen in the period? Or is there something else that has moved as well? And similarly, if I may also ask what is driving the increase in pipeline in AMECA region where you see EUR 9 billion increase in the next 3 years award. So that's the first one. Henri Poupart-Lafarge: No. Thank you, Akash. On the first -- on the pipeline. So first, let me reiterate that the market is extremely positive. As you know, we have still a long-term market growth, which is estimated around 3% by UNIFE. And that is the kind of macroeconomic view and the pipeline, which we look at, which is the sum of all the opportunities which we have in front of us, as you have seen, is still very positive. So you're right. On Europe, time goes, a lot of -- as you have probably seen in the press and the media, a lot of orders which have been allocated to Alstom, but not only in the recent period. And therefore, there is a slight decrease of the pipeline. On the growth -- the second part was on which region you were asking for the growth? Akash Gupta: It's AMECA region where your pipeline has increased by EUR 9 billion? Henri Poupart-Lafarge: On this -- so we have -- it's true in AMECA, therefore, particularly in Middle East, we have a number of turnkey projects which are coming and which have been rejuvenated, if I may say, Riyadh, for example, Line 7 of Riyadh and so on. So we have increasing turnkey jobs, which are coming in the region. Akash Gupta: Then the question for Bernard is on cash flow. So when you gave EUR 200 million to EUR 400 million free cash flow guidance in May, you had much lower visibility than what we have today. And now we have roughly 6 months gone and H1 outflow was much better than expected. You have already announced couple of large orders for Q3. So my question is, how do you feel about the range? And could we say that upper half of the range may be more likely? Or is it still too early to conclude that? Bernard-Pierre Delpit: Thank you, Akash, for that. Frankly, I will not refine the guidance that we have just reiterated of EUR 200 million to EUR 400 million. It's, by the way, a quite narrow range from my point of view. There is nothing really new. It's true that H1 was better than anticipated, but kind of phasing rather than anything else. All the good news that you have seen from a commercial momentum point of view were also in the initial guidance. So no change. I hope that by the end of Q3, I will be in a position to refine this assumption. But let's keep the EUR 200 million to EUR 400 million range, positive free cash flow as our assumption today. Operator: We'll now move to Mr. Andre Kukhnin of UBS. Andre Kukhnin: Could I ask about the margin first? You've put in a pretty solid H1 performance, and it looks like the revenue guidance increase is coming mainly from Services signaling judging by the beat in Q2 and that R&D intensity is slightly lower. So I was kind of thinking about the 7% now as a number that starts with 7% and could be something around 7%, but 7.12% as opposed to sort of high 6s. Is that -- would that be the right way to think about the way the margin is progressing? And then I've got another one. Bernard-Pierre Delpit: Okay. Andre, I will take this one. No, frankly, we keep the guidance absolutely intact. To tell you the truth, we have some headwinds coming from FX and we mitigate this negative with the R&D new guidance. But for the rest, we keep it as we issued it in May. And I think it's already good to mitigate the FX impact. And sales growth will have limited impact on our adjusted EBIT as well. So here again, I think it's good to keep the same line. I know that you guys are waiting for an upgrade. We have upgraded the sales growth. But when talking cash and adjusted EBIT, I mean, keeping the initial guidance was, I think, a good thing. Let's stick to what we said. Andre Kukhnin: Got it I guess I had to try. Can I just ask a quick follow-up? In terms of -- so you told us the backlog margin has improved by another 20 basis points. Could you comment on where your order intake margin is trending at the moment? Henri Poupart-Lafarge: Thank you for the question. I mean it's a very important and I would say very positive development in the first half. We had indeed a very nice gross margin in order intake in all our segments, in all our activities because as you have seen, as compared to previous years where we had a good gross margin in order intake, but which was supported by the mix, which was, I would say, more favorable to Signaling and Service. Here, we have recorded a number of Rolling Stock orders. And I would say, despite that, which kind of a mechanical negative mix impact, we have recorded a very healthy gross margin in the order intake, so which has enabled us to increase. It's always a slight increase because we are talking a very large order backlog. So of course, 6 months addition has only a relatively limited accretive impact, but still an accretive impact, which reflects a good level of order -- of margin in order intake. Bernard-Pierre Delpit: And if I may, on this. We have also a negative -- Andre, we have also a negative FX impact when we translate all those orders in euro. So having a 20 bps improvement in this environment, including the 1.4 book-to-bill for rolling stock, I think it's a great performance. Operator: [Operator Instructions] The question will be coming from that is from Gael de-Bray of Deutsche Bank. Gael de-Bray: Can I ask you again, I'm curious about the free cash flow performance. I mean, what surprised you to the upside in H1 and is not expected to be repeated in H2? Henri Poupart-Lafarge: Yes. This one is for me, Henri. Yes. So it's really a question of phasing. Things that were expected to be in H1 will be pushed to H2. And we have also some VAT phasing because some of the cash came later than expected. So we had no time to repay that to the treasury. It's limited, of course. But I mean when we are talking EUR 10 million here, EUR 10 million there, it can play. So nothing really changed our view. I remind you that, yes, we said upto and in July, I said I had no visibility to improve that. But there is absolutely no reason why the way we have described the year with seasonality will not happen like we described it. So it's very much like, call it, seasonality or cutoff, but as we planned initially, Gael. Gael de-Bray: Okay. And the second question is on the gross margin development. So you said it was about flat if we exclude FX and scope, but it is only not disappointing given the higher share of Signaling and Service revenues in the mix in H1? Bernard-Pierre Delpit: Well, I wouldn't say disappointing. It's a combination of many things. And maybe something that was not flagged. We have kind of regional mix impact as we have a strong growth of some LRV programs in Germany, and we have some more flattish situation in APAC, for example, it explains why we have this kind of impact on the gross margin. So I wouldn't say disappointing. It was much expected, but I suspect that gross margin will come back to a larger growth in H2. Gael de-Bray: So this regional mix impacts may reverse to a degree in the second half? Bernard-Pierre Delpit: I wouldn't say so, no. You'll see some improvement coming from performance, from volume, from different things, but the increase of our production for programs in Germany will continue in H2. Gael de-Bray: Okay. I guess there is no way you could separate the volume and the mix impact, the 20 bps you mentioned? Bernard-Pierre Delpit: No, no, difficult to refine it more than that. Operator: Next question will be coming from Daniela Costa of Goldman Sachs. Daniela Costa: I have 2 as well. One is kind of a follow-up actually on the topic of Germany and on the topic of the pipeline that Henri commented on, on the first question. Can you clarify that pipeline includes the potential opportunities going forward with German stimulus already? Or shall we think about a top-up to that once it becomes concrete what those opportunities are and what sizes should we think about in there? And then I'll ask the second one. Henri Poupart-Lafarge: Yes. So on Germany, it includes the orders and which are today, I would say, under submission and which are part of our actual commercial plan. But it does not include a kind of theoretical view of the German market, which will be triggered by the investment plan of Germany. So if it has not been translated into actual tender and projects, it's not been included. So the vast majority is not included of basically the EUR 10 billion, which will flow one way or another on the German market for infrastructure. Daniela Costa: Got it. And then the second point relates to Siemens at their Investor Day today was talking to about that being less interested in pursuing metro and CT opportunities given those weren't, I guess, as good on margin for them. Can you talk about sort of like how you view the attractiveness of those type of orders for yourself? And also, I guess, the market share you have and the opportunity that if Siemens pulls out more actively of that market, that could give for you? Henri Poupart-Lafarge: Sorry, I didn't get, what was dropped by Siemens? Daniela Costa: No, I think they were saying sort of that they were less interested in sort of actively pursuing the Metro and the city part and more focused on other segments in rail going forward? Henri Poupart-Lafarge: Yes. So first, thank you, it's a good indication. Yes, it's not new from Siemens time. I mean there's always the difficulties in metro. And their last order was, for example, in London, where they suffered a lot. And we've seen then -- and they were -- it was not their priority, the metro business. City, probably as you've seen, they are still in S-band, for example, in Germany. But they are not our main competitors in that area. As you know, we have different competitors depending on the market. If you are, of course, in India, you have local Indians. If you are in Europe, you have more people like CAF, Stadler just injuring into the metro market. So it's not a surprise to us, what you say. It will not dramatically change the picture. What is interesting is that, as you know, we are more and more in turnkeys in cities, so both rolling stock and signaling. So to some extent, Siemens may have some difficulties to sustain a Signaling business -- normal Signaling business if they totally withdraw from the metro one. So it's probably more complex. So I would say not totally a surprise, not a radical shift, but a confirmation that the market is consolidating around a few players. Operator: Next question will be from William Mackie of Kepler Cheuvreux. William Mackie: A couple, please. Firstly, on cash flow for the second half. I think if I heard you correctly, you said it remains highly dependent on the inflow of prepayments. So could you explain, first of all, how much visibility you have on that? And how you also expect the contract assets and inventories to develop in your working capital calculations in the second half? I'll come back to the second question. Bernard-Pierre Delpit: Will, I will take this one. So yes, definitely, we expect a strong inflow of -- coming from new contracts with down payments expected in H2. I would say that we have good visibility. We still some uncertainty about the amount and the timing of those. But we expect, as I said, a strong book-to-bill in H2. So there is always uncertainty, and it could be a couple of hundred millions by definition, considering the size of certain of our contracts, as you've seen for Eurostar or PKP in Poland. So I wouldn't go beyond those comments in terms of visibility, but it's true that there is uncertainty here by definition, but it was also the case last year, by the way. Contract assets will continue to grow as we are in the ramp-up phase for a lot of projects with some homologation dates that will create some contract assets, namely in Germany or for some local markets. So well, I don't expect the contract assets to go down in H2. Regarding inventories, it will depend on the quality of execution in our second half. We have a strong ramp-up as well. So we are ordering parts. It's what you've seen in H1. It will continue because we have also a strong Q4, but we expect we will consume part of those inventories. So as you've seen in H2, the last 2 years, we have consumed some part of our inventories. So I expect that in terms of turns, it will come back to what we've seen in the past. William Mackie: A couple of -- well, questions to clean up some points on the P&L and how you're building the budget and thinking. I note you've achieved a very good contribution in the equity pickup in JVs, particularly from the [indiscernible] JV. Just how are you thinking about the continuity of that in the second half? Should we expect a similar sort of performance the way that you've been speaking to your partners and the sense of how you expect that to develop? And then on the R&D, I'm just interested, I wasn't sure how you were communicating whether the change in R&D guidance relates to higher sales or whether there's an absolute change in the expectation for spend or provision on R&D? And if there's an absolute reduction, then what is it that's driving that against the backdrop of rising activity across the group? Henri Poupart-Lafarge: Thank you for the question. So 2 things. First, let me say that the joint ventures are doing extremely well on the Chinese market. Just one word on the Chinese market. We have seen contrasted trends on the Chinese market. The mainline market is going fast. The urban market is slower, and we are not -- in the past, I don't know if you remember, there were like 15 lines being opened per year. We are probably half this amount today. There are some extensions and so forth. So it's more than -- it does not mean that the market has halved, but it means that it has decreased. And as you say, the AST, which is our very high-speed joint venture is benefiting from this growth on the high-speed market. Having said that, the phasing of the profitability of the joint venture is such that H2 will be not as good as H1. But don't take it as a sign of any slowdown of the market. It's just a fading of the profitability in the year. For your second question, no, it's just a question of relative terms. So in absolute R&D is as expected, but sales are higher. So we have slightly revised downward the assumptions in terms of percentage of sales, but no change in terms of absolute number and investment. Operator: [Operator Instructions] We'll now go to Delphine Brault from ODDO BHF. Delphine Brault: Sorry, I've been disconnected. So I hope my questions have not been asked already. First, it relates to gross margin. Your gross margin in the backlog further improved to 18%. Do you plan this type of improvement, same kind of improvement by the end of the year? Bernard-Pierre Delpit: Delphine, well, the name of the game is not to grow it up to, I don't know, 20%. So at a certain point, the question is more on the execution of the backlog than growing it, growing it, growing it. So we think that will continue to grow the gross margin in the backlog. Now the magnitude of the growth in H2 might be a little too early to tell you because it will depend also on the mix. We have a large mix of Rolling Stock on the order intake. By definition, it has an impact on the growth of the gross margin. And then FX also, so it's a bit too early to tell you, but I think that kind of 10 to 20 bps improvement is what we could see in the next half. Henri Poupart-Lafarge: We have -- you have heard from us a confident outlook on the order intake. So we have a good visibility of the commercial momentum and orders which are already won but not yet booked and which are containing healthy margin. So this would support the growth. But indeed, some of the service orders are still being negotiated. So it would depend as well on the mix between Rolling Stock and service during the second half. But yes, it will continue to increase. The gross margin in the order intake for the first half is much higher than the gross margin in the backlog. So we still have some way to continue to improve the gross margin in the backlog. Delphine Brault: Okay. And my second question is the European Commission recently called for more standardization in the highway sector, including Rolling Stock. And I'm wondering if you believe that the European operators will follow this recommendation? Henri Poupart-Lafarge: As you have seen, there are several recommendations -- recent recommendations from the European Commission. We had also a long paper on very high-speed development in Europe and investment in Europe for interoperability. So the answer to -- for all these papers basically and also to your question is twofold. On one hand, what say the commission never occurs as planned. So it takes always more time, and it's not as -- I would say, as dramatic as they would like it to be. But at the same time, it pushes the needle in the right direction. And not only when they say they want standardization, it's not only the operators which are at stake, it's also all the national rules. And there is a huge program being made by the ERA, the European Railway Authority -- Agency, sorry, which is trying to make all national rules progressively converging. And this will help, and this is helping the standardization. Now there are some, I would say, some opposite directions because, of course, all the operators, they want to have their own trains, they want to have their optimized trains for 50 years and so forth. So they want to have their own dedicated trains. But at least, the main standards and the main norms are progressively converging. Operator: We'll now move to Martin Wilkie of Citi. Martin Wilkie: It's Martin at Citi. Just to come back to the question on revenue growth, and you touched upon it already. But just to clarify, the faster growth, I mean, normally, of course, you're delivering largely from the backlog and that's sort of defined by the customer schedule. So what drove the -- both the better growth in the quarter and the uplift in the year? Is it sort of alleviating bottlenecks, whether it's labor or supply? Or what allowed you to drive the growth in revenue faster than previously expected? Henri Poupart-Lafarge: You're right. On a number of projects, it's being driven by customer ability to take the trains. But on other projects, when we are delivering infrastructure projects in signaling, it's also our own speed, I would say. So we have some flexibility in some places where depending on our own speed, we can deliver more or less fast the backlog. So on that one, we made some progress. And also, we have some short-term orders, and we have put a lot of attention in the recent period on being much better into what we call gardening, i.e., to have very short-term orders. And this has been particularly positive during the first half. And this has led to also a positive move on the sales. Martin Wilkie: That's great. If I could just have one other question on the pipeline. I mean, obviously, you've announced the Eurostar order quite recently. Obviously, a lot in the press about additional operators using the channel tunnel and not just in London and Paris, but elsewhere. Is that included in your pipeline that, that line could potentially be a lot larger for that particular platform of train? Henri Poupart-Lafarge: We are very pleased because as you have seen, we have been awarded the Eurostar order. But as you've probably seen, it's a very technical decision, but this has quite important consequences. There was a decision by the ORR, so the regulator in the U.K. on the access to Temple Mills, which is one of the maintenance depot in the U.K. And this access has been provided to Virgin and Virgin being our partner also for the Paris to London route with high-speed trains are not coming from the same platform. So it's not a double-deck. It's a single-deck platform, which we are developing in Italy. We have high-speed single deck in Italy and high-speed double-deck in France. And this has been, I would say, awarded to Virgin, which was competing against other operators coming with other trains from competitors. So it's very good news. So yes, we have a particular success of our very high-speed platforms. And they are in the -- so this is in the pipeline. In the pipeline, you have also a number of operators wanting to go outside their domestic markets. You have SBB wanted to go outside Switzerland. You got Trinitalia with some ambition as well in Germany as well as in France. You have private operators trying to also establish new route, whether it's Dutch in the Netherlands, Dutch operators or another French operator. So yes, all that is included in the pipeline. Operator: We'll now move to James Moore of Rothschild & Co. James Moore: A number of my questions have been asked and answered. So maybe I could switch to Germany and German production. It looks to me like your car production in units is relatively stable in the first half, and you're looking for German production to potentially double this year. Could you talk a little bit about German production? Is that something that's more loaded to the second half? And how is that developing? Henri Poupart-Lafarge: So your analysis is correct. The German production is more loaded in the second half, definitively. There have been a start of increase at the end of the first half. So if you look -- I mean, monthly numbers, obviously, but the second quarter was higher. So we start to see the ramp-up. But it's true that the large ramp-up is during the second half. In Germany, we are, in general, at a stage where we are waiting for some homologation and certification. So we have projects which are what we call in the ramp-up phase. So it's after a start-up phase where we are just developing ramp-up phase. So we are starting to produce, but in parallel, we need to monitor very closely the speed of -- and the timing of the homologation and certification so that we adjust our production schedule to the actual ability to deliver the trains to the customer once certified. So we are in this delicate phase. But yes, it's H2, which we will see the growth in production in Germany. Operator: We have a follow-up question from William Mackie of Kepler Cheuvreux. William Mackie: I just wanted to dot the i's and cross the t's on a couple of points. There's a note where you talk, I think, about customer advances being revised from EUR 320 million to EUR 511 million within the half year period, but it's not well explained. Could you provide -- throw a bit of color on what that advanced payment reassessment is within the period that you've put as a note to the accounts? That was the first. And then secondly, with regard to the rating agencies, could -- have you spoken to the rating agencies recently in this interim period? And could you share any feedback from your perspective of the input you may have received? Bernard-Pierre Delpit: Yes. I will take the last one, giving time to my colleagues to look for this note because I can't answer on the top of my mind on this advanced payment scheme. On the rating agencies, by the way, we should say rating agency because, as you know, we are only rated by Moody's. Yes, we've discussed this print with Moody's. And I mean, they are -- I mean, it's up to them to react to our print, but nothing new. Nothing has changed as they've taken a 12- to 18-month view when they issued the last press release. So they are totally aware of the seasonality of our free cash flow, if it's the question. And there is nothing new on that front. And we'll come back to you on this note on prepayments from customers because I don't see exactly what you referred to. William Mackie: Okay. It's on Note 15.2, but I'll try something else then just to answer a follow-up from Andre's question and a couple of points you've made earlier. You've stated that the gross margins on recent order intake has been significantly better than the 18% in the backlog and that the change in the backlog is going to evolve slowly due to its scale. But can you give us a sense of what sort of differential there is between the average in the backlog and what you're typically booking now having changed the nature of your sales acceptance and the landscape of the competitive environment having shifted perhaps to a more consolidated and perhaps sensible or disciplined environment? Henri Poupart-Lafarge: Yes. So good question. So that's -- the scale is significant. We -- basically, this first half, we are again at a record high, again, despite the mix. And we are talking in the vicinity of 4 points. Bernard-Pierre Delpit: Well, on the question of advanced payments, I guess it's just an options or something like that. It's not really a down payment. It's maybe something like that. But we will refine the answer and come back to you. I've just read the note, and I will come back to you with more details on that. Operator: We will now go to Louis Billon of AlphaValue. Louis Billon: So just my question on the order intake. So signed orders were more weighted at the end of the quarter. And therefore, I guess, down payments are not yet reflected in the cash position. So should we expect these amounts to impact future free cash flow? And would it be significant? Henri Poupart-Lafarge: The phenomenon that you are describing is frankly, a nonsignificant impact, very small. We expect a larger amount of order intake during the second half than during the first half. I mean we said that it's book-to-bill above 1. But as you have understood from our comments, we are quite optimistic on this part. So we expect down payments to be higher during the second half on the back of larger orders in the second half. And the phenomenon that you are describing is insignificant. Louis Billon: Okay. And maybe another question. So what is the competition in the America? Do you see less competition with the tariff in place? And what is the competitive environment in North America? Henri Poupart-Lafarge: So the market -- and I think I said it a little bit in the text. The market has consolidated around a few players. So we have Siemens still being present. We have Kawasaki specialized on New York. Stadler has a few orders. So it's -- I would say, it's a classical competition. Traditionally, in the Americas, you have a Japanese player. So Kawasaki is there. And you had Nippon Sharyo in the past, but which is not very present anymore. What has changed recently is in Canada because as they have passed a kind of by Canadian Act, for example, in the metro of Toronto, they are now discussing a kind of direct negotiation with us because we are the only one to be able to provide local manufacturing capabilities. So this has changed the competitive landscape, of course. But in the U.S., I would say, the usual suspect, plus from time to time, some Japanese player that we don't see anywhere else. Bernard-Pierre Delpit: Okay. I come back well to the Note 15.2 to say that it relates to 2 contracts with Deutsche Bank in Germany that are included in a program of hybrid for fighting. So it has increased our progress payments in the first half. Operator: As we have no further questions at this time. Ladies and gentlemen, this will conclude today's conference. We thank you very much for your attendance. You may now disconnect. Have a good day, and goodbye.
Operator: Welcome to the Dürr conference call for the third quarter of 2025, followed by a Q&A session. Let me now turn the floor over to your host, Mathias Christen. Mathias Christen: Thank you very much, and welcome to today's call, ladies and gentlemen. The corresponding presentation is available on our website, and I assume you have it in front of you. Our CEO, Jochen Weyrauch, will start on Page 5 before Dietmar Heinrich, as CFO, will take you through the financials. Jochen, please go ahead. Jochen Weyrauch: Thank you, Mathias, and good afternoon to all participants on the call. As our main focus is on profitability, I would like to start with pointing out the high earnings level in Q3. The EBIT margin before extraordinaries increased to 6.6%, which is almost 2 percentage points more than last year, based on earnings growth in all of our 3 divisions. In the year-to-date, the margin amounted to 4.9%, which means that after 3 quarters, we are almost at the midpoint of the full year guidance. Order intake continued to be impacted by heightened macro uncertainty caused by geopolitical and trade conflicts. However, we expect Q4 to be much better. Sales accelerated in Q3 after the moderate first half and should gain more traction in Q4. Free cash flow continued to be strong in Q3, bringing the year-to-date figure to a high level of EUR 85 million. The recent months were also marked by pushing ahead with our sustainable automation strategy. We successfully closed the sale of environmental technology and thus completed the process of turning into a lean company with only 3 instead of 5 divisions. At the same time, we began to streamline our administration, aiming at cost savings of EUR 50 million. The guidance given in March and partly revised in July is being confirmed. Let's turn to Page 6. Regarding the 29% drop in order intake in the first 9 months, please keep in mind that last year's figure was extremely high due to a unique EUR 500 million contract and further large orders. Sales were slightly lower than last year. We saw sequential improvement in Industrial Automation and woodworking in Q3. Automotive should benefit from an accelerated execution of large projects in Q4. I already touched the positive trend in operating EBIT. With regards to earnings after tax, please note that this position is burdened by the EUR 120 million goodwill impairment in Q2, whereas last year's figure included a EUR 19 million book gain from the sale of Agramkow. Adjusted for both special effects, net income was up a good 50% this year. Slide 7 shows the same key figures for the group as a whole, still including the discontinued Environmental Technology business. Page 8 shows our quarterly order intake. After a decent start to the year, the effects from the high level of investment uncertainty in Q2 and Q3 are playing to see. However, there were some positive aspects in Q3. Industrial Automation [Audio Gap] than in Q2. And in general, I would like to emphasize that despite the macro turmoil, customers are not paralyzed. Many of them are pushing ahead with large investment projects, and the pipeline looks solid. This is true, for example, for strategic projects in the automotive industry, but also for HOMAG's timber house construction business. Q4 has the potential for several large orders if our customers stick to their timing. Let's move to regional order intake on Page 9. New orders in Germany dropped sharply as last year's figure was boosted by the huge EUR 500 million contract. The increase in Asia without China was driven by India and Saudi Arabia, which has become a very attractive market for Dürr. Next one is the Automotive division on Page 11. Q3 order intake was marked by the absence of large orders, but this does not mean that there are no such projects being planned. It's rather a characteristic timing issue of our plant engineering business. There are quarters with no large orders, and there are quarters with several big-ticket orders placed all at once. The EBIT margin before extraordinaries exceeded last year's high levels in Q3 and in the year-to-date, based on the good margin quality of the order backlog. Revenues were up sequentially in Q3 and should further accelerate in Q4 as the execution of large orders is speeding up after customer-induced delays in the first half. Page 12, please. Industrial Automation saw a good Q3 with order intake and sales clearly exceeding low Q2 levels and returning to the encouraging Q1 levels. BBS Automation picked up with continued strong MedTech business and improvements in the other business. The EBIT margin before extraordinaries almost doubled year-over-year and clearly exceeded the full Q2 level, spurred by volume effects and the recovery in service business. Please note that for 9 months figures, there is limited comparability as last year's figures still included the Agramkow Group that was sold on July 1, 2024. Reported EBIT was burdened by the EUR 120 million impairment in Q2. As the battery business has been suffering from poor market conditions, we initiated restructuring in Q3 to lower fixed costs. Slide 13 is on group working. The division has implemented a number of self-help measures and thus successfully strengthened earnings resilience. This is testified by the fact that the operating EBIT margin increased by almost 2 percentage points on slightly declining sales in the year-to-date. Order intake was impacted by the tariff uncertainties, causing additional investment restraint in the furniture industry. As of now, the exact timing for market recovery is hard to predict. This is why HOMAG's improved earnings resilience is so important. Looking at the timber house construction business, the outlook is brighter as we see an increasing demand and good opportunities for large orders in part already in Q4. Slide 14 gives an overview on Environmental Technology. As this business was effectively sold 2 weeks ago, there is no need to comment on the figures. Next one is Slide 15. Service sales recovered in Q3, beating the Q2 level by 14%. Under the impression of the tariff chaos, many customers immediately cut service spending in Q2. So it's good news that there was sort of normalization already in Q3. Now it's time to hand over to my colleague, Dietmar Heinrich, who will explain the financials. Dietmar Heinrich: Thank you, Jochen, and a warm welcome to everybody also from my side. Let me start with Slide 17 and our key financial indicators. As Jochen has already touched a couple of them, I will limit myself to gross profit and net income. We managed to increase gross profit by 5% despite slightly lower sales. This was mainly an effect of rising margins in the equipment business due to the value-before-volume strategy, as well as capacity adjustments and lower extraordinary expenses. Net loss in the 9-month period was marked by the goodwill impairment in Q2. In Q3, net income stood at EUR 26 million versus EUR 21 million 1 year ago. However, last year's figure included a EUR 19 million extraordinary book gain from the Agramkow sale. Adjusted for this, net income was up by almost 50% in Q3 2025. Slide 18 is on sales. In Q3, we came close to the prior year figure and exceeded this year's low Q2 level. The latter was mainly based on sequential improvements in Industrial Automation and woodworking. Automotive is expected to speed up revenue recognition in Q4, which in terms of sales is usually the strongest quarter. On Slide 19, you can see the strong margin performance in Q3, which was supported by all divisions, with Automotive achieving an outstanding figure of 8.7%. The EBIT margin before extraordinaries for the first 9 months increased to 4.9% and clearly reached the full year target corridor of 4.5% to 5.5%. In terms of absolute EBIT before extraordinaries, Q3 was by far the strongest quarter, not only in 2025, but also compared to last year. In the first 9 months of 2025, we saw an increase of 9% based on the higher gross profit. Overhead costs were up 2.6%, mainly due to higher R&D costs. Slide 20 shows that after a strong second quarter, free cash flow was clearly positive also in Q3 and climbed to EUR 85 million in the year-to-date. The main driver for this was lower CapEx spending. Please note that EBIT and DA were marked by the impairment in Q2. Our guidance for free cash flow is EUR 0 million to EUR 50 million. This implies a negative figure actually in Q4. But if you ask me if this will really happen, my answer is we stay on the conservative side, as free cash flow is difficult to predict in our business, but I can't rule out the possibility that free cash flow might develop a bit better than guided. Slide 21 is on net working capital. Compared to the end of 2024, there was a 16% decline and an improvement to 31 days working capital. Positive effects resulted from well-managed contract assets and considerable prepayments that are reflected in higher trade liabilities. These 2 effects overcompensated the temporary rise in trade receivables. Net debt shown on Page 22 was stable at a level of EUR 480 million in 2025. In Q1, liquidity was reduced by EUR 97 million payment for the acquisition of 2.5 million HOMAG shares after our cash settlement offer had ended due to a final court decision. Net debt will strongly decline as of December 31 as a consequence of the gross proceeds of EUR 290 million to EUR 310 million from the environmental technology transaction that was closed on October 31. Let's look to Page 22 and our funding situation. The funding situation is comfortable, and it will additionally benefit from the environmental technology proceeds, which are not yet reflected on the chart. The maturity profile is also favorable. We repaid Schuldschein tranches of EUR 55 million this year. The next maturity will be the EUR 150 million convertible in January 2026. So far from my side, I'm now passing back the word to Jochen, who will continue on Page 25. Jochen Weyrauch: Thank you, Dietmar. I would like to briefly comment on the sale of our Environmental Technology business. My personal judgment is that we were able to conclude a very good deal for Dürr and its investors, but also for the environmental business that will benefit from better growth perspectives. Enterprise value and proceeds clearly met our targets. We will use the proceeds to further strengthen the balance sheet and bring down net debt to presumably less than half of the pre-deal level. Please note that the EUR 290 million to EUR 310 million are gross proceeds after having acquired the 25% reinvestment share and before tax payments that will be mainly due in 2026. We anticipate a book gain of EUR 160 million to EUR 190 million after taxes, which is at the higher end of expectations. Moreover, the transaction was a major strategic step to finish D's transformation into a lean group with a clear focus on highly automated and sustainable production processes for our customers. Slide 26 visualizes our transformation. Within not more than 1.5 years, we divested the non-core businesses of Agramkow and Environmental Technology, consolidated our automotive business in one powerful division, integrated the automation business under the BBS brand, and reduced the number of divisions from 5 to 3. The new Dürr Group acts under the motto of sustainable automation with automation as a joint technology platform and further synergies, for example, bundled purchasing, cross-selling in the auto sector, shared services, and business locations, as well as best practice processes in order execution. And on top, we are more focused and easier to understand for our investors and analysts with only 3 divisions. Page 27 shows the result of our transformation process. This structure is the right setup for the coming years. We are not planning any larger M&A transactions, but will put the main focus on further improving efficiency. Our target is an EBIT margin before extraordinaries of 8%. Even though we are not yet there, we have already done a lot of homework. The Automotive division reached its mid-cycle margin target of 8% last year and is set to repeat this in 2025. Woodworking has strengthened its earning resilience and will return to an 8% plus margin under normal market conditions. In 2026 and beyond, we will put special attention on improving the margin of Industrial Automation. There is still work to do. Nonetheless, I'm fully convinced of the potential of our automation business, especially as we continue to expand the well-performing activities in the medtech sector. Slide 28, please. A consequence of our lean group structure is the planned resizing of the administrative sector. As outlined in July, we are planning to cut 500 jobs to make admin structures leaner and more efficient. This goes in line with empowering the 3 divisions and give them more entrepreneurial leeway. We are targeting for cost savings of EUR 50 million, which requires provisions of EUR 40 million to EUR 50 million in Q4. We have already started to reduce the admin workforce abroad and entered into negotiations with the Works Council in Germany. Page 30 brings us to the outlook. We are confirming the targets set in March and partly revised end of July. The order intake guidance requires a strong Q4. There is still work ahead of us, but I'm very confident that we will be successful, as there is a good level of investment activity on our customer side. Regarding sales, we are confident to reach the lower end of the EUR 4.2 billion to EUR 4.6 billion target corridor, backed by a strong Q4, especially in automotive. The EBIT margin before extraordinaries almost reached the guidance midpoint after 9 months. So it's fair to assume that last year's level should be exceeded. Regarding free cash flow, Dietmar found the right words before. We maintain a conservative approach, even though there is an opportunity to beat the upper end of the guidance. Given the book profit from the Environmental Technology sale and the good earnings performance since Q3, we are confident regarding the net income guidance of EUR 120 million to EUR 170 million. The target for net financial debt is absolutely realistic, given the environmental technology proceeds. Slide 31 is a rather technical one, designed to help you to follow the guidance, especially the information on the influencing factors for net income may be helpful. The divisional guidance on Page 32 is unchanged compared to August 7, when we made some adjustments marked in blue. We are confirming the divisional targets, especially the improved earnings performance in Q3 is a sound argument to be confident. Slide 34 brings me to the summary. The sale of the Environmental Technology business was a milestone, not only because it was a financial success, but also because it represents the final element of our transformation. Dürr has become a lean engineering group. Our leading competence for highly automated and sustainable production processes is a distinguishing feature that sets us apart from the competition. We are confirming our guidance and expect a high order intake in Q4, provided that there will be no customer-induced delays in order placement. The good performance in Q3 underscores our earnings resilience and our ability to brie margins even in a challenging environment. Free cash flow and net financial debt should meet the targets set in our guidance, maybe even more. We continue to improve earnings resilience and margins with the planned adjustments in administration, targeting for annual cost savings of EUR 50 million. And after having reshaped the group, we will direct our focus even more on improving efficiency in 2026. Ladies and gentlemen, thank you for listening. Dietman and I will now be happy to answer your questions. Operator: [Operator Instructions] And the first question is from Sven Weier, UBS. Sven Weier: I just have one regarding the order intake and what you said on Q4. I mean, with a view to the group guidance, is it also fair to assume that it's more likely that you will end up at the lower end of the range? And I was also curious how you see that on an individual divisional level. Jochen Weyrauch: Thank you, Sven, for asking the question. Yes, that's fair to assume in terms of rather the lower range of the guidance. And from a divisional perspective, we see some momentum in HOMAG, but the bigger part at this point is assumed to come from automotive. Sven Weier: So HOMAG is also going to be more towards the EUR 1.3 billion level, I guess? Jochen Weyrauch: Let's see. I would guess rather somewhat above, but let's see. Operator: The next question is from Nikita Lal, Deutsche Bank. Nikita Lal: First, congratulations on the strong profitability we saw in this quarter. Is this a run rate we can expect for the next quarter? Or what is it dependent on? My second question is on any comments on dividend already. Should we expect a payout ratio of roughly 40%? And the third one, when we think about 2026, do you see any improving KPI for HOMAG? Jochen Weyrauch: Thank you, Nikita, for your questions. Let me start with the run rate for the remainder of the year. If you make the math with the midpoint of the guidance, which we've now reached, we would expect Q4 probably not be exactly at the Q3 levels, but at least to a point that it -- I shouldn't say easily, but that it well confirms what we've guided. On the dividend, no, we have not yet discussed anything. But I would say we are probably known for some sort of continuity, whatever that means at the end of the day. And then your last question was on HOMAG, I think, for next year. Let's see how things develop. HOMAG has made good steps this year. And you can clearly see, I mean, HOMAG is up almost 2% compared to last year, that we've made our homework in terms of efficiency, and the effect of our restructuring program kicks in. But next year, to some extent, really depends on the outcome for the remainder of the year. And being at this year's level would already, I would say, is -- would be a good starting point, and let's see what's possible. Operator: And the next question is from Adrian Pehl, ODDO BHF. Adrian Pehl: Actually, a couple of questions. Well, first of all, on HOMAG again, actually, you're phrasing it a little bit differently. Since in the past, we have been talking a little bit about the quality of discussions that you had with your clients. And I was just wondering if there was some sort of incremental change on that, hopefully, towards improvement, but happy to take any color you might share. The second one is on -- as you were referring in your presentation to probably not pursuing bigger M&A transactions. Nevertheless, I wanted to hear your thoughts on the proceeds that you will be collecting from the sale of the environmental business. Is that -- will you pay down debt with the money? Or how should we think of the respective capital allocation here? And thirdly, before I might have a follow-up, on the phasing of the cash out on the restructuring, maybe you could remind us how this will unfold starting Q4 going into 2026, that would be helpful. Jochen Weyrauch: Okay. Thank you for your questions. I will answer on HOMAG, and Dietmar will probably take over for M&A proceeds and the phaseout of the restructuring. On HOMAG, the -- yes, obviously, it's -- I've been burning my tongue a few times on this topic, always looking at when things would become better. It's twofold. It's very difficult to guess action from the discussions I have with customers. So we're careful when it comes to furniture at the moment. I don't think there is more room to go down, but still, you don't see any real recovery in the numbers. I think there is with some customers in Europe, maybe discussions become a bit more positive. On the other hand, we see some uncertainty in the U.S. from customers who now, of course, have to suffer from tariffs. How this will play out in the end and when really there will be momentum upwards, downwards, I don't expect any -- hard to say. Where we see definitely activity is around wooden houses and timber processing. And there, we really are discussing with a number of customers on significant projects. And there, I'm quite optimistic. Dietmar Heinrich: So I will pick up as Jochen already mentioned, the other 2 questions in regard to the use of the proceeds of the Environmental Technology sale. We are going to use it for debt reduction. We have the maturity of the convertible bond coming up in January of next year, and we have another Schuldschein then coming up in April of next year, and we are targeting actually to repay this through debt. In regard to the cash out for the restructuring, then in the administration area that Jochen explained, we are targeting to build up the provisions in the fourth quarter of this year. We are already getting closer to the negotiation results with the works council. And so I'm confident that we will build up the related provisions in Germany, but also outside of Germany, until the end of this year. In regard to the cash out, I do not expect the real cash out to happen within this year. The majority will for sure be done in 2026. But depending on the individual agreements and the impact that we are having in there can also be that some portion of the payout still will be done in 2027. We can provide more information in regard to this when we are really having the progress in conjunction with getting the agreements with the individual employees who are targeted to leave the company. Adrian Pehl: And then last question from my side again on automotive, just also probably a bit more color, just to what you said already. I mean I took obviously, and the order intake in Q3 was pretty low. But I want to hear your thoughts. Is that just a function of shifts in projects that, on the other hand, are very likely to materialize anytime soon? Because I'm actually asking you referred in the press release to, I think that was a half sentence saying that if these projects are then finally been signed, so there's still a high level of uncertainty, obviously, and there might be some shift into 2026, but anything on color, clients, regions, investment behavior would be helpful. Jochen Weyrauch: Yes. Thanks for the add-on question. We have a few -- a bit -- yes, some large orders that are very much progressed in terms of the negotiations. And so still not signed, but it gives us the confidence that we have expressed in our comments before. On the regions, I ask for your understanding that it's also from a confidentiality point of view, and you know that the market is quite sensitive at the moment. I would rather comment on that we have booked the orders. Operator: And the next question is from Philippe Lorrain, Bernstein. Philippe Lorrain: I wanted to bounce back a little bit on automotive. From today's point of view, would that be fair to assume that the kind of order intake level that we could expect for Q4 kind of matches the one that we've seen in Q1? Jochen Weyrauch: It very much would match, yes, what we had in Q1. Philippe Lorrain: And then a second question to specify a little bit more what you were saying on the adjusted EBIT margin guidance. So I take it that you are saying, okay, you are very confident with the midpoint of the range, but the midpoint of the range at 5% would imply actually, like another 5% or so in Q4, if I'm not mistaken. So to circle back with your comment, like saying, okay, if we look at Q3 and maybe we assume that it's not exactly the same level of margin that we can generate for Q4, that would imply actually that we'll land well within, let's say, the upper half of the margin range. So is that fair to see it that way? Dietmar Heinrich: Yes. Maybe, Philippe, I take this question in that regard. As you know, we are always a bit conservative, and projects have sometimes their own dynamics. So we stay on the conservative side. And then we stay to what Jochen explained before, staying at a very -- or we stick to staying with the guidance, we are in the midrange of the guidance. We will feel comfortable in that regard; in case we perform better, of course, that will be the case. But I don't want to raise the bar right now that would not be reasonable. Philippe Lorrain: And my last question, again, on -- probably a bit more on automotive and to some extent, also on HOMAG, but now with the trend that we've seen that Q2 and Q3 were slightly longer in terms of order intake, how should we expect actually sales to evolve in the coming quarters? And I'm trying to extrapolate a little bit further than just Q4. Dietmar Heinrich: Yes, especially in automotive, we still have a very good backlog. So the orders we are now fighting for are rather further down in '26. So there, we have a nice buffer independent on whether we get one of the bigger orders a quarter earlier or later. HOMAG, we'll have to see. I mean our -- you can see it in the numbers. The order backlog has somewhat come down. This is even more visible on the furniture side. So we will have some measures in place already for Q1, which should help. And you've all -- I mean, we've seen a similar thing this year. So we're working -- I mean, we're working from, how would we say, hand to mouth. And -- but that's why I said expecting something similar to start with for next year, compared to this year, I think, is a fair assumption. Philippe Lorrain: But on a full-year basis, probably still continue on an improvement trend margin-wise? Dietmar Heinrich: That would be our aim, definitely, but let's see how the market helps us or doesn't help us. Operator: At the moment, there seem to be no further questions. [Operator Instructions] And the next question is from Holger Schmidt, DZ Bank. Holger Schmidt: Just one question on the battery side. Could you give us an update on your battery business? I mean you are making some capacity adjustments at the moment. Do you see any kind of improvement of -- or potentially deterioration of the business? Jochen Weyrauch: Yes. Thank you. Good question, Holger. No, it's tough to be quite fair at the moment. That's why we are restructuring. We see a challenging market. We still believe that there will be some activities coming back. There is a few smaller orders, but nowhere near to what we've been planning for. This is why we make significant capacity adjustments. And this is where we obviously see some earning issues at the moment. But we are adapting the team. It's not too huge anyways, and then see what we can get out of it. But it definitely is an issue at the moment, and that's why we already announced significant restructuring, and let's see how it goes forward. Fortunately, it's not a big ticket in total. Holger Schmidt: And let's assume the market would remain weak at the current level, would you also consider to step out of this business? Jochen Weyrauch: We don't do that right now. Let's see how things develop. If you listen to what is said in public, there is a confirmation that, especially in Europe, that we need some sort of a supply chain in the battery business. There is some projects. And actually, we are hopeful also to collect a few orders, at least 1 or 2 double-digit. So we will, in a way, deal with what we have. Hard to rule anything out, but at the moment, that's not our plan. Operator: And the next question is from Elizabeth Weisenhorn, Portikus Investment. Elisabeth Weisenhorn: Mr., Jochen, you very often go to China, as I noticed. And I would like to know what you think about the competition there. I read and see pictures about the automation degree that is going on there and how competitive it is. Jochen Weyrauch: Yes. Thank you for the question. Yes, indeed, I go to China quite often because it's an important business for us. And China is very competitive in any industry. And in automation, definitely, there is a number of very strong players, obviously, including us, because the majority of our employees in production automation are sitting in China, mainly in Suzhou and Kunshan, and we're playing a significant role. That's why it is important to play in China to learn what's happening there, but the dynamics are incredible. I can really only say -- and that's why, again, it is important to be there to be successful, and we are successful in our automation business with our strong local team, but you have to continuously develop, be efficient, be cost-driven. And this is why the business that we run and the competition we play with in China makes us also quite strong for the business outside of China. I hope that helps a little bit. That's all I can say at this point. And it's -- I'm always impressed. Operator: Then we come to the last question. It's a follow-up from Philippe Lorrain, Bernstein. Philippe Lorrain: Just wanted to follow up with 2 little more questions on automotive. So the first one was just like to make sure I understood you were saying your, let's say, confidence with regard to the statement speaking about an improvement in Q4 order intake trends is based more on the fact that you see orders being like nearly assigned. But how about orders that you've signed, maybe at the beginning of Q4? How has been like current trading, so to say? And the second question would be -- and perhaps it ties also together a little bit with all of that generally. But I remember you were speaking about a bit of a slowdown in execution this year. However, it seems to pick up, especially with regard to Q4. Would you say that all these issues are now behind us? Or has there been like a structural shift somewhere? Jochen Weyrauch: Yes, on auto and bookings in Q4, in general, our pipeline overall doesn't look very bad, I must say. Actually, let me turn my words around. It looks quite solid. And that is not only Q4. It is -- we're always watching the next 12, 18 months. And this is what I can say. It is solid. Is it fantastic? Probably not, but it's very solid, and there is enough projects out there to feed the organization at this point. When it comes now to Q4, there is 2 to 3 larger orders that would turn the needle. And on most of them, negotiations have progressed quite well. And then based on that, let's see how things turn out. Does that help a bit, Philip? Philippe Lorrain: Yes, perfect. So I understand it's really, yes, something that needs to be signed. And with regard to the question on the pace of execution on sales. Jochen Weyrauch: Sorry, I missed that one. I would say we are running a relatively normal pace at this point. There was a few orders or a few projects where there was some modifications at customer ends. There was a few delays on progress of buildings, which, by the way, can happen always in that business. But what we are currently seeing is, I would say, normal project execution. Operator: And as we have no further questions from the audience, I would like to hand the floor back over for closing remarks. Mathias Christen: Well, thank you, Heike. Thank you, ladies and gentlemen, for your questions and the discussion in today's call. If there are follow-ups, please don't hesitate to contact me. We are looking forward to meet some of you on the investor conferences during the next few weeks. Take care and have a wonderful end-of-the-year season. Bye-bye from our side.
Operator: Good morning. Thank you for waiting. Welcome to the earnings release call of Ultrapar to present the results referring to the Third Quarter '25. Our presentation will be conducted by Mr. Rodrigo Pizzinatto, CEO of Ultrapar; and by Alexandre Palhares, CFO of Ultrapar. The Q&A session that will follow will also have Mr. Leonardo Linden, CEO of Ipiranga; Mr. Tabajara Bertelli, CEO of Ultragaz; and Mr. Fulvius Tomelin, CEO of Ultracargo. This call is being recorded and will be accessed later through the website, ri.ultra.com.br. After the initial presentation, we are going to start the Q&A session where further instructions will be provided. I would also like to tell you that the conference is being conducted in Portuguese and there is an option for simultaneous translation by clicking interpretation. For those listening to the earnings release call in English, there is the option of muting original volume. The presentation will be shown in Portuguese and there is a version in English to be downloaded through the company's website and through the chat. Before proceeding, we would like to mention that forward-looking statements made during this call refer to business perspective of Ultrapar. Forecast and operating and financial goals are based on beliefs and assumptions of the company management and on information currently available. Forward-looking statements are no guarantee of performance. They involve risks and uncertainties because they refer to future events and therefore, depend on circumstances that may or may not occur. Investors should understand that general economic conditions, industry conditions and other operating factors can also cause results to differ materially from those expressed in such forward-looking statements. I would like now to hand the conference over to Mr. Rodrigo Pizzinatto, who will start with the presentation. Mr. Pizzinatto, you have the floor. Rodrigo de Almeida Pizzinatto: During this quarter, we recognized BRL 238 million in extraordinary tax credits at Ipiranga, resulting from the remaining portion of historical ICMS tax credits included in the PIS/COFINS calculation basis. Furthermore, we made significant progress in the fight against illegal practices in the fuel sector. We have been following with optimism that work carried out by the authorities in recent months, especially the Carbono Oculto Operation at the end of August. It represents a historic milestone in this fight, reinforcing the need for stricter legislation to fight crime and the legalities in the sector. We continue to support authorities and regulatory bodies in fighting crime, strengthening market integrity and ensuring fair competition. Another highlight of the quarter was the rapid reduction in leverage. After assuming control of Hidrovias and starting to consolidate its results in the second quarter, leverage stood at 1.9x. With the strong cash generation in this quarter and Ultrapar's EBITDA growth, we reduced leverage to 1.7x even after paying BRL 326 million in dividends in August. We also continue to advance our growth and strategic positioning agenda. In October, we completed the expansion of the Ultracargo terminal in Santos, adding 34,000 cubic meters of storage capacity. On November 1, we completed the sale of Hidrovias Cabotage operation for BRL 750 million (sic) [ BRL 715 million ] which will enable Hidrovias to focus on more synergistic and complementary businesses while strengthening its financial position. We announced the signing of an agreement to acquire a 37.5% stake in Virtu which operates in the LNG logistics for BRL 102 million. This transaction is aligned with our strategy to invest in sectors where Ultrapar can contribute to value creation with high growth and profitability potential. We also received CADE's approval for the LPG terminal in Pecém for Ultragaz in partnership with Supergasbrás. This project reinforces our commitment to safety and efficiency in LPG supply in the Northeast and North regions of Brazil. Finally, for those who were unable to attend Ultra Day 2025 held in September for the first time at Ultrapar's headquarters, please note that the presentation is available on our Investor Relations website. I will now turn the call over to our CFO, who will walk you through the quarterly results. Thank you. Alexandre Palhares: Thank you, Rodrigo. Good morning, everyone. Before starting, I would like to remind you of the reporting criteria and standards used in this presentation. Now let's move on to the results. Ultrapar's adjusted EBITDA was BRL 1.9 billion, including the recognition of BRL 185 million in extraordinary tax credits at Ipiranga representing a 27% increase year-over-year. Recurring adjusted EBITDA totaled BRL 1.8 billion, an 18% increase compared to the third quarter of last year driven by Hidrovia's record performance. Ultragaz also reported higher EBITDA, which together with Hidrovias, partially offset the lower results from Ipiranga and Ultracargo. Net income for the quarter reached BRL 772 million, an 11% increase year-over-year, mainly driven by the higher operating results and the recognition of tax credits already mentioned which were offset by higher financial expenses and higher depreciation and amortization, mainly due to the consolidation of Hidrovias. CapEx totaled BRL 756 million, 46% higher compared to the same period last year, highlighting the consolidation of investments in Hidrovias and increased investments in Ipiranga, especially for the expansion and maintenance of the service station and franchise network, in addition to investments in the evolution of the technological platform with the replacement of the ERP system. Operating cash generation was BRL 2.1 billion, almost 3x the cash generated in the same period last year, even with BRL 258 million for the settlement of the draft discount. This reflects a better operating result, the consolidation of Hidrovias and lower working capital investment at Ipiranga and Ultragaz. And now moving to the next slide. We ended the quarter with BRL 12 billion in net debt and a leverage of 1.7x compared to 1.9x last quarter. This improvement reflects the strong cash generation during the period, which more than offset the payment of BRL 326 million in dividends in August in addition to the impact of BRL 258 million from the settlement of the draft discount, as I mentioned earlier. Now moving to Ipiranga's results. The volumes sold in the third quarter was 1% higher compared to last year due to the increase in the Otto cycle, mainly in gasoline. It is worth noting that we observed the market recovery following the Carbono Oculto Operation, which has been tackling regular companies in this sector with an acceleration in sales volume in September. We ended the period with 5,812 substations. We added 70 new substations and closed 84 to our network throughout the quarter. Ipiranga's EBITDA totaled BRL 1.85 billion, 12% higher than the same period last year, reflecting the recognition of extraordinary tax credits of BRL 185 million. Recurring EBITDA totaled BRL 892 million in the quarter, a 5% lower compared to the third quarter of 2024. This result reflects a more challenging scenario given the irregularities in the sector, mainly due to the high level of naphtha imports for irregular sale as gasoline and inventory gains in the third quarter of 2024. These effects were partially offset by higher sales volume and lower expenses during the period with lower allowance for expected credit losses, marketing and personnel expenses due to a smaller head count. As a highlight, we also had cash generation zreaching BRL 1.453 billion, more than twice the BRL 723 million in the third quarter of 2024. This performance reflects working capital management, strengthening value creation for Ipiranga. For the fourth quarter, we expect a continued market recovery with volume growth and profitability similar to that observed in the third quarter. Now moving to Ultragaz. The volume of LPG sold in the third quarter was 6% lower than the same period in 2024, with a 3% decrease in the bottled segment and an 11% decrease in the bulk segment, reflecting the competitive dynamics of the market, which continued to be impacted by the pass-through of increased cost of Petrobras auctions. Furthermore, we are seeing signs of an economic slowdown with lower demand in the volumes sold to industries. Recurring adjusted EBITDA totaled BRL 463 million, a 3% increase compared to the same period in 2024, mainly due to pass-through of inflation and the positive contribution from new energies despite lower LPG sales volumes. The fourth quarter is seasonally weaker. We see a gradual recovery in volume and bulk segment is below last year's levels. We also expect EBITDA to be higher than that observed in the third quarter. Now moving to Ultracargo. The average installed capacity reached 1,097,000 cubic meters in the quarter, a 3% year-over-year increase, resulting from the addition of 23,000 cubic meters of capacity in Palmeirante and 7,000 cubic meters in Rondonópolis. The cubic meters sold was 12% lower year-over-year, totaling 3,845,000 cubic meters. This decrease reflects the lower demand from our customers for tanking services related to fuel imports, which resulted in lower handling in Santos, Itaqui and Suape. This impact is partially offset by the higher volume of handling in Opla. As a result, net revenue totaled BRL 243 million in the quarter, a 9% decrease compared to the same period last year, reflecting the lower volume even with better tariffs. Ultracargo's adjusted EBITDA totaled BRL 134 million, 20% below the third quarter of 2024, impacted by lower volumes and higher preoperational and initial costs at Palmeirante, which is still in its ramp-up phase, partially offset by better tariffs. For the fourth quarter, we see a recovery in demand from our customers and the effects of the expansion. As a result, we expect a recovery in EBITDA compared to the third quarter. Finally, going Hidrovias. The volume handled in the quarter grew by 30% when compared to the same period last year, driven by the normalization of navigation in the South corridor, which allowed higher handling of iron ore. Adjusted EBITDA reached BRL 332 million compared to BRL 169 million in the same period last year. Recurring EBITDA reached BRL 361 million, more than twice the BRL 169 million recorded in the third quarter of 2024. This record performance mainly reflects better navigation conditions in the South corridor, as I mentioned earlier, and a better sales mix. On November 4, the Cabotage sale was completed, which will affect the results of the fourth quarter and reduce the company's debt. It is important to note that there is also the seasonality of the fourth quarter, which significantly affects navigability in the corridors. We expect an EBITDA similar to the fourth quarter of 2022. With that, I conclude my presentation. Thank you all for the participation. Let's move to the Q&A session. To contribute to the dynamics of this moment, I reinforce that questions related to Hidrovias will be answered from the perspective of the controlling shareholders. Other operational details should be directed to the Hidrovia's IR team. Operator: [Operator Instructions] The first question comes from Gabriel Barra with Citi. Gabriel Coelho Barra: I have 2 questions. First, let me focus on Ipiranga and all the changes you've mentioned during the data presentation. We've seen a sequence improvement and when we talk with the industry at large, there is an expectation of sequential improvement for the upcoming quarters in terms of volume margin and fighting illegality. I'd like to hear about the end of the quarter and the trend for the fourth quarter, the new events that were observed probably they can be translated into better volumes, better margins. And I'd like to hear about the company's strategy. Would it be to recover the lost market share to the informal market? Or would you thinking about optimizing your margins? What is your strategy? Maybe Linden can help us out. Now looking from a broader perspective at Ultra, you've been making some investments in terms of capital allocation, which is a very important point considering Ultra as a vehicle of investments. So what are the next steps? You still have got a lot to deliver in Hidrovias, of course. But the company has already made all the incorporation of investments and all that. So what is the strategy for the future? Where would you consider future investments, exactly when, what would be the timing? Would you think about greenfield, brownfield, something that would bring results in the short term? So these are my 2 questions. Leonardo Linden: Good morning, Gabriel, Linden speaking. The first question is -- would be probably asked by others, so I'm going to answer it broadly. First, hidden carbon operation, Carbono Oculto has been a very positive movement to our industry. It has contributed to Brazil, to consumers, for those that make investments in the area. But we have to be aware of the fact that it's not over. Investigations have to move on. And we have 2 important projects, one of them of bad debt provision and the other one of the one single phase investment. And these are projects that really have to move on and become law. Similarly to hidden carbon there are 2 points, volume and margin. The volume is coming stronger, and you can see that there is an increasing trend. The end of the quarter was better. The first initiative of hidden occult operational was on the second half of August. And since then, we've been recovering volume. Not only volume really, but we can see selling our gasoline with additives being sold more with an increased share of it in the mix, meaning that consumers are aware of quality, positive news from volume. It's important to regain scale because of lost scale throughout months and months due to the irregularities of the industry. Margin is important, but it's not the only indicator. And the margin in terms of volume has been showing slower recovery, especially in B2B and highways, which is expected because these are markets exposed to problems that still persist, such as non mixing biodiesel. And they tend to be more resistant to changes in prices, at gas station levels, large consumer contracts have parameters. So it takes longer to have adjustments. That's all predictable, and we are okay with that. We have to keep on fighting illegality. We cannot simply assume that everything is solved. No, we have to keep on hitting the regular market because there is still a lot to be done, even though we have already observed significant improvement. For Ipiranga, it's important to recover scale. It's been a number of years with loss of volume due to irregular market, and we want the volume to be back, of course. Thirdly, margin is a consequence of the reaction of the market and how we work internally. We should stick to what we've always done, focusing on internal efficiencies, better processes and those who have been following our results know how much we emphasize that, especially in logistics and smaller operational expenses. Something that we've been working on, reducing and also emphasized by Palhares presentation. So very positive landscape, I have to say. We had been waiting for this action for a long time. But of course, it's not over, the problem is not over. Volumes are picking up, especially in Rio and Sao Paulo, where there was most of the irregular activities and margins are going to naturally be recovered, but of course, depending on market reactions as well. But of course, we are also endeavoring all our internal efforts. Rodrigo de Almeida Pizzinatto: Barra, Rodrigo speaking. Thank you very much for the questions. Capital allocation, our next steps, right? In general lines, we are going to try to look up for companies and projects that have similar characteristics to what we found in Hidrovias. In other words, a good potential to create value that depends on us. So what we can do with a company with an asset, unlocking growth, optimizing operations and assets. But if we don't come across good projects, that's okay, we just increased dividend sharing. We have these 2 options, either we come across good projects or we increase dividend sharing. That's it. Operator: Our next question comes from Gustavo Sadka with Bradesco BBI. Gustavo Sadka: My first question concerns cash generation, which was strong in the quarter, and we've seen deleveraging. Now considering the new taxation of dividends, and the profit reserve you have in your balance sheet, should we expect more dividends to be distributed this year? Second question about capital allocation. As the company has been showing interest and have had exposure to the Agro business, do you think about by a stake at Rumo because the partial investments of that can be offered in the market. Rodrigo de Almeida Pizzinatto: Good morning Gustavo. About cash generation, you're right, it was a very strong quarter. The second half of the year tends to be stronger and probably that's going to be repeated in the fourth quarter. It is following the constant discussion of legislation changes and the taxes on dividends. And yes, this is a possibility, anticipating dividends in the fourth quarter. Concerning capital allocation, I'll just repeat what I've just said. We are always looking for good projects where we can create value, unlocking growth and optimizing operations. If we find these assets, we are going to do that. If not, we increase dividend distribution. That's it. Operator: The next question comes from Bruno Montanari with Morgan Stanley. Bruno Montanari: Quick follow-up with Ipiranga. Could you please quantify in a ballpark figure of inventory variation so that we get an ideal about normalized margins. And could you please tell us more about CapEx, especially in the third quarter, CapEx tends to be high in the fourth quarter. You've anticipated somewhat in the third quarter. So I'd like to know what we can expect for the fourth quarter at Ipiranga? Second question about cash flow. It's been a year of a number of adjustments in working capital because of the draft discount. But in working capital, the level we've seen in the third quarter. Is it sustainable? Or is there still more to be done to unlock somewhat more capital to the company. Rodrigo de Almeida Pizzinatto: Good morning Bruno. Thank you for the question. About inventory levels, we don't talk about the levels of losses or gains because it's a result of our supplies policies. But I also remind you that there was a price oscillation in the third quarter of '24 and not '25. So the variation is more due to the fact that there was a change in '24. Concerning CapEx, in the year, the CapEx would be below what we had announced, probably 10% less than what was announced in our plan for 2025. Alexandre Palhares: Palhares speaking. Concerning working capital, this is a very relevant topic to all our businesses. There are some efficiencies which are captured and they are onetime possibilities included in the ordinary working capital of the company and some of them which result from market dynamics. These are the ones that we can repeat and maintain throughout upcoming periods. Operator: The next question comes from Rodrigo Almeida with Santander. Rodrigo Reis de Almeida: Good morning, Ultra's team. I'd like to talk about Ultragaz. Recently, there were new reference prices published. I would like to understand the net effect of this discussion, a lower reference price, some potential of gaining additional volume. Maybe you can tell us more and help us understand what is the net changes you expect in terms of volume and price? Can you also please tell us more about the compliance of -- with resellers because in the end of the day, prices change at the level of the resellers, right? Tabajara Bertelli: Hello, Rodrigo, Tabajara speaking on behalf of Ultragaz. Thank you for the question. The focus of Gás do Povo, Gas to People, it's a program of the government. I think it's the right program to direct the benefit to the population that really needs it, really fighting against the so-called energy poverty, things which are going into effect in a few weeks, starting in some cities and then being scaled up, but something very positive. We've been supporting the program. The model is direct payment to resellers. We are exactly at the level you talked about communicating the project and trying to get more and more compliance. If the resellers have some questions, we answer them. The government has been presenting data. The last one, there were over 3,000 resellers already on board, showing more and more companies join and it will be maintained until the first to second quarter next year. It takes time. It takes some learnings, but it's following the initial design that was imagined. And we see it very positively as a social benefit of addressing a very important issue to our country. And we believe prices and volumes are going to gradually increase. If the reseller is compliant with the program, they are committed with all the elements of the program and it's a product that is going to be picked up. It's pick and collect, not delivery not delivered at homes. Each reseller is considering how to operate, how the program works and how well it fits their operations. It's been doing and believe it's going to be maintained. In a nutshell, we still see the program with the same perspective. This is just step one of implementation. There are more things to come, certainly. Operator: The next question comes from Gustavo Cunha with BTG Pactual. Gustavo Cunha: My question is about Ultragaz as well. Trying to understand about the change in LPG. Ministry of Mining and Energy called an extraordinary meeting to talk about this issue. And I'd like to see your perspective on this topic and what do you expect in terms of time line? Tabajara Bertelli: Thank you for the question, Gustavo. There is still an ongoing process. You are calling it the reform or the regulatory review of LPG. In the beginning of the year, there were some initial inputs shared with the government. The national agency will probably launch a new review in upcoming months. And in the current schedule, it is expected to be completed in the first half of 2026. So there is still a lot to happen. Different players are getting on board, they're discussing. I think it's following the expected path. We are highly convinced of what is the best for society. It's a model of a high level of safety, well balanced, and that's what has been in place. But that's still an open-ended process inputs are being made, and there are still a number of steps until the final decision regardless of what it is to really change the regulations. Operator: Next question comes from Regis Cardoso with XP. Regis Cardoso: Good morning. Thanks all of you for your availability. In Ipiranga, I understood that you expect a similar level of profitability in the fourth quarter. Can you tell us about one-off effects, especially inventory levels, also the draft discounts of the margin, competitive improvement that we've observed in October. So reconciling really the development of the fourth and the -- third and fourth quarter. And finally, in Ipiranga, could you please tell us about the offenders that you still see to margins. Maybe you can make comments about direct sales to refining entities? And what about CBOIS? How do you see it? And how has it contributed to the operation? Leonardo Linden: Concerning the fourth quarter, the guidance is clear. And once again, it's market dynamics. This is what we've been observing happening in the market. As I pointed out, there is volume impacting the fourth quarter and margin picking up slowly. I don't think I have much to add. In terms of offenders, part of the offenders are still irregular activities that we observed throughout the market and have been covered by the hidden occult operation, Biodiesel, CBOIS, certainly still a problem. But once again, the perspective is better now. We know there's still a lot to be done. And I emphasize once again about bad debt provision and single-phase taxation, which are both essential to address the root of the problem. But we are doing our work as best as we can, fighting irregularities together with the market. But that's it. No big news there. Regis Cardoso: Let me see if I got that straight. There hasn't been any relevant losses of inventory levels, right? Leonardo Linden: Yes. Right. None. Operator: Our Q&A session is completed. Now I would like now to hand it over to Alexandre Palhares for his closing remarks. Alexandre Palhares: I would like to thank you once again for your interest and participation. Our Investor Relations team is here to answer any questions that we might not have answered. Thank you very much. See you next time. Operator: Well, the earnings release call of Ultra is finished now. Thank you very much for your participation. Have a great day. [Statements in English on this transcript were spoken by an interpreter present on the live call.]
Operator: Ladies and gentlemen, thank you for joining us, and welcome to the Innate Pharma Third Quarter 2025 Business Update and Financial Results. [Operator Instructions] I will now hand the conference over to Stephanie Cornen, Vice President, Investor Relations, Communication, and Commercial Strategy at Innate Pharma. Please go ahead. Stephanie Cornen: Good morning, and good afternoon, everyone. Thank you for joining us for Innate Pharma Q3 2025 Business Update and Financial Results Conference Call. The press release and today's presentation are both available on the IR section of our website. Before we begin, I'd like to remind everyone that today's presentation includes forward-looking statements based on current expectations. These statements involve risks and uncertainties that could cause actual results to differ materially. To begin, I briefly cover today's agenda. Our CEO, Jonathan Dickinson, will discuss our strategic priorities and path forward. Then our CMO, Sonia Quaratino, will present clinical pipeline updates on IPH4502, monalizumab, and lacutamab. Afterwards, I will present the commercial opportunity for lacutamab before turning back to Jonathan with closing remarks, and we'll open the call for Q&A. With that, I'll now hand it over to Jonathan. Jonathan Dickinson: Thank you, Stephanie. Good morning to those joining from the U.S., and good afternoon to our European audience. Turning to Slide 5. I would like to start with the strong momentum around lacutamab, supported by meaningful regulatory progress and new commercial opportunity insights. A few days ago, we received FDA clearance to initiate the TELLOMAK-3 Phase III trial in cutaneous T-cell lymphoma. This is a major milestone for the program, positioning lacutamab to advance towards potential accelerated approval in Sezary syndrome, supported by robust Phase II data. We expect the study to initiate in the first half of 2026, with filing anticipated following achievement of key enrollment milestones. Our CMO, Sonia Quaratino, will provide additional color on the Phase III trial and the regulatory path. In parallel, we hosted a well-attended lacutamab KOL event in October, featuring leading experts in CTCL. The discussions highlighted the continued unmet medical need for new, effective, and well-tolerated therapies in this space and reinforced lacutamab's unique positioning. During the event, we also presented new real-world claims data underscoring the commercial opportunity in both CTCL, which we believe further strengthens the value proposition for this program. Stephanie Cornen, our Vice President of Investor Relations and Commercial Strategy, will review the real-world evidence-based commercial opportunities for lacutamab towards the end of our call today. Moving to Slide 6. As you know, Innate Pharma's core strength lies in applying our deep scientific expertise to advance life-enhancing cancer therapies. Through our years of pioneering work in antibody engineering, we have built a differentiated high-value clinical pipeline supported by compelling data, positioning us to deliver treatments with truly transformative potential for patients and for all our stakeholders. Moving to Slide 7. As we look ahead, our path forward is clear and focused. As you remember, at our half-year results, we announced the strategic decision to focus our investment on what we believe are our highest value clinical assets, including IPH4502, lacutamab, and monalizumab, to maximize impact and value creation. In parallel, we are advancing our next generation of ADC programs through research, building the foundation for future innovation. Finally, we are streamlining the organization to ensure we remain fit for purpose and aligned with our strategic objectives. I'll now hand over to Sonia, who will take us through the clinical pipeline progress. Sonia? Sonia Quaratino: Thank you, Jonathan. In this update, I would like to highlight the 3 clinical programs we believe hold the strongest potential to create significant value for Innate, IPH4502, monalizumab, and lacutamab. Starting with IPH4502, our differentiated ADC directed against Nectin-4. As a reminder, I would like to pinpoint the preclinical model where IPH4502 has demonstrated the 2 major feature of differentiation to an approved drug such as enfortumab vedotin. The first one is related to the payload of IPH4502, which is exatecan, a potent topoisomerase 1 inhibitor. Exatecan can induce a bystander effect, a phenomenon where it kills neighboring cancer cells in addition to the targeted cells. The exatecan is released from the antibody drug conjugate in the tumor and diffuses into nearby cells. This is beneficial for treating heterogeneous tumors where cancer cells may not all express the target antigens. The second point of differentiation is that in preclinical models, we have demonstrated that IPH4502 can induce potent tumor regression in PADCEV MMAE-resistant models, allowing us to target tumors that are or have become resistant to PADCEV. We have, therefore, built the study design of the first-in-human trial on the basis of these preclinical findings. First, we look for signals in tumor types where Nectin-4 expression may be low or heterogeneous, opening to a very broad opportunity. Second, we enriched the study of urothelial cancer patients in the post-EV setting, where IPH4502 may overcome resistance to EV. This represents an area of high unmet need with no approved drugs and the potential to move rapidly into later-stage development. With this hypothesis, the emerging clinical data will indicate the indication where IPH4502 can make the greatest impact. The first-in-human trial is guided by an adaptive design, and the main objective of this study are to assess the safety, tolerability, and preliminary efficacy of IPH4502 in patients with advanced solid tumors known to express Nectin-4. Enrollment in the dose escalation part of the study is progressing very well. We started the trial in January, and we have now reached already a pharmacologically active dose, and we have started to see early signs of clinical activity. We remain on track to complete the dose escalation by the first quarter of 2026. And after that, the dose optimization part of the study should commence. Now let's turn to Slide 10 to provide an update on monalizumab, which continue to advance in collaboration with AstraZeneca. The double-blind PACIFIC-9 Phase III trial aims to demonstrate improved progression-free survival of durvalumab in combination with either oleclumab or monalizumab as compared to durvalumab with placebo in patients with unresectable Stage III non-small cell lung cancer who have not progressed after platinum-based chemo radiotherapy. The PACIFIC-9 study builds on very strong scientific rationale, supported by earlier studies such as COAST, NeoCOST and NeoCOST-2 trials. This is a large global study that has fully completed enrollment with 999 patients randomized 1:1:1 across the 3 treatment arms. The primary endpoint is progression-free survival with efficacy comparisons for both combination arms versus durvalumab monotherapy. The study is fully recruited, and the independent data monitoring committee recently recommended continuation of the trial following a preplanned analysis, an important validation of the program progress. And we look forward to the data expected in the second half of 2026. Now moving to Slide 11 and to lacutamab. As we highlighted during our KOL event last month, our development strategy is designed to enable a stepwise approach, beginning with Sézary syndrome, an indication with the highest unmet medical need, especially in patients who have progressed after mogamulizumab, then progressing with a larger opportunity in mycosis fungoides, and finally, expanding to peripheral T-cell lymphoma. We are preparing a confirmatory Phase III study in an FNSS, which, once underway, opens the door for our filing of the biologics license application for Sézary syndrome post mogamolizumab based on the existing Phase II TELLOMAK data. This represents a potential path to accelerated approval with a key milestone expected in 2027. The confirmatory Phase III will also include patients with mucosis fungoidis, the largest CTCL subtype, where there remains a clear need for disease-modifying therapies. These results of the confirmatory Phase III trial will support a full approval in 2029 in NF and then full approval for Sézary and help establish lacutamab as a game changer in the therapeutic landscape across CTCL. Our goal is to position lacutamab within the NCCN guidelines as a preferred systemic therapy, not only for late-stage Sézary and mucosis fungoides, but ultimately for earlier-stage CTCL patients who continue to face limited treatment options. Now beyond CTCL, we are also advancing development of lacutamab in peripheral T-cell lymphoma, a particularly aggressive lymphoma subtype with few effective treatment options, and an ongoing Phase II study will help defining lacutamab role in this patient population. Turning to Slide 12. I would like to remind the data that will form the basis for the accelerated approval in Sézary post mogamulizumab. They are the long-term follow-up data from the TELLOMAK Phase II trial that was presented at ASCO 2025. Sézary is an aggressive subtype of CTCL. And post-mogamulizumab, there are no approved drugs that have demonstrated clinical efficacy. In heavily pretreated patients, all pretreated with mogamolizumab, lacutamab demonstrated an impressive global overall response rate of 42.9% with a median duration of response of 25.6 months. The median progression-free survival for the whole population was 8.3 months. Of note, lacutamab was very well tolerated with very favorable safety profile, underscoring lacutamab potential to deliver a meaningful clinical benefit in this aggressive and difficult-to-treat population. Turning now to mycosis fungoides. Long-term follow-up data from the TELLOMAK Phase II trial showed that lacutamab achieved a global overall response rate of 19.6% with consistent activity observed regardless of KIR3DL2 expression level. The median duration of response was 13.8 months, and median progression-free survival was 10.2 months, again, with no difference between the 2 subgroups. Also in MF, lacutamab was very well tolerated with an excellent safety profile that supports its potential use for long-term systemic therapy at an early-stage disease. Turning to the clinical development plan for the confirmatory trial. This is an open-label multicenter randomized comparative Phase III trial evaluating lacutamab in patients with cutaneous T-cell lymphoma who have failed at least one prior line of systemic therapy. In alignment with the FDA, the study includes 2 independent cohorts with distinct statistical analysis plans, one for Sézary syndrome and the other for mycosis fungoides. In the Sézary syndrome cohort, patients who have failed at least one prior systemic treatment, including mogamulizumab, will be randomized 1:1 to receive either lacutamab or Romidepsin, which is currently the only FDA-approved option for patients who progress after mogamulizumab. The primary endpoint is progression-free survival assessed by blinded independent central review, and the key secondary endpoint is overall survival. In the mycosis fungoides cohort, patients with Stage Ib to Stage IV disease will also be randomized 1:1 between lacutamab and mogamulizumab, which represent the current standard of care for this population. Here again, the primary endpoint is PFS, weak pruritus, and quality of life as a secondary endpoint. As the Sézary syndrome and MF study subpopulations are considered as independent cohorts, answering to distinct objective sample sizes are estimated to meet the primary endpoint in both SS and MF cohorts independently. From a regulatory standpoint, we have received clearance from the FDA about this clinical trial protocol. And therefore, we are well placed to initiate the Phase III trial in the first half of 2026. And with that, I will now hand over to Stephanie Cornen, who will walk us through the commercial opportunity for lacutamab and how we plan to unlock its full value across CTCL and beyond. Stephanie Cornen: Thank you, Sonia. Now looking at commercial opportunity an important parameter is about eligible population. CTCL is aware of this diseases and assessment incidence and prevalence remain a challenge, potentially underestimating its true burden. During the occurring event, associates presented the most up-to-date source based on U.S. TELLOMAK data Versus CTCL Patient population, which highlights the higher incidents and prevalence than previously described. So if we look into each of these opportunities, starting with Sézary syndrome, as discussed it should release near-term in U.S. based on the Phase II TELLOMAK data. Sézary syndrome may affect around 3x more patients than previously believed, with an annual incidence was around 300 patients, prevalence around 1000 overall Sézary patients. And according to U.S. TELLOMAK data, approximately 300 patients treated with mogamulizumab annually. Importantly, these opportunities clearly define and actual of approximately concentrating in special and referral centers which accessible with a focused commercial footprint. Our launch strategy will therefore target specialized centers already managing these patients, allowing for a near-term and derisk opportunity in the U.S. Now moving to mycosis fungoides, which represents a larger opportunity. Here again, the TELLOMAK data shows a higher incidence than previous reported with approximately 3,000 U&M patients diagnosed each year in the U.S., and about one in four of these patients received systematic therapy. The goal of our Phase III, TELLOMAK-3, is to establish lacutamab as the new second standard of care, and our primary market research supports the view that physicians would adopt lacutamab as a second line of treatment base. And again, importantly, Sézary syndrome enable a seamless expansion into mycosis fungoides since both indications are managed by sustainable network of prescribers. So in summary, we see Sézary syndrome as our first focused entry point into the CTCL market in the U.S., a manageable and concentrated launch opportunity that will also serve as the foundation for a broader commercial in MA. Turning to Slide 17. This slide illustrates the market potential for lacutamab in CTCL and how we plan to expand over time through a stepwise strategy that Sonia previously described. We expect an initial opportunity of up to $150 million in the U.S. with accelerated approval in Sézary syndrome, where the patient population is small but highly concentrated and addressable through a focused commercial footprint. As lacutamab moves into mycosis fungoides and secures full approval the opportunity could expand to around $500 million across the U.S. and Europe. And beyond that, we see additional upside as part of our life cycle management strategy. Lacutamab offers important standard care for early-stage patients, a segment where systemic treatments are less used today. And the unique profile of lacutamab that combines tumor targeting activity, improved quality of life, and a favorable safety profile makes it a compelling candidate to unlock earlier use of systemic therapy. While the Phase III trial is designed to support registration across all stages of Innate in the second-line setting, we see a broader opportunity in addressing the Innate medical need of patients who are currently managed only with skin therapy and may benefit from lacutamab. In short, lacutamab offers a clear derisk path to commercialization starting with Sézary syndrome, expanded into larger CTCL segment over time, and then an even larger opportunity in PTCL. And now I'll hand the mic to Jonathan for closing remarks. Jonathan Dickinson: Thank you, Stephanie. As part of our focused strategy, we are advancing 3 high-value clinical assets that form the core of Innate's portfolio. Starting with IPH4502, our novel and differentiated Nectin-4 ADC, we see a significant opportunity in bladder cancer, particularly in the post-PADCEV setting, as well as across other solid tumors with low to medium Nectin-4 expression. Enrollment in the ongoing Phase I trial is progressing well, with completion expected by late 2025 or early 2026. We've now reached a pharmacologically active dose level where we're beginning to see encouraging early signs of clinical activity. Monalizumab, partnered with AstraZeneca, continues to advance in Phase III for unresectable non-small cell lung cancer, where enrollment in the PACIFIC-9 trial is now complete. Top-line data are expected in the second half of 2026, and this collaboration remains a key value driver with up to $825 million in total milestones and $450 million already received to date. And with lacutamab, our anti-KIR3DL2 antibody for cutaneous T-cell lymphoma, long-term follow-up from the TELLOMAK Phase II study has demonstrated meaningful and durable clinical benefit in both mycosis fungoides and Sézary syndrome, leading to breakthrough therapy designation in Sézary syndrome. As you know, we've now received FDA clearance to proceed with the confirmatory Phase III TELLOMAK-3 trial, and we're on track to initiate in the first half of 2026, supporting the potential for accelerated approval in Sézary syndrome. To wrap up today's call, I'll remind you that we have several value-driving catalysts ahead across Innate's portfolio. In the first half of 2026, we expect Phase I data from IPH4502, our Nectin-4 ADC program. This will be followed in the second half of 2026 by data from the PACIFIC-9 Phase III trial of monalizumab in collaboration with AstraZeneca. Looking beyond to 2027 and onward, we anticipate multiple milestones, including a potential accelerated approval for lacutamab in Sézary syndrome, the monalizumab BLA filing, and IPH4502 expansion phase data. Finally, we ended the third quarter of 2025 with a cash position of EUR 56.4 million, providing runway through the end of Q3 2026 to deliver on these key milestones. Operator, we can now open the Q&A session. Thank you. Operator: [Operator Instructions] Your first question comes from the line of Christopher Liu with Lucid Capital Markets. Christopher Liu: So I have 2. For the first one, what would you need to get done in the near term for the potential lacutamab commercial launch in Sézary syndrome? And for the second question, for IPH4502 and the upcoming data set, could you give us a little bit more color on what we can see at that readout? Jonathan Dickinson: Okay. Christopher, I can take that. So from a commercial perspective, I think one of the key things that we would need to get done prior to Sézary launch is the work to ensure that lacutamab will be included in the NCCN guidelines. So what we're aiming to be able to do, and we've already started the discussions on this with KOLs, is to ensure that when the BLA is approved for Sézary, that we basically already have lacutamab included in those NCCN guidelines for Sézary syndrome, but also for mycosis fungoides. So that will be one of the key pieces of work that we believe we will need to have in place prior to the BLA. And then IPH4502, in terms of what we hope to have next year, I think we've communicated this on a number of occasions, but what we're aiming to have is a cohort of patients in the PADCEV resistant setting, probably 10-plus patients where we will hopefully see an interesting response rate and be able to show clinical activity as well as safety data. We also hope to have data in 1 or 2 other tumor types in a similar perspective. So 10-plus patients in 1 or 2 tumor types. What we're doing with the study, and I think Sonia mentioned this earlier, is we've set up the study in a way where we can basically chase signals. We can backfill cohorts. So when we see a signal in a particular tumor type, our objective is to backfill and to substantiate that signal. So hopefully, then in 1 or 2 other tumor types, you would have 10-plus patients. And again, hopefully, an interesting response rate that allows us to then move forward into the next stages for the development of the product. Thank you for the question, Christopher. Operator: Your next question comes from the line of Justin Zelin with BTIG. Justin Zelin: You've indicated that FDA views an accelerated approval pathway here for lacutamab as viable once the Phase III study is underway. Could you just expand whether FDA is looking for any additional supplementary analyses beyond the existing Phase II data set as part of that accelerated approval package? And then just second, based off of the feedback from the October KOL event. Do you have a sense of growing momentum from the KOLs for lacutamab to become the preferred second-line option here? And should we expect mogalizumab to naturally move later in the treatment paradigm? Jonathan Dickinson: Okay. So addressing the first part of your question, Justin. So from an FDA perspective, they have not given us an indication that we would require any further substantial analysis. So basically, the BLA approval will be based off the data we have in hand today from the TELLOMAK study and the results that we've already presented that led to the breakthrough therapy designation. So we see that as reasonably straightforward. The key thing to unlocking the BLA submission here is having the confirmatory study up and running and to have established an enrollment trajectory into that study that would satisfy FDA that this study will complete and will deliver the confirmation of the accelerated approval. So that's something that we're obviously working very hard to be ready to do that ASOP because that counts down the -- it's the countdown to the submission of the BLA. We hope to be able to initiate the confirmatory Phase III study sometime around the middle of 2026. We would anticipate potentially a 6-month enrollment period to get the right trajectory to satisfy FDA requirements. And then that would allow us to submit the BLA sometime in early 2027, leading to FDA approval of the BLA, hopefully, sometime in the second half of 2027. So yes, so that hopefully answers the first part of your question. Then in terms of KOL feedback, we do see very good KOL feedback on lacutamab, and we do sense a building momentum around that. I think if you were attending the KOL event, and I think the KOL used the word game changer, which was, I think, something that summarizes what lacutamab can potentially bring not only to Sezary syndrome, but also to mycosis fungoides. I think there's particular excitement around basically what can happen in MF. If we look at the 5-year survival, of patients with MF, we do see a dramatic decrease in 5-year survival when patients progress from Stage 2a to Stage IIb, it drops from 78% to 47%. And we know that physicians want to be able to prevent that progression. And lacutamab, based on its tolerability profile and the excellent quality of life data for patients, is incredibly well placed to be able to slot into that area and be able to treat those patients at Stage b, Stage 2a, and hopefully prevent that progression of the patients to Stage Ib when you see the reduction in 5-year survival. So that's clearly, I think, factoring into the thinking of KOLs and how they will use this drug. So I think particularly in MF, we anticipate that lacutamab will be used ahead of Moga. In Sezary, we're studying post-Moga. So our expectation is that the product will be used post-Moga. Based on the excellent safety profile, I think some physicians may choose to use it in the first-line setting off-label as well. But our main assessment and where we're targeting for positioning the product is post Moga and initially in the Sezary syndrome indication. Hopefully, I've answered your question. Justin Zelin: If I could just fit in a quick question with a potential near-term approval here, could you just comment on your CMC readiness as far as commercial scale manufacturing, PPQ run stability work for lacutamab? Jonathan Dickinson: Yes, I can comment on that. I think the answer is we're in a good place. We're basically ready to go. That won't be on the critical path to submission of the BLA. So we've ticked that box, and we're ready to go from that perspective. Operator: Your next question comes from the line of Swayampakula Ramakanth with H.C. Wainwright. Swayampakula Ramakanth: So I appreciate your comments on how you plan to file the accelerated approval application by the end of 2026. So what -- does this mean you're still hoping to get a partner on board? And in your previous conversations with potential partners, how much stress was there in terms of getting a clear signal from the FDA and a protocol blessed by the FDA? Jonathan Dickinson: Thank you for the question, RK. So in terms of partner discussions, having FDA acceptance of the protocol was an important consideration. It was potentially one of those boxes that we needed to tick for a number of them for us to be able to progress with those discussions. So yes, it was an important clearing event to be able to move forward with some of those partnering discussions. In terms of partnering, commenting on partnering, I think what the company is looking to do is basically to keep our options open. We basically were continuously evaluating a variety of financial options to ensure we're appropriately positioned to support our growth initiatives and create long-term shareholder value. And we remain disciplined and opportunistic in our approach to capital management, and we'll pursue the opportunities that basically support where we're going here. So I think it's important that we keep the options open at this particular stage, particularly with the exciting news that we've seen more recently with lacutamab and the great path that we have forward. Swayampakula Ramakanth: Can I ask 2 quick follow-ups, one on 4502? What specific safety signals would you be looking out for, especially when you would like to see this differentiated against other TOPO1 inhibitor ADCs? And the second question is, so what's the thought process now for the ANKET platform, especially them taking a little bit of a backseat? What's the long-term plan for that platform? Jonathan Dickinson: So maybe I can take the first question, and then I will ask Sonia to take the question on the safety signals that we're looking out for. So -- on the ANKET platform, we are basically waiting -- we're actually finalizing the study for IPH6501. I think we mentioned previously that we've completed the dose escalation phase of the study, and we were basically exploring the MTD at this stage. We're still in the process of doing that. And we'll basically make any future decisions based on -- for IPH6501 based off clinical data. And that clinical data should come sometime in the first half of next year, and then we will be able to make the evaluations and the next steps. In relation to IPH6101, we have now basically have most of the clinical data for the Phase I and Phase II returned to us from Sanofi. So we're now in the process of evaluating that data and trying to understand what next steps could be for the ANKET platform. What I would really like to clearly emphasize, though, is from a prioritization perspective, we're putting most of our time and effort behind IPH4502, behind lacutamab and behind monalizumab, and making sure that we advance those 3 assets as quickly as possible because we believe we have the highest chance to win for those 3 assets. Sonia, if you can take the question on the safety signals we're potentially looking out for? Sonia Quaratino: Well, in terms of signal for IPH45, we try to establish a very well-tolerated and relatively safe drug. And in particular, we try to, of course, avoid all the MMA-specific adverse events like peripheral neuropathy, that is very often not reversible, and ocular toxicity. And so far, we did not see many adverse events or a specific trend in that respect. So the plan is to provide clinical efficacy in, let's say, unusual indication or indications where the Nectin-4 expression is not as high as urothelial cancer, with a very good benefit-to-risk ratio matched by a favorable safety profile. It's difficult to say a prior what you want to see, yes. Operator: Your next question comes from the line of Diana Graybosch with Leerink Partners. Daina Graybosch: Yes, Bill on for Dana. I change it up a little bit, just asking about monalizumab. So I guess I'm just curious, can you just give us some, I guess, expectations for the readout in the second half of '26? Sort of what gives you the confidence that monalizumab, I guess, and durva can actually win out against durva? Jonathan Dickinson: Yes. So maybe I can take that question. So basically, we have good expectations for the PACIFIC-9 study. And what that is based on really is the COAST study, which was the Phase II study, a randomized Phase II study that was replicating the PACIFIC-9 setting. If you look at the results and the Kaplan-Meier curves from that study, they are very interesting. When you added monalizumab to durva, you basically added 12 months median PFS on top of durva. So if we retain a proportion of that effect size going into the PACIFIC-9 study, there's a very high chance that we will have a positive study. So that gives us a, I would say, a relative sense of confidence that this will be a positive study. Hopefully, that addresses your question. Operator: There are no further questions at this time. I will now turn the call back to Jonathan Dickinson, CEO, for closing remarks. Jonathan Dickinson: Okay. I'd like to thank everybody for attending our quarterly earnings call. Thank you for your time and attention, and I wish you a great rest of the day. Thank you very much. Operator: This concludes today's call. Thank you for attending. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the Bird Construction Third Quarter Results Conference Call and Webcast. We will begin with Teri McKibbon, President and Chief Executive Officer's presentation, which will be followed by a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] Before commencing with the conference call, the company reminds those present that certain statements which are made express management's expectations or estimates of future performance and thereby constitute forward-looking information. Forward-looking information is necessarily based on a number of estimates and assumptions that, while considered reasonable by management, are inherently subject to significant business, economic and competitive uncertainties and contingencies. Management's formal comments and responses to any questions you might ask may include forward-looking information. Therefore, the company cautions today's participants that such forward-looking information involve known and unknown risks, uncertainties and other factors that may cause the actual financial results, performance or achievements of the company to be materially different from the company's estimated future results, performance or achievements expressed or implied by the forward-looking information. Forward-looking information does not guarantee future performance. The company expressly disclaims any intention or obligation to update or revise any forward-looking information whether as a result of new information, events or otherwise. In addition, the presentation today includes references to a number of financial measures which do not have standardized meanings under IFRS and may not be comparable with similar measures presented by other companies and are, therefore, considered non-GAAP measures. I would like to turn the call over to Teri McKibbon, President and CEO of Bird Construction. You may begin. Terrance McKibbon: Thank you, operator. Good morning, everyone. Thank you for joining our third quarter 2025 conference call. With me today is Wayne Gingrich, Bird's Chief Financial Officer. . Before we begin, I'm proud to note that in the third quarter, Bird was once again recognized by the Toronto Stock Exchange, ranking 17 on the 2025 TSX 30. This follows our seventh place ranking in 2024, and we are among only 10 companies that earn a place on the list year-over-year. Being recognized among the top 30 performing companies on the TSX underscores the success of our strategic focus, strong execution and disciplined balanced approach to capital allocation that positions Bird for continued profitable growth in today's active market. It continues to be an exceptional time for our industry with strong demand across key strategic sectors. Bird's comprehensive self-performed capabilities, further expanded through the recent FRPD acquisition and strong cross-selling opportunities from prior acquisitions continue to differentiate Bird. Combined with our long track record of delivering complex industrial buildings and infrastructure projects, these strengths have positioned Bird to bid on and secure significant new awards, including the recently announced Peel Memorial Hospital Phase 2 redevelopment. With record securements driving our historic combined backlog, our outlook is further strengthened by the federal government's focus on infrastructure investment and nation building across the country, setting the stage for sustained growth and long-term value creation. Revenue in the quarter was $951 million, representing a 5.8% increase from 2024 with organic growth representing over 60% of the growth. We saw continued strength in our work programs from our mining clients and the ongoing ramp-up of the East Harbour Transit Hub, driving infrastructure growth along with higher institutional construction activity, supporting buildings growth and a full quarter contribution from Jacob Brothers. Margins remained strong relative to historic levels through slightly lower year-over-year. Gross profit percentage for the third quarter was 10.7% and the adjusted EBITDA margin was 7%. The margin profile this quarter was influenced by the higher relative proportion of buildings work, which typically has lower self-performed content than industrial and infrastructure work and by project start delays where Bird continue to carry personnel and equipment costs in anticipation of mobilization. Our trailing 12-month adjusted EBITDA margin was 90 basis points higher year-over-year and within 140 basis points of our 2027 strategic plan targets. Bird's record combined backlog of over $10 billion with favorable margins to a year ago, continues to provide solid visibility into 2026 and 2027 revenue and margins and supports our path to achieving the objectives set out in our 2027 strategic plan. Year-to-date securements exceeded $3.8 billion, surpassing both full year 2024 securements and revenue. Our backlog remains diversified, risk balanced and heavily weighted towards collaborative delivery models, providing a clear path to growth and margin accretion as market conditions stabilize. Finally, Bird's healthy balance sheet continues to provide flexibility to navigate near-term uncertainty while supporting a disciplined, balanced capital allocation strategy. As we turn to backlog, our record $10 billion combined backlog with stronger embedded margins than a year ago, clearly demonstrates the underlying momentum of the business and why we remain confident of our long-term trajectory despite recent bumps in the road due to market uncertainty. Our strong line of sight to record levels of future work is supported by contracted backlog, surpassing $5 billion for the first time in the company's history. Additionally, significant collaboration -- collaborative awards grew our pending backlog by over $1.2 billion in the quarter to $5 billion. During the quarter, we added more than $1.3 billion in new securements through our backlog, bringing year-to-date securements to $3.8 billion. This figure already surpasses both total securements and revenue achieved in the full year of 2024. Combined backlog continues to reflect a high proportion of collaborative contract types and favorable embedded margins compared to a year ago. Combined backlog growth reflects the active bidding environment and continued strong demand across Bird's core markets. We see meaningful new opportunities emerging for our MRO team, supported by cross-selling, geographic expansion and continued strength across our nuclear, defense, power generation, large capital investment projects, transportation and institutional buildings markets. Bird is exceptionally well positioned to capitalize on the growing wave of nation-building initiatives across Canada and the significant infrastructure investments outlined in the budget 2025. Looking ahead, the opportunity set for our business in the next strategic plan period is even stronger than we had anticipated. The work is there, and it's a matter of disciplined execution and patience to fully capture it. While quarterly margins were down year-over-year, reflecting the higher relative proportion of buildings work and the carrying costs associated with personnel and equipment in anticipation of project mobilization, we remain in a very solid position and confident in our continued margin progression through 2027. Our trailing 12-month adjusted EBITDA margin of 6.6% continues to demonstrate the progress we've made, supported by disciplined project execution, strong self-perform capabilities and highly collaborative lower-risk delivery models. Margin accretion like revenue in our industry is rarely linear and recent client decisions to delay certain projects along with a slower to develop industrial maintenance program may moderate the pace of improvement in the fourth quarter. As with revenue impacts, we expect margins to build momentum during the second half of 2026 as the company's record backlog with higher embedded margins converts to revenue. Large capital investment projects or LCIPs, continue to be a key pillar of Bird's strategy, offering long-term visibility and scalable growth. These complex multiphase initiatives often begin with targeted scopes, allowing to demonstrate the value early and expand our role over time. While timelines for some projects have shifted, their strategic importance remains unchanged. We continue to win work, and they represent meaningful opportunities for margin accretion and business growth. In Industrial, we're seeing continued strength in large capital investment programs across nuclear, LNG, petrochemicals and potash, demonstrating resilient demand despite near-term project delays. Our industrial maintenance portfolio provides a strong recurring revenue base and meaningful upside supported by cross-selling and geographic expansion. The nuclear sector remains particularly active, both in Canada and globally, currently representing roughly 10% of revenue. We remain focused on growth, and we've recently achieved new credentials enabling broader participation across the sector. In buildings, our backlog remains robust across health care, defense, education and long-term care. We recently reached the development phase agreement for the Peel Memorial Hospital Phase 2 redevelopment, a significant achievement for the team and continue to expand our defense backlog, which is at historic levels. Our experience is strongly aligned with a $19 billion defense and security infrastructure program and ongoing commitments to health care, education and community facilities outlined in the federal budget. In infrastructure, the acquisition of FRPD has expanded for its self-perform capabilities in marine construction, dredging and land foundation, creating new cross-selling opportunities with Jacob Brothers and across our business. Secular tailwinds are powerful with nation-building and federal infrastructure focused set to drive sustained demand for transportation, trade infrastructure and critical minerals development. Across all sectors, the combination of current demand, strong federal and nation building investments and Bird's proven execution capabilities position the company for sustained long-term growth and value creation. Turning to the broader macro environment, the federal government's 2025 budget provides a powerful backdrop for long-term growth across our core markets as well as encouragement for the overall economy. The level of commitment to infrastructure in the nation-building program is significant, reinforcing longer-term visibility across Bird's key strategic sectors. Investments outlined span critical areas in transportation, defense, mining, power generation and institutional buildings, all strongly aligned with our capabilities and growth strategy. The programs designed to streamline regulatory process and accelerate project delivery are positive for Bird, as those have strengthened Canada's supply chain resilience and attracts business investment. When combined with a record backlog, strong client relationships, meaningful indigenous partnerships and balanced exposure across sectors, Bird is exceptionally well positioned to capture this next wave of opportunity and continued driving disciplined profitable growth through 2027 and beyond. Bird's acquisition of FRPD closed in the third quarter, representing a highly strategic addition to our operations and capabilities, headquartered in BC, FRPD is Canada's largest privately owned marine construction plant foundation and dredging contractor with a strong safety culture and a team of over 300 experienced employees. The company's first fleet, technical expertise and long-standing indigenous partnerships have earned a leading position in complex marine and infrastructure projects. Notably, FRPD has maintained an exclusive multiyear contract for dredging the Fraser River for over 35 years and recently renewed for an additional 12 years with an option for 8 more, providing a stable recurring work program aligned with Bird's disciplined low-risk approach. This highly strategic and complementary acquisition advances Bird's long-term strategic plan and aligns directly with our disciplined M&A criteria. The acquisition expands Bird's natural infrastructure presence adding marine construction, dredging and land foundation capabilities to our full-service civil platform. It also creates meaningful cross-selling opportunities across our businesses, including with Jacob Brothers and our Industrial and Building divisions, positioning Bird to pursue new scopes of work across the country and broaden our self-perform strength in high-demand markets. Bird supports margin expansion through improved infrastructure mix with a focus of complex, specialized self-perform work while introducing new recurring work programs through FRPD's dredging contract. The acquisition maintains for a strong balance sheet and financial flexibility, allowing us to continue to invest in both organic and inorganic growth initiatives. I'll now turn the call over to Wayne to cover our third quarter financial performance in more detail. Wayne Gingrich: Thank you, Teri. Construction revenue for the third quarter of $951.4 million represented a 5.8% increase compared to the same period in 2024. Over 60% of the growth was organic, with continued strength in work programs for mining clients in the East Harbour Transit Hub driving infrastructure growth and higher institutional construction in Eastern Canada driving buildings growth. Jacob Brothers also contributed to the overall revenue growth with a full quarter of revenue included in 2025 compared to 2 months post-acquisition in 2024. Industrial revenue was lower in the third quarter compared to the prior year. Revenue in all the company's businesses was impacted by delays in the start of certain contracted projects resulting from ongoing economic uncertainty. Gross profit of $101.9 million for the third quarter of 2025, representing a gross profit percentage of 10.7% was $0.4 million lower than the $102.3 million gross profit and 11.4% gross profit percentage recorded in 2024. The reduction in margin was partially driven by higher relative proportions of buildings work in the current quarter which typically has lower proportions of self-performed work relative to industrial and infrastructure work programs as well as ongoing delays in certain projects starts due to economic uncertainty where the company incurs certain personnel and equipment costs in anticipation of the commencement of the project. Bird remained disciplined in project selection and cost control and continues to leverage cross-selling opportunities across the company to increase the proportion of self-performed work, thereby retaining more margin within the company. Adjusted EBITDA in the third quarter was $66.9 million compared to $70.1 million in 2024. The adjusted EBITDA margin for the quarter was 7%. This is consistent with the lower gross profit. Net income and earnings per share was $31.7 million and $0.57 per share compared to $36.2 million and $0.66 in 2024. This decline includes the impact of additional noncash amortization of acquired intangible assets and other expenses related to Jacob Brothers, which was only included for 2 months of Q3 in 2024. Adjusted earnings and adjusted earnings per share were $35.4 million and $0.64 compared to $39.3 million and $0.72 in 2024. In addition to changes in net income and adjusted earnings, the weighted average shares outstanding for the third quarter of 2025 were higher by approximately 502,000 shares related to the Jacob Brothers acquisition in August 2024. On a year-to-date basis, revenue increased 2.4% to $2.52 billion. Gross profit grew 11.7% to $259.5 million representing 10.3% of revenue, while adjusted EBITDA rose 10.7% to $155.9 million or 6.2% of revenue, reflecting continued margin strength. Net income was $61.4 million, down year-over-year, while adjusted earnings was $40.5 million, were up slightly. Overall, the third quarter reflects resilient performance despite ongoing macroeconomic uncertainty supported by a record backlog with higher embedded margins and strong underlying business fundamentals that continue to provide stability and visibility. While we continue to see sustained strength across the business, we do note in our financial statements and MD&A that subsequent to quarter end, the company became aware of circumstances that arose after the end of the quarter that led us to be concerned about the creditworthiness of one of our customers. Bird has substantially completed its sole project with this customer and no further project costs are expected to be incurred. Based on amounts outstanding at the end of the third quarter, we expect the maximum exposure to be approximately $62 million. The company is in active discussions with the client to determine to what extent, if any, an impairment of these events may be required in the fourth quarter of 2025. We believe this is a unique and isolated situation and that the creditworthiness of the rest of our clients remain strong. Turning to cash flow. On a trailing 12-month basis, operating cash flow was $61 million and free cash flow was $25.7 million, reflecting continued solid performance. Seasonal investments in noncash working capital driven by the ramp-up of the company's work programs and increasing self-performed work are expected to unwind over the fourth quarter 2025 as experienced in prior years. Our free cash flow conversion of net income was 27.4% and free cash flow per share was $0.46 for the period. At quarter end, Bird's current ratio was 1.28x. Adjusted net debt to trailing 12-month adjusted EBITDA was 1.05x and long-term debt to equity stood at 28%. Liquidity and balance sheet strength remain key differentiators with $113.9 million of cash and cash equivalents and an additional $281.7 million available under the company's syndicated credit facility. Bird has flexibility to support ongoing investments in growth-related working capital, project-driven capital expenditures and accretive acquisitions to further diversify service offerings and self-perform capabilities. Together, these results highlight Bird's solid financial foundation and flexibility to continue investing in organic growth, accretive M&A and shareholder returns while maintaining a conservative balance sheet profile. Bird continues to apply a disciplined and balanced approach to capital allocation, supporting both growth and shareholder returns. Our priorities remain consistent: investing in our business through targeted capital expenditures and equipment and technology, returning capital to shareholders through a monthly dividend and pursuing strategic acquisitions that enhance our capabilities and expand our presence in key markets. We maintain a low capital intensity, and we continue to target a long-term dividend payout ratio of GAAP net income of 33%, recognizing that the ratio may fluctuate from year to year. Overall, our disciplined approach continues to drive long-term value creation through clear priorities and prudent deployment of capital. With that, I will turn the call back to Teri. Terrance McKibbon: Thanks, Wayne. Our combined backlog now exceeds $10 billion, a historic level for the company, providing strong visibility to our future work program. The high proportion of collaborative contracting and the higher average embedded margins within this backlog further reinforces confidence in our long-term growth and margin expansion outlook. We are encouraged by the 2025 federal budget, which supports significant opportunities for 2027 and beyond. With the addition of FRPD, Bird is even better positioned to capitalize on trade, port infrastructure, marine and land foundation opportunities, expanding our self-perform capabilities, introducing cross-selling opportunities and supporting long-term growth. As we look forward to the close of the year and head into 2026, we continue to work closely with clients as they navigate near-term macroeconomic uncertainty. As noted, 2025 and early 2026 will be impacted by certain industrial projects shifting into 2026, resulting in lower fourth quarter revenue compared to last year. We expect this to be temporary with momentum building through the back half of 2026 as our record backlog converts to revenue. Near-term margins are expected to be more measured, reflecting project timing and mix as our industrial business was fully utilized last year at this time. That said, the underlying margin profile of our backlog remains strong and continues to support our 2027 targets. Our healthy balance sheet and consistent cash generation remains key strengths, providing flexibility to manage near-term uncertainty while continuing to invest in future growth. We remain confident in the trajectory towards our 2027 strategic plan targets, reinforcing Bird's position as a trusted partner in delivering Canada's critical infrastructure. With that, I'll turn the call over to the operator. Operator: [Operator Instructions] Our first question will be coming from Krista Friesen of CIBC. Krista Friesen: Just thinking about the 2027 guidance and the margin there, how much of that margin improvement is within your control or internal levers you can pull versus maybe relying on the margin that's in the backlog and increasing your exposure to end markets with higher margins? Wayne Gingrich: I can take that one. I think, Krista, it's a couple of things that close that gap, right? And if you think about it, if we got 140 basis points to close between now and in the end of '27 when we think we're going to get to 8% EBITDA. Part of it is volumes are obviously down this year. So we are going to get leverage on our cost structure going forward. So certainly, that's going to help. But we do have to put work in place to get the leverage on that. But then you look at our combined backlog, both $5 billion in booked and $5 billion in pending which we'll convert to backlog. That gives us good visibility on where that work program is going to come from. If you look at the margins year-to-date today, our industrial work program is a little bit lighter because we've seen some of the MRO work shift to the right into next year, and that will come back. We've seen some of the work at some of the other industrial programs like Dow, for example, pushed to the right, but that is going to come back. We're confident certainly in that. So in the mix of our industrial business increases, we're also going to see a proportionate increase there. And then the other thing, especially with an example of Jacob Brothers or FRPD, we are going to get growth in our infrastructure side as well, and that's a very high-margin business for us. So that becomes a larger proportion of the total we're also going to see an upward lift there. And I also want to say our buildings business has done a nice job of improving their margin profile. There's less self-performed work certainly in buildings than you have in the other 2 businesses. We've done a really nice job improving the margins and being disciplined in project selection. So with all 3 businesses improving, higher embedded margin in our backlog a pretty good backdrop especially with the federal budget announced and just the opportunities and the sectors we're pursuing. Leverage on the cost structure. Yes. We feel pretty confident in getting to 8%. Krista Friesen: Okay. Great. And just one more on the comments about a few of the a few projects slipping into 2026. Can you share a little bit more color just on what sort of projects these are or where they're located? Terrance McKibbon: I think it's a mix, Krista, and certainly in some different sectors. I'd say majority would be in the industrial side with a few that are in our building business as well that are just getting delayed and going through various stages of approvals and whatnot. But it's a mix, I'd say that the -- but we're highly confident now that they'll be getting underway in first quarter and ramping up in second quarter. Operator: And our next question will be coming from the line of Chris Murray of ATB Capital Markets. Chris Murray: So just maybe continuing on the -- trying to understand the guidance update. I guess a couple of pieces of this. So basically, I think you said to us Q4 should be lower than Q4 last year. But I'm assuming that's inclusive of Fraser River. So I just want to clarify that. So it's just not on an organic basis, it's on an absolute basis. And then the second part of this question, I guess you've been struggling for the last couple of quarters just with the -- just the shift to the right on some of these projects and the delays. What gives you confidence that it's Q2 next year and not like moving everything into '27. So any thoughts around kind of the confidence level that you have on the guidance that's out there today would be helpful. Terrance McKibbon: Well, I'll give you an example, like we had a big shift in our maintenance business. And those plants, nobody's shut down one of those plants since they first got underway in the '70s. So you have to maintain them. So there's an example of one where we would have a high degree of confidence that maintenance will be a very robust area for us in 2026. That's an example. I think we're same signs in some of our industrial program of projects that have had delays that they're getting underway in 2026 with levels of activities and the work that's underway gives us certain confidence that those are going to get underway. And as I mentioned earlier, some of our other sectors that we're in, have had delays in getting underway. I think the other thing that's is affecting us to a certain extent as we've got a number of large project programs that we've contracted over the last few years and they are quite a bit larger than our historic size and the ramp-up is taking longer because of that and it sometimes can be difficult to predict as you're going through and a lot of that is on the government side. So you're going through different levels of government and reaching FID and moving forward. So I think there's a few variables, but there certainly is the real, so we can see the light at the end of the tunnel and getting them underway because we're getting to FID on these things. So -- but -- and I think the other higher level of confidence is just the scale of this backlog and the activity that's -- that we're involved in is daunting actually. So it's -- there's going to be an inflection point at some point where this really starts to accelerate next year. Wayne Gingrich: And Chris, just back to the first part of your question. I'm confirming, yes, that's inclusive of FRPD. Chris Murray: Okay. That's helpful. The other item was in your outlook was about the creditworthiness of a customer. I appreciate lots of sensitivities around this. But I was wondering if you could give us some more color about what particularly may have triggered this? And it's probably, call it, $60 million of receivables and contract assets. How should we be thinking about the process and how this may unfold in terms of what this could mean kind of going into the end of the year? Wayne Gingrich: Yes. So a couple of things. This is an event that came up subsequent to quarter end. It's difficult for us to provide specifics about what led to this and those types of things at this point. We do have concerns about this particular client's creditworthiness. We disclosed the full potential risk, that's out there. That's a $62 million combined in contract assets and accounts receivable. I think process going forward, we're going to go through fourth quarter. We're in discussions with the clients. We're going to make an assessment as to what's recoverable and we are going to take a provision in fourth quarter on this based on what we think we can recover. We're going to pursue all channels going forward to maximize our recovery. But depending on what form or what route that takes, that could take 4 or 5 years. So we're going to make our assessment in Q4, and we're going to pursue recovery but it could take a while before that plays out. Going into 2026, if we put this slide in Q4 that we've got a clean year going ahead. From a data comparison standpoint, we will adjust this out of adjusted EBITDA and adjusted earnings so that the kind of clean comparison. This is a unique and isolated situation. We feel confident this is not a widespread issue in our portfolio of clients. Our clients have very strong creditworthiness. This is just very unique. So sorry, go ahead, Chris. Chris Murray: Yes. No, I was just going to ask like I'm just assuming like some of the new lienholder protection rules help you in this? And I guess the other question I had is like, is there actually an identifiable asset that this is tied to? Or is this something kind of a broader work program that is more maybe maintenance related or something like that? Wayne Gingrich: Yes. At this time, Chris, we're not going to get into those level of detail, if that's okay. Operator: [Operator Instructions] Our next question will be coming from Maxim Sytchev of NBC. Maxim Sytchev: Maybe the first question for you, if I may. In terms of some of the MRO slippage, is it the function of the commodity environment, which I guess would be surprising as it's in a pretty decent space right now? Or is it more sort of sequencing of projects and how the mine plans are working and how that all kind of goes to kind of downgrades, et cetera? Do you mind just providing a bit more color just to have more comfort around the resumption of that work. Terrance McKibbon: On the maintenance side, certainly, the bulk of the pressure on our maintenance business was centered in oil and gas. And I think those clients just decided to delay their large maintenance turnaround, which is a big chunk of our business for 1 year. And just it's rare that you see them line up the way they did, but they lined up in unison and the larger clients that we have and push those out a year. So -- but obviously, they're not able to do that very often and they made that decision, and we expect that, that scope will come back in '26 and then some. And we've also opened up new fronts with new clients, and we're expecting some exciting opportunities to evolve with companies like [ Irving Oil ], things like that. So I think our maintenance business will be in a really good place in '26. Maxim Sytchev: Okay. And so just to reiterate, I guess you see or you have full confidence that it's hard likely that these types of activities will be pushed by 2 years, right? Terrance McKibbon: No, I don't think anyone would -- yes, I really -- I'm highly confident that won't happen. Maxim Sytchev: Okay. No, no just double checking. Terrance McKibbon: Yes, that's not we were having before. So I just -- I can't imagine that could happen even this 1-year delay is unique, 2 years would be unheard of. Maxim Sytchev: Okay. Okay. No, that's good color. And then in terms of the -- obviously, you've been quite successful in replenishing the health care-related work. And it's all on negotiated sort of new structure with the clients. But do you mind maybe talking a little bit about sort of control processes there, just to make sure that we don't see any repeat of previous issues that we've seen in buildings. I mean that goes back a number of years ago, but maybe any color and context there that would be helpful. Terrance McKibbon: So I think the big difference, we wouldn't be in these contracts if they weren't like highly collaborative. And any of the health care that we've got, we essentially have our cost guarantee. So whereas if you go back into the '16 to '18, '19 Europe, those were full risk transfer in whether they were P3s or design builds. The risk transfer was very high at that time, and obviously, that put a lot of pressure in that sector. And I think the other difference today that we -- in that time frame, we purely relied upon our subcontractors. And today, we have our own electrical mechanical contracting business. We have our own site development capability to develop these projects these sites. We have our own communication services for underground communication and in-building communications as well, which is a big part of the hospital. So we have a lot of the pieces that we'll get, obviously, accretive margins out of these projects. So we're really excited about this. I think it's taken time for the clients to realize this is a much better model, but the big areas where most of this activity is today in Canada is Ontario and BC, and they're both feed into collaborative models, and you're seeing that to be a tremendous value and they're now becoming champions of those models and whatnot. And we've been at this a while now. So we have a deep resume to be able to deliver this kind of thing. And we're also seeing this kind of model being used extensively with the federal government of Defense. So the same kind of model is being used in the defense space as well. So it's -- yes, it's a different world today than the full risk transfer that we had back in the previous year. Maxim Sytchev: Okay. That's helpful. And then just 1 last question. I was wondering if you had some initial reactions to the federal budget. How are you thinking about your potential addressable opportunities there. I mean, certainly, it feels like more capital is coming, but wondering if you can maybe quantifying the timing, et cetera, of anything that could be coming your way. Terrance McKibbon: Yes, we're really excited about the budget. I think the scale, for example, in defense, $19 billion, like that -- that group is moving very, very aggressively forward with a very large program, and you see it coming out in the federal budget, you can see that there's a full support behind it. So we're -- that's just one example. But if you go across the -- some of the nation building projects that the federal government are engaging in to try to enable to accelerate. We haven't seen the full list yet, but some of the new ones that you see coming through in mining and LNG and obviously, nuclear, all the areas that we have a large presence. I don't think you could wish for a stronger budget and create 1 if you tried, like this was seeing this budget was really, really encouraging. And just we're going to have a nice run as long as we can see out on the horizon with the scale of what's coming through. And it's -- yes, it's a very exciting time to be in our industry, and we're excited about the next couple of years and highly confident that we're going to meet our strategic plan targets. Operator: Our next question will be coming from Michael Tupholme of TD Cowen. Michael Tupholme: Teri, earlier in the call, you talked about -- you pointed to the backlog and the significant size of the backlog as part of the reason for your confidence in a resumption of activity going forward. I think you described it as daunting just the size of the current opportunity set here. I guess my question is, can you talk a little bit about your capacity to tackle all of this work as well as the industry's capacity more broadly and what steps you're having to take to ensure you've got the right talent to meet all of this opportunity that's in front of you, both with what you've already secured, but also all these opportunities that are getting talked about in terms of future opportunities, nation-building projects, et cetera. Terrance McKibbon: Thanks, Mike. So I think, first and foremost, we're extremely careful when we're pursuing something that we've got a team assembled for. And that's putting pressure on our earnings in 2025 because we've got these teams assembled ready to go and some of these really large initiatives that we're involved in, we could be working for 18 months with a team of 30 people and before you can even get to break ground kind of thing. So that is part of the -- I would say that some of the pressure that we're seeing in 2025 with our overall organization. But yes, we're -- we have a very, very mature team that's highly talented. When we don't have the capacity, we'll partner with other companies. Obviously, our acquisitions are adding tremendous strength to give us that self-perform capability and I just think overall, if you think about the type of company we've built with the high engagement and the fact Republic, we're able to talk about things like TSX 30 and I think we've become a company that individuals in our industry want to work for. So it's we've got our business in a good spot. And I think we're also very attractive from outside companies to partner with. So that's kind of how we're balancing it. But I'd say that we don't get engaged in something unless we have a solution and for a Tier 1 team. Michael Tupholme: No, that makes sense. And just with respect to the sort of the broader industry, like I mean, our -- are there challenges within the broader industry just sort of to meet all this demand? I mean clearly, you're being mindful of the talent you need and selective and what you pursue. But just generally speaking, given all of the opportunity like how do you see the industry being able to manage this and cope with it? Terrance McKibbon: So I think if you were to roll the clock back a couple of years when there was such a high demand in housing and condos and that type retail to a certain extent. But if you go back, when you saw that type of demand, that's gone now. So there's a lot of really talented construction workers that transition from building a condo or an apartment building. It's a pretty easy transition to come and work for us to build the kinds of things we built. So we're seeing a lot of movement, horizontal movement of the trades. And I think we don't seem to feel the pressure on it like we would have a couple of years ago. That's just where we're at with Bird. It doesn't mean that everyone is like that. I think there's a lot of softness in the smaller companies and the demand for the smaller companies, smaller the former guys, guys that work in horizontal housing, vertical housing and apartment billings and condos, things like that, I think that's a pretty tough sector retail. Those are tough. So this is a pretty big army of talent that would typically go to work every day in that sector. And we're obviously -- they're able to just transition into what we're doing, and it's pretty similar. Michael Tupholme: Thats helpful. I don't think it's come up much on this call today, but wondering if you can spend a minute talking about opportunities for yourselves in the nuclear sector and how you're positioned and what your capabilities look like there? Terrance McKibbon: So we've had a heavy focus on remediation on the nuclear side, and that seems to be continuing to accelerate. So that's exciting. So we'll go in and do nuclear remediation on various sites, and that's on a national scale now with different areas that the federal government is looking at. Obviously, we're very involved building a new campus up at Chalk River for -- indirectly for atomic energy, but through CNL. And then on the new build side, obviously, we're supporting the existing facilities with their infrastructure that they need. As you know, we're not in the refurbishment side of the reactors that we weren't in the nuclear business when that was procured. So -- but we also have been developing our licensing and our accreditations and capabilities and facility certifications, and we've got that in hand now. So we're in a good spot in terms of the opportunities that evolve. We're excited about the new builds on the sort of some of the full-scale opportunities that are evolving in the planning stages. And I think contractors like us will be in high demand for those projects as they evolve because of their scale. And I think those have a high likelihood of moving forward over the next 2 years for both OPG and Bruce. And that's kind of the highlights. I think it's an exciting business for us. There's always a lot of activity. There's always a lot of maintenance that goes on. We now have those types of agreements and interfaces where we were able to do that. So... Michael Tupholme: That's great Teri. Just one more quick one here, if possible, on the data center opportunity, can you speak a little bit about what you're seeing right now? It seems to me that maybe notwithstanding all of the headlines about all the activity, like in your own case, it seems like there's been sort of some ebbing and flowing just based on project activity and how it's kind of come along. But anyway, if you can just maybe provide an update on what you're seeing right now and what the opportunity set there looks like? Terrance McKibbon: Yes. We seem to be consistently involved in data centers that are smaller in scale that are, I'd say, below 100-megawatt kind of thing. I'd say the larger ones right now really are -- we've spent a lot of time planning, modeling and working with some of our partners on these. But I'd say there's still clarity that's needed on power sources, power allocation especially in Ontario. In Alberta, there's sort of a philosophy that Alberta is open for business, but bring your own power. That seems to be a bit of a headline. And I think there's some opportunities that are getting underway there. But to bring your own power is probably highly centered around gas-fired cogens and you have to be at the front of the line in terms of those turbines to generate that power or to be able to procure those turbines. So you have to be in a scenario where you had long lead times and you're out front of that. So there's some uncertainty there. And I think that's how we're approaching it, and we'll see. It's -- there's some variables, but I'd say most of the variables lead to power. And yes, we'll see. So it's -- again, the smaller ones seem to be active, and we're busy with those. The bigger ones, I think, feels like it's taking a little longer unless you've got the power source that's been solidified. Operator: Thank you. And this concludes our question-and-answer session. I would now like to hand the call back to Mr. McKibbon for closing remarks. Terrance McKibbon: So I just wanted to thank everyone for joining today's call. Bird delivered solid performance in the third quarter, supported by a record backlog and continued strength across our key sectors. Importantly, we remain focused on long-term value creation, while revenue growth and margin progression can fluctuate from quarter-to-quarter, our trajectory remains clear, and we are firmly on track to achieve our 8% adjusted EBITDA target by 2027. Thank you all for joining us this morning on our earnings call. Operator: And this concludes today's conference call and webcast. You may disconnect your lines. Thank you for participating, and have a pleasant day.
Operator: Good afternoon, and welcome to the Flux Power Holdings, Inc.'s Fiscal First Quarter 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. At the conclusion of today's conference call, instructions will be given for the question and answer session. A reminder, this conference call is being recorded today, November 13, 2025. I would now like to turn the conference over to Joel Achramowicz of Shelton Group Investor Relations. Joel, thank you, and over to you. Good afternoon, and welcome to Flux Power Holdings, Inc.'s Fiscal First Quarter 2026 Earnings Conference Call. I'm Joel Achramowicz, managing director of Shelton Group, Flux Power Holdings, Inc.'s investor relations firm. Joel Achramowicz: Joining me on the call today are Krishna Vanka, Flux Power Holdings, Inc.'s CEO, and Kevin Royal, Chief Financial Officer. Now before I turn the call over to Krishna, I'd like to remind our listeners that during the course of this conference call, the company will provide financial guidance, projections, comments, and other forward-looking statements regarding future market developments, the future financial performance of the company, new products, or other matters. These statements are subject to the risks and uncertainties that we discuss in detail in our documents filed with the SEC, specifically our 10-K and our most recent 10-Q, which identify important risk factors that could cause actual results to differ materially from those contained in the forward-looking statements. Also, the company's press release and management statements during this conference call will include discussions of certain adjusted or non-GAAP financial measures. These financial measures and related reconciliations are provided in the company's press release and related current report on Form 8-Ks. They can be found in the investor relations section of Flux Power Holdings, Inc.'s website at www.fluxpower.com. For those of you unable to listen to the entire call at this time, a replay will be available via webcast on the company's website. And now it's my great pleasure to turn the call over to Flux Power Holdings, Inc.'s CEO, Krishna Vanka. Krishna? Please go ahead. Krishna Vanka: Thank you, and welcome, everyone, to our Q1 2026 conference call. As we announced in our press release earlier today, revenue in the quarter reflected a temporary pause in the customer orders. This was mainly due to the uncertainty surrounding the tariff situation during the quarter, and also due to the near-term caution regarding the macroeconomic situation. With the uncertainty that tariffs had on pricing, customers held back on placing orders until there was more clarity. This dynamic also temporarily impacted our gross margins during the quarter. Lately, however, we have begun to see order rebound in our second fiscal quarter, and this is highlighted by multimillion-dollar orders from top material handling customers totaling $2.4 million. In addition to these repeat orders, we also recently secured a large order with another major airline for ground service equipment. With this new customer, we now supply to eight major North American airlines, and this represents a doubling of our airline customer base compared to last year. As I have shared with you on the prior earnings calls, the leadership here has established five strategic initiatives to guide our execution and performance. As a reminder, these initiatives include profitable growth, operational efficiencies, solution selling, building the right products, and integrating value-added software across our battery portfolio to generate recurring revenue streams. Let me provide you with an update on these initiatives. During the quarter, we made additional progress on the operational efficiencies. We achieved this by implementing another limited workforce reduction. Since my arrival, we have reduced our headcount cost by a total of 20% while maintaining consistent production levels. In October, we were also pleased to receive confirmation that we retained our listing on the NASDAQ Capital Markets. So this is now behind us. We remain committed to maintaining the integrity of our listing for broad access to our common stock. I'm also thrilled to announce that we have completed two capital raises totaling $13.8 million in proceeds, net of underwriters discount fees and expenses. These funds will be efficiently used for working capital needs and to accelerate our product development roadmap. We believe this product acceleration will create more opportunities and ultimately lead to better margins. We are excited that we recently received UL EE listing across our entire material handling portfolio of products. This will also open new market segments representing around a billion dollars in total addressable market, and these new market segments include chemical, agriculture processing, oil and gas, and pharma industries. During the quarter, we also achieved UL 1973 listing for our 80-volt intelligent batteries. This marks our first globally recognized certification for a mobile battery energy storage system best in the GSE industry and also unlocks new opportunities in AGVs and AMRs. Overall, these key safety standards provide assurance to customers that our products are reliable and safe. Our batteries were also certified recently by a world-leading multinational industrial equipment OEM for use in their new lift truck models. This showcases our commitment to working closely with OEMs and our partners as we continue to build the right products and solutions to meet our customers' needs. Another key initiative is to expand our software offerings to improve recurring revenue. During the quarter, we graduated our SkyMS 2.0 SaaS platform and converted a major airline from beta testing to a paying customer. We now have multiple paying customers on this software platform and continue to receive strong interest. We also started working on adding new AI-driven operational features to SkyMS that you'll hear about on future calls. It is our goal that every battery shipped be cloud-connected, and we are working hard towards this goal. With that, let me now hand the call over to our CFO, Kevin Royal, to discuss our first quarter financial results in more detail. Kevin? Please go ahead. Kevin Royal: Good afternoon, everyone. Revenue for 2026 was $13.2 million compared to $16.1 million in the same quarter last year. As Krishna outlined earlier, the decrease in revenue was driven mainly due to a pause in customer orders as a result of the tariff uncertainty and macroeconomic concerns. Gross margin in the first quarter was 28.6%, compared to 32.4% in the prior year period. The decrease in gross margin resulted mainly from lower sales combined with a shift in mix to our lower energy capacity products, which have lower gross margins. Operating expenses in 2026 were $5.9 million compared to $6.4 million in 2025. The decrease in operating expenses reflects the benefits of our cost reduction initiatives, including rightsizing the workforce to match current operating levels. The net loss for the first quarter was $2.6 million or $0.15 per share compared to a net loss of $1.7 million or $0.10 per share in 2025. Excluding costs associated with stock-based compensation, first quarter non-GAAP net loss was $2.4 million or $0.14 per share compared to a non-GAAP net loss of $1.1 million or $0.06 per share in the prior year period. Adjusted EBITDA for the first quarter was negative $1.7 million compared to negative $400,000 in the same quarter a year ago. Reflecting the lower revenue and margins in the quarter. Turning to the balance sheet. We ended the quarter with cash and cash equivalents of $1.6 million compared to $600,000 a year ago and $1.3 million in the prior quarter. Subsequent to quarter end, as Krishna highlighted earlier, we raised $9.2 million in proceeds net of fees and underwriters discount from the secondary offering of common stock. And we also raised $4.6 million in proceeds net of fees from a private placement of prefunded warrants and common stock warrants. Proceeds will primarily be used for working capital and to accelerate the redesign of our product portfolio in order to lower costs and improve gross profits. I will now turn the call back over to Krishna for his final remarks. And then we will open it up for questions. Krishna? Thank you, Kevin. Krishna Vanka: In closing, despite the challenges we faced during the quarter, I'm really proud of the progress we have made. This includes streamlining our cost structure, completing the capital raises that we need to support our business, regaining compliance with Nasdaq listing requirements, accelerating our product roadmaps, receiving key certifications with UL, and an important OEM, delivering SkyMS 2.0 with paying customers. With these actions and the new leadership in place, we are well-positioned to achieve profitable growth in the coming quarters. With that, let's open the call to questions. Operator? Operator: Thank you. We will now begin the question and answer session. To join the question queue, you may press star then 1 on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing any keys. We will pause for a moment as the callers join the queue. We have the first question on the line of Rob Brown from Lake Street Capital Markets. Please go ahead. Rob Brown: Hey, Krishna. First question on the order trends sort of post-quarter. You talked about some recovery in orders, I guess, and you've announced some bigger orders. But how are the order trends coming through? And are you seeing that strength to continue into the end of the fourth quarter? Krishna Vanka: Yeah. So while we are seeing some evidence of a rebound, you know, we highlighted $2.4 million in orders for the material handling industry as well as a significant airline order. We really are still seeing some headwinds, which we continue to attribute to recent tariffs as well as some impact in the quarter from the government shutdown. However, we are seeing more promising trends in the second half of the year. And in particular, seeing some strengthening in our third fiscal quarter, which is 2026. Rob Brown: Great. And then in the ground support equipment market, you've had good progress there in terms of adding customers and expanding penetration in the customers. How is that market sort of looking from an investment standpoint on their part in terms of rolling out product and what sort of further penetration can you get there? Krishna Vanka: Yeah. They continue to adopt the clean energy solutions in the GSE. So I'm not seeing any pushback from the overall goal and how the airlines are thinking about going lithium, so that trend is very supportive. It was really this short-term tariff that paused some of the progress. But as Kevin mentioned, early next year, calendar-wise, we'll start seeing more activity. As you noticed, we doubled the airlines we now serve. And some of the airlines are just getting started, like the first order, literally, in the case, as I mentioned on the call. So we look forward to them taking more and more orders as they start deploying lithium. Rob Brown: Great. Thank you. I'll turn it over. Operator: Thank you. Participants who wish to ask a question may press star 1 on their telephone keypad. As there are no further questions, I would like to hand the conference back over to Mr. Krishna Vanka for closing remarks. Krishna Vanka: Sure. Thank you again for joining us on the call today. We look forward to reporting our continued progress throughout the quarter and on our next earnings call in mid-February. Operator, you may now disconnect. Operator: Thank you. This brings us to a close to today's conference. You may now disconnect your lines. Thank you for participating, and have a pleasant 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: You all sites on hold. We appreciate your patience, and please continue to stand by. All sites on hold. We appreciate your patience, and please continue to stand by. Sites on hold. We appreciate your patience, and please continue to stand by. Good day, everyone, and welcome to today's BioAtla, Inc. Third Quarter 2025 Earnings Call. At this time, all participants are in a listen-only mode. Later, you may have the opportunity to ask questions during the question and answer session. I will be standing by should you need any assistance. It is now my pleasure to turn the conference over to Julie Miller with LifeSci Advisors. Please go ahead. Julie Miller: Thank you, operator, and good afternoon, everyone. With me today on the phone from BioAtla, Inc. are Dr. Jay M. Short, Chairman, CEO, and Co-founder; Dr. Eric L. Sievers, Chief Medical Officer; Sheri Lydick, Chief Commercial Officer; and Richard A. Waldron, Chief Financial Officer. Earlier this afternoon, BioAtla, Inc. released financial results and a business update for the quarter ended 09/30/2025. A copy of the press release is available on the company's website. Before we begin, I'd like to remind everyone that statements made during this conference call will include forward-looking statements, including, but not limited to, statements regarding BioAtla, Inc.'s business plans and prospects, potential selective licensing, collaborations, and other strategic partnerships. The potential for our clinical trials to be registrational results, conduct progress, timing of our research and development programs and clinical trials, expectations with respect to enrollment and dosing in our clinical trials, the anticipated clinical benefits, safety, efficacy, and market potential of our product candidates, plans and expectations regarding future data updates, clinical trials, regulatory meetings, and regulatory submissions. The potential regulatory approval path for our product candidates, expectations about the sufficiency of our cash and cash equivalents, and expected R&D and G&A expenses. These statements are based on current expectations and are subject to various risks and uncertainties that can cause actual results to differ materially from those expressed or implied. These risks and uncertainties are described in our filings made with the SEC, including the most recent quarterly report on Form 10-Q and other subsequent filings. You are cautioned not to place undue reliance on these forward-looking statements which speak only as of today, 11/13/2025. And BioAtla, Inc. disclaims any obligation to update or revise such statements to reflect new information, future events, or circumstances except as required by law. With that, I'd like to turn the call over to Jay M. Short. Jay? Jay M. Short: Thank you, Julie. And thanks to everyone for joining us for our third quarter 2025 BioAtla, Inc. earnings call. First and foremost, it is important to update that we are in advanced stages to finalize a strategic transaction with a potential partner by year-end. Further, in September, I'm pleased to report that we achieved FDA alignment on the phase three OSV registrational trial design including dosing regimen, comparator arm, and approval endpoints for the treatment of second-line plus oropharyngeal squamous cell carcinoma or OPSCC. OPSCC represents a sizable and steadily growing patient population poorly served by EGFR inhibitors and other standard of care regimens. Importantly, this randomized phase three trial will evaluate dual primary endpoints of overall response rate and overall survival. And this dual endpoint design provides the opportunity for achieving accelerated approval followed by full approval. We are currently preparing for initiation of the OSV phase three study and remain on track to advance this program. We also recently presented compelling data with programs, including our dual CAB EpCAM TCE or BA 3182, and MACV. Which further validates the potential of our CAB platform to deliver differentiated therapies for patients with difficult-to-treat cancers. In a few moments, Eric will provide an overview of these data. I'm also pleased to share that we achieved a development milestone under our license agreement with Context Therapeutics. Related to the dual CAB Nectin 4 TCE program. This milestone not only provides non-dilutive capital but also further validates the underlying biology and its impact on improving the therapeutic index of our CAB T cell engager platform. We continue to be encouraged overall by our CAB T cell engager results, including this milestone achievement as well as the promising interim data from BA 3182 recently presented at ESMO. Finally, our MEKV program continues to distinguish itself with the potential for increasing overall survival compared with approved treatments in soft tissue sarcoma recently presented at SITC. These overall survival data are analogous to the prolonged overall survival data we observed in mutant KRAS non-small cell lung cancer patients. With that, I would now like to turn the call over to Sheri Lydick to provide an overview of the substantial market opportunity for OSFI our CAB ROR2 ADC. Sheri? Sheri Lydick: Thank you, Jay, and good afternoon, everyone. OSFI has demonstrated compelling clinical activity in heavily pretreated patients with HPV-positive OPSCC, a population with a poor prognosis. OPSCC is a steadily growing indication primarily driven by prior HPV infection. Up to 80% of OPSCC cases in the US are caused by HPV. And by 2030, OPSCC is projected to become the most common subtype of head and neck cancer in the US. The unmet need is significant in current standards of care, EGFR inhibitors, provide minimal benefit in this setting. This epidemiology underscores the urgency of advancing new therapies. From a commercial perspective, the opportunity is significant. We estimate worldwide peak sales of OSFI to be approximately $800 million in second-line and later, OPS alone. The total worldwide OPSCC market is projected to reach $3 billion by 2032. And when you consider the broader HPV-positive solid tumor market, including cervical cancer, the value exceeds $7 billion globally. We continue preparations for enabling initiation of the phase three study with the goal of advancing the study with a strategic partner early next year. With that, I would now like to turn the call over to Eric L. Sievers for additional clinical and program updates. Eric? Eric L. Sievers: Thank you, Sheri. Phase three trial preparations for OSFI continue as we achieved alignment on the phase three registrational trial design with the potential for accelerated approval followed by full approval with its dual endpoint design. Importantly, OSV offers a differentiated profile in HPV-positive OPSCC. As overexpression of the ROR2, a target of the ADC, is driven by oncoproteins associated with HPV infection forming a cancer axis that is associated with poor prognosis and resistance to chemo and immunotherapies. We have seen OSV's potential with our strong phase two data in late-line patients demonstrating an overall response rate of 45% and a median overall survival of 11.6 months compared to the historical response rates of only 0% to 3.4%, and median overall survival of only 4.4 months with standard therapies. Beyond OSV, we continue to make exciting progress with our dual CAB EpCAM T cell engager, EpCAM is broadly expressed across adenocarcinomas of the colon, stomach, pancreas, biliary tract, lung, breast, prostate, and thyroid, making it a compelling bispecific T cell engager target. However, EpCAM is also broadly expressed on healthy epithelial tissues. And this broad expression is associated with on-target off-tumor toxicities when targeted by traditional antibodies. We believe we have a notable advantage with our dual CAB EpCAM T cell engager. As it is designed to selectively bind within the acidic tumor microenvironment and eliminate on-target off-tumor toxicity. We recently presented preliminary data from our phase one trial with our dual CAB EpCAM T cell engager in advanced adenocarcinomas at the annual 2025 European Society for Medical Oncology Congress. Overall, data indicate that the safety profile is manageable. In addition, we are continuing to see encouraging preliminary signs of tumor reductions across a broad range of indications. And notable prolonged tumor control. With a confirmed partial response at the 0.6 milligram dose. This responding patient with intrahepatic cholangiocarcinoma, a particularly challenging cancer of the biliary tract, remains on treatment without progression now for more than six months. We also remain encouraged by the performance of mecobotamab vedotin, or MEKV. Data from our phase two trial of MEKV alone and in combination with nivolumab in patients with treatment-refractory soft tissue sarcomas, were recently presented at the Society for Immunotherapy of Cancer Annual Meeting. Data from 44 evaluable patients with leiomyosarcoma, liposarcoma, and undifferentiated pleomorphic sarcoma showed median overall survival of 21.5 months compared to median overall survivals of only 11.5 to 13.6 months reported for approved agents in similar advanced soft tissue sarcoma populations. Further, these overall survival observations are directionally consistent with prior experience in mutated KRAS non-small cell lung cancer from our other ongoing phase two trial of MEKV and support its potential utility as a treatment for solid tumors. The safety profile of MEKV as a monotherapy and in combination with an anti-PD-1 antibody was manageable and is consistent with conditional binding of the axil target restricted to the tumor microenvironment. No new safety signals were identified. I shall now hand it over to Richard A. Waldron to review the third quarter 2025 financials. Rick? Richard A. Waldron: Thank you, Eric. As of 09/30/2025, we had $8.3 million in cash and cash equivalents. In October 2025, Context Therapeutics triggered a $2 million milestone payment to us under the license agreement for the dual CAB Nectin 4 TCE. The payment was received recently and reflects continued progress and validation of BioAtla, Inc.'s differentiated T cell engager platform. Of note, our third quarter cash and cash equivalents do not include this payment or any R&D funding from the collaboration. For the third quarter ended 09/30/2025, we reported a net loss of $15.8 million compared to a net loss of $10.6 million in the same quarter of 2024, which included $11 million in collaboration revenue from our license with Context Therapeutics. The increase in net loss was primarily due to the collaboration revenue recorded in 2024 and a $2.1 million non-cash loss on warrant liability recorded in 2025 related to warrants issued in the December 2024 financing offset by decreases in R&D and G&A expense. Research and development or R&D expenses were $9.5 million for the quarter ended 09/30/2025, compared to $16.4 million for the same quarter in 2024. The $6.9 million decrease was primarily driven by reduced program development costs due to prioritization of clinical programs, lower headcount-related expenses following the workforce announced in March 2025, and lower non-cash stock-based compensation. We continue to expect R&D expenses to decline through the remainder of 2025 as we continue to concentrate resources on our prioritized programs. General and administrative or G&A expenses were $4.2 million for the quarter ended 09/30/2025 compared to $5.9 million for the same quarter in 2024. The $1.7 million decrease was primarily attributable to reduced personnel costs related to the workforce reduction in March 2025 and lower stock-based compensation expense. And now back to Jay. Jay M. Short: Thank you, Rick, and thank you all for joining us today. As we look ahead, BioAtla, Inc. is entering an exciting phase. Now with FDA alignment on our phase three trial design for OPSCC, we are poised to begin enrolling our registrational phase three trial early next year. This program not only addresses a critical unmet need in oncology, but also represents a substantial commercial opportunity. In addition, we believe our dual CAB EpCAM TCE program represents one of the broadest pan-cancer opportunities since PD-1, with the potential to treat over one million adenocarcinoma cancer patients per year in high unmet need areas. Not surprisingly, the potential of this program is attracting numerous early discussions with both investors and potential future partners. We expect the key clinical trial readout in 2026. Finally, we remain focused on our prioritized programs for delivering meaningful therapies to patients and value to shareholders. We appreciate your support and look forward to sharing further updates in the exciting months ahead. With that, we will turn it back to the operator to take your questions. Operator: You may withdraw yourself from the queue at any time by pressing star 2. Star and 1. Once again, that is star and 1. We'll take our first question from Arthur Hayes with CU. Line is open. Arthur Hayes: Hey. Good afternoon, Jay and team. Thanks for taking my question. So maybe for Eric, for the ROR2 program, the phase three study design-wise, could you give us more color around what's the patient number side by the agency to getting an accelerated approval readout there? And also, for the control arm, is there any stratification according to different treatments that the patient is going to receive? Eric L. Sievers: Thank you, Arthur. So your first question is about what would be the number of patients for an accelerated approval? And I want to refer everyone to slide 42 on our corporate deck where we discuss the phase two meeting key outcomes. And here we talk about the pivotal trial design, where for full approval we're looking at approximately 300 patients that are prospectively randomized and stratified. And for accelerated approval, it would be an interim analysis roughly about the time of the full enrollment of patients. But obviously, that look would be much earlier. And then your second question is about stratification factors for the two arms. And we haven't disclosed that, but there we P16 would be one of them, and then it would have to do with local regional disease. Yes or no? And, again, stratification factors are to ensure that there's equal distribution of patients based on important prognostic factors across the two arms. Arthur Hayes: Thanks, Eric. And maybe for the 3182, could you tell us a little bit more, like, what kind of data we can expect here for next year? The readout-wise? Eric L. Sievers: Sure. So as you know from the ESMO dataset, we presented 35 patients all receiving subcutaneous dosing and then a pretty fulsome accounting of the patients and their experience on slide 23, which is the swimmer's plot showing the confirmed partial response and where we are in the dose escalation. For the next data output, we would anticipate it would be in the first half of next year, and we would be reporting pretty comprehensively on the additional dose and schedule evaluations that we'll be doing over the course of the next few months. To try to provide a really fulsome accounting of the experience altogether. Jay, did you want to add anything? Jay M. Short: No. I think that captures it, Eric. Don't really have anything to add on that. But I think, you know, certainly, I think we'll be able to meet the timeline of being in the first half. Arthur Hayes: Okay. Awesome. Thanks. Thanks, Jay, and congrats on the progress. Operator: Yeah. Thank you, Arthur. Once more for your questions, that is star and 1. We'll pause just a moment. And it does appear that there are no further questions at this time. I would now like to turn the call back to Jay M. Short for any additional or closing remarks. Jay M. Short: I just like to say I think it's a very exciting time for the company, and we're very much looking forward to the key readouts that are just around the corner. So thank you for your continued support and for listening today. Bye-bye. Operator: This does conclude today's program. Thank you for your participation. You may disconnect at any time, and have a wonderful rest of your day.
Operator: Good afternoon. I will be your conference call operator today. Please note that today's call is being recorded, and all participants other than management are in listen-only mode. There will be a Q&A session following the management's presentation. I will now turn the call over to Valter Pinto, Managing Director of KCSA Strategic Communications. Please go ahead. Valter Pinto: Thank you, operator. Good afternoon, everyone, and welcome to RenovoRx's Third Quarter 2025 Conference Call. I'm joined today by members of our leadership team, Dr. Ramtin Agah, Chairman, Founder, and Chief Medical Officer; Shaun Bagai, Chief Executive Officer; Lisa Gentry, Chief Clinical Officer; Ronald Kocak, VP Controller and Principal Accounting Officer. Before we begin, I'd like to remind everyone that statements made during today's call contain or may contain forward-looking statements covered by the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995 and applicable federal securities laws. These statements, including statements regarding RenovoRx's clinical and commercial plans, strategies, and estimates of performance, are based on management's current plans and assumptions, and actual results may differ materially. Please refer to our filings with the SEC, including our Form 10-Q for 2025 and our most recent Form 10-K for a detailed discussion of the risks and uncertainties facing RenovoRx. With that, I'd like to turn the call over to our Chairman, Founder, and Chief Medical Officer, Dr. Ramtin Agah. Ramtin Agah: Thank you, Valter, and good afternoon, everyone. This quarter marks another important step forward in RenovoRx's fourteen-year journey transforming a bold concept into a new therapeutic option that is now reaching patients across the country. Our preparatory transarterial microperfusion therapy platform, or TAMP, is designed for targeted therapeutic drug delivery across the arterial wall near the tumor site to bait the target tumor. By localizing and targeting delivery of therapeutic agents beyond the peripheral vascular system, TAMP is designed to optimize drug concentration where it's needed. This targeted approach is designed to minimize systemic exposure and toxicities related to chemotherapy and address the longstanding challenge in cancer care of poor blood supply to tumor sites. We believe that TAMP represents a significant advancement in the way cancer treatment can be approached. For decades, pancreatic cancer treatment has revolved around three pillars: surgery, radiation, and chemotherapy. We're proud to be introducing TAMP as the fourth option for patients diagnosed with solid tumors. What began as an ideal tested in controlled clinical trials is now translating into real-world impact. Several times a week, a patient somewhere in the U.S. is being treated with our TAMP technology, and that is deeply meaningful to our team. The early signs of clinical adoption are promising. We're seeing interest and adoption from academic medical centers, NCI-designated cancer centers, and large community hospitals. Importantly, physicians who have used TAMP enabled by RenovoRx are treating additional patients, validating the utility and safety of our technology. We are also expanding engagement across including interventional radiology, surgical oncology, medical and radiation oncology, reflecting the truly multidisciplinary nature of our platform. To support this effort across multiple specialty lines, we have launched our TAMP workshop series in an online peer-to-peer forum. We're also proud to be expanding our scientific advisory board with world-renowned physicians who believe in the potential of our technology. Our mission is to integrate our approach to therapeutic drug delivery into the standard of care and ultimately improve patient outcomes by offering a more targeted and tolerable treatment path. With that, I turn it over to our CEO, Shaun Bagai, to share some details on our commercial and clinical progress. Shaun Bagai: Thank you, Ramtin. Building on our clinical progress, we are also seeing strong commercial momentum for RenovoCath as a standalone medical device. Year-to-date revenue through the end of Q3 was approximately $900,000, putting us on track to finish out the year strong as we continue to build a lean, cost-efficient sales and marketing foundation that will enable meaningful revenue acceleration in 2026 and beyond. It's important to remember that we've achieved our RenovoCath sales results with a lean team and within our budget with a relatively small capital outlay. While our goal is to grow from the base we've established, our plan is to remain and maintain our philosophy of prudent capital deployment. Since organically launching commercial sales less than a year ago, and without a dedicated sales and marketing team, we've expanded from five centers approved to purchase RenovoCath at the start of 2025 to 14 leading cancer centers now approved to purchase. Five of these centers have already used the device in patients and made repeat orders, demonstrating both demand and customer satisfaction. In addition to the 14 centers now approved to purchase RenovoCath, we have delivered product quotes to 10 additional leading centers across the nation, bringing the total to 24 centers that have formally requested quotes for RenovoCath. In addition, we have engaged with dozens of physicians at various medical conferences and in their institutions who have expressed commercial interest in utilizing RenovoCath for their patients. We continue to nurture and build on this interest that will drive commercial success going forward. Physician feedback continues to underscore what we view are the benefits of the targeted drug delivery that can be achieved with TAMP, including reducing systemic chemotherapy toxicity and improving patient quality of life. With our small team, we've now established a diverse network of clinical institutions using and interested in TAMP enabled by RenovoCath spanning through the United States. This network represents not only leading academic institutions and NCI-designated cancer centers but also high-volume community hospitals, giving us the confidence and the potential for deep market penetration of our technology. Our focus remains on strategic, data-driven expansion, ensuring each new center is well supported through onboarding, training, and case follow-up. We are also seeing growing physician-to-physician advocacy, one of the strongest indicators of adoption in interventional oncology. To support and expand our commercial efforts, in August, we announced the hiring of Phil Stockton as Senior Director of Sales and Market Development. Phil brings more than twenty-five years of med tech leadership to the team, including a decade focused on interventional oncology. His expertise has been invaluable as we broaden our footprint across the U.S. while maintaining a lean operating structure. In alignment with our existing budget and to respond to growing demand, we have added two additional regional sales managers and plan to add a marketing director to drive physician engagement. It's also been a year of intense learning for us based on our experience in the field, and we've gathered valuable data on metrics like customer preferences and sales cycles. We plan on applying these learnings into 2026. We are pleased to report that we are seeing repeat use and expansion of interest among a growing number of approved centers and increasing market awareness and interest across oncology disciplines. As we refine and grow our efforts with a small but dedicated sales and marketing team, we continue to expand our revenues to grow during 2026 and beyond. Taken together, we are encouraged by our early adoption curve and believe our commercial growth strategy positions us for long-term success. Our vision is for RenovoCath to address a large unmet need in oncology. We continue to estimate that the initial PQS market opportunity of RenovoCath as a standalone device is approximately $400 million annually and ultimately a several billion dollar opportunity as we expand into other tumor types. Importantly, as mentioned, we continue to operate with fiscal discipline, positioning RenovoRx for long-term growth as we scale our commercial foundation and prepare for broader adoption. As of 09/30/2025, RenovoRx had over $10 million in cash and cash equivalents. Through the first nine months of 2025, RenovoCath sales totaled approximately $900,000, which we expect will increase over time and reduce our burn rate. Based on our current plans, our cash on hand is expected to fund both the RenovoCath commercial scale-up and continued progress of our Phase III TIGER PACT trial, as well as other activities into 2026. Of course, any increase in sales momentum beyond our current expectations could extend this timeline. As we continue to make progress commercially, and as each day we get closer and closer to our Phase III data readout, we have multiple potential opportunities to strengthen our balance sheet as needed even further, including but not limited to debt and/or equity financing, as well as our current ongoing licensing and partnership discussions. I feel it's important to note that the three-year anniversary of our shelf registration statement is expiring next week, and we will be refreshing this following. Additionally, we will be establishing an at-the-market offering. All of these financing options should provide our company with the best flexibility as we continue to drive shareholder value. In conclusion, we are excited about where we stand today as a company, progressing our Phase III clinical trial and post-market registry study while growing our RenovoCath sales efforts as we bring our novel technology to more and more doctors and patients. Ramtin spoke of a fourteen-year journey with our commercial sales efforts for RenovoCath, and with the end of our Phase III trial around the corner, we are seeing light at the end of the tunnel. We are all as enthusiastic about our future as we've ever been. We are truly grateful to our investors and other stakeholders, including our early adopter centers and physicians who continue to believe in our mission of helping make our vision a reality. With that, I'll hand the call over to our Chief Clinical Officer, Lisa Gentry, to provide more detail on our clinical programs. Lisa Gentry: Thank you, Shaun. The primary goal of our clinical research and scientific programs is to continue to strengthen the evidence base supporting our TAMP platform. Our new post-marketing registry study that we launched in July is progressing well, generating real-world data on the safety and effectiveness of RenovoCath across a range of solid tumors. We are pleased to have initiated the first patient procedure at the University of Vermont Cancer Center in September and to have Baptist Health Miami Cancer Institute and the University of Pittsburgh Medical Center joining as additional study sites. This capital-efficient multicenter study will generate critical evidence on the long-term safety and performance of RenovoCath across solid tumors. Importantly, our registry study also advances our future clinical strategy by generating meaningful data that will open the door for how best RenovoCath may be leveraged in additional high unmet need oncology indications beyond locally advanced pancreatic cancer. In addition, we continue to advance investigator-initiated trials in borderline resectable and oligometastatic pancreatic cancer. These studies are designed to be cost-neutral to the company while providing meaningful data that may further broaden the application of our TAMP therapy platform. Together, these initiatives reflect how RenovoRx is building a robust body of evidence to integrate our technology into the treatment continuum not only as an alternative but as the new fourth option that may enhance the current standard of care. Finally, our Phase III TIGER PACT trial continues to progress with enrollment expected to be completed in early 2026 and final data anticipated in 2027. Last quarter, we reported that the Data Monitoring Committee completed their review of our second preplanned interim analysis and recommended that we continue the study. We believe the DMC's recommendation is an expression of confidence in the potential for a positive outcome in the trial overall. The second interim review of data reinforces that the trial should proceed as planned to the final analysis as we seek to potential the safety and superiority of interarterial gemcitabine delivered via RenovoCath with the treatment of locally advanced pancreatic cancer as compared to IV chemotherapy, the current standard of care. TIGER PACT remains the cornerstone of our clinical development program, validating our mechanism of action and safety profile through rigorous long-term evaluation. In closing, I would like to share that we are proud to have recently strengthened our scientific advisory board to now include recognized surgeon and pancreatic cancer expert Dr. Timothy Donahue and internationally renowned interventional oncologist Dr. Thierry De Baere. Dr. Donahue is Director of UCLA's Aggie Hirschberg Center for Pancreatic Diseases and Chief of the Division of Surgical Oncology at the David Geffen School of Medicine. He is also the Gary Shandling Chair in Pancreatic Surgery. Professor De Baere is Head of Interventional Radiology at both the Gustave Roussy Cancer Center and the University of Paris-Saclay in France. With that, I'll hand the call over to our Controller and Principal Accounting Officer, Ronald Kocak, to review our financials for the quarter. Ronald Kocak: Thank you, Lisa. For the third quarter ended 09/30/2025, RenovoRx reported revenues of approximately $266,000, driven by both new customer orders and repeat purchases of RenovoCath, resulting in a total of approximately $900,000 of revenues through the first nine months of 2025. This early in commercial launch, we're not surprised by relatively minor fluctuations in sales given that our commercialization efforts are so new, have been handled by limited staff, and a handful of patients receiving treatment via RenovoCath can move the needle in product orders. We firmly believe that our efforts to date set the stage for revenue growth going forward. Research and development expenses were $1.7 million, reflecting our continued investment in TIGER PACT and support for investigator-initiated and registry studies. Selling, general, and administrative expenses were $1.7 million, reflecting stable operating expenses while we add targeted commercial capabilities. We ended the quarter with over $10 million in cash and cash equivalents. Based on our current operating plan, we believe this cash is sufficient to fund our ongoing commercial efforts and the completion of enrollment in TIGER PACT. As of September 30, 2025, common shares outstanding were approximately 36.6 million. Operator: With that, I will now turn the call back to the operator for Q&A. Thank you. Operator: Ladies and gentlemen, we will now be conducting a question and answer session. If you would like to ask a question, please press star and one on the telephone keypad. You may press star and 2 to queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Ladies and gentlemen, we will wait for a moment while we poll for questions. Operator: Thank you. Our first question comes from Ed Woo with Ascendiant Capital. Please go ahead. Ed Woo: Yeah. Congratulations on all your progress. I know you guys have your hands full, you know, commercializing in the U.S. But have you thought, you know, given the positive reception, of maybe going international? Shaun Bagai: Yeah. Thank you for the question. Always great to talk to you. So we've looked at it in the past, and the favorable reimbursement and the large interest in the U.S. has determined that we'll focus on the U.S. for now. There's obviously a pancreatic cancer and other solid tumors that could be treated potentially effectively with our technology. So something we'll explore in the future. By keeping a close eye on capital burn and the large potential market that right at our fingertips, it makes sense to 100% focus in the U.S. today. Ed Woo: Great. And a little bit about your, you know, supply chain. How quickly would you be able to ramp it up if it turns out that, you know, expectations are even faster than you expect? Shaun Bagai: It's actually a great partnership we formed with our contract manufacturer. We announced a stronger collaboration almost a year ago. And they've already begun ramping. We've already reduced our COGS and increased our margins. And the great thing about the way we've built this device is RenovoCath actually has over a two-year shelf life. So we're already building stores up with high margins where we can supply what we anticipate the demand to be. And it is a larger operation. We can turnkey and ramp even quicker if we need to. So we've got a good collaboration and good supply chain so far. Ed Woo: Is that supply chain, is it manufactured in the U.S.? Shaun Bagai: Thanks for asking that question. It's something that comes up quite often. Yes. Our contract manufacturer is based outside of Chicago in the U.S. And largely, pretty much all the components used to build the are also sourced from the U.S. So we've been relatively insulated from the global macro issues in terms of supply chain so far. Ed Woo: Great. Well, thanks for answering my questions, and I wish you guys good luck. Shaun Bagai: Thank you, Ed. Operator: Thank you. Our next question comes from Charles Wallace with HCW. Please go ahead. Charles Wallace: Hi. Thanks for taking my question. This is Charles on for RK. So for my first question, can you talk briefly about any fruits you're seeing from the hiring of the new senior director of sales? And then, looking ahead, do you hope to, when you're kind of building out the commercial effort, do you hope to increase the number of approved centers or do you hope to focus more on going deeper into the approved centers to get more repeat orders? Shaun Bagai: Yeah. Thanks for the question, Charles. It's a very focused deep effort, and we're starting to increase the breadth with the addition of the new hires. So with the addition of the senior salesperson, he's both player-coach. So he's out there selling and also helping build out the strategy. It's important to note that with a new technology like this, that we're first to market in a brand new space. And we've learned the multitude of steps that need to be done to get physicians from first engagement to patients really shorten time from initial contact to first patient treatment. And I have begun to see the fruits of his labor in that regard and from the two new hires he's put on board as well. The good news is that after six to nine months of being in the market, we're not seeing headwinds in our strategy. And we're creating already meaningful market adoption and some revenue with just a small commercial team driving into 2026. So we do anticipate increasing the breadth and the footprint as well. Currently, I've mentioned that we've got five active centers treating patients and multiple patients with multiple catheter orders. And in total, 24 hospitals have requested formal quotes for the device, and I'd say dozens on the tails of that that have expressed interest that not my small focus team can go and drive through to get those first patients in. So getting this team in place and learning the strategy very carefully with our burn over the last several months, we're really gearing up to be ready to drive this into the end of the year and then towards a lot of growth for next year and then beyond. Charles Wallace: Great. Guess to follow-up on what you just said, could you maybe provide a timeline that's typical for these hospitals that requested approval to the actual approval? Shaun Bagai: Yeah. So the sales cycle is actually quite wide. And we've seen anything from several weeks to a couple of months to several months beyond that. And I do believe that'll get shortened with constant contact with more local. We did hire a couple more regional territory managers to help drive that forward. As far as going deep, taking low-hanging fruit where we can get approvals, get on the shelf, and we do have multispecialty engagement sooner. We can shorten that timeline to within a handful of months. And what's great about looking into 2026 is we do have a very strong pipeline already. And it's really been a matter of resources to have reps be able to service those physicians and get this through the approval process onto the shelf and getting to that first patient. So the timeline is where we sit right now with, as I mentioned, 24 requests. Another few dozen behind out of interest, we can start to see those leak under fruition in the several months ahead of us. Charles Wallace: Great. And then sorry if I missed it, just maybe on the clinical side. Did you provide the patient numbers for how many have enrolled and how many events have occurred in the study for TIGER PACT? Shaun Bagai: So we did at the '2 announcing ninety-five patients randomized and sixty-one events by the '2. Now we've updated guidance that we do anticipate final enrollment to be early next year and final data in 2027. Again, as a reminder, we need to randomize a total of one hundred fourteen patients and the eighty-six deaths will trigger the final analysis. Charles Wallace: Okay. Thanks for taking my questions, and great. Shaun Bagai: Thank you. Thanks, Charles. Operator: Thank you. Ladies and gentlemen, a reminder to all the participants if you would like to ask a question, please press star and one on the telephone keypad. Thank you. As there are no further questions, I would now like to hand the conference over to Shaun Bagai for closing remarks. Thank you. Shaun Bagai: Thank you, everyone, for calling in and those listening to the recording afterwards. We're very excited with the progress we've made. As mentioned, we see the light at the end of the tunnel. We're seeing physicians and patients really seeing the opportunity to benefit from our technology here. And I appreciate you joining in and a lot of exciting things to come in the very near future. Ramtin Agah: Thank you. Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Operator: Greetings, and welcome to the Tenon Medical Third Quarter 2025 Financial Results and Corporate Update Conference Call. As a reminder, this call is being recorded. Your hosts today are Steven Foster, President and Chief Executive Officer, and Kevin Williamson, Chief Financial Officer. Mr. Foster and Mr. Williamson will present results of operations for the third quarter ended 09/30/2025 and provide a corporate update. A press release detailing these results was released today and is available on the Investor Relations section of our company's website at www.tenonmed.com. Before we begin the formal presentation, I'd like to remind everyone that statements made on the call and webcast may include predictions, estimates, and other information that might be considered forward-looking. While these forward-looking statements represent our current judgment on what the future holds, they are subject to risks and uncertainties that could cause actual results to differ materially. You are cautioned not to place undue reliance on these forward-looking statements, which reflect our opinions only as of the date of this presentation. Please keep in mind, we are not obligating ourselves to revise or publicly release the results of any revision to these forward-looking statements in light of new information or future events. For a more complete discussion of these factors and other risks, you should review our quarterly and annual reports on file with the Securities and Exchange Commission at www.sec.gov. At this time, I'd like to turn the call over to Tenon Medical's Chief Executive Officer, Steven Foster. Please go ahead, sir. Steven Foster: Thank you, Rob, and good afternoon, everyone. I'm pleased to welcome you to today's Third Quarter 2025 Financial Results and Corporate Update Conference Call for Tenon Medical. The third quarter was a very exciting time for Tenon Medical, where our progress is really showing through in our financial results. Our results demonstrate significant momentum in executing our strategic growth initiatives. We achieved record revenue of $1,200,000 with a 32% increase compared to the same period last year. This performance was fueled by unprecedented cadmium procedure volumes, underscoring strong demand and growing adoption among physicians. Additionally, the integration of the SciVantage portfolio contributed meaningfully to our top-line growth, an early indication of what our portfolio expansion strategy can deliver. These results affirm the strength of our commercial and the increasing recognition of our differentiated solutions in the marketplace. As discussed during our second quarter earnings conference call, and in line with our commitment to advancing innovation and expanding our market presence, we completed a strategic asset acquisition of CyVantage's Symmetry and Symmetry Plus sacroiliac joint fusion technologies during the third quarter. This transaction marks a pivotal milestone in our growth strategy, transforming Tenon into a multiproduct, multiproach company capable of addressing a broader spectrum of sacropelvic fixation infusion needs. The Symmetry platform brings a well-established clinical foundation and a differentiated approach to fusion, complementing our existing cadmium system. Importantly, this acquisition has been immediately accretive to revenue and enhances our ability to serve a wider range of physicians and patients. We also welcome key members of the CyVantage leadership team whose deep experience and expertise will be instrumental in accelerating our commercial execution and driving continued innovation. I'd like to quickly acknowledge the efforts of the newly combined team for efficiently coming together as one, aggressively completing integration activities, and delivering a strong quarter. Another key milestone this quarter was the full commercial launch of our Catamaran SE, SI joint fusion system, which expands our implant portfolio and strengthens our competitive position in the sacroiliac joint fusion market. The Catamaran SE features a reduced profile, offering physicians greater flexibility when treating patients with smaller SI joint anatomy or performing revision procedures. This design enhancement supports a minimally invasive inferior posterior approach and includes a proprietary instrument set with multiple drilling options catering to diverse surgical preferences. Backed by expanded inventories and field support, bolstered by our recent SciVantage acquisition, we are well-positioned to meet growing market demand. With over a thousand catamaran devices implanted to date, the system continues to demonstrate strong clinical performance across a range of indications, including primary SI joint dysfunction, revision, and adjunctive applications in complex multilevel spine fusions. The successful transition from alpha testing to full launch reflects our commitment to innovation and our ability to execute with speed and precision. During the quarter, we were proud to share that the second peer-reviewed publication from our ongoing main sales study was published. This further validated the safety, efficacy, and durability of the Catamaran SI joint fusion system. This prospective multicenter clinical trial evaluated patient outcomes in patients with sacroiliac joint disruptions, degenerative sacroiliac treated with our catamaran implant. The twelve-month data from the first twenty-four patients demonstrated statistically significant improvements in pain and disability scores. VAS scores dropped from 78.8 preoperatively to 23 postoperatively, and ODI scores improved from 51.6% to 20.8%. Notably, eighty-three percent of patients showed unequivocal evidence of fusion with bridging bone across the SI joint at twelve-month CT confirmed by independent radiographic review. The study also reported no serious adverse events, reoperations, or reinventions, and eighty-three percent of patients expressed high satisfaction with their outcomes. These results reinforce the Catamaran system's clinical value and support its role as a reliable, minimally invasive solution for SI joint dysfunction. As we continue to build our clinical evidence base, we believe these findings will be instrumental in driving broader adoption and payer coverage that supports our long-term growth. Subsequent to quarter end, we announced a major regulatory milestone with the FDA 510(k) clearance of our Symmetry Plus SI joint fusion system. This next-generation platform builds on the proven foundation of the original Symmetry system and introduces several key advancements, including 3D printed titanium implants, a robust joint decorticator, and a simplified bone graft delivery system. These enhancements are designed to support authentic arthrodesis through a minimally invasive lateral approach, rooted in established orthopedic fusion principles. With this clearance, Tenon now offers two distinct minimally invasive surgical approaches: an inferior posterior through our Symmetry Plus and Catamaran systems, respectively. This multiplatform strategy significantly strengthens our competitive position and enables physicians to tailor treatment to individual patient anatomy and pathology. We are prepared for an alpha launch of Symmetry Plus in the coming weeks. A select group of physician users whose feedback will guide our broader market introduction will be the first to use the technology. This milestone not only expands our portfolio but also reinforces our commitment to delivering durable, clinically validated outcomes for patients suffering from sacroiliac joint dysfunction. Physician education remains a top priority. In the third quarter, we hosted 26 physicians in various Tenon workshops, including critical peer-to-peer engagements. We ended the quarter with $3,400,000 in cash and no debt. Subsequent to quarter end, we bolstered our cash position with a $2,850,000 pipe financing primarily consisting of investment from industry partners, giving us the flexibility to continue executing our strategic roadmap with confidence. Looking ahead, we remain focused on driving adoption across our expanded product portfolio and leveraging recent regulatory and clinical milestones to support commercial growth. With a strong foundation in place, we are confident in our ability to scale up operations, deepen market penetration, and deliver continued value in the quarters to come. We are actively onboarding sales professionals to the Tenon commercial team through a strategic hybrid structure, and we're already seeing the momentum build into the fourth quarter, driven by the expansion of our commercial footprint and increased horsepower of our sales organization. And with that, I'll turn the call over to Kevin to discuss our financials in detail. Kevin Williamson: Thank you, Steve. I will now provide a summarized review of our financial results. A full breakdown is available in our press release that crossed the wire this afternoon. Revenue for 2025 was $1,200,000, an increase of 32.3% compared to $900,000 in the same period last year. Revenue for the nine months ended 09/30/2025 was $2,500,000, in line with $2,500,000 for the nine months ended 09/30/2024. The increase in the third quarter revenue was primarily driven by an increase in the number of surgical procedures in which the catamaran system was used, as well as the addition of sales in the last two months of the quarter from the newly acquired Symmetry SI joint fusion system. The demand for both Catamaran and Symmetry increased throughout the quarter and has continued into the fourth quarter. Gross profit was $800,000 or 66% of revenue in 2025, compared to $400,000 or 47% in the prior year quarter. For the nine months ended 09/30/2025, gross profit was $1,300,000 or 54% of revenue, compared to $1,400,000 or 54% of revenue for the previous year's period. Gross margin for the quarter improved due to higher revenue absorbing fixed overhead costs in our cost of goods sold. With a similar margin profile for both Symmetry and Catamaran, we expect our gross margin to continue to improve as revenue increases and fixed overhead costs are further absorbed. Operating expenses totaled $4,200,000 in 2025, up from $3,600,000 in the prior year period. For the nine months ended 09/30/2025, operating expenses totaled $11,300,000, compared to $12,000,000 in the prior year period. The increase in operating expenses for the quarter was primarily due to higher sales expenses driven by higher revenue and related variable commission expenses, as well as higher marketing and G&A expenses driven by integration efforts in relation to the SciVantage acquisition. The decrease in operating expenses in the nine months was driven by lower fixed expenses, including lower stock-based compensation across several operating categories. Net loss for the third quarter was $3,300,000 or $0.40 per share, compared to a net loss of $3,200,000 or $3.63 per share in 2024. For the nine months ended 09/30/2025, net loss was $9,700,000, compared to $10,600,000 in the same year-ago period. The year-over-year improvement was largely driven by reduced operating expenses and lower fixed costs, raising operational leverage. We ended the quarter with $3,400,000 in cash and cash equivalents, compared to $6,500,000 as of 12/31/2024. Subsequent to quarter end, Tenon raised an additional $2,850,000 in cash to fund future growth initiatives through a pipe financing. The pipe was led by an industry-supported investor cohort that believes in the strategic vision of Tenon and the growth opportunity in front of us. Additionally, Tenon had no outstanding debt as of quarter end, further positioning the company to continue executing on our strategic initiatives, including the development and launch of the SciVantage assets, continuing to build clinical evidence, and expanding our commercial footprint. In summary, we believe the transformational steps taken this quarter, both financially and strategically, position Tenon well to accelerate growth while maintaining a lean and focused cost structure and driving long-term shareholder value. I'll now hand the call back to Steve for closing comments. Steven Foster: Thank you, Kevin. In summary, the third quarter was marked by strong execution across our strategic priorities, from record revenue growth and the successful integration of the SciVantage acquisition to the full market launch of Catamaran SE and key regulatory and clinical milestones. We remain focused on expanding our portfolio, deepening physician engagement, and building a robust foundation for sustained growth. With momentum building across our commercial and clinical initiatives, we are confident in our ability to drive long-term value for patients, providers, and shareholders. I thank you all for attending, and I'd like to hand the call back over to our operator to begin the question and answer session with our covering analysts. Operator: Rob? Thank you. At this time, we'll be conducting a question and answer session. If you'd like to ask a question, please press 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Our first question comes from Scott Henry with AGP. Please proceed with your question. Scott Robert Henry: Thank you, and good afternoon. It's exciting to see the company come together as it approaches greater scale. A couple of questions. First, could you comment on the product revenues, how much was the kind of base CyVantage revenues of the $1,200,000? Steven Foster: Thank you, Scott. I appreciate the question. Yes. So we're, obviously, early. We had two months of CyVantage product contribution, if you will, to the top line. Right, in the third quarter. We closed right around August 1. The transaction itself. So primarily, the primary driver of our revenue was record catamaran procedures and what have you. We did a little over a million, close to a million one in catamaran revenue. And the rest of the revenue was early Symmetry activity. Keep in mind that the Symmetry activity is base what I refer to as base Symmetry technology. We're just now in the coming week or two, going to initiate the Symmetry Plus Alpha. So start seeing revenue build from Symmetry Plus here going forward. Scott Robert Henry: Okay. Great. And, you know, obviously, sequentially in the fourth quarter, you'll get another month of the base CyVantage revenues. You'll get the Symmetry Plus contribution even if it's small at that point. But would you expect Catamaran to grow sequentially from third quarter 2025 to fourth quarter 2025? Steven Foster: We do. I think, you know, look. The drivers behind Catamaran is data. You know, the main sale data continuing to come out and show that Catamaran is delivering on its promises. So we do expect Catamaran activity, number of surgical procedures, etcetera, to continue to grow. And to your point, you know, we'll get the extra month of CyVantage activity in the full fourth quarter. And, frankly, what means more to us is this initial phase of the alpha launch of Symmetry Plus. We have physicians who are really excited about getting their hands on that technology. We anticipate it'll be a good growth driver as we move through alpha. Scott Robert Henry: Okay. Great. And when we think about the Symmetry Plus Alpha launch, you know, how should I think about that? Should I think of that as a pilot launch at first, or is that a full-scale launch? Just trying to get a sense of how that launch will evolve, you know, over the next six to twelve months. Steven Foster: Yeah. I appreciate that question. Absolutely. It's the physicians that informed us and partnered with us to give us feedback on what they wanted the system to do, etcetera, will be the first users of the technology. So it's a relatively small and focused group in the first, call it, sixty to ninety days of the alpha. Then we get feedback and make absolutely sure, hey, is everything working as expected? Are refinements required? Are there tweaks required? Etcetera. To make sure this is ready for prime time, if you will, and to go to a broader audience. And at that point, we'll start expanding things pretty aggressively. So it's exactly what you said. Right? It's a bit of a pilot, if you will, for a short period of time to make sure we got everything right. And that the instruments and the implants are meeting expectations. Scott Robert Henry: Okay. Great. And just the final question, perhaps for Kevin. G&A, do you think the third quarter is reflective of what we'll start to see on a quarterly basis? Or I know you'll have another month of, should we be thinking about, you know, CyVantage, but, you know, it looks like maybe there were some one-time stuff in there as well. Is it $2,100,000 to $2,200,000 a quarter? Kevin Williamson: Yes. Good question, Scott. Fair on both of your comments. So a little bit of some one-time more integration type expenses in there. But also some increased expenses going forward. So, you know, probably somewhere just south of that number we posted here in Q3. But closer to that number than where we were previously, given some of the increased expenses going forward. Scott Robert Henry: Okay. Great. Thank you for that color. And thank you guys for taking the questions. Operator: Thank you, Scott. Please press 1 on your telephone keypad. One moment, please, while we poll for questions. Our next question comes from Thomas McGovern with Maxim Group. Please proceed with your question. Thomas McGovern: Thank you. So it sounds like you guys are well on your way to integrating CyVantage. I just want to get maybe an update on how that process is going. Is it fully done? Are there additional milestones you're looking to achieve in this integration process? Maybe just kind of high level how you view it moving into the fourth quarter. Steven Foster: Yeah. Thanks for the question, Thomas. Yeah. Look. I'm really, really proud. I mentioned it in the prepared statements here, and we'll reinforce it here. Live through a lot of integrations. Bringing people together and getting them to, if you will, take the risk to dive in, to trust each other, to get after it, and start performing as one is really the biggest challenge in these integrations. Right? And I'm just really, really pleased with the progress that we've made. Sure. There's all kinds of stuff to do with the audit itself. You know, just some of the tactical stuff that has to be done as part of an integration. It's really about winning hearts and minds. And this team is coming together really nicely as one and starting to check all the boxes so we can perform as an integrated team going forward. So just super, super proud of the work that's being done. Kevin can comment a little bit, but I think largely, we are finished now. And a good indicator of that, probably the best indicator of that, is bringing the Symmetry Plus Alpha in on time and executing on that in the course of all of the integration activities going on. You know, we'll initiate that here this month. And we're super excited about seeing what Symmetry Plus can do out there with physicians that prefer a lateral approach. So all of those things are coming together, Thomas. And I'm just really thankful to the CyVantage folks, the Tenon folks coming together and becoming the new Tenon. It really has been a pleasure to work with everybody. Thomas McGovern: Great. I appreciate that answer. Kevin Williamson: Apologies there. I can just quickly add, you know, to keep in mind this even though this was a business combination, we really acquired just the assets of CyVantage. So integrating the assets, the inventories, the know-how into our quality system and into our commercial team was really the main focus. Obviously, a focus on launching Symmetry Plus as we acquired those products right before this launch coming up here in the coming weeks. And then integrating the customer base, the physician base, distributor base to continue and accelerate sales. So I think we feel very good about how that played out throughout the quarter and how we're rolling up here so far in Q4. Thomas McGovern: Great. Glad to hear it. And, again, thank you guys for answering that. Next question for me. You guys mentioned adding commercial sales professionals. So just curious if you could maybe quantify, just give us an idea of the scope of these headcount additions. And then maybe a little bit more on kind of how you guys plan to balance marketing for Catamaran versus CyVantage and Symmetry Plus. You know, are there going to be specialized salespeople for specific products? Are these going to be cross-trained salespeople? Just kind of give us an idea of your strategy as you move forward. Steven Foster: Excellent. Yeah. So first to the scope of commercial additions. Right? So one of the many upsides to the CyVantage activity in the transaction that we did is onboarding some really key commercial members, Nate Rowe, White Geist, really experienced people that come on board that have an entire network of relationships through their years of experience, etcetera, it's going to greatly enhance what we're doing out there. We're committed to a hybrid commercial structure, meaning we'll be engaging independent distributors and ten ninety-nine resources. And that'll be managed by our direct sales management team led by Nate Growe as our chief commercial officer. So, we'd see the scope of that continuing to grow really quickly. Onboarding these distributors and getting them trained, etcetera. To your second question, these folks will be informed and trained across Tenon and all of our products in the portfolio. Right? What we want to be able to do is present ourselves to a physician as having a tool bag that will allow them to choose what they prefer in treating patients with these sacropelvic disorders. Right? They prefer lateral approaches. We want to have the state-of-the-art solution for what they're looking for. If they prefer an inferior posterior approach, we have that with Catamaran, etcetera. And what we rally around, Thomas, are the principles of an authentic fusion. Right? You'll see all of these products check the boxes of AO principles of arthrodesis. Right? We don't dance around that topic. We don't just put a screw in and say there. These are technologies, surgical techniques, and instruments that deliver across those requirements. So the distributors that we're interfacing with rally around those principles. And they will be trained on all aspects of what Tenon has to offer. Thomas McGovern: Understood. I appreciate the thorough response there. And last thing for me, you know, you guys highlighted again your clinical data. Obviously, you know, great in terms of not only, you know, educating physicians but also pursuing additional payer coverage decisions. So just curious, you know, maybe how are you weighting that as you're looking at several commercial ramp-ups, the commercial pilot program or the pilot launch, if you will, of Symmetry Plus. How are you balancing, you know, your focus on that expanding headcount and integration along with using this data to pursue, you know, additional payer coverage? Just kind of want to understand how you're stacking your priorities maybe in the next several months. Steven Foster: Yeah. Sure. So, you know, priorities were more strategic in the last two to three years as it related to, you know, engaging the process and making sure coding big picture coding issues were addressed. And that codes became clear so that, you know, things could be done accurately out in the field. That's fantastic. But you have a medical device technology. It has to be backed by prospective data in order for it to be accepted in most cases and covered by the private payers in particular. And so we're in that stage now with the publication of the catamaran data with the data that the dataset that's in place for symmetry technology, we can have a very, very thorough discussion with private payers and commercial payers and make sure these technologies are recognized and covered within their policies. So there's a great deal of work going on there. You know, it's not the fastest work in the world. I wish it was, but it's not. But working through all of that takes time and effort from a focused group. But that's a separate group from our commercial organization. Our commercial organization is really focused on engaging physicians, providing world-class training opportunities for them so they can be fully informed. World-class peer-to-peer opportunities so they can learn from physicians who have adopted these technologies, etcetera. That's really a separate set of activities, Thomas. And so, really, we're doing those things, you know, in parallel out there and really one's not prioritized over the other. They're both equally important and exceedingly important to drive our opportunities to grow going forward. Thomas McGovern: Got it. Well, thanks for answering all my questions, and congrats on the quarter, I guess. Steven Foster: Thanks, Thomas. Operator: We have reached the end of the question and answer session. I'd now like to turn the call back over to Steven Foster for closing comments. Steven Foster: Thank you, Rob. I'd like to thank each of you for joining our earnings conference call today. We look forward to continuing to update you on our ongoing progress. And if for some reason we were unable to answer any of your questions, please reach out to our IR firm, MZ Group, who'll be more than happy to assist. And with that, I wish everybody a good evening. Operator: This concludes today's conference. You may disconnect your lines at this time. And we thank you for your participation.
Operator: Good day. And welcome to the Xos, Inc. Third Quarter 2025 Earnings Call. All participants will be in listen-only mode. Should you need assistance, after today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on your touch-tone phone. To withdraw your question, please press star then 2. Please note that today's event is being recorded. Please go ahead. I would now like to send the conference over to David Zlotchew, General Counsel. Thank you, everyone, for joining us today. Hosting the call with me are Xos' Chief Executive Officer, Dakota Semler, Xos' Chief Operating Officer, Giordano Sordoni, and Xos' Chief Financial Officer, Liana Pogosyan. Today, after the close of regular trading, Xos issued its third quarter 2025 earnings press release and filed its quarterly report on Form 10-Q for the periods ended September 30, 2025. As you listen to today's conference call, we encourage you to have our press release and quarterly report in front of you, including our financial results, as well as commentary on the quarter and nine months ended 09/30/2025. Management's statements today reflect management's views as of today, 11/13/2025 only, and will include forward-looking statements, including statements regarding our fiscal year 2025 management's expectations for future financial and operational performance, and other statements regarding our plans, prospects, and goals. These statements are not promises or guarantees and are subject to risks and uncertainties, which could cause them to differ materially from actual results. Additional information about important factors that could cause actual results to differ materially, including, but not limited to, Xos' ability to access capital when needed, continue as a going concern, Xos' ability to implement business plans and identify and realize additional opportunities and potential supply chain disruptions, including as a result of changes to or uncertainty around trade policies and tariffs, is included in today's press release and in our filings with the SEC, including our most recent annual report on Form 10 and subsequent filings. We undertake no obligation to update forward-looking statements except as required by law. You should not put undue reliance on forward-looking statements. Further, today's presentation includes references to non-GAAP financial measures and performance metrics. Additional information about these non-GAAP measures, including reconciliations of historical non-GAAP measures to comparable GAAP measures, is included in the press release we issued today. Our press release and SEC filings are available in the Investor Relations section of our website at www.exostrucks.com/investor-overview. With that, I now turn it over to our CEO, Dakota. Dakota Semler: Good afternoon, everyone. At Xos, we are building something that did not exist before and doing it under constraints that might break most companies. And yet, quarter after quarter, we've shown that discipline when paired with conviction scales. It creates momentum. It compounds. And in Q3 2025, that momentum was unmistakable. This quarter, we shipped 130 vehicles generating $16,500,000 in revenue. We actually shipped 140 vehicles, including 10 strip chassis already on their way to upfitters for a major customer program. That revenue will be recognized in the coming quarters. But the signal is clear. Demand is real, customers are returning, and scale is growing. Much of this volume went to UPS and FedEx ISPs. Organizations that do not forgive unreliability, that do not tolerate downtime, and that absolutely do not adopt new technologies unless they believe in your engineering and your ability to deliver at scale. Their confidence in us is earned, not inherited. We continued fulfilling the largest single order in our company's history, a 200-plus unit order program. We believe this is the shape of the future for Xos. Deeper relationships, larger programs, repeatable volume. Our GAAP gross margin was 15.3%. This margin reflects a complex reality, a diverse mix of customers, long-term structured pricing with national accounts, and, yes, tariffs that were not contemplated when some of these large programs were originally priced. These large fleet agreements may compress margins in the near term, but they're the foundation of a durable industrial business. They create the volume and the credibility needed to expand margins in the future. And while we shipped the highest units in our history, we also drove our lowest operating loss since the business went public, to $7,000,000. That did not happen by accident. It happened because we questioned every expense, every process, and every outdated assumption about how vehicle OEMs should operate. This quarter represents the ninth consecutive quarter of positive non-GAAP gross margins. Many companies talk about discipline. We have lived inside it, and it shows. We've also strengthened our liquidity while continuing to invest in the opportunities that are expanding around us. I want to personally acknowledge the Alger Mae Automotive Company whose support of Xos has been unwavering. They have seen our progress up close, and they've seen the technology, the execution, and the market shift towards reliability and total cost of ownership. Together, we amended the repayment structure of the convertible note, moving from a single August 2025 maturity to quarterly installments from November 2025 through February 2028. This is not just a restructuring. It's a strategic alignment. It allows us to operate from a position of focus rather than constraint. Interest accrued to the original maturity was paid in common stock in August 2025, making Algerme our largest shareholder. A strong signal of their conviction in our long-term trajectory. We will continue to pursue capital strategies, equity, debt, or hybrid structures that allow us to scale responsibly and capture the opportunity in front of us. Even as the step in continues to drive substantial revenue, our strategy has never been limited to a single product. We are deliberately expanding into higher margin, lower concentration categories, including powertrains and energy infrastructure. This quarter, that strategy became real. We delivered 18 powertrain systems to Bluebird Corporation this quarter, and since quarter end, we've received nearly 80 additional powertrain orders. School districts are electrifying faster than anyone expected, and our technology, which is modular, reliable, and highly serviceable, is becoming the backbone they trust. And speaking of school districts, we are actively selling into that market right now. Gio and I are in Austin this week for the Bluebird annual dealer meeting, demonstrating firsthand why Xos powertrains outperform on reliability, serviceability, and total cost of ownership. Our presence here is already opening doors, and we expect this engagement to translate into significant commercial opportunities over the next one to three years as we expand our pipeline in the massive school bus market. And then there's the Xos Hub. Grid constraints are not a theory. They are the single largest friction point in North American fleet electrification. The hub addresses this head-on. It's not a prototype. It's deployed. It's working, and its impact is expanding far beyond transportation. In Q3, deployments and demonstrations accelerated, and interest in the hub broadened meaningfully. We also showcased the hub at RE plus, the largest renewable energy conference in North America, where it drew significant attention from utilities, energy developers, and industrial users looking for mobile power, resilience, and peak shaving solutions. The response confirmed what we already knew. The hub addresses a problem that almost no one else in the market is addressing effectively. We're now preparing the 2026 hub update, which will deliver greater power resilience, energy cost optimization, and advanced load balancing capabilities. This isn't just a charging product. It's a mobile energy platform capable of serving industrial users who require temporary power, peak shaving, and resilience in environments where grid and infrastructure is either delayed or nonexistent. This dramatically widens our total addressable market and it positions Xos as an energy systems company, not just an electric truck company. All in, Q3 2025 was a milestone quarter. We achieved record deliveries, maintained revenue momentum, substantially improved operating performance, and further validated that our cost discipline and product strategy cannot only maintain operations, but accelerate it. As we look ahead, the opportunities in front of us are expanding, not contracting. Order sizes are increasing as customers experience the real-world cost advantages of our trucks and our charging solutions. And our product pipeline, including the upgraded hub, and our foray into power resiliency solutions, aligns with secular markets that will grow regardless of political cycles, incentives, or noise. I believe we are experiencing what durable industry companies go through in their formative years, pressure, discipline, breakthroughs, and the unmistakable feeling that the work is beginning to gain traction. With that, I'll turn it over to Gio to walk through the operational highlights of the quarter. Giordano Sordoni: Thanks, Dakota, and good afternoon, everyone. Q3 was another quarter of steady execution, disciplined operations, and forward momentum as we continue to deliver for customers and position Xos for sustained long-term growth. Our Tennessee plant remained the cornerstone of our success this quarter, running efficiently and producing at a consistent cadence for our major fleet customers. We continue delivering on our UPS order, demonstrating our ability to maintain quality at scale for one of the world's largest and most demanding fleet operators. With a small, highly capable production team, we achieved rates of three chassis per day, underscoring our ability to efficiently scale into higher volumes. Our engineering, supply chain, and production teams also responded quickly to customer requests during the quarter, designing and deploying product improvements that enhance reliability, serviceability, and customer satisfaction across our chassis line. Production of our innovative mobile charging system, the Xos Hub, also continued in Q3. The hub remains one of our most differentiated offerings in the market, providing fleets a fast, flexible, and cost-effective way to deploy electric vehicles without waiting for fixed infrastructure. The hub allows these fleets to speed up the time it takes to deploy fast charging, skipping lengthy permitting, utility power upgrades, and construction processes. Customers are now using the hub across a broad range of segments and unique charging use cases, including electric trucks, school buses, light-duty electric vehicles, and even autonomous vehicle fleets. The hub engineering team has been hard at work developing new variants aimed at further expanding the product's addressable market and enabling new use cases. Q3 also marked the expansion of our powertrain production capabilities, as we advanced new powertrain variants for the Blue Bird School Bus Company. These efforts further validate the versatility and maturity of the Xos powertrain platform and strengthen our position as a trusted electrification partner for vehicle manufacturers seeking proven and road-tested solutions. As we close out the year, our focus has shifted towards setting the stage for 2026. Across our trucks, powertrains, and hubs, we're preparing for continued growth that we expect will bring higher volumes and a broader customer base. In Tennessee, we've begun expanding the hub and powertrain assembly areas within our factory in anticipation of 2026 demand. These improvements will allow us to scale efficiently without production increases without significant increases in capital expenditure, while maintaining flexibility across product lines. Q3 reinforced what makes Xos unique: reliable execution, engineering innovation, operational discipline. We continue delivering for our major customers like UPS, built new hubs, advanced powertrain programs with OEM partners, and invested in the foundation to support our next phase of growth. As we look ahead, our team is focused on finishing the year strong and carrying this momentum into 2026, where we see significant opportunities across all three pillars of our business: trucks, powertrains, and charging infrastructure. With that, I'll hand it over to Liana for financial review. Liana Pogosyan: Thank you, Gio. Third quarter 2025 revenue was $6,500,000 on 130 units, down from $18,400,000 on 135 units last quarter and $15,800,000 on 94 units a year ago, reflecting strong execution of our delivery plan and major shipments to customers like UPS, Bluebird, and FedEx ISPs. While we recognized revenue for 130 units this quarter, as Dakota mentioned, we actually shipped a total of 140 units. For 2025, revenues totaled $40,800,000 on 294 units compared to $40,500,000 on 246 units in the same period last year. We delivered more units year over year, reflecting strong demand, so the shift in product mix driven largely by our strip chassis product and powertrains resulted in a lower average selling price and a modest decline in total revenue. GAAP gross margin was 15.3% in the third quarter compared to 8.8% in the second quarter this year and 18.1% in 2024. The sequential increase was mainly driven by changes in product mix discussed earlier, including more powertrain units sold, which generally have a higher margin than strip chassis and step vans. In addition, we had a higher ASP from the sale of UPS strip chassis this quarter due to a negotiated rate to include the impact of tariffs. Non-GAAP gross margin was 16% this quarter, up from 1.4% in Q2, mainly because inventory-specific reserves increased this quarter, are added back in the non-GAAP number. This marks our ninth consecutive quarter of positive non-GAAP gross margin. For 2025, non-GAAP gross margin was 9.3% compared to 16.6% in the same period last year. We remain confident in our ability to improve margins over time as we scale production and execute on cost reduction initiatives. Turning to expenses. Operating expenses were $9,500,000 in the third quarter, up $800,000 or 9% from the second quarter this year and down $3,000,000 or 24% from 2024. For 2025, operating expenses totaled $28,700,000, a $10,300,000 or 26% improvement from $39,000,000 in the same period last year. These sustained reductions demonstrate the structural impact of our prior cost-cutting actions and reinforce our disciplined approach to managing the business. Operating loss for the quarter hit a record low since going public at $7,000,000, down from $7,100,000 in the second quarter this year and down from $9,700,000 in 2024. Non-GAAP operating loss since the business went public also hit a record low at $4,800,000 compared to $6,900,000 in the second quarter this year and $6,600,000 in 2024. For 2025, operating loss was $23,300,000, improving from $31,300,000 in the same period last year. While non-GAAP operating loss also improved to $19,700,000 from $25,700,000 in the period last year. Moving to the balance sheet. We ended the quarter with $14,100,000 in cash and cash equivalents, up from $8,800,000 at the end of last quarter. Our improvement in liquidity this quarter was boosted by three main factors. First, successful launch of our ATM program, which generated $2,400,000 in net cash proceeds this quarter. Second, strategic inventory management. Inventory declined to $25,200,000 from $31,000,000 last quarter, driven by strong unit sales outpacing production as we move more units from existing inventory, reflecting our ongoing inventory management to support upcoming deliveries. Third, accounts receivable came down to $15,400,000 at the end of the quarter from $21,000,000 at the end of June. We had very strong collections this quarter, about $18,700,000 from customers as well as Stategram program administrators. While our UPS delivery carries longer payment terms, which increased new receivables in the quarter, we feel well-positioned for continued solid collections going into next quarter. Our focus this quarter has been on execution, financial discipline, and strengthening the foundation for sustained growth. During the quarter, we took strategic actions to strengthen our balance sheet and extend our financial runway. We amended our $20,000,000 convertible note, extending principal payments quarterly starting in Q4 2025 through early 2028 to enhance liquidity and provide greater flexibility. We also reached an agreement to terminate our Mesa facility lease that we acquired as part of the EMV acquisition during the first quarter of 2024, which is expected to generate approximately $20,700,000 in cash savings through 2033. Although we're no longer responsible for rent on the Mesa facility, the termination agreement does require us to make 18 monthly payments totaling about $2,800,000. As part of the termination, we also recognize a $9,400,000 gain in non-operating income along with other required GAAP adjustments such as the removal of the related operating lease liabilities. We continue to actively manage our liquidity position and are exploring additional opportunities to further enhance it. Together, these actions demonstrate our disciplined approach to capital management and our ongoing commitment to positioning Xos for long-term stability and growth. Beyond the balance sheet actions, we continue to execute well operationally. We generated positive free cash flow of $3,100,000 in the third quarter, marking the third time we've been free cash flow positive since going public. This is down slightly from $4,600,000 in the second quarter but is a major improvement from negative $11,700,000 we reported a year ago. That progress reflects strong deliveries and continued discipline in managing working capital. Finally, turning to guidance, we are reaffirming our full-year 2025 guidance for revenue and unit deliveries and previously revised non-GAAP operating loss guidance. Revenue between $50,200,000 and $65,800,000, non-GAAP operating loss between $24,400,000 to $26,900,000, and unit deliveries between 320 and 420 units. With that, I'll turn the call back over to Dakota. Dakota Semler: Thank you, Liana. Stepping into 2026, momentum behind Xos is unmistakable. Our priorities are clear: accelerate growth, reinforce liquidity, and continue expanding margins with precision and discipline. Over the last twelve months, we've shown that a company can be both lean and innovative, that you can run efficiently without sacrificing the strength or competitiveness of your product portfolio. We built a deep and diversified sales pipeline even while navigating global supply chain disruptions that caught much of the industry off guard. Our ability to adapt quickly to absorb unexpected shocks, and to keep delivering for customers is one of our defining capabilities. And customers notice. In a marketplace that changes by the week, resilience and reliability are currency, and they're becoming core reasons fleets are choosing Xos as a long-term partner. As we move toward what we expect to be our largest and most transformative year, our confidence is only growing. We believe we're positioned to confront challenges head-on and to continue building the most durable, dependable business in our sector. With that, I'll hand it back over to the operator for questions. Operator: Thank you. We will now begin the question and answer session. If your question has already been addressed and you'd like to remove yourself from the queue, please press star then 2. At this time, we'll pause momentarily to assemble our roster. And today's first question comes from Craig Irwin with ROTH Capital. Please go ahead. Craig Irwin: It's Andrew on for Craig. Congrats on the continued progress, and thanks for taking my questions. First one for me is on the hub. I mean, the use case for fleets is pretty obvious. But I think we're seeing increased activity here in the autonomous vehicle space. And you guys have talked about increasing demand for uses such as backup power applications. So how should we think of the opportunity for the hub platform now? Dakota Semler: Yeah. Andrew, thanks for the question. With the hub opportunity, I think there will continue to be in the realm of double-digit growth in the next year for that EV charging segment, which is supported by a lot of our fleet customers. But also customers beyond the customers of Xos trucks. So one of our larger customers that we've talked about is Waymo, the self-driving car company. They've been continuing to grow their purchases with us. We also have several utilities and state transportation agencies like Caltrans who bought quite a few units. So we continue to see that market growing at a very stable clip. But our power resiliency and backup power functions are going to be launched next year, and that's another opportunity that we believe far exceeds the growth potential of the EV charging market. As you may know, the power cost in the US and Alaska five years have risen anywhere from 20-50% depending upon where you are in the States and what utility you're in. And that incremental cost is borne by consumers and borne by businesses. And while a lot of that market has been addressed by the consumer market has been by residential energy storage, there hasn't been a large influx of commercial and industrial buildings adopting energy storage. So we view significant opportunities in that market to participate in wholesale power markets, to do demand response programs, and to ultimately help businesses with reducing their total energy cost. So that's really where our focus on growth is going to be for the hub in the years to come. We haven't provided specific guidance around how we're quantifying that growth and volume, but we expect it will follow similar trajectories to the launch of the hub charging system and also continue to be a higher margin product, that's really more of a unique product in a segment that hasn't been widely addressed by other suppliers in the space. Craig Irwin: Great. Well, seems like an exciting opportunity, and thanks for the details. Second one for me here is on your chassis deliveries to Blue Bird. It seems like they're accelerating. You guys said, I believe, eighty more orders following quarter end. You touched on it in the prior remarks, but can you just talk about customer feedback, what you're seeing, and what's kind of driving this accelerated growth? Dakota Semler: Yeah. Absolutely. It's been an exciting partnership with them, and we've continued to build this over the last couple of years, and it's finally starting to take hold. We've delivered those first 20 or so units, and they're actually operating with a customer up in the Northeast right now. And one of the exciting things for us is that Blue Bird has been selling electric vehicles for many years now, working with other powertrain providers. And their powertrain options, I would say, are more limited than what we can provide. So one of the first projects we helped them bring to market was a shorter wheelbase powertrain configuration that hadn't been an option before for some of these short wheelbase school buses that are used in city environments. And so we packaged that first powertrain on with them over a year ago, went through the full durability and validation process. And now that's in market with customers. And if there's anything we've learned this week from being at the Bluebird dealer meeting in Austin, it's that there's a lot of interest in that product beyond the initial launch customer. So we mentioned that we've got those additional follow-on orders subsequent to the quarter close. And we are actively working on additional variants with increased capacity and range that will ultimately start marketing to the Bluebird dealer body as well as many of their national accounts. What's really exciting about that is there's a significant growth opportunity in school bus. We're still seeing high rates of electrification. Bluebird being the leading alternative powertrain provider in the school bus industry, and we are going to be their first LFP battery option and powertrain option. Which will, I think, significantly help with their customers in adopting these just because, again, it's going to increase the reliability and the resiliency of these battery packs. School bus fleets, which obviously, reliability and durability and longevity for their fleet, is top of mind. It's probably one of the single most important evaluating criteria when they're making a determination of which partner they work with. So we expect that to continue to grow into 2026 pretty substantially, and hopefully, we'll be able to talk about that more by next quarter and give a little bit more detail on those orders beyond the additional 80. Craig Irwin: Great. Well, I appreciate the color. And last one for me. If I may. You guys had another solid quarter of unit deliveries. I believe you're at 294 for the year. You reiterated your guide of 320 to 420 for the year. Can you just talk about the puts and takes reaching kind of the high and low end of the guide there? Dakota Semler: Yeah. As we've talked about in the past, we always have seasonal and that's attributed to the industries that we serve. Delays in delivering through Q4. We work with the largest parcel delivery companies in the world. And many of them, meaning, once the Thanksgiving holiday starts, are operating during their peak season in Q4. Their network volumes can often double, and they're dealing with a lot of other additional growth and package volume than they normally do. So it's generally a lighter quarter from our key customers in Q4. So we expect a little bit of that impact to hit us in Q4. We still expect to remain within that guidance range. But there'll be other deliveries in Q4, such as powertrain deliveries and some other customers and hub deliveries, that will continue to round out the year. And then we expect that to continue to grow back in Q1 and Q2 of next year. Craig Irwin: Great. Well, appreciate the color, congrats on strong results. Operator: Thank you. Our next question comes from Ted Jackson at Northland Securities. Please go ahead. Ted Jackson: Thank you very much. And I will echo congratulations on a quarter. It went well across the board. Dakota Semler: Thanks, Todd. Ted Jackson: Let's start with tariffs, Dakota. You know what I mean? So one of the comments that you made in your prepared remarks was that you were able to do some renegotiation with UPS with regards to tariffs. I guess the first question around tariffs is, have you been able to price adjust that across your product offering at this point? Or is there still some impact that's that will come to bear as we roll through going forward? Dakota Semler: Yeah. I'm happy to start, and I'll pass it over to Gio to follow on. But I think we're taking a multistep approach to insulate ourselves from the volatility that we've experienced this year from tariff regime changes and uncertainty in the tariff environment. The first of which is focusing on reshoring or getting as much domestic content as possible to make sure that we don't face this kind of volatility in the years to come. The second is working with our suppliers and sharing in that cost and helping us to realize better cost improvements or accelerated cost-down efforts that they understand, obviously, will help them grow their sales pipeline with us. But sharing in some of that exposure has been, I think, the second most important decision. And then the third and last area is just, again, an effort to work with our customers not to just increase prices to them, to give them clarity around the tariff changes that have impacted us. And then figure out how we share in that tariff exposure. And we want to build long-term durable relationships with our customers. These aren't fly-by-night customers. They're some of the most sophisticated fleets in the world. And so our efforts are not just to pass everything along to them, but to demonstrate to them that we're willing to work together to share in that cost exposure while still trying to reduce the acquisition cost of our vehicles for them so they can be competitive from a total cost of ownership standpoint. And ultimately get these vehicles to near price parity with diesel vehicles. I'll let Gio add a little bit more context too. Giordano Sordoni: Yeah. I think Dakota hit the nail on the head. It's really been it our supply chain team busy with tariff changes starting earlier in the year. We've seen some continued at least talk of changes. So we are keeping our options open, working with our supply base, establishing backup supply in critical parts where needed. And it's really on the cost front been an open conversation, and there's been willingness to share in some of the cost increases between ourselves, our suppliers, and our customers. And we're doing everything we can to make sure we can guarantee supply going forward without blowing up costs. Ted Jackson: Okay. Next question. First, to verify so you shipped 18 powertrains to Blue Bird during the third quarter? And then you had 80 orders since that time. Dakota Semler: Yeah. Approximately. We've I think it closer to exactly 75 incremental orders. But, yeah, we've had substantial follow-on since we made those other deliveries. Ted Jackson: And then if you did 18 powertrains, did you have any hubs went out during the quarter? Liana Pogosyan: Yeah. It'll be in the queue as well. Ted Jackson: If you don't have it in front of you, it's not that big of a deal. So then then I and then so Liana Pogosyan: Yeah. We actually we did have an incremental hub. While we don't disclose the breakout between powertrain and hubs, we did have hubs deliveries as well this quarter. Ted Jackson: So usually, actually, you do break it out in the queue. Anyway so then you with the 75 new powertrains, those will will those be get are those the bulk of those will will ship? Ship in 2026? Dakota Semler: That's correct. Yeah. Ted Jackson: So then it's been when I think about that, like, so how this growing? Fat you know, fast. Powertrains is growing fast. You're bringing the cost of tariffs more in line. So, you know, you so if you go forward, you're gonna have a mix shift towards your higher product margin products in '26 along with you know, less of a drag on tariffs. What can we think about when we I mean, if it's more of a general concept, but what kind of margin improvement do you think you could get you know, in '26 vis a vis '25 with all those those, you know, tailwinds, if you would. Dakota Semler: Yeah. Well, we haven't provided specific guidance around next year. I think when we look at the margin profile of our core truck products, it's really variable depending upon our customer profile, and that can be you know, as low as the low teens to kind of the mid 20% gross margin range. Based upon product configuration specifications, customer pricing, you know, bulk purchases, things of that nature. When we look at our other product lines, like the powertrain and the hub business, those are generally, I would say, in the kind of 15 to 35% range with the hub representing that higher end of that range, and the powertrain configuration representing kind of the lower to the middle portion of that range. So you're right in assuming that the margin mix will shift towards the higher end of our margin spectrum. And that's something that as we work with our partners and our customers, I think we can continue to mitigate and minimize the exposure and disruption from tariffs to further improve that in a way that benefits both of us and hopefully improves margin on our powertrain kits as well as on their end-user products that they're selling to their customers. Ted Jackson: But, I mean, is it fair to just conceptually that, you know, the chances are that you'll have, you know, a noticeable improvement with regards to your margins. In '26 versus '25 because of how the mix is of your business is changing. Dakota Semler: Yeah. I think that's a very fair assumption. Ted Jackson: Okay. And then can I can I touch over on the lease So you're you have a $2,800,000 that you're gonna be paying over the next eighteen months? Is that what you said? Dakota Semler: That's correct. Ted Jackson: Yeah. So then so so basically then it's like what is it like? You know, you know, 450 a quarter, 470 a quarter, and then you'll be done in you know, like, you know, you know, as you exit 26 for the most part, you know, in the twenty seven. And then if that is then you know, and then with regards to working capital, you know, you've made tremendous progress with regards to, you know, your working capital in the last couple of quarters. Can we expect to see continued improvement on that as we go into in the fourth quarter and then beyond? Dakota Semler: Yeah. That's a deliberate part of our focus. I have to beg Gio to make any payments and to release any payments that are going out to our vendors. But, no, in all honesty, I think it's a team effort across the company to focus on how we can manage cash flow, how we can improve receivables collection. And we've had some very supportive customers that have been willing to work with us on the terms that we offer them and ensuring that they're adhering to those terms and paying in a more timely manner. And one of the most significant drivers of this is that increased product mix away from trucks and direct sales of trucks will reflect lower, you know, proportion of those sales being driven by incentives. And so that'll shorten our receivables time dramatically if we don't have to collect from those incentive agencies or government agencies. Ted Jackson: And so so then we so we we should expect to see, you know, you know, just generally speaking as we go forward, an improvement in DSOs and I mean, I tend to look at inventory on a day's basis too, but in a continued improvement there, relative to what you know, the progress that you've made and the second and the third quarter, we'll see even more improvement kind as we march forward over the next several quarters. Dakota Semler: That's fine. Ted Jackson: And then my my last point is is is kind of a question and kind of more just asking for some commentary. you know, You know, there was a, it was I just saw it in the journal today, so the timing was just kind of capital is perfect. But one of your peers, Harbinger, did a raise of I don't know, it was like a $150,160,000,000 dollars with FedEx. And I still need it and and you know, and then FedEx is like, they say that, you know, FedEx is basically gonna take a lot of their product and they're spewing it out that they're gonna ship 3,000 units. Next. Year. I mean, you know, like, how do you think about that? Does that give you an kind of pause as it relates to your relationship with FedEx? Or you know, you also could look at it, the fact that they're able to raise that kind of money that, it says it's a it's also an option. So you don't say, hey. Yeah. A vote. If you would, of of confidence in your end markets and the that you yourself face. I mean, having a little discussion about that. Yeah. Dakota Semler: Think from, I'll I'll kinda segment the question, but I think from a capital markets standpoint, it's an incredible validation and proof point that there's still interest from investors in investing into the transportation business and into commercial electric vehicles, which we see as a very positive indicator because in the last couple of years, it has been different in what we saw from the fundraising environment in the preceding few years. And so I think that's a great indicator for our industry as a whole. And for our ongoing access to capital. Secondly, I think pertaining to the commercial opportunity that exists, you know, we view FedEx as a critical customer of ours, and I a key customer, and we want to continue to work with them. We've built an incredible relationship with the Express team in Memphis and also the former ground team in Pittsburgh. It is now a part of FedEx corporate and I think that relationship will continue to extend actually messaged them and congratulated them this morning on the announcement. And I think we see them as a strategic partner. And one thing I'll I'll mention, which I think is really important relevant is these large parcel delivery companies and large fleets they don't sole source. With any of their products and any of their technology in their fleets, they're always gonna have generally two to three, sometimes even four primary suppliers they work with to maintain some competitive tension, to make sure they don't have too much exposure to a single company. And we see another company in this space as a validation that the industry is still growing, there's still opportunity, and there's still really strong customers, are willing to make investments and grow in this segment. I think, you know, for us, FedEx is one of many customers that we have, but we're still excited very excited about working with them and continuing to work with them. And to this point, it's not referred to as FedEx Ground anymore, but for their contractor business, we are the largest electric vehicle vendor with more electric vehicles than anybody deployed across their network. And so I think we expect that trend to continue, and we'll keep working with the contractors as well as with their fleet management, their centralized fleet management for their corporate-owned fleet. So I think it actually bodes well for the industry and for us as a company. Ted Jackson: Great. So, again, congrats on the quarter. You I mean, literally, you just you just moved the ball. You know, move as my my wife says, you moved the chains. And you did it on every front in your business. So congrats. Dakota Semler: Thank you, Ted. Appreciate you calling in. Operator: Thank you. And that concludes our question and answer session and today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.
Operator: Thank you for standing by. And welcome to TMC the metals company Inc.'s Third Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. To remove yourself from the queue, you may press star 11 again. I would now like to hand the call over to Craig Shesky, CFO. Please go ahead. Craig Shesky: Thank you very much. Please note that during this call, certain statements made by the company will be forward-looking and based on management's beliefs and assumptions from information available at this time. These statements are subject to known and unknown risks and uncertainties, many of which may be beyond our control. Additionally, please note that the company's actual results may differ materially from those anticipated and except as required by law, undertake no obligation to update any forward-looking statement. Our remarks today may also include non-GAAP financial measures, including with respect to free cash flows, and additional details regarding these non-GAAP financial measures, including reconciliations to the most directly comparable GAAP financial measures, can be found in our slide deck being used with this call. As always, you are welcome to follow along with our slide deck, or if joining by phone, you can access it at any time at investors.metals.co. And I'll now turn the conference call over to our Chairman and CEO, Gerard Barron. Gerard Barron: Thanks, Craig, and thanks to everyone for joining this call today. I also like to start our quarterly calls with a small bit of reflection. After so much news this year, it's hard to believe that it's just over seven months since we announced our pivot to The United States. And since then, we have seen President Trump's executive order to support this industry. We've launched three applications with NOAA including the first-ever application for a commercial recovery permit. We've seen new investment flow in from Korea Zinc, the Hess family, and even more investment from our partner, Allseas. And as outlined during our strategy day in August, we have published two SEC-compliant technical reports showing a total resource value of more than $23 billion. All the while, progress with our new regulator, NOAA, has continued, and the tailwinds for critical minerals from both public and private capital providers have only become more clear. And yet, I'm sure many of you are chomping at the bit for more news. And I don't blame you. Yes, we've been relatively quiet in our messaging over the last couple of months, but please don't take that as a sign that things are slow around here. Quite the contrary. And beneath the calm surface, our feet are pedaling faster than ever. And I'm very eager to share more color when the time is right. But let me summarize where we are right now. We continue to feel confident that our US pivot will lead to a commercial recovery permit in 2027. Our regular with NOAA and the US government are productive, and we believe that the directives in April's executive order will be delivered upon including the recent reports of NOAA's streamlined application review process sent to the White House. And given our robust cash position, I can assure you that we have no need anytime soon to tap the public capital markets. We're in an excellent liquidity and capital position with approximately $165 million of liquidity today, inclusive of our recent warrant exercises and over $50 million of potential additional proceeds from in-the-money warrants. This does not factor in the potential $48 million proceeds from the Korea Zinc warrants at a $7 strike price nor the Select business combination warrants at $11.50. Nor the warrants held by our sponsoring stakes. We see a pathway for more than $400 million of incoming cash from warrant exercise. Certainly, we and our partners have plenty of work to do as we prepare for commercial production targeted for 2027. And we have a strategy in place to ensure we can do so in a shareholder-friendly fashion. But let's start today by highlighting the problem that we're looking to solve for The United States and remind ourselves why this remains such a critical resource. Today, America is critically dependent on foreign sources for the very metals that it once dominated in the late nineteenth through to the mid-twentieth centuries. For manganese, cobalt, and nickel, America now imports roughly 100%. Even copper is nearly half imported. And just this month, copper joined the other three metals on the critical mineral list published by the US Geological Survey. So this is a major strategic risk. We're not just talking about metals. We're talking about national security, energy independence, and industrial resilience. A resource of 1 billion tons of nodules can fundamentally transform The United States, offering not just mineral independence, but strategic dominance in three metals. Based on today's level of American consumption, it could supply 300 years of manganese and 200 years of cobalt and almost a century of nickel. And through public-private partnerships, the administration is clearly taking steps to solve vulnerabilities in rare earths and lithium. Base metals, and beyond. Major financial institutions are also following suit. And we believe that for nickel, cobalt, and manganese in particular, our nodule resource provides the most scalable and economically viable solution for our reindustrialization in The US. And it's clear that The US sees seafloor resources as a key part of a broader solution. Just last week, the United States and Japan announced a landmark partnership to develop rare earth minerals from seafloor muds around, Minamitori Island. A framework signed during President Trump's recent visit to Tokyo. And Japan will now begin preparations to test the feasibility of listing rare earth muds as early as January 2026. With larger scale test mining anticipated one year later. Separately, we're also pleased to announce that Allseas' Hidden Gem vessel will play a key part in Japanese nodule collection trials, alongside the University of Tokyo. The Hidden Gem will head to Japan's exclusive economic zone near Minamitori Island to conduct new nodule collection pilot in early January 2027. And this represents the perfect opportunity to test our own technical readiness and some of the planned upgrades to the mining equipment while also helping the Japanese advance their own industry. Together with Allseas, we also see this as a very good commercial opportunity whilst we await the NOAA permits to be issued. So the US government shutdown slowed progress on NOAA's review of our applications over the course of several weeks. But with the government returning to work, our applications will once again continue to systematically move through NOAA's regulatory process. In fact, NOAA confirmed to us earlier today that they are back at work and again focused on these applications. And as a reminder, NOAA has confirmed that both the exploration applications were fully compliant and our exploration applications are currently in the certification stage which involves an interagency review of the applications. Following certification, an environmental impact statement or EIS is expected to be prepared under NEPA, and a public comment period will be provided. And following the public comment period, NOAA will determine whether to issue the requested licenses and permit, and if so, under what terms and conditions. In July 2025, NOAA issued proposed amendments to its regulations on the DISHRA. And the proposed regulation introduces a new consolidated application procedure, allowing applicants to submit a single application for both an exploration license and a commercial recovery permit. And these changes are intended to modernize and streamline the permitting process under DSHMRA's implementing regulations. The public comment period closed on September 5, 2025. And on October 29, it was reported that NOAA had sent the proposed regulations to the White House for approval. Over the past week, our and environmental teams attended the underwater mineral conference in Florida. And during this event, former long-time ISA secretary general gave a tremendous speech, which provided some important context on The US seabed mining rate regulations. Bottom line, in his eyes, The US has been legally consistent for decades and NOAA regulations from the 1980s actually formed the basis for the ISA exploration regulations. And, of course, this is firmly in line with the conclusions of TMC our council, and the United States government DISCHFARA and the NOAA implemented implementing regulations are clear effective, sophisticated, and enforceable. Next week, Craig will be presenting at the benchmark Week Conference in LA, and Michael Lodge and a representative from the US Department of Interior regarding seafloor resources. He'll also be meeting with automakers battery makers, and investors as our path to production has never been more clear. On that note, I'll turn it over to Craig to walk through some project updates and the financials. Over to you, Craig. Craig Shesky: Thanks, Gerard. So before getting into the economics and financials, it's worthwhile to take a step back and recognize the myriad world's first that this company has already achieved. Alongside our partners. TMC the metals company Inc. has now produced the first SEC and Canadian compliant resource statements the first PFS for a nodule project, and the first reserves for a nodule project. We've achieved the first production of most of the metal products that we intend to produce, with significant flexibility based on market conditions and customer needs. We built on decades of environmental research, pioneered originally by our regulator, NOAA, including the largest deep-sea dataset ever produced. In 2022, we and our partner, Allseas, achieved the first integrated pilot mining test since the 1970 lifting over 3,000 tons of nodules to the surface. Of course, we're building on the work of many pioneering US companies, back in the 1970s. So nearly fifty years ago, when this industry first took shape, US companies tested a range of technologies to collect nodules. These early pioneers understood the challenges, given the technology available at the time, their decisions were very sensible. Lacking today's advanced buoyancy systems, engineers feared heavy tracked vehicles might get bogged down in soft sediment. The Ocean Minerals Company, therefore, developed an Archimedes group of propelled miner that relied on deep-sea sediment sinkage for traction. Its rotating collector head with hooked teeth gathered nodules effectively, but without the height adjustment, it ingested excess sediment and struggled on some uneven terrain. Inside, crushing nodules for proved very problematic. As sediment and fines repeatedly clogged the mechanism. With only a nascent understanding of the pelagic communities, sediment-laden water was discharged at the surface, into the ocean's most biologically productive zone. Fast forward fifty years, and we can see clear benefits of partnering with a company that made its name pioneering the development of offshore oil and gas. With over 250 engineers working on the project, Allseas based engineering decisions on decades worth of environmental data. Resulting in a system designed from the seafloor up to deliver minimize, excuse me, to minimize impact also delivering maximum pickup efficiency. And that principle is evident in five key innovations. Our Kawanda nozzles, our Kowanda nozzles refined through modern modeling and real-time height adjustment dramatically reduce sediment intake. Inside the vehicle, differential flow and countercurrent washing clear nearly all sediment from the nodules while advanced rear diffusers keep the sediment plume localized, and predictable. Where early pioneers struggled to keep collectors from sinking, our challenge was the opposite. Advanced buoyancy allows our collector to move gently across the seafloor Resource. From bench-scale lab testing of single-digit kilo samples, to commercial-scale processing on 2,000-ton batches on existing plant lines, we now know that we can take our nodules from seafloor, to high-value products in various formats to support a variety of industries. And recently, we delivered another industry first, the successful conversion of nodule-derived manganese silicate into battery-grade manganese sulfate. This is a very important milestone for two reasons. First, it demonstrates that our nodule resource can produce three key metals in sulfate form. Nickel, cobalt, and now manganese, using a conventional hydrometallurgical route. Second, with this achievement, TMC USA now has a clear pathway to produce every feedstock required for precursor cathode active materials or PCAM. Including for the manganese-rich chemistries that major US automakers are moving toward in their next-generation EV platforms. This work was done using nodule-derived manganese silicate refined, at Kingston Process Metallurgy's operating facility in Ontario. Further validating the flow sheet we've designed and the scalability of our partner's technology. And importantly, this now extends our track record of nodule-derived firsts. Nickel sulfate, cobalt sulfate, manganese sulfate, reinforcing that the resource is real, the chemistry works, and the technical risks continue to come down. Now this hard-won portfolio of innovation means that TMC is the world leader in nodule project development, and it leaves us in the pole position to kick start an entire industrial ecosystem around this resource. Our extensive investment in scientific research gives us the most comprehensive deep-sea dataset ever compiled. Making this data available to NOAA, enable updates to the programmatic environmental impact statement has not been refreshed since 1980, and will materially reduce the burden every other US company that might operate in the clearing and clipperdin zone. On the processing front, our proven flow sheet opens the door to take clearing clippered enzyme nodules, and turn them into high-value products. And this means real offtake potential and optionality for future American refining capacity as laid out in our prefeasibility study. In collection technology, our scale positions us to accelerate a broader domestic supply chain from riser systems and dewatering units to subsea equipment and discrete nodule pickers. Operationally, we see clear opportunities to share vessels, assets, and methodology with other players. And finally, in survey technology, we're already working with USAUV, ROV, buoy, and subsea battery developers. And we've committed to NOAA that our offshore campaigns can support third-party tech testing. This is how you build a new industry by creating an ecosystem not just a single project. And as many of you know, our strategy day in New York talks quite a bit about this first project, our prefeasibility study and initial assessments, which had two documents including sign off from qualified persons, showing a combined project net present value of $23.6 billion while also showing a clear capital-efficient path to first production. And, the PFS also included a world first reserves for a nonprofit. Just a quick reminder on the geographical areas that each study covers. The PFS covers the area known as an OED, here seen on the slide in dark blue. And the initial assessment covers everything else. But keep in mind that neither study covers the additional ground that we've applied for under The US law, where we now have priority right. Just a quick reminder of some of the economics we expect to generate almost $600 per dry ton of nodules during steady-state production, defined as our average production from 2031 through 2043. Overall, the revenue mix is expected to be very similar to what we shared with the market over the last several years. 45% of revenue from nickel products, 28% from manganese, 17% from copper, and 9% cobalt being the smallest source of revenue. With our steady-state revenue per dry ton of nearly $600 and OpEx per ton of about $340, we arrive at our EBITDA margin per ton expected to be about 43%, or $250 per dry ton during the steady-state years between 2031 and 2043. So, again, adding up the NPV of the $18.1 billion for the initial assessment, $5.5 billion for the PFS, we arrive at a total estimated resource NPV of $23.6 billion, and over the life of both projects on an undiscounted basis, revenue of approximately $369 billion EBITDA in excess of $200 billion a position in the first quartile of the cost curve. And yet, despite the quality and size of the resource, we remain undervalued in our opinion compared to peer developers, explorers, and significantly undervalued compared to producers. On the left side of this page, this will be familiar to some of you who attended our strategy day and listened to our last quarterly call. We'll provide a TMC valuation example illustrative purposes only. Using a slight premium to the upper end of the nickel developer and explorer valuations, applied to our PFS NPV and then adding in the average of nickel developer and explorer valuations for the initial assessment, we can see a path a total illustrative market value based on comps of approximately $10 billion or over $20 a share. So from there, you can see on the right side of the page what a nickel or copper producer trade at as a multiple of NAV showing the potential for multiple expansion. As our path to production approaches and begins. So on to the financial results for the quarter. In 2025, TMC reported a net loss of $184.5 million or 46¢ per share compared to a net loss of $20.5 million or 6¢ per share for the same period in 2024. The net loss for the third quarter included exploration and evaluation expenses, of $9.6 million versus $11.8 million in Q3 2024. G and a expenses of 45.7, versus $8.1 million in Q3 2024. Other items of $129.2 million. Exploration and evaluation expenses decreased by $2.2 million in 2025 compared to the same period in 2024, General and administration expenses increased by $37.6 million in 2025 compared to 2024, mainly due to an increase in share-based compensation of $35 million as a result of amortization of the fair value of retention grants, restricted stock units, and options granted to directors and consultants in the third quarter. And an increase of $2 million in professional and consulting fees primarily relating to the company pursuing our US regulatory route. Other significant items impacting the net loss in the quarter and the most significant is the change in the fair value of the royalty liability, plus Tonga warrant costs and the change in the fair value and, gain on dilution of our investment. In the LCR transaction. So a bit of additional context on those valuations. Following the company's filing of our PFS on the Noridi project in August 2025, the fair value of the royalty liability for Nori Area D was valued at $130 million as at September 30, using an income approach While for NORI Areas A To C, a market approach was used resulting in a fair value of $15 million. The resulting royalty liability fair value of Nori Areas A through D totals $145 million, and therefore, an increase of $131 million in 2025 is a nonoperating noncash expense. The Tonga warrant cost of $5 million represents the fair value of warrants issued to the Tonga Sea Bend Minerals Authority as part of a revised sponsorship agreement. The change in the fair value of warrant liability resulted from a decrease in the price of the company's shares the price of our public warrants during 2025. The free cash flow for 2025 was negative $11.5 million compared to negative $5.9 million in 2024 primarily due to higher environmental, personnel, and corporate payments. This was partially offset by interest earned on a higher cash balance in 2025, and higher payments to campaign eight vendors made in the comparative period. Free cash flow is a non-GAAP measure, and I would encourage you to look at the appendix for that non-GAAP reconciliation table. We believe, as Gerard stated, that our cash on hand is more than sufficient to meet our working capital and CapEx requirements for at least the next twelve months from today. And our accounts payable and accrued liability balance at September 30 was $46.8 million, which includes $32.9 million owed to Allseas for various services provided. The majority of which be settled in equity at TMC's election. So operator, we now like to open up the call for Q&A. Operator: Yes, sir. As a reminder, to ask a question, you will need to press 11 on your telephone. To remove yourself from the queue, you may press 11 again. Once again, that's 11 on your telephone. To ask a question. Please stand by while we compile. The Q&A roster. First question, comes from the line of Dmitry Silversteyn of Water Tower Research. Your line is open, Dmitry. Dmitry Silversteyn: Good afternoon, gentlemen. Thank you for taking my call. I just want to clarify one thing. I think I missed this when Gerard was talking about potential incoming cash if all of the warrants are exercised. Can you repeat what that number was? Craig Shesky: Yeah. Well, I'll leave you, Craig. Yeah. So the total potential proceeds, excluding, you know, some that were exercised over the course of Q3 and in October, total potential additional proceeds would be over $432 million. The majority of which would be $11.50 strike pipe price public and private warrants from the SOAC Deep Green business combination, and those have an expiration date of September 2026. There's also some nuance, Dmitry, because there are certain warrants and, you know, there's half a dozen categories outstanding. Certain warrants where they may have cashless exercise. But overall, there's a very significant potential inflow of cash at what we would view to be interesting exercise prices. So point being, we do have a very strong liquidity position today at $165 million. There's over $50 million of warrants proceeds that could come from in-the-money warrants and then quite a bit more beyond that. Dmitry Silversteyn: Understood. Thank you for that clarity. And then I was excited to hear you guys are sending Hidden Gem off to Japan. Understanding international relationships and helping out with diplomacy is this a pro bono work for you, or are you going to be getting paid for the exploration that you helped the Japanese do? Gerard Barron: Certainly not pro bono. And, but Allseas, we didn't step in the middle of that. Allseas will have a direct contract with the foundation that is funding that program. TMC will get some financial benefit out of that as well. But, but, yeah, certainly not pro bono. Dmitry Silversteyn: Understood, Gerard. And then final question. You mentioned that the NOAA is adjusting, it's streamlining its regulation process. And combining exploration and commercial exploitation licenses. How exactly would that work? In other words, does gaining an exploration license basically you have to have a commercial project in place. I mean, why would you combine those two and how would that work in your case specifically? Gerard Barron: Well, that's today, if you read the regulations, you have to have an exploration license before they'll consider a commercial recovery permit. That's impractical in our case, because we are slightly unique case. In fact, I'd say we're the only company in the world who has a already prepared commercial recovery permit application with all of the substantiating data. And so, you know, that meant that from a NOAA perspective, like, we've already got an exploration license. It's straight away. with the ISA. So we'd like you to start work on the commercial recovery And they're like, yeah. We want to start work on that as well, but we do need to change the regs to allow for that. And so, so it's a little bit of a tidy up. Because it was never anticipated when they put these regs in place in '80 that an applicant would have already done that work. So, you know, they're just making making good with the current circumstances. It's a very good opportunity for us. Dmitry Silversteyn: Understood, Gerard. Thank you. All the questions I have for now. Gerard Barron: Thank you, Dmitry. Operator: Thank you. Again, to ask a question, please press 11. On your telephone. Again, that's 11 to ask a question. Craig Shesky: I think in the meantime, we'll take one from the webcast. From, Jacob Sekelsky. Will the exploration permit be granted at the same time as the production permit? If not, when is the exploration permit anticipated to be approved? Without getting into specific dates, I think it's worth noting that implicit in our Q4 2027 production start time be granted this permit, the commercial recovery permit, is no longer the critical path given that, you know, TMC and Allseas agree that there is sufficient regulatory certainty provided by The US process that you know, we can get ourselves ready to go on the Hidden Gem vessel in even begin sooner ordering some longer lead time items. So while there is a possibility, of the streamlined and consolidated exploration license and commercial recovery permit process accelerating the potential grant of both even if this path were to be sequential first exploration license, then commercial recovery permit, that is all still consistent. With the Q4 2027 production start date. So we'll provide, more data as we continue down the NOAA path, but again, as noted, it was very heartening to see that they were working during the shutdown. On the consolidated process and now back at their desks full time. Operator: Thank you. As I show no further I would now like to turn the conference back to Gerard Barron for closing remarks. Sir? Gerard Barron: You know what, Latif, we might take another couple. Oh, okay. If you populated the So if others have questions, feel free to drop it in the chat. There is a question about why do we call it mining. Instead of the, more palatable word harvesting. Duly noted, John Allman, you know, sometimes we refer to it as collection. As opposed to mining, but you know, we feel very confident that the terminology here you know, when people actually look at what's being done on the seafloor, certainly very different than traditional land-based mining. So we'll take that on board. We also see a question from, James Selke. The PFS explains an approach of processing MAT products through Capital Light at existing facilities in the Eastern Hemisphere. But, it also assumes that by year 10 of production, we are bringing some refining capacity to The United States. So, Gerard, just kind of an overall question, what opportunities do we see available for funding and permitting and construction of such facilities at scale, within The United States. A little comment for you, James, too. I mean, we do note, the refining capacity that's implicit in the prefeasibility study. And then, you know, additional assumptions made for the initial assessment. Most of that is focused on spending in the 2030s and beyond. But, obviously, look, The US has a major gap when it comes to certain metals. And, you know, TMC is fortunate to have know, not only the expertise here, but the ability to be flexible. On what product formats might be. And I think we've demonstrated that with the world first production of manganese sulfate. From the nodule-derived intermediate manganese silicate product. So I think our overall message is, you know, we've put out our PFS and our initial assessment assessment, and those assumptions are quite clear in those documents. But there is flexibility that we have through this unique nodule resource, and that puts us in a very good position. When talking about, capital providers, whether it's, through the US government, the private markets. Operator: And I still show no questions from the phone line. Gerard Barron: Okay. Well, thank you everyone for attending today's call. And we have an exciting run-in to the end of the year. Craig is off to Benchmark Conference. I'm off to DC. And, we're happy the government's back to work. And, you know, we'll be sure to keep you updated on exciting developments If not, we'll chat to you on our next quarter. Operator: Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Greetings. And welcome to the Pioneer Power Solutions, Inc. Third Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star and then 0 on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Corbin Woodall of Hayden HR. Thank you, and you may begin. Corbin Woodall: Thank you, Claudia. The call today will be hosted by Nathan J. Mazurek, Chairman and Chief Executive Officer, Walter Michalec, Chief Financial Officer, and Geo Murickan, President of Pioneer eMobility. On the call today, we will review the third quarter financial results and recent business highlights. Following this, there will be a Q&A session open to participants on the call. Before we get started, I would like to remind participants this call is being recorded. During this call, management may make forward-looking statements. These statements are based on current expectations and assumptions and are subject to risks and uncertainties that could cause actual results to differ materially. Please refer to the cautionary text regarding forward-looking statements contained in the earnings release issued earlier today, Thursday, November 13, which applies to the content of this call. I would now like to turn the call over to Nathan J. Mazurek, Chairman and CEO. Nathan, please go ahead. Nathan J. Mazurek: Thank you, Corbin. Good afternoon, everyone, and thank you for joining us today. The third quarter was a highly successful period for Pioneer Power Solutions, Inc., highlighted by key equipment deliveries, strong order momentum, and significant penetration into the distributed power space. These achievements, combined with a robust project pipeline and Pioneer's continuing investment in product development, position us to realize our full year 2025 growth objectives and position us for accelerated growth in 2026. For the third quarter, we generated revenue of $6.9 million, an increase of 7.4% year over year, driven primarily by an increase in service sales from our critical power business. Year to date, revenue reached $22 million, up 68% compared to the same nine-month period last year, driven primarily by demand for our eBoost mobile charging solutions. These results reflect our ongoing success in expanding our product scope, broadening our customer base, and capitalizing on large new vertical markets. Specifically, in the third quarter, we completed delivery of the last five eBoost units of a 25-unit order for a landmark school district project totaling $1.3 million. This project represents one of the largest school bus fleet electrification initiatives in the country and underscores our ability to deliver turnkey mobile charging solutions for heavy-duty, high-utilization electric vehicles. This milestone strengthens our position as a leader in fleet electrification and highlights the growing demand for mobile, high-capacity energy solutions in the public sector. In the broader fleet electrification market, we delivered our eBoost Mobile OpenFlex unit to the city of Portland. This 175-kilowatt multifunctional unit features a level three fast charger, multiple level two chargers, and a grid-tie transfer switch. Pioneer Power Solutions, Inc.'s ability to design and implement the power-dense, flexible mobile power system further solidifies our reputation as a trusted vendor of complex, resilient, distributed power. Also in Q3, we received a $725,000 order from the city of Long Beach, California, for an eBoost mobile stretch unit, a specialized 250-kilowatt off-grid EV charging system, which is scheduled to ship before year-end. Securing this project also highlights Pioneer Power Solutions, Inc.'s ability to craft custom, complicated, and value-driven power charging solutions. The last mile delivery market continues to represent strong demand for eBoost equipment. Following a successful pilot during the peak holiday shopping season last year, one of the world's largest online retailers placed a follow-up order for new eBoost units, which were delivered in the third quarter and indeed confirms the success of the initial pilot last year. Based on current discussions with this retailer, we expect additional eBoost units to be deployed at many depots and distribution centers in 2026. Also, shortly after quarter-end, our strategic partner, SparkCharge, placed an additional order for four new eBoost pure energy 275-kilowatt units, valued at $1.6 million, as part of a multiyear purchase plan reinforcing eBoost's critical role in supporting rideshare and autonomous vehicle electrification. These units are also expected to be delivered by year-end. More importantly, Q3 marks the actualization of Pioneer Power Solutions, Inc.'s two most impactful growth initiatives. First, our natural expansion into the distributed power market and second, the technical completion of our residential power/charging unit originally known as HomeBoost, now rebranded as PowerCore. Pioneer's expansion into the distributed power market was validated in Q3 with over $700,000 in product deliveries and an additional $750,000 in new purchase orders. The expertise gained in designing and integrating complex mobile power solutions with the original launch and evolution of the eBoost platform enabled us to smoothly transition to a pure custom distributed power suite of solutions. Indeed, Q3 deliveries of our distributed power solutions cut across a swath of verticals, including a large shopping center, a large condominium tower, and a solid waste processing facility. The new $750,000 distributed power order we received is from one of the largest fitness chains in the United States for a peak shaving application at its flagship facility. Together, these wins underscore the increasing demand across various sectors for fast deployable flexible power solutions. Building on this early success, we are expanding our focus to serve the broader distributed power market and are excited to introduce a pre-engineered scalable power block system designed to meet the increasing energy requirements of large data centers, industrials, universities, and hospitals. Our 1.25-megawatt natural gas-fired, resilient, and modular power solution is engineered to provide reliable, redundant, efficient power for critical needs and the new surge in demand for on-premise compute power needs. We anticipate launching this innovative system by the end of 2025, exponentially expanding our ability to address the overall distributed power space. Secondly, within the broadened product portfolio, our HomeBoost power unit product is being rebranded as PowerCore and is on track to launch later this year on December 15 and December 17 at a scheduled event hosted by Pioneer Power Solutions, Inc. at our Miami, Florida facility. We initially introduced HomeBoost as a residential product that seamlessly integrates distributed generation with EV charging. In its original form, HomeBoost offered homeowners the ability to combine prime power generation, natural gas or propane, with advanced fast EV charging and an automatic transfer switch to manage utility outages or go into island mode during extended grid outages. With the transition to the PowerCore branding, the solution is positioned as a scalable, always-on power platform that integrates natural gas power generation and, at the user's discretion, combines fast DC charging into a single system architecture. This elevated design is not just aimed at the residential segment, but indeed also at light commercial and other resilience-demanding markets, where continuous reliable on-site power and EV charging are critical but not easily available. This offering essentially provides the user with their own natural gas-powered power plant. We continue to receive positive feedback from early customer demonstrations, and we believe that PowerCore will be a key growth driver for Pioneer Power Solutions, Inc. in 2026 and beyond. PowerCore materially expands Pioneer Power Solutions, Inc.'s addressable market, moving us beyond large fleets and municipal deployments to permanent high-value installations that demand both power generation and/or high-capacity EV charging. This product represents the next chapter in our evolution toward providing fully resilient distributed power solutions. Finally, there are several countries around the world that are currently experiencing a high EV growth market supported by policies and incentives similar to US policies back in 2021. Pioneer Power Solutions, Inc. is actively engaging with several charging businesses in these thriving international EV markets through an eBoost franchise-type model where we are able to leverage our existing engineering and development expertise to help local partners achieve similar success. These strategic alliances will enable faster adoption of EVs in those markets and provide Pioneer Power Solutions, Inc. an additional stream of revenue from licensing, technology transfer, and revenue share models. In summary, the third quarter reflects both continued operational execution and important strategic progress. We are expanding our reach, diversifying our revenue mix, and strengthening our foundation for long-term growth. Based on the momentum we have built and our visibility into the pipeline, we are reaffirming our full year 2025 revenue guidance of $27 million to $29 million, representing approximately 20% year-over-year growth. With that, I'll turn the call over to Walter for a detailed review of our financial results. Walter Michalec: Thank you, Nathan, and good afternoon, everyone. Please be advised that we have included a non-GAAP financial measure of operating income or loss from continuing operations. This excludes corporate overhead expenses, research and development costs, depreciation and amortization expense, and nonrecurring professional fees. Please refer to our press release issued earlier today, November 13, 2025, for further information, including a reconciliation between GAAP and non-GAAP financial measures. The press release can be found on our website at pioneerpowersolutions.com/investors/newsroom. Such non-GAAP measures should not be used as a substitute or alternative to any measure of financial performance calculated and presented in accordance with US GAAP. Instead, we believe this non-GAAP measure should be used to supplement our financial measures derived in accordance with US GAAP in order to provide a more complete understanding of the trends affecting the business. Third quarter revenue was $6.9 million compared to $6.4 million in the year-ago quarter, an increase of approximately 7%. The increase was primarily due to an increase in service sales from our Critical Power Solutions business. Third quarter gross profit was $640,000 or a gross margin of approximately 9% compared to a gross profit of $1.5 million, a gross margin of approximately 20% in the third quarter of last year. The decrease in gross profit was primarily attributable to an unfavorable sales mix. During 2025, Pioneer Power Solutions, Inc. incurred an operating loss from continuing operations of $1.4 million compared to an operating loss from continuing operations of $714,000 in the third quarter of last year. Additionally, during 2025, Pioneer Power Solutions, Inc. incurred a non-GAAP operating loss from continuing operations of $196,000, which excludes corporate overhead expenses, R&D expense, depreciation and amortization, and nonrecurring professional fees, compared to a non-GAAP operating income from continuing operations of $865,000 for the same quarter in 2024. Net loss from continuing operations for 2025 was $1.8 million compared to a net loss from continuing operations of $738,000 during 2024. Taking a look at our balance sheet, as of September 30, 2025, we had cash on hand of $17.3 million, zero bank debt, and working capital of approximately $22.8 million, compared to $41.6 million of cash on hand, zero bank debt, and working capital of $26.7 million as of December 31, 2024. The cash on hand as of September 30, 2025, represents cash per share of approximately $1.56. The decrease in our cash on hand compared to the prior year-end is primarily due to the payment of a one-time special cash dividend of an aggregate of $16.7 million in January and the payment of federal and state income taxes totaling approximately $4 million during the second quarter. Today, we are reaffirming our guidance for revenue of $27 million to $29 million for the full year of 2025, which represents year-over-year growth of approximately 20%. This concludes my remarks, and I will now turn the call back over to Nathan. Nathan J. Mazurek: Operator, you can open the lines for questions. Operator: Thank you very much. At this time, we will conduct a question and answer session. If you would like to ask a question, please press star and then one on your telephone keypad. The confirmation tone will indicate your line is in the question queue. You may press star and then 2 if you would like to remove your question from the queue. Please limit your questions to one question and one follow-up question. For participants using speaker equipment, it may be necessary for you to pick up your handset before pressing the star key. One moment, please, while we poll for questions. The first question comes from Amit Dayal from H.C. Wainwright. Please proceed with your questions, Amit. Amit Dayal: Thank you. Good afternoon, everyone. Thank you for taking my questions. Nathan, looks like another strong quarter. You know, what's interesting is your end markets are getting increasingly diverse. I'm just wondering, you know, how you are creating your marketing awareness to reach across, you know, multiple segments that you are now playing in? Nathan J. Mazurek: So excellent question. So, I mean, we started turning our attention to it because so many of the applications that we've been working on end up, you know, the heart of the expertise is really delivering this power. Adding a charger is an expertise or a series of chargers. But not as complicated all the time. To date, we've been doing it almost in a haphazard way. People either it's you know, we're being recommended from others based on other projects that we've done, or the same contractor or the same engineering firm. And then we had some significant success already in the third quarter. Which really means that we need to put together a very, very focused team to focus on certain verticals. And that's what we plan on doing. One on the industrial side, and the other really focused on the on the larger modular edge computing type data center, where a 1.4 power block under the right circumstances that's quickly deployable you know, we should be benefiting from and offering some sort of a value proposition there. Amit Dayal: Interesting. Thank you for that, Nathan. Then just one on the gross margin side. You attributed the softness this quarter to the sales mix. Do you expect some bounce back in the next quarter? Nathan J. Mazurek: Yeah. So, I mean, we you know, we're already experiencing it, but, yes, we expect a bounce back. And you're right. You know, the issue was the gross margin. The last five units for the for the large school district that we did were were not good. Not good for us even below what we'd experienced earlier in the year for whatever those reasons were. And it's not important to discuss openly here. But that that hurt. City of Portland did achieve more or less the margins that we had set out for it, a little bit less against some execution issue, but overall okay, but not enough to command gross margins that we did the other quarter. Fourth quarter, the mix is much more favorable to us. And and we expect them to bounce back. Amit Dayal: Okay. Thank you, Nathan. I'll get back in queue. Operator: Thank you. Ladies and gentlemen, just a reminder, if you'd like to ask a question, please press star and then 1. If you'd like to ask a question, please press star and then 1. The next question comes from Rob Brown from Lake Street Capital. Please proceed with your questions, Rob. Rob Brown: Good afternoon. Hey, Rob. Nathan J. Mazurek: Hi. My first question is on the online retailer project and the expansion there. You talked sort of some opportunity in 2026. Could you kind of outline the scale of that relative to sort of what you've done or maybe the the planning steps that need to happen here and and how that might look next year? Nathan J. Mazurek: Yeah. I mean, to date, what we've been doing with them is short term rentals. You know, we did a short term, a ninety day rental last year at the end of the year for the holiday period to help them with that and and let them sort of prove it out under the more intense part of their year. This year, it's it's it's a six month rental, so the revenue is is relatively small. And the discussions are, you know, pending, again, that these units work as we plan as the initial one did. They're talking about probably five to 20 units next year from a for a purchase. Rob Brown: Okay. And she's moving moving from rental to a purchase model. Nathan J. Mazurek: Yeah. So okay. Great. Great. And then on the on the on the modular sort of data center project, you talked a little bit about here. But but that's how do you kinda see that opportunity? What what's sort of the the the ideal application there? And I guess, sort of that larger megawatt unit is I assume, a fairly large, ASP on that, but you can give a sense sort of the range of of what those units, sell for? Nathan J. Mazurek: Yeah. So so we're gonna do a formal kind of unveiling of this before the end of the year. You know, with the with the team around it and its own sort of cache. But I'll let let Geo give you a little I don't know. Give give Rob a little you know, a a a concise teasing view of it now, if you can, for in in ninety seconds. Geo Murickan: Yeah. Thank you, Nathan. Rob, so the what we have in the market engagement we've done we have seen in the data center market, the move to AI compute applications And one of the more immediate needs has been the need to test the AI compute loads because they are they have a very variant use compared to normal cloud compute load the data centers have today. So in order to test these, they need a lot of smaller systems on data center premises. That are behind the meter powered and can be actuated in a four to six months time frame. In order for them to scale and plan for the bigger data center cycles. Beyond that, there are also industrials who are adding critical power applications across different retail sectors. So those are some of the markets that we are addressing in the next one to three years. Rob Brown: Okay. Excellent. Thank you. I'll turn it over. Operator: Thank you so much. Ladies and gentlemen, we have reached the end of the question and answer session. And now I'd like to turn the call back to Nathan J. Mazurek for closing remarks. Thank you, sir. Nathan J. Mazurek: Thank you, Claudia. This quarter's results reflect strong execution and meaningful progress in expanding into new markets including distributed power. With a robust pipeline, strategic product launches like PowerCore, and continued operational momentum, we are well positioned to drive growth and achieve our full year 2025 objectives. Thank you for your continued support. We look forward to updating you on our next earnings call. Operator: Thank you very much. Ladies and gentlemen, that does conclude today's call. Thank you very much for joining us. You may now disconnect your lines.
Operator: Good afternoon, and welcome to the Trevi Therapeutics Third Quarter 2025 Earnings Conference Call. At this time, please press one on your phone. Please note this event is being recorded. Various remarks that management makes during this conference call about the company's future expectations, plans, and prospects constitute forward-looking statements for purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by the forward-looking statements as a result of various important factors, including those discussed in the Risk Factors section of the company's most recent quarterly report on Form 10-K, which the company filed with the SEC this afternoon. In addition, any forward-looking statements represent the company's views only as of today and should not be relied upon as representing the company's views as of any subsequent date. While the company may elect to update these forward-looking statements at some point in the future, the company specifically disclaims any obligation to do so if its views change. I would now like to turn the conference over to Jennifer Good, Trevi's President and CEO. Please go ahead. Jennifer L. Good: Good afternoon, and thank you for joining us for our third quarter 2025 earnings call and business update. Joining me today on this call are my colleagues, Dr. James Cassella, our Chief Development Officer, and Farrell Simon, our Chief Commercial Officer. I will make some comments on the business and financial results, then the team is happy to answer any questions you may have. The first half of this year was a major inflection point for Trevi Therapeutics, Inc. With positive data readouts in both the CORAL trial for chronic cough in patients with idiopathic pulmonary fibrosis or IPF and the RIVER trial for patients with refractory chronic cough or RCC. We recently presented these results at CHEST, and it was great to see the interest from leading thought leaders and community pulmonologists. As a result of these strong data, we were able to raise approximately $100 million in June, giving us cash runway into 2028 and an ability to execute on the next clinical studies for each indication. It is an exciting place to be in our development, and we have not wasted any time in moving forward. Let me provide a brief update on what the team has been up to in each of our chronic cough indications. We have recently completed a couple of important Phase I studies to advance our IPF cough program. The FDA requested we conduct a drug-drug interaction study looking at any potential PK interactions when Nalbuphine ER is co-administered with pirfenidone or nintedanib, which are anti-fibrotic and the standard of care taken by patients with IPF and other progressive fibrotic diseases. We recently received the data from this study, and we are pleased that there were no clinically meaningful changes in the pharmacokinetics of any of the drug combinations used in this study. We will publish these data in the future, but we did not see anything that will impact the dosing in our Phase III program. We also made good progress on our TITLE study, which is assessing respiratory function and safety of Nalbuphine ER in IPF patients. Recall, this is a study requested by the FDA to investigate if there were any potential signs of respiratory depression in patients with IPF following dosing with Nalbuphine ER. The IPF patients in the study were housed in clinic for ten days and given increasing doses of the drug while having their oxygen, carbon dioxide levels, and respiration rate assessed for periods of time. A planned review of data by an external safety review committee in a sentinel cohort of patients concluded that there were no safety signals in the study to date. As a result, the committee gave approval to complete enrollment for the study. We will include the available data for both the DDI and respiratory safety studies in the end of Phase II meeting package. As for the end of Phase II meeting, we expect to request that meeting in the fourth quarter of this year. The key points we are looking to discuss with the FDA are to gain alignment on the Phase III program for chronic cough in patients with IPF, get their input on the Phase III study design and other parameters, as well as agree upon any other NDA enabling work which needs to be completed. In parallel, the clinical team has been preparing to initiate the Phase III program in the first half of next year and is busy lining up key vendors and identifying sites for these global studies. We have also been preparing for a study in other non-IPF interstitial lung diseases, or ILD. This population will include non-IPF ILD patients that have lung fibrosis and chronic cough. We estimate there are approximately 228,000 of these patients, with 50% to 60% having uncontrolled cough. This more than doubles the market opportunity of IPF chronic cough, and these patients are primarily seen by the same pulmonologists as IPF patients. This keeps our clinical and commercial efforts efficient and creates synergies. We plan to request a meeting with the FDA once we align on the IPF pivotal program to discuss our study design and protocol for this indication as well. Once we have FDA input, we will be prepared to initiate this study. Finally, we have been working on the next study in refractory chronic cough. We expect that study to be a Phase 2b parallel arm dose-ranging study and are planning to initiate that study in the first half of next year. We are drafting the protocol and identifying sites for this study as well. So as you can see, there's a lot of planning going on at Trevi Therapeutics, Inc., as well as preparation work to align with the regulatory authorities and initiate multiple trials in the first half of next year. This takes time to ensure that we get these trials right. We will provide updates on next steps as we gain alignment and have line of sight to study starts. I will now provide a quick review of the financial results for the quarter. The full financial results for the three months ended September 30, 2025, can be found in our press release issued ahead of this call and our 10-Q, which was filed with the SEC today after the market closed. For the third quarter of 2025, we reported a net loss of $11.8 million compared to a net loss of $13.2 million in the same quarter in 2024. R&D expenses decreased to $10.1 million during the third quarter of 2025 from $11.2 million in the same quarter last year. The reduction was primarily due to decreased clinical trial work in which those trials were actively enrolling in the prior year and reported data in the first half of this year. This was partially offset by increased costs related to our recently completed Phase I studies and personnel and related expenses. Farrell Simon: The increased professional fees were primarily due to increased costs as we continue to prepare for compliance with SOC 404 regulations. As of September 30, 2025, our cash and investments totaled approximately $195 million. Our cash and investments give us cash runway into 2028, subject to finalizing the development for each of our indications. We expect to be able to fund two Phase III trials of Hiduveo for the treatment of chronic cough in patients with IPF, along with a long-term extension for those trials. Our planned Phase 2b/3 trial in chronic cough in patients with non-IPF ILD, our next trial in patients with RCC, and our ongoing Phase I supportive studies. So in closing, Trevi Therapeutics, Inc. is positioned with strong data in two serious chronic cough conditions and is preparing to advance into the next stage of development for each of the three chronic cough indications. Chronic cough is a debilitating condition for which there are currently no FDA-approved therapies. Also, the company is financially strong with enough cash to complete the next stage of development work to potentially advance these therapies closer to the patient. We believe we are well-positioned to execute our strategy and create meaningful shareholder value over the next couple of years. This concludes my prepared remarks. Jim, Farrell, and I are now happy to answer your questions. I will turn the call back over to the operator for Q&A. Operator: We will now begin the question and answer session. The first question comes from Ryan Deschner with Raymond James. Please go ahead. Ryan Phillip Deschner: Hi, thank you very much for the question. Have you narrowed down more of what inclusion and exclusion criteria you would target for the non-IPF ILD study, maybe in terms of what constitutes chronic cough in those studies? And would you exclude any ILDs from an initial study in this space off the bat? Thank you. James V. Cassella: Hi Ryan, this is Jim. So thanks for the question. We had some good discussions with our KOLs for the non-IPF ILD study. I think you can imagine that there's going to be a lot of similarity in the underlying lung disease. We'll define that in a certain way. Chronic cough, I think we're going to go in with the standard criteria. Typically, we look at some minimum amount of cough in terms of maybe 10 coughs per hour. So it'll be very consistent with what we're looking at in the rest of our program. So I think those are narrowing down rather nicely. I think the important point to remember about that type of trial is that while there are going to be patients with lots of other comorbid conditions, we're really focusing on the entry criteria being related to the amount of cough that they have and the amount of lung damage, lung fibrosis that they have. So those are going to be the defining features for the inclusion. And then there'll be other things to manage around their comorbid conditions. Jennifer L. Good: And Jim, anything we're carving out? James V. Cassella: At this point in time, we're not really carving out anything. We're going to base it on those basic criteria. So of course, it's a broad swath of conditions. And as we get closer to that, inclusion or it's closer to defining that protocol a little bit more in-depth, we may carve out one or two, but for the most part, it's going to be based on lung disease and the amount of cough. Ryan Phillip Deschner: Excellent. Very much. Maybe quickly just on the DDI study, would you anticipate needing to do any more studies like that for a trial like this or subsequent trials? Outside of, I guess, chronic cough and RCC. James V. Cassella: Yeah, so that's great, Ryan, thanks. So the study we got done was a DDI looking at our drug with pirfenidone and nintedanib as the key antifibrotics in this space. There will be other DDI studies that we will have to do based on the mechanism of drug metabolism. We are metabolized by CYP, primarily the 2C9, 2C19 species. So there will be a DDI looking at probably a 2C9 inhibitor. These are things that we'll talk with the FDA about, but it is expected that we will have to do a couple more Phase I studies and at least one more DDI study. Ryan Phillip Deschner: Thank you very much. Operator: And the next question comes from Annabel Samimy with Stifel. Please go ahead. Annabel Eva Samimy: I just wanted to clarify for the respiratory study, you had interim results from the DSMB saying that you have no issues. Do you need to complete that study before you have the end of Phase II meeting with the FDA? And is there any other hurdle that you need to get past for that meeting? And then separately, if you could just share a little bit of the feedback that you've been hearing from the CHEST meeting at this point, how are the pulmonologists looking at this? And how do you start thinking about targeting the market that you're looking at? Thanks. Farrell Simon: Hi, Annabel. So on TITLE, we had a sentinel cohort of four subjects that we completed. And the plan was to have our data monitoring committee review those subjects. That all went fine. There were no safety issues identified. So we continued on. To answer your question, we will have the available data when we submit the package. Jennifer L. Good: Really hasn't been a lot of work done on things that matter day to day to the patient. So we're getting a lot of attention in our sessions. The data has gotten a lot of attention. And we also hosted a reception one night that was very well attended by U.S. investigators interested in getting into our study. So, really encouraging. Jim and I were both there and quite busy the whole time. I think, Sarah, I'll let you take on sort of based on the feedback how you might be thinking about targeting the market with any feedback. Farrell Simon: Yes. Thanks, Annabel, for the question. When we look at the market, we do need to raise the burden of disease, and that's work that's ongoing. That we're continuing and we'll launch next year. There's also just targeting in terms of how we look at segmenting this market, which will start next year just to make sure that we have appropriately sized our field force to target the key prescribers in this area. So that's some of the work, and then we're continuing to always do physician and payer research to understand how our new target product profile based on the positive core results is seen by physicians and payers within this space. Annabel Eva Samimy: Great, thank you. Operator: And the next question comes from Leland Gershell with Oppenheimer. Please go ahead. Leland Gershell: Great. Thanks for the update and taking the questions. Just a couple, joined a little bit late, so my apologies if you may have covered. But as you head into the end of Phase II meeting, Jennifer, are there any particular questions or issues that you would like to address for your clarity on? Then also wanted to ask on the drug-drug interaction side, is there any need for Trevi to run interaction studies within patients who may be on other opioids concomitantly? Thank you. James V. Cassella: Leland, this is Jim. So in terms of the end of Phase II meeting, standard questions are going to be related to the protocol design, endpoints, duration of the study, really nuts and bolts around the Phase III. We'll be submitting a full final draft protocol to them, so we'll have the protocol with them in hand. And we will guide some of the more important questions regarding the design, patient inclusion, exclusion criteria, our statistical approach, pretty basic things that are really important to narrow down at this meeting. So we will have absolute clarity on what we need to do for the Phase III coming out of that meeting. Jennifer L. Good: Safety database size too is an important one. James V. Cassella: Safety database size, we will be discussing the extent of any long-term data collection. And we'll also be, as we've talked about the DDI study, we did talk that we may need to do some more work in the Phase I world on wrapping up things for the NDA submission. We will probably do another drug-drug interaction study that encompasses our mechanism of drug 2C19 in particular. So we'll be asked to do a drug-drug interaction study with drugs that are inhibitors of that system to understand what the effects are on pharmacokinetics. There might be some other Phase I studies that we're anticipating that we will discuss with the FDA at the end of Phase II meeting as well. Jennifer L. Good: I would add though, Leland, I think you specifically asked about other opioids. They are contraindicated. We have excluded them because as you know, our mechanism is a mu antagonist. So if you're on other opioids, it will put you into opioid withdrawal, which is obviously super helpful from the addiction side and labeling side. But we do contraindicate that in our trials and it will be in our label. Leland Gershell: Yes. Thank you, Leland. Operator: And the next question comes from Judah Farmer with Morgan Stanley. Please go ahead. Judah Farmer: Yes. Hi, guys. Thanks for taking the questions. Maybe could you help us with the latest thinking on the potential to incorporate the non-IPF ILDs into the Phase III program for IPF. Will you get any clarity on that at the end of Phase II, do you think, or do you have to wait for that subsequent interaction? And then what are your thoughts on launching with both indications in the same label versus sNDA? And then secondarily, obviously, high level, but any thoughts on changes in CBER leadership and impacts of the programs? Thanks. Jennifer L. Good: I'm just going to comment on strategy. We could probably both do this. But I think, Judah, we made a decision that we're going to go in with sort of our strongest foot forward and do the end of Phase II meeting. Jim's got a lot of data, robust data. We want the FDA to catch up with where we are, all the studies we've run, the data we've generated. And we will tease up there that our broader program includes both RCC, but importantly non-IPF ILD, which we think shares a common biology. So we will tee that up, but you only get one hour in this meeting, and we don't want to get distracted debating non-IP ILD there because to Jim's point, we need to walk out with clear guidance on our Phase III program. So really trying to protect that and keep it whole. As soon as we feel we have alignment with the agency, we're going to be prepared to submit a protocol and non-IPF ILD and request a Type C meeting. Hopefully, that's a pretty easy ask coming off the heels of the IPF end of Phase II. So that was sort of a strategy point because we could have jumped in earlier, but felt we wanted our strongest foot forward. I mean, as far as the sort of CBER change in leadership, and I'll let Jim add any color as well. I mean, obviously, a new person named this week, an oncology person, I don't know how much that's really affecting the divisions we've had. I mean, baffling to me, timely feedback, on time, clear communications. I don't know how the FDA is holding it together. Kudos to them. So I don't know how much those levels are affecting things. When you're in a clinical trial mode. I'm sure at the point in time they look at your NDA it does. But hasn't seemed to impact what we're doing. I don't know, do you have anything to add? James V. Cassella: No, nothing to add to that other than I think the surprise factor of how responsive they've been is has been high on my list. It's like this is very unusual for me to get this kind of responsiveness. So very pleased about that. Judah Farmer: Great. Thank you, Judah. Operator: And the next question comes from Serge Belanger with Needham and Company. Please go ahead. Serge D. Belanger: Hi, good afternoon. I think in the past you've discussed the potential of HYDUVIO being eligible for orphan drug exclusivity in IPF cough. Just curious if you have any updated thoughts on that and whether that's something you will seek like an orphan drug designation in the upcoming end of Phase II meeting with FDA? Thanks. Jennifer L. Good: Jim's laughing because he made me promise. We are going to request orphan drug for IPF. I do always warn people that, you know, I don't want people to put too much in that. Although IPF has gotten orphan drug. This is cough in IPF and cough is a broad problem. So we'll see what they have to say. So we will apply, I think it's an answer we should know. Jim made me promise that we wouldn't do that until after we went through our end of Phase II meeting. He doesn't want them to be distracted on any other side questions. So I think on the heels of end of Phase II, we'll go ahead and submit for that and find out their views on cough and IPF. Serge D. Belanger: Thank you. Operator: And the next question comes from Rowena Ruiz with Leerink Partners. Please go ahead. Rowena Ruiz: Great. Good afternoon, everyone. So a couple for me. First one is given the evolving IPF landscape with recent positive data from United Therapeutics TETON study, I was curious how could that impact how Haduvia fits into the prescribing approach and treatment algorithm of physicians? Michelle, you want to take that or I can as well? Farrell Simon: Yeah, happy to. Thanks, Rowena, for the question. If anything, it probably doesn't really change much for us. When you think about chronic cough, the high burden of disease among these patients, physicians look at this as either first or second line therapy, and that can be before an anti-fibrotic or after an anti-fibrotic is initiated. When you look at the drugs and the new approvals that are already coming to market, they're still slowing the progression of the disease and they're not having a positive impact on the cough. So there's still a very high place for a chronic cough therapy and concomitant therapy with these anti-fibrotic products that are on the market or potentially coming to market. Jennifer L. Good: And so I would just add too, I've heard a lot of discussion about, you know, with improvements in therapies and treatments for patients, it probably just improves the diagnosis. So the patient groups will start to grow, I think people are focused on this disease a little more. Hopefully, cough comes to the forefront when we actually have something for treatment. So it's obviously great for the patient to have options. But I just think overall, it probably grows the market as well. Rowena Ruiz: Yep. Makes sense. And a quick follow-up about the TITLE study. What do you hope to see in the results in terms of a best-case scenario now that you can complete enrollment? And any sort of thoughts on how that might impact the end of Phase II discussion with the FDA? James V. Cassella: Yes. Hi, this is Jim. So we are looking at basic respiratory function, PO2, CO2, and respiration rate. FDA was interested in a study like this just to make sure that we don't have any blatant signals regarding respiratory depression. So we're taking a very fundamental approach on key respiratory parameters and looking at those. The ideal outcome for this study and the data have been great so far is that there's no findings here. There would be no findings, meaning that there's no changes on any of those parameters. We are dosing at night, looking at these IPF subjects while they are asleep, which is considered a conservative way, the most sensitive approach to this. So that's the nature of the study to really pull out if there's anything there. So obviously clean results and no impact on the program is the ideal outcome. Ideal here. Jennifer L. Good: Jim, I would just add. We've obviously had this in what two hundred people now, IPF patients clinically. And never seen any signal. So I think this will just sort of go hand in hand with the safety database they look at as well. Rowena Ruiz: Makes sense. Thanks. Jennifer L. Good: Thanks, Rowena. Operator: And the next question comes from William Wood with B. Riley Securities. Please go ahead. William Wood: Hi, thanks for taking our questions today. So a couple from us, kind of focused on the Phase III. It sounds like from what I can tell you, you've essentially got your sort of Phase III package sort of put together in terms of how you want it. Obviously, that's got to be discussed with the FDA and approved or at least agreed upon. But I was just curious if you could walk through sort of maybe what you're thinking at a high level in terms of doses and or timing titration you're looking to take forward? And maybe just remind us are you going to allow patients to use background anti-fibrotic in the study? And will you be looking at a biomarker improvement within the study? And then lastly, just briefly, would this be conducted in the same sites that your other Phase IIs were, or will you be branching out further? James V. Cassella: Sure. I think I can remember all those. I got them written. I got them down. So William, thanks. This is Jim. So in terms of doses, we did CORAL was a great study for us because we learned a lot from it, including that was our definitive dose-ranging study. So in terms of dose going forward, we did a lot of work over the summer. We interrogated the fifty-four and the one hundred eight-milligram dose group in CORAL because of the titration up, we were able to determine in individual subjects and looking at dosing groups. At the one hundred eight, really didn't add any significant value to the fifty-four milligram BID dose. So fifty-four milligram BID will be our top dose going forward. Twenty-seven milligram BID dose is a titration dose. We identified that as a minimum effective dose in the CORAL study. So it will not be considered a treatment dose, but it will be considered a titration dose. What we also learned from the CORAL study is that when we do our titration, as we've done in all of our programs to date, we see that most of the adverse events that we see typical for this compound, which are mostly GI and CNS in nature, most of those come on with the initiation of dosing. So what we're going to do is extend a little bit further the once a night dosing under the twenty-seven milligram dose, go into twenty-seven milligrams BID, and then get our fifty-four milligram BID treatment dose. So we will extend that titration period a little bit. To mitigate some of the earlier side effects that we see with the compound. And just a reminder about the adverse events that we see with Nalbuphine. Is that we typically see some GI and some CNS. These are typically transient and these are typically things that do tolerate out over time. And that's why we're going to extend that titration period. In regards to your question about allowing background antifibrotics, over eighty percent of our subjects in the CORAL study were on either nintedanib or pirfenidone. So yes, we are going to allow approved anti-fibrotic as background medication. In terms of biomarkers, we don't have any intention of looking at those in any, well, we're not going to look at those. And in terms of the sites, if you recall in CORAL, we were running that study ex-U.S. We will be going back to the more successful sites in that region. And we will also be bringing in a large number of U.S. centers. The great thing about the Pulmonary Fibrosis Foundation is that there are over 80 excellent care centers. And we are talking to them about conducting our trial. So we will be bringing in, in a major way, U.S. centers as well as Canada and Europe. William Wood: Got it. That's very helpful. Thank you for answering all my questions. Very briefly and lastly, the end of Phase II package, once you actually get that submitted and discussed, will you be relaying that to us and or investors, the public? Or is that just how will that be dispersed, I guess? Jennifer L. Good: Yeah. No, it's a good question, William. I think typically you do the meeting and then you wait thirty days for the minutes. Usually, you want to wait to see the minutes so that what we think we heard we actually see in writing when we get it. When we have that information, we'll definitely give an update to the Street. I mean, we probably won't put out a separate press release. I think one of our earnings calls or some venue, we'll use it to update people. But yeah, it's important information for sure. William Wood: Got it. Helpful. Thank you very much, and I'll hop back in the queue. Jennifer L. Good: Okay. Thanks, William. Operator: The next question comes from Kaveri Pohlman with Clear Street. Please go ahead. Kaveri Pohlman: Hi. Good evening. Thanks for taking my questions. So my first question is about how well do the current trial match the real-world patients, things like, you know, the inclusion exclusion criteria? Comorbidities, or, you know, use of other drugs. And for future trials, for both IPF and RCC, do you plan to make the eligibility criteria broader to include a more diverse population, or will they stay the same? James V. Cassella: Yeah, hi, this is Jim. So we will keep this population for the Phase III as broad as possible. We are really trying not to make it strictly a clinical trial population, but we want to keep it broad. So we are working with the KOLs to really refine our inclusion and exclusion criteria to make it definitely more real-world. So we will have few restrictions other than they need to be diagnosed with IPF, they need to have some other things that make them relatively healthy that they can actually be involved in the study. So I can promise you that it will be as broad as possible, as real life as possible. Jennifer L. Good: Not too much different than our 2b, right? James V. Cassella: Not very much different, in fact, somewhere else. Actually refining a few things to broaden it from our 2b. We will allow basically unless something that is going to interfere with our ability to measure cough or will have a direct impact on cough in the trial. Their concomitant medications will be allowed per normal. And I don't know if there's any, what else did you, was there anything else that you asked? Kaveri Pohlman: I think I covered those two things. Okay. Right. Yeah. That's helpful. And, I also want to understand for the RCC Phase 2b trial, do you plan to study the same dose regimen as it was in the Phase 2a or do you plan to kind of test QD options also since the drug seems pretty safe? James V. Cassella: Yeah. We're actually going to probably eliminate the top one hundred eight dose in that trial. And we will be exploring QD dosing, once a day dosing in that trial as well. Kaveri Pohlman: As well as BID. James V. Cassella: As well as the BID. So we'll probably add a 27 QD arm in there, because if you recall, the data, our twenty-seven BID dose was about as effective as the two higher doses. Kaveri Pohlman: Got it. And maybe just like a last one. Respiratory safety study, it was surprising that the FDA needed that after you showed 200 patients worth of data. But I still want to understand, will you be assessing long-term effects? Do you need to keep patients on to provide that data or it's not required? James V. Cassella: So I think the FDA is curious about doing a very specific study. I've been in this situation before where they like to see a more directed controlled study just rather than collecting adverse events. So I think it's their progress to ask for a study like this, I think it's going well. I'm sorry, what was the second part of it? Long term. I mean long term or long We will do long-term data collection in our Phase III program. The anticipation based on previous FDA experience here is they'll be looking for something like fifty-two weeks of safety data. Kaveri Pohlman: Got it. Alright. Thank you. Jennifer L. Good: Thanks, Kaveri. Operator: I'm not showing any further questions. This concludes our question and answer session. I would like to turn the call back over to Jennifer Good for closing remarks. Jennifer L. Good: Thank you. We appreciate you joining us for today's call. I know this is the end of earnings season, so you're all probably happy as well. Enjoy the upcoming holidays and we are available after the call or tomorrow for any follow-up questions that you may have. Thank you. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Good afternoon, ladies and gentlemen, and welcome to the Precigen Third Quarter 2025 Financial Results and Business Updates Conference Call. At this time, all lines are in listen-only mode. We will conduct a question and answer session. If at any time during this call you require immediate assistance, please press 0 for the operator. This call is being recorded on Thursday, November 13, 2025. I would now like to turn the conference over to Steven Harasym. Please go ahead. Steven Harasym: Thank you, operator. And thank you to all those joining us for our third quarter 2025 update call. Joining me today are Helen Sabzevari, our President and CEO; Phil Tennant, our Chief Commercial Officer; Rutul Shah, our Chief Operating Officer; and Harry Thomasian, our CFO. Before we begin our prepared remarks, I remind everyone that we will be making certain forward-looking statements. These statements are based on our current expectations and beliefs. We encourage you to review the slide in this presentation and in our SEC filings, which include risks and uncertainties that could cause actual results to differ materially from today's forward-looking statements. With that, I will now turn the call over to Helen. Helen? Helen Sabzevari: Thank you, Steven. And thank you to all those joining us for our third quarterly update call. The approval of Papcemias in August marked a monumental turning point for all those impacted by recurrent respiratory papillomatosis or RRP. Patients, families, physicians, and the RRP foundation alike. We would like to welcome you to the new era of RRP treatment with Papcemias poised to become the standard of care. Papcemias is the first and only available treatment for adults with RRP, and it represents the best data, and that's by a wide margin, ever generated in adults with RRP. Why is Papcemias a groundbreaking therapy? Let's look at the facts. First, Papcemias addresses the underlying root cause of RRP by generating an immune response against HPV 6 and 11 infected papilloma cells. Secondly, Papcemias has demonstrated transformative clinical benefit. What do I mean by that? Fifty-one percent of patients achieved complete response requiring no surgery for twelve months post-treatment, with the durability shown in fifteen of eighteen complete responders remaining surgery-free at a median duration of three years without any additional treatment. Also, overall, eighty-six percent of our patients had a reduction in their surgical burden after Papcemias treatment. Papcemias has a very favorable safety profile with nothing greater than grade two TRAs, which are similar to those of all receiving a flu vaccine, for instance. Also, the ease of administration of Papcemias. It's given as a subcutaneous administration that can be administered at any clinic or any of the physician's offices. Furthermore, Papcemias is not associated with a painful device necessary for administration. Let me be very clear here. We have treated the most severe RRP patients and demonstrated unmatched complete response rate, which has been durable with an excellent safety profile. Based on the RRP pathology, it is easy to extrapolate Papcemias results to a less severe patient population, which has been reflected in FDA's review and subsequent grant of a broad label for all adult RRP patients irrespective of the severity of their disease. In contrast, it is very difficult to extrapolate the results achieved in a less severe patient population to a more severe RRP population, as is the case with the competitor. I would like to emphasize that Papcemias pivotal study is the first and to date the only clinical trial in RRP conducted with this robust prospectively defined statistical primary endpoint. Papcemias clinical data not only beat the highest statistical bar set for the pivotal study, using the most robust clinical efficacy endpoints ever evaluated in RRP, it furthermore demonstrated the strongest data shown to date for RRP. In summary, Papcemias was granted full approval by the FDA with a broad label of adult RRP that does not include restriction on a number of prior surgeries. This is a testament to the transformative clinical data that include unmatched efficacy and strong ongoing durable responses. From a pivotal study with a prospectively defined statistical primary efficacy endpoint of complete response rate. In addition, due to the mechanism of action of Papcemias, there is an opportunity for redosing of Papcemias. And with full approval, we have significantly raised the bar for clinical data for any competitor to enter the adult RRP space in the future. This approval also marks a pivotal transition for Precigen, propelling the company into a commercial estate. Delivering this transformative therapy to market with exceptional speed and agility is a remarkable achievement. In the short time since approval, we have made great strides toward recognizing the robust commercial opportunity and building the strong foundation for Papcemias to be the newest standard of care treatment. As always, our dialogue with the FDA continues to be very productive, including the completion of a successful post-approval meeting. We are currently working toward the initiation of Papcemias clinical trial for the pediatric RRP population. In addition, we have initiated our efforts for geographic expansion of Papcemias. With that in mind, I'm pleased to announce that we have submitted a marketing authorization application with the EMA. I will now turn the call over to our Chief Commercial Officer, Phil Tennant, to walk us through our commercial development. Phil Tennant: Thank you, Helen. And I am delighted to share with you all today the exciting progress we are making with the launch of Papcemias. We've achieved a lot in a relatively short space of time. As a reminder, the approval in mid-August was the trigger to bring the full sales team of 18 key account managers on, who were hired, onboarded, and deployed in September. In the few weeks since full team deployment, we have made great progress towards our goal of quickly establishing Papcemias as the new standard of care for adults with RRP. So let me highlight the key achievements to date. Firstly, the drug is available and has started shipping to prescribers in the US for the treatment of all adults with RRP. Our field team has now engaged with 90% of our target institutions, which cover a significant portion of the 27,000 adult patients with RRP. These engagements are focused on supporting and expediting the formulary inclusion process, and we have been very impressed by the enthusiasm of the HCPs in accelerating that process. We have already seen multiple formulary approvals nationally. We're also working with HCPs in those to enroll patients who are waiting for treatment. So then, we have over 100 patients registered in our Precigen patient services hub, and a significantly larger number also being processed through institutions' own patient services teams. In line with our expectations, there is clearly pent-up demand that these hospital systems are now processing for treatment with Papcemias. Pleasingly, it's not just the large academic sites or IDNs that are expressing an interest in Papcemias. We also make good progress with a number of community practices to expedite product uptake, including some of the supergroups affiliated with ENT, oncology networks around the country. This clearly reinforces what we heard in our market research ahead of launch, and we're now seeing in practice. There is a strong preference for Papcemias due to its efficacy, durability, safety, and mode of administration. The drug can be shipped anywhere, as well as stored and forwarded easily. No device needed, no training on device needed, just a simple subcutaneous injection. And as Helen said, no need for painful electroporation. Payer coverage is advancing rapidly. As of last week, over 80 million lives are covered, and a number of other policy updates are expected to be announced in the near future. Importantly, Papcemias is also covered through Medicare and Medicaid. Suffice it to say, we're extremely pleased with this momentum, which is in line with our expectations. Finally, we're seeing strong support from physicians, whether from a large institution or community practice. Again reflective of the speed at which our teams have engaged with our target customers. We continue to see strong support and efficacy from the RRP Foundation. We have published important new data regarding the significant burden of RRP, both at the individual level and to the healthcare system, including the data released this week at the IS4 meeting in Europe. These data, coupled with the impressive and evolving durability profile of Papcemias, are helping to propel us forward as we look to establish a new treatment paradigm. In summary, we are extremely pleased with the progress being made. The market is embracing Papcemias as expected, and we also expect to further build on this momentum throughout the rest of Q4 and into Q1 2026. I look forward to continuing to share further progress across key indicators of success as we complete Q4 and move into the new year. I will now turn the call over to our Chief Operating Officer, Rutul Shah, to give a brief update on manufacturing. Rutul? Rutul Shah: Thank you, Phil. Good afternoon, everyone. I'm excited to share Papcemias manufacturing operations updates today. As part of our strategic commitment to long-term value creation, we have made significant investments to help control over our cGMP manufacturing operations. We operate a dedicated in-house cGMP facility for commercial Papcemias drug substance manufacturing. Our facility has been fully operational and a successful pre-approval inspection by the FDA, and has been manufacturing Papcemias drug substance since prior to approval. With significant in-house expertise in the production of adenoviral vectors, we are executing on our operational plan to supply Papcemias to both current and anticipated future demand. I'd like to take the opportunity today to briefly address those participating in this call. Before touching on the quarter, I want to thank our long-term shareholders for providing us the support necessary through the development and ultimate approval of Papcemias. It has been less than five years for this drug to go from the lab to approval, and we could not have achieved this momentous feat without your support. In addition, I'd like to say that I am proud to be part of the team that has provided patients with the first and only therapy targeting the root cause of RRP. Turning to our quarterly financial statements. Specifically starting with our balance sheet. At September 30, 2025, we had $123.6 million in cash, cash equivalents, and investments following our recent drawdown of the first tranche of our credit facility, which was entered into during the quarter. We expect this balance plus our projected revenues from Papcemias to fund our operations to cash breakeven, which includes continuing Papcemias launch costs and further development of our pipeline. I want to pause and repeat this point. We expect that our cash and investment balance plus expected projected revenues from Papcemias to fund our operations to cash breakeven. We remain confident in Precigen's financial future as we continue to execute on our upcoming milestones. Additionally, on the balance sheet, we ended the quarter with approximately $3 million in inventory, which represents the manufacturing costs that we have incurred subsequent to the approval of Papcemias. Costs incurred in manufacturing the product prior to the approval have been expensed as part of our R&D expenses. Lastly, during the quarter, all of our preferred shares were converted into common shares, providing us a simplified capital structure going forward. In regard to our statement of operations, the one item to note within our operating expenses is the increase to our SG&A costs of approximately $14 million in the quarter ended September 30, 2025, versus the same quarter in the prior period. The majority of this increase was driven by increased commercialization spending related to the Papcemias launch, and to a lesser extent, employee-related costs, most of which is attributable to the accounting for share-based awards. Additionally, our net loss attributable to common shareholders for the quarter ended September 30, 2025, includes two large accounting-related non-cash items, a change in the warrant liability and a deemed dividend related to the conversion of our preferred shares. Those two items combined represent $0.95 per share of the $1.06 per share loss attributable to common shareholders. We do not expect these two items to recur in future periods. For more information on our financial statements, I refer you to today's press release and our 10-Q, which was filed with the SEC after market closed this afternoon. I do want to provide certain guidance relating to our gross to net revenue adjustment. We anticipate that this adjustment will be in the high teens to low 20%, which is consistent with peers in our industry. Lastly, it has been quite a year at Precigen. As we prepared for the approval of Papcemias, we made a number of infrastructure investments, including the implementation of a new ERP system this past year. With these investments, we have positioned Precigen with appropriate systems, personnel, and controls to manage the various processes of a commercial company. With that, I'd like to turn it over to the operator for Q&A. Operator? Operator: Ladies and gentlemen, we will now begin the question and answer session. You will hear a prompt that your hand has been raised. If you would like to withdraw from the polling process, please press star then the number two. If you are using a speakerphone, please lift your handset before pressing any keys. One moment while we prepare the Q&A roster. Your first question comes from the line of Jason Butler from Citizens. Please go ahead. Jason Butler: Hi, thanks for taking the questions and congrats on the launch. I'm wondering if you can give us any color on whether any patients have received reimbursement approvals yet or whether any patients have been dosed with the first dose of Papcemias. And then the follow-up is how should we think about the cadence of the pull-through from patients that are now registered in the hub to getting reimbursed drug. Thank you. Phil Tennant: Thank you, Jason. And I think for the first question, I would refer to our Chief Commercial Officer, Phil. Phil? Phil Tennant: Sure. Hi, Jason. Yes, still here. Good to speak to you. So, as we mentioned, we've started shipping Papcemias to institutions basically for patients who are being scheduled for treatment as we speak. And as I mentioned, we've got payer coverage coming through thick and fast. So those two things are coming together and we're not going to go into details about specific patients being dosed at the moment. But I think in Q4, we'll see that come through and we'll be when we report our Q4 earnings, we'll be able to talk specifically to numbers of dosed and of course the earnings and the revenues that go along with that. Oh, the second question regarding patients in the hub. Again, you know, they're sitting there now ready for benefit verification and prior authorization. So and we're also seeing a whole load of those patients who are not necessarily in our hub, but are going through the institution's own patient services systems. So you know, that pull-through will be institution by institution, but we expect that to be starting to pick up the pace as we go through Q4 as these come together, both on the institution side, and the payer side. But we're very pleased with the number of patients that we're seeing coming into the top of the funnel ready to be activated and treated. Jason Butler: Can I just squeeze in a quick clarification point there? So do you expect the majority of patients that go into one of the hubs to actually become to pull through into receiving drug? Phil Tennant: That would be our expectation. Yes. Helen Sabzevari: And Jason, maybe I can add on. These patients, both the ones that are being registered at the Papcemias hub or at the centers that they have their own registration hub, basically they are various adult RRP patients, that through their physicians have been identified for the treatment and will be joining to receive. So that's very exciting. And I think prior to approval of Papcemias, our analysis had shown that there will be a large patient population. And as you have seen it, the estimate is 27,000 in the United States. And it's really important to say that we are seeing that kind of a demand coming through from the various centers. And just to reinforce, Jason, a lot of these centers, they prefer to use their own expertise and systems and patient services initially. Now obviously if they want to explore copay support or free drug support where for appropriate patients they would need to ultimately come into our hub. So we've, as you said, sort of got these two hub components that are coexisting at the moment, both of which suggest that the pent-up demand that we identified is absolutely there. Operator: Your next question comes from the line of Swayampakula Ramakanth from H.C. Wainwright. Please go ahead. Swayampakula Ramakanth: Thank you, and congratulations everybody, everyone on the team there. It's a great moment, and it's a time to take order for you guys. Excellent. So for my one question, I want to check with Harry regarding the statement saying that you are funded to cash flow breakeven. Which is obviously a significant statement you're making. What sort of assumptions are you taking into this, you know, in terms of either revenue or patient penetration, how did how how should you know, rethink to to get there? Harry Thomasian: Yeah. Okay. Good to good to talk to you, and appreciate the question. I would say at this point, we're not guiding on revenue. So it's kind of difficult to say you know, when or or how we get to cash flow breakeven. But I think we're willing to state that by the 2026, we'll be cash flow break even. Operator: Your next question comes from the line of Michael Dufour from Evercore ISI. Please go ahead. Michael Dufour: Hi, guys. Thanks so much for taking my question. Question and huge congrats on all progress here. Number one, just given the obvious pent-up demand and bolus of patients that are expected to go on therapy soon, could you give us any color as to how long that bolus may last just considering the reimbursement hurdles that any new therapy encounters during the first year? And I have a follow-up. Phil Tennant: Well, do. We look at analogs of rare diseases and the uptake where you do have pent-up demand. So we think that's going to last for quite a while. The 27,000 adult patients that we've identified are already there in the system. Obviously some more severe than others. Some see the healthcare protection practitioner more often than others. But those are the patients that are actually there in the treatment and then you would have the incident population on top of that. So I think this bolus of patients is going to be there for quite a while to come. Helen Sabzevari: And Michael, maybe I can also further add. The importance of broad labels which covers basically all adult RRP, which means anyone who is also going to be diagnosed immediately or they had for instance, one surgery. And it will be continuously added to this hubs for the treatment, and it's very clear, at least from what we are seeing from the patients' enthusiasm as well as the physicians. That based on the data that has been published from Hopkins prior, that basically patients by fifth surgery, they have irreversible damages to their either trachea or vocal cords. Clearly now the patients, early as their diagnosis, they will be joining. So the pent-up demand, obviously, all of the severe patients, but also now all of the patients. That have been diagnosed or undergoing diagnosis they are basically eligible to receive their Papcemias, and their physician, actually this is the important. And as for instance, if you look at our press release today, Dr. Best, which is one of the renowned physicians for the treatment of RRP in the world, he refers to Papcemias as nothing short of remarkable data for these patients' treatment of adult RRP, and then also positioning it. It's poised to become a standard of care, which then covers all that population. I think that's very important. Michael Dufour: Excellent. Thank you for that, Helen. And just my quick follow-up is, just for modeling purposes, how should we think about subsequent cycles of therapy and would payers even allow subsequent cycles beyond the first four doses? Helen Sabzevari: Yeah. I think this is an excellent question. First of all, it's very important. And this was one of the interesting concepts that FDA has encouraged. Very much for the redosing of the Papcemias and for the expansion of that. And the reason has been based on the safety obviously, the efficacy and the durability of a response results that we have seen. And at the moment, of course, in the label, it's at the discretion of the physician. In order to redose. So if they feel that the needs to be redosed, they can prescribe to that. And of course, as we are moving forward, we are further generating further data on redosing of the patients. So I think there is huge expansion from that side. And one of the other things that we have mentioned is that our partial responders as I mentioned, eighty-six percent of our patients they reduce their number of surgeries. And it's very, very important, and that was part of the discussions along for our BLA that clearly they will benefit, it seems, from the redosing because their immune system is being enhanced to address the root cause of this disease, which is HPV 6 and 11. And I think this is one of the areas that we are also expanding besides our pediatric clinical trials. It's further generation of the data on the dosing of the patients. Redosing of the patients, I should say, which is initiated in the next year. Phil Tennant: And I would just add from a payer perspective, the one characteristic of the drug that really stands out for them and will support us in any redosing conversations is the durability. You know, so we started off with the one year from our clinical registrational studies. We then get the two-year follow-up in our label. We've just published our three-year data. All of this is very important data. For the payers and obviously we share that with them, build that into our value proposition so that we can support the concept of redosing. Operator: Your last question is from the line of Brian Cheng from JPMorgan. Please go ahead. Brian Cheng: And congrats on your progress here. I just wanna clarify how you record Papcemias revenue on your financial statements. Do you recognize revenue following each injection or at the end of the four injections? And I have a follow-up. Thank you. Harry Thomasian: Hey, Brian. This is Harry. Thanks for the question. Yeah, we recognize revenue when title transfers to either shipping through a specialty pharmacy or directly to the IDN or the community hospital, and we recognize revenue upon receipt by those entities. So we don't wait until the injection occurs. Which generally is going to be within a day of it being received. Brian Cheng: And as we think about the registered patient population within your patient hub and also the institutional patient hub, I'm curious if you can help us think about, you know, the size and the trajectory of the registered patients. And then is it safe to assume that all of the all these registered patients will will get Papcemias? Within a defined period of time. Phil Tennant: Yeah. I mean, look. Our hub and the hubs that we are understanding are being set up and implemented at the institutions. They are recruiting patients rapidly. There's a lot of momentum there and we would expect to continue obviously with the bolus of patients that we know is out there. They'll be worked through as we said earlier, you know, patients are there for a reason because they've been identified for treatment with Papcemias. And so we would expect the vast majority of those to ultimately then make it on to Papcemias. The period of time is difficult to pin down, but there's a high sense of urgency that we have picked up in our interactions with the physician community whether it's at the IDNs, but actually also at the community level. With physicians approaching us and wanting to expedite access at the community level. So I do think there will be an expedited uptake from the initial pool of patients that we're seeing, but that will continue for quite a while. Helen Sabzevari: And maybe, Brian, I can add really to what Phil said. I think what we are seeing, especially with the broad label, that now we are going to be treating the patients that as early as having one surgery or actually just being diagnosed. And they have to go through the surgery, plus all the other severe patient population that exist there, and they are being scheduled by their physicians. And as we have already knew prior to the approval, but clearly have been seeing it post-approval as well from the physician. Physicians do not want to do these surgeries. And they are trying to prevent having these surgeries as soon as possible for these patients. Because they know that with every surgery there is basically closer to that damage line of five surgeries that causes irreversible damage for these patients. So I think collectively, when you're at all of that, there is a continuous patient addition. And with the understanding that, of course, these patients not only are identified and they will be getting a treatment, and they are enrolling as we speak and actually the prescription is ongoing. Operator: There are no further questions at this time. So I'll turn the call over back to Helen Sabzevari for closing comments. Please go ahead. Helen Sabzevari: Thank you to all those participating in the call today. As you can see, times are very exciting for us at Precigen and for the RRP community as a whole. We look forward to providing you with further updates as our launch progresses. In closing, I would like to leave you with words from a Papcemias patient who is one of the complete responders from the clinical study. The sound of hope living with RRP the last twenty-four years has been the sound of my own voice. When I have it. It's being heard even when this virus is trying to destroy my vocal cords. RRP not only took away my voice physically but also emotionally. So hope for me has been the moment I've been able to speak and others been able to hear me. Power of voices is camaraderie and advocacy. Being part of a community that refuses to be silenced, when my voice is weak, others are standing beside me and if needed speaking up for me. Today, hope sounds different. It's a physician telling their longtime RRP patient you don't need another surgery. There's something new. Today the sound of hope is Papcemias. Operator: Ladies and gentlemen, this concludes today's conference call. Thank you very much for your participation. You may now disconnect.
Matt: Perfect. Good afternoon. Thank you for attending the Owlet, Inc. Q3 2025 Earnings Conference Call. My name is Matt, I'll be your moderator for today's call. At the end. I'd now like to pass the conference over to our host, Jay Gentzkow, Investor Relations. Jay, please go ahead. Jay Gentzkow: Good afternoon, everyone, and thank you for joining us. Earlier today, Owlet, Inc. released financial results for the third quarter ended September 30, 2025. I'm pleased to be joined today by Jonathan Harris, Owlet, Inc.'s President and CEO, and Amanda Twede Crawford, our CFO. Before we begin, please note that our financial results press release and presentation slides referred to on this call are available under the Events and Presentations section of our Investor Relations website at investors.owletcare.com. This call is also being webcast live with a link at the same website. The webcast and accompanying slides will be available for replay for twelve months following this call. The content of today's call is the property of Owlet, Inc. It cannot be reproduced or transcribed without our prior consent. Before we begin, I'd like to refer you to our safe harbor disclaimer on Slide three of the presentation. Today's discussion will contain forward-looking statements based on the company's current views and expectations as of today's date. These statements are only predictions and are subject to certain risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. These risks and uncertainties include, but are not limited to, those described in our most recent filings with the SEC and in the Risk Factors section of our Annual Report on Form 10-Ks as updated in the company's quarterly reports on Form 10-Q and other filings with the SEC. Please note that the company assumes no obligation to update any forward-looking statements whether as a result of new information, future events, or otherwise, except as required by law. With that, it's my pleasure to turn the call over to Jonathan Harris, Owlet, Inc.'s President and CEO. Jonathan Harris: Thanks, Jay, and good afternoon, everyone. Thank you for joining Owlet, Inc.'s third quarter 2025 financial results call. As you saw from our results, Q3 was another exceptional quarter, the best in Owlet, Inc. history across key metrics. We are firing on all cylinders as a business. Let's get right to the financial highlights and update. I'll start with the third quarter results at the top of Slide five. We drove broad-based growth in Q3, hitting company records across the business. Q3 revenue was a record for Owlet, Inc. at $32 million, increasing 45% versus Q3 2024. Revenue outperformance was driven by the launch of our new DreamSight camera and ongoing momentum in the core business. Q3 gross profit of $16.2 million was a record, resulting in Q3 gross margins of 50.6% as top-line strength was able to offset tariff impacts. Q3 adjusted EBITDA of $1.6 million was also a record for Owlet, Inc. and our sixth consecutive quarter of adjusted EBITDA profitability. And we're proud to announce Q3 operating income of $1.2 million, our first quarterly operating profit in company history. Before highlighting some key developments in our strategic growth areas, I would like to comment on the FDA's recent safety communication on September 6, regarding unauthorized infant monitors as a critical moment of market clarification and how this can translate into a strong validation of Owlet, Inc.'s strategy. The FDA's warning clearly cautions consumers and caregivers against over-the-counter infant monitors that have not been reviewed for safety and effectiveness and make unsubstantiated claims. This action creates a firm demarcation in the market. On one side, unreviewed unauthorized devices the FDA is actively cautioning against. On the other side, Owlet, Inc.'s DreamSock. We are proud to stand alone as the first FDA-cleared over-the-counter infant monitoring device and the only one on the market today. This clearance confirms the DreamSock has met the FDA's rigorous standards for safety and accuracy in providing live pulse rate and oxygen saturation readings. For both parents and our retail healthcare partners, this regulatory clarity can help to increase the value proposition of our regulated products, reinforces our market leadership, and creates a significant competitive advantage. We are strategically positioned to capitalize on this heightened consumer awareness to drive market share gains and greater brand trust as we move into the crucial holiday and Q4 period. The progress in the third quarter on all key fronts has been outstanding as we continue to stack wins across the business, both financially and operationally. I'm incredibly proud of this team as we leverage our leadership in the category and ongoing momentum to deliver key results. Now, turning to our strategic focus areas for growth, we've continued to make outstanding progress on driving continued global adoption of DreamSock, transitioning Owlet, Inc. into a service through the Owlet 360 subscription, supporting parents from infancy into the toddler years and increasing customer lifetime value, and lastly, expanding healthcare channels to offer an insurance-reimbursed monitor. Kicking off with our core business, DreamSock continues to drive adoption, demonstrating what we believe is the most differentiated product in the nursery ecosystem. DreamSock demand remains robust in the U.S. In Q3, domestic sell-through grew 42% versus the prior year. The strong performance was driven by ongoing adoption for DreamSock as well as a record-setting Amazon Prime Day in July, where total sell-through units were up 72% versus the prior year. Another valuable leading indicator on the momentum of our core business is registry data. Across the registries we track, including Amazon, Babylist, and Target, total DreamSock additions remain strong with 30% year-over-year growth in Q3. We also continue to solidify our position as the market-leading pediatric health brand. According to Circana customer research and our own data, Owlet, Inc. increased our share of total dollars spent on baby monitors to 40% in 2025, a record high for market share since we started tracking Circana data. Brand health also remains in a very good position with DreamSock's recent NPS at 77 at the end of the third quarter and overall blended product NPS at 71. With the differentiation our FDA clearance provides, and in light of the FDA's recent warning statement, we're confident with our position in the market and ability to drive further share gains. In September, we launched the new DreamSight camera, our third-generation video baby monitor. DreamSight represents an important next step in the category for Owlet, Inc. with this new camera offering the latest in advanced technologies while also delivering greater reliability, deeper security, and a price point that makes sense. Importantly, DreamSight is future-ready, including onboard AI capabilities to support our rollout of camera-specific subscription features and future build-outs. Paired with DreamSock, it can create a connected monitoring experience that gives parents a holistic view of the health and wellness of their children. We're thrilled with the feedback we've received since launch and are excited about DreamSight's potential in the category and as a key part of our platform. Turning to international, DreamSock momentum is surging globally as we drive growth in our current geographies and open up new global sales channels. In 2025, international revenue growth was up 171% year over year. International strength in the quarter was in part driven by the September 9 launch of our new DreamSight video monitor and the associated timing of our load into our distributors, as well as ongoing momentum globally. As we recently announced, the Central Drug Standard Control Organization approved DreamSock for distribution in India, opening up a new global sales channel starting in early 2026. This marks an important milestone as Owlet, Inc. becomes one of the few infant health technology companies to meet India's stringent medical device requirements. In addition to our two FDA clearances, we now have six international regulatory clearances for DreamSock, including Europe, United Kingdom, Australia, New Zealand, South Africa, and now India as we look to capture adoption globally and continue to drive the substantial international opportunity. Shifting to Owlet 360 subscription, total paying subscribers have continued to grow, recently surpassing 85,000. The strong trends and overall feedback have been outstanding with another quarter of sequential growth in monthly recurring revenue, attach rate, and improved retention. What's particularly exciting is that we're still just getting started. Owlet 360 only launched in January and has so far been available exclusively in the U.S. With more than 650,000 active Owlet, Inc. device users globally, we see tremendous runway ahead to expand our subscriber base. We're beginning to roll out subscriptions in the first international markets in Q4, starting with the UK, Ireland, Australia, New Zealand, and South Africa, with plans to expand our subscription offering to all existing and new markets in 2026. Subscription attach rate for DreamSock passed 25% as of the end of the third quarter as the value of our subscription offering to parents continues to grow. We also see major growth opportunity for the new DreamSight camera. Today, our subscription adoption has primarily come from DreamSock users, but the new DreamSight and Dream Duo opens an entirely new segment of opportunity. In 2026, we plan to introduce camera-based subscription features that take advantage of the new camera's advanced capabilities and onboard AI chipset, combining the best of our biometric data from the Sock with computer vision technology from the camera to create a uniquely integrated experience that no one else in the market can deliver. Parents' biggest challenges continue to center around sleep patterns and routines. They lose an average of three hours of sleep each night, and 61% report feeling exhausted. Our upcoming DreamSight subscription features are designed specifically to help parents better understand and improve their baby's sleep through actionable insights, intelligent guidance, and a smart nursery ecosystem that sees, senses, and responds, taking the guesswork out of parenting. Looking ahead, we're also investing in next-generation AI experiences built on Owlet, Inc.'s proprietary pediatric dataset. In early 2026, we plan to pilot a new generative AI insights feature that will provide parents with personalized sleep coaching and tips tailored to their baby's unique patterns. This is just the beginning. We'll continue to experiment with and integrate AI capabilities to deliver even more meaningful support for parents and caregivers throughout their journey. Also, we began piloting our telehealth platform, which we are calling Owlet On Call. We're still early here and want to get the experience right before we launch in 2026, and we're excited about this opportunity to begin testing a more personalized actual remote care and begin to commercialize and scale this opportunity next year. The momentum we're seeing from Owlet 360 subscription prescribing Owlet, Inc. devices in the hospital, patients being able to obtain insurance prior authorization prior to hospital discharge, and taking home our medical-grade infant monitoring devices. We are also rounding out our RPM with Owlet Connect as we finalize infrastructure integration with Rhapsody Health, our digital health platform partner. Owlet Connect will also go live this week with our first customer and will be able to very quickly connect to future hospitals with RPM programs. We continue to have more and more conversations with potential additional hospital partnerships, similar to CHKD. The official launch and successful implementation of Owlet Connect are important milestones, and we look forward to updating you on that progress in the coming quarters as this has become an important strategy towards unlocking the large healthcare opportunity for BabySat. It's an exciting time to be part of Owlet, Inc. as we're executing across our strategic growth areas and that progress is translating into strong results. Now I'd like to turn the call over to Amanda Twede Crawford to discuss those results for Q3 and provide an update on our 2025 outlook. Amanda Twede Crawford: Thanks, Jonathan, and good afternoon, everyone. I'll begin on Slide nine. Unless noted otherwise, I will be comparing third quarter 2025 results to 2024. Q3 was another very strong quarter, setting records across the business. As Jonathan referenced, the best in Owlet, Inc. history. Third quarter 2025 revenue was $32 million, an increase of 44.6% compared to the prior year. Revenue strength was driven by the launch of our next-generation camera, DreamSight, with load-in from our domestic and international retail partners as well as ongoing momentum in DreamSock and Owlet 360's subscription. Q3 gross profit of $16.2 million was a record for the business, resulting in Q3 gross margins of 50.6%. As top-line strength was able to offset tariff impacts. Reminder that in Q3, tariff cost impact included a blend of the previously announced 10% tariffs on Thailand and Vietnam and newly increased tariffs of 19% and 20% on Thailand and Vietnam respectively. In Q3, tariff costs negatively impacted our gross margin by 280 basis points. Total operating expenses in the third quarter were $15 million versus $16.4 million in the same period last year. It is important to note two specific items that impact year-over-year comparability. First, this quarter includes a $1.2 million insurance recovery related to the shareholder litigation we discussed in Q4 2024. Second, the prior year quarter included a $1.9 million non-cash impairment charge associated with our internally developed software. As a percentage of revenue, Q3 operating expenses were 47% compared to 74% in Q3 2024 as we continue to drive strong operating leverage as we scale the business. Q3 operating income was a record for Owlet, Inc. at $1.2 million, the first quarter of positive operating profit in company history. Net income was also positive in the third quarter at $4.1 million versus a $5.6 million net loss in the same period last year. Q3 net income includes a positive $4.3 million common stock warrant liability adjustment. Q3 adjusted EBITDA was $1.6 million, another quarterly record for the business, improving $1 million compared to the same period last year. Strong revenue growth despite tariff costs drove the increase, our sixth consecutive quarter of adjusted EBITDA profitability. Cash and cash equivalents as of quarter end September 30, 2025, were $23.8 million versus $21.8 million at the end of the second quarter 2025. In the quarter, we drew down on our line of credit, increasing to $18.6 million at the end of Q3 versus $14.9 million at the end of Q2. The principal balance on our term loan was $7.5 million at the end of Q3 and Q2. Repayment of the term loan begins in November, and we expect it to be paid off by January 2028. In October, we completed two important critical capital markets milestones to strengthen our business and support Owlet, Inc.'s long-term growth opportunity. First, we completed the warrant exchange announced on our second quarter earnings call. We received shareholder approval at our annual meeting on October 8, and the transaction was completed on October 10 with over 96% of series A warrants and all of the series B warrants converting into 5.4 million shares of our common stock. We're pleased to be able to complete the exchange and be able to simplify our capital structure and improve the attractiveness of our stock for current and potential investors. In addition, we successfully completed a follow-on equity offering on October 23, raising net proceeds of approximately $32 million. After giving effect to the warrant exchange and equity offering, as of November 10, 2025, we had approximately 27.6 million shares of common stock outstanding. The strategic raise bolsters our balance sheet, furthers a bridge to cash flow independence, and provides financial flexibility to opportunistically invest for growth. We have some near-term R&D investments that we will begin prioritizing in this current fourth quarter as well as into 2026. But to be clear, despite the capital raise, we intend to maintain the financial discipline we have instilled over the past few years and aim for long-term consistent profitable growth. Turning to an update on our financial outlook. Given our performance in the third quarter and expectations for the fourth quarter, we are updating our 2025 guidance. For the full year 2025, we are raising revenue expectations to the range of $103 million to $106 million or 32% to 36% growth year over year. The momentum of the business remains strong despite a macro backdrop that includes uncertainty around the consumer environment, government shutdown aftereffects, and tariff policies that could impact our important Q4 holiday sales period. Q4 as the first full quarter of increased tariff cost impacts. We are narrowing our 2025 expectation range for gross margin to 48% to 50%. This updated guidance includes tariffs of 20% on imports from Vietnam and 19% on imports from Thailand or approximately 500 basis points to our margin in the quarter. And finally, for the full year 2025, we expect adjusted EBITDA to be in the range of $3.1 million to $3.8 million, an improvement versus 2024 and our first full year of adjusted EBITDA profitability. As we look ahead to 2026, we're expecting ongoing momentum as we drive further growth in our core business, subscription platform, and the healthcare opportunity. We look forward to discussing 2026 expectations in more detail on our fourth quarter earnings call. With that, we will now take your questions. Operator: We ask that you please limit yourselves to one question and one follow-up and reenter the queue. We'll pause here briefly as questions are registered. First question is from the line of Charles Rhyee with TD Cowen. Your line is now open. Lucas Romanski: Hi, this is Lucas Romanski on for Charles Rhyee. Thanks for taking the questions and congrats on the quarter. I want to ask about your guys' opportunity to partner with health systems. Would love to hear some incremental color on, you know, the early experience that you guys have had with the Children's Hospital of the King's Daughters in Virginia. I guess just how the partnership has gone so far and then obviously, I understand it's early days, but would be curious to see if you've seen other health systems reach out, seeking to form similar partnerships. Jonathan Harris: Yeah. Thank you very much. Great question. As you know, we're super early with the CHKD partnership. And we just went live with our integration with them on the RPM. They're happy. We're happy. So far, the integration is very successful. And we are leveraging the CHKD relationship and partnership as a pilot for other healthcare systems. We are already in conversations with both us and looking at the CHKD integration. So we don't have anything to share today. But look for something very soon. And we're very opportunistic on this as we get down the road. Lucas Romanski: Okay. Appreciate that. And then just a follow-up. Want to ask about international growth, obviously strong, 171% growth in Q3. As well as, you know, adding new regulatory clearance in India. So, you know, would expect this momentum to continue, but can you just help us understand which countries are you seeing the most growth in right now? And I guess as we think out to 2026, what markets should we think about continuing to drive the growth and adoption in international markets? Jonathan Harris: Yeah. Overall, international performed very well this quarter. This is one of the things that we hinted at on our Q2 earnings call. If you recall, Q2 was a lighter quarter for international. And the reason for that is that we just launched our third-generation DreamSight and Dream Duo products. With the sell-in to our distributors occurring during Q3. So that's why we saw the Q2 softness. It's really heads up year to date, but overall, really pleased with the performance internationally. We still have continued momentum. We're seeing sell-through growing in all of our European countries. It's going well. We've also been announcing new clearances, which will give us further opportunity for global expansion. Operator: Thank you for your question. Next question is from the line of Owen Ray Rickert with Northland Capital Markets. Your line is now open. Owen Ray Rickert: Hey guys, thanks for taking my question here and congrats on a great quarter. I guess quickly, can you elaborate on how the Rhapsody partnership changes the value proposition of BabySat? Or your broader clinical platform for these hospital or potential hospital partners? And then more specifically on that, how does it streamline implementation or improve clinician engagement compared to before the integration? Jonathan Harris: Yep. Hey. Thank you, Owen Ray Rickert. Good to hear your voice again. Yeah. We're super excited about the Rhapsody integration. This is the RPM integration that's the engine that drives, which we're calling Owlet Connect. And by driving this, this is giving neonatologists and hospitals real-time access to the BabySat data as the babies are discharged from the NICU in their home. So the neonatologist can log in through their platforms leveraging the Rhapsody and the Owlet Connect to get real-time data. So what's really great about this integration is we've built the structure, and now we can very quickly plug this into other hospital systems. So we believe that this is going to give us the opportunity to scale and add new hospital networks and new platforms at a much more rapid pace. Owen Ray Rickert: Got it. Super helpful. And then secondly for me, in terms of Owlet 360, how are those subscriber retention rates trending? And maybe are there any specific features or new features to call out that might be driving some higher engagement or improved LTV? Jonathan Harris: Yeah. Another great question. We're not sharing any of our subscriber churn numbers today, but we are seeing subscribers stay on our platform for quite a while. If you'll recall, we launched this in January, so we don't have full-year results yet. But we are seeing strong engagement from our Owlet 360 customers. We can actually already tell, many of the families who are using Oura Ring. Because we're getting a lot of the same feature sets that Oura is delivering on their platform and they're asking for that same feature set for their babies on Owlet 360. So super excited about that. And as you'll recall, Owlet 360 today is primarily based on sock features. So, look forward to a lot more camera features especially with the new launch of DreamSight. Which is a next-generation platform and has AI capabilities built right in. So we see a lot more camera and duo features coming to the market as we begin to grow and expand. And as you'll recall, we have as many camera users on our platform every night as Sock. We really believe that we can scale and grow this opportunity. Operator: Thank you for your question. There are currently no further questions registered. So as a reminder, there are no additional questions waiting at this time, so I'll pass the call back to Jonathan Harris for any concluding remarks. Jonathan Harris: Sorry about that. So as we head into the final month of 2025, I'm incredibly proud of the progress our team has made in strengthening Owlet, Inc.'s foundation and delivering meaningful innovation for every family. This quarter's results demonstrate both resilience and focus, proof that our strategy to expand our products globally and enhance our hero product ecosystem is working. As we look ahead, entering a pivotal phase scaling our impact, broadening our reach, deepening consumer and investor trust, and driving sustainable growth through smarter technology and operational excellence. Our mission remains clear: to become the wellness ally for parents by empowering them with peace of mind and valuable health and sleep data. We're excited about what lies ahead as we continue building on this momentum and broaden our relationship with Owlet, Inc. families across the globe. Again, thank you, and let's soar. Operator: That concludes the conference call. Thank you for your participation. You may now disconnect your lines.
Arturo Langa: Good afternoon. Welcome to Globant's third quarter 2025 earnings conference call. I am Arturo Langa, Investor Relations Officer at Globant. All participants on this call will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded and streamed live on YouTube. By now, you should have received a copy of the earnings release. If you have not, a copy is available on our website, investors.globant.com. We will begin with remarks by our Chief Executive Officer, Martin Migoya, our Chief Financial Officer, Juan Ignacio Urthiague, and our Chief Technology Officer, Diego Tartara. This will be followed by a Q&A section. Before we begin, I would like to remind you that some of the comments on our call today may be deemed forward-looking statements. This includes our business and financial outlook and the answers to some of your questions. Such statements are subject to the risks and uncertainties as described in the company's earnings release and other filings with the SEC. Please note that we follow IFRS accounting rules for our financial statements. During our call today, we will report non-IFRS or adjusted measures, which is how we track performance internally, and the easiest way to compare Globant to our peers in the industry. You will find a reconciliation of IFRS and non-IFRS measures at the end of the press release we published on our Investor Relations website. Announcing this quarter's results. I will now turn the call over to Martin Migoya. Martin Migoya: Hello, everyone, and welcome back as Globant presents its earnings for Q3 2025. We appreciate your continued interest as we navigate the ever-evolving technology landscape. Our commitment to innovation and reinvention remains at the core of who we are. The speed of change is only accelerating. This quarter, we are excited to share how we are not only adapting to market trends but also proactively shaping the future of our industry. Our focus on sustainable growth and delivering exceptional value continues to drive our efforts as we look ahead. Our business fundamentals remain strong, and we continue to perform by putting innovation first. Our AI studios bring together our talent to provide a new kind of AI-based solutions, specific for each industry. They transform how consumers interact with brands and how our clients run their businesses. Our AI bots are our next-generation offering designed to deliver agentic AI-based services that scale faster, operate more transparently, and focus on measurable outcomes. They combine the speed and autonomy of AI with the creativity and oversight of our experts, enabling customers to access continuous outcome-driven transformation at scale. All our agentic AI-based solutions from our industry-specific AI studios to our AI pods are orchestrated through Globant Enterprise AI, our central intelligence platform that acts as the golden path for enterprise-wide AI adoption and impact. Delivered through a transparent consumption-based model, it transforms AI isolated experiments into a predictable, scalable, and measurable source of enterprise value. Together, these elements form the backbone of Globant's growth to provide value for our customers and shareholder returns. During Q3, we generated $617.1 million in revenue, $2 million above our most recent guidance. We also launched a share buyback program reflecting how bullish we are on our long-term prospects. The pipeline has hit another all-time high, currently at $3.7 billion, representing 30% year-over-year growth. It marks the solid demand we see for our services, and it grew this quarter despite very strong bookings. AI continues to emerge as the world's dominant technology. With an expected market of $4.8 trillion by 2033, it would have made a 25x increase in one decade. Over the past few months, we have seen a healthy dose of realism in the AI space. There has been a shift beyond hype towards tangible and effective adoption. We see tremendous potential in AI transformation today. While software as a service has played a crucial role in corporate technology by providing efficient and scalable solutions, our new AI pod subscription model represents a significant evolution in how organizations can leverage technology. With our AI Pods, we empower leaders to develop tailored solutions that effectively address their unique and ever-changing needs. Our AI studios and core studios are having these conversations with our clients to provide clarity in AI transformation, build versus buy, and cost optimizations that are top of mind for corporate leaders today. Since doubling down on our 100 square strategy this year, we have seen the execution being shown in bookings and revenue. Our top five clients grew sequentially by 2.1%, exceeding the company's average growth over this period. The share of clients we have identified as 100 square potential as part of our total bookings is currently 56.7%, up from 50% last year. Today, we have over a thousand engagements related to GenAI, CoreAI, or data currently running, representing a third of our overall projects. We have over 900 projects related to AI readiness in our pipeline. The new offering of AI pods, a departure from traditional consulting engaging models, has nearly doubled in its share of our pipeline. This growth significantly outpaced the overall pipeline expansion. Clients access these solutions via the Globant Enterprise AI platform, which serves as a multipurpose hub. First, as an AI hub connecting seamlessly with more than 140 LLMs. Clients can interact with the LLMs that are best for their needs without being locked into a single provider. Second, it is a corporate hub that connects with all major corporate information systems and data lakes, like SAP, Salesforce, Databricks, and many others. And third, an agent hub that allows clients to create agentic workflows to automate corporate processes. Globant Enterprise AI can be acquired on a subscription basis. This shift to our subscription revenue model is not just a theoretical goal. It is actively underway in our most valuable client base. Within our top 20 customers, a group that collectively represents close to 40% of our total revenue, we are currently embedding our subscription model with 17 of them in meaningful ways. This is a huge milestone, specifically considering we officially launched this methodology in June. We are encouraged to see how our clients are incorporating this new model. For example, at YPF, the largest shale oil operator in the world outside The United States, we are moving into full execution with 46 agents to optimize sourcing, inventory, contract, and supplier management, bringing clarity and efficiency to how the company interacts with its complex supply chain. As you know, Globant has a talent for applying AI to reinvent the human experience in entertainment, which is why we are particularly proud of our new engagement to bring agentic process to La Liga, one of the world's top sports leagues. Diego will expand on this later. A great example of our growing partnership is our work with Natura, a Brazilian multinational cosmetics company. This quarter, we announced that Globant will lead their S/4HANA migration, chosen for our ability to seamlessly integrate innovation and AI SAP methodology, development, and testing while enhancing traditional implementation efficiency. Together with SAP's SHU, our AI agents and platforms will accelerate delivery, reduce time to market, and support the clean core strategy by anticipating deviations and suggesting real-time corrections. Governed by our AI agents, this project brings a new vision of how technology can transform SAP implementations and drive business performance. This month, we also announced an important partnership with Riot Games, the company behind global esports phenomena League of Legends and Valorant. Globant will support its advancement in artificial intelligence, new game development, esports experiences, and software engineering capabilities. Over the next several years, both companies will push the boundaries of technology to deliver richer, more personalized experiences for millions of players and fans globally. This partnership is one of the largest agreements in the history of our games business. We are proud to work with companies that continue to shape global esports culture and inspire millions of players. We are making decisions to unlock the full power in our core studios as well. We recently announced that all of Globant's marketing and advertising efforts were consolidated under the GAT brand umbrella. Today, Globant and GAT bring a uniquely consistent and complete value proposition to the entire C-suite, empowering CTOs and CEOs to transform their business through technology while helping CMOs push creativity and marketing performance better than ever. Just as Amazon transformed the technology landscape by removing friction from how businesses access and scale computing infrastructure, effectively inventing the modern cloud industry, we aim to do the same for technology and professional services through our AI pods and subscription model. Traditional consulting engagements are filled with friction, lengthy planning cycles, detailed scope definition, change requests, and constant budget negotiations that slow down execution and dilute impact. Our AI pods eliminate those barriers by combining agentic AI with expert human oversight, a transparent token-based subscription model that focuses on outcomes rather than hours. We define supervised talking capacity and continuous monitoring, execution becomes faster, auditable, and adaptive, allowing our clients to focus on delivering value instead of managing project logistics. We are not just redefining consulting. We are leading a revolution in how businesses access technology and professional services. Thank you for joining us on this exciting journey. Hello, all. Arturo Langa: As we look at the third quarter, one thing has remained constant. The urgency for enterprises to deliver measurable results through AI. We have tirelessly enhanced our portfolio of services Diego Tartara: and products around that very premise to enable our clients to apply AI fast and effectively to unlock business value at scale. What we are doing with LaLiga is a great example. The world's most successful football league is becoming the first global sports organization to adopt agentic models to reinvent its business end-to-end. From talent development, performance analysis, workflow automation, to personalized content creation. This quarter, we also expanded our footprint in immersive high-impact experiences. Through our strategic collaboration with Adobe and Red Sea Global, Saudi Arabia's vertically integrated real estate developer, together we are building a connected visitor experience platform. From trip planning to arrival and stay, the platform unites content, data, and AI agents to deliver personalized context-aware journeys at scale. Global Enterprise AI is at the core of our AI-centric solutioning and keeps delivering on our commitment to make it the best common gateway for clients to navigate the complex forest of AI. Less than a week after OpenAI launched the agentic commerce protocol in late September, we released a new version of Global Enterprise AI, including ACP and enabling our clients to create AI agents capable of executing commercial transactions safely and intelligently. Our partner ecosystem remains critical to scaling our AI vision, and as we see that our clients' biggest challenge is not the lack of technology, but the complexity of integrating it for real business outcomes or how to make their long-standing core systems agile, intelligent, and cloud-native without disrupting the business. With Unity, the world's leading platform to create interactive experiences, we join a service partner program combining Globant's global footprint with Unity's real-time 3D capabilities to power new immersive and interactive experiences in industries such as automotive, healthcare, and manufacturing. With AWS, we achieved the MSP partner program designation, recognizing our ability to deliver end-to-end cloud transformation and manage mission-critical operations at scale. A fundamental layer for AI adoption, while others provide basic cloud migration, Globant differentiates by focusing on cloud-native development and optimization. We leverage the full stack of AWS services from serverless computing to their Bedrock AI platform to build resilient, scalable, and cost-efficient solutions. With Microsoft, we have been appointed as a finalist of the 2025 Microsoft Media and Telco Partner of the Year award. Globant was honored among more than 4,600 entries from more than 100 countries for demonstrating outstanding Microsoft cloud application services, devices, and AI innovation during the past year. And by joining the IBM Quantum Network, we are preparing our clients to embrace quantum computing and unlock the next computing paradigm, ensuring they remain ahead of the curve as the future of intelligent systems unfolds. GAT, now powered by Globant's global creative and marketing capabilities, keeps accelerating cross-selling and elevating leading brands including AB InBev, P&G, MercadoLibre, Easting, Kraft Heinz, Verizon, and Havaianas. Also, Brazil's team created the first fully AI-generated campaign for MercadoLibre, Latin America's largest e-commerce platform in partnership with Samsung. Additionally, the official report was published listing GAT as the number nine global agency network at Cannes Lions 2025. Across sectors and geographies, our team continued to work with passion and creativity. Our AI pods are gaining traction. Our AI platform continues to improve, and new industries are embracing our approach to reinvention. We believe the winners will be those who act decisively today, and we are positioning Globant to help them accelerate that journey as we continue shaping the future of enterprise transformation. Thank you very much. Hello, and good afternoon, everyone. I am pleased to discuss our third quarter results. Juan Ignacio Urthiague: During this period, we increased our top line, expanded profitability, and generated strong free cash flow, all while maintaining a prudent and healthy balance sheet. Our revenues reached $617.1 million, up 0.4% year over year and 0.5% sequentially, exceeding our previous guidance expectations. Excluding the positive impact of foreign currency, revenue was flat year over year. Turning to profitability, we closed Q3 with an adjusted gross profit margin of 38.1%, flat relative to our previous quarter despite significant FX headwinds coming from LatAm currencies. Our adjusted operating margin reached 15.5%, an increase of 50 basis points sequentially. In addition, this quarter we managed to dilute adjusted SG&A by 20 basis points sequentially. The effective tax rate for the quarter stood at 29.4%, increasing significantly due to the acceleration of the Argentine peso depreciation during the quarter, which resulted in higher taxes than anticipated. We were able to partially offset this impact with FX hedges. Despite the mentioned tax effect, we achieved an adjusted net income of $69.7 million with an 11.3% adjusted net profit margin, flat relative to our previous quarter. Adjusted diluted EPS for the quarter was $1.53 based on 45.6 million average diluted shares, in line with our guidance. Our balance sheet remains strong, ending this quarter with $167 million in cash and short-term investments, $205.3 million in net debt. We repaid $56.7 million of our debt during the quarter, reducing our total leverage. During the third quarter, we generated $67.5 million of free cash flow, achieving a free cash flow to adjusted net income ratio exceeding 96%. This strong performance is consistent with our historical pattern where free cash flow generation is much stronger in the second half of the year. Lastly, as mentioned by Martin, we have authorized a $125 million share repurchase program, which reflects our belief in our long-term strategic position and our commitment to enhancing shareholder value. Now let's turn to our guidance. Demand trends across our client base have started to stabilize, though the macro environment remains fluid. For 2025, we expect revenue to be at least $6.5 billion, reaffirming the implied guidance provided in our prior earnings call. This Q4 guidance implies a minus 5.8% year-over-year growth and includes a positive FX impact of 150 basis points. We expect a non-IFRS adjusted operating margin to be at least 15%. And the IFRS effective income tax rate is expected to be in the 22 to 24% range. Non-IFRS adjusted diluted EPS is expected to be at least $1.53 per share, assuming an average of 45.2 million diluted shares outstanding during the fourth quarter. For the full year 2025, we now expect revenue to be at least $2.447 billion, representing 1.3% year-over-year growth. This expected growth includes a positive FX impact of 30 basis points. We now expect our non-IFRS adjusted operating margin to be at least 15% and the IFRS effective income tax rate is expected to be in the 23 to 25% range. Our full-year non-IFRS adjusted diluted EPS is expected to be at least $6.12 per share, assuming a full-year average of 45.2 million diluted shares outstanding. To conclude, while much of the uncertainty persists, we are confident in our market position and ability to adapt. Our DNA is built on constant reinvention and industry-leading growth. Based on our operational discipline, we will continue investing in our AI studios, our subscription model, and top-notch talent to deliver differentiated value to our customers. Thank you for your continued support, and we look forward to sharing more updates on our growth and achievements in the coming months. Arturo Langa: Thank you, Juan, and hi, everybody. So as we go through the Q&A section of this call, I will first announce your name. At that point, please unmute your line and ask your question. Please mute your line after your question is done, and I would also ask you to please limit yourself to one question and one follow-up. Puneet Jain: So thank you very much. And with that in mind, we take the first question today from the line of JPMorgan. Puneet, please go ahead. Hey. Thanks for taking my Juan Ignacio Urthiague: So I wanted to ask about AI use cases. Like, are you seeing clients looking for AI use cases in global gut area, like AI-powered form factors for customers to do retailing or banking, through new form factors. Martin Migoya: Thank you, Puneet, for the question. You said mute what? New what? Juan Ignacio Urthiague: So the new platforms, like, new way, like, in which consumers can buy or do banking, like the which is powered by AI. Martin Migoya: Yeah. I think the whole consumer experience is being transformed, and there's a lot of active projects that are going in the direction of changing that interface from a navigational interface towards a transactional or a conversational interface. And in that direction, we have been doing several projects on those areas, in many different customers. But it's not just connected to financial services, I would say that this kind of conversational interface is being seen in many different areas and in many different types of industry. I would love Diego to take it over. Diego Tartara: Sure. So, Puneet, here's an overview of what we are seeing and how it is working. Many large companies, the ones that are heavily regulated, what they are doing is they are building their platform for AI transformation and development. But while doing that, they are already doing AI projects. You mentioned, as an example, financial services. Fraud detection is one of the examples. Hyper customization for claim management is another one. With regards to internal operation, portfolio management is being also handled by Ascentyx system these days. So that is how it looks now. Even the most regulated sectors are jumping into AI, doing AI projects. I have to say that more than half of our projects are heavily related to AI. Juan Ignacio Urthiague: No. That makes sense. Like, the reason I asked, like, it seems like there's a lot of demand, like, the underlying demand for AI, but, like, that's not reflecting in overall results. Bryan Bergin: Do you think, like, the clients are at a point that, like, all those AI use cases and AI projects that they are ready to move them into mainstream or into production so that can overcome, like, the weak macro or other headwinds that you faced basically, can, like, should we expect, like, much better growth rates next year based on the pipeline, based on what you are saying compared to current trends. Martin Migoya: Yeah. I mentioned in my part of speech, I was saying, Puneet, that the pipeline grew to something that was 30% higher than the same period last year. And about 900 projects are currently being inside a pipeline that are based on this kind of AI transformation projects. So I see a clear evolution from the beginning of the year in which projects were more exploratory and now they are more kind of transformational efforts going across the different parts of the company. And this is not just on what we were talking before, which is consumer interaction, but also on how to run processes. And, specifically, in that case, we announced a case with YPF but also the one with Riot Games with the one with Natura in which AI kind of takes a central role. And I think that this is something that will keep on evolving as we move forward. Also, our AI pod offering is also gaining a lot of momentum. It's kind of now the pipeline more than doubled from what we had on the last quarter just in two and a half months that we launched the initiative. Bookings are also high, the number of customers got increased substantially too. So we are seeing that AI is taking a central role. Of course, the digital transformation projects, the enterprise projects, like SAP migrations, now all of them are including this kind of AI initiatives inside of them. So it's difficult to split them, but it's very clear that these are the technology is making an impact. And, again, it's not that it's easy to implement one of these things and make it productive. And make it into production for large corporations. We're talking about probabilistic systems that need to be managed in a slightly different way from the traditional systems. And that will require a lot of our help to our customers moving forward. And I see pretty much all the industries now growing, as opposed to the last few quarters. All of the industries are moving forward in terms of revenue. So that is helping. And as you have seen on the news, we have announced many deals with many different big companies and deals in many different sectors. So I hope that will propel the revenue for 2026, and we will see good growth next year. Juan Ignacio Urthiague: Thank you. Arturo Langa: Thank you, Puneet. The next question comes from the line of TD Cohen. Brian, please go ahead. Hey, guys. Good afternoon. Thanks for taking the question. Bryan Bergin: Was hoping if you could just help us connect the strong pipeline commentary with the operation headcount dynamics just sequentially. I understand you were going through a transition here. But can you give us a sense of just early 2026 client budgeting conversations we're just trying to determine when a growth trough may form for you. And just any early comments are you willing to share here, on next year's top line potential. Martin Migoya: Yeah. I would take the pipeline thing. The pipeline, as I said, is much higher. The conversion speed as opposed to what we see in the first half of the year has also increased in the last few months. So that makes us happy. And I would say that we see a clear evolution towards the end of the year with all the deals we have. In terms of the headcount, I would like to take it. Sure. Juan to answer it. Hi, Brian, how are you? Juan Ignacio Urthiague: Look. In terms of headcount, as you know, last quarter, we announced a business optimization plan to align our company, our headcount, to the needs of the business, given the changes that we put in place in terms of industry studios, in terms of the subscription model, and also looking at the level of growth. You have to keep in mind that we started the year with expectations of much higher growth. Now all that is aligned. We are seeing flattish type of numbers for the fourth quarter. And when we look into 2026, when we look at how the new AI studios, new AI industry studios are tractioning combined with the traction on the pipeline and also on our top customers related to the subscription model, I think that puts us in a much better place to start thinking about 2026. The conversations with customers are ongoing. Everybody is finalizing budgets. When we look at all our internal numbers, initial numbers, we are seeing more growth in '26 than what we have now for the rest of the year in '25. So we are optimistic. I think that the situation is improving. You start to close deals like the one we recently announced with Riot Games or some other things that are being worked right now where they are growth-oriented. And for us, that's always great news. Right? When we start to see all the deals we're doing with YPF or with McCallery, a lot of those deals are growth-oriented. And when that happens, we tend to do better. We tend to gain market share. And that puts us in a much more optimistic position relative to '26 than what we were before. And as you can see, after a difficult year in terms of guidance and everything, this quarter, we were able to maintain the implied fourth quarter. We were able to raise a little bit the full-year number. So in general, we think it's a much better quarter. Based on the $2 million that we exceeded the number in Q3. And we are optimistic about 2026. Bryan Bergin: Okay. That's helpful. Thanks for that detail. And maybe just one on the margin front. So, obviously, that's a bigger focus for you going forward. Talk about the early efforts around efficiencies and how you're feeling about those efforts. Juan Ignacio Urthiague: Yeah. So this quarter, we had a good quarter in terms of operating income. It increased about 50 basis points sequentially, together with accelerating growth during Q3. We have mentioned over the last two, three calls, and we continue to mention that there is a much bigger focus also on maintaining or improving margins, also on our free cash generation. It's a moment that, until the level of growth becomes much higher, we need to pay attention at the same time to hold those variables together. Right? And that's what we are doing. We will be executing on that. When you look at, for example, the CapEx levels going forward, they're going to be a little bit more aligned to the current levels of growth. So we are paying attention not just to the revenue or to the top line, but also to the gross margin. And you can look at the numbers. There has been a lot of peers taking margins significantly down. We have been very cautious on not doing that. You look at our margin, gross margin was stable, operating margin improved. And when you look at the fourth quarter operating margin is again above 15%. So we are trying to balance all the different things that are happening at the same time. Arturo Langa: Thank you. Thank you, Brian. The next question comes from the line of Citi. Brian, please go ahead. Your line is open. Yeah. Hi, guys. Just wanna ask about the pricing environment in general. Bryan C. Bergin: You know, there's some concern just with GenAI that there's pricing pressure through contracts and contract pricing as cost saves get passed on to clients. How do you guys think about the whole pricing environment through, as GenAI gets put into all these contracts? And what do you think about pricing as you head into next year? Martin Migoya: Thank you, Brian, for the question. We don't look measure pressure on the pricing environment. I believe that the deals that we are putting together have a lot of value added, and that helps us to position the pricing in the place we want. Indeed, the revenue per head is doing okay. So it's not changing or going down. So that's a good sign of us being able to maintain that pricing efficiently. Martin Migoya: But the most important comment I would say is there's a very strong connection between what you offer and how much you can charge for that and which is the value that you're creating for your customer. And at Globant, we have always paid a lot of attention to that value creation and to that specialization. And now with our AI studios that are capable of delivering a very substantial know-how for each of the industries in which we specialize. Plus, our core studios are bringing solutions that can go across pretty much all the industries, and I think that value proposition is resonating quite well. And if you add on top of that, we are accelerating the offering and we are discussing with 17 out of the 20 top customers the next generation model on how to engage with us, with our AI bots and with the subscription model. And enterprise AI, which is our platform, also is gaining a lot of traction as each time we sell an AI pod, it has to do with our enterprise AI platform. So I believe that this is being accepted and this is being like, you know, we are able to reflect that on the price that we put on proposals hence maintaining our margin and maintaining our revenue per head. I don't know, Juan or Diego, if you want to comment. Diego Tartara: No. I think that pretty much summarizes it. If you think about the individuals, like, on a profile basis and you tell me how does probably that price compare to what it used to be four years back? Yes. There's pressure there. But the mindset today is about efficiency. The mindset is about business impact. And when you talk about that, and that's one of our main strategies with the AI studios. When you talk about that, the conversation changes completely. So and that's why we've been able to maintain revenue per head. Bryan C. Bergin: Got it. And then that's helpful. And then just one just thinking about the third quarter being roughly flat in revenue growth, and then it drops to about 7% organic. X x currency. Can you just help us to step down in revenue growth? What's causing that? And then I'm guessing this might be the trough in revenue growth in the fourth quarter. And then what does the first quarter look like sequentially? Juan Ignacio Urthiague: On the talking about the fourth quarter, you know, the main impact that we have over there are the furloughs in mostly in professional services. That's impacting, you know, pretty much that's explaining pretty much the decrease on a sequential basis. When we look at I just give you some color on Q1, but when we look at the Q1 right now in all the initial numbers that we are seeing, we don't see any scenario similar to what we have in the last few years. You know, for example, 2025, Q1 was sequentially down 4.7%. We don't see anything similar to that at this point, anything at all. And that puts us in a much better place to get the ears that gives us also, you know, some we look at, you know, okay, how the ASR is building up, what are the conversations with the customers, what each AI studio is bringing to the table, what are the we are to just sign a very large deal with a gaming company as we discussed. Now when we accumulate all that, the Q1 number, you know, is definitely a lot better than, you know, what we have seen in prior years. Right? And I think that that puts us in a much better place getting into 2026. Bryan C. Bergin: Great. Thank you. You're welcome. Arturo Langa: Thank you, Brian. The next question from the line of William Blair. Maggie, please go ahead. Maggie Nolan: Thank you. Hi. Jamie Friedman: I wanted to put a finer point on the margin question, particularly as it relates to SG&A. Can you drive more SG&A dilution from here? And are you planning to? Or is this a reasonable level SG&A to settle as a percentage of revenue? Juan Ignacio Urthiague: You know, we closed the quarter at 17.7%. You know, almost one point below Q4 last year, for example. There is of course, there is always room to keep on diluting over time. But we also need to balance the growth that we expect to recover. You know, we need to balance all the changes that we are making in terms of our offering, all the changes we are making about our business units, you know, with all the AI industry studios. So there is more room, but, I mean, as always, you need to keep looking at, you know, 10 to 20, even 30 basis points of dilution every year, not more than that. But definitely, you know, as a business, this is a business that has the potential to run at, you know, about 15% SG&A over time. But it's something that you have to achieve as you scale. Right? When you look at which are the companies that are running at those levels, those are the ones that are already at a very large scale. I think that 17.9%, 17.8%, 17.7% is a good number for the size that we have right now. Given all the different things that we are doing these days. Right? So I think that that's how we see SG&A in my Jamie Friedman: Thank you. That's helpful. And then it does sound like there's some momentum building across the business. I was wondering if you could comment on professional services in particular. Maybe if you back out the impact of the furloughs that you already commented on, do you feel like that vertical is showing signs of stabilizing? Maggie Nolan: Yeah. Definitely. I mean, when you look at Juan Ignacio Urthiague: and I think that when we are looking into Q1, for example, it's one area of recovery. Right? I mean, after the furloughs in Q4, we have started to see stabilization in one large customer that was impacting that group. Plus, we are seeing growth in two or three others that will help us to offset what has happened to that customer that I mentioned before. But even in that large customer, now it has stabilized in a new level, but we see opportunities to recover from this new level upwards. So we think on professional services, once we go through the furloughs, that's the bottom of that sector for us. And we should start to see better numbers Jamie Friedman: Great. Thank you. Juan Ignacio Urthiague: Going forward starting in Q1. You're welcome, Maggie. Martin Migoya: Thank you. Bye. Arturo Langa: Thank you very much, Maggie. The next comes from the line of Goldman Sachs. Jim, your line is open. Maggie Nolan: We cannot hear you, Jim. Arturo Langa: As Jim tries to get his line back, we will go on to the next participant. The next question comes from the line of Guggenheim. Jonathan, please go ahead. Maggie Nolan: Great. Thanks for taking our questions. Can you help one some of the vertical and geographic assumptions around that 4Q outlook and maybe the level of conservatism that you're assuming? Yeah. Juan Ignacio Urthiague: As mentioned, you know, the one sector that will come down further down is professional services. Because of the furloughs that they it's going to be impacting that sector. And pretty much for almost all other sectors, you're going to see stable numbers. So I think that's something that again, I think that after a few quarters of moving pieces, we are definitely seeing stabilization in the business. With some green shoots that are putting us in a more positive way looking into '26. You know? Deals like some of the ones that we announced today have been on the cook for several months. And you start to see them closing. Some of them and companies are again becoming more aggressive in terms of growth. And I think this is always a positive sign for Globant. Conversations are in a much better place than where they were six months ago. So we are more confident about '26. And we think that, you know, that that's something that will be very positive for the business. And also Martin Migoya: I think it's quite clear how you know, the difference in terms of conversion that we have seen in the at the very beginning of the year. I mean, at the very beginning of the year, everything kind of got frozen. Right? And now the things start to move not at the speed we saw in 2021, but, you know, much faster than before. And that is remarkable because Martin Migoya: and also, the pipeline generation has been quite because we closed, like, large deals. And even closing those large deals, the pipeline grew a lot. So I think that dynamic is very different from what we have seen in the first half of the year. And that's the most remarkable part. That conversion coming back, our AI studio has been able to articulate that value proposition much better. I think that that evolution of Globant and that evolution of the market are two positive things to consider moving forward and into 2026. Maggie Nolan: Appreciate that color, guys. You know, as you think about your confidence around 2026, what gives you incremental confidence that these client conversions or these pipeline conversions should continue into the middle of next year. Martin Migoya: Well, we saw in the last few months a lot of activity in the space. I would say abnormal as opposed to one year ago or something like that. So I believe that this momentum will continue moving into Q4 and Q1 next year. That would generate increasing opportunities and incremental opportunities as Juan said, we don't see, you know, something happening on the first quarter, like, happened in February 2025. I mean, 2026 will be much more close to Q4 than it was before. So, I think that that's a positive sign of what we are seeing and how the momentum is coming. Jonathan, I think that, Juan Ignacio Urthiague: what we are seeing is mostly shared by the industry today. So I think that everybody is being more positive about the market, the rural market condition. About 2026, so I think that we are after, you know, a few quarters of us or a few quarters or even a few years, if you look at some of our peers, of a very negative sentiment in terms of the market, in terms of the opportunities, I think that everybody is becoming a little bit more constructive. Maggie Nolan: Mhmm. And we are in on that same boat. Yeah. And everybody's realizing that, you know, creating these projects takes a lot of energy. Martin Migoya: And takes a lot of knowledge and takes, you know, really, you know, Martin Migoya: deep knowledge on how to navigate the AI landscape that is exponentially growing and exponentially becoming more complex. So I think that discussion is coming to an end. And people are starting to realize that yeah, they want to adopt AI. They need someone to help them adopt AI. Hundreds of new projects that didn't exist before now are happening. And are possible to happen. And then the traditional projects would need to keep on going. Now with the new AI technology. So opportunity keeps on building, keeps on being very large for the whole industry. And I'm more convinced than ever that, you know, once we pass this kind of difficult situation during the first half of the year, the opportunities moving forward will multiply and expand our opportunities for 2026. Arturo Langa: Thank you for the question, Jonathan. Next question comes from the line of Itau Maraclara, please go ahead. Your line is open. Maggie Nolan: Hi, everyone. Thanks for the opportunity. I just wanna Maria Clara: to explore more about how you can balance employee and grow ahead. So even the current headcount and utilization levels, do you believe that you need to hire new people to honor a potential acceleration of growth in 2026, or maybe employees are becoming more productive with AI, so you are fine with your current headcount? Thank you. Yeah. Thank you, Maria Clara. So there's going to be a Juan Ignacio Urthiague: combination of slightly higher utilization and hires. We're not gonna be able to get back to highest levels of growth without incrementing a little bit our headcount going forward. We have made all the equalization or the balancing of the level that we need right now. But as we get into next year and as we start to see those deals materializing, utilization, there is still room to go up because even though we increased 50 basis points, we're still below our target of 80%. There is some room there. But also we see that headcount is still a part of the equation. Of course, AI increases productivity of our developers. But you also will see headcount growing as we get higher levels of growth going forward. Maria Clara: Thank you. Juan Ignacio Urthiague: You're welcome. Maria Clara: Thank you, Maria Clara. Arturo Langa: The next question comes from the line of UBS. Leonardo, please go ahead. Bryan Bergin: Hi, everyone. Good evening. First of all, congrats on the huge leverage reduction, 20 quarter on quarter. I've been particularly critical about Leonardo Olmos: cash generation now. You've proved me wrong, so congrats on the figure. My question is about AI. I think you mentioned something about the embedded solution in 17 embedded AI pods in 17 out of the top 20 clients. Right? You said you said they're embedded in meaningful ways. Would like you to discuss that a little bit so we can try to assess, how could that eventually become, ready. Martin Migoya: Leonardo, let me first clarify what I said. I said inside 17 of the top 20 accounts, we are about that. Not in all of them, we included already the AI bots, but in some of them, yes. Martin Migoya: But the important thing is that those discussions are progressing quite healthy. Martin Migoya: And I think the expectation in general of the model around a consumption model instead of different kind of metrics. While you have, like, variable scope, and you need to have a methodology that doesn't punish you and is more transparent than other methodologies that you have in the past. Is the concept that has been extremely well accepted by our customers. So what we foresee is that many new deals will come and are coming with that offering inside the proposal. By default. So what we're seeing is a natural growth of the pipeline of these. The conversion of that is quite healthy. It's almost doubling the pipeline, doubling the conversion, and the amount of customers is almost, you know, double from the 18 that we announced last quarter into what we have now. So I believe that those are the variables to have in mind. I don't know if you want any specific explanation of how we are implementing those things, but please, your question if you want. You're muted. Bryan Bergin: Guess I didn't learn Leonardo Olmos: 2020. Thanks for that. No. It's quite clear on that. I think just if you could talk a little bit, maybe, at is difficult to predict. Maybe a little bit ahead, three, five years, how much of revenue could come from subscriptions more model and if AI plus will be the single driver of outcome-based out of time and materials. Are you thinking of something else? Martin Migoya: No. Look. I mean, I don't have, like, a prediction to share with you about how much of the revenue that will be. Yes. What I can tell you is that the model is progressing much faster than any other thing that we have proposed to our customers in the past in terms of next-generation proposals. So that's a clear sign that it will take over, you know, I think, by storm next year. But I cannot predict a specific number. I know you want to include it in the model, but the thing is I don't have a number to provide to you at this moment. It's just two months and a half. But the things are the signals that we're receiving from the customers are very, I would say, positive. Leonardo Olmos: Sounds promising. Thank you very much. Good evening. Martin Migoya: Thank you. Thank you. Arturo Langa: The next call the next question comes from the line of Sean Kennedy from Mizuho. Sean, please go ahead. Hi, everyone. Thanks for taking my questions. Sean Kennedy: I was wondering if you could discuss what factors could raise conversion rates for the pipeline because as you noted, the growth there is robust. Is it just as simple as a better global economy, or are there other factors like AI, as in your customers are taking more time to think through their AI strategies before investing. Martin Migoya: Yeah. I think there are several factors that may help. Of course, you know, as the global economy improves, it makes more sense for people to make more transformational projects. I know companies are I think that by the nature of understanding and going deeper into the benefits of that AI that any company can get from this new technology, I think companies are starting to understand that they need to move out from, I would say, trials into full programs. And this always takes time, and in other massive technology shifts we have seen in the past, these took time. So we expect now that there will be needed some more time Martin Migoya: for the companies to agree that they need to go in the Martin Migoya: full transformation, multi-year full transformation AI program for every single area. But the good news is that we are seeing that happening already maybe not on 100% of the cases, but in many more cases than six months ago. So that's a clear maturity of understanding how these projects must be developed that will help in the transform sorry. That would help on the conversion of these deals. And then, you know, if interest rates go down, if, you know, the economy, you know, in the US, which is one of our main markets, it has been quite stable if you take out the investments in AI. Martin Migoya: So I believe that this will come back to growth Martin Migoya: in some way as the whole economy improves. And that will help a lot. Right? But then Martin Migoya: on the internal side, on the Globant side, Martin Migoya: as we progress with our AI studios, and as we progress with our offering, and as we progress with our value proposition of new ideas like the AI and the enterprise AI and the subscription model. All those things will help, you know, customers say, okay. Yeah. Let's do it. You know, enterprise AI is the perfect path for AI. It will isolate you from any vendor dependence. You can connect with 140 LLMs on one side, on the other side with all the corporate information systems, then you can use those two things to create agents. And to give workflow that, you know, automate processes. But also that transform how consumers interact with your brand. So, as that value proposition gets stronger and deeper, and goes deeper into our customers, I think conversion will accelerate too. So there are multiple factors there affecting in my perspective in the future. But I don't know, Juan or Diego. Diego Tartara: No. I think just to add a little bit on top of what Martin said. I think there's something related to what you mentioned, Sean, that the market continues to be in a mood that is about efficiency and impact. Right? And this is very important because what we see is, first of all, all the proposals that we send, they're being evaluated. And, of course, they need to understand the impact that will have in the business. And they're either a go or no. But I think with regards to the time it takes to evaluate proposals, close them up, which has certainly their larger period of times lead times, until closure, I think that it has a lot to do with the maturity both of the market and the technology as well. Evaluating a proposal, how to properly use new platforms, the proper model, the implementation, which is super complicated, and you have three different offers that might be totally different and you're not even super mature with regards to that, tends to take a lot more time. I think that will only improve in time, and hopefully, we will get back to the usual times of the industry. Sean Kennedy: Great. Good Sean Kennedy: good to hear. Thanks for that. And then as a quick follow-up, I was wondering you were seeing demand from helping companies or companies prepare for AI in terms of data and cloud. Like, before the AI pods implementation? Sean Kennedy: Yeah. Yeah. I think that those are interesting data points mentioned in the script. Juan Ignacio Urthiague: There are 900 projects or potential projects in the pipeline. That are what we would call data readiness projects, which is either data, either a generative AI, either AI bots or a mix of the above. So there are plenty of projects that are happening and plenty of projects that are in the pipeline. That are AI-related. We still see many companies that need to get prepared for making a better use of AI. Right? And that's going to continue for a while. You have some comments that are there. Others are getting there. Martin Migoya: Well, I'm sorry. But I know and not all the projects are generative AI. I mean, there's a lot of projects that are traditional AI, machine learning projects, in which a massive amount of information is being involved and models are being trained or tuned or I mean, not all the projects are about conversational projects or interfaces. There's a lot of AI projects that are traditional AI, you know, projects, of course, get enhanced by the use of generative AI. But it's much more the traditional data gathering and then trying to train models based on that information to predict certain factors or certain things, that you cannot do only by using a generic LLM. Right? So, it gets accelerated by using LLMs but it's traditional AI or fine-tuning or doing machine learning on specific industries, specific sectors, on specific areas of the company, that are also fueling that pipeline and that amount of projects that Juan was mentioning. Sean Kennedy: Great. Sean Kennedy: You. Appreciate all the color. Martin Migoya: Thank you. Arturo Langa: Thank you for your question, Sean. Unfortunately, that's all the time we have for the Q&A section today. I will now Arturo, Martin Migoya: hold on a second. There was one that got missed on the line. I don't know if he's ready for the question. Jim? Arturo Langa: Jim, are you there on the line? If not, we can move to one more question then. Maggie Nolan: I'm sorry. Arturo Langa: Unfortunately, that's all the time that we have today. I don't see Jim in there. But with that, we will conclude the call today. Maggie Nolan: And I would like to turn over the line to Martin. Martin, please go ahead for some closing remarks. Martin Migoya: Thank you very much, guys, for supporting us, for being here with us. For another quarter of Globant. I'm looking forward to seeing you in the next one.
Operator: Excuse me, ladies and gentlemen, please remain on the line. Your conference call will begin in approximately five minutes. Please remain on the line. Your conference call will begin in approximately five minutes. Good afternoon. Welcome to WidePoint's Third Quarter 2025 Earnings Conference Call. My name is Kelly, and I will be your operator for today's call. Joining us for today's presentation are WidePoint's President and CEO, Jin Kang, Chief Revenue Officer, Jason Holloway, and Chief Financial Officer, Robert George. Following their remarks, we will open up the call for questions from WidePoint's publishing analysts and major investors. For additional information, please contact WidePoint's investor relations team at wyy@gateway-group.com. Before we begin the call, I would like to provide WidePoint's Safe Harbor statement that includes cautions regarding forward-looking statements made during this call. The matters discussed in this conference call may include forward-looking statements regarding future events and the future performance of WidePoint Corporation that involve risks and uncertainties that could cause actual results to differ materially from those anticipated. These risks and uncertainties are described in the company's Form 10-Q filed with the Securities and Exchange Commission. Finally, I would like to remind everyone that this call will be made available for replay via a link in the Investor Relations section of the company's website at www.widepoint.com. Now I'd like to turn the call over to WidePoint's President and CEO, Mr. Jin Kang. Jin Kang: Thank you, operator, and good afternoon, everyone. Thank you for joining us today to review WidePoint's financial results for the third quarter ended September 30, 2025. The progress we have recently experienced is a direct result of the strategic foundation built over the last few quarters, setting WidePoint up for sustainable growth and offering a glimpse into the margin accretive contract opportunities currently in our pipeline. While the past two quarters did not meet our expectations, largely due to opportunities shifting to the right, we took important steps to stabilize our cost structure while maintaining staffing levels and continuing to invest in our business. These actions have positioned WidePoint for a strong finish to 2025 and enable us to capitalize on delayed pipeline opportunities throughout 2026. Revenues for the third quarter were $36.1 million, which was a modest 4% increase from last year. More importantly, we saw an encouraging turnaround in our adjusted EBITDA and free cash flow results. For the quarter, adjusted EBITDA was $344,000 and free cash flow was $324,000, representing not only our thirty-third consecutive quarter of positive EBITDA and eighth consecutive quarter of positive free cash flow, but also an 88,260% sequential increase respectively. We can confidently say we are back on the same growth trajectory we experienced throughout 2024. With many opportunities on the horizon, and 2026, we remain confident in carrying this upward trajectory into Q4. Bob will have additional details on our financial performance in his prepared remarks. Now on to some operational highlights for the quarter. As we have continued to emphasize, WidePoint's FedRAMP authorized ITMS platform unlocks opportunities that were previously out of reach. We stand apart as the only SaaS managed mobility platform with this status, positioning WidePoint as true pioneers and setting WidePoint clearly ahead of our competitors, who simply cannot match or compete with our capabilities, accreditations, and certifications. Our recent margin accretive multiyear software as a service contract to deliver our FedRAMP authorized ITMS platform to one of the big three mobile telecommunication carriers in The United States serves as a strong validation of this advantage. As we have previewed in our last earnings call, this contract requires WidePoint's ITMS platform to serve as a system of record for 2 to 2.5 million devices across government telecom operations. We estimate that this single contract alone will generate $40 to $45 million in margin accretive SaaS revenue over the initial three-year term. WidePoint's ITMS platform will serve over 50 government clients and further establish us as the premier SaaS FedRAMP authorized solution provider. This single contract validates our early investment in the FedRAMP process and highlights the advantage of being an early adopter. FedRAMP opens the door to large-scale margin accretive opportunities, enhances our access to major companies pursuing FedRAMP authorized solutions, and supports our anticipated growth trajectory. And as mentioned previously, FedRAMP in process is a minimum requirement for the upcoming DHS CWMS 3.0 contract. We strongly believe that FedRAMP authorized status will receive a higher rating during the evaluation phase of the CWMS 3.0 recompete. That said, I am pleased to announce that last Thursday afternoon, the final DHS CWMS 3.0 RFP was released. After reviewing the announcement, we found that the requirements are materially the same from the draft RFP that was released a few months earlier. The schedule announced in the final RFP states that the proposals are due by December 17, 2025. We anticipate that a decision on the winner will be announced thirty days from the proposal due date and contract awarded. Accounting for a potential protest of thirty to sixty days, we are optimistically targeting an award by late Q1 or early Q2 2026. We also recently received an extension to our CWMS 2.0 contract, a six-month extension consisting of a two-month base period and four one-month options. We also have existing contract and task orders in place through November 2026 at a minimum under the current CWMS 2.0 contract. This includes the recent task order with the US Customs and Border Protection, of which the ceiling of the task order exceeds $27.5 million. Revenue recognition for this task order began at the start of Q4, which will provide additional support for our year-end results and reinforce the growth momentum seen in Q3. As we have continued to communicate over the past year, and particularly after reviewing the final RFP, we are even more confident we possess all required certifications, meet every criterion, and with our proven track record, as a two-time incumbent delivering exceptional results to the DHS, WidePoint is well-positioned as a prime contractor to secure this upcoming opportunity. We have invested significant time and resources into the preparation and we look forward to capitalizing on this investment and securing this contract for the third consecutive time. For a quick update on Spiral 4, we have secured eight task orders year to date and four awards in the third quarter alone. We want to reiterate while we are competing with some of the largest players in the industry, WidePoint stands out as the only provider under the Spiral 4 contract to provide multi-carrier and carrier-independent solutions. The flexibility WidePoint offers is a value-added differentiator that is beginning to show in our pipeline. We are currently pursuing several opportunities that are larger in scale than our existing wins. While we are still in the early stages of the potential ten-year contract, we remain bullish in our ability to capture our fair share of the $2.7 billion ceiling. WidePoint being awarded eight contracts at this early stage while competing with some of the largest players in the industry is a strong proof point of what the future may hold for us and shows that we can punch above our weight class. We are showcasing that we have the capabilities required to compete alongside the six other companies under Spiral 4. And we believe that FedRAMP will emerge as a meaningful differentiator under this contract vehicle. And we remain bullish and opportunistic in our ability to capture additional awards for the next decade. Jason will expand on this topic shortly. But to provide an update on our device as a service, or DaaS solution, we are continuing to invest in the logistical large-scale opportunities and position the organization for future growth. Our pipeline remains strong, and we remain confident that the opportunities originally expected this year that were delayed will materialize in the coming year. Shifting to Census 2030, the latest request for information was issued in August 2025, and we have since submitted our response. From our perspective, the timing of activities mirrors that of Census 2020, and activities are already underway. We anticipate a very similar scope of work and support requirements for the 2030 activities and continue to align closely with CDW as we progress. While we are still several years away from any significant developments, we are strategically positioning ourselves for success now. At this time, WidePoint has no immediate material impact from the government shutdown. However, with the government operating at reduced staffing levels, we may see a slowdown in activities if the shutdown persists. Additionally, the execution of several opportunities in our pipeline has been delayed. However, we remain confident in our ability to secure these deals after the shutdown and any associated lag. Bob will highlight later in the call, but our current cash balance is more than sufficient to sustain operations, even if the government shutdown extends longer than anticipated. We are confident that the first half of the year was an outlier and we expect adjusted EBITDA and free cash flow growth demonstrated in this quarter to extend into Q4 and 2026. Overall, we remain optimistic for the remainder of the year. The steps we have already taken throughout, combined with opportunities delayed from earlier this year, position us well for sustainable growth in 2026 and upcoming opportunities. Jason? Jason Holloway: Thanks, Jin, and good afternoon, everyone. Beginning in the fourth quarter of last year, we increased staffing and invested in the business in anticipation of robust opportunities within our pipeline. Although these opportunities have slightly shifted to the right, we made the strategic decision to maintain and continue those investments as we believe these capabilities will support and sustain our long-term growth. Our sales pipeline remains strong, and we were able to begin realizing it through our recent contract with a major and leading US telecommunications carrier. The estimated 2 to 2.5 million devices we expect to manage under this contract highlight the strategic value of ITIM FedRAMP authorized status and positions WidePoint as a leader in a market where competitors struggle to meet such rigorous demands. Although we cannot name the customer, the carrier's decision reinforces our agility and capability to satisfy the stringent security and compliance standards of federal government clients. This contract represents only a glimpse of the margin accretive SaaS revenue opportunities that we are actively pursuing with our FedRAMP authorized ITMS. While officially securing these opportunities requires patience, even landing a single award can meaningfully enhance our financial position and specifically our bottom line results. We are pleased to finally showcase a glimpse of the margin accretive opportunities ahead and I look forward to executing and delivering results. Shifting to DaaS, we are continuing to invest in supporting our DaaS solution and recently completed the implementation of our initial DaaS win with our federal health agency partner. As we've mentioned previously, the majority of DaaS opportunities are commercial clients, and we continue to advance discussions with leading firms across industries such as manufacturing, healthcare, financial services, and public IT sectors. Many of the opportunities in our pipeline are with Fortune 100 companies that typically manage large fleets of devices. We are currently awaiting award decisions from several of these organizations and remain optimistic about beginning these opportunities in 2026 to further propel our growth. While we cannot disclose the potential range of devices to be managed, the predictability of the DaaS business model allows us to forecast the material impact of these opportunities. In fact, we believe securing even one of the opportunities in our pipeline could produce meaningful results, particularly given the scale of device fleets managed by these Fortune 100-sized companies. We are also aligned with our strategic partner CDW and are in discussions on the final terms and conditions to support our partner. We stand ready to support the upcoming LA 28 Olympic and Paralympics if called upon. This event is estimated to involve approximately 95,000 to 135,000 athletes and support personnel and a similar number of devices to be managed. We will be providing our ITMS platform to help secure, manage, and provide visibility into the devices that will be utilized during this historic event. Our platform will be delivered using a SaaS model. Shifting to Mobile Anchor, we have a premier federal government systems integrator in our Mobile Anchor pipeline and are in the process of implementing a project for a major defense contractor for their derived ID certification program. We remain optimistic about the future of Mobile Anchor and plan to continue innovating the product to further generate market interest and drive demand. We're focused on the right opportunities and investing in initiatives that lay the foundation for long-term sustainable growth. This past quarter was only the tip of the iceberg, and we're excited to build on this momentum as we close out the year and head into 2026. I will now pass the call over to Bob for our third quarter financial overview. Bob? Robert George: Thanks, Jason, and thanks to everyone for joining us today. Before I review our financial results, I'd like to briefly address our previously disclosed revenue guidance. As we assess WidePoint's 2025 performance to date, and the timing of several key opportunities, we now expect full-year revenue to be slightly below our previously issued guidance range, primarily reflecting delays in certain contracts and the impact of the first half results. Additionally, we are revising our full-year adjusted EBITDA and free cash flow. We expect results to be positive but below our previous guidance, primarily due to the shift in timing of key opportunities. To be clear, while our results may come in modestly below our prior expectations, this is a matter of timing, not demand. We're deliberately using 2025 as a stepping stone into 2026, investing into key parts of the business to unlock sustained growth in the years ahead. We are already seeing our financial results return to the growth trajectory we left off in 2024, with notable sequential improvements to our EBITDA and free cash flow performance this quarter. We look forward to closing the fourth quarter on a strong note and carrying that momentum into 2026. That said, I'm pleased to share the details of our financial results for the third quarter and the nine months ended September 30, 2025. Total revenues for the quarter were $36.1 million, an increase of $1.5 million or 4% from the $34.6 million in the same period last year. Our nine-month revenues were $108.2 million, an increase of $3.3 million from the $104.9 million reported in the same period last year. Now I'll provide a further breakdown of our third quarter and nine months revenues. Our carrier services revenue for the quarter was $20.4 million, a slight decrease compared to $22.4 million reported in the same period last year. This is a result of variations in the total number of lines managed in Q3 for one of our DHS customers. Though our carrier services revenue for the nine-month period was $65 million, an increase of $2.8 million compared to the same period last year. Our managed services fees for the quarter were $10.1 million, an increase of $1.6 million compared with the same period in 2024. For the nine-month period, our managed services fees were $28.6 million, an increase of $2.2 million from the same period last year. The increase was primarily due to a new federal end customer that began in September 2024. Billable services fees for the quarter were $1.3 million compared to $1.7 million in the same period last year. The decrease was primarily due to a slightly lower number of billable positions in the third quarter. Although, for the nine-month period, billable services fees were $4.4 million, an increase of $249,000 from the same period last year, reflecting more billable positions in the first half of the year. Reselling and other services in the third quarter were $4.3 million, an increase of $2.3 million from the same period last year. For the nine-month period, reselling and other services were $10.3 million compared with $12.2 million in the same period last year. This quarter reflects the impact of the change in our revenue recognition for SaaS type reselling agreements. Certain sales that were recognized at delivery last year are now being recognized ratably over the contract period. As a result, Q3 shows a modest benefit while the year-to-date comparison appears lower simply because last year's revenue was more front-loaded. Importantly, this change does not affect total annual revenue, only the quarterly timing of when reported. Gross profit for the third quarter was $5.3 million or 15% of revenues compared to $4.7 million or 14% of revenues in the same period in 2024. Gross profit for the nine-month period was $15.2 million, or 14% of revenues, compared to $14.3 million or 14% of revenues in 2024. The gross profit percentage, excluding carrier services, was 34% in the third quarter compared to 38% in the same period last year. The decrease was partially due to slightly higher labor costs as we bolster our customer delivery capabilities and relatively more reselling revenues, which carry lower margins. Importantly, for the nine-month period, gross profit percentage excluding carrier services, increased to 35% compared to 33% in the same period last year. The increase was due to a combination of increased managed services fees and lower reselling revenues for the nine-month period compared to last year. Our gross profit percentage will vary period to period based on our revenue mix. Sales and marketing expenses in the third quarter were $700,000 or 2% of revenues compared with $500,000 or 2% of revenues in the same period last year. Sales and marketing expenses for the nine-month period were $2 million or 2% of revenues compared to $1.7 million and 2% of revenues in the same period last year. The increase reflects increased sales and marketing activities in 2025. We expect to see further dollar increases here as we continue to invest in sales and marketing efforts, though we expect sales and marketing to be lower as a percentage of revenues in the future. General administrative expenses in the third quarter were $4.8 million or 13% of revenues compared with $4.4 million and 13% of revenues in the same period last year. General and administrative expenses in the nine-month period were $14.5 million, or 13% of revenues compared with $13.3 million and 13% of revenue in the same period last year. The dollar increase primarily relates to general inflationary pressures, additional headcount, and associated costs, which were partially offset by less share-based compensation expense. We expect general and administrative expenses to increase in dollar terms as our business grows, but to remain constant or lower as a percentage of revenues. As a result of the previously discussed items, net loss for the third quarter was $559,000 or a loss of $0.06 per share, compared with a net loss of $425,000 or a loss of $0.04 per share for the same period last year. Net loss for the nine-month period was $1.9 million or a loss of $0.20 per share compared with a net loss of $1.6 million or a loss of $0.17 per share for the same period last year. Adjusted EBITDA for the third quarter was $344,000 compared with $574,000 in the same period last year. Free cash flow for the third quarter was $324,000 compared with $511,000 in the same period last year. This represents our thirty-third consecutive quarter of positive adjusted EBITDA and eighth consecutive quarter of positive free cash flow. More notably, third quarter adjusted EBITDA and free cash flow experienced an 88,260% increase respectively compared to last quarter's results. With the robust pipeline, Jin and Jason mentioned earlier, we remain confident in carrying this growth trajectory and momentum into 2026. Additionally, with our recent telecommunications carrier contract award, valued at approximately $40 to $45 million in SaaS revenue over three years, we estimate that that revenue will begin to be recognized in 2026. We anticipate continuing this upward trend in our bottom line adjusted EBITDA and free cash flow and beyond. Additional opportunities such as CWMS 3.0 and DaaS, while not yet materialized, are progressing in the right direction, and we believe these initiatives will help us maintain this growth trajectory in future quarters. We ended the quarter with a strong federal contract backlog of approximately $269 million, providing solid revenue visibility for the coming year. The majority of this backlog represents recurring work with long-standing government customers. Moving to the balance sheet, we ended the quarter with $12.1 million in cash compared to $6.8 million at the end of the second quarter, with no bank debt. In anticipation of the government shutdown, we also strategically maintained a strong cash position at quarter-end in case the shutdown extends longer than expected. As a reminder, we also have additional liquidity available with a revolving line of credit with $4 million of potential borrowing capacity, although we do not anticipate having to rely on that facility. This completes my financial summary. For a more detailed analysis of our financial results, please refer to our Form 10-Q which was filed prior to this call. With that, I'll turn the call back over to Jin. Jin Kang: Thank you, Bob and Jason. Our optimism for the future stems from the pipeline of deals that is currently in the works and a steady increase as a percentage of revenue of our managed services and SaaS revenues. While we cannot share specific details into our pipeline yet, we were pleased to be able to close our recent SaaS contract with one of the big three US mobile telecommunications carriers and showcase exactly the types of opportunities that we have coming up. As we stated at the end of 2024, WidePoint continues to pursue margin accretive contracts that contribute meaningfully to our bottom line results. New opportunities through our FedRAMP authorized ITMS platform, our DaaS program, Spiral 4, and upcoming CWMS 3.0, among others, are avenues where we aim to capture these types of contracts that will serve as a catalyst to propel WidePoint into the next phase of growth. That concludes our prepared remarks. And we will now take questions from our analysts and major shareholders. Operator, will you please open the call for questions? Operator: Certainly. The floor is now open for questions. If you have any questions or comments, please press 1 on your phone at this time. We ask that while posing your question, please hold just a few moments while we poll for any questions. Your first question is coming from Barry Sine with Litchfield Hills Research. Please pose your question. Your line is live. Barry Sine: Hey. Good afternoon, gentlemen. Can you hear me okay? Jin Kang: Yes, Barry. Good afternoon. Great to hear from you as always. Barry Sine: So huge news on this $40 to $45 million contract during the quarter. And, yeah, we'll see what additional information I can, we can get from you. You did provide some incremental information. It'll be about over three years, and start about the middle of next year. And, Bob gave the backlog. I think it was $269 million. How much of that 45 is in the $269 million? And did I, yeah, did I get those data points right in terms of the timing? Jin Kang: You are correct, Barry. To answer the last question first, how much of that $45 million is in the backlog? The $269 million only includes our federal government. This $45 million would add to that. We are looking at being fully implemented probably starting in the third quarter of next year. You know, but the schedule is still in flux. And so, you know, we're still having conversations with our customer. And, you know, some of the customers think that the implementation of the solution and fully migrating all of their data into our system is going to be, you know, sometimes even later than that. And some of the folks want it earlier. So we're just taking an average to say that it's going to be in the third quarter. Barry Sine: Okay. That makes sense. And then you're obviously not at liberty to name the customer there's three major US wireless carriers, AT&T, Verizon, and T-Mobile, so it's presumably one of those. How are you doing with the other two? And would this preclude you from selling the solution to the other two? Jin Kang: The answer is no. We do not have an exclusivity with this carrier. And if you look in the FedRAMP marketplace, you will not find any one of the big three telecom mobile carriers here in The US in that marketplace. It's just what we're surmising is that they're going to get the same pressure from their federal government customers to manage their data using a FedRAMP authorized platform. So we don't have any direct, you know, we're not having direct conversations with the other two yet. But, you know, we're hopeful that we can start that conversation. And, and and it this this agreement that we have currently does not exclude us from having those conversations and licensing or slash you know, white labeling our platform as a service to the other two carriers. Barry Sine: Okay. Well, that's great news. And then, my other question, in terms of the cash balance, you ended the quarter with $12.1 million and you've got huge government backlog, and I didn't realize the 40 to 45 is not even in that, so that's even bigger. CWMS is looking good. I can't believe they issued the RFP during the shutdown. You've got Spiral 4 contracts coming in and, you know, other potential contracts plus the census and the Olympics. So it looks like you got almost too much cash. How so my question is, how is how does the M&A market look? Are you building the cash for acquisitions? Are you seeing anything? Are there opportunities out there? Do the valuations look okay? Jin Kang: Yeah. I mean, we are looking around. In terms of our cash position, we went on a very aggressive treasury management to ensure that we, you know, retain cash and preserve cash. To process all of our vendor invoices and and and and so we waited for the very last moment to pay our invoices and and the the increases some of the increases in the cash position. Was timing of invoices. In in terms of, you know, our cash balance being sufficient to, you know, run operations, I we believe that we have plenty of cash and you know, sufficient networking capital to, you know, weather any type of, you know, slowdown in federal government as slowdown in invoices. We are continuing to add cash to our balance sheet, and we're gonna continue to do that. We want to make sure that we fortify our balance sheet. But at the same time, we are looking around for potential opportunities and we are quietly looking around for acquisition targets. We haven't run across any, you know, thing, you know, material opportunities out there. So we're quietly looking. I think the the multiples and the valuations are still pretty high. And so we're patient, and we have plenty of runway. And, we're we're going to continue to generate cash and build our balance sheet. Barry Sine: Okay. Those are my questions. Thank you, gentlemen. Jin Kang: Great. Thank you, Barry. Operator: Your next question is coming from Casey Ryan with West Park Capital. Please pose your question. Your line is live. Casey Ryan: Thank you. Hello, team. Jason Holloway: Hey. Pretty good quarter. I guess Casey Ryan: Hey. Thanks. Hi. I guess I was expecting expecting a little more turbulence from the government shutdown, but seems like you guys knew what to expect and what to do to navigate that. So that's impressive, I would say. Jin Kang: Yeah. I mean, we've been we've been through this rodeo many times. Since the current management team has been in place. I mean, government was shut down at least three or four times. And and all through all of that, you know, we're considered essential services. So, you know, and and I'm, you know, had obligated funds. So so we're, you know, used to dealing with this thing and we'll continue to do so. But now the government is open, hopefully, they'll, you know, there won't be too much of a lag in them coming back to work. Casey Ryan: Right. Right. Which will be great. So setting aside the government opportunities, on the commercial side, yeah, I'm curious about the, the mobile opportunity that that you referenced is exciting as a proof point. I'm just curious about kind of implementation time and deployment time and sort of how long it takes until that gets up and running? More importantly, I'm asking about does that prove you know, serve serve as a proof point and a selling point to other potential customers? Once that's live and going. Jin Kang: Yeah. So so so the answer is it you know, the length of the implementation usually involves, customer input. We are in the process of implementing one of the larger systems integrators here in the DC area, federal government contractor, and that's going well. And and and I'll have, you know, Jason tell you, you know, more about it. But I will tell you that, you know, a lot of the implementation and the the the the time it takes to do that is dependent on customers' participation because it it involves, you know, the entire organization, not only their IT, but also their human resources. For, you know, those, personally personal person identifiable verification. Right? And so, Jason, if you wanna add some color to that, Jason Holloway: Sure. Hi, Casey. So normal normal implementation time is sixty days. With the government shutdown, that did happen. Obviously, that delayed it a little bit, but that's okay because they're already a client. You know, we won the award. And as Jin said, these folks, they need to be present because of Mobile Anchor. We are taking, all of their existing data then we're deriving it onto their mobile devices. So, typically, you're looking at about sixty days for that kind of activity. But, you know, we we'll be able to, to catch up now that everything is, you know, back open. Casey Ryan: But it's not gonna slow anything down. Jin Kang: Right. So so so at some point before the end of the year, Jason Holloway: Oh, yeah. For sure. And so for WidePoint as an organization, you can start to say, hey. Look. We've we've stood somebody up, and they're on it, and it's great. Which I think is important. Other question is, when Mobile Anchor is being put in, does it need to interface with any other security systems? And and I'm asking out of ignorance. But but identity management systems or, you know, other type things or is it separate from those and doesn't need to sort of interface with with those types of things? Jason Holloway: No. The great the great news is is that Mobile Anchor doesn't doesn't rely on anything else because we are the tip of the spear in terms of cybersecurity. We we are literally at the top of the food chain. We don't need to integrate with, you know, with anything. So we take those certificates that are on their current smart card credential, and then we can issue a a net new certificate already using those existing credentials, and we put it directly onto the device itself. So we yeah. So we don't require anything else. Jin Kang: Yeah. So just Casey, just one one clarification on that is is that you know, we issue our our digital certificates and identity certificates and we don't rely on any system for that. What the what what good about it is is is that all of the current systems, the Microsoft Active Directory, and the Unix, you know, lightweight directory applications. They all accept the digital certificates that we issue. And so, you know, while we don't have, we're relying on any these systems, but there are these systems that are consumers of our identity certificates can ingest and accept those certificates as their security token. So so that's a huge plus for us as opposed to us going out and building all of the infrastructure all of the infrastructure is there. Casey Ryan: Yeah. Well, thank you for that because that that was sort of the direction I was was going was was was well, no. No. I mean I mean, once you're saying that you guys don't rely on actually, it would make sense that other infrastructure or security systems would maybe start to rely on you and come to you to sort of ingest your data to sort of to sort of improve what they're offering, basically. Jin Kang: Correct. Correct. Casey Ryan: Okay. Terrific. And then help me understand what the opportunity is with the Olympics again. I feel, underinformed about how big and and what the opportunity might look like. And, you know, if you guys have been involved in in Olympics before in some previous version. Jason Holloway: We have not been involved in the Olympics prior. We do have significant past performance with CDW. I really cannot offer too much additional color regarding the Olympics because that's something that is still, you know, very much that's that's currently happening. So we just need to be careful about what we say. What we can tell you is is that, you know, and and we said this on the previous call, is that CD that CDW, you know, is is the official provider for those services. And we do work with CDW. So that's, yeah, that's that's kinda where we're at right now. Okay. And, Jin, you got anything to add? Jin Kang: Yeah. You know, it's it's this is the the DaaS device a service opportunity. And CDW is a premier provider of that service, and they rely on our platform. So they'll be using our FedRAMP authorized ITMS platform to manage all of these devices that they'll be utilizing for the Olympics. And so we're estimating somewhere between 95 to 135,000 athletes and devices. And it does it's not a one for one, you know, one athlete to one device. And so this opportunity could be larger. But it is very similar to what we did for our Census 2020. And so we know that our solutions can scale. And, you know, we've we've been teamed with CDW and they're a great partner. And we look forward to, you know, supporting them on this LA 28 Olympics and Paralympics. Which they are a an official supporter of. Casey Ryan: Now. Right. Okay. Alright. Terrific. And then last question, I guess. You know, it sounded like you were saying sales and marketing maybe has ticked up a little bit but wouldn't continue. And I was curious about that because it's it's you know, again, I guess, coming to this kind of as a newer following analyst, you know, I would think that that that that the commercial opportunities might incent you or sort of drive you to spend more in sales and marketing as you sort of you know, pursue those greenfield opportunities. Robert George: Yeah. Hey, Casey. This is Bob George. Hey, Bob. I'll clarify that comment. We expect that the dollar amounts of sales and marketing will go up. It's just a matter of as a percent of revenue, it'll be constant. Relatively constant to where it is. So it takes percent times what our, you know, next year's revenue. That that's a lot of dollars in sales and marketing. Casey Ryan: Okay. Got it. Got it. Thank you for the clarification. Well, thank you for the question. Hey, Jason. Did you wanna say Jin Kang: Okay. Okay. Oh. I think I think, you know, Bob hit that pretty pretty accurate. Okay? Okay. Well, listen. You know, for all this reputation about shutdowns and people exposed to federal, I thought it was a really great quarter. And I appreciate you taking my questions. Thank you. Jin Kang: Great. Thank you, Casey. Operator: At this time, this does conclude our question and answer session. If your question was not taken, please contact WidePoint's IR team at wyy@Gateway-GRP.com. I'd now like to turn the call back over to Mr. Jin Kang for his closing remarks. Jin Kang: Thank you, operator. We appreciate everyone taking the time to join us today. As the operator mentioned, if there were any questions we did not address today, please contact our IR team. You can find their full contact information at the bottom of today's earnings release. Thank you again, and have a great evening. Operator: Thank you for joining us today for WidePoint's third quarter 2025 conference call. You may now disconnect.
Operator: Good afternoon, and welcome to Hyperfine, Inc.'s Third Quarter 2025 Earnings Conference Call. Currently, all participants are in a listen-only mode. We will be facilitating a question and answer session towards the end of today's call. As a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to Webb Campbell from Jill Martin Group for introductory disclosure. Webb Campbell: Thank you for joining today's call. Earlier today, Hyperfine, Inc. released financial results for the quarter ended September 30, 2025. A copy of the press release is available on the company's website as well as sec.gov. Before we begin, I would like to remind you that management will make statements during this call that include forward-looking statements within the meaning of federal securities laws, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements contained on this call that relate to expectations or predictions of future events, results, or performance are forward-looking statements. All forward-looking statements, including, without limitation, those related to our operating trends and future financial performance, expense management, expectations for hiring, training and adoption, growth in our organization, market opportunity, commercial and international expansion, regulatory approvals, and product development, are based upon our current estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by the forward-looking statements. Accordingly, you should not place undue reliance on these statements. For a list and description of the risks and uncertainties associated with our business, please refer to the risk factors section of our latest periodic filings with the Securities and Exchange Commission. This conference call contains time-sensitive information and is accurate only as of the live broadcast today, November 13, 2025. Hyperfine, Inc. disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward-looking statements, whether because of new information, future events, or otherwise. With that, I will turn the call over to Maria Sainz, President and Chief Executive Officer. Maria Sainz: Good afternoon, and thank you for joining us. On the call with me today is our Chief Administrative Officer and Chief Financial Officer, Brett Hale. The third quarter marked an important new beginning for our business, driven by the launches of our next-generation subsystem and the Optive AI software. We delivered revenue of $3.4 million, up 27% sequentially, and materially expanded gross margins to a record of nearly 54%, supported by a record average selling price of $361,000. We also drove a meaningful reduction in cash burn, down 27% sequentially, excluding financing. And in October, we strengthened our balance sheet by raising over $20 million to extend our cash runway into 2027. We have discussed 2025 as a year of transformation and a tale of two halves, with the second half of the year's performance driven by the growth catalyst that came to fruition over the last few months, namely the new technology launches as well as the full launch into the new office market. I am pleased to report that after the first hundred days with our next-generation subsystem and the Optive AI software in the market, we have user feedback and proof points to feel confident our technology is now ready for mainstream adoption across the hospital, office, and international markets. In addition, we also have capital to support our commercial rollout for the foreseeable future. The third quarter is just the beginning of the next exciting chapter for Hyperfine as we meaningfully accelerate growth, drive commercial adoption, gain operational leverage, and improve our financial performance. Market interest and demand for our next-generation system is very strong. In the third quarter, we focused on deal activation and executed a seamless commercial launch, selling multiple units and building our sales funnel. Taking a step back, our journey to date has been driven by continuous innovation and iteration to deliver portable AI-powered MRI technology ready for mainstream adoption and scale. We launched the first-generation portable brain MRI system in 2020 with a very compelling clinical promise. The 64 millitesla mass net strength allowed for safe scanning anywhere, and the system was portable. The original image quality was in its infancy. Over the last five years, we have greatly improved image quality, incorporated AI, and have listened to our users closely to deliver a next-generation system that is ready for broad adoption. The next-generation system operates on the Optive AI software, which is our tenth-generation AI-powered software. In addition to a step-function improvement in image quality, additional upgrades include a user and patient-centric design to accommodate a broad patient population, especially beneficial for pediatric, elderly, or anxious patients, making MRI more accessible for all. Early users appreciate this system's high level of image quality, functionality, and usability. Many users have commented on how closely our Optive AI image quality resembles that of high-field scanners. Moreover, our office clinical study enrolled in the last few months will give us a robust dataset of comparative cases between the subsystem and high field, which I will discuss later in this call. The proprietary hardware in the new scanner enables us to drive image quality innovation through software updates going forward at a cadence of one to two releases per year. We are planning our first upgrade to the Optive AI software to be released in 2026. I am very proud of the AI expertise and leadership we have built at Hyperfine. We continue to be featured prominently on the AI-enabled medical devices list published by the FDA amongst the largest players in healthcare. Observing clinicians note that the images produced by our next-generation system with Optive AI approach those of conventional 1.5 Tesla MRI scanners, which is a testament to the impressive technical lead Hyperfine has developed in ultra-low field MRI. The radiology community is key to the adoption of our subsystem. This community has provided overwhelmingly positive feedback on our current image quality and is now broadly supportive. This new subsystem paired with Optive AI has triggered an activation of commercial deals markedly different than what we have seen in the past, with interest from multiple sites of care inside hospitals down to the most remote community health setting. I will now provide an update on our three diversified commercial verticals: the hospital, the office, and our international markets. Starting with our progress in the US hospital setting, we have placed our new system in all the hospital sites of care we call upon today, including adult critical care, pediatric critical care, and the emergency department. The device MSRP of our new subsystem is $550,000, roughly a 15% premium to the prior version. And these next-generation subsystem hospital placements resulted in a significant average selling price uplift in the third quarter. We have also converted our entire hospital deal pipeline to the next-generation subsystem. Compelling clinical utility, strong economic value proposition, multiple sites of care placement, and broad health system and IDN engagement are key long-term drivers to our hospital strategy. The clinical interest for the subsystem in ICUs, ERs, ORs, and clinics continues to increase to address the very real issues related to timely access to MRI and patient progress. The economic value proposition associated with the adoption of the subsystem, reducing cost, accelerating patient progress, and freeing up conventional MRI scanners for additional elective procedures, is compelling to administrators. Hospitals' return on investment assessments are showing one to one and a half year breakeven timeline versus three to four years typical for capital equipment. Although the subsystem is a capital acquisition process in the hospital setting, with strong radiology support, clinical interest, and administrative buy-in, we are now seeing higher priority placed on subsystem projects and acceleration of the deals in our pipeline. Our ability to go deep in the hospital and broad through health systems and integrated delivery networks is beginning to materialize. I am happy to share that in the third quarter, we sold two subsystems into the same hospital network, and our pipeline of multiple deals by hospitals is robust. Today, we are actively engaged with several health systems and IDNs to evaluate system-wide deals to standardize care. Generating evidence to further clinical relevance continues to be an important investment for us. Our work in stroke triage supports expansion into the emergency room, with the value proposition of the subsystem being strong given the importance of time to scan and the focus on patient progress in the ER setting. Our most recent effort, the PRIME study, being led by the Yale School of Medicine, evaluates the potential of AI-powered portable MRI technology to triage a broad, diversified set of patients who present to the emergency department. Enrollment in PRIME is going well, with over 75 patients enrolled. We have also begun evaluating the use of the subsystem in the Operating Room for neurosurgery, which represents a potential additional use case and expansion of our total addressable market. We recently commenced PRISM PMR, a study designed to collect data and optimize the subsystem's real-world clinical utility in this setting. We have enrolled over 20 cases at this point. Now turning to the office. In the third quarter, we commenced our full commercial launch of the subsystem into the neurology office setting. A completed pilot program in which multiple sites secured IAC accreditation, scanned patients, and received payment through the reimbursement process with CNS and private payers validated this opportunity. As I have previously mentioned, neurology offices represent a very compelling opportunity for the subsystem. Neurologists directly impact 100 million patient lives in the United States and order an average of 500 to 600 MRIs annually. But only approximately 10% of private neurology practices have MRI equipment on-site. The neurology office call point is large and diversified, with practices of many sizes based on the number of practitioners and volume of patients. We are proceeding with selling both the first model subsystem with Optive AI and the next-generation subsystem with Optive AI to provide more pricing flexibility in this setting. To drive the adoption in the office, similar to our strategy in the hospital, we have several clinical studies underway. Our most recent study, Neuro PMR, is run in the neurology offices to compare portable ultra-low field MRI and conventional 1.5 and 3 Tesla high-field MRI with respect to pathology findings, clinical utility, and patient experience. I am happy to share that the study has completed enrollment, and data is expected in early 2026. Additionally, our Alzheimer's study, Care PMR, continues enrollment with ongoing presentations of the increasing dataset at major medical conferences, most recently at AAIC 2025. Our team has been actively selling into both single and multiple clinician practices, building relationships and pipelines of both first and next-generation subsystems as we deploy a strategic segmentation pricing strategy to engage offices of all sizes. Additionally, we have been leveraging our partnership with NeuroNet to promote the subsystem to their network of neurology practices. Our full commercial launch in the office is still in its early days, and I have high optimism for this business vertical and its growth potential. Finally, turning toward international markets, where we are focused on selling primarily into the hospital setting. During the third quarter, we received CE Mark and UK CA Mark approvals for Optive AI software, and we now expect to launch Optive AI in 10 different European languages by the end of the year. We also expect our next-generation subsystem to be available in Europe and Canada markets by 2026. In the past few weeks, the subsystem was referenced in France's largest public hospital procurement body to facilitate nationwide purchases of portable MRI technology. Our international strategy includes our goal to launch in India, where we continue to anticipate regulatory approval before the end of this year. Looking ahead, we are driving three pipelines, one for each of our business verticals. The aggregate Hyperfine pipeline is stronger and more diversified than it has ever been. In conclusion, I am more optimistic than ever about the path ahead for Hyperfine. We now have a system that is ready for mainstream adoption and a diversified set of revenue-generating opportunities as we sell into hospitals, offices, and international markets. With this offering, we will be driving significant growth and financial performance improvement going forward. With that, I will now turn over the call to Brett to review our financial performance and 2025 guidance. Brett Hale: Thank you, Maria. I will recap our financial results for 2025 before providing an update on our financial guidance. Revenue for 2025 was $3.4 million, up 27% sequentially. In 2025, we sold eight units, had a strong mix of next-generation subsystem sales, and delivered a record average selling price. Gross profit for 2025 was $1.8 million, and gross margin for 2025 was 53.8%, a record and representing a 450 basis point increase sequentially driven by the increased average selling price. We continue to drive healthy margins for our stage and believe we are well-positioned for meaningful margin expansion at scale. R&D expenses for 2025 were $4 million, a sequential quarterly decrease from $4.5 million in the previous quarter. We continue to realize the benefits of the reorganization completed in the first quarter as we transition to a commercial growth stage organization. Sales, general, and administrative expenses for 2025 were $6.7 million, as compared to $6.4 million in the previous quarter. Net loss for 2025 was $11 million, equating to a net loss of $0.14 per share, as compared to a net loss of $9.2 million or a net loss of $0.12 per share in the prior sequential quarter. The third quarter 2025 net loss and the second quarter 2025 net loss included a non-cash change in fair value of warrant liabilities of $2.3 million and $0, respectively. For 2025, our net cash burn excluding financing was $5.9 million, down 27% sequentially from the prior quarter. Reducing our cash burn remains a significant focus of ours, and we will continue to prioritize spending discipline and optimize our operating leverage while also balancing the needs of our ongoing commercial launch and associated growth trajectory in 2025 and beyond. Our net cash burn including financing in 2025 was $3.9 million, and as of September 30, 2025, we have $21.6 million in cash and cash equivalents on our balance sheets. This cash balance does not include the $18.4 million in net proceeds raised from our October 16 equity financing and subsequent greenshoe that totaled $20.1 million in gross proceeds. We are in a strong capital position to continue fueling our commercial efforts. Now turning to our financial guidance. We expect revenue in 2025 to be approximately $5 to $6 million. This guidance range equates to a very significant revenue step-up and at the midpoint represents sequential and year-over-year quarterly growth of 60% and 137%, respectively. Accordingly, for the full year 2025, we now expect revenue to be $30 million to $40 million. For the full year 2025, we are now increasing our gross margin range to 49% to 51%, representing a 430 basis point increase in gross margin on a year-over-year basis at the midpoint. We expect the progression of gross margin percentage increase to closely follow our sales growth. We expect gross margins to exceed 50% going forward as we realize higher volumes and average selling prices driven by the execution upon our growth catalyst. Lastly, we now expect total cash burn to be in the range of $29 million to $31 million for the full year 2025, representing a 22% decline in cash burn on a year-over-year basis at the midpoint. We continue to operate lean, with strong spending discipline while making investments in areas such as inventory and commercialization to support our recent launches and capitalize on our strong commercial growth prospects. With our strengthened capital position, we now see our cash runway for the business lasting into 2027. I would now like to turn the call back to Maria for closing comments. Maria Sainz: Thank you, Brett. I am very proud of the Hyperfine team and the excellent work done to bring to market the Optive AI software and the next-generation subsystem. Medical technology businesses that build new markets often go through this transition from a first-generation pioneering technology to a next-gen ready for broad adoption. That is the transition we are undergoing at Hyperfine. The fundamentals remain strong, with broad labeling and existing reimbursement. Our strategy to diversify into multiple sites of care inside and outside the hospital and expand internationally is beginning to yield results. In addition, we now have capital to support our commercial growth for the foreseeable future. Q3 is just the beginning of the next exciting chapter for Hyperfine. With that, we now open the line for questions. Operator: Thank you. You will need to press star then the number one on your telephone keypad. And if you would like to withdraw your question, press star 1 again. We do request for today's session that you please limit to one question and one follow-up. Your first question comes from the line of Frank Takkinen with Lake Street Capital Markets. Your line is open. Frank Takkinen: Great. Thank you for taking the questions, and congrats on the progress. I was hoping to talk a little bit more about the composition of the backlog, maybe by setting would help as you are entering some new settings, maybe where have you seen backlog growth? And then as a second part to that question, just maybe talk about what is really supporting the $5 million to $6 million fourth quarter guidance. Is that record backlog? Is that faster conversion from order to actual shipment and revenue recognition? Any kind of context around that to support the guide would be helpful. Thanks. Maria Sainz: Sure. Hi, Frank. So, our pipeline, I think, it has evolved now with the full launch in the office business to be really three pipelines that we are really managing independently, and I would argue that we have the eyes of our sales leaders, but also our strategy leaders by business vertical, very, very intently involved in it. So we are managing a pipeline only associated with US hospital deals, another on US office deals, and the third one, which is our international business. So when you really add those three layers, the total continues to be an incredibly robust pipeline that is growing significantly from anything we have seen in previous quarters before we had again the new technology on the one hand but definitely the office business. The $5 to $6 million is predicated on what we are seeing in the pipeline, exactly the deals that are there. We do not comment on intra quarters. Sort of numbers. But I would say we are not only seeing more rows in the pipeline, but we are seeing more rows that have more than one unit. For some of the accounts that are looking to purchase this quarter and more going deeper into some of the IDNs with going from the first hospital in an IDN to a second hospital in the IDN. We are also managing the pipeline by individual, fed territory or sales area. So we are also very triangulating to make sure that we have confidence that we are not putting sort of all of the eggs in the one basket or one area, and we have a very nicely diversified across geographies and across the three verticals. Brett Hale: Yeah. I would add. This is Brett. I would add that the fourth quarter is the second quarter of the launch for both the next-generation technology in the hospital as well as in the office setting. So we, I think, commented previously that the first quarter was that first hundred days, and now we are into that, really, that second quarter where we converted the entire pipeline of hospital deals to next-generation technology in Q3. And we are seeing those that well, they are working through the process, and we anticipate, you know, them landing, you know, a subset of them landing here in Q4. So just kind of the natural order of the launch trajectory. Both with the next-generation technology as well as the office setting. Frank Takkinen: Got it. Really helpful. Thank you. And then maybe if I could try for 2026, I realize you are only talking about 2025 today, but any directional comments you can speak to on 2026 as we have a confluence of different growth drivers coming together at one. Maria Sainz: Appreciate the question, but I am going to tell you we are not really going to provide a lot of direction around 2026, a little bit because as Brett just mentioned, we are on quarter two of the launch. And a lot of what we are going to use, really, I like to think of Q3 as an incredibly important quarter where the first quarter showed sort of the excitement and the feedback on the actual technology and the beginning of that activation. This is the second quarter. A lot of it is going to be the launch pad into 2026. So we really would prefer to reserve the commentary around 2026 until we get into the beginning of 2026 with a closed Q4 as well. Again, it will continue to be composed of the things that I just outlined, so it is the three pipelines and it is clearly, time is always a friend because more things get added into the pipeline, and the hospital deals, as we know, sometimes take time. So, but for now, I think we are going to focus more on just what is near term Q4, 2025. Frank Takkinen: Okay. Fair enough. Thank you. Operator: Sure. Maria Sainz: Thank you. Operator: Your next question comes from the line of Yuan Zhi with B. Riley Securities. Your line is open. Hi. This is Paula on for Yuan. Thank you for taking our questions and congratulations on the quarter. I have a couple of questions. First, can you provide an update on the timeline and initial trajectory of market penetration in the neurology office? And when can we see a ramp-up of orders? And the second is for international expansion. Does it take similar time or longer time to sign the contract versus those in the US? Based on your current experience, what do you think are the major bottlenecks for international expansion? Thank you. Brett Hale: Great. So I think the I'll just maybe repeat the question, make sure we've got that right is that you're speaking about the penetration and foremost, into the neurology office. And then the timeline on international deals. Did I get that correct? Maria Sainz: Yes. Operator: Okay. Maria Sainz: So great question. So in I think in neurology offices, we really have a very active pipeline. We have said I think the call point is very, very large. So thinking in terms of percentage penetration, it's a little bit more challenging because I think what is really, really important to understand is how the offices are really grouped between what I would call the more solo practitioners, a single practitioner versus multiple practitioners. That immediately dictates the size of the practice. And with the size of the practice, there's a very strong correlation to the volume of scans that they are going to do and how they think about the economics of being in technology like the subsystem to add on imaging to their offering. Right now, we have a bit of a segmentation approach where we are using our first model with the latest software with Optive AI at a price point that offers more flexibility to go into the smaller offices. And we are using, of course, our next generation with the same software, Optive AI, for the larger. We also have a partnership with NeuroNet, which de facto operates a little bit like an IDN, if you want, of the office space. To be able to penetrate that group. We're also going to be going for the first time to one of the meetings that groups those kinds of offices together, which is a headache meeting, which is happening early December in the US. So we're really trying to drive the strategy to go and approach both call points, but we haven't really and we're looking at growing on both. On the solo practices as well as on the multipractitioner, larger volume practice but I don't have a good metric of penetration. It will be more about the growth and the adoption. You remember maybe that we conducted a study called Neuro PMR. We conducted it in two very, very large practices. The Dent Institute in Buffalo and Texas Neurology in Dallas. We started in April, but we were able to put the new devices into those two practices for the study so that the data that comes out, which is now only literally a few a couple of months away because it will be early 2026, is with the latest technology, both hardware and software. So that's going to be really exciting. To your question about international, I said, international is not about the office. International is about hospitals. So there are some procurement processes. There are some tendering processes. There are some multidimensional processes like in the US. One of the big wins this quarter was the French referencing. So this body called UniHA, which is really a very large catalog procurement process that allows all French hospitals to more swiftly buy through that without a lot of the procurement process kind of timelines. So we think, for instance, in a market like France, we will start seeing a more expedited way of being able to transact with hospitals, but it is still hospitals. So it's not a swift decision-making as the, as the. And for international, it's really important that it really is going to be this quarter when we bring to them the new image quality. Although we did get the clearances both on the CE Mark front and the UK CA front last quarter. There's another work stream that we need to do beyond the regulatory approval, which is produce the software and all the labeling and the documentation in local languages. We now have 10 different local languages. So the Optive AI with the new level of image quality will get launched in local languages in 10 of those local languages. Only here in Q4. Paula: Okay. Okay. Thank you. Operator: Of course. Thank you. Maria Sainz: Thank you for your question. Operator: No further questions at this time. I would like to turn the call back over to Maria Sainz, CEO, for closing remarks. Maria Sainz: Thanks, everyone, for joining us in today's call. I'm truly, truly excited about the inflection point in which we are at our company, and I look forward to providing you further updates here in just a few short months. Thanks, everyone. Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.
Operator: Greetings, and welcome to the Where Food Comes From Third Quarter Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It's now my pleasure to introduce Jay Pfeiffer of Investor Relations. Please go ahead. Jay Pfeiffer: Good morning, and welcome to the Where Food Comes From 2025 Third Quarter Earnings Call. Joining me on the call today are John Saunders, CEO; Leann Saunders, President; and Chief Financial Officer, Dannette Henning. During this call, we'll make forward-looking statements based on current expectations, estimates and projections that are subject to risk. Statements about financial performance, growth strategy, customers, business opportunities, market acceptance of our products and services and potential acquisitions are forward-looking statements. Listeners should not place undue reliance on these statements as there are many factors that could cause actual results to differ materially from forward-looking statements. We encourage you to review our publicly filed documents as well as our news releases and website for more information. I'll now turn the call over to John Saunders. John Saunders: Hello, and thanks for joining the call today. In our earnings release this morning, we again reported strength in a wide range of service offerings that essentially offset the continued impact that the smaller herd sizes are having on our core beef-related verification activity. We also reported solid bottom line results in spite of the modest revenue decline, an accomplishment that underscores the resiliency of our business and our successful efforts to align expenses with revenue run rates as we navigate a challenging macro environment on top of some industry-specific headwinds. Total revenue in the third quarter was $7 million, a decline of just $92,000 over the same quarter last year. Revenue in our verification and certification segment grew by 1% to $5.6 million based on increased activity across our portfolio, which includes by far the industry's most comprehensive set of solutions. Verifications for pork, dairy and egg operations all increased year-over-year, and our CARE certified program continued to attract new customers in a variety of proteins. Similarly, certification activity for organic, non-GMO, gluten-free and Upcycled all showed gains. In addition, we continue to benefit from a unique ability to bundle services, an advantage that saves our customers' time and money, contributes to revenue growth and at the same time, helps on the gross margin side. Finally, customer retention rates well above the 90% level have also played a big role in revenue stability. Hardware sales declined to $1.2 million from $1.3 million year-over-year with lower tag volumes due to herd shrinkage and tag subsidies being partially offset by growing demand for value-added tags that we sell at higher price points. Gross margins remained fairly stable year-over-year and SG&A expense actually declined slightly in the third quarter, reflecting careful management of fixed costs and lower marketing and trade show expenses that largely offset higher compensation costs. That led to operating income of $575,000 compared to $608,000 in the year ago third quarter. Net income grew to $1.1 million or $0.22 per share in the third quarter compared to net income of $500,000 or $0.09 per share a year ago. The increase included a $946,000 gain on the sale of our Progressive Beef ownership and a $48,000 gain on digital assets. I think it's important to highlight some of these profitability metrics in light of headwinds we're encountering in the forms of tariffs and inflationary pressures, including significant wage inflation and smaller herd sizes, which impact both verification and hardware revenue and profitability levels. Our balance sheet remains strong and clean. We closed the quarter with cash and cash equivalents of $4.8 million, up from $2 million at 2024 year-end. We have no debt. The Progressive Beef stock sale, which closed in the third quarter, generated cash proceeds of $1.8 million and the return of 12,585 shares of our common stock, which was another 150,000 returned to shareholders or which have been canceled and removed from our total issued and outstanding stock. Turning to stock buybacks. We retired an additional 60,721 shares in Q3 through our buyback program that was initiated in 2018, raising our year-to-date buybacks to 116,547 shares and our total buyback since planned inception to more than 1.3 million shares, representing more than $14 million in value returned to stockholders over the past 7 years. Earlier this week, we announced our inclusion in Time Magazine's America's Growth Leaders 2026 ranking. Where Food Comes From was ranked 74th among more than 4,000 public companies in the United States. This ranking places Where Food Comes From among the most innovative and dynamic publicly held companies in America. The list was led by NVIDIA and included names like Tesla, Palantir, CrowdStrike, Broadcom, and Alphabet. You can find a link to the story in the November 11 press release posted on our website. As one of the smallest companies in the top 100 list, we view our inclusion as validation of the growing importance of verified sourcing in the world today. Consumer demand for transparency into food origins, ethics and safety has never been more relevant. And we are playing a lead role in the megatrend that involves all participants in the supply chain, ranchers, growers, distributors, retailers and consumers. Our ability to remain at the forefront of this megatrend is based on a customer-focused approach that gives ranchers and growers the tools they need to address evolving demands of retailers and consumers in real time. We are constantly innovating with new services that are often years in development but are ultimately expected to become meaningful revenue streams. A case in point is our labeling program, which has been in place for more than 10 years and is now beginning to gain traction as forward-thinking retailers recognize its value in attracting and maintaining customers. We have other innovative new services in the pipeline that will further expand our market-leading portfolio and benefit both customers and consumers, and we hope to be announcing one of them in the very near future. And with that, I'll thank you again for joining the call today and open the call to questions. Operator? Operator: [Operator Instructions] And the first question comes from the line of James Ford with First Ballantyne. James Ford: I had a quick question with regard to the herd size and product revenue long term. When do you think you'll see a material pickup in product revenue relative to herd size growing? Is the beef and cattle futures prices high enough to get the demand up there in a year or 2? John Saunders: Thanks for the question, James, I'll take the first stab, and then I'll let Leann answer from her perspective as well. I do think that the cattle prices have started to reach the level where there is some building back in the herd, but we're still faced with issues relative to primarily the border being closed with Mexico and that none of those cattle are able to come into Texas, Oklahoma. So that's typically a big part of our beef supply. And with this screwworm issue, I think we're just really struggling to see how it's going to be a short-term solution to this problem. So yes, I think in certain areas, we're starting to see a build back, but it's going to take a lot of time. Leann? Leann Saunders: Yes, I agree with everything. I think it's a very predictable cattle cycle. I think we're dealing with some issues that are unique relative to supply, just a lot of generational turnover in the cattle industry, which is a challenge. And then you also have continued drought in some areas, which are restricting those locations from building back. So we anticipate -- I mean, we're probably going to see maybe another year and then start to go up again in supply, which is very typical. But again, we're kind of in new waters here a bit. So just waiting to see and not try to predict as much as we typically have there. John Saunders: Yes. And maybe one final point with that. I think one of the things that we're encouraged about, although it was politically a very hot topic over the last couple of weeks, is that it appears that this administration is starting to look at utilizing public lands more than it has been over the last, obviously, 4 years. But I think that's something that's going to probably incentivize younger ranchers or ranchers and farmers that are looking to grow their herds that, that incentive hasn't really been there for a while. So we're encouraged by that, that there seems to be more financing available and just land that's available for use if you're wanting to raise livestock. Leann Saunders: The other thing on the demand side is a little bit of things unknown relative to trade negotiations. I mean China became our biggest export market for beef prior to now they're not purchasing U.S. beef products. So again, it's like we have all these factors relative to trade agreements happening at the same time. So it's challenging to predict. So we kind of waiting to see on that as well and some increased restrictions from the EU, which are problematic. Operator: The next question comes from the line of Chris Brown from [private] investor. Christopher Brown: Following up on that question, under the assumption that kind of the beef verification is kind of stable and not growing particularly fast in the next year or so, what are the other businesses and programs that you're most excited about that you think will be kind of growers in the next year or 2? And then the second question is kind of a little bit capital structure. Are you thinking of yourselves as a growth company? Or can we think about more of kind of a stable cash-generating business going forward? I know you've done some dividends in the past, et cetera. How do you think about the balance sheet, the buildup of cash and what you do with it? John Saunders: Two great questions, Chris. Thank you. The first one, I think in the script and we talk about it, there are a number of factors right now, which are driving primarily our dairy, our poultry, that being both broilers and egg laying hens. But in addition to that, the organic certification, there's been some recent strengthening of the regulations relative to organic, which has expanded the number of customers that are eligible or required to participate. And then again, we are the exclusive supplier of the Upcycled certification. So that really puts us in a unique spot when we look at CPG companies that are trying to address consumer demand. So you've seen like let's call it the Fairlife Protein 42, all these new protein drinks that are shelf stable, Chris. I don't know if you're familiar with those or not. But people involved in exercise, weight lifting, any of that type of stuff are really looking to get as much protein as they can. And it's kind of the old new that has dairy and milk, especially this new kind of milk, this hyper-energized is something that they're looking for. So obviously, they're wanting to do that. So I think what we're really doing is looking at consumer trends and then trying to match our business with that, understanding that the beef industry is a long-term play for us. And we still are the -- we basically control the disease traceability, the verification systems through our Beef Passport system. So we're not giving up on that. We're understanding that it's a marathon, not a sprint. But this is also giving us a big opportunity to really look at those other markets and to grow them, which thankfully are continuing to grow really rapidly and our Validus and our Where Food Comes From organic division have been doing great work and really expanding and getting more efficient, and we're much better at customer intake and processing. So anyway, we've got a lot to be excited about that's different than beef. So believe me, we're working on that hard. The second question, I think, with our sale of Progressive Beef, it gave us an opportunity to really to get, I think, even better capitalized. We are constantly looking at new opportunities and new growth areas, new companies. I've mentioned before several times that the closer we can get to consumers, I think that's the direction that we want to move and just continue to look at technology. We've got probably 6 or 7 new AI initiatives that we're working on within the company, just looking at ways to either be more efficient or to be better at customer service or be better at getting in front of customers. And one thing we've spent a lot of time on, we haven't talked about, but if you go to whatever your search engine is today and type in third-party verification, Where Food Comes From is now going to be placed on the first page, I think, in all circumstances. So that wasn't on accident. About a year ago, we really started to invest in SEO and to be better at getting in front of consumers and understand -- and meeting them where they're at and understanding what they're wanting to talk about. So I think we've done a really good job there. If there's opportunities for us to invest in new companies, and it's something that we can finance ourselves, Chris, believe me, we're going to do it. And that's -- so we are absolutely a growth company. We're a patient company, but we're happy where we are with our balance sheet. We're happy we have no debt, but we'll be more than willing to use capital to grow if we see the right opportunity. Christopher Brown: I've been a shareholder for probably 7, 8 years, and you guys have always been great stewards of capital. Operator: [Operator Instructions] There are no further questions at this time. I'd like to turn the call back to John Saunders for closing remarks. John Saunders: Thanks again, everyone. Appreciate the questions, and we'll talk to you soon. Take care. Operator: This concludes today's conference. You may disconnect your lines at this time, and thank you for your participation.